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News and Blog

  • The Economy’s Hidden Problem: We’re Out of Big Ideas

    By all appearances, we’re in a golden age of innovation. Every month sees new advances in artificial intelligence, gene therapy, robotics and software apps. Research and development as a share of gross domestic product is near an all-time high. There are more scientists and engineers in the U.S. than ever before. None of this has… Read more…

    The Economy’s Hidden Problem: We’re Out of Big Ideas
  • The Best Investors In The World Aren’t Special And Neither Are You

    One of the great things about investing is the many ways that people approach it. Throughout history it’s been shown that hundreds (if not more) ways have been used to turn a profit within the stock market…. Whether you use fundamentals, technicals, astrology, or hire a monkey to throw a dart. However, one commonality among… Read more…

    The Best Investors In The World Aren’t Special And Neither Are You
  • Statistics And Other Things

    Last week LB spoke at the Young AICC in what was a fairly polite look at shares versus property. You can tell by the fact that I used the world polite that I obviously wasn’t speaking. After the event there were a few things I pondered on the way home. The first was my observation… Read more…

    Statistics And Other Things
  • Ten Minutes With Tate – One Month In

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The Economy’s Hidden Problem: We’re Out of Big Ideas

By all appearances, we’re in a golden age of innovation. Every month sees new advances in artificial intelligence, gene therapy, robotics and software apps. Research and development as a share of gross domestic product is near an all-time high. There are more scientists and engineers in the U.S. than ever before.

None of this has translated into meaningful advances in Americans’ standard of living.

Economies grow by equipping an expanding workforce with more capital such as equipment, software and buildings, then combining capital and labor more creatively. This last element, called “total factor productivity,” captures the contribution of innovation. Its growth peaked in the 1950s at 3.4% a year as prior breakthroughs such as electricity, aviation and antibiotics reached their maximum impact. It has steadily slowed since and averaged a pathetic 0.5% for the current decade.

Outside of personal technology, improvements in everyday life have been incremental, not revolutionary. Houses, appliances and cars look much like they did a generation ago. Airplanes fly no faster than in the 1960s. None of the 20 most-prescribed drugs in the U.S. came to market in the past decade.

The innovation slump is a key reason the American standards of living have stagnated since 2000. Indeed, absent a turnaround, that stagnation is likely to continue, deepening the malaise that has left the middle class so dissatisfied.

More here – Wall Street Journal

PS: No invention of the past 50 years matches the invention of indoor plumbing for a change in the way people live.

The Best Investors In The World Aren’t Special And Neither Are You

One of the great things about investing is the many ways that people approach it. Throughout history it’s been shown that hundreds (if not more) ways have been used to turn a profit within the stock market…. Whether you use fundamentals, technicals, astrology, or hire a monkey to throw a dart. However, one commonality among those that have risen to the top of our field have had one thing in common: They follow a process. The Market Wizard series by Jack Schwager has countless examples of this, with many of the investors echoing each other in their adherence to following a defined discipline.

More here – Andrew Thrasher – Technical Analysis

PS: My view is that the majority of people fail at the majority of things they attempt because they dont understand that success is built around process. It is not built around making it up as you go along.

Statistics And Other Things

Last week LB spoke at the Young AICC in what was a fairly polite look at shares versus property. You can tell by the fact that I used the world polite that I obviously wasn’t speaking. After the event there were a few things I pondered on the way home. The first was my observation that I am old and have been around for a long time, as such you get a different perspective on markets of all sorts. Since I became interested in markets I have seen the following –

  1. The bull run of the 1980’s
  2. The 1987 Crash
  3. The collapse of the GBP and its removal from the ERM
  4. Japans wonderful bubble and eventual demise.
  5. The collapse of Barings Bank
  6. The Dot Com boom
  7. The Asian Economic Crisis
  8. The Dot Com bust
  9. The bull market of the 2000’s
  10. The GFC

This is the benefit of longevity, my observation of property folks is that they have only ever seen a bull market and this coloured many of the points they made. To them it was inconceivable that property could ever encounter problems. This observation is simply a function of their lack of experience and the fact that if you had bought property in Melbourne any time in the past decade it has gone up. I saw the same thing happen to traders during the Dot Com boom and every other boom I have witnessed. I had a not so close acquaintance who worked for a local branch of a US tech company who was always boasting about how easy it was to make money. All you had to do was to borrow money and buy anything with dot com at the end of the name. I asked him on numerous occasions what he would do when the music ended and he said it never would and he was too clever to be caught. A few months later the Porsche was gone, as was the big house and the Harley.

There is little wisdom to be gained in having the same experience over and over again.

The second observation I made was the reference to the median price of houses. The use of the median as a measure where there are few outliers has always intrigued me. The statistical argument for using a median as a data point is that the average can be skewed by a few outlier values. When I was a student I had a stats lecturer who constantly laboured this point and for ever going on about the mathematician who drowned in a creek that had an average depth of three feet. When you have a series of outliers occurring with some regularity then the median is a better measure that the average. This is a particular problem in small sample sizes. However the best figure I could find said that in 2015 there were  63,133 home sales in Melbourne – this is not a small sample size.

Perhaps the answer as to why those involved in real estate choose to use the median price can be found in the picture that is presented when you compare average sale price with the average median price.

mean_median

Ten Minutes With Tate – One Month In


 

Jack Schwager presents: 15 Hedge Fund Market Wizards

Financial Conduct Authority Report

I have been scanning the Financial Conduct Authority Report out of the UK which if you are in need of a good snooze you can read here. One thing did catch my eye and it was the chart below which looks at the profit margin of the funds management industry in the UK.

Nice work if you can get it…..

Fund

Interesting Stat Of The Day

A little while ago I was playing around looking at the returns on the components of the S&P/ASX 200 in order to get a sense of what the distribution of returns for the year to date were starting to looked like. One of the reasons for doing this is that markets seems to be in the doldrums when we look at it from the perspective of what the index is doing and also public interest. Public interest is firmly rooted in the bubble that is real estate and think that this is the only game in town much to the detriment of the overall economy.

What surprised me is the number of stocks that beat the index for the year to date and the number that have had stonkingly large moves. One of the problems of looking at something everyday is that you dont tend to notice this sort of data in much the same way you dont see your parents getting old. You see them constantly as a child so you dont notice the incremental change over time. The same is true of markets unless you take a step back you dont actually see what is going on.

The table below contains all those stocks that have beaten the index to date and I have highlighted the number that have had triple digits returns.

returns

 

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