The Last Straw

Ben Hunt, former hedge fund manager and creator of Epsilon Theory, once wrote that a bet is a tax on bullshit. It is a sharp and accurate reminder that opinions are free, narratives are endless and forecasts cost nothing to produce. Talk demands nothing. A bet, however, demands everything. It requires sacrifice. It forces you to risk something you value […]

I recently came across a fascinating, if slightly uncomfortable, piece of research titled Long-Term Shareholder Returns: Evidence from 64,000 Global Stocks (you can read it here). It examines thirty years of market history and reveals an awkward truth: almost all the wealth created by equities comes from a vanishingly small number of companies. Of the 64,000 stocks studied, just 2.4% […]

We often use capital as a synonym for money in markets. We talk of capital raising, capital structure, capital adequacy… but that’s not what capital is. Not really. So, at the risk of getting a little philosophical, I wanted to frame capital in the proper context. Partly because it’s interesting, but more so because a clear conception of capital gives […]

Most technologies can be improved upon significantly after their initial invention. Steam engines, telephones, automobiles, and software all evolve through iterative refinement, with better versions replacing older ones. But every so often, something emerges that is fundamentally final in its category. Not because people stop innovating, but because the nature of the thing itself admits no superior version. Algebra did […]

Let’s talk about gold. That shiny yellow metal that’s captivated humans for thousands of years. Traditionally seen as a ‘safe haven’ asset, its recent price action is more akin to that of a meme stock. Which is unusual in itself, but especially so when all other assets are likewise on their way to the moon. So, what gives? Maybe it’s […]

Terry Smith is a former UK analyst and banker who, in 2010, founded Fundsmith with a philosophy that is disarmingly simple: “Buy good companies. Don’t overpay. Avoid fiddling.” It’s a straightforward but powerful approach that has allowed him to quietly outperform most professional investors. He looks for companies with high returns on capital, strong competitive advantages and robust cash generation. He […]

There’s a growing sense of discontent today, and not unreasonably so for those who feel the system has let them down. And, let’s be real, it has let a great many people down. Unless you have outsized earning power, or have built up a decent portfolio of assets, life is getting increasingly difficult. And even if you do, life isn’t […]

One of the great things about equity investing is that you can be extremely fussy. You don’t need to buy hundreds of stocks. A dozen or so can give you solid diversification, provided they’re not all marching to the same beat. And you’ve got literally thousands of candidates to choose from. Tens of thousands, if you’re happy to look offshore. But […]

I recently watched a talk by Patrick Honohan, Ireland’s central bank governor through the depths of the GFC. He was reflecting on the country’s property and banking collapse of 2009, and no surprise, it got my inner perma-bear twitching. But this isn’t about to turn into some Chicken Little rant about the similarities with Australia’s housing market. Actually, there are […]

Company earnings drive share prices over the longer term. More specifically, earnings per share, or EPS, does. It’s the great attractor that ultimately pulls prices along. You won’t find a single example of a company, ever, that has compounded its stock price over decades without also compounding EPS. It just doesn’t happen. That’s why EPS should sit at the centre of […]