EDITOR: | May 9th, 2019

When do you invest?

| May 09, 2019 | No Comments
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Over the years via InvestorIntel, I have put my thoughts down about problem solving, decision making, planning and excellence. I have also detailed articles on rare earths separation and other aspects of resource management. My reasons were to provide you with the knowledge, the logic and the skills needed to understand the Resource world and perhaps the Investment world. I now feel that I never really finished the whole gambit. Something was missing. As sort of an excuse, I stopped writing for InvestorIntel as my retirement projects list and schedule mounted up, but that workload has now slowed some and I’ve been thinking. Well, recent events seem to have re-sparked my thinking into how to summarise, how to finish the series. The question that keeps me constantly pondering is WHEN do you act? WHEN do you solve problems? WHEN do you plan? Is there a systematic answer to the question of WHEN? Is there an approach that can help?

Let’s go back in time to when I was a much younger process engineer working in day to day operations. Projects were assigned by my boss. So, the work load was very much management driven. Top down. Especially when the “Exocet” directive from Head Office would come to “reduce operating costs by X dollars per, and by quarter whatever. I used to feel like my involvement into these directions was very limited and these directions would always come with little notice and never enough time. I thought I needed to work out a better way. So away from my day to day responsibilities, I developed my future projects list. These were the “how do I get 10% more tonnes through the plant?”, “how do I improve recovery by 10%?”, “how do I reduce costs by 5%?” type questions. Problems to be solved. Decisions to be made. Planning to be developed. Invariably, the questions all met with stumbling blocks, otherwise they would be valid projects at that very point in time. Energy costs, IR issues, product pricing, return on investment criteria etc. all stalled the process. I would then file these opportunities away, not to collect dust but I would revisit them annually and not redo the whole analysis, but just look at those issues that put them on suspension and see if those triggers (as I called them then) had changed sufficiently to “re-open” the file. This “trigger analysis” was part of my WHEN thinking but for PC reasons that will be presented later I’ll look for a better title.

My career changed somewhat and I became very interested in risk management. Operationally this revolved around safety and environmental management, but allowed my thinking around quality and excellence to be developed. Obviously, site incidents presented problems to be solved (in a systematic way of course) and projects needed to be rolled out in a well planned and controlled manner (again the system comes to the fore). So the WHEN is defined. But what if you want to get in front of your incidents to prevent them occurring in the first place. That is to remove the loss by controlling WHEN. A system was devised (what else) to notify across involved parties (divisions, companies, regulatory bodies etc) that all incidents, both actual and near miss, were distributed. We could then review others and get in front of those issues that were applicable. The system of WHEN was beginning to develop in my head. WHEN was now if the incident was yours, it (the WHEN) was controlled by you if the incident was someone else’s. Then I received my first major curve ball.

In Australia, in the early 90’s we were going through “the recession we had to have”. I recall the high interest rates, high inflation but most importantly I recall the high unemployment. I was OK but others were not so fortunate. I remember vividly seeing 10% unemployment, 10.2, 10.5 and sure it was in the papers and sure the Keating Labor government were doing their thing, but boy, the reaction to a figure of 11% unemployment was immense. Which was great, but in my WHEN theory, why did it appear that 11 was the magical number? Why wasn’t it 10 or 9 or whatever? What was the “tipping point” (note not trigger anymore)? Was it the actual number? Surely not, that would imply that those numbers building up the WHEN moment were somewhat acceptable. And surely no government would operate like that. Or would they? I thought about that for a while and came to the conclusion that the “tipping point” was not the action number, but it was the reaction by the media and society to that number. So the WHEN for the government to implement the always necessary, but always unpopular actions was controlled by the accepted need by all that now was the time to fix it. As an aside, I still wonder what would have happened to Australia if the unemployment rate had peaked at 10.75. Would those unpopular but necessary actions still have been enacted? Keep that thought.

So the WHEN is not a simple economic number. Energy cost, product price, ROI, there is much more to it. Let’s move ahead a few years to Australia’s worst mass shooting. Too many people were killed by a single gun man in Port Arthur, Tasmania. The Australian government acted and imposed extremely strict gun laws. A very good thing and the Howard Liberal government were well praised. But was the WHEN decided by the number of people killed or by the public reaction giving the government the open authority to act? I know this sounds callous but the questions need to be asked. Would the gun laws have changed if the number of people killed was much less? Almost 30 years later a similar event has occurred in New Zealand, and now they are changing their gun laws to be similar to Australia. Think back to my risk management days, if this type of incident can happen in Australia why did it take 30 years and the loss of 50 people’s lives to decide that the WHEN moment is now in New Zealand? Would it have been different if it was only 5 people killed? Big questions, but if you want to get the right answers to the WHEN system they have to be asked. Again, as an aside, I shudder as to what would cause the WHEN question to gun control in North America.

I have used these somewhat extreme examples to show you how difficult the WHEN question is to define and even more difficult to try to systemise, but I want to discuss another, probably more interesting WHEN question, to the investor audience. When do you invest?

When do you invest? Well we all invest. We have shares, term deposits, cryptocurrencies, etc etc. But when? Is it on advice from a broker to buy share XYZ or it is in response to a surging market and you don’t want to miss out? These are all WHEN questions.

It is now 2 months since I have written anything. My mind got to scrambled trying to get the systemisation of WHEN into a process I could write down. Well the penny has dropped! All along I was looking in the wrong place, in the wrong way. This isn’t a question of WHEN. WHEN is the answer to the question, not the question it’s self. The issue is PRIORITY. High priority you do now. Low priority you do later, if at all.

Example: How do you prioritise your working day? My rules have always been:

  1. Keep your boss happy. That will keep him off your back.
  2. Keep the system happy. That way all those other pressures won’t be buzzing around giving you grief and disturbance.
  3. Lastly, with all the other noise out of the way, you get to do what you want to do. No time? Generally the case, but its much easier to work extra hours or at home if its on something that you are really interested in rather than something Head Office is getting its knickers in a knot about.

The Government actions. The trigger points. The trip points. That swing into action event. The actions were always necessary. Its just that the priority of public reaction or the political opportunity to be seen to be doing the right thing, changes the priority. Funny though that we as a society applaud a government for solving the 11% unemployment problem but we were quiet when it was 10. We were quiet about gun control until a massacre occurs and even then if its not our massacre then perhaps we don’t have to act. We don’t seem to ask ourselves the right questions.

So investment. WHEN, oops I mean how do I prioritise? Simple. Ask yourself the right questions and the answers will set the priority which will drive your decisions. Here are a few questions.

  1. Am I an investor or a speculator? What overall annual return do I want from an investment option?
  2. Am I a systematic investor or do I have the dreaded FOMO? (Fear of missing out). A classic speculator weakness and the main culprit of bubbles and busts.
  3. Am I really smart enough to do this on my own?

So it’s not WHEN. It’s a risk reward balance based on your needs, your mentality, your maturity. Can you systemise that? I’ll write again if any more useful stuff comes out of these grey cells of mine. Stay safe!


Steve Mackowski

Editor:

Steve Mackowski is a former Senior Consultant of PDCA Management Services P/L, a consultancy dedicated to problem solving, making decisions and excellence in the Resources ... <Read more about Steve Mackowski>


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