Investment musings
Investment Musings
As my pension is paid into my bank account each month, I mutter a silent thank you to the investment analysts and fund managers who make it happen for me and other pensioners around the world. That said, on a recent road trip I found myself mulling where I would invest on the basis of my regular musings, particularly the five inexorables described in my last newsletter.
Most funds have a goodly proportion invested in the safety of cash and bonds. Now neither of these is a topic I have focused on in my musings to date. However, with banks now offering negative interest rates I might be better off stashing banknotes under my mattress, even if it got a bit uncomfortable now that the EU has dispensed with Euro 500 notes and I have to use more of the smaller denominations. With sovereign debt at record levels and oil producing countries at risk of default in a carbon-free world, maybe minimal interest bonds are not a good idea either.
Banks have also not featured much in my musings; until authorities follow the Icelandic example and jail some senior banking miscreants, I think I would prefer not to invest there. Insurance companies of course are going to face the triple challenges of more climatic disasters, longer lifespans and fewer road accidents
Turning to the resources sector, investment in oil, gas and coal, with the exception of petrochemicals and bitumen, is definitely a no-no. As the communications sector turns to fibre and spectrum and renewable energy localises electricity generation, copper mining could suffer. Platinum mining could also nosedive as electric cars take to the roads displacing the need for catalytic converters. Iron and, of course, lithium for batteries will both remain resilient, though steel and cement manufacturing might need some technical breakthroughs to reduce reliance on energy and coal.
Given their historic investment in coal and nuclear, I’m not sure that traditional electrical utilities are a good bet. I should really be backing the developers and implementers of solar and wind powered facilities to the hilt but I worry about the viability of some, given the low prices they charge for power and the sheer pace of technical innovation. Perhaps I would be better off putting my money into the basic components that underpin energy farms or into green funds. I have the same concerns about the automotive industry; which of the existing manufacturers is going to make the transition to electric or are they going to be upstaged by newcomers. Again it would seem that component manufacturers are a better bet.
Now property looks promising on the whole. There are going to be more people needing housing. The rich can afford bigger estates and more of them. As the climate changes, farmland in the remaining productive regions is going to command a premium. So, yes, I would definitely put money into property, but selectively so that places like Dubai, Qatar and Abu Dhabi would definitely be off my radar screen as they are hit by lower oil and gas prices and higher temperatures.
I’ve mentioned a few areas of manufacturing where I would invest. To those I would add the makers and purveyors of goods and services for the rich: luxury yachts and private jets; jewellery, designer clothing and exotic fittings for opulent mansions; cruise liners and upmarket hotels and restaurants; security services to shield them from the unruly poor; the list goes on and on.
I have mixed feelings on technology. The big data aggregators – Google, Facebook, Amazon, Apple, Alibaba – all look as though they could be around for the long term. The past two decades have seen so many next-best-things come and go, with Twitter maybe next despite Donald Trump’s best efforts, so one can’t be too sure. Once again, maybe the best investment is in the underpinning technical infrastructure. Incidentally, the traditional media, including TV, would be off my list but I would consider investing in the entertainment opiates for the rich and unemployed alike.
More people surely means more shopping, so retail should be another investment hot spot. Again I would exercise some care in choosing where to invest, considering the impact of more people with lower incomes and the onslaught of online shopping. Malls and supermarkets could well go the way of the traditional bookstore. Food could definitely be profitable – provided it was produced well away from areas about to be climate ravaged.
There are some other factors we need to consider. I get the impression more companies are delisting from stock exchanges than listing with the result that there is more money chasing fewer listed shares. Given their power, the rich and the super-rich are likely to be given preferential access to the best investment opportunities, leaving us ordinary pensioners to live on the riskier crumbs.
Now, I wonder how my pension fund manager would feel about all this?
Investment Musings Comments
Thank you to those of you who provided comments on my last musing. Here is an extract of some of the comments:
AB: with the future looking so insecure and shares tumbling in many sectors, isn't investing in gold the ultimate refuge? I am not talking about gold ETFs but solid gold seems to have weathered all storms for many years and still keeping its value. Expressed in fiat currency figures, despite some yo-yo effects at time, it has managed in the long run to keep increasing in value. Many countries ban excessive gold stocks but one can still invest in gold producers.
HS (Thailand): my favourites for investments would be pharmaceutical companies, healthcare incl. manufacturers of expensive hospital equipment. Property, yes but it might be too late in Europe because prices are already high due to the very low interest rates, and anyway the most important issue is location.
CJC (UK): I don’t change much from my long held respect for the American who told his son ‘ Invest in land my boy, They ain’t making any more of it’.. I was a little over twenty when an elderly restaurant and lodging house owner said to me ‘people have to live somewhere and have to eat.’
LW (Australia): My theory is that the price of manufacturing (ex raw materials) will trend towards zero as machine learning and robotics improve. So access to the raw materials will become a bigger and bigger factor in the world of consumption. At the same time from a moral point of view I hate the idea of investing in resources: I think they pay so little regard for the environment and as a rule of thumb promise all the things they need to promise to get the licences and then backflip on their obligations as governments are too disorganised and transient to take them on.
A thought: should we refrain from Investing in things with which we’ve got a moral issue. Once a stock is floated the company doesn’t really gain further by a higher share price or higher demand for its shares so should I refrain from investing in morally bankrupt companies? I think in short the answer is yes – by increasing demand for their shares we’re contributing to a higher share price, which allows them to raise more capital more easily to expand their rotten enterprises. It also validates the actions of the execs (who are also typically shareholders) by rewarding them for their actions.
As my pension is paid into my bank account each month, I mutter a silent thank you to the investment analysts and fund managers who make it happen for me and other pensioners around the world. That said, on a recent road trip I found myself mulling where I would invest on the basis of my regular musings, particularly the five inexorables described in my last newsletter.
Most funds have a goodly proportion invested in the safety of cash and bonds. Now neither of these is a topic I have focused on in my musings to date. However, with banks now offering negative interest rates I might be better off stashing banknotes under my mattress, even if it got a bit uncomfortable now that the EU has dispensed with Euro 500 notes and I have to use more of the smaller denominations. With sovereign debt at record levels and oil producing countries at risk of default in a carbon-free world, maybe minimal interest bonds are not a good idea either.
Banks have also not featured much in my musings; until authorities follow the Icelandic example and jail some senior banking miscreants, I think I would prefer not to invest there. Insurance companies of course are going to face the triple challenges of more climatic disasters, longer lifespans and fewer road accidents
Turning to the resources sector, investment in oil, gas and coal, with the exception of petrochemicals and bitumen, is definitely a no-no. As the communications sector turns to fibre and spectrum and renewable energy localises electricity generation, copper mining could suffer. Platinum mining could also nosedive as electric cars take to the roads displacing the need for catalytic converters. Iron and, of course, lithium for batteries will both remain resilient, though steel and cement manufacturing might need some technical breakthroughs to reduce reliance on energy and coal.
Given their historic investment in coal and nuclear, I’m not sure that traditional electrical utilities are a good bet. I should really be backing the developers and implementers of solar and wind powered facilities to the hilt but I worry about the viability of some, given the low prices they charge for power and the sheer pace of technical innovation. Perhaps I would be better off putting my money into the basic components that underpin energy farms or into green funds. I have the same concerns about the automotive industry; which of the existing manufacturers is going to make the transition to electric or are they going to be upstaged by newcomers. Again it would seem that component manufacturers are a better bet.
Now property looks promising on the whole. There are going to be more people needing housing. The rich can afford bigger estates and more of them. As the climate changes, farmland in the remaining productive regions is going to command a premium. So, yes, I would definitely put money into property, but selectively so that places like Dubai, Qatar and Abu Dhabi would definitely be off my radar screen as they are hit by lower oil and gas prices and higher temperatures.
I’ve mentioned a few areas of manufacturing where I would invest. To those I would add the makers and purveyors of goods and services for the rich: luxury yachts and private jets; jewellery, designer clothing and exotic fittings for opulent mansions; cruise liners and upmarket hotels and restaurants; security services to shield them from the unruly poor; the list goes on and on.
I have mixed feelings on technology. The big data aggregators – Google, Facebook, Amazon, Apple, Alibaba – all look as though they could be around for the long term. The past two decades have seen so many next-best-things come and go, with Twitter maybe next despite Donald Trump’s best efforts, so one can’t be too sure. Once again, maybe the best investment is in the underpinning technical infrastructure. Incidentally, the traditional media, including TV, would be off my list but I would consider investing in the entertainment opiates for the rich and unemployed alike.
More people surely means more shopping, so retail should be another investment hot spot. Again I would exercise some care in choosing where to invest, considering the impact of more people with lower incomes and the onslaught of online shopping. Malls and supermarkets could well go the way of the traditional bookstore. Food could definitely be profitable – provided it was produced well away from areas about to be climate ravaged.
There are some other factors we need to consider. I get the impression more companies are delisting from stock exchanges than listing with the result that there is more money chasing fewer listed shares. Given their power, the rich and the super-rich are likely to be given preferential access to the best investment opportunities, leaving us ordinary pensioners to live on the riskier crumbs.
Now, I wonder how my pension fund manager would feel about all this?
Investment Musings Comments
Thank you to those of you who provided comments on my last musing. Here is an extract of some of the comments:
AB: with the future looking so insecure and shares tumbling in many sectors, isn't investing in gold the ultimate refuge? I am not talking about gold ETFs but solid gold seems to have weathered all storms for many years and still keeping its value. Expressed in fiat currency figures, despite some yo-yo effects at time, it has managed in the long run to keep increasing in value. Many countries ban excessive gold stocks but one can still invest in gold producers.
HS (Thailand): my favourites for investments would be pharmaceutical companies, healthcare incl. manufacturers of expensive hospital equipment. Property, yes but it might be too late in Europe because prices are already high due to the very low interest rates, and anyway the most important issue is location.
CJC (UK): I don’t change much from my long held respect for the American who told his son ‘ Invest in land my boy, They ain’t making any more of it’.. I was a little over twenty when an elderly restaurant and lodging house owner said to me ‘people have to live somewhere and have to eat.’
LW (Australia): My theory is that the price of manufacturing (ex raw materials) will trend towards zero as machine learning and robotics improve. So access to the raw materials will become a bigger and bigger factor in the world of consumption. At the same time from a moral point of view I hate the idea of investing in resources: I think they pay so little regard for the environment and as a rule of thumb promise all the things they need to promise to get the licences and then backflip on their obligations as governments are too disorganised and transient to take them on.
A thought: should we refrain from Investing in things with which we’ve got a moral issue. Once a stock is floated the company doesn’t really gain further by a higher share price or higher demand for its shares so should I refrain from investing in morally bankrupt companies? I think in short the answer is yes – by increasing demand for their shares we’re contributing to a higher share price, which allows them to raise more capital more easily to expand their rotten enterprises. It also validates the actions of the execs (who are also typically shareholders) by rewarding them for their actions.
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