Welcome to Finance and Fury, The Furious Friday edition

Today We will go through how the share market changes with economic theory, particularly the theory of Milton Friedman in regards to shareholder value and certain volatility

  • The share market behaviour changes as the thoughts of investors change
  • It is based around Game Theory

To Start:

  • What is the predominant thought of today
  • The returns of a company drive demand, people want shares that are doing well
  • Quarterly reports have a short term focus
  • This can take priority over long term health
  • What is the fiduciary duty of directors?

 

Where does this view come from?

  • Who is Milton Friedman
  • 1962 collection of essays “Capitalism and Freedom”

“There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud.”

  • Prices can respond quicker with information being readily available

 

How does this all work?

  • Projected versus actual financial reporting
  • Value is not price, it is what people think the price should be
  • Technically pursuing short term value should maximise long term value
  • Sometimes short-term gains come at a loss of long-term potential
  • What is another view of economic good?
  • Public companies are always exposed to short term investors or speculators who have a clear goal
  • Slight misallocation started to occur
  • The drive for CEO’s to be held accountable with shares as payment, came with an incentive to manipulate share prices

 

This is the sort of market we have to work with

  • Companies with good managers is the number one measurement
  • Long term performances

 

One of the most important parts

  • Don’t panic sell
  • If the company is good, it should recover long term
  • Selling the shares just crystalises the loss
  • Slow and steady wins the race
  • Next best things “in fashion shares”
  • When to get out?
  • Buy and hold well managed companies
  • I looked at the difference between large cap and small cap active managers
  • I outsourced the guessing to people who do this professionally

 

Thanks for listening, if you want to get in contact you can do so here.

 

Wars and the original purpose of Central Banks

Welcome to Finance and Fury, The Furious Friday Edition.  Today is an interesting episode - Central Banks and Wars – Often wouldn’t think of these two together – What is the purpose of a central bank? Financial stability, a lender of last resort, to smooth out the...

Cover your butt! A closer look at diversification

Episode 6 Not all returns are created equal; diversification (and over diversification), correlation and covering your butt Welcome to Finance & Fury! I’m sure that everyone’s heard the saying, “playing it safe” before. And in any game, it’s generally a good idea....

Buying Property & Financial-Crash proofing your investments: how to get yourself into a position to survive any market correction

Episode 10 Buying Property & Financial-Crash proofing your investments: how to get yourself into a position to survive any market correction Financial-Crash proof your investments This is a flow on from the last Say What Wednesday, this episode talks about how to...

(Intro Series) Translating Finance

Intro - Episode 2 Translating Finance Welcome to Part 2 of this intro series to Finance & Fury. Today I wanted to start this episode off with getting you to imaging you’ve hit the lotto jackpot! Say for instance, you’ve got a guaranteed million dollars per annum...

Creating new year financial plans to turn into financial actions.

Welcome to Finance and Fury. I hope you all had a good Christmas – if you are like me might be a few kg heavier. This episode – be looking at making new year plans – new years is upon us – many people have new years resolutions. To start with - looking back on the...

How can the combination of an argument from authority and fear be used as a method of enforcement, allowing the economy to be shut down?

Welcome to Finance and Fury, the Say What Wednesday edition. This weeks question comes from Scott in Texas. “Thank you for your steady course on the social and resultant economic collapse from Govt reaction to the covid 19 virus. I am just as dismayed as you that we,...

The market is in retreat! Is it from the economic impacts of the coronavirus or speculative selling and is it a good time to buy?

Welcome to Finance and Fury What a week last week was for markets – ASX lost value of just under 10% - All around news of the Coronavirus and speculation on Government responses – So Aus and international markets have dropped heavily – might be thinking that it is...

Nailing Business Cashflow Forecasts, whether you’re established, looking to expand, you’re a start up or a business in trouble

Hi Guys and welcome to Finance and Fury’s ‘Say What Wednesday’ Episode. Today we’re joined again by Nick. Our question today comes from Justin who asks, “Our building company recently went through issues with its cashflow, so as directors we halved our wages to help…I...

Gold as a portfolio hedge – Why is the price rising and what are the methods of accessing gold?

Welcome to Finance and Fury,   Today – next gold rush – Final part of capital preservation – Allocation as a hedge for a financial meltdown - should preserve capital, withstand market volatility, and provide diversification across a portfolio Gold – an asset...

Who controls the World Bank and why do they seem to do more harm than good?

Welcome to Finance and Fury, the Say What Wednesday edition. This week’s question comes from Francesca. “I have really liked your podcast on the pandemic bonds, I had read about these bonds maybe a month ago in The Economist. My question after listening to the podcast...

Pin It on Pinterest

Share This