Friday, 30 December 2016

Is it the End of Times or the Start of the Greatest Boom Ever?

2016 rolls to a close with the FTSE100 closing on all time high of 7142. So have we hit peak times in the UK or is this the start of something truly great?

When I started investing (or at least started keeping proper records of my investing) in 2007, the FTSE was at 6607. So in the 9 years since, it has crept up just 8%. Hardly an indicator of a booming economy. Of course, we've had the Great Financial Crisis in that time and several other mind-blowing black swans like Brexit, Euro Crises, wars, and terrorism.

Every bit of finance reading I do tells me that it is foolish to try and time markets or even worse do your own stock picking, yet if you had bought a FTSE tracker you'd be just 8% better off over those 9 years. That is truly awful performance for your money. No wonder cash still holds its appeal even with its derisory interest rates.

This year the Team Dave Fund of Fun-ness finished up 24.7% - the best year for quite some time.

This result was all due to timing the market - going big with two chunks of money - once in January when markets were nervous about Fed tightening and immediately following Brexit. The rebounds after each drop have been huge and represented excellent opportunities. In January buying anything in the US market was the thing to do while in July buying anything in the UK was the correct option.

I got 'lucky' both times I guess. And so for this year, I can't help but feel we have hit the top and will probably bob around this level for a while. America seems massively over-valued and Trumptimism could be sadly mis-placed - how quickly can he genuinely make changes? And does anyone actually believe he knows what he's doing?

In the UK, there is no catalyst for a boom to come - everyone here is stretched massively by housing costs while business is equally poorly treated by appalling business rates and high rents. Meanwhile savers continue to be pillaged by Mark Carney's ridiculous behaviour at the Bank of England. How does he sleep at night while the pound is ravaged, companies and intellectual property are sold off to the world. Someone really does need to point out to him that currency / exchange rates are only useful to business when someone actually wants to buy your product / service. If you make something no-one wants, it doesn't matter how cheap it is in exchange terms.

This year's massive devaluation was the third one I've experienced here and every time, it provides only VERY short term boosts. Meanwhile it destroys savings, imports inflation, and reduces internal investment. Who knows how Brexit will turn out this year. Maybe that will be the catalyst for a boom? It's a fingers crossed time though and hugely reliant on people in the civil service and government actually caring and doing their best rather than feathering their nest. Maybe we'll see an actual real redistribution of income because of it but I doubt it.

My guesses for 2017:
Cocoa - it was destroyed in 2016 - bound to make a comeback eventually.
Gold - again decimated - got to be an option if inflation makes a re-appearance.
Any decent internet based world focussed company. eg. Boohoo, Superdry, Microsoft.
ITV to be taken over.
Samsung to fire a bunch of people and return from the ashes.

Monday, 15 February 2016

Management - is anybody worth 350x more than another person?

You have to listen to this podcast by NPR on why CEO pay exploded in the 90s and has continued ever upwards ever since.

Episode 682: When CEO Pay Exploded

Friday, 22 January 2016

They go down, they go up

Spotted in a telegraph comment on the fractious stock market this week. 

News from a week on the stock market. 
Helium was up, but feathers were down. Paper was stationary, but pencils lost a few points. Lifts rose but escalators continued their slow decline. Switches were off and mining equipment hit rock bottom. The raisin market has dried up. Pampers remained unchanged while Sun peaked at mid-day. Andrex tissues touched a new bottom.

Monday, 21 December 2015

Awful Management, Horrible People

The longer you invest in companies, the more you realise that management are the key to everything the business does. You don't have to look hard to see companies behaving badly in this world. From oil companies, banks, utilities, and retailers - it seems everyone is putting their hands in the till, robbing their customers, destroying the environment or mistreating their staff. Bad management has been mentioned before on the blog and its a theme that needs continuing.

What continues to surprise though is that at the top of companies and in management positions everywhere are PEOPLE. People just like you and me who wouldn't want to be treated poorly, paid badly, or provided an inferior service. As a shareholder, I want the staff in those companies to feel valued, paid fairly, and therefore be productive at work and in their communities. As a shareholder, I want the customers to get great service, buy more products / services and recommend the company to friends and families creating a growing business. As a shareholder I don't want either of the next two examples happening to me.

Just this week (and it's Christmas remember), we've got another couple of examples of terrible management making bad decisions for staff and customers.

First, there's Mike Ashley and his team of thugs who run Sports Direct. The Guardian have produced an expose on working conditions there and detailed how poorly staff are paid and treated. The share price of SPD.L has dropped to 570p after averaging around 700p during the last 6 months. Poor treatment of staff has not just affected Mike's workers but also the millions of people who have shares in Sports Direct in their pensions. This poor attitude to people has cost everyone money.

Secondly, NPower's customer service has been so bad they've been fined £26M. Mental! Had they bothered answering their phone, treating customers with dignity, and sorting out the problems they would have avoided having to pay this fine. As it is, behaving like a normal company would almost certainly have cost them less than the fine - spending a few million more on a customer service centre would have solved most of the issues. NPower is run by German company RWE and routinely loses money in the UK. It's a basket case that should probably be closed or be absorbed by someone who knows what they're doing.

I'm reminded of Seth Godin's writings here. Whatever you feel about Seth, his common sense posts may just be spouting the obvious a lot of the time, at least he's putting these observations into print. A recent post suggested the pursuit of perfection in companies was impossible, the resources required to make small incremental increases in service levels were unaffordable. He called it 'Understanding the Doublings'.
One approach, which some organizations use, is to redefine your usual systems so you are able to please most people without your team going through a Herculean sprint every day, and then (this is a key element as well), eagerly and regularly apologizing and giving refunds to the one in 150 where it just can't be done.
Common-sense stuff. Nobody's perfect. Trying to get there is impossible, but having a system in place to compensate when you can't meet impossible expectations is good business. Your customer isn't put out and your reputation stays intact. This just isn't happening in the UK at the moment. Everybody has given up on perfection - that's fine. But they've also given up on Good, OK, Average and Mediocre. I can think of only one place in the country that has any standards whatsoever in customer service and that's John Lewis.

No wonder people are beginning to seek local over national. Reputation is easier to to ascertain with a local company or person - a few phone calls and you've got the recommendations that you require. Locally a Facebook group helps with recommendations on companies that provide great service and products. A quick post to find out the best plumber, electrician, etc. gets plenty of replies in our community. How are the Sports Directs / NPowers of the world going to compete against that? Answer: They're not. They're dinosaurs that are going to die.

Bad management doesn't seem to be going away in the UK, despite numerous fines and general contempt now commonplace for industries that perennially offend (eg. Banks, Utility companies). Why do leaders behave this way? Would they want to be treated this way themselves? Are they so removed from society they no longer understand how the world works?

For more information on how to behave properly as a manager in an organisation see any of Tom Peter's books or his blog. Putting People First is basically his entire manifesto and would be a great place to start for any manager / leader of a bank, shitty retailer, or utility company.

Thursday, 5 November 2015

Fundsmith - still delivering

Wrote about Fundsmith a few years ago and popped a few pounds into Terry's fund at the time. It's done ok....

Fundsmith at five: 'I naively supposed the financial crisis had taught investors a lesson'

The highlights:

17.2% annual returns over 5 years
121% up

Not bad.

Wednesday, 23 September 2015

Save Dat Money

Something a bit different this time but with the same ethos behind Investimouse's approach to life. This is a video by rapper Lil Dicky. Not being a mega celebrity superstar, Lil Dicky has no money to make his video so approaches those much wealthier for assistance to make his new video, $ave Dat Money.

I may not have sold it that well, but it's very funny. Watch as Lil Dicky goes door knocking in wealthy LA suburbs asking to use their swimming pool, gets rejected by multiple big name car brands, and is forced to beg to get into a swanky nightclub for filming.

Remember kids, Save that Money.

Lil Dicky - $ave Dat Money feat. Fetty Wap and Rich Homie Quan

Friday, 1 May 2015

What does Insider Trading look like?



This is Creighton's share price for the last few months this year. You may remember I tipped them as my small cap guesstimate for this year in the year-end review post.  See them plodding along doing nothing until April 19th this year. Then a steady week of increasing share price. For no reason whatsoever. Until an RNS on the 30th April about them selling their Real Shaving business.

How is it possible for the world to know of these events before they are released to the share market?