Long term Investing

We are now well into the ISA season madness. Everywhere I am reading about the importance of making long term considered decisions which I must stick with going forward through thick and thin performances. Financial advice along these lines is coming from the lips of a multitude of Financial Advisers, all of course advocating their own company`s funds. To me this type of “long term” investing has its roots in the philosophy of Las Vegas. Recently many of these pundits have been advocating investing in Russian funds, before that it was Emerging market funds and of course we have the continual perceived wisdom of owning gold funds. Well anybody following this advice last year would have caught a major cold in their bank balance. They were gambling on certain events taking place and the timing was just simply wrong. Just a thought- If all the Financial Analysts in the world were laid end to end it might not be such a bad thing.

kaizen Why can long term investing not be considered as a series of short term decisions? In manufacturing when making moves towards product improvement one uses the system called “Kaizen” which means taking small steps forward on a continuous improvement basis. This method allows mistakes and errors of direction to be quickly and cheaply rectified before too much damage has been done. To allow this to take place one needs to have access to a constant supply of measured information so that the correct decisions can be made. Surely investing would benefit from this approach. Certainly we at Saltydog have access to these numbers and the portfolio results show the benefits of taking this shorter term approach. It`s the old question “How do you eat an elephant?” and the answer is “Slowly, and one bite at a time.”

Maybe this is the approach that President Putin is taking as he starts to re-assemble the old USSR. Last year he took back control of Georgia, now it is the Crimea and perhaps the next course will be Moldova, followed by the remains of the Ukraine. He is making a long term investment by simply making small incursions to achieve his end game. I guess he hopes that each step will be insufficient to cause a major reaction from the West. I do believe he will continue with this approach as long as the numbers say he will succeed. He is just simply making investments for Russia in other people`s land.

To Frack or not to Frack that is the question

Back in January of this year I wrote an article on the above subject. My basic complaint was that I struggled to find a forum where an adult conversation was taking place on the merits or disadvantages of Fracking. I come from the camp advocating that the opportunity to receive nature`s gift of all this locked up energy must simply not be ignored and therefore should be exploited and the problems resolved as they come along. The Americans have completely resolved their energy and manufacturing costs by going down this route so why should we not do the same.
Well after the article I was on the receiving end of a considerable amount of flack from the Green and Environmentalist lobby which did include some of my closest relatives. Their objections were three fold. Firstly, the fracking itself would generate earthquakes. Secondly the chemicals and water injected to release the gas and oil ends up on the surface in the form of toxic waste lakes. These in turn will decimate the local and migrating bird populations and of course pollute our own water supplies. Finally, a countryside covered in “Nodding Donkeys” was not a country in which they would wish to live.frackinguk

Taking these objections in turn.

-There would not seem to be any hard evidence that the fracking will cause earthquakes, especially as the North American fracking has by and large taken place at a shallow depth and in the U.K. it will apparently take place at around 12000feet deep, so there is no previous history that can be relied upon.

-There is however very hard evidence that as a direct result of fracking, North America has acquired many large chemically polluted lakes of toxic waste water. This for me should be the killer argument for not proceeding with the fracking process. However this is not the end of this story, it appears that clever scientists are well on the way to treating these lakes using processes well beyond my understanding. The end result is that there occurs a high level of algae growth which consumes and converts the toxic waste into useable energy. A second bite at the energy cherry so to speak. I am of course assuming that the waste water is contained away from the countryside and bird population. So this is a possible solution to this particular problem.

-Nodding Donkeys or Wind farms, it`s all the same to me. They are both eye-sores on the landscape but it must be easier to hide the drill heads as opposed to the windmills remaining in full view. There has been a drilling rig down in Poole Harbour for very many years and few people know of its presence. I guess it would only be fair that local people were given a share of the financial gain to offset the inconvenience caused by establishing the drilling facilities.
In conclusion I would still like to be able to listen to an unbiased discussion from informed debaters on the merits or otherwise of fracking. But for now I am still firmly on the side of getting on with fracking whilst resolving the problems as they come along. The financial benefits are just too large to ignore. It is the chance for the U.K. to follow the example of Norway and create our own Wealth Fund for future generations and not fritter the benefits away.