December, 2017 | Slack Investor

December 2017 – End of Month Update … and Bitcoin again

Slack Investor remains IN for US, UK, and Australian index shares.

… and further gains for the Australian Index (+1.6%) and the US index (up 1.0%) on the month. The UK Index is in record high territory, up 4.9% in December.

Slack Investor is on the couch again and congratulates himself for being involved with the world stock markets in an environment where a no risk cash 12-mth term deposit will reward him with a paltry 2-4% p.a.

In order to reach financial independence it is necessary to embrace some risk – but as discussed below, Bitcoin may be a “Bridge too Far”.

Bitcoin Revisited

Bitcoin USD chart from Dec 30 2017. Latest chart can be found at etoro.com

Bitcoin is a regular feature in the papers and even around the Christmas Table. Since my last note on Bitcoin, the price has been on a bit of a wild ride.

Going deeper than Slack Investor really wants to go is a whole world of Bitcoin – and its own language – such as “forking”. This is “sort of” explained by Business Insider. Oh yes … there are “Hard forks” and “Hybrid forks” and “Coin Splits”, and “Bitcoin Cash” and “Bitcoin Gold” and … and … see Wikipedia. The complexity is amazing and “makes my head hurt”

Yet, despite this wild chart, in only a six weeks, Bitcoin has almost doubled in value.

Slack Investor has thought of another way of doubling your money that is much simpler … and faster! Go down to your nearest Casino, stroll to the Roulette table and put your investment money on “red” … No No No … Black! (This is not Investment Advice! – Slack Investor is just experimenting with a Dream Sequence). If you are lucky, you can double your stake in minutes, and walk out with a smile – or, if not, you can walk out feeling like an idiot.

The reason that Slack Investor doesn’t go to the Casino – OR invest in Bitcoin – with his hard-earned investment money is RISK. The bitcoin price might get to $100000 USD, or it might crash to nothing. The trip to the Casino and investing in Bitcoin represents too much risk to my capital.

40% of all bitcoin value is held by 1000 people. There is an obvious price risk if one of the bitcoin “whales” decides to suddenly sell. There also could be a difficulty in getting your bitcoin money out if there is a sudden crash.

What does the great investor and Slack Investor hero Warren Buffet think …

“It doesn’t make sense. This thing is not regulated. It’s not under control. It’s not under the supervision [of] any…United States Federal Reserve or any other central bank. I don’t believe in this whole thing at all. I think it’s going to implode.” – from Forbes

My case rests your honour.

All Index pages and charts have been updated to reflect the monthly changes – (ASX, UK, US). I have also done the quarterly update on the portfolio page. A newcomer to the portfolio is the Vanguard FTSE Asia ex Japan Shares Index ETF – (VAE.AX) on Yahoo. This should give me some exposure to a wide range of companies in the growth region of Asia with not too much expense (MER 0.4%). Bought October 9, $62.34; Monthly Stop Loss $58.79)

Australia … Dumbing Down!

Further reading of the excellent article referred to in my last post by Kerr Neilson – The Rise of Asia – has got the Slack Investor onto one of his hobby horses. In a previous life, before my main working stint as a meteorologist, I was a maths and science high school teacher in Australia, UK, Jamaica, US and PNG. With the zealotry of an ex-teacher, I have been keeping a loose eye on the education system in Australia and … I don’t like what I see …

There is an international (OECD countries) test that measures student skills (in mathematics, science, and reading comprehension) called the Program for International Student Assessment (PISA). Shown below, 7 of the top 10 positions were filled by Asian countries. In 9 years, Australia has fallen from no. 9 in 2006 to no. 21 in 2015. The UK ranked 23 and has not changed much in the rankings. The US ranked 31 and also has had a declining performance this past 6 years. There are arguments that these absolute rankings can be misleading, but they are presented below.

2015 Rank	Country	2015 Average Score	2006 Average Score	Change In Rank (2006-2015)
1	Singapore	552	543	+1
2	Hong Kong (China)	533	542	+1
3	Japan	529	517	+7
4	Macao (China)	527	509	+10
5	Estonia	524	516	+6
6	Chinese Taipei	524	526	0
7	Canada	523	529	-2
8	Finland	523	553	-7
9	Korea	519	542	-5
10	B-S-J-G (China)	514	–	–
11	Slovenia	509	506	+5
12	Ireland	509	509	+3
13	Germany	508	505	+4
14	Netherlands	508	521	-6
15	Switzerland	506	513	-3
16	New Zealand	506	524	-9
17	Norway	504	487	+11
18	Denmark	504	501	+4
19	Poland	504	500	+4
20	Belgium	503	511	-7
21	Australia	502	520	-12

Source: OECD (PISA)

What is wrong and how can we fix it …

Smarter people than myself have been contemplating this problem. Most of the information below comes from a Conversation article “Six ways Australia’s Education system is failing our kids”. .. and the answer is not just spending more money. Education spending in Asia is around 2-4% of GDP and lags that of Western countries (about 5%). Perhaps a clue can be found in the importance that other countries place in education – In addition to normal schooling, around 80-90% of Asian families are willing to give their kids private tuition, compared to just 20-30% of households in western countries.

The solution to this alarming relative fall in standards is complex but a good start would be to bring Education more to the forefront of Australian minds. Germany had a similar fall in its PISA scores in the year 2000. However, in contrast to Australia, it started a national conversation that saw education on the front page of newspapers for the next two years! Germany has since greatly improved its ranking.

There seems to be a morale problem with teachers. Gabrielle Stroud reports that new teachers complain of a lack of support and have difficulty getting secure full-time jobs. Experienced teachers complain of the many non-teaching duties that they have to do and they don’t have time for mentoring younger staff. Also it seems that teachers are not hanging around …

Australian Bureau of Statistics suggest 53 per cent of people who hold a teaching degree do not currently work in education. – from abc.net.au

A few of the distressing facts from the Conversation article …

Australia ranks 22 out of 37 on the OECD league table that measures the total investment across education as a percentage of GDP.

In maths and science, an average Australian 15-year-old student has the problem-solving abilities equivalent to an average 12-year-old Korean pupil.

Australia is just about the only developed nation that does not make it compulsory to study maths in order to graduate from high school.

Teacher education degrees had the highest percentage of students entering with low University entrance scores.

You cannot expect top performances if we recruit our teachers from below average students. Perhaps we should take a lead from Singapore, where the government has focused on a centralized system of education and a key factor in their ranking rise has been the standard of teaching, recruiting their teachers from the top 5% of graduates.

“Singapore invested heavily in a quality teaching force – to raise up the prestige and status of teaching and to attract the best graduates,” – Prof Sing Kong Lee, Nanyang Technological University

Whatever we do, we must do it soon and hold our politicians to account for this depressing trend. The march to be successful in the future depends on ideas and technology – and the growth trends are definitely in China’s favour.

I haven’t even started on the sparsity of financial education in Australian schools … I think I had better go for a lie down!

November 2017 – End of Month Update … and the rise of the Asian Middle Class

Slack Investor remains IN for US, UK, and Australian index shares.

… and further gains for the Australian Index (+1.0%) and the US index (up 2.8%). The UK Index dropped 2.2% in November due to what the Financial Times attributes as the “Firmer Pound contribution”.

Slack Investor is on the couch again and

marvels at the sage judgement of the Financial Times – and most other financial publications that always assign a reason for the random walk of market fluctuations after the fact.

Asian middle class on the rise

While on the couch, Slack investor has an ear out for world affairs and came across an article from the accomplished fund manager (and Asia Buff) Kerr Neilson – The Rise of Asia – worth a full read if you have the time. The article points to the need to consider Asia, and its effect on the world economy, over the next 10-20 years. It is a powerful collection of facts e.g,

China and India have grown their economies consistently at 6-7% for the past 20 years – they are now 4 times bigger than they were in 1998.
When measuring purchasing power, their combined GDP of US $33 trillion is 50% larger than either the US or the EU!
China and India originate nearly 120 million high-spending overseas travellers each year.

The last point is backed up by CNN Money who report that the number of Chinese tourists travelling internationally has more than doubled to 120 million people over the last five years – 1 in every 10 international travellers now comes from China.

Chinese people tend to begin traveling abroad once their household earns about $35,000 – from CNN Money

The rapidly rising middle class of these countries is behind this increased tourism and the graph below indicates the influence of these two economies will be on the rise.

Sourced from Australian Financial Review

Mental Note Slack Investor – Look for Asian themes in your investments.

All Index pages and charts have been updated to reflect the monthly changes – (ASX, UK, US).