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by Bertie

Amazing growth!

May 20, 2013 in behavioural economics, Investment

You would be tempted to think that Germany’s growth in GDP over the past quarter was dismal, 0,1%.

But there is in Germany as is often the case a disjunct between the country’s GDP and its stock exchange and specifically the companies indigenous to that country, but who trade globally.

Look at the growth you could have achieved with selected German stocks if you had bought at the nadir of the crisis on 6th March 2009:

Volkswagen:   438% up!

BMW:                262% up!

Adidas:             272% up!

Bayer:              142% up!

No wonder the DAX (is the DOW and S&P) is at an all time high. How much more room for the upward movement – that’s the question of course.

I have one question though on the issue of “all time high.”  Comparing the heights of the DAX, DOW and the S&P in 2007 with the present should take inflation into account, or not? An S&P at  14000 in 2013 surely is not equal to an S&P 14,000 in 2007?

I would love to hear your comments.

 

 

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by Bertie

Youth employment is not a problem!

May 15, 2013 in Euro Crisis

Well it certainly is in southern Europe and most emerging markets and especially South Africa.

BUT NOT in Germany.

The Frankfurter Allgemeine Zeitung (FAZ for short), which regular readers will by now know is my current favourite Sunday reading, had the most remarkable open letter two weeks ago by their editor Winand von Petersdorff (aged 49) to his son Jost (aged 19).

His advice to his son, you generation will be assured of jobs. You can take your time to pick the best opportunity.

Absolutely remarkable. No editor of a Spanish or French or Greek or South African newspaper can write the same. The German economy is on the brink of full employment! Already four of the German Länder (Provinces) have full employment.

How did this happen? First of all demography. The Baby Boomers are on the verge or retiring and the German Baby Boomers had fewer children than their equivalents in the rest of Europe and the emerging world. The potential work force is so much diminshed.

Secondly the German economy took the pain before the crisis began. In an era where people are by default cynical about politicians, the previous German Chancellor, Gerhard Schröder stands out as unique in sacrificing his political career for the future well-being of Germany. He negotiated a new treaty with the unions, benefits were contained, all the things Germany now demand from southern Europe, before the crisis struck. That is why the German economy can now carry its able working population and the future for German youth looks so rosy.

If Angela Merkel is so imposing a leader (and she must rank as far as female statesmen go with Catherine the Great, Elizabeth I and Margaret Thatcher) it is because she is standing on the shoulder of giant, Gerhard Schröder (to take a quote from Isaac Newton).

Looking for a job? Learn German my young friend!

 

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by Bertie

The Hummer or the Prius?

May 14, 2013 in Environment

Things are not always as they seem. I was most amused last week when a client and friend who recently finished first in his MBA year at a top Business School in South Africa recounted the following case study they did  some three years ago:  Taken over the entire life-cycle of the product, which leaves the biggest carbon footprint, the Hummer or the Prius? Well just posing the question means that you will deduce the improbable answer.  Taken into account the carbon needed not only in the reloading of the batteries of the Prius, but also the disposal of the batteries in an environmentally friendly way, translates in the Prius losing out to the Hummer.

Things are not always as they seem!

Which brings to me to another oblique take on climate issues.

At first glance it looks like another crack pot take on global climate change. The title of the article: “In defense of Carbon Dioxide” with the subtitle “The demonized chemical compound is a boon to plant life and has little correlation with global temperature.”

Until you look at the authors: Harrison H Schmitt , ex Apollo 17 astronaut and adjunct professor of engineering at the University of Wisconsin-Madison and William Happer, Professor of Physics at Princeton University and former Director of the Office of energy at the US Department of Energy.

Once again so much for the conventional wisdom of the entire scientific community speaking with one voice on the topic. The article appeared last week in the WSJ. Go and read the full text there. It really helps to think differently!

Here is just a short excerpt from the final paragraph:

“We know that carbon dioxide has bee a  much larger part of the earth’s atmosphere than it is today and the geological record shows that life flourished on land and in the ocean during those times. The incredible list of supposed horrors that increasing carbon dioxide will bring the world is pure belief disguised as science.”

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by Bertie

How good are you at finding the truth?

May 9, 2013 in behavioural economics, Education, Smart thinking

Buffet clearly understand that you it is more important to look for facts that disprove your notions or theories than for instance that support your opinion – if you want to find the truth of the matter.

However, it is so ingrained in us to look for confirmation of our opinions that psychologists have named it the Confirmation Bias.

Click back to Chris’s response to the previous post: http://blogs.fin24.com/bertieduplessis/2013/05/07/what-darwin-taught-buffet/ and my answer to his response.

Here is the classic question that test your ability to supersede the confirmation bias (only 30% of MBAs and other university students get this right):

You have four playing cards in front of you. If the card has a vowel on the one side it should have an even number on the other side. The four symbols you can see are: E, 4, K and 7.  Which card(s) do you need to turn over to make sure that the statement is true?

Let’s discuss tomorrow!

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by Bertie

What Darwin taught Buffet

May 7, 2013 in Smart thinking, Uncategorized

Pay attention to information that seems to disprove your beliefs!

Darwin had the habit of writing down contradictory information within 30 minutes of coming across it, not doing this, he said, allowed the brain to come up wIth reasons not to take the contradictions seriously. (Reports WSJ)

Buffet applied the principle at his recent Omaha event, when he invited  Doug Cass ( a hedge fund manager who shorts Berkshire Hathaway) to be part of the panel discussion.

The WSJ also reports that only 12% of a sample of 500 companies reported that the floor is open to any one at their annual meetings.

I would want to avoid those ones when investing!

 

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