Economic Rigor

Once again, the press is stuffing up the "Group of Death". In the Women's world cup draw, the group of death is being referred to as Group D, which contains, in country (rank) format;  USA (1), Sweden (5), Australia (10) and Nigeria (35). Sure, a nasty group. But not the group of death. Again, it is more about the variance in rankings of the top 3 teams and the variance between the 2nd and 3rd rank team in each group. Based on my calculations, it is actually Group A which is the group of death, which contains the Host Nation, Canada (8), then China (14), the Netherlands (15) and NZ (19). All pools, from deadliest to easiest) Group A - Canada (8), China (14), the Netherlands (15),  NZ (19) Group E - Brazil (6), Korea (11), Spain (16), Costa Rica (40) Group D-  USA (1), Sweden (5), Australia (10), Nigeria (35) Group F -  France (4), England (7),  Mexico (25), Columbia (31) Group C - Japan (3), Switzerland (18), Equador (49), Cameroon (51) ...

So its official. James Packer is buying Peter Holmes a Court's stake in the Souths Rugby League club for $12.5 million. Not a bad return for Peter. He and Russell Crowe paid $1.5 million cash each (as well as taking on 8 million in debt between them). So you can roughly say, they paid $5.5 million each for their stake in the Rabbits. 8 years later, Peter gets 12.5 million (cash), but has to write off excess debt of 4.5 million owed to him. But that still works out at a nice $8 million return. Now, I'm not sure how much else was injected by Peter over the years...but if we just look at the initial capital, compounded over the years, the investment was worth 10% a year. Not bad when you look at the fact that this was during the GFC. So you can make money out of Sports Club ownership! It's just that it isn't a particular liquid investment. But selling after the Rabbits had just won the Premiership is surely selling at the peak! It can't get any better than ...

Had a look at the unemployment figures that came out today...6.1%. Not great. Especially with a participation rate that continues to decline. So I was curious...are we turning out to be the US with a participation rate hitting below average. Well apparently not. In fact, our average since 1978 has actually been 63.1% so at our current rate of 64.5% we aren't going too bad. But a more detailed look at the participation stats gives us a little more insight into where the problems are, if you call them problems. It's actually in the young areas where the participation rates have been dropping. Averages (Feb 1978-Aug 2014) 15-19         20-24     25-34     35-44        45-54      55-60      61-65       65+      All Ages 58.8%      ...

Had a look at the Woolworths stock a couple of days ago and wondering if it was undervalued. Not quite yet. It is making it's cost of capital, unlike Westfarmers (one to avoid if my calculations are correct), but I have a price target of 29.50 on it. At the Woolworths current price of 35.00 its still a little over valued for mine. But one to keep an eye on if the correction comes.

Been running my eye over MYER after the full year financial report yesterday...doesn't look good. Even with the reduced dividend, it is pretty much paying out it's entire profit, so growth without debt and equity doesn't look good. And when you look at the debt, it's a shocker, especially when you include the non cancellable Operating leases. I don't see them being able to borrow much more than they can at the moment...so that means equity injections, all of which will be shocking for the share price. In fact, by my calculations, I have a price target over the next 12 months of only 95 cents, way below the current price of $2. Good candidate for shorting though (though before you do this, please see your financial advisor)

Just been looking into the financial report behind Spotless. Found two interesting items that happened in late November 2013, before it was floated. We have this (on page 14) paid $301.5 million in a return of capital to shareholders on the 22nd of November 2013 (0.477 per share) We have this (on page 15) paid $148.5 million in dividends to shareholders on the 22nd of November 2013 (0.2359 per share) All this before float mind you. That's a cash out of $450 million to PE shareholders. (Private Equity Partners) Then you have the sale $1.60 offer price, 596,000,000 shares offered - Revenue of $953.6 million to PE shareholders (Private Equity Partners) Grand total to PE of $1.4 billion PEP spent $723 million in taking it private in 2012, assume 10% restructuring costs a year ($71.3*2 = $142.6 million) So Net Investment = $865.6 million over two years Net Return to PEP = $534.4 million ROE per year (compounding) : 27.2% a year. Not bad when yo...

Jb Hi Fi came up on my ROC tracker last night. Yep, the share price had lost over 10% of its value over a 12 day period, which I thought was a little over the top. So what if Dick Smith had a good year. Jb Hi-Fi is still kicking a lot of goals...Return on Equity over 40% and meeting its cost of Capital of 20%. I calculated a price target based on its free cash flow and i have a target of $19.55, which is above the current price of $16.75. (by 17% no less) The technical indicators look sound as well; the Bollinger Bands, Scholastic O and RSI look compelling. Could be a buy in my book (though as always, please seek your own financial advice before making such a decision)

Been looking through some logistics stocks and for mine, Qube logistics looks undervalued. Currently at $2.27 but my price target is a solid $3.39 based on a fairly low cost of equity of 7% (it has a 7.1% ROE in 2013). While it has a fairly high debt of around $700 million in total so it is looking at Debt to Equity ratio close to 0.7, it is not in the scray zone as yet. But we will see...the Financial full year report is out in August. Might be worth while to thow some dollars in to see what happens. Not: Not a recommendation to invest/not invest in Qube. If pain persists, please see your investment professional.

Its all about the variance. So far this season.... NRL - Variance between the win percentages of all 16 teams is 0.0148 AFL - Variance between the win percentages of all 18 team is 0.037 So by this rational, the NRL is at least twice as competitive as the AFL, with less teams. So much for the draft levelling things up. It's about the Salary Cap stupid.

Have started getting into Sports Statistics recently, probably due to my World Cup series of posts as well as my following of Nate Silvers fivethirtyeight.com statistics blog (see my link list if you would like to view) Anyway, being also an avid NRL fan, I was wondering if we could use statistics to work out the most improved/least improved teams of the 2014 NRL season so far. So I have calculated the last 3 year average win percentage of each team in the NRL an have used that as the baseline of what the win percentage should be in 2014. I have then compared that average with what the current win percentage is to get an idea of the percentage "improvement" or "detriment" of each team is. And the improvers are :- 1. Parramatta: 99.3% improvement 2. Penrith: 66.4% improvement 3. Gold Coast Titans : 25% improvement 4. Sydney Roosters : 18% improvement 5. New Zealand Warriors : 15% improvement 5. West Tigers : 15% improvement 7. Bulldogs : 8% improvement ...

Yep, its time for the all important Market Risk Premium for 30 June 2014. This is the risk premium that goes into all the valuations for stocks from the annual reports. Using the same methodology as always...we have the capital return for the market over the trading days of the year to be 11.13% Add the average dividend yield over that period of 4.51% and you have a total market return being 15.64% (a bit down from March) Average 10 year bond yield is now 3.63% and you have the Market risk premium of 12.01% (down from March). So, still high but on the decline. I wonder if this is the beginning of the long awaited correction. It would not surprise.

Based on my spreadsheets from yesterday, I was curious if Public education was growing. It is growing, up around 5% since 1999, but in a lot of states it is going backwards. Check this out

Been looking into Education funding, particularly in the Primary and Secondary Space. Interesting to note that while education funding has increased over 14 years between 1999 and 2013, the number of schools operating has dropped. I note that over the 14 years there has been a decrease of 194 schools...schools that have closed. But it's worse in the Government sector. Over the 14 years, 306 Government schools have closed...it's just that Catholic schools (16) and Independent Schools (96) have opened to counter the decrease. I guess that is why the rate of students in private schooling has increased over the years. The biggest drops in schools have been in VIC (105 Government schools closed), SA (101 Government schools closed) and QLD (64 Government schools closed). The only difference is that in QLD, an equivalent amount of Catholic and Independent schools have opened, leaving only a net loss of 1 school. The other two states are still in the deficit of schools...

Still no luck with the Soccer gods for Australia. Looking at our underwealming performance in the World Cup, I have started to think about our next big event...hosting the Asian Cup. Bit of Silverwear for the Socceroos? Not likely based on the draw. Once again, we have ended up in the pool of death, along with South Korea, Oman and Kuwait. Based on my formaula for pool of death, created during the World Cup, we are no certainties to go through...it's the strongest group. Home field advantage will hopefully help propel us across the line...but no guarantees. The danger is when you look at our record against the teams over the last 5 years. South Korea Record over the last 5 years. Played 4 times, Wins equal 1-1 (2 draw) Oman Record over the last 5 years. Played 6 times, Australia 3-1 (2 draws) Kuwait Record over the last 5 years. Played 2 times, Kuwait 1-0 (1 draw) We have played Oman the most, with the most victories, but who knows about the other two. Might be...

Yeah, World cup starts today, so running the ruler over the groups to see which is the most likely to cause some upsets. Generally, the way you calculate the "Group of Death" is to calculate the variance of the 4 teams in the pool based on their rankings and the group with the lowest variance would be the "Death" group. By this rational, it would be, in order of deadliest to easiest. Group D (Uruguay, Costa Rica, England, Italy) Group E (Switzerland, Ecuador, France, Honduras) Group G (Germany, Portugal, Ghana, USA) Group C (Columbia, Greece, Ivory Coast, Japan) Group F (Argentina, Bosnia and H, Iran, Nigeria) Group H (Belgium, Nigeria, Russia, South Korea) Group A (Brazil, Mexico, Cameroon, Croatia) Group B (Spain, Netherlands, Chile, Australia) You can see the problem here. The traditional method says that Group B, the team containing 3 teams ranked in the top 15 is the easiest. This is due to the presence of my team (sigh), Australia which is ranked ...

Further to the previous post I calculated the minimum wage growing at around 3.5% a year from 1997-2012. Not bad. But when you look at the Salaries and wages out of the ATO tax statistics, you have the average wages per tax payer growing at 4.5% a year over the same period. So clearly, it's not minimum wags responsible for job growth. Which sort of makes sense. Generally, business do not want to hire minimum wage workers, especially in an advanced economy. Minimum wage workers are people with low bargaining power; i.e the elderly, young, uneducated, disabled or immigrants performing "grunt" jobs, jobs that don't require a lot of thinking or automomy...clearly jobs that a lot of people don't want. Also, this type of job is on the decline as automation and IT self service systems replace the jobs so there are not enough of them (last count I have seen is less than 10% of the workforce) to really influence job growth statistics. Generally, you wan...

A lot of press at the moment about the decision to increase the minimum wage by 3% or so. Business claiming it will cause some grief in regards to employment. So I grabbed some info from the ABS around growth in "Employed Australians" and GDP (seasonally adjusted), grabbed the updates to the minimum wage from Fair Work and did a basic regression. Couple of assumptions 1. Assumed that the June 30 was the end of the year. 2. Growth in GDP was for the year (July - June) 3. Growth in Employed Australian's was for the Year (July- June) 4. Tried a couple of regressions, with a few lags. 5. MinWage increase takes affect on July 1st Best model was Jobs Growth = 0.34*GDP + 0.32*GDP (year before) - 0.1*MinWage Growth(year before) Adjusted R2 = 0.28, ANOVA F Stat p value = 0.08. GDP and GDP (year before) statitsically significant at the 89% level (not 95% level) and Minwage growth (year before) only significant at the 78% level So really, you would have to say that ...

Top 5 nouns from this month vs last month This month growth remain low rates interest prices Last Month growth rate year conditions rates remain But the big Verb is the kicker This Month = Decline (mentioned 4 times, up from 2 times in May) Last Month = Demand (mentioned 4 times)   So doesn't look good for a rise any time soon, at least not until inflation rises (they seem to be watching prices a bit)  

Been looking through the taxation statistics provided by the ATO for 2011/2012. With all the talk around the budget being too unfair, and that Superannuation and negative gearing tax concessions should be getting reduced instead, I decided to check who was actually using them. For negative gearing, I looked at the amount of tax payers recording a Net rent loss, and the total amount of losses. It turns out there 1.2 million tax payers recording around  $13.8 billion in losses (around $10,000 loss each). The biggest concession Biggest users of this in order...Men Earning between $100,000 - $150,000 in taxable income from 30 - 59 years of age (the manager class really). Also men between 50-54 who are earning between $60,000 - $80,000. Also a couple of Female groups in the non-taxable class (I'm assuming spouses) who are aged between 35-44 and earning less than $6000 For Superannuation - the Salary Sacrifice tax dodge, we have it as the silver medal concession wi...

With all the talk of the budget's effect on the poor, I was curious what sort of impact another recession might cause to incomes, based on the affect of the recession in 2008/2009 and income growth before that vs income growth after. If you look at the 13 years before (and including 2007-2008) we had the below income growth (compounding) per year for the following quintiles Lowest quintile : 3.95% Second quintile : 3.75% Third quintile : 3.62% Fourth quintile : 3.08% Highest quintile : 4.71% After the recession and including the 17 years before (and including 2011-2012) we had the below income growth (compounding) Lowest quintile : 2.51% Second quintile : 2.77% Third quintile : 2.69% Fourth quintile : 2.67% Highest quintile : 3.10% So as a result of the recession, we have the following drop in the growth of incomes 1.61% Highest quintile 1.44% Lowest quintile 0.98% Second quintile 0.93% Third quintile 0.41% Fourth quintile So if the rich can affo...

Well, Bill did his reply...almost 600 more words than Hockey and a load more retorical questions. Got sick of replacing question marks in my word cloud code :-) Anyway, top 10 nouns in the cloud (i'm taking the Budget as a noun) Budget - 49 times Prime -  35 times Australia - 34 times Australians - 30 times Labor - 28 times Minister - 26 times People - 23 times Australian - 21 times Family - 17 times Government - 15 times Contrast this to the top 10 nouns of Hockey's speech Government - 30 times Budget - 29 times People - 21 times Billion - 20 times Year - 17 times Years - 12 times Australia - 11 times Family - 11 times Nation - 11 times Research - 11 times So we have the common words Government Budget People Australia Family Which leaves the Govenment focussed on Billion, Year, Years, Nation and Research vs Labor's Prime, Australians, Labor, Minister, Australins. Do you think Bill is focussed more on the Prime Minister, that he (Shorten...

Been running my word clouder over the Treasurer's budget speech....did you know "Will" was mentioned 83 times! That's a lot of will. Other interesting results "Government" mentioned 30 times "Budget" 29 times "Build" 22 times "People" 21 times "Billion" 20 times "new" 17 times "now" 17 times Contrast this with Wayne Swans last budget in 2013. "Economy" mentioned 29 times "Billion" 27 times "Australia" 26 times "Speaker" 23 times "Will" 22 times "Tonight" 21 times "Budget" 20 times "Million" 20 times So what can we say about the two speeches. Hockey is all about the Governments Budget, that it is new, its going to build stuff and is happening now and they Will do stuff. Wayne Swan was all about the economy, focused on the dollars and talking to the speaker that night , rather than the people. And ...

Been playing around with VBA in excel trying to create word clouds and the like. One of the areas I have been focusing on is the Monetary Policy releases from the RBA. Trying to detect changes in tone etc to see if I can accurately predict the next move in interest rates from the language. Couple of interesting things from the last three months. 1. The RBA seems to be focusing on more local issues now...in the May RBA release, there is no mention of another country except China, as opposed to March and April which mentioned the Euro Zone and the US. 2. A lot more present tense use. Less waiting for something to happen and now more is happening. 3. Number of words in the statements are increasing. From 428 words in March to 486 in May. Trying to justify it's lack of movement perhaps 4. "Fragile" has disappeared from the word list and "Strong" has now appeared 5. Using a very basic weighting system assigned to each word to reflect a "positive...

Using the same methodology as the previous posts, I wanted to see what were the top 10 box office bombs...those movies with a budget of $100 million or more (in 2013 equivalent dollars) that had the worse profitability. And here they are... 1. The Adventures of Pluto Nash 2. Heavens Gate 3. Mars needs Moms 4. The Postman 5. Hudson Hawk 6. Timeline 7. Virus 8. Red Planet 9. The 13th Warrior 10. Son of the Mask Quality list of the dodgiest movies of all time!

Being a big fan of movies, I stumbled upon some data from Nate Silvers blog (fivethirtyeight.com). Basically gave you a list of around 1600 movies since the 1970's and their budgets and revenues (and also adjusted to 2013 dollars so you could do an accurate comparison). So using this data you could actually get the gross profits over a period of time for a lot of movies. Now I was interested in the most profitable movies based on revenue per dollar of budget. (sort of an inverse gross profit ratio). Surprising figures really..all the big movies aren't really in the list, due to those large budgets. The top 10 most profitable movies are, in order from most profitable are :- Paranormal Activity The Blair Witch Project El Mariachi The Texas Chain Saw Massacre The Towering Inferno Rocky American Graffiti Clerks. The Rocky Horror Picture Show In the Company of Men Horror seems to be the best option really, with 4 in the top 10. Paranormal Activity made $610 rev...

Just been looking at one of my favourite ABS releases, the detailed Labour force stats...a veritable treasure trove of info on Australian work habits and demographics. One thing I have been looking at is Part Time workers between 15-64. I notice a very strong seasonal signal in the Female Part time stats as a percentage of the civilan population. In January of most years, it appears there is a drop of around 1.5-2% consistantly. See the graph below The same signal is not as apparent in Male Part time work (or if it is, it is too small to be detectable) So what would make women drop part time work so consistently over January? It's either school kids or the beach in my opinion.

I'm always interested in gender politics and the like, and I wonder what the affect of the reduction in Full time work is having on the male population. Because the drop is dire. Looking at the ABS figures on the Labor force, I note that the percentage of the male civilian population (15-64) that is employed full time is at all time lows...in fact August 2013 was the lowest ever recorded at 64.66%; the second lowest in Jan 2014. This is in comparison to the all time high of 79.4% which was recorded in December 1980. Now when you think the male identity is traditionally defined by being a provider, especially in a family situation, this has to have an impact on the male psych. I'm sure the feminists out there will be talking about how the female full time employment to population ratio is still low at 36%, well, to that I say, at least it is on the climb (it was at 30% in 1978). Also women traditionally have other sources of power and identity that remain undiminis...

Wow is all I can say. Calculated the Market Risk premium of March 2014 and we are looking at a risk premium of 12.5% Getting pretty crazy out there. ASX200 market return (Capital) over the last 2.5 years is sitting at 11.61% a year. Average dividends of 4.57%. Meaning the Market has returned a very nice 16.18% a year. Not bad going. Risk free rate is now sitting at around 3.67% so that leaves us a Market Risk Premium of 12.5%! That is the highest it has been since I started recording them back in 2011. For mine, that is getting a bit unsustainable. You would have to start thinking a big correction is coming as there is no way companies out there can have their equity cost of capital at those sort of levels. They can't have a ROE of over that consistently in the current conditions.

Another bumper result from David Teoh and his merry men at TPG. 15% growth in EPS, is smack dead on the sustainable growth ratio (with 37% as the new DPO..it was 26%) and an ROE of 24% (Remember the formula for sustainable growth = (1-DPO)*ROE) Just goes to show how much of a cash machine this business is. Barely any debt and loads of dosh. And management consistently meet their targets. Who cares if David Teoh controls everything. He is the Rupert Murdoch of Broadband! After the annual report was published in 2013, I was tempted to buy into this company as it appeared it was heavily undervalued. I actually had a price target of  around $9 on it...as it's return on equity was around 24% and it's cost of equity (using CAPM) was only 9%...And this was when it was trading at $4.30! Price is now at $6 and I think the cost of equity has risen a bit. Still, might still be worth while buying in before the end of the financial year. Still, I could be wrong....

Premier Investments gave their half yearly results today...a pretty good effort, growing their sales quite well. Congrats to Mcinnes and all the kids. However, I do wonder about their strategy to expand into the UK using their Smiggle brand, which is the sale of Stationary. If you look at the results, Smiggle is actually one of the more under performing brands, by store The order of performing brands is as follows 1. Peter Alexander (sales - 990,000 per store for the half year) 2. Portmans (571,000 per store) 3. Dotti (528,000 per store) 4. Just Jeans (432,000 per store) 5. Jay Jays (400,000 per store) 6. Smiggle (398,000 per store) 7.  Jacqui-e (364,000 per store) So it just strikes me as a waste to go hard on Smiggle in the UK, when Peter Alexander would probably be a better fit. Sleepwear would be a bigger market and would be more profitable in my opinion.

Myer results came out today. Pretty underwealming, especially compared to DJ's, its main competitor. One thing that stands out is that DJ's 38 stores are better at raising revenue than Myers 66 stores...Dj per store revenue is $26.9 million for the half, vs Myers $21.9 million for the half. And then we get to debt. When you include DJ's non-cancellable operating leases (discounted at 4.4% interest rate) of $1.1 billion to the on-balance sheet debt of $45 million, you get total debt of $1.15 billion. Equity for DJ's is $840 million, leading to a Debt to Equity ratio of 1.37. Not bad But Myer's non-cancellable operating leases (discounted at 4.2% interest rate) is equal to $2.5 billion. Add on the balance sheet debt of $306 million and you get a total of $2.8 billion! Huge. On an equity total of $938 million, that gives you a debt/equity ratio of 2.9!!! Maybe that is the real reason why Myer wants to merge with David Jones!

With the election of the co-alition government, there has been a focus on Government spending. One of the main focus has been the Government spending on the ABC. I wonder whether the wages bill of the ABC has gone out of control. So I have crunched the numbers since 2007 (or 6 years). We have Government Funding growing at around 2% a year during that time, which isn't too crazy. However over that time, the average wage of the FTE (wages bill divided by number of FTE's) has gone from $79,074 to $102,372, an increase of 4.4% a year, far in excess of inflation. Seems like the ABC could do with some wage restraint. Turn off the tap in my opinion!

After calculating the Qantas debt, I thought it was time to try and calculate the Virgin Australia total debt, including non-cancellable operating leases. Looks a bit worse than the Qantas story to be fair. Firstly, we have on-balance sheet debt of $2.15 billion. No dramas there. But buried deep in the 2013 annual report (no mention in the half yearly 2104) we have $3 billion in non-cancellable operating leases. Discounting at the Virgin Australia weighted cost of debt (at 3.3%) brings us to a value of 2.7 billion So that brings us to a total debt of $4.85 billion. Now you think that is better than Qantas, which it is in value. However Qantas at least has $5.6 billion in Equity to back up it's 8.7 billion in debt (a Debt/Equity ratio of 1.53) Virgin has an equity value of $1.04 billion...leaving it's Debt to Equity ratio at 4.69! There is a real danger of Virgin sinking into the mire...no wonder Richard Branson is making noise. Virgin Australia is heavily leveraged. Th...

Read with interest the first radio ratings of 2014 for the Sydney Metropolitan area and the effect of Kyle and Jackie O's defection from 2DAY FM to KIIS. Was a huge result for KIIS with the ratings going from a 4.9% share to an 8.8% share, mainly due to the increase in Breakfast listener's. And I was wondering, what sort of money might that bring into ARN, the owners of KIIS. Firstly, according to the the Commercial Radio Network statistics, the NSW Metropolitan Radio advertising market was worth $209 million in the year 2012/2013. Not bad for an industry that gets a lot of flack for being outdated. Secondly if we assume that the advertising is dependent on the share of ratings, we have KIIS originally getting 4.9% of that share, which works out to be around $10.3 million a year. Provided Kyle and Jackie keep their audience over the year, the increase in market share to 8.8% means that KIIS's share of revenue is now $18.5 million. That'...

Was reading Plane Talking, the usually reasonable aviation blog on Crikey and hit an article that mentioned Qantas was $12 billion in debt. A bit high I thought, so I crunched the numbers from the half yearly figures. Firstly, we have on balance sheet debt of $6.2 billion. No dramas. Secondly, we have non-cancellable Operating Leases, (which are debt by any other name) of around $3 billion. Now the usual method of accounting for the Operating leases is to discount them to Present Value at the Cost of debt Capital. Using the Qantas costs of debt capital of 7%, it turns out the 3 billion is more like $2.5 billion. So that leaves us a total of $8.7 billion. High, but not crazy high

Yes, it's that time again to calculate the Market Risk Premium for the ASX200 and it's massive. Usual methodology applies. Last 2.5 years of daily returns of ASX200 gives us an average capital gain of 6% (alot better than Septembers 2%). It has almost tripled. Add on the average dividend yield of 4.625% and you get a total return from the share market of almost 10.70% (that's great guns) The average 10 year bond rate has reduced to 3.70% as investors like the look of our bonds as well (I don't really know why...ultimately the price of bonds will drop like a stone). All up, it means that the market risk premium is now at 7%. Wait for the correction...it should be coming.

Read with interest some reaserch regarding the month of January (and the first 5 trading days of the year) being a good reflection on avaerage returns for the entire year. The research was performed on the S&P500 and seemed to be compelling over the last 30 odd years. I decided to have a look at the last 12 years (2002-2013) of the ASX200 to see if a similar effect was going on here. The results were mixed. Regarding the month of Jan being a good indicator, only 7 out of 12 years had a positive correlation between average returns in Jan vs average returns over the entire year (Data was daily returns from yahoo finance). However for the first 5 trading days in Jan, 10 out of 12 years were correlated (which is a little more interesting) Behavioural finance in all it's glory. People start like they want to finish. In that case, battern down the hatches for a negative 2014.

Was reading in the Afr a puff piece regarding an IT/mining company called Smarttrans. The article was basically saying that there Revenue was up this year due to app sales in China and Bitcoin mining. If the Bitcoin stuff wasn't a red flag already, I decided to delve into the annual reports to see what secrets prevail. A couple of things. 1. Chairman of directors resigned in November 2012. 2. Not a lot of independence on the board. A few are ex managers of the the business and related entities 3. Revenue recognition is a worry. Basically the annual report specifies the company recognizes revenue when goods or services are delivered to the customer. No refernce to using the standard comment when "collectibility is reasonably assured". Combined with statements like "push" marketing for apps, there are concerns that revenue may be overstated. 4. 59 million in accumulated losses. 5. Accounting Queries. 2013 annual report had an asset sale of 2 million inclu...