Searching for Investment Opportunities Among the Risk

In today’s Money Morning…searching for opportunities among the risks…your first tip for better investing in 2017…why you shouldn’t try to make order from chaos…and more…

Happy New Year Everyone!

Greg Canavan here. In case you missed the announcement at the end of last year, I’ll be your regular editor at Money Morning in 2017. I’ll be writing to you on Monday, Tuesday and Wednesday each week, with your other regular editor, Sam Volkering, giving you his two cents (or pence, actually) on Thursday and Friday.

In writing our sister publication, Markets and Money, I focused a lot on the macroeconomic picture. I highlighted the bizarre world of debt-based economics, and Australia’s position in it.

I will still do that to some extent. But there are always opportunities amongst the risks. And it is these opportunities that I really want to bring to you in Money Morning.

Or, more accurately, I want to show you how to spot the opportunities and know when to ignore the risks that are ever present in this twisted financial world that we live in.

More on that in a moment.

But for now, I know that you’re probably still on holidays. We need to ease into the New Year.

So I’ll start with a tip…

I’m currently holidaying with family in Adelaide. My wife’s parents live on the coast in a suburb called Marino. From the rocks at Marino you sweep down past Seacliff and into Brighton. It’s a few kilometres of white sand lapped by aqua blue waters.

In other words, it’s pretty sweet. And there is no one around.

Compare that to the east coast swarm. Last week I saw an aerial photo of Bondi Beach smothered with people…it looked like a summertime nightmare.

I lived in Bondi years ago, when it was semi-affordable. I hardly ever went to the beach. Too many poseurs. But when it was hot, I could at least walk across the road and jump in the water.

But if you came from afar the parking was impossible…and expensive.

That’s pretty much the case up and down the coastline of Sydney these days. And Melbourne.

Actually, in Melbourne recently swimming in the beaches has been riskier than buying gold futures contracts. The recent deluge there swept a whole bunch on unwanted goodies into the water. As The Age reports:

Melburnians looking longingly at the warm-to-hot weather forecast for this weekend had better hope for no deluges of rain before then, or swimming will be off limits at the city’s beaches.

The Environment Protection Authority says last Thursday’s heavy rains swept faecal matter from roads and waterways into city beaches.

Which brings me back to a summer in Adelaide…

Yesterday, I took my kids to the beach. We got a park right in front of the water. There were no parking meters. The water is tropically warm. Perhaps a little too warm, actually: There have been some shark sightings.

As Adelaide is in the Gulf of St Vincent, it doesn’t get the ocean swells, so the water is perfect for kiddies. And, as I mentioned, there are no crowds.

That’s probably because there is only a limited economy here, and everyone has gone to Melbourne or Sydney looking for work. That’s certainly the case with my wife’s brothers and sisters. She has three siblings. They live in Sydney, London and New York, working in law and immunology.

But the lack of hustle and bustle makes it a great place to visit if you want to come back the other way for a break. If you’re looking for a relaxed summer holiday, in a place with good food and coffee, it’s not half bad.

You just have to hope that the place isn’t searing with heat and raging with fires when you do come. It can get pretty hot here…

But not today. It’s headed for 28 and I’m headed to the beach to drag my girls around on a boogie board like a packhorse for a few hours. Can’t wait…

But before I go — and before letting you get back to your holiday — let me impart one key insight that you will increasingly notice as a Money Morning theme this year.

That is, I urge you to look for the investment opportunity that doesn’t make sense.

It didn’t make sense (at the start of last year) that oil and commodities would be amongst the best performers in 2016. It didn’t make sense that the gold price collapsed following the election of Donald Trump in November.

It didn’t make sense that, from the perspective of early 2016, US stock markets went on to make new all-time highs by the end of the year.

Remember this: Markets are not meant to make sense. They only make sense in hindsight. And after something has made sense to you — that is, after you have rationalised it and you feel comfortable making an investment — it is nearly always too late.

To get around this problem, you need to change the way you think. You need to embrace the fact that you actually know nothing. When you embrace ignorance, you won’t get locked into some erroneous way of thinking. You won’t feel the need to be ‘right’.

I’ll help you along this path from time to time. One of the things I do to remind myself that I haven’t got a clue about anything, is listen to the market. I let the market guide me, rather than imposing my views on the market.

I do this by looking at stock charts. You may have seen my mates over at Money Morning Trader do the same thing. I highly recommend this service. It will make you a much, much better investor by learning to look at the charts.

It’s a New Year. Use it to wipe away your biases and preconceived notions about the way things ‘should’ work. Do it, and you’ll give yourself a much better chance of making money in 2017.


Greg Canavan,
Editor, Money Morning

Greg Canavan is a Feature Editor at Money Morning and Head of Research at Fat Tail Investment Research.

He likes to promote a seemingly weird investment philosophy based on the old adage that ‘ignorance is bliss’.

That is, investing in the Information Age means you have all the information you need at your fingertips. But how useful is this information? Much of it is noise and serves to confuse, rather than inform, investors.

And, through the process of confirmation bias, you tend to read what you already agree with. As a result, you often only think you know that you know what is going on. But, the fact is, you really don’t know. No one does. The world is far too complex to understand.

When you accept this, your newfound ignorance becomes a formidable investment weapon. That’s because you’re not a slave to your emotions and biases.

Greg puts this philosophy into action as the Editor of Crisis & Opportunity. As the name suggests, Greg sees opportunity in a crisis. To find the opportunities, he uses a process called the ‘Fusion Method’, which combines traditional valuation techniques with charting analysis.

Read correctly, a chart contains all the information you need. It contains no opinions or emotion. Combine that with traditional stock analysis and you have a robust stock-selection strategy.

With Greg’s help, you can implement a long-term wealth-building strategy into your financial planning, be better prepared for the financial challenges ahead, and stop making the basic, costly mistakes that most private investors do every time they buy a stock.

To find out more about Greg’s investing style and his financial worldview, take out a free subscription to Money Morning here.

And to discover more about Greg’s ‘ignorance is bliss’ investment strategy and the Fusion Method of investing, take out a 30-day trial to his value investing service Crisis & Opportunity here.

Official websites and financial e-letters Greg writes for:

Money Morning Australia