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.
Jul 22, 2014 8:00 am
It is said that ‘demographics are destiny’ and this is certainly a theme that figures into our economic assessment of Bermuda and one that we have discussed many times in the past. By now no one on this Island should be surprised that Bermuda is facing an unprecedented wave of ageing, or a “grey tsunami”, as the baby boom generation — defined as those people born between 1946 and 1964 — move to the end of their productive careers. The...
Jul 14, 2014 8:00 am
All nations’ economic progress through time can be decomposed into four fundamental components:
1) Population growth — We have discussed this many times in different forms. Basically if you have more workers producing more goods the economy expands. The very nature of having more working bodies in a country like Bermuda, for example, magnifies the local economic benefit. This is to say, more workers earning money locally will have...
Jul 7, 2014 8:00 am
Do you remember when you were young and your parents and teachers taught you the importance of sharing? If you have your own kids now, you are probably teaching them to share as well. Sharing does make you a better person as it helps you to interact with others and develop trust with other people.
All these great aspects of the ‘sharing economy’ should be embraced by everyone.
Finally, all those years practicing to share your toys...
Jun 30, 2014 8:00 am
A few random ramblings on the markets and the macro investing situation to start the week:
The turmoil and chaos in Iraq is putting a bid under the energy markets. This of course is helping to escalate the price of crude oil and energy cost worldwide. I have a couple takes on this, outside of the fact that increasing unrest in the Middle East and its possible contagion will escalate the “fear premium” in crude.
Jun 9, 2014 8:00 am
Lower for Longer?
“The stock market is never obvious. It is designed to fool most of the people most of the time.”
-- Jesse Livermore
Remember when everyone called for higher rates? Recall when it was “only a matter of time” before the ten-year yield in the US approached its longer term “fair value” of near 4.5 percent (two percent inflation plus 2.5 percent real growth)? I can remember. I can also understand why we...
May 30, 2014 8:00 am
When you are in a hole the first thing you need to do to get out is stop digging. Ladies and gentleman, it looks like we have finally stopped digging (furiously, at least). While the economy has contracted for five straight years (2009-2013) we are approaching what I’d refer to as a “statistical bottom”. Although we are near this bottom and should hopefully carve one out this year, we have little to cheer regarding the resumption of robust...
May 12, 2014 8:00 am
The high level of computerisation and the liquidity-induced reduction of bid/ask spreads has slashed the cost of investing to an extremely low level. There isn’t a venue in the world, in my opinion that offers a greater chance for investors to compound wealth if done so in a prudent and judicious manner. One of the most efficient ways to invest these days is through Exchange Traded Funds (“ETFs”). Some funds actually let you invest in small...
Apr 29, 2014 8:00 am
For many people the stock market was already viewed as a casino and a giant gamble; its systems and processes opaque and nonsensical. The latest firestorm on High Frequency Trading (HFT) has not helped dispute this view. Lately the market has been buzzing with discussion involving Michael Lewis’s latest book Flash Boys which is all about HFT. The book goes so far as suggesting that the market is “rigged” and that individual investors are...
Apr 3, 2014 8:00 am
“Investment is most intelligent when it’s most businesslike.”
- ‘The Intelligent Investor’ by Benjamin Graham
The Berkshire Hathaway 2013 Annual Shareholders Letter came out on Saturday, March 1. As many readers will know, I am a huge fan of Mr Buffett and his straightforward and practical approach to investing. In a world awash with reams of information that gets fed to the consumer through a fire hose, it’s refreshing to...
Mar 11, 2014 8:00 am
Leverage is a wonderful thing when it works in your favour. It enables development, amplifies returns and at times offers illusory periods of above-trend growth. Eventually, however, the effects of additional debt begin to fade and, on the margin, offer less and less benefit. Once a nation, company or individual gets to a point where potential incremental growth does not justify higher levels of indebtedness, repayments begin, and the...
Mar 3, 2014 8:00 am
“In a market economy such as ours, economic activity or growth is not dictated by Government but rather determined by entrepreneurs and their employees working in their own self-interest. The Government’s job is to create a favourable and fair environment for job makers to thrive, just as a farmer’s job is to provide fertiliser and water for his crops to grow. The farmer knows he can’t make his plants grow — nature has to take its course —...
Feb 10, 2014 8:00 am
“ ... there is the dream and the will to found a private kingdom ... there is the will to conquer: the impulse to fight, to prove oneself superior to others, to succeed for the sake, not of the fruits of success, but of success itself ... Finally there is the joy of creating, of getting things done, or simply of exercising one’s energy and ingenuity.
— Joseph Schumpeter, on the nature and essential character of the...
Jan 20, 2014 8:00 am
According to the Book of Odds, a collection of statistics about everyday life, of the 317 million adults in the US, only one in 2.2 make a New Year’s resolution. Of these, one in 8, or 17.8 million will actually keep it for the year. If you do manage to keep the resolutions, however, you are ten times more likely to change your life. So the odds may be stacked against you but the rewards are high. Here is a shortlist of five investing New...
Jan 14, 2014 8:00 am
“While doctors might be able to advise patients about their general health, they could not determine whether a healthy patient would be struck by a brick upon leaving the hospital.” — in “Fortune Tellers” by Walter Friedman
“As I think back over the years, I have been guided by four principles for decision making. First, the only certainty is that there is no certainty. Second, every decision, as a consequence, is a matter of...
Jan 6, 2014 8:00 am
In January of last year I laid out 13 unexpected events or surprise situations that were currently outside of the conventional consensus opinion that I felt had a reasonable chance of occurring (http://www.royalgazette.com/article/20130114/COLUMN05/701149987). Let’s go back and take a look at how these ‘surprises’ panned out:
1. Despite a floundering economy, the BSX Index climbs again. Specifically I stated that the BSX would tack on a...
Dec 23, 2013 8:00 am
This is the final instalment of the three-part series on retirement planning and investing.
“Retirement at 65 is ridiculous. When I was sixty-five I still had pimples.” - George Burns
Retirement planning lore is littered with conventional wisdom, heuristics and rules of thumb. Unfortunately, many of these are dead wrong or far too simplistic. For example, maybe you believe you can put off planning for retirement or...
Dec 16, 2013 8:00 am
This is the second part of a three-part series on retirement planning.
“Fragility is the quality of things that are vulnerable to volatility.”
— Nassim Nicholas Taleb
Life in retirement should be fun and stress free; the “golden years”. However, many people spend 20 to 30 years in retirement and funding these years may present a significant challenge. Here we will concentrate simply on the market risks of a...
Dec 9, 2013 8:00 am
This is part one of a three-part series on retirement planning and investing for retirement that will be delivered over the next couple of weeks.
“It is always wise to look ahead, but difficult to look further than you can see.”
- Winston Churchill
As we run around shopping for Christmas and planning for the festive season I’m pretty sure no one is really spending time considering their financial future.
Nov 25, 2013 8:00 am
The S&P 500 is having its best year since 2003 with gains of over 26 percent year to date. Small cap stocks are soaring even further — up some 30 percent and the Dow Jones Industrial Average has been hitting record highs — up over 20 percent as well. All these widespread gains have sparked a raft of bubble talk and scepticism. Barron’s even had a picture of a bubble on its front cover last weekend. Ironically this is nothing new, some of...
Nov 19, 2013 8:00 am
Bermuda’s national health care issues are indeed numerous (eg, access, pricing, coverage, funding etc) and one of the Island’s biggest fiscal drains. Rapidly rising healthcare costs undermine the all-important confidence of small and medium-sized businesses, costing jobs and ultimately economic growth. The debate has recently focused on “who is without” and “who pays for what”, and not the more important aspect of actually lowering overall...
Nov 4, 2013 8:00 am
Recently Bermuda’s Department of Statistics (DoS) released its fourth annual Environmental Statistics Compendium which claims Bermuda’s population has increased over the past two years.
In our latest quarterly economic update Anchor Investment Management did some work on this issue and we estimate that Bermuda’s population declined by 4.2% since the last census in...
Oct 16, 2013 8:00 am
The Chartered Financial Analyst Society of Bermuda recently hosted the Global Interdependence Conference in Bermuda on October 10 and 11. It was a fantastic forum with some world-class speakers. What follows are a few key takeaways.
1) Sometimes we don’t know
Sep 30, 2013 8:00 am
“The one thing I will tell you is the worst investment you can have is cash. Everybody is talking about cash being king and all that sort of thing. Cash is going to become worth less over time. But good businesses are going to become worth more over time. And you don’t want to pay too much for them so you have to have some discipline about what you pay. But the thing to do is find a good business and stick with it. We always keep enough cash...
Sep 16, 2013 8:00 am
“A democracy cannot exist as a permanent form of government. It can only exist until the people discover they can vote themselves largesse out of the public treasury. From that moment on, the majority always votes for the candidate promising the most benefits from the public treasury, with the result that democracy always collapses over a loose fiscal policy — to be followed by a dictatorship.” — Alexander Fraser Tytler
Sep 9, 2013 8:00 am
How high will bond yields rise and where does the rout in US Treasury securities cease in the short term?
This question has been on bond investors’ minds for some time now.
Much of the recent rise in yields is likely related to investor concerns over the Fed’s intentions to taper its purchases of government bonds as soon as this month and potentially end its purchases completely by sometime next spring.
Sep 3, 2013 8:00 am
There is a branch of economics that deals with the operations of the political process called public choice theory.
Often credited to the economist James Buchman who won a Nobel Prize in economics, it deals with a theory linking individual behaviour to ultimate political action.
In general, the political process works very well when there is a close and transparent relationship between the receipts of benefits and payment of costs.
Aug 19, 2013 8:00 am
I recently watched an online video commentary by Brian Wesbury at First Trust on basic economics (links to the videos below). What struck me about these pieces was their elegant simplicity in summarising what many would consider complex economic aspects. At the end of the day there are two basic economic trains of thought: demand side economics and supply side economics. I’ll summarise each briefly and then end with a great story to narrate my...
Aug 5, 2013 8:00 am
(Second of two parts)
Unit labour cost (“ULCs”) is a well-known measure of international competitiveness which combines labour cost and productivity into a single measure. In general, unit labour costs show how much output the economy receives relative to wages, or labour cost per unit of output.
Jul 29, 2013 8:00 am
The world is increasingly becoming a more open economic forum. As a result the inexorable march in global competition continues every year. (This is Part 1 of 2)
Nations are at war for jobs, economic growth and distinct, sustainable competitive advantages.
As we have written before in Bermudas New Normal, one aspect in determining a nations base growth rate is how productive it is.
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