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Financial Ramblings

Nathan Kowalski
BUSINESS COLUMNIST
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Nathan Kowalski is the chief financial officer of Bermuda-based investment firm Anchor Investment Management Ltd. He holds Chartered Accountant, Chartered Financial Analyst and Chartered Investment Manager designations. He is currently the president of the Chartered Financial Analyst Society of Bermuda board. Mr Kowalski started his career with KPMG, where he provided assurance, tax and financial advisory services for some of the largest corporations in Canada. He then worked for Deloitte & Touche Corporate Finance Inc, where he specialised in providing advice on mergers and acquisitions, valuations for corporate clients and private-equity firms, entrepreneurs and governments.

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  • What my mom taught me about investing
    May 9, 2016 8:00 am

    What my mom taught me about investing

    We all likely have some great quotes and lessons we learnt from our mom while growing up. Here are a few quotes from my mom that you can apply to investing.

    1. Look both ways before you cross the street!

    In this case she meant consider both the good and the bad aspects of an investment. It is unwise to potentially walk into oncoming traffic or in this case rush into an investment, without first considering all the risks and...

  • Central bank rock stars
    Apr 11, 2016 8:00 am

    Central bank rock stars

    Nickelback is one of my favourite rock bands. A group of guys from Hanna, Alberta, Canada who have created a number of great hits. One of my favourites is <i>Rock Star. </i>

    After listening to the tune I couldn’t help but think of central bankers. That’s right, when I listen to rock I like to meditate on central banking actions.

    Since the Great Recession, the central bankers of the world have become the rock stars of...

  • Warren’s wisdom
    Mar 7, 2016 8:00 am

    Warren’s wisdom

    <i>“It’s easy to look back over the 115-year span and realise how extraordinarily beneficial agricultural innovations have been — not just for farmers but, more broadly, for our entire society. We would not have anything close to the America we now know had we stifled those improvements in productivity. (It was fortunate that horses couldn’t vote.)” </i><b>- Warren Buffett</b>

    The Berkshire...

  • Bermuda’s tightrope walk
    Feb 23, 2016 8:00 am

    Bermuda’s tightrope walk

    Nathan Kowalski, Financial Ramblings from the Rock

    On August 7, 1974 French high-wire artist Philippe Pettit took a walk between the Twin Towers of the World Trade Centre. The young French acrobat had to contend with winds, the natural sway of the tower and the logistics of setting up a solid line to balance on. A difficult feat to say the least.

    Bermuda is doing its own tightrope walk. It has myriad items to balance as it makes...

  • China and oil: investors’ major concerns
    Feb 8, 2016 8:00 am

    China and oil: investors’ major concerns

    January was not a kind month for equity investors. The volatility was discerning and uncomfortable. While markets may correct further (nobody knows for sure) it’s very important to realise that market sell-offs are par for the course. In times like these it is important to focus on your long term plan and what you own. I believe that it is axiomatic that while capital flows will drive market values in the short term, valuations will drive...

  • Twelve possible surprises for 2016
    Jan 18, 2016 8:00 am

    Twelve possible surprises for 2016

    “Never make predictions, especially about the future”

    — Casey Stengel

    “Every year I talk to the executives of a thousand companies, and I can’t avoid hearing from the various gold bugs, interest-rate disciples, Federal Reserve watchers, and fiscal mystics quoted in the newspapers. Thousands of experts study overbought indicators, oversold indicators, head-and-shoulder patterns, put-call ratios, the Fed’s policy on money...

  • Review of 2015 surprises
    Jan 11, 2016 8:00 am

    Review of 2015 surprises

    “Humans don’t want accuracy; they want reassurance. The Nobel laureate and retired Stanford University economist Kenneth Arrow did a tour of duty as a weather forecaster for the US Air Force during World War II. Ordered to evaluate mathematical models for predicting the weather one month ahead, he found that they were worthless. Informed of that, his superiors sent back another order: ‘The Commanding General is well aware that the forecasts...

  • The twelve financial ramblings of Christmas
    Dec 21, 2015 8:00 am

    The twelve financial ramblings of Christmas

    What follows is a series of twelve facets in the financial markets for 2015. I’m pretty sure you won’t be able to sing this as a carol.

    1. One Fed Hike. They did it. Finally. Probably a bit late too. The Federal Reserve hikes interest rates for the first time in nine years! We have been at microscopic rates for so long it’s beginning to feel like Japan.

    2. Two Markets Diverging. Growth has been beating value for some time. In fact...

  • Should the Fed raise rates?
    Dec 15, 2015 8:00 am

    Should the Fed raise rates?

    Tomorrow we will get the Federal Reserve’s decision on whether or not they will raise the Fed Funds rate. The market has been stewing over a rate rise for what seems like an eternity. I think they will move and the market seems to agree, with the Fed Funds futures pricing in a 72 per cent probability as of this writing.

    But should they? The Fed has what is called a dual mandate: inflation and unemployment. Essentially they are tasked...

  • Three financial aspects to be thankful for
    Nov 30, 2015 8:00 am

    Three financial aspects to be thankful for

    They call economics the “dismal science”. The world often seems far more interested in the awful things going on rather than positive developments. That’s why we rubber-neck when we see car accidents, but airplane landings never make the news.

    Now that Thanksgiving has come and gone I hope all those who celebrate this seasonal break have had a chance to take a moment and think of those things we can be thankful for rather than worry...

  • Paris attacks: the financial impact
    Nov 23, 2015 8:00 am

    Paris attacks: the financial impact

    The investment community is coming to grips with the effects from the horrific attacks in Paris. These abhorrent actions should not be callously dismissed and retribution is being dealt with as we speak. But what of the financial and market effects? The initial reaction, at least as portrayed by the regional stock markets, seems muted.

    The CAC 40 (France’s major exchange), ended only fractionally down on Monday (losing less than 0.1...

  • The Wal-Martization of the world
    Nov 16, 2015 8:00 am

    The Wal-Martization of the world

    Over time prices rise and fall at varying rates. The rate of inflation and its effects on an economy are often talked about endlessly.

    The latest jobs report has significantly increased the likelihood of a December rate hike. But is this rate hike necessary in the face of what appears to be underlying deflationary pressures and weaknesses in many sectors of the economy?

    It’s difficult to cheer a rate rise when sales for the...

  • Back to the Future and a lesson in investing
    Nov 2, 2015 8:00 am

    Back to the Future and a lesson in investing

    “Of all sad words of tongue or pen, the saddest are these: it might have been.”

    - John Greenleaf Whittier

    October 21 was Back to the Future day. This was the day that Marty McFly travelled to from 1985 in the second Back to the Future movie.

    A lot of what was portrayed in the movie never really came to pass: think hover boards and making payments with only your thumb print. It’s very easy to point out what the...

  • China’s pulse: tea with Mr M
    Oct 19, 2015 8:00 am

    China’s pulse: tea with Mr M

    China has been in the news a lot lately. There are many stories of concern, ranging from the currency devaluation, the economic slowdown and the stock market collapse.

    When I was in Hong Kong last week and my friend asked me to join him for tea to speak to Mr M, I jumped at the chance.

    Mr M is a well-connected man. He sits on six or more boards in China (when he was giving out his business card to me he pulled out a deck of...

  • Stocks do go down
    Oct 5, 2015 8:00 am

    Stocks do go down

    “If we don’t discipline ourselves, the world will do it for us.”

    - William Feather, American author

    After four years without a 10 per cent correction in the S&P 500, August issued a reminder to investors: stocks do go down. In fact the saying is that stocks take the stairs up and the elevator down. As shares plummet, people begin to focus on their portfolios and regain a sudden, more intense, focus on investing.

    ...

  • Sep 8, 2015 8:00 am

    The future of work in Bermuda - part three

    In part one we briefly went through the theory and history of innovation on employment. We covered two aspects that affect Bermuda: the pace of change and the occupational risk mix. In part two we reviewed some implications for Bermuda, including inequality and worker opportunities. Today we will discuss some potential policy options.

    Policy suggestions

    “If you want to have good ideas, you must have many ideas” —Linus...

  • The future of work in Bermuda — part two
    Aug 31, 2015 8:00 am

    The future of work in Bermuda — part two

    In Part 1 we briefly went through the theory and history of innovation on employment. Then we covered two aspects that affect Bermuda: the pace of change and the occupational risk mix. Today we will look at the implications for Bermuda.

    Implications for Bermuda

    Are we actually seeing this disruption? Is all this heralded change actually manifesting itself on our island? The short answer is maybe. One will never be able to prove...

  • The future of work in Bermuda
    Aug 24, 2015 8:00 am

    The future of work in Bermuda

    “If a man takes no thought about what is distant, he will find sorrow near at hand” — Confucius

    The world is changing. The very essence of work is changing. As Bermuda’s job market continues to stagnate it’s important we briefly delve into the changing nature of technological innovation and its implications for the future employment and society more broadly on the Island.

    David Ricardo in his seminal work The Principals of...

  • Bermuda’s statistical summertime madness
    Aug 17, 2015 8:00 am

    Bermuda’s statistical summertime madness

    A flurry of statistics has hit the wires over the last month. The data dump comes in the middle of summer when most would rather be hitting the beach and not the keyboard for inputting data into spreadsheets. I’ll hit the keyboard for you. What follows is a brief commentary on a few of the recent reports.

    Labour Force Survey

    In short, it wasn’t good. Although the headline drop in the unemployment rate from 9 per cent to 7 per cent...

  • China: Where markets ain’t markets
    Jul 13, 2015 8:00 am

    China: Where markets ain’t markets

    Trees don’t grow to the sky. After surging over 150 per cent over the past year, the Shanghai Stock Exchange Composite Index forest has been cut down. The recent breathtaking destruction of capital seen in China has sucked a huge amount of oxygen out of this market.

    At one point the rout in Chinese shares was over $3 trillion, which is equivalent to the size of India’s entire stock market. Near the peak the ChiNext (Chinese Technology...

  • The Greeks’ end game
    Jun 29, 2015 8:00 am

    The Greeks’ end game

    I probably don’t need to tell you that Greece has a debt problem. Actually, it’s better to call it a crisis. It now faces two very large and imminent debt payments: 2 billion euros due to the International Monetary Fund (“IMF”) within 30 days and by the July 20 it has to pay 3.5 billion euros to the European Central Bank (“ECB”). If Greece somehow manages to negotiate a refinancing or restructuring for these amounts it “kicks the can down the...

  • Pricing ourselves out of the market
    Jun 22, 2015 8:00 am

    Pricing ourselves out of the market

    Let’s make something clear, local inflation doesn’t help anyone without pricing power — it lowers living standards by reducing purchasing power. It also can act as a disincentive for business investment and ultimately the level of employment.

    If costs escalate then returns on capital invested are likely to be reduced when assuming one has limited pricing power (which is a very realistic assumption in today’s world of hyper...

  • Jun 8, 2015 8:00 am

    Know your alpha, beta ... and gamma

    For many, the title might remind you of the Greek alphabet. For those in the investment industry it denotes factors for returns.

    Professionals in my industry are obsessed with measuring everything. In some cases this is very important. In others, unfortunately, it tends to obfuscate the important dynamics of investment management and financial planning.

    For those unfamiliar with the terms, alpha generally refers to the...

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