Previously on Sharpfokus
Inequality rules 👌
June 30th, 2019
⏰ 2 minute read
⏰ 2 minute read
Difficulties
A tweet from President Trump today post G20... ’leaders... congratulated me on our great economy. Many countries are having difficulty on that score...’ what an understatement. Last week, a bit belatedly post holiday, Indonesia reported trade data for May. Imports which is our favorite strength measure were $14.5bn up 0% from $14.5bn in March 2011!
Kids
BSJ
Last week I had 5 students aged 15 to 16 spend a week with me. They all study at the British School Jakarta. It used to be called the British International School, but the word International is not allowed by the authorities to be used any more. Why? Perhaps it’s too elitist. But elitism is exactly what Indonesia needs.
Week
We spent the week looking at stock markets, listed companies, economic & financial data as well as financial statements. By the end of the week they’d all learnt how to make a simple, working, financial model just like the ones we use in Sharpfokus Saham. They were quite surprised how straightforward what seems so complicated was.
Simple
Without needing to look further than Google, we were able to use simple numbers & math to prove theories which academics seemingly cannot agree on despite huge budgets & thousands of hours study. One of these was economic equality & how to ensure that there’s more opportunity for all. Here’s how we did it.
Inequality
Wealth
We looked at the success & wealth of different economies. We showed just by typing it into Google that ‘Japan GDP’ hasn’t grown for 25 years, Europe for 12 & Indonesia for 8 (imports). They learnt that by dictionary definition the US is the only real economy (consumption) & US stocks are the world’s largest at $32tn with a $21tn GDP vs Indonesia’s $0.5tn & $1tn.
Number 1s
We discussed the names of the biggest listed stocks, here BCA which at $52bn is now over 10% of the market! In the US, they realized tech dominates with MSFT, AMZN & AAPL all 3 close to $1tn, each just 3% of the market but the same size as the whole Indonesian economy. Meanwhile here BCA is 50% larger than the second biggest stock BBRI!
Inequality
So far, so unequal in Indonesia. But then we looked at an average company. With 600 listed here an average one should be 0.2% weight. In the US there’s 4,300 listed so an average company should be 0.02%. BCA is thus 50X bigger than the average, MSFT et al 150X! The inequality is greater in the US but the economy & opportunity are much greater too.
What
Nothing?
Once you realize what the problem is, it makes it a lot easier to do something about it. One thing for sure, continuing to do the same things as have been done since 2011, like trying to get rid of elitism by banning words, will not work. Something has to change, a different approach has to be tried.
Free
Once you know that more inequality is the way to a richer economy with better opportunities for all, you need to look for ways to create more inequality. One way would be to stop giving away things for free to those who don’t have them & don’t pay for them. Less free health & education to people who don’t pay taxes would be one.
Encourage
The other simple solution is to make it easier for those who care to, to get as rich as possible & encourage them to do so. That means cutting regulations which slow things down. Also increasing incentives & reversing taxes so that you instead pay businesses which create jobs, income & wealth for people, & thus future taxes.
Next
It’s not likely the current country leadership will do anything of the sort, but regardless, people through businesses & markets always ultimately find a way. The most gratifying thing about last week was how easily & quickly a group of teenagers could understand how things really work. The future is bright.
Be a great investor!
Sebastian
A tweet from President Trump today post G20... ’leaders... congratulated me on our great economy. Many countries are having difficulty on that score...’ what an understatement. Last week, a bit belatedly post holiday, Indonesia reported trade data for May. Imports which is our favorite strength measure were $14.5bn up 0% from $14.5bn in March 2011!
Kids
BSJ
Last week I had 5 students aged 15 to 16 spend a week with me. They all study at the British School Jakarta. It used to be called the British International School, but the word International is not allowed by the authorities to be used any more. Why? Perhaps it’s too elitist. But elitism is exactly what Indonesia needs.
Week
We spent the week looking at stock markets, listed companies, economic & financial data as well as financial statements. By the end of the week they’d all learnt how to make a simple, working, financial model just like the ones we use in Sharpfokus Saham. They were quite surprised how straightforward what seems so complicated was.
Simple
Without needing to look further than Google, we were able to use simple numbers & math to prove theories which academics seemingly cannot agree on despite huge budgets & thousands of hours study. One of these was economic equality & how to ensure that there’s more opportunity for all. Here’s how we did it.
Inequality
Wealth
We looked at the success & wealth of different economies. We showed just by typing it into Google that ‘Japan GDP’ hasn’t grown for 25 years, Europe for 12 & Indonesia for 8 (imports). They learnt that by dictionary definition the US is the only real economy (consumption) & US stocks are the world’s largest at $32tn with a $21tn GDP vs Indonesia’s $0.5tn & $1tn.
Number 1s
We discussed the names of the biggest listed stocks, here BCA which at $52bn is now over 10% of the market! In the US, they realized tech dominates with MSFT, AMZN & AAPL all 3 close to $1tn, each just 3% of the market but the same size as the whole Indonesian economy. Meanwhile here BCA is 50% larger than the second biggest stock BBRI!
Inequality
So far, so unequal in Indonesia. But then we looked at an average company. With 600 listed here an average one should be 0.2% weight. In the US there’s 4,300 listed so an average company should be 0.02%. BCA is thus 50X bigger than the average, MSFT et al 150X! The inequality is greater in the US but the economy & opportunity are much greater too.
What
Nothing?
Once you realize what the problem is, it makes it a lot easier to do something about it. One thing for sure, continuing to do the same things as have been done since 2011, like trying to get rid of elitism by banning words, will not work. Something has to change, a different approach has to be tried.
Free
Once you know that more inequality is the way to a richer economy with better opportunities for all, you need to look for ways to create more inequality. One way would be to stop giving away things for free to those who don’t have them & don’t pay for them. Less free health & education to people who don’t pay taxes would be one.
Encourage
The other simple solution is to make it easier for those who care to, to get as rich as possible & encourage them to do so. That means cutting regulations which slow things down. Also increasing incentives & reversing taxes so that you instead pay businesses which create jobs, income & wealth for people, & thus future taxes.
Next
It’s not likely the current country leadership will do anything of the sort, but regardless, people through businesses & markets always ultimately find a way. The most gratifying thing about last week was how easily & quickly a group of teenagers could understand how things really work. The future is bright.
Be a great investor!
Sebastian
