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Let’s Compare Bets gateway to trading and investing information. Learn how to trade sports bets and financial markets, or invest in financial markets and antepost betting markets. This section of Let’s Compare Bets is a sub section of our main website, Let’s Compare Bets.  Let’s face it, many things in life are a gamble, trading and investing are quite similar.  The outcome is unknown, but, Let’s Compare Bets aims to educate and provide visitors with the information needed to get closer to trading and investing goals.  Remember to bookmark Let’s Compare Bets or add us to favourites (ctrl D) so that you can find us again.

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Trading

Trading what? Lot’s of things can be traded from, goats… if you are in the mountains of the middle east to financial assets.  Stocks, shares and commodities can be traded by normal people or people on the trading floor working in a high stress trading environment.  After the invention of the betting exchange even betting odds can be traded.  One in ten people trading online make massive profits.  Slightly more make small returns and the rest loss money.   This section investigates the types of trading and methods to make the path to successful trading easier whether it’s bet trading or financial trading. Better yet, join Let’s Compare Bets and get a free Betfair training document to get started on Betfair. Look right!

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Investing

Investing is more long term than trading and favours a slower but more relaxed route to financial independence.  Investing  is more capital intensive but can be more rewarding in the long run.  Get investing help from someone making investing decisions right now. This section investigates investing techniques, publishes stock tips and has our very own portfolio.

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Use the search box or the category list to search this section. Use the subscribe buttons to the top right to get the latest posts on Bet trading, financial trading, and financial investing.

magic money tree

Shibboleths and self fulling prophecy, betting on the next financial crisis

Would it be good to know what’s going to happen in the future? Planning for retirement and investments would be easier if you could see the future.  Being editor of Let’sCompareBets.com I am constantly looking at ways to take a bet on the future. Not an easy task by any means, because, that’s a bet you don’t want to lose. Especially if you are investing for retirement or family.

What to do? Long story short, with no employer pension and no prospect of having an employer to pay into a pension, who’s going to save me from this quandary? That’s that’s right no one! WAIT, no sorry, ME. Of course there’s financial advisers and other industry professionals, but by comparing bets, we surely stand a chance of winning more wealth.

Readers may want to use this post to frame thoughts about how to plan for a financial future-self. What does the future look like? Comfortable retirement, new house, it’s all in the realms of possibility.

Out of a fear of being on the wrong side of financial markets a question preoccupying my mind has been when will the next financial crisis hit, what is going to happen and what it means for the future. Many other people are asking similar questions.

Cutting to the chase, YES, another crisis is going to happen. Possibly in the next 24 months. But, why, how, and for how long.

To answer this question, readers may want to ask how deep does the rabbit hole go? After a bit of digging about this subject, the answer is unsurprisingly really deep. A better question is, if I where a rabbit, how deep would I want to scurry into the rabbit hole? Bearing in mind, ‘going all in’ with managing personal finances is a big bet (if you think about it): so it’s not going to be something you can scribble on the back of an envelope (except possibly the following words, dollar hegemony, shibboleth, self fulfilling prophecy, financial institution, cooperation, and gold).  Read on to find out what the hell we’re talking about.

In the words of Deutsche Bank emanating from their annual long-term asset return study “ we’re quite confident that there will be another financial crisis/shock pretty soon”. For the purposes of this post we’re going to roll with Deutsche Bank’s definition of crisis (all from October 2017 prices); a 15% drop in the equity market (or more), a 10% fall in government bonds, or double digit inflation”. Interesting, there no mention of deflation in this definition. Deflation is definitely a bogey man for mainstream economists and politicians. Deflation would be bad for Wall Street, The Square Mile and main street (the man on the street).

Having started in 2009 the current economic expansion (although it may not feel like that for some people) is the second longest period of expansion since WW2. May 2018 marks the date making it the longest period of economic expansion in recent times. Taking a simple look at previous cycles a crisis will probably be caused by a recession or abrupt slow down in economic activity. How is it going to play out?

To answer this question without help, as a layman, would be like pissing in the wind. Let’s face it, what do I, you, we, know about economics, and how is it going to be possible to predict what hasn’t happened yet? Understanding economics in a bit more detail is an essential ingredient of tackling this question.

We have assembled a team of experts to help in our quest. This post will focus on the macro economic view point and suggest ways to place financial bets moving forward. Reader’s will notice a big slant towards what’s going on in the USA. The USA is the global command economy and what happens there will ripple across the pond (both ponds). To take teaching from the Sage of Omaha (Warren Buffet CEO and Chairman of Berkshire Hathaway) “ don’t bet against America”. Wise words.

Who is going to help us see the wood for the trees?

Our A-team consists of two economists, a hedge fund manager, a lawyer, a historian and a physicist. All are commentators about current affairs and what’s happened in the past. An almost random selection of people to answer the question. You may have guessed it, this post is not going to be a short one, be prepared. Here’s our list of experts, not all to be used in the post directly but have been indispensable sources of information.

The economists
After stumbling upon a book called ‘The Accidental Theorist and other dispatches from the dismal science’, the Author Paul Krugman, is going to be the first economist to help. Krugman’s book is well written with short essays and witty criticism of other economic ideas. I also digested this book quickly as it’s easy to read and light on complex theory, equations and the like. Mr Krugman is a American economist (Professor of economics at Princeton University USA and a Nobel Prize winner). Published in 1999 during the Clinton administration (you know, I did not have sexual relations with that women!, and generally well received welfare reforms and economic policy), it is great because his criticisms of other economic ideas can be assessed using the test of time. Krugman specialises in recessions making him perfectly positioned to help.

Steve Keen is an Australian professor of economics and head of School of Economics, Politics and History at Kingston University London. Contributing to the subject by studying instability in financial markets. Influenced by Hyman Minsky (and others) he’s built mathematical models that help predict the future. Being a straight talker he’s unlikely to win the Nobel Prize, in my view making him a perfect fit for this task. His material includes books, and Youtube content – which is more detailed than output from Mr Krugman, which is more marketed towards the mainstream.

The hedge fund manager
Ray Dalio, billionaire hedge fund manager of Bridgewater Associates. Having built up the worlds largest hedge fund Mr Dalio has taken a more public profile, is writing books and doing interviews. Hedge funds have been a source of economic crisis in the past making Dalio a good selection. During the economic crisis of 2008 he made a group of wealthy people even more rich so he is popular with his clients amoung other people. As rich as Mr Dalio is, his books and commentary have not been produced out of necessity but from generosity, so he’s making the cut for our A-Team of advisers. His views are mainstream. His hedge fund is so big that it takes a command position in the markets and may also be contribute to future instability. Cynics may mumble that a multi billionaire hedge fund manager writing a book is a sure fire contrarian indicator suggesting something is about to change.
Great economists of yesteryear have described the economy has being a delicate machine, which is perhaps by Mr Dalio has released a video called “How the economic machine works”, which has helped me with a general understanding of economy. It’s simple but doesn’t make you feel like a simpleton, so it’s worth 30 minutes of your time. Here is the link. Bridgewater associates have made it available in multiple languages, they’re clever guys at Bridgewater Associates.

The Lawyer
James Richards was the lead lawyer for the bailout of Long Term Capital Management, which collapsed in 1998, and has given advice to US Government agencies. Mr Richards made the New York Bestseller list on a number of occasions. His geo-political insights make him stand out from the crowd as does his apocalyptic narrative of current economic affairs. He has said the US Federal Reserve is involved in what he calls “the greatest gamble in the history of finance”, making him a perfect source of information for LetsCompareBets.com. Apparently Ray Dalio makes his trainees read Richards’ book, Currency Wars, when they start working for him. Richards is a good communicator and helps make complex geo-politcal interactions comprehensible for the uninitiated. One of his projects it to tinker with a predictive analytical systems that use techniques and methodology not used by the big banks.

The historian
Mary Beard professor of classics at the University of Cambridge, UK. Beard has written a number of books and presented history programmes on the UK’s BBC and brings us a classical historian’s view point. Her book SPQR A History of Ancient Rome provided me with a number of light bulb moments regarding elitism, taxing the rich and the formation of institutions at grass roots level. SPQR is the Romans’ own abbreviation for their state: Senatus Populus Que Romanus, ‘the Senate and People of Rome’. This book gets into nitty-gritty of early Roman Empire and readers will get a proper understanding of how historians ply their trade. An understanding of the rise and fall of empire will help with answering our question, if only to discount the chance of a catastrophic bear market. There is no better place to look than Ancient Rome.

The physicist
Michio Kaku is a Japanese American theoretical physicist and professor of theoretical physics at City College of New York. Physics and especially theoretical physics is a good base to help answer this question of what the future holds, because, theoretical physicists are trying to work out how everything works. If you really want to see the wood for the trees, then check out Mr Kaku’s futurologist views in this video. In Mr Kaku’s view we are a multicultural, scientific and cultural society moving into a type 1 economy (among other things).

betting on financial crisis

Fire and fury like the world has never seen

The USA military will use fire and fury like the world has never seen. Words from President Trump of the United States in response to threats from North Korea to strike a US military base on Guam using medium to long ranges missiles. A tense situation. Let’s hope that if they are going to war they have agreed not to go nuclear.

Anyone doubting war may want to take a look at this video. Added here for a couple of reasons. One because the speaker, George Friedman, tackles the subject from an interesting angle. He says “ global war is sitting in your pocket”. Mr Friedman spoke at Brain Bar Budapest, a forum for challengers and trend setters. Well, if Mr Friedman is setting trends then what he says may just be a self fulfilling prophecy, but an important one.  Here is a link.

Fire and fury

Time for balance

As editor of Let’s Compare Bets.com I have showcased a number of posts about investing and trading.  Suggestions for investments have been given to readers with the caveat of do your own research (DYOR). Two things recently converged to spur a new post to review the performance off a hypothetical investment portfolio.  A portfolio where all the possible investment ideas have been followed and invested.  In the post title My Sip Conundrum…. (link below) we suggested a retirement investment portfolio, which should be re-balanced at regular intervals.

Two tings have converged to make me want to balance my hypothetical portfolio.  In the interests of full disclosure the auther has investments in some of the companies mentioned.

Number one.  War drums are getting loader in the USA. Geopolitical risks are on the up.

Number two.  The current phase of the business cycle for the USA and UK which normally precedes recession or a contraction in economic activity is getting long in the tooth.  Odds of recession or a contraction in economic activity are getting shorter.

Next we’ll check how each investment has performed from the date of the original article.  Links to the original article have been provided. The percentage change in value, with a suggestion to either buy, sell, hold, accumulate or reduce have been are given.  ‘Buy’ means now is a good time to buy more. ‘Sell’ means sell the whole investment (a sell suggestion would be based on the valuation and technical analysis of the share price chart), accumulate means buy more at regular intervals giving the benefit of cost averaging into the investment, reduce mean sell a portion of the investment in order to balance the portfolio to within your target range, and hold means do nothing.

Balancing a portfolio is not a science.  From the original article about running a self invested personal pension it was suggested dividing the portfolio into categories.  Each category has a target asset allocation percentage compared to the total value of the fund.  When the percentage goes over target it’s time balance. Readers should balance in accordance with their own style.  Normally holdings that get sold would be rotated into categories that are underweight.

For simplicity my portfolio would be split one third in equities focused on growth, a third focused on income, and a third focused on commodities.

Now is a good time to hold cash. Readers may want to investigate the Sage of Omaha’s $100 billion dollar problem.  Cash has something called option value because it gives the option to invest the cash when valuations on shares are better.

15/05/2012    Astra Zeneca

(income category)

Performance + 100.5% including dividends. Over the past two months the share price has declined by 16.1% due to negative news flow about the drug pipeline. Now is a good time to buy more. Dividends have gone up during this time and the yield is currently a very good 4.8%.

Accumulate 

28/11/2015     My SIPP Conundrum

CF Woodford Equity Income fund (accumulation)

(income category)

Performance + 10%.

Long term the fund price is still in a up trend.

Hold

Woodford Patient Capital Trust

(growth category)

Performance 0%

Patience is required with this one. No change in price over that time but it has a bright future as we progress through the long term credit cycle.

Hold

J O Hambro Japan Dividend Growth

(income category)

Performance + 47% including dividends. The investment case remains the same.

Accumulate

Fidelity Asian Dividend (accumulation)

(income category)

+ 54% including dividends.  As above.

Accumulate

BlackRock Commodities Income Investment Trust

(commodities category)

Performance + 28% (including dividends)

still in an uptrend.  The category is also underweight compared to the income and growth categories.

Accumulate

continue portfolio results

Amazon, death of retail

Amazon fever, the death of retail

Amazon is causing the death of retail! Remember when they used to sell books? Now they are the causing the death of retail and the stock price has gone parabolic, making Amazon Inc stock market darling.

Where do Amazon make money?

Amazon make money on their traditional e-commerce platform, the third party marketplace which enabled every day folk to make money online ( in a similar way to Ebay), Amazon Prime subscriptions, Web Services, and hardware.

Less and less people are shopping in bricks and mortar shops either in city centres or out of town shopping centres because they are buying their stuff online. Amazon started as a book retailer and has grown into some much different affecting competitors in every market they enter. They are the largest internet based retailer in the world by total sales and market capitalisation.

How has Amazon done this?

Amazon’s CEO Jeff Bezos has harnessed technology to make Amazon a very lean company. Using technology they have evaporated most of the costs of traditional retail. First by using the power of the internet and riding the digital revolution, then by bringing supply chains into the 21st centuary, reducing the cost of deliveries and now by eliminating human staff from bricks and mortar stores (they are doing this in the USA).

Cutting costs allowed Amazon to compete on price and undercut everyone else. Great for growing revenues. Profit however, have been more elusive. Amazon has a astronomically high share price with a multiple of earnings of 200x as of August 2017.

Automation has been key to Amazon’s business plans. Check out Amazon fulfillment warehouses;

Amazon Go;

and

Amazon Prime Air.

Wow, pretty cool if you ask me, but, are they getting ahead of themselves. Economists say one of the missing ingredients of modern western economies is productivity growth. Simply put, the amount of output per unit of input into the economy. Automation is the future of which Amazon has been a driving force, and it could trigger a productivity miracle. This is not without some serious side affects;

Causing unemployment, where people give up looking for another job, leaving them reliant on the welfare state.

Causing deflation in wages, when wage inflation is needed in a healthy economy.

Amazon has built a brand and grasped market share at the expense of making reliable profits that justify the valuation. Amazon e-commerce operates on very tight margins, as does it’s hardware division.

To be valued the same as any other retailer they are going to need to grow their earnings 16 times by using widely used valuation metrics. So why are they valued so high? Innovation and ingenuity is pushing them forward and the stock market loves it. Increasing the social good by relieving people from doing boring cashier jobs, working in a warehouse, or driving delivery vans. Increasing productivity and making a lot of stuff a lot cheaper than it was before.

Add up all their profits since 1994 they still made less than Microsoft made in the fist 6 months of 2016. Amazon web services is the division that makes makes most money (with the highest margins) and subsidises the expansion and growth of Amazon retail. Amazon has never paid a dividend because most of it’s earnings go into growing the revenues.

Is there a cure for Amazon fever, we think so

Global reserve currency

A bet on geopolitics and history in the making

Historical events don’t always have to come out of a book, or be taught in colleges and universities. People around the world enjoy reliving history.  Dressing and acting like people did from times long past no doubt make historical events come alive.  Events from the past have provided copious inspiration for film, music and books based on true stories, and using historical fact to weave stories around.  Two examples, before we enter this post.  Jaws the film was an incredible success for director Stephen Spielberg.  Jaws the book by Peter Benchley, was based on the Jersey Shore shark attacks of 1916.  A panic stricken beach town caused by one shark attacking multiple people inspired one of the best known film stories of all time.  I bet you didn’t know the book about Norman Bates called Psycho was later made into a film, but, the book was actually based on a real murderer called Ed Gein.

Historical events happen all the time, but, there as some monumental events happening right now. Not just Brexit, Donald Trump insulting another journalist, Vladamir Putin playing grand piano as he waits for the Chinese Premier Xi Jinping at the “One Belt, One Road summit”.  Rather events that your children’s, children may study in the future but not from a school curriculum.  This post will review big things happening in geopolitics, economics and how it’s going to affect financial markets.

In the lifetime of most people the United States of America has been a leading global superpower. Affecting our culture from everything from Breakfast cereals to Televisions shows, sorry television programmes, and children’s toys.  Not to mention the functioning of politics, pensions plans and other financial institutions.  The Hollywood film industry is (or rather the industry as a whole) is arguably one of the most powerful industries in the world, with the power to inspire and influence peoples ideas, lifestyle choices and emotional biases.

Could this be the beginning of the end of America being the worlds leading superpower?

American has provided security and stability to a lot of countries by providing intellectual and financial capital for financial systems, institutions and contributions to countless technological breakthroughs.  Any big change to this will have big consequences for anyone thinking about where to place their bets for growing their wealth.  Let’s take a look at the bigger picture.

Since the Bretton Woods Agreement after World War Two the United States Dollar has been the worlds dominant reserve currency. US Dollars where lent to countries damaged by war to build infrastructure again so that society would function properly. A good idea, which especially helped the United States, because it developed the world economy and promoted North Amercian economic and political values. Values which they gained originally from Europe (and the rest of the world before that). Great news for the World Economy as it developed a stable system allowing countries and individuals to trade and prosper. Part of the agreement stipulated oil had to be traded in Dollars. So if you need oil for industry or whatever you have to buy dollars to trade it. The reserve currency status also meant dollars where the preferred currency to trade goods and services in the global economy.

Soviet representatives attended the conference. They declined to sign off on the final details of the plan. Labeling the institutions created by the agreement to be branches of Wall Street. Which of course they are / where. Institutions created by the USA and United Kingdom where the International Monetary Fund and the World Bank.

The IMF’s Articles of Agreement state: the IMF is ” to promote international monetary co-operation, international trade, high employment, exchange-rate stability, sustainable economic growth, and making resources available to member countries in financial difficulty. ” All good things right? They hold a fund made up of Special Drawing Rights which consist of a basket of other currencies that can be used to help stabilise member nations using liquidity (cash injections).

Other things that came from the Bretton Woods Conference where the instigation of freely floating currencies and the idea that it’s better to reduce trade tariffs to promote trade. Relative to before Bretton Woods the world economy is almost a completely free trade system now with low tariffs being standard practice.

Agreements ratified at Bretton Woods encouraged many countries around the world to use dollars for trade. This financial model has worked well and allowed a lot of people to benefit who would not have if a plan had been signed off based on the principles of the Soviet era. Many advances in technology, medical sciences, welfare systems would not have happened had it not been for this system. For normal people, this means no more having a toilet in the shed in the back garden, hot water, a General Practitioner to help with your ailments, a pension, money if your your boss cuts you loose from your job as well as other welfare benefits and many more things like, iPhones, GPS so you don’t get lost,  free online software, shops with almost anything you could want, and doctors with almost any drug required to help you live longer. Let’s not forget the option to travel almost anywhere in the world for a holiday or vacation.  Of course the list goes on.

Betting on Geopolitics

Investing in Royal Mail

The letter is dead long live Royal Mail

Royal Mail’s bread and butter business is in structural decline.  As sure as video killed the radio star email has killed the letter.  Following the accession of a new monarch in various countries on lookers would proclaim ” the king is dead, long live the king “.  As one monarch dies they salute the new monarch.  Royal Mail’s letter business is dying but they are saluting new avenues of growth from Parcel Deliveries in the UK and around the world through the wholly owned dutch subsidiary General Logistics Systems (GLS).

Let’s take a look at why Royal Mail could be a good investment.  Royal Mail was fully privatised for the first time in 500 years in October 2013.   During is life as a state run monopoly Royal Mail built up a massive asset base and had no pressures regarding operating efficiency (like modern publicly listed companies do).  It employees are well treated with generous pensions and sorting offices use aging technology.  For the new management of Royal Mail cost saving opportunities will be around every corner.  From making better use of technology to bringing the employee pension scheme up to modern standards.

Modern technologies are being employed to create productivity gains, the work force has been reduced and the number of mail centres and delivery offices have been reduced.   Rivals like Deutsche Post (DP) where privatised years ago and it has had a marked positive affect on their business (possibly not for employers but for the business).  DP sports operating margins of close to 8%.  Royal Mail’s operating margins are just over half of that figures so they’ve got some catching up to do.  Catching up is what they are currently doing.

What has an investment in Royal Mail share got going for it?

  • Lots of low hanging fruit for saving costs, costing savings plan increased to £600M by 2018.
  • Can bid for contracts outside of the UK allowing Royal Mail to benefit from Globalisation. GLS operating in 42 European Countries and all over the world and is the 3rd largest parcel delivery provider in Europe. Revenues from this part of the business are growing at nearly 10% per year.  Stimulation of Eurozone economies by the European central bank are feeding through to GLS’ main markets including Germany, Italy and France.
  • Operating profit margins and operating profits should rebound as transformation costs reduce and investments in acquisitions start to enhance earnings. Geographic expansion has been made having purchased ASM in Spain and GSO in California, USA.
  • More control over pricing in the UK and in the other countries they operate in.
  • Online shopping is growing at 10% per year.  Parcel Deliveries are becoming a larger part of the delivery Market help offset the decline in letter deliveries.  Royal Mail should continue to win a significant part of this business despite competition from TNT, DP and Yodel.
  • Offering customers a better service.  Personally having bough myself a new watch recently with Royal Mail’s 24/7 tracked service I new where it was each step of the way.
  • Royal Mail owns lots of property.  As property prices have inflated the value of not or under used Royal Mail property has soared.  Sale of these assets to property developers desperate for quality plots in prime London locations will help fund Royal Mail future expansion plans and pay it’s dividend. Owning property is also a good hedge against inflation.
  • Royal Mail debt is relatively low.  Interest payments are covered by operating earning easily and net debt is a comfortable amount.
  • Dividend growth was over 5% last year and is expected to be over 4% this year.  The dividend yield is currently higher than average.
  • As far as the share is concerned it is in a range bound market and currently sits at the bottom of the range.  Making a increase to the upper end of the range a good bet.

What are the negative aspect of investing in Royal Mail

  • Higher transformation costs and investment spend has hit operating profits and reduced profit margins
  • The dividend is barely met by free cash flow after capital expenditure, financing and acquisition costs. Albeit higher due to the current transformation and acquisitions to lay down geographical expansion.
  • Amazon are delivering their own parcels.
  • Increased competition from Rivals, espcially in the UK market.  For instance Deutsche post has moved into the UK market by buying UK Mail.
  • Regulatory burdens reducing competitiveness, such as having to provide the universal service
  • Slightly overvalued compared to the transportation industry average (not taking into account dividend growth)

Big questions remain

Can the growth in Global operations and high performance of UK Parcel deliveries offset the reduction in revenue from UK letter deliveries?

Can acquisitions add to growth after financing costs?

Will the cost reduction programme go to plan without spiraling transformation costs?

Will dividend increases continue at the current rate?

Opinion of the author; Royal Mail is a good bet based on dividend yield, dividend growth rate, manageable debt levels, transformation plan of decreased costs, technological enhancement and productivity drive going to plan, and the global expansion.  A reduction in operating costs will see it’s share price move up and reduce it’s PE ratio to be inline with that of Deutsche Post, which has a 5 year average PE of around 15 and a lower dividend yield.

 

Disclosure; the author owns share in Royal Mail.