Stanford Brown Communications
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|Shares trended lower this week, as reduced forecasts for global economic growth and stalled trade negotiations weighed down on investor sentiment. The week began with a number of esteemed investors such as Ray Dalio and Seth Klarman warning of heightened risks of a global recession in 2020, citing elevated debt levels, trade wars and the rise of populism as key contributing factors. These warnings coincided with reports that Chinese economy slowed to its lowest yearly growth rate since 1990.|
| Source: Wall Street Journal |
In local news, the December jobs report was surprisingly upbeat with the unemployment rate falling to 5%. Despite the positive economic development, there is a growing consensus that the RBA’s next move will be a rate cut rather than a hike, as the economy will likely need stimulus in the face of a weakening property market.
Finance 101 – Herding
|The renowned American investor Joel Greenblatt was once asked to teach a class of 9th graders from Harlem about investing. In his first class, Greenblatt brought a jar of jelly beans and asked each student to inspect the jar and make an estimate of how many jelly beans there were. After collecting the initial estimates, he went around the class and asked each student to share their answer, and gave them the chance to change their estimate.|
The average answer from the initial estimate was 1771, an excellent result considering there were 1776 beans in the jar! The average answer from the second round of guesses, where the estimates could be influenced by the opinions of other students, was around 850. Greenblatt told the students that most investors allow the opinions of others (friends, the media, etc) to influence their decision making, even though being cold, independent and analytical leads to greater success.
The lesson to take from this anecdote is the dangers of herding, whereby investors mimic the behaviour of the crowd. It is human nature to want to fit in, however human nature dates back to times when we were living in caves, and is ill equipped for investing in the 21st century. The next time your mate from the golf club urges you to invest in ‘the next Google’ offer him a jelly bean!
Stanford Brown Podcast
|Sick of the radio? Bored of the tennis? Then tune into Stanford Brown’s Market Insights podcast during your next commute as we cover the recent market sell-off, troubles in Europe, and the four factors present in most market bubbles!|
Davos – Defeating Defeatism!
|Each year, the world’s political and corporate elite descend upon the Swiss ski resort of Davos to attend the annual World Economic Forum conference, supposedly to fix the world’s problems! The theme of this year’s meeting is “Globalisation 4.0”, in allusion to the fourth industrial revolution (characterised by robotics, artificial intelligence, etc).|
Speakers at the event ranged from Nobel Peace Laureate Denis Mukwege to beloved documentary presenter David Attenborough to Brazil’s new populist president Jair Bolsonaro. Although the conference has the potential for great change, it ends up being little more than an opportunity for global leaders to posture. For example, Japanese Prime Minister, Shinzo Abe, proclaimed (with a straight face) that Japan had “defeated defeatism”. We were surprised a Saudi Arabian representative didn’t speak on their ongoing commitment to a free press!
Doomsday Around The Corner?
|Each year, the Bulletin of the Atomic Scientists releases its Doomsday Clock, which represents the likelihood of a man-made global catastrophe. Last year the clock was set at 11:58, the closest to Midnight (global catastrophe) since 1953 when the US and Soviet Union both ran hydrogen bomb tests. It was announced this week that the clock remains at 11:58 for 2019, as risks such as climate change, cyberwarfare and artificial intelligence threaten to escalate global tensions.|
|Stanford Brown is a place full of rational optimists. Now is not the first time the world has faced seemingly unsurmountable challenges, nor will it be the last. The largest threat to humanity is a lack of co-operation, as it was the collective ingenuity of humans that overcame the problems of the past.|
Hey Siri, Are You Still Listening?
|Every January, 150,000 tech die-hards make the pilgrimage to Las Vegas to attend the Consumer Electronics Show (CES) – a Disneyland for techies. Among the cornucopia of gadgets and gizmos, our favourite was a newly unveiled homeware product that allows you to modify a room’s scent by stating simple voice commands. “Hey Siri, make my lounge smell of coffee!” As these technologies enter into the most intimate aspects our lives (such as voice activated kitchens and bathrooms), concerns regarding privacy and data protection are being raised. Apple downplayed these concerns by turning a classic Las Vegas quip into a billboard!|
|As Americans celebrated Martin Luther King Day this week, we revisited his letter from Birmingham Jail, where Dr King’s words ring as true today as they did in 1963.|
“Injustice anywhere is a threat to justice everywhere. We are caught in an inescapable network of mutuality, tied in a single garment of destiny. Whatever affects one directly affects all indirectly”
““We will have to repent in this generation not merely for the vitriolic words and actions of the bad people but for the appalling silence of the good people”
“Justice too long delayed is justice denied”
Who Am I?
|We’ll be very impressed with who guesses this one correctly! Clue – think creatively!|
Pic of the Week
|Although it may not look like much, this photo below is the most liked photo on Instagram!|
|The photo was posted by the account world_record_egg, with the aim of surpassing social media starlet Kylie Jenner’s previous record of 18 million likes. As of this morning, the egg had more than 50 million likes!|
Video of the week
|Forget the doomsayers, the world is full of wonderful people like this!|