A long term perspective is the best cure for anchoring.

Above is the AUD to USD chart since the Australian dollar floated in December 1983. These glory days are numbered. The historically strong Aussie may stay above a US dollar for a brief period, but long term it will revert to the mean, no doubt overshooting on the way there. Same goes for the kiwi dollar.

Note: I’m considering an employment offer from a US company, so this view is biased.

It’s difficult to see what can propel Australian corporate earnings higher and as I showed here last month, ratio expansion is also unlikely to deliver meaningful returns.

I continue to stand by my decision to sell the banks, which I mentioned here in February. I was looking at their fundamentals and economic future, though the technicals confirmed the banks were looking stretched. As usual I missed the top, but in investing getting close gets you a cigar. A kink in China’s growth story, a peaked residential property market, a continued high AUD hurting the slow gear in our two speed economy, there were and there remains many reasons why it was time to take banking profits.

Our Elders Hybrid debt continues to be my most worrisome investment. I probably shouldn’t be stretching for so much upside on these fledgling debt investments. IPGA Ltd continues on its growth path. If you take a look concentrate on the people and their track record rather than the numbers. Biota languishes as investors realise that LANI’s payday may be far away and GSK have little interest in promoting Relenza. Despite that, I continue to like the risk reward profile and there are numerous possible catalysts. The markets’ love for Amcom was fleeting, though I think this half will make more investors see the value in Amcom’s business. I’m hoping Clearview finally deliver on their promise this half, management is on a short leash. M2 Telecommunications remains a long term hold, though as I mentioned a couple times recently it has and may again drop down into buy territory.

Meanwhile our US fund has slipped below its benchmark, but with 38% cash it has the resources to profit from future opportunities. Thus far sell in May and go away is playing out. I look forward to refocusing on our US funds and a major sell off would be impetus to do so.

Disclosure: Long positions is all companies mentioned. This post is for entertainment purposes and should never be considered advice.

Here it is – written in real time, so I can think more about my writing framework. The framework for this post was written outside on paper while enjoying a bright winter day communing with nature. It should come as no surprise  when I say that Being There is one of the most insightful movies of all time. Gardens and on the grander scale nature contains most answers!

Chip in if you’re reading along. Leave a comment, turn this into a discussion.

Life is a project! Life’s a game. Plan it, have fun with it. Do it! As JLP said “Make it so.”

To plan is to succeed. It was no coincidence I became an authority on SAP business wide integration and SAP Project Systems. Plan=succeed. Mere words to some, but my over arching framework. I see almost everything as a project. From working in the garden to my entire life to most worthwhile endeavors (my kingdom for a u) in business.

My life plan is on a ten year cycle, although I’ve completed the last ten year’s in seven so I’m flexible on that as I am in most things. Within each ten years there’s multiple projects all the way down to writing this post. Most things work and many repeat on multiple scales.

Just do it. Less chat more action. It’s better to take one step forward even if it is on the wrong direction, Bear Grills et al.

See, I can do detail!

Big Picture. Why? Because that’s me. For the major personality traits,  I find innate or at least learnt early the most likely theory. I’m obviously biased to how great big picture thinking is, and reinforce the superiority of my trait by concentrating on the positives (optimist) while still realising there is value in all perspectives. There’s a place for detail and it has to be done and if required I’ll do it, but my value and what I consider most valuable is synthesizing (I give up on correcting this spell checker! At least wordpress is free). Gotta love free. Freeconomics. I still own the domain payconomics, it’s an idea that can wait, as Levitt has already taken my thunder with freakonomics. Great book… but let’s get back to the story.

Synthesizing the big picture is difficult. It requires more effort, more perspective, more layering.I love doing it and do it well, very well.

Analytical

Projects have problems. Come with solutions. Know why they’re solutions and know why several layers deep. In investing, in business, in most of your external conduct in life an analytical approach will serve you well. As will being ethical. Do the right thing, always. As David Sokol recently found all it take is one mis-step to ruin a career. It’s worth re-quoting Munger

“We think there should be a huge area between what you’re willing to do and what you can do without significant risk of criminal penalty or causing losses. We believe you shouldn’t go anywhere near that line. You ought to have an internal compass. So there should be all kinds of things you won’t do even though they are perfectly legal. That’s the way we try to operate.”

Open Minded

Humans are always wrong. It’s a defining fault in this evolutionary step, to be human is a synonymy for failing…’he’s only human‘. Wrong, wrong, wrong. We’re wrong so often that it’s essential to be open minded and inquiring. You must see where we’ve come from, stand on giants shoulders and look both ways. Always question, always doubt. Oh my! Could I still rebelling against my Catholic upbringing? Nah, I think not.

Regularly toss a belief in the trash, for a while at least. Sometimes you have to retrieve discarded beliefs, smooth them out, shakes the crumbs off.

Fusion

It’s about time I did another post on fusion, particularly fusion investing. When I can type faster it’ll be a book. There is good in most things and always opportunities to learn. Take the best, while recognising the best is just your opinion.

Passion

Without certainty of belief you need passion. Passion about ideas, passion for people, for experiences and maybe for some things. I’m passionate about business and investing.

People used to fell ill over my overt passion for my wife and after 23 years that passion still lights my way. Passion in work, love and the rest of the life is essential. I’m lucky to have had so much of it.

Time – Past present future. It’s all there in front of you to see. Like everything the more you practice the better you get. See through time. The past is there and full of examples of how things transpire. Use those examples to look forward in time to see how you get somewhere. It all repeats, just the players are different.

Jump forward in time and look backwards. Do you know how you got to where you are? I sure hope so! It’s easy as you’re looking back over your life. So place yourself in the time and circumstance that you want to be, then look back to see how you got there. If you haven’t done it before, give it a burl, it’s fun. Learning only by your own experience is too slow.

Arbitrage time. Leverage time. Leverage your own time, through education, through inspiration or perspiration.

In investing the short term in crowded, time is more fruitfully deployed or at least has a higher probability of success if you focus on the long term. Though of course if you’re in a hurry the short game has the positive skew. Good luck with that, you’ll need it.  Most importantly do what is right for you. The long game is right for me as is a continuous investment in myself.

Invert alway invert. More broadly look from different perspectives. Solutions are best if simple, so when I can’t see a solution I know it’s time to invert. Hand in hand with perspective and time is seeing beyond things. It is essential to see beyond problems. See beyond the next quarter. See beyond the hurdles.

With the US market down heavily overnight and the Australian market falling, it’s best to invert. Down is good! Down is what you want. You want the opportunity to buy lower.

Focus. Need it. Should come easily if you’re passionate about whatever requires focus.

Capital is scarce – opportunities are plentiful. Scale that idea! From my kids pocket-money all the way to the global monetary system. In investing and in business capital is always scarce and it’s sensible allocation paramount.

Non-fiction. Hat tip to Paul Craigie for that one. Friends were stunned when Paul said he only read non-fiction. I thought how sensible and now limit myself to a couple pieces of fiction a year.

It’s all in front of us. Nature! My Garden. Growth, patience, competition, co-operation, efficiency, focus and more. The right way to do things. Humans replicating nature will be our deliverance from our current over consumption. Growth is my framework, that’s why I’m 6’5″. Growth, value, momentum, fuse them all to profit from both the weighing and voting machines.

See past the distractions to the gems beyond and then visualize the gems bloom and grow. When I look at a garden I don’t simply see the plants in front of me, I see from seedling to maturity, I see the growth. I envisage what the plants will look like and review what they did look like. Great success in investing can be found in a similar fashion.

Enjoy, smile, love, give, be thoughtful and respectful, improve yourself and all and everything around you, laugh, experience…and so much more.

Dean. Self confessed, self aware, hoping to be self actualized, ENTP, A Type who likes to listen.

This post would not be complete without the two quotes from my front page.

“The whole problem with the world is that fools and fanatics are always so certain of themselves, and wiser people so full of doubts.” Bertrand Russell, philosopher, mathematician, author, Nobel laureate (1872 – 1970)

“Too much prosperity makes men greedy and their desires are never controlled sufficiently to stop at the point of attainment.” Seneca

No related posts.

Successful management team bringing large deposits to market. Perhaps to market early? Other speculations are bulk test results, JORC upgrade or an update on EIS.

It would be great to hear from anyone familiar with the CuDeco story?

Last quarterly Moves towards production, China’s Sinosteel to supply 3 mt pa processing plant. They have water for that qty and can contract for more.Issued 6.25m shares at $4, current SP $3.18.

Management

Annual Report

A quick visual overview of the company. Hopefully they had a fantastic voice over instead of the music at the presentation.

The Story. Huge resource opportunity. Fist 18 months worked with one RC and one Diamond and market punished them for that. When boom over they completed 3.5 years in 7 months with 16 drill rigs. Now have five rigs, 3 Diamonds. RC is reverse circulation (tube within tube that hammers way into ground at around 300m a day. RC rig is not the best thing as don’t get to see core like with diamond and the large chunks don’t go up the RC so measurements aren’t as accurate or definite. Drilled with it not knowing there were large nuggets down there.

Valuation. To figure out a net present value (NPV) you’d need to estimate the commodity cycle and production levels, yes you could do that with a probability weighted matrix, but you’d be ignoring other likely scenarios. Perhaps you can assume away those other scenarios and come up with NPV. At worst it gives you a number other people will be looking at and a comparison point for other valuations. A peer comparison by resource size and production gives a fast broad range of values. Acquisition pricing off recent deals.

If the valuations are above the current SP, keep digging.

$460M market cap could be sitting on multi-billion dollar area.
Valuation Info: 20 year offtake agreement for mineral concentrates to China Oceanwide International which has agreed to purchase a minimum of 60% of the total product from the Rocklands project. CuDeco has the right to sell the entire 100% of production to China Oceanwide. Copper/gold and pyrite/cobalt concentrates with pricing linked to LME and the LBMA see details.

Recent news from M*

Las Minerale Central is one of the richest deposits of copper in the world to a depth from surface to 150m within the supergene zone over a central bonanza zone of over 800 metres.  In 2006 I, as the Chaiman of CuDeco, reported that the Rocklands Group Copper Project was one of the richest copper mines in the world and declared Rocklands would be a “World Class Copper  Cobalt Deposit.”   I say it again this time with more confidence and conviction.

Yours Faithfully
Wayne McCrae
Chairman & CEO

As I’ve said many times, focus on the downside and let the upside take care of itself. Bruce Berkowitz always tries to figure out what could break his investments, from memory he even hires outsiders to try and disprove his investment ideas. Of course with St Joe’s Berkowitz had David Einhorn to do that for free! Another of my favourite saying that fits with this meme  is, capital is scare while opportunities are plentiful.

While Data Diary’s number one tip, “Size an investment according to its expected volatility“,  may sound like he is suffering from the modern finance virus and should seek medical assistance, his following comments show he is fit and well.

Rather than volatility Rohan is talking about expected risk to return. Risk despite what modern finance says has little to do with volatility. Risk is being wrong in your assessment. Risk is a permanent loss of capital. Volatility has little to do with those things. Further a share can have high volatility and still be  trending up, simply in a volatile fashion. Conversely a share can be a POS and slide to zero with little volatility. Volatility is a crutch, utilised for the sake of nice equations. Exorcism should be considered as a final resort to rid oneself of the evils of volatility, that is, if a good whack to the head doesn’t work.

In other news ADO had a massive day today, surging 20% on a massive 70M shares, 10x its average daily volume. The move was on no news, so it will be very interesting to see what develops next week.

Biota received excellent news yesterday with their second revenue stream, the antiviral Inavir (nee-Lani), posting excellent sales in Japan. The market got excited for a couple hours on Thursday afternoon on the 3.6B Yen in quarterly Inavir sales before shrugging its shoulders today, sending Biota back down to whence it came. I think the market is underestimating Inavir, while many long term holders are over-estimating the probability of Biota delivering on its potential.

Advanced Share Registry (ASW.AX) has been trading down at reasonably value, but certainly not back up the truck valuations. They continue to add customers at a respectable clip. M2 Telecommunications (MTU.AX) has likewise been trading at reasonably value. I recently took a starting position in a loss making internet company. As such it deserves no more than a small weight. If the story develops I’ll be well placed to add.

Some of my US holding are hitting highs, notably Nuance Communications and Vertex, and now provide little room for a misstep. I look forward to having more time to keep abreast of my US companies.

Australian’s should consider international investing now and over the coming months. In the not too distant future I imagine there’ll be a lot of people  wondering why they didn’t pick up some quality US and other international companies when the AUD was so strong. I recommend starting small and buying up big at Amazon or your favourite online US retailer.

Two weeks of lectures, three assignments and three exams to go.

Hat tip to Colin Nicholson for his wonderful data.

The convergence-of-interest hypothesis suggests that a firm’s market valuation should rise as its management owns an increasingly large portion of the firm. On the other hand, the entrenchment hypothesis suggests that as management increases its ownership, the incentive to maximize value declines as market discipline becomes less effective against a larger shareholding manager. The authors attempt to reconcile these competing theoretical predictions by examining empirical data of firm management ownership and Tobin’s Q. The latter variable, equal to the ratio of the firm’s market value to the replacement cost of its physical assets, is used as a proxy for market valuation of the firm’s assets. A piecewise linear regression reveals a positive correlation between management ownership and Tobin’s Q in the 0% to 5% ownership range. From 5% to 25% management ownership, the relationship is negative, but at levels greater than 25% the relationship again is positive. The authors put forward a theory that the convergence-of-interest effect operates over the whole range of ownership, whereas the entrenchment effect reaches a maximum value at some less than 100% management ownership mark. Thus, at low levels, the convergence effect is predominant. At somewhat higher levels, the entrenchment effect becomes predominant. Finally, having reached a maximum value, the still-increasing convergence effect again becomes the predominant factor. Management Ownership and Market Valuation: An Empirical Analysis Morck, Shleifer, Vishny