Previously on Sharpfokus
The importance of imports, Sharpfokus91
May 20, 2019
⏰ 2 minute read
⏰ 2 minute read
Not gambling
We’re writing a book called How To Make A Financial Model On An Iphone. In it there’s a bit on stocks vs gambling. Casinos give best win odds < 50% & fall over time, stock give > 50% & rising. Using monthly data & 1 year changes, stocks are normally up 70% of the time. But the JCI is currently down 60% of the last 12 months. Time to buy?
4 minute mile
1st
I went to a business presentation day last week in Singapore. The first speaker used the story of the 4 minute mile as an example of how when you break out of a long thought impossible achievement, new things become possible & the record almost immediately gets broken again & again. A bit like a stock market.
Not 1st
The only problem with this oft told story is it’s not true. Search Google & you will quickly find references to the 4 minute mile being broken in the late 1700s & on into the 1800s. Why have these stories been airbrushed out of athletics history? Because the earlier athletes were paid professionals, later stamped out by amateur regulators.
Why
I’ve told this story to several people who all question the measuring. But it turns out here too we in the modern era are not quite as clever as we thought we were. Stopwatches accurate to within a second we’re already around by the late 1700s. Lesson, regulators will never win, but they can sure slow things down for a hundred years or more.
30 years flat
Always up?
Besides the not gambling discussion in the book, we also point out that despite the always up nature of markets there’s good reasons to still need a financial model. One thing which surprised me years ago & often surprises others is that buying stocks is not investing. It’s consumption & like other consumables might depreciate.
1990
When I first came to Jakarta in the early 1990s, the stock market was well below its 1990 peak. The JCI had a 10X deregulation inspired run up in the late 1980s which took it from 60, to a May 1990 peak close to 640. This month 29 years ago, the rupiah was at 1,750. 640 divided by1,750 is 0.37.
Today
This morning when the JCI opened, it fell to 5,780 almost another 10X from the 1990 level although over a long period. But the rupiah is at 14,500. Divide the one by the other again & you get 0.398. A single digit % increase in 29 years. The 1990 level was broken about 10 years ago, but we haven’t made many new records since.
Imports
Stocks
If you ask what is the main measure we use for the performance of the Indonesian economy & stockmarket, you might be surprised what the answer is. It’s imports. Either stocks have been a great predictor of imports or imports are rhe best predictor of stock because over time the two perfectly match.
Flat
Imports are a simple measure of our economic buying power for both consumption & investment which are of course related. That imports have not increased since 2012 exactly matches the poor performance of stocks. Last year imports came right into the cross hairs of regulators & the result was a whopping 20% drop in imports in the 1Q of 2019. Stocks have now followed south & match exactly.
Rising
Once again we are reminded what damage regulators will do to offset the natural human instinct to advance. The good news is imports are recovering again with last week’s strong April number. Imports have now risen 20% from the February low. This shows that now stocks have adjusted down, they’re due a recovery & it is time to get in.
We’re writing a book called How To Make A Financial Model On An Iphone. In it there’s a bit on stocks vs gambling. Casinos give best win odds < 50% & fall over time, stock give > 50% & rising. Using monthly data & 1 year changes, stocks are normally up 70% of the time. But the JCI is currently down 60% of the last 12 months. Time to buy?
4 minute mile
1st
I went to a business presentation day last week in Singapore. The first speaker used the story of the 4 minute mile as an example of how when you break out of a long thought impossible achievement, new things become possible & the record almost immediately gets broken again & again. A bit like a stock market.
Not 1st
The only problem with this oft told story is it’s not true. Search Google & you will quickly find references to the 4 minute mile being broken in the late 1700s & on into the 1800s. Why have these stories been airbrushed out of athletics history? Because the earlier athletes were paid professionals, later stamped out by amateur regulators.
Why
I’ve told this story to several people who all question the measuring. But it turns out here too we in the modern era are not quite as clever as we thought we were. Stopwatches accurate to within a second we’re already around by the late 1700s. Lesson, regulators will never win, but they can sure slow things down for a hundred years or more.
30 years flat
Always up?
Besides the not gambling discussion in the book, we also point out that despite the always up nature of markets there’s good reasons to still need a financial model. One thing which surprised me years ago & often surprises others is that buying stocks is not investing. It’s consumption & like other consumables might depreciate.
1990
When I first came to Jakarta in the early 1990s, the stock market was well below its 1990 peak. The JCI had a 10X deregulation inspired run up in the late 1980s which took it from 60, to a May 1990 peak close to 640. This month 29 years ago, the rupiah was at 1,750. 640 divided by1,750 is 0.37.
Today
This morning when the JCI opened, it fell to 5,780 almost another 10X from the 1990 level although over a long period. But the rupiah is at 14,500. Divide the one by the other again & you get 0.398. A single digit % increase in 29 years. The 1990 level was broken about 10 years ago, but we haven’t made many new records since.
Imports
Stocks
If you ask what is the main measure we use for the performance of the Indonesian economy & stockmarket, you might be surprised what the answer is. It’s imports. Either stocks have been a great predictor of imports or imports are rhe best predictor of stock because over time the two perfectly match.
Flat
Imports are a simple measure of our economic buying power for both consumption & investment which are of course related. That imports have not increased since 2012 exactly matches the poor performance of stocks. Last year imports came right into the cross hairs of regulators & the result was a whopping 20% drop in imports in the 1Q of 2019. Stocks have now followed south & match exactly.
Rising
Once again we are reminded what damage regulators will do to offset the natural human instinct to advance. The good news is imports are recovering again with last week’s strong April number. Imports have now risen 20% from the February low. This shows that now stocks have adjusted down, they’re due a recovery & it is time to get in.
The importance of imports
Consumption
We can have a rally back up, but if we are going to make records & keep breaking them, it’s going to take a change of regulatory mindset. Athletics today has moved a long way back towards professional. Now you know how important imports are, the next time someone suggests cutting back or substitution, show then the chart.
Be a great investor!
Sebastian
We can have a rally back up, but if we are going to make records & keep breaking them, it’s going to take a change of regulatory mindset. Athletics today has moved a long way back towards professional. Now you know how important imports are, the next time someone suggests cutting back or substitution, show then the chart.
Be a great investor!
Sebastian
