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Markets fell modestly this week, as a jittery US reporting season and the emergence of a new front in the trade war kept investors on edge. Markets trended lower to begin the week as investors digested softer than expected earnings from major US companies. Investors then woke up to a midweek treat from the Oval Office, with Trump announcing $11b of tariffs on the European Union.
Keen observers of previous TW3 Market Wraps may remember that last July Trump claimed that neither he nor the EU believed in tariffs! This is yet another example of why investors should not let any talk about trade wars influence their investing decisions, as nobody knows what Trump is going to do next, let alone the man himself…
In other news, new investors in the Pepsi of the ride sharing industry (Lyft) have not had a great ride so far, with the share price falling 30% since listing on the NASDAQ a fortnight ago. The Coca-Cola of the ride sharing industry (Uber) is likely to go public in May, of new equity, despite revealing in its prospectus that it may never achieve a profit!
Source: Charlie Bilello
Finance 101 – Timing The Market
Whenever equity markets fall, a few nervous investors get on the phones and ask us to sell their shares. One common justification for this misguided (but understandable) strategy is “If I sell now, I can buy even more shares at the bottom!”. Which begs the question – If the investor has such great insight into timing the market, why did they wait until after the sell-off to sell their shares?
Unsurprisingly, the investor in our example is not the first person to try and time the market. Millions of academics, institutions, professional investors and amateur investors have spent countless hours trying to formulate a strategy that can predict the direction of markets. And for good reason too. An investor who could correctly time the daily fluctuations of the S&P 500 would have turned one dollar in 1993 to just under a sextillion (a billion trillion) dollars in 2015! Unfortunately, it is unlikely that Stanford Brown will ever have this model in its arsenal. If we do develop such a model, we are likely to be found aboard our 1,000 foot yachts.
The lesson to glean from this example is not to succumb to the temptation to try and time markets. Building a robust portfolio requires ongoing investment, diversification and discipline
Stanford Brown Podcast
What is the meaning of life? What happens to us after we die? How are bellybuttons related to yield curves? These are some of life’s greatest questions, and this of Stanford Brown’s Market Insightspodcast answers at least one!
A Nation Decides…Reluctantly
It’s official. Australians will have to suffer through five weeks of squabbling to decide whether Scott Morrison or Bill Shorten will lead the country for however long it is until the next leadership spill. Voters will reluctantly have to choose between whatever Scott Morrison stands for and the conviction of Bill Shorten (“). Thankfully, most Australians concluded long ago that the majority of politicians are about as useful as a screen door on a submarine, and subsequently don’t take politics too seriously.
For those of us who do take politics seriously, a primer on moral psychology can help avoid fruitless political debates. American social psychologist Jonathan Haidt believes that , which is why political debates often go nowhere. Most people think political differences come from ignorance or callousness (e.g. progressives want to tax rich people because they’re economically illiterate and/or envious), where in reality they tend to stem from differences in values (e.g. people who value equality and fairness higher than individual autonomy tend to vote for progressive parties). Without understanding differences in values, any discussion on politics will go down as well as !
So what are your morals? Dr Haidt has created a number of to help people better understand their moral compass, and it is quite interesting to see the results. Believe it or not, Nic’s lowest scoring value was respect for authority (Ed – this is not a surprise)
Billionaires vs Business?
Even those amongst us who try our best to avoid politics may have come across a term that is becoming increasingly prevalent – populism. Populism is a political strategy that pits “the people” against business and/or political elites. Rising wealth inequality and stagnant wage growth are seen to be two of the leading causes driving the resurgence in populist politics, and have caught the attention of two billionaire investing legends.
Hedge fund extraordinaire Ray Dalio penned a 7,500 word essay on , citing figures regarding and historically high levels of wealth inequality as indicators that capitalism was no longer working for the average American. Unfortunately, Dalio’s solutions to the problem were not particularly enlightening (we need more leadership, need to make the system work better, etc).
The legendary distressed debt investor Howard Marks dedicated his to populist economics, warning that while capitalism guarantees “The unequal sharing of blessings”, socialism guarantees “The equal sharing of miseries”. Whilst he agrees with Dalio’s assessment that the system needs to be improved, he urges that socialists will destroy the very prosperity they are trying to redistribute.
Capitalism may not be perfect, but as we can see below, it has helped lift billions out of poverty. To allude to Mark’s previous “Capitalism is the worst economic system, except for all the rest”
We promise this is the last political article! The dumpster fire that is Brexit will be extended for another excruciating 6 months after EU leaders . Theresa May now has until October 31 to negotiate a deal with the EU that will be approved by the British parliament.
Hopefully it won’t have to come to this!
Posh Pick Palmy Over Point Piper
As if being the setting for Home & Away wasn’t enough, Palm Beach can now lay claim to being the in Australia! The list was dominated by Sydney postcodes, with 6 of the top 10 falling in the Eastern Suburbs or Lower North Shore.
Source: Australian Tax Office
The also delved into the wealthiest occupations, with healthcare professionals accounting for five of the top six positions.
Private Health Reforms
If you have Private Health Insurance, be sure to watch Stanford Brown’s on the reforms to Private Health Insurance that came into effect on the 1st of April!
In the last TW3 instalment we asked our readers if they were smarter than an 8 year old. It would appear that Mark and Judy certainly are! They have earned themselves a bottle of red for sending through the correct answer – A keyboard!
Name That Line!
Callum and Greta are , as a bottle of red is headed their way after correctly guessing last week’s Name That Line!
But what was this classic line?
Video of the Week
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