The mining tax grab, Greece and the EU and other oil slicks

The word is out, massive end of season sell out prices reduced across the board.

Okay well sort of. At the time of writing (I try to write all my articles by the previous Monday before publication) the market is down about 15%. Not bad and not great, I’d prefer a bit more for my own personal ‘margin of safety’.

There seems to be a confluence of factors at the moment that are combining to produce ‘a perfect storm’ in global and domestic financial markets causing the current round of discounting.

Sometimes I jokingly think our local market should just not bother trading at all and rise or fall according to Wall St. Basically it follows its price lead mechanism anyway regardless of any domestic concerns.

‘Greece’ the wheels of commerce

I love these new buzz words like “Austerity measures” makes something that sounds painful so… Well nice, so it’s nice and painful I guess (for them).

The EU might collapse, what a catastrophe!? Who cares! If so, didn’t it survive okay before it became the EU? Nations will still trade based on their relative strengths and weaknesses.

At the Berkshire Hathaway AGM – thousands of enthusiastic fans (shareholders), two old billionaires and a heap of questions. When asked about the ‘Greece’ story Warren E Buffett’s right hand man Charlie Munger replied “That’s the start of a very interesting situation”. Neither of the guys knew how that movie will end as Buffett put it.

Trust me, they don’t know because they DON’T REALLY CARE!

As Peter Lynch, America’s most successful fund manager put it, the worst thing you can do is try to predict the direction of the economy and interest rates.

It’s great ‘water cooler’ conversation but never put it into action.

Trying to time the market is futile. Set up a financial plan that allocates your assets based on your risk tolerance, so that you can sleep at night.

Opportunities abound

Follow their lead, there’s a reason why these guy’s are so successful and worth billions of dollars – they don’t let events going on around them destroy their disciplined approach to investing.

Take a look at some great companies with depressed prices. For those with little direct cash to allocate (ie. 10k or less), not only is there a discount to unit prices, but distribution season is just around the corner.

That should produce Charlie Munger’s famous ‘Lollapalooza’ effect.

That’s where I’m getting in with mine, how about you?

At this stage ignore the distortions and writings of the press. ‘Mr Market’ has just caught a dose off short-termism.

Next week I will go over Peter Lynch’s incredible reign as head fundy of Fidelity Magellan.

Nick Christian is a Financial Adviser and planner and authorised representative of Millennium3 Financial Services.

 The views and opinions expressed within this letter are those of the author and do not necessarily reflect those of Millennium3 Financial Services Pty Ltd.

The above is general in nature and should not be acted upon without seeking the advice of a professional licensed financial planner.