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Tyrion Lannister
Posted: 11 April 2018 23:26:01(UTC)
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In response to Dyfed’s post in the investment thread, maybe we should have a separate thread to discuss politics and their effect on investments. That would give KL and his nemeses the opportunity to air their views on the subject without diluting the central discussion or theme of other threads. :)

I’ll start on the subject of Hungary v Germany and demographics.

The internet and related technology means that globalisation is here to stay, so the argument about national demographics will become irrelevant in the near future. It’ll be no more relevant to business and economics than the North/South divide in the UK is now.

Brexit and nationalism is little more than a desperate attempt to cling onto an outdated socioeconomic model, as was the Luddite movement back in whatever century it was.
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King Lodos
Posted: 12 April 2018 00:04:48(UTC)
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Well the point that probably got lost there was that Hungary, Poland and Czech are completely different kinds of investment to Germany .. And investing shouldn't be like betting on horses.

There's no reason to suggest Germany's particularly undervalued – so you hold it at market weight, if at all.

In Eastern Europe you find cyclical companies at the extreme end of the value spectrum, and you find geopolitical risk .. And I'd say the reason for looking there is that, in the 60s, everyone wanted to own Fundsmith-type stocks, and they often sat on PEs around 50-60.

So back then there was more of an opportunity to find average businesses that were very undervalued .. Nowadays, possibly the opposite is true – everyone's hung up on 'cheap', and not many people are looking for 'good'.

So if you want to capture that value premium (which may provide some form of diversification, in markets that are generally at the high end of valuations), you may have to go to where people aren't generally trying to capture it.

But the reason it's not for most people is because you need to be thinking on a quarter-century horizon .. Which means if you'll be tempted to sell on the threat of war, or commodity turmoil, or a 60% drop in a week, it's not worth betting on an Eastern European horse in the first place .. It's not worth trying to catch falling knives, or taking profits on 100% gains .. It really is just a case of patience, the right amount of diversification, and mean reversion
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jvl
Posted: 12 April 2018 12:21:01(UTC)
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I disagree with pretty much all of Tyrion's last two paragraphs and all the assumptions behind them.

To my mind how can the composition and values and dynamism and freedom and education and policies of a population not affect its businesses and economic performance?

It's still relevant. We still have different performances between nations and there are good reasons for that. That's why the nation state (and languages) live on. There's competition between cultures and countries, as there should be. I look at places like South Korea and Singapore and I see innovative, nimble, hard-working, well-educated populations with low rates of crime. It makes me more inclined to want to invest there.

Globalisation seems to have stopped in Russia and China to the extent that they haven't moved to free democracies. Without that, they'll always be behind the likes of the US.

As for the same old complete mis-thinking about Brexit, I think Taleb pointed out that the EU is clinging to out-dated 1950s economics. Since 1845 the UK has been ahead of the game in free-trade until it was constrained in a protectionist customs union...

But it's pointless talking about it.

KL, what do you think about Russia now? I dipped a toe in the water though I was always sceptical. When you can't trust the rule of law in a country, what is there?
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Theo Shackleton on 12/04/2018(UTC), Sara G on 12/04/2018(UTC)
Apostate
Posted: 12 April 2018 12:31:52(UTC)
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The FTSE All-World gives Russia about 0.5% of the global stock market and that's enough for me. The country is essentially run by gangsters - there is little foreign investment because it just gets stolen.
King Lodos
Posted: 12 April 2018 13:37:50(UTC)
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jvl;60514 wrote:
KL, what do you think about Russia now? I dipped a toe in the water though I was always sceptical. When you can't trust the rule of law in a country, what is there?


I think Russia's priced according to risk .. and it's priced extremely cheaply. (CAPE of 6.2 – which means at today's earnings, you only have to wait 6.2 years to make your initial investment back .. The US is on 30.)

The risk of absolute loss of capital is there in every market .. The question is: have we got it right? And I think Russia's one of these cases where sentiment is very negative, largely because of the Democrats.

Syria's an interesting case .. Why do we call Jidahists bombing Syrian churches and threatening genocide on Christians 'Rebels'? Why not terrorists? Why would Assad suddenly use Sarin gas on women and children, days before the US is ready to withdraw? Why remove another Sadam, knowing what would follow?

I'm not sure we're the good guys in this .. I think the key with investing in regions like Russia is to consider risk first – the case for mispricing might be strong; but that doesn't mean I'd want more in Russia than US.


As for Globalisation .. I think we'll have more global corporatisation .. At the level of academia and technology, the population working in those fields are already closer in culture than people they share towns and cities with .. But at the everyday level, I think the backlash against globalisation could last generations, with the pendulum swinging far the other way.
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Keith Cobby
Posted: 12 April 2018 16:04:56(UTC)
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Globalisation is here to stay. It would be unthinkable that air travel which has been expanding for decades should go into reverse and global trade with it.
King Lodos
Posted: 12 April 2018 16:56:19(UTC)
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Air travel could go into reverse against environmental pressures – especially with another 6 billion people on the planet .. It could be taxed into oblivion once global warming's effects start weighing on global GDP.

One of my predictions is that technology and the environment are going to lead to extreme localisation.

Probably the most nonsensical thing we do, daily, is occupy a few dozen square metres at home, then do a hundred mile round trip on a motorway – pointlessly lugging 1.5 tonnes of metal – to occupy a few dozen square metres in an office.


Efficiency is what capitalism strives for, and at the level of the individual, we're a long way off .. And I think the reason is that the environment doesn't yet factor into large-scale financial models.

There's no reason a person couldn't live, eat, sleep, work, shop, exercise, socialise, etc. in a single building .. Covering hundreds of miles a day to occupy maybe occupy a few hundred square metres is lunacy, and basically poor planning
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Alan Selwood
Posted: 12 April 2018 20:36:44(UTC)
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All this travel instead of 'living over the shop' is because we have been able to do it to a large extent over (say) the last 50 years.

Go back to the mid-1850s and most work, housing, shopping were within walking distance of each other, because transport was slower and there was not enough surplus cash in hand for most people to indulge in the luxury of working where work was effective while living where you wanted to live (with more space, better air-quality, etc).

Come the train and the motorcar, travel times shrank and as wages grew relative to costs, it became affordable to live away from work. The increase in 2-worker households added to the ability to live away from work.

If you look at the typical USA work/house/shop divide, there are many places where you need a car, because the distance between places of work, shops and homes are so vast that transport is essential.

Take away relatively free 'gas', stop the supply of relatively cheap 'automobiles', and very many Americans will be in desperate straits. If it happened, many people would become unemployed, rely on internet shopping exclusively, or never meet more than a handful of other people per month.

Because the mobile way of life is so ingrained in American culture (and to only a lesser extent UK culture too), some real plannning needs to be done, and incentives used to change behaviour, if they are to survive long-term. Self-sufficient Cadbury-style villages and small towns would have quite an edge in this environment, and your sprawling national megalopolis would collapse under its lack of affordable infrastructure.

Technology will clearly help, because anyone working in other than a face-to-face environment will be able to do more and more work without travelling - but plumbers, carpenters, hairdressers and the like will either have to travel to work or be travelled to. Shopping is currently very de-localised, and some massive changes would have to occur to avoid excessive transport. So locally grown crops, seasonal availability of produce, and reduction of choice would be inevitable. Back, in other words, to how it used to be!
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Theo Shackleton
Posted: 12 April 2018 22:08:58(UTC)
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King Lodos;60524 wrote:
Air travel could go into reverse against environmental pressures – especially with another 6 billion people on the planet .. It could be taxed into oblivion once global warming's effects start weighing on global GDP.

One of my predictions is that technology and the environment are going to lead to extreme localisation.

Probably the most nonsensical thing we do, daily, is occupy a few dozen square metres at home, then do a hundred mile round trip on a motorway – pointlessly lugging 1.5 tonnes of metal – to occupy a few dozen square metres in an office.


Efficiency is what capitalism strives for, and at the level of the individual, we're a long way off .. And I think the reason is that the environment doesn't yet factor into large-scale financial models.

There's no reason a person couldn't live, eat, sleep, work, shop, exercise, socialise, etc. in a single building .. Covering hundreds of miles a day to occupy maybe occupy a few hundred square metres is lunacy, and basically poor planning


This is already well under way. Many public sector employers, for instance, now provide an insufficient number of desks and parking spaces for their employees so that home working is a necessity. It is increasingly common throughout the economy, and the technology to effectively work and communicate remotely has been around for a good while. Personally, I love home working. No need for a tedious commute or spending time in a shit, noisy office full of germs and annoying people.

Whilst climate change is a matter of fact, and always has been, the theory of anthropogenic global warming is not yet a proven science. There's evidence for and against, and much we do not know. The climate is extremely complex and dynamic, so the modeling of it can have the same sorts of limitations as economic modeling, and we all know how effective that tends to be at predicting even the near future. The climate thing has been heavily politicised. The science has been polluted by all sorts of moral, ideological, commercial, and other considerations. The scientific method has nothing to do with those things, or consensus, and there's something rather creepy about the way dissenters have been treated. AGW - it might be true. It might not. If it is, its effects might not be anywhere near as bad as some, with vested interests, claim. But maybe they will be.

Besides, I tend to think that we'll be taken completely by surprise by the new technologies that emerge. These smart phones would've seemed like the stuff of science fiction as recently as the early 2000s. Maybe we will have low energy teleportation in future so people can travel as much as they like, and have a very low impact. HS2 could be an irrelevance within a decade or two of its expensive completion. Maybe we'll be out there colonising other planets, and, so to speak, hedging our bets as a species, and the population on earth won't be of much concern.

It seems to me that the main objective is for us to keep growing, inventing, and innovating - and that will mean not being held back by negative, self loathing, and cynical belief systems. The sort that underlies so much of the environmentalist and other movements.
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King Lodos
Posted: 13 April 2018 00:45:38(UTC)
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Theo Shackleton;60537 wrote:
This is already well under way. Many public sector employers, for instance, now provide an insufficient number of desks and parking spaces for their employees so that home working is a necessity. It is increasingly common throughout the economy, and the technology to effectively work and communicate remotely has been around for a good while. Personally, I love home working. No need for a tedious commute or spending time in a shit, noisy office full of germs and annoying people.

Whilst climate change is a matter of fact, and always has been, the theory of anthropogenic global warming is not yet a proven science. There's evidence for and against, and much we do not know. The climate is extremely complex and dynamic, so the modeling of it can have the same sorts of limitations as economic modeling, and we all know how effective that tends to be at predicting even the near future. The climate thing has been heavily politicised. The science has been polluted by all sorts of moral, ideological, commercial, and other considerations. The scientific method has nothing to do with those things, or consensus, and there's something rather creepy about the way dissenters have been treated. AGW - it might be true. It might not. If it is, its effects might not be anywhere near as bad as some, with vested interests, claim. But maybe they will be.

Besides, I tend to think that we'll be taken completely by surprise by the new technologies that emerge. These smart phones would've seemed like the stuff of science fiction as recently as the early 2000s. Maybe we will have low energy teleportation in future so people can travel as much as they like, and have a very low impact. HS2 could be an irrelevance within a decade or two of its expensive completion. Maybe we'll be out there colonising other planets, and, so to speak, hedging our bets as a species, and the population on earth won't be of much concern.

It seems to me that the main objective is for us to keep growing, inventing, and innovating - and that will mean not being held back by negative, self loathing, and cynical belief systems. The sort that underlies so much of the environmentalist and other movements.


Absolutely, I was going to mention the rise in home working, 'digital nomads', gig-based economy, etc. I've got Asian friends who work entirely from sites like upwork.com – doing translation jobs, data entry, copywriting .. They seem like they've been doing it forever – like it's a completely normal lifestyle.

I've been freelancing and trading from home for a long time .. It can be a double-edged sword .. There is a fairly accurate cliche of the journalist who moves to London for their career, lives in a bedsit in Hammersmith, works nonstop to pay rent, and essentially spends 10 years talking to their cat.

The problem with global warming is the crazy leftists who push it .. All they want is control – especially if it involves curtailing big corporations .. But exaggerating claims and demonising opposition is shortsighted .. It's pushing sensible people towards skepticism – which might not be good either .. And I think it would've been far smarter to invest in a high-speed Internet, like S.Korea's, rather than HS2 .. As for technology, there is a theory that the reason the universe doesn't look very populated is because at a certain point (which we're probably very close to) virtual reality offers a better alternative to 'looking outwards' .. When you see the social effects of World of Warcraft, Facebook, anime porn (thinking of Japan's fertility rate), there'll be social structures collapsing everywhere




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philip gosling
Posted: 13 April 2018 07:02:33(UTC)
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I find myself agreeing with KL over Germany and other eastern Countries regarding investment now or for the long term. Germany reinvented itself twice in past 70 years once after WWII and again after reunification. In past 50 years it maintained its manufacturing , engineering and ship building bases much more than UK by exploiting 2 things - its semi control of EU policy and its use of 3 million plus " Gastarbeiter" or guest workers mainly from Turkey. Few were employed in the old 'East Germany' so perhaps Mrs Merkel had little experience of the different culture they brought but she now has 1 million plus new refugees (not counting extended families to follow) to integrate perhaps going forward over next 50 years that will strain even German finances and social cohesion.
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Tyrion Lannister
Posted: 13 April 2018 17:22:34(UTC)
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jvl;60514 wrote:
I disagree with pretty much all of Tyrion's last two paragraphs and all the assumptions behind them.

To my mind how can the composition and values and dynamism and freedom and education and policies of a population not affect its businesses and economic performance?

It's still relevant. We still have different performances between nations and there are good reasons for that. That's why the nation state (and languages) live on. There's competition between cultures and countries, as there should be. I look at places like South Korea and Singapore and I see innovative, nimble, hard-working, well-educated populations with low rates of crime. It makes me more inclined to want to invest there.

Globalisation seems to have stopped in Russia and China to the extent that they haven't moved to free democracies. Without that, they'll always be behind the likes of the US.

As for the same old complete mis-thinking about Brexit, I think Taleb pointed out that the EU is clinging to out-dated 1950s economics. Since 1845 the UK has been ahead of the game in free-trade until it was constrained in a protectionist customs union...

But it's pointless talking about it.

KL, what do you think about Russia now? I dipped a toe in the water though I was always sceptical. When you can't trust the rule of law in a country, what is there?


You're absolutely right, but you missed my point. There'll always be regional variations but defining the region by national boundaries is continually becoming less relevant.
philip gosling
Posted: 13 April 2018 17:30:30(UTC)
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Theo Shackelton said

...." Besides, I tend to think that we'll be taken completely by surprise by the new technologies that emerge....."


..............and today I read an article on electric car battery charging used while driving on roads and a trial road etc being built in Sweden just opening.

" How it works is pretty straightforward. There's a metal strip embedded in the road that provides power. An electric vehicle will need a movable arm to deploy and contact the strip, which will provide the circuit necessary to charge the car's batteries. If the car changes lanes, the arm disconnects. It's similar to how slot cars receive their power."

As I live in a 'block of flats' in the centre of a city with 11 other flats and no parking spaces available outside nor room for charging points this could be a partial solution, especially in cities & on toll roads.



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Theo Shackleton on 13/04/2018(UTC)
King Lodos
Posted: 13 April 2018 17:48:30(UTC)
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Tyrion Lannister;60564 wrote:
You're absolutely right, but you missed my point. There'll always be regional variations but defining the region by national boundaries is continually becoming less relevant.


It's certainly true within spheres like art, academia and technology .. and it probably always has been (for as long as there's been travel and trade).

But I think the big unknown with globalisation is whether oil and water cultures – like conservative Islam and liberal democracy – merge .. or we wind up with a world completely divided into regional factions.

If you think how far apart Bangladesh's culture is from Canada's .. there's no happy medium between having transgender politicians and Sharia law .. Either one culture absorbs the other, or there's conflict .. And globalisation's clearly stoked a fire under radical Islam – with the younger generation getting more nationalistic, more conservative, more religious .. that may well be how people respond to globalisation
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Tyrion Lannister on 13/04/2018(UTC)
Tyrion Lannister
Posted: 13 April 2018 18:24:50(UTC)
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King Lodos;60567 wrote:
Tyrion Lannister;60564 wrote:
You're absolutely right, but you missed my point. There'll always be regional variations but defining the region by national boundaries is continually becoming less relevant.


It's certainly true within spheres like art, academia and technology .. and it probably always has been (for as long as there's been travel and trade).

But I think the big unknown with globalisation is whether oil and water cultures – like conservative Islam and liberal democracy – merge .. or we wind up with a world completely divided into regional factions.

If you think how far apart Bangladesh's culture is from Canada's .. there's no happy medium between having transgender politicians and Sharia law .. Either one culture absorbs the other, or there's conflict .. And globalisation's clearly stoked a fire under radical Islam – with the younger generation getting more nationalistic, more conservative, more religious .. that may well be how people respond to globalisation


Who knows?

I'm not sure you're right though about the younger generation getting more conservative and nationalistic, I'd say the opposite is true. Maybe more of the younger generation are getting more religious, especially Muslims, but that could be a relatively short term thing.
King Lodos
Posted: 13 April 2018 18:46:36(UTC)
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Tyrion Lannister;60569 wrote:
Who knows?

I'm not sure you're right though about the younger generation getting more conservative and nationalistic, I'd say the opposite is true. Maybe more of the younger generation are getting more religious, especially Muslims, but that could be a relatively short term thing.


It's true of western Muslims – statistically they're more likely to support Sharia and radical groups than their parents are.

But actually it's also true of Generation Z .. And this is something that has informed investing decisions (such as avoiding Google and Twitter, who have serious problems engaging with Gen Z).

https://www.forbes.com/sites/ashleystahl/2017/08/11/why-democrats-should-be-losing-sleep-over-generation-z/

Why Democrats Should Be Losing Sleep Over Generation Z

"There has been much talk about the Millennial generation being entitled, lazy, and narcissistic. And while Millennials like myself were busy fending off the harsh criticisms and stereotypes constantly flung at our generation, a whole new demographic was slowly emerging from the shadows. Hello, Generation Z! The fiscally responsible, tattoo hating, Republican leaning group, touted by conservatives as their best hope for the future, and as the antithesis of Millennials."


And I think the most important rule for investing, with this kind of conversation: forget your preconceptions .. I would've said Western and Asian kids were getting more liberal, if I hadn't looked into it .. Never ever let yourself invest on an opinion – because that'll be the lazy trade .. Not that this is directly tradable information; but always data first
Dennis .
Posted: 15 April 2018 08:54:27(UTC)
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In 1979 I was living and working in Bath and my employer offered me a job 60 miles away in Dorset, the expectation was that I would be in the new job for about 2 years. I was offered a full company relocation with the company paying all removal fees plus various allowances to cover new carpets , curtains etc etc. as the commute would have been unreasonable. The job actually lasted nearer 10 years and my next assignment in 1989 was back in Bath but this time there was no way that the company would pay for a move back to Bath as it was only 60 miles and easily commutable. My point is that during that period, peoples' attitudes to travel changed tremendously.

Dennis .
Posted: 15 April 2018 09:00:32(UTC)
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I have always taken the view that you should not invest in a company that sends bills to consumers. The reason being that poiiticians (and then the Daily Mail) get involved and we have all seen the recent pressure on British Gas over price rises and pressure on electricity, water and other utility suppliers. National Grid, by comparison, doesn't seem to come under public and government scrutiny in the same way.
King Lodos
Posted: 15 April 2018 14:10:44(UTC)
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People's attitudes to travel have certainly changed .. But the gridlock around London and Oxford 5 days a week looks to me like society barely functioning .. London exceeded its annual Nitrogen Dioxide limit in a single week back in 2016.

That anyone's job would involve 4 hours a day sat in a metal box inhaling 100,000 other people's exhaust fumes is insanity .. And those situations are either solved, or get pushed past the point of insanity and become physically unsustainable.

The global population has to nearly double again, and as with the Pareto principle, most of these people will be gravitating towards the same big cities
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