Monthly Archives: September 2015

Be careful, think before “updating” to Windows 10

I rarely blog on issues outside of economics, investing or trading but this is different.

I have just made my biggest mistake of 2015. After many intrusive requests, I relented and installed Win 10.

What a mistake It took nearly 3 hrs to fully install Win 10. Then the problems started:

  • Win 10 had disabled one app that I use frequently.
  • While I could receive emails using Outlook I could not send emails.
  • Win 10 removed some icons including explorer.
  • The use of Word was very clumsy.
  • And at start-up Win 10 is impossibly slow.
  • Cortana in Win 10 is the so called “personal assistant” but seems to me to simply be an intrusive spying module. What does Microsoft do with the data?

Fortunately it took only 20 mins to totally remove Win 10 and revert to Windows 8.1. But now I am left with a compromised machine with… Continue reading

Uncertainty before a market fall?

Volatility has been the norm for equity markets over the past several months. This will continue given a number of events which are unfolding in this global low growth environment. Uncertainty continues over the Chinese economy. A more recent issue is the uncertainty over effects that mass immigration of refugees will have on the weakening European Union economy. John Mauldin in his recent newsletter underlines the political and economic problems that the refugee crisis brings to Europe and indeed the threats it poses to the future of the European Union. Russia’s intrusion into the Syrian war only heightens fear that Middle East conflicts will escalate and further exacerbate the refugee situation in the European Union.

The economic uncertainties are mirrored in the daily chart of the ASX200 below, which shows a symmetrical triangle which is a pattern of uncertainty. This uncertainty will likely be resolved this week given the very… Continue reading

World markets are likely to fall but China is the key.

Although the decision of the Fed not to raise interest rates has at least temporarily removed a variable from the markets, volatility in world equity markets can be expected to continue. Of the several remaining very significant unknowns which contribute to this volatility the most important one is China.

China has recently had four interest rate cuts and reduced the reserve-ratio requirement. These measures and others which in effect reduce financing costs for local government authorities, have created conditions that exacerbate the debt situation and potentially increase the risks of instability in the Chinese financial system.

Easy money conditions were a major contributor to the Chinese stock market boom and as a result retail investors are now the biggest contributors to the national debt. The Chinese debt is now about US$25 trillion and is estimated to be close to 250% of GDP. In fact the rate of growth of debt… Continue reading

Do growth stocks have a place in the portfolio?

After a difficult year for investors it is worth looking critically at the portfolio to see what adjustments need to be made. The question to ask is, do growth stocks have a place in the portfolio in a world in which growth is slowing?    Consider the logic of the following.

World growth is slowing

In Europe, growth for the last quarter has slowed significantly. Growth in the US economy is below its long-term average and is not sufficient to stimulate the global economy. In Asia growth is slowing: Japan has recorded an annualised fall in GDP of 1.5%. China’s economy has problems and the recent devaluation of the yuan is a clear indication that growth has fallen. In the BRIC economies, only India is likely to maintain a high growth rate during 2016.

So the global growth outlook is deteriorating at a time when developed economies… Continue reading

Are CBA, TLS and BHP a buy in a falling market?

In this falling market the prices of some blue chip stocks have fallen further than is justified given the fundamentals of their businesses. Is it a time to buy these stocks when the world economy is weak and the Australian economy is likely to go into recession? There are two factors that investors consider when looking to buy quality stocks which are showing attractive returns in a downturn.

  • Will the dividend be maintained into the future?
  • How much further will the share price fall and will it recover?

To answer these questions it is a matter of assessing each company on its merits. The following table shows the dividends for the current reporting season for 5 companies, with the returns based on share price as of September 4th. Clearly the dividend returns of 8% to 10% per annum are very attractive given the current cash rate of 2%… Continue reading

Risk, Probability and Investing

Successful investing is all about understanding and managing risk. One approach to managing risk is to consider the probability of longer term trends in major economic indicators.

Consider the probability that the following economic events will occur.

There is a very high probability that:

  • The AUD will continue to fall perhaps to 50 Cents
  • Equity market volatility will continue
  • World economic growth will be low for the foreseeable future
  • Low interest rates will continue at least through 2016
  • The problem of sovereign debt will continue
  • Deflation will continue

While the level of confidence is lower for the following events, there is a probability that:

  • The Australian economy will enter recession
  • The RBA will cut the cash rate by 25 basis points
  • Unemployment will rise in Australia
  • The United States Fed will not raise interest rates
  • Chinese economy will continue to weaken
  • The commodity bear market will continue

The assessment of… Continue reading

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