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Sovereign Wealth Funds

In the circuitous way you often come to things I was looking at a collection of charts on base metals. As you can see from the screenshot below there really has been nothing to get excited about over the past few years, which puts lie to the notion of our supposed mining boom. What we really had was a mining infrastructure boom which is now long gone and everyone who raced to buy properties in the middle of nowhere are probably suffering the death of a thousand cuts.

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However, the parlous state of commodity prices is not the point I am chasing. Thinking about commodity prices for some reason got me thinking about sovereign wealth funds. So I decided to dig up some figures and look at the relative sizes of the major players in the sovereign wealth fund business. However, instead of simply taking a list from Google I decided to look at only those funds whose income had  been derived from the management of commodity resources. As can be seen from the table below those canny Norwegians come out on top with their careful management of the royalties that have flowed from the North Sea oil fields.

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What did surprise me about this list was the presence of several US states – I was unaware that many had created their own funds based upon resources within their states. For some reason I had assumed that any attempt to do this would be viewed as communism by the general rabble and roundly defeated as an idea. What did not surprise me was the complete absence of a domestic wealth fund other than Western Australia’s fairly poor showing at the bottom of the table. The local future fund derives its income from government surpluses and its current balance sits at about $109B .To get an idea of the scope of the disparity between funds consider the chart below.

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As a thought experiment it is interesting to ponder what size a domestic commodities based wealth fund would be. The table below from the ABS shows that whilst Norway produces more oil than we do, we trounce them and many others on the production of other commodities.

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As interesting as it is to consider such things, unfortunately as with all things, vested interest gets in the way and the loudest squeal in Australian politics is always that of the ever so aggrieved billionaire.


Charts Of Interest 27/03/15

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Designing Your Life

“It took off in just about a heartbeat,” says Evans, who oversees instruction with help from guest lecturers and a small army of student volunteers, who lead discussion groups. Today, 17% of seniors enroll in “Designing Your Life,” and many more vie for the limited seats in each section. “We’ve had students literally teach the class on the side to their friends who weren’t enrolled,” he says.

Evans divides the course into two parts: first, he says, “We reframe the problem. That’s where dysfunctional beliefs get blown-up. Then we give them a set of tools and ideas to take steps to start building the way forward.” Each course section convenes for one quarter, two hours per week.

Here’s what they learn: gratitude; generosity; self-awareness; adaptability. All reinforced by design thinking-based tools, from a daily gratitude journal to a deck of cards featuring problem-solving techniques. In lieu of a final exam—the class is pass/fail—students present three radically different five-year plans to their peers. Alumni say they still refer back their “odyssey plans”—a term that Evans coined—and revise them as their lives and careers progress.

Maqubela eventually found out that he had played a role in his now-wife’s odyssey plan—but at the time, “she wouldn’t show it to me.” Today, they still reference “Designing Your Life” when making decisions together. “Building your life around somebody else, and orienting around love as part of one’s career, is part of the class,” he says.

For years, students have resisted this kind of overlap between university-sponsored programs and their private lives. After the Civil War, mandatory chapel disappeared, academics rather than ministers became university presidents, and courses like “Evidences of Christianity” vanished from the required curriculum.


What Do You Think You Know

The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.

Warren Buffett, annual letter to Berkshire Hathaway shareholders, February 2008.

One of the trading beliefs I cling to dogmatically is that I don’t know anything about markets and I know even less about the instruments I trade. I will happily and extreme confidence tell anywhere who asks me that I have no idea where markets are going. I will readily place a series of bets on where the market has been but where it will go is a mystery to me since what I think doesn’t matter. It is important to understand that only one-opinion matters and that is the markets opinion – my opinion doesn’t count nor does yours. All we can do is align ourselves with the markets opinion and then be wary of when the market changes its mind.

All too often traders or investors get caught up in their narrative. Somehow believing that their story is important and can in some way be communicated to the market.

Instead of finding this lack of ability distressing I actually find it liberating because I have found over  the years I do not have to know where the market is going. All I need to be able to do is avoid catastrophic errors and make money when I fortuitously align myself with the market. The reason I raise the point of not knowing is that it rids me of any existing belief regarding an instrument. This freedom brings with it clarity.

Consider the chart below of Qantas.

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Qantas is currently the second best performing domestic stock I hold. In conversations with others who trade similar systems to mine it has emerged that many do not hold Qantas despite their system telling them to. The reason they didn’t take the trade is that they had a perception of what an airline stock should do and go up was not one of the perceptions they held. Intriguingly, last year the DJ US Arline Index was one of the best performing sectors in the US – a rally that was missed by many because investing airlines could never be a good thing.

Airline Index

Knowing nothing means expecting nothing and expecting nothing is generally a good thing.

Opportunity International


Why We’re All Overconfident

On the flip side if we were not overconfident we would still be living in caves….


At Kodak, Clinging To A Future Beyond Film

The story of Kodak fascinates me – the company that invented the digital camera 1975 was eventually sent broke by it.

What happens after a tech company is left for dead but the people left behind refuse to give up the fight? At Kodak the answer is to dig deep into a legacy of innovation in the photography business and see if its remaining talent in optics and chemistry can be turned into new money in other industries.

Once a household name as big in its day as Apple and Microsoft have been for later generations, Kodak was part of everyday life, its film — sold in a yellow box — recording births, vacations, weddings. And then Kodak became a cautionary tale about what happens when a tech company is slow to change. For Kodak, the advent of digital photography was ruinous. Today it has $2 billion in annual sales, compared with $19 billion in 1990 when consumer film was king. It now has 8,000 employees worldwide; it had 145,000 at its peak.

Since emerging from bankruptcy, the company has mostly served niche film markets — there are still a few die-hard directors who refuse to shoot digital — and provides equipment for printing newspapers, on packaging and the like. Much of its revenue comes from legacy businesses. For Kodak’s new chief executive, along with veterans like Mr. Taber, the key to survival is in its research legacy, thousands of patents and a coterie of scientists who are making new discoveries.

More here – The New York Times

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