Why investing is like having a barbeque/boarding a boat/playing rock-paper-scissors

Analogy of the week.

Financial advice abounds with analogies, but here's a particularly digestable one from Matt King at Citi via Ft Alphaville:

Its a nice contrast with the more laboured contributions we usually get. Here's Morning Star's stock course taking a nautical approach:

The main thing you can control is what ship to board. Think of the seaworthiness of a ship as the competitive positioning of a business, and the horsepower of the engine as its cash flow. Some ships have thick, reinforced metal hulls, while others have rotting wood. Clearly, you would pick the ships that are the most seaworthy (with the best competitive positioning) and have the most horsepower (cash flow).

Though the ship’s captain (company management) certainly matters, the quality of the ship is more important. On a solid vessel, as long as the captain does not mess up, there is not much difference between a good and a great captain. Meanwhile, there is nothing the best skipper can do if the boat’s engine is broken and the boat is constantly taking on water (poor business). To relate this to stocks, business economics trump management skill.

And here's the Wall Street Journal explaining a heavily annotated rock-paper-scissors analogy from LPL Financial:

The comparison is meant to illustrate the factors to consider – and their relative importance – when evaluating an investment:   Rock (valuations-the current worth of an asset or a company) beats scissors (fundamentals-the relevant data that influence value, such as a company’s balance sheet and income statement). Scissors beats paper (technicals-an analysis of statistics generated by market activity, such as past prices and volume.)

Paper, of course, beats rock — so there is no one best solution for all circumstances.

It's all so much clearer now.

Sausages. Photograph: Getty Images
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I'm a Remain voter who feels optimistic about Brexit - here's why

Take back control is more than just a slogan. 

Most politics geeks have found themselves deliciously sucked into a soap opera over the last few days. It’s fast-paced, personality-based and ripe for speculation. But underneath it all, the deeper, harder questions remain – what does Brexit look like, and how can we make it work?

When news of Leave’s victory broke in the early hours of Friday morning (is it possible that was just a week ago?) I felt like the only Remain voter who had some kind of optimism. Fellow Remainers still reeling from the result berate me for it, but I continue to find two reasons for hope.

First, leaving gives us a chance to build a different type of economy. I don’t wish to belittle the recent economic fallout, but with the right leadership and negotiations, we could use this moment to push for an increase in trade with the Commonwealth and beyond. A fall in the pound will disappoint many, but it could help with a much needed rebalancing of our economy, moving from one predominantly based on financial services in London to manufacturing across the regions. 

Second – and perhaps more importantly – leaving is a chance to rebuild our politics. For too long, millions of people in this country have felt ignored or exploited by those who call themselves democratic leaders. In protest, they have left mainstream parties to join UKIP or the hordes of non-voters. In winning this referendum, they have finally been listened to. Perhaps the pressure cooker of discontent can finally be taken off the boil. Perhaps parties can use this result as a chance to rebuild trust and shake up some of our other institutions that are badly in need of reform. 

This point was really brought home to me by a student in the school where I teach. The morning of the referendum she told me that she didn’t think we’d leave the EU, even if the people voted for it. Her friends agreed, saying it was “weird you have to vote in pencil”. They were scared the people’s voice could so easily be rubbed out. When I saw her the next day, a small part of me was relieved that these students had seen that people can genuinely trump the establishment. 

If you’re not convinced, just imagine the backlash if Remain had won by a point or two. We almost certainly would then have voted in an extremely right-wing government, much the same way that the SNP saw a boost after they lost the independence referendum last year. 

Of course, a positive path for Brexit is far from guaranteed. Any leader that goes back on the vote, or tries to fudge it by saying that open borders are a price worth paying, is going to do worse than plummet in the polls - they are going to undermine our entire democracy. And a whole generation’s trust in politicians is already dangerously low.

But this doesn’t have to be a moment for the right. Good leaders understand that Leave’s “take back control” message was about a genuine concern with our borders. Great leaders will acknowledge that it also reflected a deeper concern about the need for agency. They understand the vote was a rejection of a neoliberal approach to the economy that fails to make space for well-paid work, family and community.

The public voted for decreased pressure on public services and a Britain that would negotiate as hard in India as it would in Germany for trade deals. They voted to end a perceived overcentralisation of power by elites, and create a more democratic Britain that gives more dignity to its people. I might not have believed that leaving the EU was the best way to achieve these things, but I’m on the left because I believe we are best placed to make these desires real.  

The vote to Leave or Remain was a binary decision. But Brexit is not. What type of path we take now depends entirely on the direction we choose, and the perseverance we show along the way.

Rowenna Davis is Labour PPC for Southampton Itchen and a councillor for Peckham