Sunday Culture

What would happen if you take a group of wacky + creative + talented graffiti artists and put them inside an empty building?

Instagram: @sofles @selinamiles @drapl @fintan_magee @butchdaddy @ironlak www.facebook.com/ironlak

When I'm travelling and find well done graffitis I always try to take a picture. Because it might not be there tomorrow. It is an art form that constantly lives.

German Energy

Note for the future:

Lately I've seen some news complaining how Germany must lower their energy prices. This might provide good investment opportunities for value investors. Because if electricity prices go down or something "negative" happens suddenly, like government taking strong measures, then it is possible that all energy companies will experience a strong negative share price decline. This could happen very quickly, but I'm more expecting a slow long-term reaction. 

Lower returns will also mean that any company with money problems will have troubled times ahead of it. 

I must go through all companies in the German energy sector so I will be prepared for sudden value opportunities. 

Portfolio status +52%

If I had been asked on first of January 2013 "what is stocks I would recommend to form a portfolio with", I would have given the following names: AIG, Bank of America, Citigroup, China Green Agriculture, First Solar, Nordic Mining, Protective Life Corp, Tesla Motors, Xinyuan Real Estate, Longwei Petroleum Investment Holdings.

You can check that I have mentioned all those names earlier in my blogs posts. In January I quickly combined my favorites together incase needed that info. I never found the moment to check the situation more carefully, but I'm sure the list would have been pretty much the same due to my careful earlier research.

In my heart I'm a value investor. That is the basic of how I choose stocks. It doesn't mean I only invest to value stocks though, I also like technology and growth companies with strong quality etc. But value fundamentals are the basic how I look at every company. Strong future with a strong return is what we always expect from our stocks picks, right?

I had been following all these companies for some months before January and I was happy with what I had found out. Now looking back there is only one company that in the end was a very bad choice. That was Longwei Petroleum Investment Holding, it was in January revealed that LPIH is actually just one those those chinese hoax companies we are so afraid of. It is an old hoax company and seemed very good by all the information I found out about it. But this is why we have a portfolio of stocks instead of one. And in the end this one doesn't matter since rest of my picks are doing much better and are able to cover it. I just have to learn from this experience and use it later.

Most of my picks are up 20-40%. But a few are different. First lets settle the case on Nordic Mining ASA. They are currently still waiting for their final permits (Thank you Norwegian government) so they had to get more money from the markets and this took their stocks price down. Currently I'm still trusting they will eventually get their permit and all ends well. So I'm definitely keeping them in my portfolio for now.

Two other positive surprised in my portfolio are Xinyuan Real Estate Ltd (+68%) and Tesla Motors Inc (+398%). Xinyuan has been doing very well and so far seems to be doing that in the future. So that one is staying in the portfolio for now. Tesla Motors is another case. After some slightly positive news investors got very excited and the stock has gotten up to great highs. To my eyes their stock price is greatly overvalued now and I'm expecting investors to notice this quite soon and sell their shares. Plus current news about a burning Tesla has also frightened the investors so Tesla Motor's stock will be sold from my portfolio. If stock price returns to more sensible levels, I might be buying it back then.

Current price will be used. 3rd of October 2013, spot price is $172,10. Giving us a return of 408,12% ($172,10-$33,87 / $33,87 * 100%) . The company has paid no dividends.

Portfolio Return

Prices used in below are taken on 16th of August and I admit they are not the closing prices of they day, but prices of the moment when I was checking. 

Plus this calculation does not contain any possible dividends or changes in exchange rates. I must remember to add dividends at the end of the year. 

With a total return of 52% I can be very happy with my picks. Most of these stocks will probably be kept in my portfolio after I re-check the prices incase they are now overvalued (That will be done at the end of the year). After selling Tesla and taking the failed Longwei out of the portfolio I still expect rest of my picks to at least stay in their current levels, or more likely keep going up for now.

Tesla Motor has indeed been a lucky pick. To have seen it risen so suddenly and so high is something an investor can usually only dream of. Even without it returns are still very nice if Longwei is left out as well from killing most of the return. With it total return drops to much lower, but still very acceptable, +13%

I plan to have a minimum of ten stocks in my portfolio but right now I'm a bit too busy to focus on it. So probably portfolio will stay as it is and I will take care of it as year turns. More about that as the moment comes.

Sunday Culture - Jaar

Nicolas Jaar - And I Say (Xinobi Edit)

CFA Institute Magazine

If you are not actively engaged with the financial markets, then there will be many good information channels that you are not yet aware of. One of those those quality sources, that also has most of its material online, is CFA Institute Magazine. Below you can find a link to one of their articles and HERE is a link to their archive. Enjoy! They have plenty of great articles for those who are interested.

Here is a good article that I was enjoying some time ago about weaknesses in our financial system.

ZOMBIE SWANS

Sunday Culture – Silver Magic

A few songs from a musician that never gained the fame he deserved, except in South Africa.

I only found out about him because I started to watch a movie telling about his life. Here is a trailer:

Sunday Culture

Fifth Element Diva song – full version. 

SINGING – EVGENIA LAGUNA.

Temptation – Willpower

I just read a HBR blog on how to grow a bit stronger by using your temptations to your advantage. Great to read and makes you think a bit more on how to improve yourself and have a bit more willpower. Original post is behind the link, here I just list the most interesting sentences of the text.

How to Use Temptation to Strengthen Your Willpower
by Peter Bregman, Harvard Business Review  |  12:00 PM March 27, 2013
Link to original post

Think about any good movie you've seen recently. I bet the first few minutes introduced a problem and the rest of the movie was devoted to the tension of a protagonist who wants something, usually with some urgency, that she does not get. Then, it was only in the last few minutes that the tension was resolved and she achieved whatever it was she was seeking. 

The reason good movies follow that formula is that there is no way to keep an audience engaged once that tension is dissipated. 

That's because ninety-five percent of our pleasure is in that tension. It's the tension of suspense, of anticipation, and it feels at least as good and lasts much longer than the resolution. In fact, we only care about the resolution because of the anticipation.

But consider how much time I spend anticipating the dinner, compared to eating it.

This, it turns out, is the key to strengthening our willpower. Willpower is mastering the tension of not getting what we want in the moment. How much easier would it be if, instead of withstanding, we could actually enjoy?

 Next time you feel tempted by something, take a moment to feel the pleasure of that tension. Don't think of it as temptation; feel it as anticipation. 

Indulge yourself fully — think about what you want and feel the emotions of wanting it. Then realize that as soon as you give in to the temptation, as soon as you release the tension, all the pleasure will be gone. 

We know from research that people who delay their gratification succeed more on a number of different criteria — relationships, finances, achievements. 

I'd like to add one more: Pleasure.

Growing Interest on Mexico

Lately I have started to be more and more interested about Mexico due to its current situation as a strongly developing country with great future potential and a great location to the USA's markets... Among many other reasons. Therefore I'm slowly trying to gain better understanding of Mexico's situation and as an investor of course about Mexican companies as investment targets. I will have to start learning Spanish to get a better inside view and also really be able to consider the possibility if I could move there in a few years. Which I'd be happy to do if I'm able find a job for myself. Moving outside Europe to a totally new place would be an amazing life experience.

Now listing short pieces from a text I recently read in the pages of the International Monetary Fund concerning Mexico.

The Comeback
FINANCE & DEVELOPMENT, March 2013, Vol. 50, No. 1
Herman Kamil and Jeremy Zook

•Over the past seven years, Mexican manufacturing exports rose from about 11 percent of the U.S. import market to an all-time high of 14.4 percent—at first elbowing out such competitors as Japan and Canada, but in recent years gaining market share at the expense of China. Between 2005 and 2010, both Mexico and China gained market share in the United States. Since 2010, however, Mexico’s gains in the U.S. import market coincided with a decline in China’s market participation.­                                              

•Mexico’s rebound has been driven primarily by exports of electronics, telecommunications, and transportation equipment. 

 •Only a handful of industries lost market share, including electrical equipment (still a major sector, accounting for 14 percent of Mexican exports) and apparel.­

 •Mexico’s comeback in the U.S. market reflects both its improved competitiveness and developments that are making Chinese exports relatively more expensive. Most important among these developments are a narrowing gap in labor costs between Mexico and China, increased productivity gains in Mexico, and rising transoceanic shipping costs.

•In addition, strong productivity increases underpinned by significant investment in the manufacturing sector in Mexico have helped lower the cost of labor per unit of output and increase the competitiveness of manufacturing production.

•Mexico has also benefited mightily from being close to the United States. The price of oil increased from $25 a barrel in the early 2000s to more than $100 in February 2013, which substantially raised transoceanic freight costs. This proximity has given Mexico a competitive edge over China, particularly when it comes to trendy time-sensitive goods and heavy and bulky items.­

•According to the 2011 U.S. Manufacturing-Outsourcing Cost Index (AlixPartners, 2011), goods produced in Mexico had the lowest landed costs (that is, their price at a California port) for U.S. importers in 2010 of all key low-cost outsourcing countries.  

•Mexico’s strong commitment to the protection of proprietary technologies has also helped it attract foreign direct investment, with its beneficial impact on efficiency. Mexico has a strong reputation for protecting international intellectual property, patent, and trademark rights and is a party to several international treaties, including the World Intellectual Property Organization Copyright Treaty.

•Mexico’s trade agreement network is one of the world’s largest; it has free trade or preferential trade agreements with 44 countries and has shown a strong commitment to avoiding the use of trade restrictions and ensuring unrestricted access to markets and intermediate inputs to companies operating in Mexico. Moreover, Mexico has signed international standards and quality agreements that facilitate the participation of local manufacturing companies in global supply chains, particularly in the automotive and aerospace industries.­ 

•A number of the factors that have contributed to Mexico’s increased competitiveness and its recovery of U.S. market share are likely to be long lasting—or structural, as economists say. These include the locational advantage, improved unit labor costs from enhanced manufacturing productivity and increased labor participation, and trade openness that appear to have underpinned Mexico’s improved competitiveness in the U.S. market in recent years.  

•Manufacturing in Mexico was hit hard by China’s rise on the global stage at the beginning of the past decade; but today, as some of China’s cost advantage has eroded, Mexico’s manufacturing sector is among the best positioned to benefit from the changing global landscape.­

If you wish to read more, please click here for the original text. 

The Seven Immutable Laws of Investing

I read an interesting text on laws of investing by a long term value investor BARRY RITHOLTZ. If you have been already investing for a long time this text might not offer anything new to you, but for everyone else it should offer some interesting reading. Original post can be found HERE containing plenty of explanations and graphs to support this text. Below you can read a shorter version

1. Always insist on a margin of safety

2. This time is never different

3. Be patient and wait for the fat pitch

4. Be contrarian

5. Risk is the permanent loss of capital, never a number

6. Be leery of leverage

7. Never invest in something you don’t understand

Sounds simple enough doesn't it?

But implementing them all will most likely take you a lifetime.

Now for a bit of information on each of the laws.

1. Always insist on a margin of safety

The concept of a margin of safety is probably one of the most important things Benjamin Graham taught us as value investors.

The valuation of the company you are buying is probably the most important factor that will determine your future returns.

You always want to make sure that you do not buy an investment at fair value but below fair value so that you have a margin of safety should something go wrong with the company.

And because valuation is an imprecise science a margin of safety gives you the added security in case you did something wrong in your calculations.

For me a margin of safety means researching only companies that are valued a lot cheaper than the market.

I will be the first to admit that these companies are not perfect, that's the reason why they are cheap. But numerous research studies have shown that just randomly buying a portfolio of the most undervalued companies will ensure that you beat the market over long periods of time.

What I have done over the past 20 years is look at a lot of research studies and combined the factors that led to the companies outperforming the market. I've combined all these factors into a model that I used to select and evaluate the investments I make.

This has led to me substantially outperforming the market over long periods of time.

2. This time is never different

James mentioned that Sir John Templeton defined "this time is different" as the four most dangerous words in investment.

Whenever you hear talk of a new era (remember “clicks not bricks”, in the Internet bubble) you should make sure that you start running in the other direction.

3. Be patient and wait for the fat pitch

Patience is a very important trait of a value investor. When investing patience is required not only while you are waiting for the companies you bought to be re-valued but also because you have to be patient and wait for an undervalued opportunity to appear before investing.

In times like the Internet bubble it may be very frustrating as you may be sitting on cash, searching for an undervalued investment, while the market and the returns of your friends are going through the roof.

Well you know how that turned out; investor did well for a year or two but thereafter lost everything when the bubble deflated.

4. Be contrarian

Value investors tend to naturally act contrary to the popular investment trends because trendy companies offer no margin of safety.

When others are selling you are normally buying and when others are buying and talking about stocks all the time you are most likely selling or have sold already.

This is not easy to do. Humans are by nature herd animals and are much more comfortable doing the same thing as everybody else than standing on the side line either watching or doing the exact opposite to what all your friends are doing.

5. Risk is the permanent loss of capital, never a number

With this law James refers to institutional investors who would like to define risk as a single number. Think of all the terms like beta, standard deviation and value at risk (VaR) you have heard before.

This is however not the case. Risk is a multifaceted idea that cannot be reduced to a single number.

James then names three risks that can permanently impair your capital:

1) Valuation risk – you pay too much for an asset;

2) Fundamental risk – there are underlying problems with the asset you have bought (for example a value trap); and

3) Financing risk – leverage.

6. Be leery of leverage

Debt is a dangerous animal. And adding debt to a bad investment can never make it better.

Also simply adding debt to a low return investment doesn't transform it into a good return generator.

As you know value investing requires patience and if you have invested with debt the repayment of the debt may come at exactly the time when it will be most critical for you to hold onto your investments.

Being forced to sell may turn an undervalued investment (that is now even more undervalued because of a market decline) into a permanent loss of capital because you are forced to sell.

7. Never invest in something you don’t understand

This may look like a law that is far too simple to be included in the timeless laws of investing but I can assure you it isn't.

I cannot remember the number of times I have advised friends to simply say no when their bank offers them some structured product that would give them a slightly higher return than a normal savings account  but which they do not understand.

It is most likely the person selling you the product doesn't understand it either.

Investment is inherently a very simple concept.

Value investment for example is: you buy undervalued companies, holding until the undervaluation is gone at which time you sell.

It is of course a lot more difficult to implement but the concept itself is very, very simple.

The other thing you can be sure of is that the more complex the product is the higher the fees the party selling it is earning. A lot of times complexity is added simply to hide or increase the fees that can be charged.

It really is as simple as that, if you do not understand it then don't invest.

Sunday Culture - Bronze Boxer

Something from the ancient world for you today. Before I saw this video I didn't know that in ancient Greece bronze was used to create statues long before modern times. And that most statues we nowadays see are copies made by the Romans and bronze was melted to be re-used. Therefore very few original statues exist. I hope you find this video as interesting as I did.

Apollonius, Boxer at Rest, c. 100 B.C.E., bronze, Palazzo Massimo, Museo Nazionale Romano, Rome

Game Theory

Once again on the subject of educating yourself. Game Theory is something that can help you to make decisions. It works with psychology, with investing, with poker.. So when you understand it you have, simply said, much more stronger knowledge to make strategic decisions based on your information.

Maybe the easiest way to study Game Theory is as an online course in Coursera. It only requires a simple registration and even though the course has ended already (so you can't do the exam anymore) all the materials and video lectures are still available for you to study. They are very clear in their explaining so I highly recommend them.

This course is held by Kevin Leyton-Brown (The University of British Columbia), Matthew O. Jackson and Yoav Shoham (both from Stanford University). So quality of the teachers and the course is high.

About the Course

Popularized by movies such as "A Beautiful Mind", game theory is the mathematical modeling of strategic interaction among rational (and irrational) agents. Beyond what we call 'games' in common language, such as chess, poker, soccer, etc., it includes the modeling of conflict among nations, political campaigns, competition among firms, and trading behavior in markets such as the NYSE. How could you begin to model eBay, Google keyword auctions, and peer to peer file-sharing networks, without accounting for the incentives of the people using them? The course will provide the basics: representing games and strategies, the extensive form (which computer scientists call game trees), Bayesian games (modeling things like auctions), repeated and stochastic games, and more. We'll include a variety of examples including classic games and real-world applications.

Wikipedia definition: Game theory is a study of strategic decision making. More formally, it is "the study of mathematical models of conflict and cooperation between intelligent rational decision-makers." An alternative term suggested "as a more descriptive name for the discipline" is interactive decision theory. Game theory is mainly used in economics, political science, and psychology, as well as logic and biology. The subject first addressed zero-sum games, such that one person's gains exactly equal net losses of the other participant(s). Today, however, game theory applies to a wide range of class relations, and has developed into an umbrella term for the logical side of science, to include both human and non-humans, like computers. Classic uses include a sense of balance in numerous games, where each person has found or developed a tactic that cannot successfully better his results, given the other approach. 

Modern game theory began with the idea regarding the existence of mixed-strategy equilibria in two-person zero-sum games and its proof by John von Neumann. Von Neumann's original proof used Brouwer's fixed-point theorem on continuous mappings into compact convex sets, which became a standard method in game theory and mathematical economics. His paper was followed by his 1944 book Theory of Games and Economic Behavior, with Oskar Morgenstern, which considered cooperative games of several players. The second edition of this book provided an axiomatic theory of expected utility, which allowed mathematical statisticians and economists to treat decision-making under uncertainty. 

This theory was developed extensively in the 1950s by many scholars. Game theory was later explicitly applied to biology in the 1970s, although similar developments go back at least as far as the 1930s. Game theory has been widely recognized as an important tool in many fields. Eight game-theorists have won the Nobel Memorial Prize in Economic Sciences, and John Maynard Smith was awarded the Crafoord Prize for his application of game theory to biology.  More information by Wikipedia.

So if you are interested to improve your skills I highly recommend you to go through this course and www.coursera.org is a great way to do it whenever you have the time to focus on it.
They also have plenty of other courses and more to come that can be useful knowledge for investors, so check them out and lets IMPROVE OUR SKILLS TO RULE THE MARKETS ;)

The Secret To Staying Motivated? Optimism

I wanted to share with you this text I recently read. It shares my view on how to be motivated, but I had forgotten I was using it. In short, being optimistic keeps you motivated.

There’s an old idiom, “don’t get mad, get even.” I’ve always loved it, but of course, that just means I’m a hothead. Because if you really break down that idiom’s meaning, it’s not telling you to quell your conniption. It’s telling you to channel that anger to reach new heights. So to the bells of Rocky, many of us punch away at projects, venting our way to the top.

But as Emily Esfahani Smith points out over at The Atlantic, research has shown that optimism--for however cheesy that term can sound to the bag-punchers in the crowd--is a lot more powerful when your chips are down than making two fists and fighting your way out of a corner.

This is what Dr. Dennis Charney, the dean of Mount Sinai School of Medicine, found when he examined approximately 750 Vietnam war veterans who were held as prisoners of war for six to eight years. Tortured and kept in solitary confinement, these 750 men were remarkably resilient. Unlike many fellow veterans, they did not develop depression or posttraumatic stress disorder after their release, even though they endured extreme stress. What was their secret? After extensive interviews and tests, Charney found ten characteristics that set them apart. The top one was optimism. The second was altruism. Humor and having a meaning in life--or something to live for--were also important. 

For many years, psychologists, following Freud, thought that people simply needed to express their anger and anxiety--blow off some steam--to be happier. But this is wrong. Researchers, for example, asked people who were mildly-to-moderately depressed to dwell on their depression for eight minutes. The researchers found that such ruminating caused the depressed people to become significantly more depressed and for a longer period of time than people who simply distracted themselves thinking about something else. Senseless suffering--suffering that lacks a silver lining--viciously leads to more depression.

Counter-intuitively, another study found that facing down adversity by venting--hitting a punching bag or being vengeful toward someone who makes you angry--actually leads to people feeling far worse, not better. Actually, doing nothing at all in response to anger was more effective than expressing the anger in these destructive ways.

Taking this research into account, another idiom comes to mind: “The darkest hour is just before the dawn.” Interestingly enough, that was also the slogan of the latest Batman movie. In other words, even Bruce Wayne, who dedicated his life, fortune, and fashion sense to avenging his parents ultimately figured out this whole optimism lesson. Maybe there’s hope for the rest of us yet.

Source of the text

Sunday Culture - A Tale of Two Cows

Sadly I am not able to post the entire picture here so the text would be readable.

You can view it perfectly in 9GAG.com.

It is a hilarious joke, especially the last part. 

Click Here.

Nordic Mining - Starting up

                           

                             Nordic Mining        

                             Homepage

Among my other companies that I follow or have invested in I have one company in my portfolio that is still truly a stat-up company. Situation is that NOM is currently waiting for final permissions from the government to start its operation. Sadly the government has been typically slow on this matter. Norway is expected to anytime now to publish their new mineral strategy, it is expected that by that time NOM will get its final permits to start operation in Engebø and it will be included in the plans in some way being strategically an important company. 

Source: http://www.nrk.no/nyheter/distrikt/nrk_sogn_og_fjordane/1.10901249

This mineral strategy was already supposed to be published a few weeks ago, but for unknown reasons it was still pulled back. Problem this delay is causing is that NOM will soon need more financing but as uncertainty about the permits is still strong the stock price stays in low levels. So getting more money  now by releasing stocks isn't a great option for them. If the permits come in before that, the price of the stock could be much better for them. This waiting and uncertainty has kept stock price in low levels and lately trading has been very quiet as well.

Personally I have a strong belief that in the end the permits do come and NOM will be seen as a prosperous company in the future. For now seeing the time scale of this is difficult as it is up to the government.



Nordic Mining ASA is a Norway-based mining company engaged in the exploration and production of industrial minerals and metals. The Company carries out project development activities related to anorthosite in Gudvangen in the Sogn og Fjordane region, Norway, as well as in Engebofjellet in Sogn og Fjordane, where it also has rights to deposits of rutile and garnet. Nordic Mining ASA has established cooperation with the Department of Geology and Mineral Resources Engineering at the Norwegian University of Science and Technology in Trondheim (NTNU) and the Norwegian Geological Survey (NGU). The agreement enables the Company to carry out mapping and prospecting activities for mineral and metal deposits in Norway. The Company is operational mainly in the Nordic region, through a number of subsidiaries, which include Keliber Oy, Nordic Mining America, Inc., Gudvangen Stein AS and Nordic Rutile AS.

HERE is an 8 months old report on the expectations and situation of Nordic Mining, provided by Carnegie.

Engebø (TiO2)

Gudvangen Stein AS

Keliber

Exploration

NOM in Oslo Stock Exchange.

Board of Directors

Team

Sunday Culture, 10th of Feb

This Sunday I'll share with you one interesting song that I found while watching season four of Breaking Bad. Enjoy.

Fever Ray "If I Had a Heart"

+a comic

Blood on the Streets

Pardon for this blog being a few months late from expected. I was travelling for three weeks and had to adjust to new year again so my thoughts have been in other matters.

In this blog I'm listing my current investment favorites in terms of "blood on the streets". If you are unaware, this is used to mean for example times when there is a financial crises and stock prices plummet. During this time an active digger can find companies that have gone down in price but still offer excellent business foundation, or companies that have more problems to solve but still offer great growth opportunities in the future.

Financial crisis in the US harmed many companies, but these three are what I consider worth following and investing into. Current situation especially in the Europe also has taken prices down of many good stocks, but for now I'm only talking about these three here. 

They have already been saved, so unless a new major crises comes they shouldn't not be falling down. They are already major players in the US and in the global market. But they are still adjusting to their current situation and waiting for the right time to perform normally again, without control from the direction of the government. Investment horizon of course is multiple years. They have been recovering nicely during 2012 but we can only guess their future speed of recovery. Especially since the world economy is still uncertain.

Bank of America Corp Homepage

Bank of America Corporation (Bank of America) is a bank holding company, and a financial holding company. Bank of America is a financial institution, serving individual consumers, small and middle market businesses, corporations and Governments with a range of banking, investing, asset management and other financial and risk management products and services. Through its banking and various nonbanking subsidiaries throughout the United States and in international markets, the Company provides a range of banking and nonbanking financial services and products through six business segments.

AIG Homepage

American International Group, Inc. (AIG) is an international insurance company, serving customers in more than 130 countries. AIG companies serve commercial, institutional and individual customers through property-casualty networks of any insurer. In addition, AIG companies are providers of life insurance and retirement services in the United States

Citigroup Inc Homepage

Citigroup Inc. is a global diversified financial services holding company whose businesses provide consumers, corporations, governments and institutions with a broad range of financial products and services. It operates in two segments: Citicorp, consisting of Citigroup's Global Consumer Banking businesses and Institutional Clients Group, and Citi Holdings, consisting of Brokerage and Asset Management, Local Consumer Lending and Special Asset Pool. Global Consumer Banking (which included retail banking and Citi-branded cards in four regions-North America, EMEA, Latin America and Asia) and Institutional Clients Group (which included Securities and Banking and Transaction Services).