Phil Anderson debunks popular investing doctrine
Thursday, 24 May 2018
By Bernd Struben
- It’s there for everybody to see
- Let your minions do the talking
- Investing in Korean peace
When you read about Phillip J Anderson, you’ll often see his name preceded by the words ‘controversial economist’.
And there’s good reason for that.
Most economists don’t like to stray far from the pack. They prefer to be wrong all together, rather than risk striking out on their own and being wrong all by themselves.
But that herd mentality also keeps the majority of economists from being right…all by themselves.
Phil, on the other hand, doesn’t care a lick what his peers believe. He does his own independent research — decade’s worth of it — and draws his own conclusions.
Many of these conclusions, like his Grand Cycle Theory, are indeed controversial. But time and time again, the facts back him up.
This week we’ve looked at a number of Phil’s trading and investing tips.
Like never treating the stock market as a supermarket and going bargain hunting. Rather Phil, and his team of analysts over at his trading service Time Trader, recommend buying high and selling higher.
And never buy stocks based on the latest good news in the media. If it’s in the news…it’s in the price.
Yesterday we also covered ‘dead stocks’ — stocks that are trading sideways, going nowhere. While it may be tempting to hold onto those stocks, thinking they could begin to move any day now, Phil believes that’s a big mistake. He says:
‘You want to be in stocks that are moving… The last thing you want to be doing is just getting into those stocks going sideways, because then your money just does absolutely nothing.’
Phil’s proprietary T.I.M.E.D. stock trading methodology is designed to avoid those dead stocks at all costs. When the occasional laggard does find its way into the Time Trader portfolio, it gets cut fast.
Today we’ll cover one of ‘controversial economist’ Phil Anderson’s more, erm, controversial ideas.
And that’s debunking the myth of diversification.
We’ll get back to that after a look at the markets.
But first, a quick reminder that the doors to new membership in Phil’s premium trading service, Time Trader close tomorrow at midnight. Be sure to check out what’s on offer with our most popular trading service before then. After midnight tomorrow, the doors might not open again until next year.
You can get all the details by clicking here.
Overnight the Dow Jones Industrial Average closed up 52.40 points, or 0.21%.
The S&P 500 rose 8.85 points, or 0.32%.
In Europe, the Euro Stoxx 50 index finished down 45.43 points, or 1.27%. Meanwhile, the FTSE 100 fell 1.13%, and Germany’s DAX lost 193.08 points, or 1.47%.
In Asian markets, Japan’s Nikkei 225 is down 299.64 points, or 1.32%. China’s CSI 300 is down 0.12%.
In Australia, the S&P/ASX 200 is down 2.81 points, or 0.05%.
On the commodities markets, West Texas Intermediate crude oil is US$71.73 per barrel. Brent crude is US$79.62 per barrel.
That puts WTI down 0.28% overnight. But the big picture still tells me oil is heading for a much larger retrace by the end of northern summer.
The US continues to pump oil at record levels, with all signs pointing to more US supply to come.
OPEC may well scrap, or at least amend upwards, its production caps when the member nations meet in Vienna next month. And even if they don’t, current high prices are increasing the incentive to cheat on any agreement they do reach.
And the political standoffs the US has engaged in, with the oil producing nations of Venezuela and Iran, could resolve themselves a lot faster than most analysts believe.
But this apparently isn’t the same big picture the directors of Santos see. They appear to be banking on high oil prices for the long run.
From The Sydney Morning Herald:
‘Santos directors, in rejecting Harbour Energy’s $US14.4 billion bid for their company, have tied their reputations, and perhaps their positions, to the future prices of oil and Santos shares…
‘Whether or not that price was absolutely compelling… it was certainly not much short of that status.
‘Indeed, for it to be less than compelling and for Santos’ view that it didn’t represent a full value of the company to be borne out, oil prices would have to remain at or above their current level of $US80 a barrel, not just for some weeks or months, but for some years.’
Clearly Santos’ directors haven’t been keeping up with Port Phillip Insider. Nor, it would seem, are thousands of options traders.
As you can see in the chart below, more than 93 million barrels have been priced on expectations oil will hit US$100 inside the next 12 months.
Click to enlarge
‘Whether it’s the specter of sanctions on Iran, Venezuela’s output plunge, or a momentum play on the back of the past year’s 46 percent surge in Brent, there are now the equivalent of about 93 million barrels wagering on the global benchmark hitting $100 at some point in the next 12 months.
‘While triple-digit oil may be a way off in practice, talk that prices could top that barrier over the next 12 months is gaining traction. Bank of America said earlier this month that oil could rally to $100 by the middle of next year…’
US$100 per barrel oil next year?
They may be right. But it still looks like oil’s heading the other way to me.
Turning to gold, the yellow metal is trading for US$1,294.45 (AU$1,712.46) per troy ounce. Silver is US$16.45 (AU$21.76) per troy ounce.
Bitcoin continues to slide after reaching a 35-day low. One bitcoin is worth US$7,624.45.
The Aussie dollar is worth 75.59 US cents.
It’s there for everybody to see
A regular mantra regurgitated by mainstream financial advisors — who also don’t like straying far from their herd — is the importance of diversification.
Before being allowed to offer general financial advice in Australia, all advisors — your editor included — need to pass certain exams. To study for those exams, there are a range of professional education textbooks.
Here’s an extract on diversification from my own Tier 1 Adviser Compliance Solution 923 Securities textbook:
‘One of the key elements of successful investing is diversification within an investment portfolio… Diversifying their [a client’s] share investments across different stocks as well as different sectors and industries is a prudent way of managing their share portfolio.’
I imagine you’ve also been told that diversification is crucial for the successful investor.
But is it?
Here’s Phil Anderson’s decidedly controversial take:
‘You hear this so often about the fundamentals, and other people telling you that you’ve got to have a diversified portfolio because then you’ve got at least a good chance of making some returns, and everything else.
‘If you have a diversified portfolio the result you’re going to get is, well, diversified! Who wants that these days?
‘You actually want good results.
‘I say you want to be in the stocks that are moving.
‘And I have found, and this is 100% accurate, I have found that the market tells you in advance what stocks are going to be moving.
‘It’s there for everybody to see.
‘It’s not secret, it’s published.
‘The market publishes every day, what stocks are moving! The market tells you.
‘You just have to know how to read a chart. And that’s what we do, that’s the whole Time Trader methodology, really. That’s to get you into those stocks that the market tells you are moving.’
To be clear, Phil is not saying that you should put all of your investable money into the stock market. Rather that the money you do choose to invest doesn’t need to be spread among a diversified basket of stocks.
Instead focus on the winners.
As Phil says, that’s the whole Time Trader methodology.
If you haven’t taken the time to check out exactly what Phil and his team do over at Time Trader, you can do so by clicking here now.
Let your minions do the talking
If you follow the daily mainstream headlines, you may be thinking that the historic meeting between Korean leader Kim Jong-un and President Donald Trump could be scuttled.
While anything is possible, I remain convinced Jong-un won’t turn down the opportunity to directly sit down with Trump. And Trump himself has chosen his language very carefully…saying that while he may walk away from the meeting he hopes it will still happen. And he is offering ‘peace’, as well as assuring that Jong-un’s ‘country will be rich’ if they can reach a deal.
Most political analysts are having a hard time wrapping their heads around the new world of diplomacy unleashed by Donald Trump.
The latest aggressive words from the North Korean regime have raised further doubts among the naysayers. From CNN:
‘Choe Son Hui, a vice-minister in the North Korean Foreign Ministry, said if the US continued on its current path, she would suggest to North Korea’s leadership that they reconsider the planned summit between President Donald Trump and North Korean leader Kim Jong Un….
‘“Whether the US will meet us at a meeting room or encounter us at nuclear-to-nuclear showdown is entirely dependent upon the decision and behavior of the United States,” Choe said.’
Son Hui also lashed out at US Vice President Mike Pence, calling him a ‘political dummy’ for comparing Libya to North Korea.
Now all of that may sound alarming.
But what’s important to note here is who is doing the sledging.
Last year the violent threats and derogatory statements flew fast and furious between Trump and Kim Jong-un themselves.
Now Trump remains very subdued and positive, and we hear no direct threats from Jong-un.
Instead they’re letting their minions do the trash talking.
Choe Son Hui is merely a vice-minister in the North Korean Foreign Ministry. And she’s not insulting Trump, but rather Pence and Bolton.
This should tell you something. Something the mainstream appears to be missing entirely.
And then there’s China…
A quick peace deal between Jong-un and Trump may not be in China’s best interests.
But then neither is a nuclear war on their doorstep.
China is North Korea’s most important supporter. While tensions have flared between the two neighbours over China’s support of US led sanctions, Jong-un undoubtedly pays close attention when China speaks.
And here’s what China’s State Councillor Wang Yi stated at a news conference yesterday:
‘I told our US colleagues that if you want to solve the problem, now is the time. If you want peace, now is the time. If you want to make history, now is the time.’
Look, anything could happen.
But the way I read these tea leaves, the 12 June summit between Trump and Jong-un is on.
And peace on the Korean peninsula may not be far away.
Investing in Korean peace
If Trump does pull a rabbit from his hat and gets North Korea to abandon its nukes, it could open the door to huge opportunities for South Korean companies.
That could see their share prices fly. And it should see the broader Korean stock market rise as well.
One way to potentially profit if peace breaks out is with the iShares MSCI South Korea ETF [ASX:IKO].
The exchange traded fund seeks to track the investment results of an index composed of South Korean equities. Its composed of mid and large-cap South Korean stocks.
The ETF is down 0.53% since last Friday. And it’s up 9.81% over the past 12 months.
I don’t make official recommendations in Port Phillip Insider. So you should do your own research before considering IKO. If things turn pear shaped and war breaks out…I reckon the share price will plummet.
But if Trump manages to bulldoze his way to a peace accord — as I expect he will — then South Korean companies should be among some of the biggest immediate beneficiaries.
Finally, the latest on the Queensland by-election, from The Australian Tribune:
‘By-Election Battle Heats Up in Queensland’
‘If nothing else, the fall-out from the dual citizenship fiasco is keeping our pollies busy.
‘Not busy trying to improve the way Australia is run, mind you. But busy trying to gain more seats for their party.
‘And the looming by-election showdown between a “gentle giant” and a casualty of the dual-citizenship crisis is…’
If you’re fed up with sanitised, politically correct dogma cut and pasted from one mainstream source to another then The Australian Tribune is for you.
And it’s absolutely free.
Sign up here to get The Australian Tribune delivered free to your inbox five days per week.
You can visit our website at https://www.theaustraliantribune.com.au/ to read the complete article above now.