Tuesday, 21 January 2014 - 20:00
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Seed Weekly - Charlie Munger: Poor Charlie?s Almanac
Over the Christmas break, I had the opportunity to read Poor Charlie’s Almanack – a compendium of insightful articles, essays about and talks from Charlie Munger.
Who is Charlie Munger? He is the partner of the better known Warren Buffett, chairman and CEO of listed Berkshire Hathaway. He has partnered Buffett for some 45 years. Munger, now 90 years old, is vice chairman of the Berkshire Hathaway and Chairman of Wesco Financial Corporation.
Munger is noted as an excellent thinker and this book gave some insight into how his mind works. Buffett said of him, “Charlie can analyse and evaluate any kind of deal faster and more accurately than any man alive. He sees valid weakness in sixty seconds.”
Munger has a systematic way of analysing problems and approaches to business analysis and assessment. Instead of making a standalone assessment of a company and its finances, he will rather conduct a more comprehensive analysis, calling the tools that he uses his “Multiple Mental Model”.
“You must know the big ideas in the big disciplines and use them routinely – all of them. Not just a few. Most people are trained in one model – economics for example – and try to solve all problems in one way. You know the old saying, “to the man with a hammer, the world looks like a nail.” This is a dumb way of handling problems.”
When properly collected and organised, his Multiple Mental Models (around 100 of them he estimates) provides a context or latticework that leads to remarkable insights as to the purpose and nature of life. His models supply the analytical structure that enables him to reduce the inherent chaos and confusion of a complex investment problem into a clarified set of fundamentals. Some of the more important models that he knows well and uses often include:
• Redundancy / backup, breakpoints and critical mass system model from engineering
• Compound interest, permutations, probability and decision tree model from maths
• Breakpoint / tipping moment / autocatalysis model from physics and chemistry
• Cognitive misjudgement model from psychology
• Accounting – double entry bookkeeping
• Microeconomics – scale and competitive destruction
• Chemistry
His most basic guiding principles and fundamental philosophy of life includes preparation, patience, discipline, and decisiveness.
As part of his decision making process, Charlie Munger firmly believes in using checklists for investing decisions. Such a checklist, not necessarily used by Munger, was outlined in the book and covered the following headings:
• Risk – all investment valuations should begin by measuring risk;
• Independence – only in fairy tales are emperors told they are naked;
• Preparation – the only way to win is to work, work, work and hope to have a few insights;
• Intellectual humility – acknowledge what you don’t know is the dawning of wisdom;
• Analytics rigor – use of the scientific method and effective checklists minimises errors and omissions;
• Allocation – proper allocation of capital is an investors number one job;
• Patience – resist the natural human bias to act;
• Decisiveness - when proper circumstances present themselves act with decisiveness and conviction;
• Change – live with change and accept irremovable complexity; and
• Focus – keep things simple and remember what you set out to do.
All in all, a very good outline for decision making from a very successful investor.
Kind regards,
Ian de Lange
www.seedinvestments.co.za
info@seedinvestments.co.za
021 914 4966
Tue, 21 Jan 2014
Top News
South African stocks ended slightly lower on Tuesday after booking all-time closing highs in the previous session, as profit-taking in resource shares and technical factors took some of the steam out of the market. Full story
South Africa's rand held its ground against the dollar on Tuesday after a heavy sell-off last week, with investors taking looming strikes in the mining sector in their stride. Full story |
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Syrian and international delegates were arriving in Switzerland on Tuesday on the eve of peace talks that few believe can succeed as the three-year-old civil war and geopolitical acrimony it has brought show no sign of abating. Full storyA suicide bomber killed four people on Tuesday in a residential district of southern Beirut known for its support of the powerful Shi'ite Muslim military and political movement Hezbollah, security sources said. Full storyThe Thai government declared a 60-day state of emergency to start on Wednesday, saying it wanted to prevent any escalation of more than two months of protests aimed at forcing Prime Minister Yingluck Shinawatra from power. Full story |
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Markets | European shares climbed to fresh
5-1/2 year peaks on Tuesday, as glimmers of optimism from
Unilever and Remy Cointreau SA, as well as
solid. . . Full story | | U.S. bond prices slipped and
the dollar rose on Tuesday on speculation the Federal Reserve
will further pare its bond-buying stimulus at next. . . Full story | | Britain's top shares consolidated
near an eight-month high on Tuesday as reassuring news about
economic conditions in emerging markets boosted consumer staples
and financials,. . . Full story | | U.S. stocks edged higher on
Tuesday, putting the S&P on pace to snap a two-session decline,
as gains in the materials sector were. . . Full story |
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| Gold fell on Tuesday, dragged
down by firmer equities and a broadly steady dollar after
renewed talk that the U.S. Federal Reserve might. . . Full story | | U.S. stocks rose at the open on
Tuesday, putting the S&P 500 on track to snap a two-session
losing streak after a flurry. . . Full story | | European shares rose to 5-1/2
year highs on Tuesday, boosted by gains in consumer goods group
Unilever after strong results and by China's. . . Full story | | European shares edged higher
early on Tuesday as relief at moves to defuse a cash squeeze in
China was tempered by a batch. . . Full story |
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SA Business | A 29.6 carat blue diamond, one of the rarest and most coveted in the world with a possible price tag of tens of millions of dollars, has been discovered at a. . . Full story | | The South African Reserve Bank's monthly leading business cycle indicator edged down 0.2 percent month-on-month in November, partly because of a decrease in the number of residential building plans passed in. . . Full story | | Gold was holding just below a six-week peak on Tuesday amid higher equities and worries that physical demand could ease due to the recent rally in prices.. . . Full story |
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| Business leaders
gathering for their annual high-profile networking forum in
Davos are feeling a bit better about their companies' prospects
and a lot more. . . Full story | | The chief executives of the
world's top three platinum producers said on Tuesday wage hikes
being sought by the AMCU union, which plans. . . Full story | | South Africa's National Union of Mineworkers said on Tuesday over 7,000 of its members would return to work on Wednesday at. . . Full story | | Dissidents in South Africa's AMCU union are forming a rival to the militant labour group, accusing its leadership of recklessly pursuing. . . Full story |
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| Unilever said it would stick to
its emerging markets growth strategy as a fourth-quarter
recovery in sales in the region boosted the consumer. . . Full story | | South Africa's Treasury sold a total of 2.35 billion rand of its 2030, 2037 and 2048 government bonds on Tuesday.. . . Full story | | South African food company Tiger Brands said on Tuesday it had agreed to buy a Kenyan firm, identified by a newspaper. . . Full story | | South African food company
Tiger Brands has agreed to buy a Kenyan milling and
confectionery firm for $25 million, the Business Day newspaper
reported. . . Full story |
World Markets (Spot Prices)
Name | Time | RP | Move | % Move | JSE Overall | 17:00 | 46889.64 | -44.95 | -0.10% | JSE Top 40 | 17:00 | 42195.76 | -45.18 | -0.11% | JSE Gold | 17:00 | 1168.29 | -46.76 | -3.85% | JSE Financial | 17:00 | 33181.37 | 239.30 | 0.73% | JSE Industrial | 17:00 | 62300.38 | 164.55 | 0.26% | JSE Indust 25 | 17:00 | 54907.28 | 147.38 | 0.27% | JSE Resource | 17:00 | 53263.41 | -759.92 | -1.41% | DJ Futures | 19:52 | 16300.00 | -95.00 | -0.58% | DJ Ind | 20:00 | 16370.97 | -87.59 | -0.53% | SP 500 | 20:00 | 1838.86 | 0.16 | 0.01% | Nasdaq | 20:00 | 4211.58 | 14.00 | 0.33% | FTSE 100 | 18:35 | 6834.26 | -2.47 | -0.04% | DAX | 19:08 | 9730.12 | 14.22 | 0.15% | CAC40 | 19:08 | 4323.87 | 1.01 | 0.02% | Nikkei | 08:32 | 15795.96 | 154.28 | 0.99% | Shanghai | 09:28 | 2008.31 | 17.06 | 0.86% | Hang-Seng | 10:30 | 23033.12 | 104.17 | 0.45% | All Ords | 07:39 | 5342.00 | 34.40 | 0.65% | NZSE 50 | 06:48 | 4921.67 | 31.17 | 0.64% |
| | Name | Time | RP | Move | % Move | Gold $ | 19:59 | 1241.70 | -12.82 | -1.02% | Gold R | 20:00 | 13480.48 | -113.65 | -0.84% | Gold R/kg | 20:00 | 433398 | -4525 | -1.03% | Silver $ | 19:59 | 19.8500 | -.4430 | -2.18% | Platinum $ | 19:59 | 1448.50 | -18.00 | -1.23% | Palladium $ | 19:59 | 746.50 | .50 | 0.07% | R157 | 15:43 | 6.34 | .08 | 1.20% | R186 | 15:39 | 8.39 | .02 | 0.24% | R204 | 15:40 | 7.47 | .05 | 0.67% | R207 | 15:39 | 7.74 | .04 | 0.52% | Brent Crude | 20:00 | 106.93 | -.13 | -0.12% | Rand / Dollar | 19:59 | 10.8556 | 0.0212 | 0.20% | Rand / Pound | 19:55 | 17.8479 | 0.0720 | 0.41% | Rand / Euro | 19:55 | 14.7041 | 0.0084 | 0.06% | Rand / NZD | 19:59 | 9.0208 | -0.0079 | -0.09% | Rand / AUD | 19:55 | 9.5528 | -0.0033 | -0.03% | Yen / Dollar | 19:59 | 104.1600 | -0.0050 | 0.00% | Euro / Dollar | 19:59 | 0.7380 | 0.0002 | 0.03% | Dollar / Euro | 19:59 | 1.3550 | -0.0004 | -0.03% | Pound / Dollar | 19:55 | 0.6067 | -0.0017 | -0.28% |
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The JSE Today
Trading Statistics
Date | Adv. | Decl. | Unch. | Actives | Volume | Value | Trades | Orders |
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21/01/2014 | 180 | 176 | 58 | 414 | 206,555,807 | R13,499,245,173 | 132850 | 1553784 | 20/01/2014 | 194 | 167 | 69 | 430 | 183,869,242 | R10,516,429,004 | 116109 | 1031703 | 17/01/2014 | 175 | 206 | 73 | 454 | 282,477,868 | R18,536,398,376 | 181887 | 1697218 | 16/01/2014 | 204 | 174 | 68 | 446 | 206,317,731 | R15,306,516,507 | 152287 | 1468092 | 15/01/2014 | 235 | 125 | 67 | 427 | 189,769,052 | R11,837,322,697 | 131678 | 1400767 |
* Includes all listed instruments on the JSE
Index Summary Index Name | RP | Move | % Move | Top 40 | 42,195.76 | -45.18 | -0.11% | Industrial | 62,300.38 | 164.55 | 0.26% | Mid Cap | 59,552.15 | -.98 | -0.00% | Small Cap | 50,864.28 | -93.53 | -0.18% | Resource 20 | 53,263.41 | -759.92 | -1.41% | Industrial 25 | 54,907.28 | 147.38 | 0.27% | Financial 15 | 12,634.16 | 105.92 | 0.85% | Financial & Ind. 30 | 57,775.97 | 242.48 | 0.42% | All Share | 46,889.64 | -44.95 | -0.10% | Oil & Gas | 41,242.64 | 541.08 | 1.33% | Mining | 31,824.61 | -653.40 | -2.01% | Gold Mining | 1,168.29 | -46.76 | -3.85% | Platinum Mining | 50.75 | .24 | 0.48% | GENERAL MINING | 9,295.42 | -202.73 | -2.13% | Oil & Gas Producers | 22,175.40 | 290.92 | 1.33% | Basic Materials | 28,287.88 | -556.33 | -1.93% | Chemicals | 24,888.81 | 26.25 | 0.11% | Forestry & Paper | 29,572.06 | -355.26 | -1.19% | Industrial Metals | 24,053.76 | -701.12 | -2.83% | Industrials | 44,164.81 | -44.51 | -0.10% | General Industrials | 135.65 | .01 | 0.01% | Consumer Goods | 58,218.30 | 453.43 | 0.78% | Automobiles & Parts | 10,190.06 | .00 | 0.00% | Household Goods | 320.14 | 1 | 0.21% | Health Care | 73,129.02 | 314.52 | 0.43% | Beverages | 187.84 | .23 | 0.12% |
| | Index Name | RP | Move | % Move | Food Producers | 66,836.95 | 673.39 | 1.02% | Personal Goods | 1,078.66 | 13.98 | 1.31% | Consumer Services | 11,190.19 | -39.59 | -0.35% | General Retailers | 59,333.44 | 443.05 | 0.75% | Travel & Leisure | 5,630.16 | -24.97 | -0.44% | Media | 254.44 | -2.71 | -1.05% | Support Services | 2,556.24 | 26.00 | 1.03% | Telecommunications | 10,151.58 | 49.58 | 0.49% | Financials | 33,181.37 | 239.30 | 0.73% | Banks | 55,524.50 | 270.85 | 0.49% | Non-life Insurance | 46,830.70 | 1401.17 | 3.08% | Life Insurance | 32,754.59 | 516.01 | 1.60% | General Financial | 3,255.33 | 16.76 | 0.52% | Technology | 42,824.11 | -121.58 | -0.28% | SHARIAH TOP40 | 3,973.75 | -35 | -0.88% | FTSE/JSE SHARIAH ALL | 4,086.27 | -33 | -0.80% | COAL MINING | 19,847.56 | -204 | -1.02% | FTSE JSE Fledgling | 6,395.42 | -18 | -0.28% | FTSE/JSE Alt X | 1,240.58 | 2 | 0.14% | SA LISTED PROPERTY | 485.98 | | 0.13% | CAPPED PROPERTY | 425.21 | | 0.04% | RESOURCE | 29,087.95 | -417 | -1.41% | DIVIDEND PLUS | 215.52 | 1 | 0.40% | FTSE/JSE RAFI 40 | 9,263.14 | -22 | -0.24% | Capped Top 40 | 22,289.18 | -10 | -0.05% | Capped All Share | 23,735.94 | -17 | -0.07% | JSE TABACO | 7,193.00 | 103 | 1.45% |
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Click here for the Sharenet Index Summary page
Latest Consensus Changes** Code | Company Name | Status | Updated | ASR | ASSORE LTD | SELL | 20/01/2014 | KIO | KUMBA IRON ORE LTD | HOLD | 20/01/2014 | EXX | EXXARO RESOURCES LIMITED | HOLD | 20/01/2014 | MRF | MERAFE RESOURCES LTD | BUY | 20/01/2014 | ARI | AFRICAN RAINBOW MINERALS | HOLD | 20/01/2014 |
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Results Expected** Expected | Company Name | Fin. Date | 31/01/2014 | ZCI | September 2013 (Interim) |
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Recent Dividends** Share Name | Dec-Date | LDT | Pay-Date | Amount | FOORDCMPS | 20/01/14 | 07/02/14 | 17/02/14 | ZAR 0.5875 | MARSHALL | 17/01/14 | 31/01/14 | 14/02/14 | USD 0.0180 | DON | 08/01/14 | 24/01/14 | 03/02/14 | ZAR 0.1600 | ARGENT | 04/12/13 | 20/03/14 | 31/03/14 | ZAR 0.0700 | PNR FOODS | 25/11/13 | 24/01/14 | 03/02/14 | ZAR 0.8600 |
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Ex Div** Share Name | Dec-Date | LDT | Pay-Date | Amount | ILRPREF1 | 31/12/13 | 17/01/14 | 27/01/14 | ZAR 11.9962 | ASTRAL | 11/11/13 | 17/01/14 | 27/01/14 | ZAR 2.2200 | LEWIS | 11/11/13 | 17/01/14 | 27/01/14 | ZAR 2.1500 | CLICKS | 24/10/13 | 17/01/14 | 27/01/14 | ZAR 1.1950 | NAMPAK 6.5 | 06/12/13 | 17/01/14 | 27/01/14 | ZAR 0.0650 |
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Upcoming AGMs** Code | Company Name | Date | Status | FVT | Fairvest Property Holdings Ltd. | 21/01/2014 | Confirmed | FVTP | Fairvest Property Holdings Ltd. | 21/01/2014 | Confirmed | IDQ | Indequity Group Ltd. | 21/01/2014 | Confirmed | IDQP | Indequity Group Ltd. | 21/01/2014 | Confirmed | IDQPA | Indequity Group Ltd. | 21/01/2014 | Confirmed |
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