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.
Wednesday, January 15, 2014
Tuesday, January 14, 2014
Is first 5 trading days of the year a good sample for the ASX200?? Looks like it
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.
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.
Monday, January 6, 2014
Smarttrans...is it smart?
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 included under revenue..
6. One of the biggest assets is capitalized mining expenditure.
7. Cash flow is a Concern. Without the 2 Million in asset sales and a 2 million capital raising, the cash flow would have been negative.
Other comments: in my opinion, it is very hard to make money from apps. When 12 year olds are writing apps for mobile phones, it is pretty clear that there are no barriers to entry in the app world. If this is where Smarttrans is heading, I fear for its long term viability. As for the Bitcoin stuff...as I understand it, anyone can mine bitcoins..it's just an algorithm. Dangers are that the Bitcoin price will drop, which it has already, as countries start banning its use or start policing it. Also, there are only a fixed number of bitcoins that will ever be produced..and who knows whe the tap will turn off.
But hey, I could be wrong.
Note: not an recommendation to invest/ not invest in Smarttrans. Please see your financial advisor before investing.
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 included under revenue..
6. One of the biggest assets is capitalized mining expenditure.
7. Cash flow is a Concern. Without the 2 Million in asset sales and a 2 million capital raising, the cash flow would have been negative.
Other comments: in my opinion, it is very hard to make money from apps. When 12 year olds are writing apps for mobile phones, it is pretty clear that there are no barriers to entry in the app world. If this is where Smarttrans is heading, I fear for its long term viability. As for the Bitcoin stuff...as I understand it, anyone can mine bitcoins..it's just an algorithm. Dangers are that the Bitcoin price will drop, which it has already, as countries start banning its use or start policing it. Also, there are only a fixed number of bitcoins that will ever be produced..and who knows whe the tap will turn off.
But hey, I could be wrong.
Note: not an recommendation to invest/ not invest in Smarttrans. Please see your financial advisor before investing.
Friday, November 29, 2013
Amateur hour in the Treasurer's office
Is it just me or are we all a little disappointed in the Coalition at the moment.
Frankly, I'm shocked by the rubbish coming out of the Treasurer's office at the moment
1. The debt ceiling.Requesting a $500 million increase when $400 million would have been enough. Especially after badgering the government over their debt, to turn around and request an increase is a pretty bad look.
2. Secondly, the idea that the commonwealth should invest 10% in a losing industry like Airlines (through Qantas) is a very outdated idea that has no place in a modern government's policy. The industry is competitive enough and there are better things to spend $500 million on.
2. The rejection of the Graincorp deal. This is very much politics over the national interest. It is mentioned in Hockey's statement
"A further significant consideration was that this proposal has attracted a high level of concern from stakeholders and the broader community. I therefore judged that allowing it to proceed could risk undermining public support for the foreign investment regime and ongoing foreign investment more generally. "
If that isn't code for "We don't want to lose the Farmers support", I don't know what is!
As for the premise that 85% of exports from East Coast Farmers go through GrainCorp's logistical network, I say, big woop. There is the "WEST" coast Farmers as well, and the West Coast actually is the biggest exporter of their grains, not the East Coast, of which 66% of the harvest actually flows into domestic supply.
So just a red herring. It's a pretty sad result all up as the Grains industry would have got a $200 million capital injection from ADM straight away, which is badly needed for those East Coast markets that lag behind the more efficient West Coast industry.
Sad day when politics get in the way of foreign investment. A rookie mistake by Hockey.
Frankly, I'm shocked by the rubbish coming out of the Treasurer's office at the moment
1. The debt ceiling.Requesting a $500 million increase when $400 million would have been enough. Especially after badgering the government over their debt, to turn around and request an increase is a pretty bad look.
2. Secondly, the idea that the commonwealth should invest 10% in a losing industry like Airlines (through Qantas) is a very outdated idea that has no place in a modern government's policy. The industry is competitive enough and there are better things to spend $500 million on.
2. The rejection of the Graincorp deal. This is very much politics over the national interest. It is mentioned in Hockey's statement
"A further significant consideration was that this proposal has attracted a high level of concern from stakeholders and the broader community. I therefore judged that allowing it to proceed could risk undermining public support for the foreign investment regime and ongoing foreign investment more generally. "
If that isn't code for "We don't want to lose the Farmers support", I don't know what is!
As for the premise that 85% of exports from East Coast Farmers go through GrainCorp's logistical network, I say, big woop. There is the "WEST" coast Farmers as well, and the West Coast actually is the biggest exporter of their grains, not the East Coast, of which 66% of the harvest actually flows into domestic supply.
So just a red herring. It's a pretty sad result all up as the Grains industry would have got a $200 million capital injection from ADM straight away, which is badly needed for those East Coast markets that lag behind the more efficient West Coast industry.
Sad day when politics get in the way of foreign investment. A rookie mistake by Hockey.
Wednesday, November 27, 2013
Clean Energy Finance Company is optimistic!
Was reading with interest today regarding the Clean Energy Financial Companies claims that getting rid of it will cost the budget 200 million a year.
Seriously! First of all, according to the CEFC's own 2013 annual report, they made a grand total of $147,000 out of interest income from a single loan of $50,000,000. That is a yield of 0.2%! Go you good thing.
I presume they are talking about investments made after the reporting date. If you look at the annual report again, we have the following investments made after the reporting date.
87,000,000 (July)
353,000,000 (July)
Takes us to a grand total of $490,000,000. There must be another $46 million flying around then to take it to the amount mentioned by Broadbent and co of $536 million. This still leaves another $400 odd million in the kitty though (as in July Treasury paid a nice withdrawal of $811 million from the special account) which i presume is just sitting in Cash account at the moment earning nothing.
But we won't know the quality of these loans until the next annual report. But how can the board of this company say they can get a yield of 7% based on 4 months of investment???? This is purely the company board (and executives) trying to keep their directors fees/salary intact for another year.
Seriously! First of all, according to the CEFC's own 2013 annual report, they made a grand total of $147,000 out of interest income from a single loan of $50,000,000. That is a yield of 0.2%! Go you good thing.
I presume they are talking about investments made after the reporting date. If you look at the annual report again, we have the following investments made after the reporting date.
87,000,000 (July)
353,000,000 (July)
Takes us to a grand total of $490,000,000. There must be another $46 million flying around then to take it to the amount mentioned by Broadbent and co of $536 million. This still leaves another $400 odd million in the kitty though (as in July Treasury paid a nice withdrawal of $811 million from the special account) which i presume is just sitting in Cash account at the moment earning nothing.
But we won't know the quality of these loans until the next annual report. But how can the board of this company say they can get a yield of 7% based on 4 months of investment???? This is purely the company board (and executives) trying to keep their directors fees/salary intact for another year.
Tuesday, November 19, 2013
Do you ever get the feeling that Jessica Hart thinks she is God's gift?
2010 : "If you see me, or another model, in a bar wait until you are spoken too before you speak,”
2013 : "I think what you find is that for a lot of us, we've been working for 14, 15 years; what it takes to make it here comes from experience and confidence and knowing how to be confident with yourself" (when dissing Taylor Swift)
2013 : "I think what you find is that for a lot of us, we've been working for 14, 15 years; what it takes to make it here comes from experience and confidence and knowing how to be confident with yourself" (when dissing Taylor Swift)
Wednesday, October 30, 2013
Carry over Kyoto!
You know the greenies have infiltrated the Climate Change Authority when you read the following in their recent draft report
Australia's commitment to Kyoto was to keep our emissions to 108% of 1990 levels. While you wouldn't read about it, we are actually ahead of the game. Our emissions are actually at 105% of 1990 levels. Well done team!
The thing is, that gives us around 91 MT of emissions we could carryover into our new emissions target if we decided to sign up to the new Kyoto protocol. That's great. Start on the front foot, ahead of the game. But guess what I found in the report
They are recommending we take the 3% and create an even more aggressive target to try and influence other countries to take on more aggressive targets! As if. We have zero influence with the developing world on this regard and China would laugh at us if we decided to suggest they sign up to these aggressive targets. It could be worse of course. Some of the recommendations offered by Green groups proposed voluntarily extinguishing the credits.
Thankfully, we have a Liberal Government in power who will no doubt disregard the advice, but it just goes to show how the Climate Change Authority is not really economically dry when it comes to offering advice.
Australia's commitment to Kyoto was to keep our emissions to 108% of 1990 levels. While you wouldn't read about it, we are actually ahead of the game. Our emissions are actually at 105% of 1990 levels. Well done team!
The thing is, that gives us around 91 MT of emissions we could carryover into our new emissions target if we decided to sign up to the new Kyoto protocol. That's great. Start on the front foot, ahead of the game. But guess what I found in the report
They are recommending we take the 3% and create an even more aggressive target to try and influence other countries to take on more aggressive targets! As if. We have zero influence with the developing world on this regard and China would laugh at us if we decided to suggest they sign up to these aggressive targets. It could be worse of course. Some of the recommendations offered by Green groups proposed voluntarily extinguishing the credits.
Thankfully, we have a Liberal Government in power who will no doubt disregard the advice, but it just goes to show how the Climate Change Authority is not really economically dry when it comes to offering advice.
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