Tuesday, October 13, 2009

Lessons and learning

It is a never ending process of increasing your base knowledge.

Sometimes through reading and studying others,

Sometimes 1st hand experience

At other times from seeing the way others operate

Sometimes it takes doing something (right or wrong) yourselves to re-enforce what you thought you already knew!

This process shall never end and nor shall I ever wish it to end. I believe over time I shall grow to be a wise old investor. I hope I don't get to cocky to many times in the future and think I'm better than I actually am.

Friday, October 2, 2009

Money Management

One of the things I have learnt is that there is always way's to make money, making money is not the hard part. Keeping it is.

Many people I know have been destroyed financially by this global crunch, some with much more wealth before it than me, some less so. So what did they do differently from me. I guess not acknowledging the changing times and moving with it. Some will never start investing or trusting the property/stock market again.

Having said that, some people saw the coming change and managed the times a lot better than me.

So I guess the take away lesson is this;

Making money is the easy part, keeping it and managing it in a reliable safe manner is so important, but so easily over looked. Most people (myself included) focused purely on making it, not keeping it.

Like Warren Buffetts famous 2 rules

Rule No.1: Never lose money.
Rule No.2: Never forget rule No.1

So am closely following cash flow positive transactions now, and keeping my cash flow at a constant positive rate.


Well as the GFC is diminishing into the background as these famous 'green shoots' take effect, what are the lessons to be learned for me personally

Well to be honest I believe this whole experience has been a great thing for me, even though I lost a fair bit of money last year, this recovery has been good to me.

I think the main lesson is research, research and more research. To follow a plan and stick to it and to have rules that govern my investing behavior. Not to just get into something because it seems like a good idea.

I have come though this, still standing with a reasonable portfolio left, not like I started with, I was forced to sell 2 properties and numerous share holdings. To pay down debts, like so many individuals and corporations. But everything is now on a much more secure footing. And am happy with my approach.

Am going to focus more on cash-flow and less on capital gains, Cash-flow is king. Capital gains can't pay the bills without selling or re-financing, cash-flow can.

Thursday, February 12, 2009

The Greatest Responsibility of All

This week marked a permanent change in my life, my wife gave birth to a little boy. Our first child, it was a amazing and surreal event, still I don't think it's fully sunk in. To hold this tiny bundle of flapping arms and legs, and to think I'm responsible for caring for this little one, to guide him, teach him, throughout his life.

Although we are pretty tired, it's great to have him home, and to start to settle into a routine. I intend to be a hands on dad.

It's a great time!!!

Wednesday, February 4, 2009

So what where my mistakes ??

I am an active investor , where I take control of my decisions and investments myself, Where as people that have Managed Investments or through a Financial Planner and things go wrong, can always put part of the blame and responsibility on them.

So I alone must bare 100% fault or success, I prefer this, although by doing this I acknowledge that I don't have as much skills or access to different investments as some professionals.

The hardest thing is to keep a lid on success and not go crazy thinking I'm a unique, brilliant, free thinker in Investments. And the other part is to fully understand where I fail, and to acknowledge that and learn from it and most importantly DON'T REPEAT THE MISTAKES!!!

So what went wrong....

Global Commodity prices tanked
Hedging - the importance and risks
Global Credit Crunch
Tip sheet picks
High gearing in Margin Loan
Not understanding business models and profitability
High debt levels in companies
Bad company culture

Although many things in that list are beyond my direct control, I can choose to invest in any business so ultimately it is all my fault.

So what would I do differently?

Focus more on underlying profitability, less debt, good products, less gearing, and more individual research. Don't force or hope for certain returns in a set time frame. No matter how good the research, the exact eventual return will always differ from the original plan.

Even so good investments can turn bad, understanding that share prices do tank, but understand the difference between share price falls and fundamental changes in business conditions both external and internal to the company.

Be more selective with my stock/property investments.

Reduce gearing

Only invest in profitable cash flow positive investments

Have a loan set up so in emergency I have access to funds to see me over the worst of it, so I can re arrange my structures at my leisure, not by forced margin calls.

Ignore all hot tips and research notes and tip sheets (they can only be part of the background research)

Be more aware of macro-economic forces, both international and nationally .

If a company isn't cash flow positive in 1 year, it is a speculative investment and should never exceed 5%

If a company is struggling to manage it's existing projects be very careful

Companies that consistently take over others, should be ignored. Any take over should be carefully examined to see if it changes the fundamental's of why I invested. And should be fully bedded down before embarking on any other projects.

Pay down debts, to be ready when the economy turns around, to able to take advantage of opportunities.

Patience is the key, allow good opportunities to pass, there will be more!!

Sunday, February 1, 2009

The Losses of 08!!

I think one of the 1st things I should do is face my mistakes and losses, write them all down in one place and look at them. Acknowledging them is imperative before I can truly move on.

It would be easy to dust of the losses of last year and not mention them again. But I feel I need to face them so here they are.

Aim Resources
Arasor Ltd
IBA Health
Beach Petroleum
Prime Retirement
Destra Media
Macmin Silver
Equinox Minerals

Ouch this is a bad looking list...

AIM Resources

I bought $49,730.49 worth at a average price of 0.166 and sold the lot at a average price of 0.036 for a loss of $38,830.49

Why I bought;
This was a start up mine due to go into full production in 08, the zinc price was good and profitability was meant to be high

The problem;
The Zinc price tanked (90% fall) , the company failed to hedge forward production during booming prices. Due to fall zinc prices they couldn't get the last 50 odd mill to finish the mine.

My mistake;
Failing to understand the growing problem of the plummeting zinc price, not understanding that hedging during a boom is a must, to at least guarantee the mines viability during the 1st 3 years. Not understanding the looming credit crunch would impact small miners getting access credit to finish projects. Averaging down was biggest mistake here!!

Arasor Ltd

I bought $23,020.00 at a average of 1.644 and sold all at a average 0.25 at a loss of $19,520.00

Why I bought;
This was a tech company operating in the boom markets of India, the potential was massive. Also it was recommended from a tip sheet I was subscribing to at the time.

The Problem;
The earnings that where forecast where just not there. Too much hype not enough fact.

My Mistake;
Got caught up in a tip sheet hype, hoping the earnings would be there. Not believing facts

IBA Health

IBA is a e-health company. I bought $34,284.62 at a average 0.98 and sold at a average of 0.647 a loss of $11,636.12

Why I bought;
I bought because the product they where selling was good, in the primarily government health field.

The Problem;
No real problem

My mistake;
This is one a really regret having to let go, It's a outstanding company with outstanding prospects and a future, But I got margin called out of it in October. My mistake was over gearing.

Beach Petroleum

It is a mid tier oil producer mainly in Australia but spreading out more globally. I bought $10,622.42 at a average $1.296 and sold at a average of 0.859 a loss of $3,582.90

Why I bought;
Rising oil prices this looked a attractive investment, I still think it is

The problem;
Falling oil prices caused falling share price, causing a margin call

My mistake;
Over gearing, I would still like to hold this one, I still like the fundamentals

Prime Retirement Trust

Prime owns retirement complexes in Australia and builds them, I bought 10000 at 0.57 for my wife's income portfolio. I still hold at a loss.

Why I bought;
I bought for the income, and because the NTA was $1.00 , lots of room I thought, if things going wrong.

The problem;
Even knowing that they relied on assest revaluation for profits, this is no longer possible in the new era we are in. Dividends where cut then stoped. Sale of new units have dried up as retirees can no longer afford them, due to falling sharemarkets.

My Mistake;
Thinking a 50% in NTA was good enough, thinking retirement investment would be immune to global problems. I have written the debt over these off, the margin loan provider has eliminted them from there list. They are currently sitting at about 0.12c

Destra Media

Where a digital media company, I bought at a average of 0.24 with $2,400.00 and sold at 0.055 haveing a loss of $1,850.00

Why I bought;
Believing the hype from the tip sheet, again! Thinking that the company was at the cusp of a new frontier of online and digital media.

The problem;
Destra spent to much time and money buying other companies and thinking that that was growth. Debt balloned up, and profits where no where in site.

My mistake;
Yet again beliveing the hype, at least I managed to sell at 5c when one month later they called in the administrators .

Macmin Silver

Where building a silver in mine in queensland. I bought $9,900.00 at 0.165 and sold at 0.037 for a loss of $7,680.00.

Why a bought;
I believed the silver bulls that another bull run was around the corner, and I wanted exposure to it. I knew this company had had some problems , but full productions was just around the corner.

The Problem;
Bad management, problems on site, delay's in production, rising cost's of production, directors treating shares like they can be given away and diluting the company.

My mistake;
Jumping in on a average investment when I knew there where problems.

Equinox Minerals

Is building a large scale copper mine in Zambia, I bought $55,040.00 at a average of 4.403

Why I bought;
When the copper price was half it's height it was still a massively profitable mine.

The problem;
The copper price has dived, how ever even at it reduced price of $1.50 - $1.40 / pound it is still a profitable mine. They have hedged 30% production for the next 3 years. I still hold.

My mistake;
Only real mistake is to buy at $4.40, but who could forsee the price drop in copper so much. Either way I still of great hopes for this one, in the mid term , which is the term I bought for. Still profitable, looking forward to when the copper price recovers, this will easily boom back past what I paid.
So all up a loss of $83,099.51 (only counting the ones I have sold)
That's not a pretty number, ohh well live and learn.....

AND LEARN IS WHAT I INTEND TO DO..................

The Long Break!!

Well it's been a long time since I last wrote something in this blog, 08 has been a hell of a year for me. My confidence, enthusiasm, motivation has been sapped. So what has happened and why??

Some major changes have occurred in 08

1) The GFC (The Global Financial Crisis)

This has smashed my share portfolio, particularly in Oct due too to high gearing on my part.

2) My wife getting pregnant and becoming a one income family

3) I have had to work 3 jobs to get back in front, so my energy levels have been very low lately

I now have more time on my hands as I now don't have to work anywhere near as much. So I thought I should update my blog.

So after a horror financial year, I have finally come out the other side a lot leaner, meaner, smarter and better positioned. I have given a lot of thought about what has happened and am determined to learn from the mistakes I have made and use them to profit from the future. I think I shall post more about them later.

On the plus side, I shall become a father this Thursday, which should be more exciting and challenging and rewarding than any financial pondering I do (which is quite a bit)