£2.95 Monday 15 September 2014 Vol III, Issue XI HNW MAGAZINE Exploring profit & wealth strategies for entrepreneurs HNWIs (high net worth individuals business angels, and investors. hnwmagazine.co.uk September 2014 IN THIS ISSUE FEATURE P3 5 Myths Wall Street Wants You To Believe… RUTHLESS P5 How to Drop the Dead Donkey…At A Profit READ‘EM & REAP P7 The Market Voices You Should Listen To THE UK’S £350M P7 BUSINESS OPPORTUNITY THE F&J INDEX P9 Measuring the Media’s Fear & Judgement LEADERSHIP P11 The Entrepreneur, The Leader And The Manager FUNDING NUSOU P13 The Angels Den’s Knockout Street Food Sensation HIGH GROWTH P14 COMPANY NEWS Desk Union Launches “The Square” With RBS Measuring the Media’s Flotsam & Jetsam of Market Predictions… If history tells us anything it’s that the media, like the vast investor herd, always misses on market predictions. Page 5 READ ‘EM & REAP BEN CARLSON A Wealth of Common Sense Looking back at nearly 100 years of stock market data, stocks have averaged a 10% correction once a year and fallen at least 20% once every four years or so. But actual results are anything but average so setting your watch by the averages and waiting for them to happen right on schedule is impossible. Page 7 BY ED EMERSON THE F & J FLOTSAM & JETSAM MEDIA SENTIMENT MONITOR RUTHLESS How To Drop The Dead Donkey…At A Profit “This is a ruthless world and one must be ruthless to cope with it.” Page 5 5 MYTHS WALL STREET WANTS YOU TO BELIEVE… BY MIKE WILLIAMS Which Myths Were Myths....? Remember crude oil was going to $300 a barrel....uh, not. In fact, nearly every month now the IEA is lowering the global oil demand. We are already back to levels seen in early 2012. Why? Electric, natural gas and high mileage auto industry remakes are all working rap- idly to nip at the fringes of demand growth. Not only has that growth in demand now peaked, it is now falling even as we drive more and get more done. The Silver Lining? Don't tell anyone but the oil finds we have made here in the US over the last 4 years are staggering. We are less than 5 years away from becoming energy independent and soon after we will become an exporter. With that in mind maybe we actually do want crude oil to go to $300 a barrel in an- other 10 years! Consumer Incomes Are Falling....Hey, Not So fast There Cowboy... Sure, the roar from the bears made it clear F & J
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£2.95
Monday 15 September 2014
Vol III, Issue XI
HNW MAGAZINEExploring profit & wealthstrategies for entrepreneursHNWIs (high net worthindividuals business angels,and investors. hnwmagazine.co.uk September 2014
IN THIS ISSUEFEATURE P35 Myths Wall StreetWants You To Believe…
RUTHLESS P5How to Drop the DeadDonkey…At A Profit
READ‘EM & REAP P7The Market VoicesYou Should Listen To
THE UK’S £350M P7BUSINESSOPPORTUNITY
THE F&J INDEX P9Measuring the Media’sFear & Judgement
LEADERSHIP P11The Entrepreneur, TheLeader And The Manager
HIGH GROWTH P14COMPANY NEWSDesk Union Launches“The Square” With RBS
Measuring the Media’sFlotsam & Jetsam ofMarket Predictions…
If history tells us anything it’sthat the media, like the vastinvestor herd, always misses onmarket predictions. Page 5
READ ‘EM & REAPBEN CARLSONA Wealth of Common Sense
Looking back at nearly 100 years of stockmarket data, stocks have averaged a 10%correction once a year and fallen at least20% once every four years or so. But actualresults are anything but average so settingyour watch by the averages and waitingfor them to happen right on schedule isimpossible. Page 7
BY ED EMERSON
THE F & JFLOTSAM &JETSAMMEDIASENTIMENTMONITOR
RUTHLESSHow To Drop The DeadDonkey…At A Profit
“This is a ruthless world andone must be ruthless to copewith it.” Page 5
5 MYTHS WALL STREET WANTS YOUTO BELIEVE…
BY MIKE WILLIAMS
Which Myths Were Myths....?
Remember crude oil was going to $300 abarrel....uh, not.
In fact, nearly every month now the IEA islowering the global oil demand. We arealready back to levels seen in early 2012.
Why? Electric, natural gas and high mileageauto industry remakes are all working rap-idly to nip at the fringes of demand growth.
Not only has that growth in demand nowpeaked, it is now falling even as we drivemore and get more done.
The Silver Lining?
Don't tell anyone but the oil finds we havemade here in the US over the last 4 years arestaggering. We are less than 5 years awayfrom becoming energy independent andsoon after we will become an exporter.
With that in mind maybe we actually dowant crude oil to go to $300 a barrel in an-other 10 years!
Consumer Incomes Are Falling....Hey,Not So fast There Cowboy...
J. Paul Getty thought so as well when he said: “No onecan possibly achieve any real and lasting success, or getrich in business, by being a conformist."Rememberthose thoughts when we all itch in our mind to "sellsomething because it is not working."
All great investments have many periods where they arenot working. They are indeed no fun as they unfold.Most recover. A small percentage overall do not. Overtime, with diligence and patience, it all tends to workout if we are willing to see things a bit differently thanthe rest of the players in the game.
Quantitative Easing (QE) Is The Only Reason theMarket Rallied....Yea, Right….
As shown many times before, earnings for 2015 are nowprojected to be about 265% higher in the twelve monthsahead than were seen for the 12 months of 2008. Werethe S&P also 265% higher, it would stand at 2400 plus.
The deep dark secret of it all is that we continue to priceearnings and value stocks more cheaply than at anytime since the peak of the tech bubble.
QE "printed dollars" were transfers on a balance sheetto repair banks. The rest was funnelled into savingsaccounts out of fear. At the bottom of the tech implosionwe had about $2 trillion in savings accounts here in theUS. Today it is cresting $9 Trillion while our deficitsplunge.
The Myth? The World Is Terrible….
In many, many areas the world has never been betterand the future never more promising and alive withopportunity. The "problems" we see today are merelythe gardens from which opportunity will blossom in theyears ahead....and then new problems will arise to fix aswell.
Let's pray for a good correction so we can buy anotherslice of that opportunity on the cheap. And one finalmyth; you are a fool to buy stocks in good companieswhen the market is at an all-time high.
Really? Imagine if we all acted on that idea at 1,001,3,001, 6,001, 8,001 or 10,001 on the DOW? They wereall new-all-time highs too.
(for about 38 seconds) that there was widespreaddisappointment with August’s US payroll employment gainof only 142,000. In addition, the previous two months wererevised downwards by 28,000.
We agree with Dr. Ed Yardeni of Yardeni Research whosays: "This weakness simply doesn’t jibe with lots ofother labour market indicators showing very low layoffs,plenty of job openings, and lots of national and regionalbusiness surveys with solid employment indicators."
This more upbeat view of the economy was confirmedby the Earned Income Proxy (EIP) chart above, whichshows aggregate hours worked, multiplied by averagehourly earnings in the private sector.
It is highly correlated with private wages and salaries inpersonal income, and rose 0.4% month-on-month to yetanother new record high last month. This augurs wellfor consumer spending.
Add that to the huge benefit of the $14 fall in crude oilthat has quietly taken place and you get a nice, solidbase for holiday season shopping, which we will be in-undated with shortly.
Hugging The S&P Is Good....Keep It In The Box...
The "boxes" idea created by the marketing machineknown as Wall Street is one of the greatest schemes everto pull the wool over the consumer crowd. It impliesthat somehow "having boxes filled in your portfolio"will produce a better rate of return.
Yet studies have consistently shown that managers stick-ing to "their boxes" (read: hugging theirindex) underperform those who stray outside of theirboxes. Further, folks tend to diversify to the point ofmediocrity under the guise that the lesson is risk man-agement.
It’s not. Success starts with being different. One of myfavourite investment writers (and a successful manager),Howard Marks, makes this point strikingly well, when hewrites: “If you want your portfolio’s performance to beabove average, the portfolio will need to be differentfrom the average portfolio – by definition! In otherwords, to avoid a mediocre performance, you need totake a chance that your portfolio’s performance will turnout to be below average. The same applies to life in gen-eral; if you don’t dare to be different, you have zero
hnwmagazine.co.uk September 2014
5 MYTHS WALL STREET WANTS YOU TO BELIEVE… (Cont.)
Are you fed up with earning littleor no interest on your savings
If you’re looking for an income to safeguard your long term financial future thensimply having all your eggs in a bank or building society deposit account basket
AS MA L A N T E E L S S E T A N A G E M E N TAlan Steel Asset Management Limited is authorised and regulated by the Financial Conduct Authority.
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“The market commentatorsthat you should befollowing every day...”
ALAN STEELTHE “SANTA CLAUS” RALLYPoints of Few
"There’s an endless parade of articles and punditstoday discussing the historical monthly returns ofSeptember. In January the media will run with the“January effect”. Then in May they’ll pump the“sell in May” story. Then in September they’llpump the scary September stories. Then in Octoberthey’ll talk about that time in 1987 when the stockmarket crashed. Then in December they’ll starttalking about the “Santa Claus rally. It’s justridiculous.” Read More Here
BARRY RITHOLTZRobbing A Bank…From The InsideThe Big Picture
William Black is a former bank regulator who’s seenfirsthand how banking systems can be used tocommit fraud — and how “liar’s loans” and othertricky tactics led to the 2008 US banking crisis thatthreatened the global economy. Read More Here
JOSHUA BROWNThe “LOL” ReportThe Reformed Broker
Sorry, I couldn’t think of a more apt title for thispost. CNBC: The CBOE Volatility Index, a populargauge of whether people are expecting gyrations inthe market, just saw its biggest monthly plunge innearly three years. So are we headed for a mellowSeptember?” Read More Here
READ ‘EM AND REAP
fers, an investor would have to maintain relationships with650 entities and 15,000 people. The service offers a free 7-day trial and tiered monthly subscription rates.
James Waterhouse says: “The number ofconstruction opportunities on the marketaccurately reflects the construction boomwhich is seeing activity among buildersapproaching a seven-year high. It’s alsointeresting to see high-value activity inother sectors which can provide low entrybarriers and rapid returns.
“The position for business investors is strong, with positiveeconomic indicators, low interest rates and Private Equity firmsopen to supporting these kinds of deals.”
READ MORE HERE
Business acquisition opportunities with a combinedturnover of £345.8 million are coming on to the UKmarket this month, with the number of Constructiondeals leading the way, closely followed by Industrialand IT.
In value terms, the Food & Beverages sector is provid-ing the most opportunities, with potential acquisitionstotalling £131.3 million turnover, followed by Indus-trial (£97.2 million), and Automobiles & Parts (£68.7million).
The data has been released by theDeal Connections Index, which is a ba-rometer of business deals. It has beenlaunched alongside the Deal Connec-tions (www.dealconnections.co.uk)online service that provides instantvisibility of 85 per cent of the UK busi-nesses for sale market.
Using data from more than 7,000 live business dealson the table at any one time, the Deal Connections In-dex accurately reflects activity in the mergers and ac-quisitions (M&A) and management buy-in (MBI)marketplace.
Deal Connections has been founded by entrepreneurJames Waterhouse, who has a 25-year track record incorporate deals and investments, ranging from SMEacquisitions to multi-million pound listed companytakeovers.
He launched the service after finding that businessinvestors were struggling to get an overview of thebusiness for sale market. To gain visibility on the 85per cent plus of the market that Deal Connections of
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The Flotsam & Jetsam (F&J) market monitor measures the bull / bear sentiment of the media each day from across40 major news outlets throughout the UK and America. As the media has never predicted a market crash the contrarianperspective is be wary when the headlines read euphoric, and euphoric when the headlines read danger. The Flotsam& Jetsam is the shipwreck of misinformation we wade through everyday to bring you the F&J…
….then on to the dark side of financial market reportingfrom the TV talking heads; an exercise in myopic analysis,speculation and shiny teeth.
Last week we saw the F&J run for four days at the BearEnough reading and ended on Friday with Bear-a-Bull. Thisgives us an overall positive market outlook going forward.For further details see Alan Steel on Points of Few.
Every morning I troll the views of dozens of financialmarket commentators - the good ones like Reformed BrokerJosh Brown, Barry Ritholtz of The Big Picture, Ben Carlson’sA Wealth of Common Sense, Ryan Detrick, Bob Seawright,Jeff Miller’s A Dash of Insight, Scott Grannis as the CalafiaBeach Pundit, Tadas Viskanta, Howard Lindzon /StockTwits…so many great opinion-formers and so manyI haven’t mentioned here.
They are, in the majority, a thought-provoking andinsightful lot, and more often than not less than militantabout their particular bull/bear sympathies, warninginstead of the danger of single variable assumptions andspurious correlations. And like a good portfolio, all theiranalytical eggs are never in one basket.
vision for tomorrow to engage everyone in the business. They area natural bridge between entrepreneurs and managers.
ManagersManagers focus on today - on the business and its processes. Theyprovide the rigour and attention to detail that ensures the busi-ness runs smoothly. In short, managers make you money.
Interestingly, whilst leadership is revered in business, as demon-strated by the thousands of books and blogs written on the sub-ject, managers rarely receive such accolades.
Most people want to identify themselves as leaders and far feweras managers for fear of being seen as a poor relation.
But the emotive distinction is limiting; entrepreneurs are concernedwith vision and the future; leaders are concerned with people andtomorrow; and managers are concerned with process and today.Businesses grow faster and more profitably when the right peopleare in the right roles and when the management skill mix alignswith the business' position in its life cycle.
In the early stages, entrepreneurial skills are essential toinnovate great products. Without that the business wouldnot exist. As the business moves from a conceptual stageinto growth, a leader is required to build a great team ofmotivated people to take the product to market. As thebusiness grows in size and complexity, managementskills are essential to implement processes and to driveprofit from the activities in the business. We can proba-bly all think of great businesses that have been aroundfor years but eventually foundered through a lack of in-novation and failure to keep pace with a changing mar-ket. So the role of the entrepreneur will be to take amature business through to advanced growth, by devel-oping a stream of innovative products that provide a con-sistent source of future profits.
In summary, entrepreneurs, leaders and managers are keyroles in business culture, each playing their part to enablecompanies to deliver sustainably against their strategicobjectives. READ MORE HERE
BY DARREN SHIRLAW
Business owners have a responsibility to create a cul-ture that allows innovation to thrive, whilst driving along-term competitive advantage for the business. Dis-tinctions are commonly made between the roles of lead-ers and managers. But there is a third key role isessential in the culture of sustainable businesses: therole of entrepreneur. There are clear distinctions be-tween the three roles and the part they each play overthe course of a business' life cycle.
EntrepreneursEntrepreneurs are excited by novelty. Their focus liesin the future rather than the day-to-day. They are notalways the best communicators and due to their drive tocreate new things, they are not best placed to createprofit from their inventions.
LeadersLeaders are revered in society for their ability to con-nect and communicate with everyone. They are natural-ly people-focused and have a talent for creating a clear
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A street food truck serving freshly cooked noodle soup, Nusoulaunched in the spring of 2013. Since then, through sunshineand storms, they've been serving their 'mix, slurp, dash'Asian-inspired pots at markets and festivals throughoutEdinburgh and Glasgow.
ANGELS DEN CROWDFUNDING FOCUS ON…NUSOU“NUSOU is the winner of the Scottish Heats of the British Street Food Awards 2014 and the knock-out Street Food sensation at this years Edinburgh Festival; generating £41K of sales in 25 days.With investment NUSOU can secure it’s first Kiosk within Edinburgh Waverley Station starting a3-year journey to building a £3.8 turnover business.” GET INVOLVED HERE
You can book a tour of the space and find out more on the Desk Union website here
Desk Union Opens “The Square”For Entrepreneurs With RBSDesk Union has opened their first workspace in the heartof Edinburgh; at the RBS branch on the first floor of 36 StAndrew Square. The Square is designed for businessowners who need somewhere in town to work or meet ona part-time basis which reflects the needs of small busi-nesses in Scotland.
The pioneering co-working space, branded Desk Union atThe Square consists of 24 workspaces alongside a largemeeting room, which is available for hire by the hour.The space opened for business earlier this month andalready seven businesses have moved in.
Desk Union works both with commercial landlords andcorporates who have room to spare, and with small busi-nesses looking for a flexible and affordable workspace.Victoria Arnold, founder and CEO explains: “The way peo-ple work is changing. We’re no longer restricted to sethours or based in office cubicles. Businesses crave‘touchdown’ workspace, where workers can meet, con-nect and collaborate with like-minded co-workers.”
