Port Phillip Publishing Investment Director Kris Sayce on the Gift of the Magi…a declaration of war on fake contrarians…the biggest scam in history…and three sectors set to soar (if you’re prepared to see them)…
Do you know the Magi?
(It’s a story of a woman who sold her hair, her most precious possession, to buy her husband a chain for his watch. Unfortunately though, while she was selling her hair, her husband was out selling his watch – his most prized possession – to buy combs for her hair.)
Turns out it doesn’t matter anyway. Why? Because the Magi are irrelevant. A ruse. A red herring!
In fact, that’s the only reason why Kris told this story to the audience – to prove a point: ‘that over the past six years you have been fed tens hundreds of financial and economic red herrings by the mainstream…a diet of one fake crisis after another.’
He reeled off a few crises…the stand-off in the Ukraine, the tapering of QE, China’s slowing growth. 21 in total. And they’re all the same, said Kris: distractions stopping you from making money.
It was a refreshing change from a morning of deep macro-analysis.
And he started with a declaration of war…
A war on fake contrarians!
It had us smiling at the Markets and Money.
Because it’s true…most people think being a contrarian simply means doing the opposite of everyone else, at all times, no matter what.
And if you think that, then you’re in the 99% of people who do. And you’re wrong, said Kris:
‘Stop and think for a moment about how illogical that definition is when you apply it to investing. If contrarian investing means doing the opposite to everyone else, then logically it must mean that a contrarian investor will always lose money…
‘It would mean that you would short sell into a rising market and buy into a falling market.’
The real art to contrarian investing, Kris explained, is getting behind an idea BEFORE the broader market makes the same decision.
The trouble is most contrarian investors aren’t interested in spotting future trends.
They’re too busy thinking about the Magi…fussing about things that will never make them money.
‘Had you heard of SHIBOR, before it threatened to take the market down?’ Kris asked the audience.
The answer was a resounding NO.
Meanwhile, stocks keep going up.
Kris brought up the following chart.
click to enlarge
Source: Google Finance
‘Anyone scared off the market thanks to one crisis or other missed out on a 139.7% gain for the US S&P 500 index…and a 58.8% gain for the S&P/ASX 200 index.’
Next up Kris turned to the theme of this conference: survival in the digital age.
This is where you’ll find the single biggest threat to liberty, the biggest scam in history and the single biggest cause of bubbles and busts.
The way Kris sees it, there are only two groups of people you need to protect yourself from in the digital age: Cyber criminals…and Government criminals.
But one is a bigger threat than the other.
Of course, Kris is referring to the government.
‘These thugs have developed the best known and most successful electronic ‘money skimming’ operation in history – it’s known as the Pay As You Earn or Pay As You Go system (PAYE or PAYG).
‘In total, during the 2012 financial year the government – in various forms – swiped $329 billion either directly or indirectly from individuals.’
So what are you to do?
Kris offered this tip among others:
‘One option is to hold investments in the name of whichever person in your relationship is on the lower tax rate. If you’re on the 45% tax rate and your partner is only on the 37% tax rate, it makes sense to hold positively geared investments in the name of the lower income earner.
‘If you own negatively geared investments then the reverse is true.’
Then you should invest like a REAL contrarian, not a FAKE one.
According to Kris that means looking for future trends. Emerging markets are a great opportunity, Kris reckons.
China has potential. The Chinese government aims to lodge two million patents by 2015. This could be the catalyst to shift them from a manufacturing hub into an innovation hub.
As Kris said:
‘[China] hasn’t innovated in one damn way over the last 1,000 years. China’s most recent innovations are paper and gunpowder. That tells you something about the lack of innovation. But that’s about to change.’
He revealed several other potentially profitable trends you should keep an eye on, but you can find those out here.
for Markets and Money