 Sept 2008 |
Debt:
The devil's delight
Banks used to be simple entities; paying
for deposits, adding a margin and lending
out against security ...... In this note
we have tried to synthesise a highly complex
evolution of the US and to some extent,
the global banking system, which has been
characterised by a remarkable shift in
prudential standards where leverage has
been taken to an extreme. |
| June
2008 |
Changes in the political structures in China and Russia
In the early 1990s the standing observation in financial markets was that China was prioritising the modernisation of its economic system ahead of its political system. This was judged by many as sound when juxtaposed against Russia which at the time was doing the precise opposite.
The attached article, Long Time Coming – The Prospects for Democracy in China gives an interesting account of changes and growth in democratic forms and processes in China. The second article, The Myth of the Authoritarian Model, has as its central contention, the argument that Putin’s undermining of the democratic gains of the early post-communist years has created a society where despite strong economic growth, the outcomes for the average Russian on a whole range of measures mean that they are worse off today than a decade ago.
With the world readying itself for massive changes in the balance of world power, we felt these articles would offer some insights. As an investor it has important implications for risk and potential reward. Whichever way it turns, surely the old order will be hard-pressed to dominate global debate…
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| Dec
2007 |
Discovering China on a Bicycle
I have always loved travel; it occupies the first line on my budget and is the favoured child of bonuses and unexpected windfalls. I am happiest when I am on a trip and have a ticket in the drawer for the next one. In the hall outside our bedroom is the biggest map that would fit and next to it, a series of magnetic strips. Each strip is titled: This Year, Next Year, Before Retirement, After Retirement, and has a number of movable magnets with my dreams - horseback riding in Iceland, the Sahara Music Festival in Mali, Patagonia. They get ordered and reordered and are often studied the last thing in the day as we head to bed. China has been migrating to the top of the tower for some time, my investments know it well, but I’ve never been there.
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Sept
2007 |
Highlights from a UK Motoring Holiday
Tell friends that you are having a motoring holiday around the North of England and Scotland and I suspect that you will notice a slight grimace or kindly understanding smile tinged with pity. The “Tattler Set” will know you are a retarded loser and will in all probability change the subject or patronise you with the joys of Tuscany and the back streets of Lucca.. |
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| June
2007 |
A
ray of hope
The trendy subject of the day is global warming. Some newspapers even run regular columns on sustainability and how we as individuals might reduce our carbon footprint. There is no question that the public generally acknowledges the problem we face if indeed all are to share in the world’s finite resources and enjoy the material standard of living most in the west regard as their birthright. This is a subject quite distinct from arguments of global warming and empirical evidence of climate change.. |
|
| June
2007 |
A
history of US finance
A history of US finance since the 1970s
which gives an interesting insight into
modern securitisation and the complex
issues of risk. This history partially
explains how seemingly unsustainable
growth in mortgage and other debt are
sustained, thus partially explaining
many things in our modern world from
property prices to current account deficits.
Some predictions are made. ...
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| Dec
2006 |
What cost? Sun, wind, water and carbon credits
While “Global Warming” has
been a generally accepted theory by the
scientific community for some years, it
would appear that Australia’s political
leadership has now finally decided to acknowledge
the reality. At least the debate
has moved on to what we as a nation should
do about minimising our greenhouse gas
emissions. If you find it disturbing
to listen to the interminable discussion
about whether we should or shouldn’t
ratify the Kyoto Protocol or build nuclear
power stations, whilst at the same time
watching vast iceshelfs break-up and
disintegrate on the nightly news, the encouraging
point is that we can each take action to
compensate for the greenhouse gas emissions
we currently produce ...
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| Sept
2006 |
Dalmation
Coast .
Sitting in the airport in Vienna, we
met a most engaging fellow. He was Czech,
solidly built and with mischievous twinkly
eyes. It transpired that he sold body-parts,
the confession of which was accompanied
by several flicks of a serpentine tongue
and a wink for the benefit of my wife.
Among the many things we learned was
that the more chaotic the country, preferably
at war, the better was his business of
selling prosthetics - once peace came
he assured us with authority that business
went to hell. The opposite applies to
the tourist industry. Croatia, and presumably
the other remnants that were once Yugoslavia,
is still suffering from the war tag that
deters visitors even though open hostilities
ceased more than 12 years ago. This is
the opportunity. ....
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| June 2006 |
Russia.
During June, my wife and I spent two weeks
travelling around Eastern Europe. The
itinerary was not particularly adventurous,
taking in standard tourist destinations
such as Dresden, Prague, Budapest, Moscow,
and St Petersburg. Having spent a
large part of the last 18 years following
developments in China and India, I was
eager to see for myself another of the
new emerging economic giants, or so called "BRICs" (Brazil,
Russia, India, and China) ... Although
one shouldn't jump to conclusions, particularly
with my limited understanding of the country,
and acknowledging that we were on holiday,
I'm still pretty clear that we should from
here on only refer to the "BIC's"....
Learning
to lead at Toyota.
Toyota’s famous production system makes great cars – and with them great managers. Here’s how one American hotshot learned to replicate Toyota’s DNA....
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| June 2006 |
Learning to lead at Toyota.
oyota’s famous production system makes great cars – and with them great managers. Here’s how one American hotshot learned to replicate Toyota’s DNA....
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Mar 2006 |
The Mekong.
The anxious throb of the engine and the clatter of the camera -
toting passengers is the only evidence of modernity as we swiftly
pass jagged rock protrusions scattered along the edges of the waterway.
At the higher reaches, the Mekong, an oily grey-brown, flows apathetically
through winding, hilly country ...
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| Dec 2005 |
Northern Territory.
The middle of July … driving northwards and passing through the scenic eastern Kimberley hill country, our first stop was at Parry’s Creek near Wyndham, our second visit. A peaceful and quiet campground on the bank of a bird-rich billabong, with the bonus of a small outdoor restaurant dishing up first class food. Walking is pleasant here along the billabong and amongst ghost gums, so after a meander we perched ourselves in the shade and waited for things to happen ...
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| Sept 2005 |
Las Vegas.
It may not come immediately to mind as a place for a family holiday but Las Vegas (high meadow) has a lot to offer. There is one important caveat, however. Each family member should fully understand probability theory, be well-versed in Platinum's "curious investor behaviour" series of advertisements and should not be prone to obsessive compulsive disorders.
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| June 2005 |
The Ghost In The New Machine Age.
Chris Creed O’Hanlon gives us a retrospective of the information technological revolution, highlighting the extraordinary influence of radio waves and the subsequent emergence of the digital age. It is possible today to code nearly every human activity in digital form and importantly, other digital codes can be spliced (seamlessly) to create reliable or totally fictitious imaginings. Further, with the Internet now being made available ubiquitously via radio waves (wireless), our lives are taking surprising directions. Creed touches on some of the implications for business and society which at the very least will stir your imagination.
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| Mar 2005 |
Shongololo.
If you like wild life (not a wild life), enjoy viewing the passing countryside, visiting tribal villages and markets, are not in a particular hurry, prefer not having to lug your baggage around while covering considerable distances, can handle confined spaces and are gregarious, this may be a trip for you ...
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| Dec 2004 |
China’s Diverging Labour Markets.
The 1950s saw China's government introduce a household registration (hukou) system and other measures to restrict movement around the country and enable better government control of an expanding population. This policy has created a bifurcation in China's labour market, proving to be particularly relevant today
Honeymoon In India.
We have often expressed our interest in India as a source of investment opportunity. However, in their holiday time several staff have recently sampled India as a tourist destination ...
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| June 2004 |
China’s Water Shortage Could Shake World Food Security.
In the case of China, the current drive of industrialisation is quite without precedent. Equally so is its impact on mother earth. The challenges this creates will require imaginative solutions, and the consequences of properly accounting for the cost of water will yield some rewarding investment opportunities.
The Path Towards Personalised Medicine.
Molecular biology has come a long way since the identification of the double stranded helix of DNA in the 1950s, however it looks as though scientists have hardly scraped the surface.
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| Oct 2003 |
Price Indices: The trouble With Statistics (Hedonic Adjustment)
"Every quarter the Government publishes its Consumer Price Index (CPI) and it tells us inflation is low. Every year our expenses appear to be increasing faster than that. There seems to be a disconnect between the reported inflation rate and our actual experience."
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| Sept 2003 |
Perhaps There's a Better way.
"Every once in a while, when I'm in a melancholy mood, I think of how little the craft of portfolio management has changed during my 40-year career. Sure we have computers now instead of Quotrons, and programs to determine value at risk and volatility, but if you analyze how money managers spend their days, it isn't all that different from what it was in the 1960's."
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| June 2003 |
What Price For The Last Drops?
It is not so much that we are about to imminently run out of oil – more that man’s ingenuity has ensured that we have probably discovered nearly all the readily exploitable reserves, that depletion is occurring much faster than new additions to reserves and all this is happening just as the great populations of China and India climb aboard the energy-consuming treadmill.
Part Man, Part Monkey.
James Montier of investment bankers Dresdner Kleinwort Wasserstein teases us with various examples of self deception with which most of us can readily identify. Worse still, we see that we are often serial offenders and extraordinary slow learners. The illusion of knowledge is one of the defining characteristics of young analysts; if we only followed the advice of being “less certain in your views” and “aim for timid forecasts and bold choices” we would be generally surprised at our successes.
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| Mar 2003 |
Bad Money.
"At Platinum we have become increasingly concerned that lower income American consumers (and possibly American consumers in general) have too much debt. We think this situation will end in a blaze of credit defaults and a substantial slowing of consumer spending. This will have a large impact on businesses that rely on buoyant consumer finance (such as the automobile manufacturers and their suppliers) and also on the holders of consumer debt and the debt of companies that lend to consumers (such as some life insurance companies)."
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| Feb 2003 |
North Korea - A Trip To.
"Nick Harbinson, MD of Merrill Lynch's Asia desk has been living and working in Asia for over 20 years and this article reflects his personal views and observations on North Korea."
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| Dec 2002 |
Myanmar - A Trip To.
"As you will know by now, nothing delights us more than spotting an opportunity that others may overlook. The case in point is Myanmar (Burma) which is not yet on the tourist map."
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| July 2002 |
Tyco - Acquisition Accounting and Conglomerate Scandals.
"The entire premise of a Tyco was a little difficult to credit. The premise was startlingly arrogant; that in the late 1990s with asset prices at historic highs, a small team could regularly make takeover offers at a substantial premium to the market and through their own superior management could create value. When the acquisitions numbered over 700 this beggared belief."
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| June 2002 |
Do We Ever Learn From The Past?
"John Kay, a writer with the Financial Times, provides an excellent historic perspective of the costs of short-termism, and also with glowing examples of its antithesis. He highlights how short-term pressures or a misreading of a company's inherent strength has often led to disaster, while pursuing long-term objectives can produce surprising outcomes. It is what he describes as the "principal of obliquity". He points out that corporations cannot directly target shareholder value any more than individuals can directly target happiness, because of the complex interaction of forces and events."
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| Dec 2001 |
What Went Wrong At Enron?
"This very big bust was a very big surprise. This once again reminds investors of the financial leverage within the system which adds to the vicissitudes of managing businesses and of investing."
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| Sep 2001 |
Lenders and Investors Beware!
"The US consumer has more debt than they have ever had. At the edge, some lenders are using very questionable practices to make their accounts look good."
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| June 2001 |
Uncommon Sense, Warren Buffett's Immutable Universe
An audience with Warren Buffett and Charlie Munger at the Berkshire Hathaway AGM.
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| Mar 2001 |
Financial Manias Are Not New.
"On the anniversary of the peak of the Nasdaq and subsequent 70% fall we thought it might profitable to examine the common characteristics of financial manias."
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| Dec 2000 |
The Digital Revolution.
An illuminating description of the digital revolution.
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| June 2000 |
The New (Technology) Paradigm.
"When studying the great booms of the past, there is a common thread that runs through them all. Without exception, money is plentiful and large segments of the population become involved in the pursuit of wealth. The excitement of the moment tends to dull critical faculties. At the height of the rush it is very difficult to stand aside with self-confidence and defeat the case that is being made. This is so because invariably the object of enthusiasm has elements which are irrefutable."
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| June 1999 |
Corporate Anarchy?
"The broader concept of stakeholder value has tended in the last fifteen years to be squeezed into a narrow concept of shareholder value, the view being that all stakeholders will benefit to the extent that profitability is optimised. This has given rise to the return of the fashion of stock options that was common in the 1960s in the US, except that the scale today is gargantuan by comparison. Income disparities have widened dramatically in the industrialised world at a time when marginal income tax rates and other progressive taxes have diminished."
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| June 1998 |
Near Perfect US Economy. Stock Options.
For some time most US commentators have gushed that the economy is near perfect. Earnings distortions caused by the expedient treatment of stock options among US companies. This essay explores some of the realities that may catch up with the economy and with Wall Street.
Europe Transforms.
Transformations that have taken place in Europe in the nineties and the prospect of further major integration as a consequence of the interaction of globalisation and Monetary Union.
China.
This colossus is in the midst of conversion to a fully market-led economy and yet finds itself facing significant hurdles. With Japan in recession and much of Asia in crisis the question that is yet to be answered is how China will weather the storm that has engulfed its neighbours.
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| June 1997 |
US Equity Markets.
The danger of the current super bull market turning into a fully fledged mania is real. Some may even point to the excesses (for instance, change in corporate ownership via options, massive flows into mutual funds etc.) as evidence of some markets already being afflicted by a mania.
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| June 1996 |
Global Perspectives From Three Leading Economic Commentators.
"The emergence of investment strategists; generally working in teams, brew up a concoction of economics, history back-tested models and measures of market sentiment. Thus we find large broking houses employing not only regional but also global investment strategists who produce intensive studies in their attempts to predict the future. The real value to investment managers from these writings is the triggering of ideas rather than necessarily the conclusions."
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