Monthly Archives: December 2014

Are fossil fuels a bad investment?

Are fossil fuels a bad investment?

It’s hard to miss the carnage in oil stocks at the moment. I’m sure many, like me, are tempted to load up on them as oil reaches lows not seen since 2009. Surely this must be overdone, oil at $60 a barrel will not be sustained? Well that may be true, but the question I’m interested in is are fossil fuels going to prove to be a sensible investment long term?

‘Unburnable Carbon’ is a report by the Carbon Tracker Initiative. It raises an important issue at the moment, and that is if all the world’s fossil fuel companies extract and use all their proven reserves, the emissions will total 5 times the currently agreed limit by all major governments. There is a complete disconnect between the targets agreed by governments, and how the market is valuing fossil fuel reserves far in excess of those targets. In effect the market assumes the targets will be completely ignored.read more

Moats aren’t forever

Moats aren’t forever

There was once a time when a moat was one of the best defenses of a castle. It slowed down attacking troops or bottle-necked them into a narrow route of attack. However times change, and nowadays with the advent of both artillery and aircraft a moat has little use. Such is the way with competitive “moats” in business; what was once insurmountable suddenly becomes insignificant. I was reminded at the weekend of one of my favorite shops growing up – Argos ($HOME.L), a UK catalogue retailer, and began thinking about its once great moat. Unlike most catalogue retailers, Argos had physical stores where you would buy their products, rather than ordering over the phone. You would also pick up a catalogue to take home and browse through at your leisure when looking for gift ideas or something you needed. Most houses contained an Argos catalogue and back in the day, if you suddenly realized you needed something, whether it was while cooking, seeing an advert on TV etc, you would usually go first to the catalogue and check out how much it was. But that moat didn’t last forever and here are two big things in the future that I think will destroy lots of company moats in a similar way.read more

Deceptive Mathematics

Deceptive Mathematics

Mathematics is often thought of as a difficult subject, and as a graduate of Mathematics I can certainly testify to its complexity at a high level and at times mind-boggling abstractness. Investing requires mastery of very few Mathematical concepts, and those are mainly simple ones such as percentages and annualized growth rates. But the danger in Mathematics is not from a persons inability to use more advanced techniques, it is from a failure to comprehend the true implications of deceptively simple concepts. Here are some interesting examples of how simple Math can yield unexpected results.read more


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