Monthly Archives: April 2014

The thinking investor

In a recent newsletter economist John Mauldin noted that successful investors understand their investment beliefs and the principles that underpin all of their investing activities. This caused me to reflect on my approach to investing.  The following is my approach, the process that I go through and the questions I need to ask when considering any investment:

  • Is this market efficient, does it represent reality given the available fundamental data?
  • Am I truly objective in my assessment of the market and its potential to yield a profit?
  • What returns do I require from my investments?
  • Given my assessment of macro-economic conditions and the position of the market, is my investment plan… Continue reading

Is continued devaluation of the US dollar likely?

The United States dollar (USD) is the international reserve currency based on the successful and stable United States economy with its abundant dollar-denominated securities and a market for United States treasuries which is both liquid and deep.

While the US dollar continues to reign as the global reserve currency recent IMF analysis shows that it has slumped to a 15-year low, raising concerns that it may lose its reserve currency status.

The value of the USD is measured by the United States dollar index which estimates the value of the United States dollar relative to a basket of 6 other major currencies of which the Euro comprises 57%.  The  monthly… Continue reading

What could trigger a market reversal?

There are currently a number of socioeconomic uncertainties in the world, any one of which has the potential to lead to another widespread financial crisis. But is another bear market similar to 2008 likely to occur?

Technical analysis suggests that there is a high probability of a widespread market reversal when analysing the stock market indices of all major world economies. RSI analysis shows a pattern which is now evident in all major indices, (as it was in late 2007) suggesting the high probability of a worldwide market correction. 

Since technical analysis suggests the high probability of a significant market correction it is worth considering whether there are any economic threats which… Continue reading

Sell in May and go away

Sell in May and go away is a Wall Street adage which is based on strong historical data. There is persuasive evidence from the United States markets showing that the months of November to April offer significantly higher returns than the months of May to October.   For example data from John Mauldin show that “if you had invested $10,000 in the Dow in 1950 and only kept the money in stocks from November through April, you would have had $684,073 as of the end of 2011. If you reversed the strategy and invested for the May-October period, you would have lost $1,024 over the same 61-year period”. When this analysis is… Continue reading

A significant fall in oil price is likely!

It is only a few years since belief in the concept of peak oil provided the grim prospect of a world where oil was at its point of maximum production  and a decline was imminent with the expectation that oil prices would escalate. But now the whole world energy scene has changed with fracking technology making available vast amounts of formerly inaccessible hydrocarbons.  This changes the balance of energy supply and demand.  For example the USA is expected to become not only self-sufficient in energy but to become a significant exporter within a few years and there are significant implications for other nations who are either net energy consumers or providers.… Continue reading

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