Why our govt should worry more about local investors...

"Finally, consider capital, which is presumed to respect no boundaries. Foreign direct investment makes up only 9 percent of all fixed investment globally. Roughly 15 percent to 20 percent of venture capital is deployed outside the investing fund’s home country, and equity investors have only 20 percent of their stock holdings abroad."

Read full article here.

Shining brightest in Colombia

Interesting story in unintended effects.

"Colombia, the world’s largest cocaine producer, said illegal gold mining is becoming the “next major threat” to security as government efforts to crack down on drug crops prompt rebels to seek new revenue sources."

Read full story here.

A time to buy. A time to sell?

A year ago, a mining major asked my firm look around for M&A opportunities. They felt that the proven resources of some of the targets we identified were too little for them and the share prices of others were too high. They were willing to wait for share prices to decline. With the recent steep decline in share prices generally and being cash rich, I imagine that they are getting ready to go on an acquisition spree.

Mining executives are anticipating a pick-up in deal-making with the sharp 40 per cent drop in sector share prices over the last 10 months flushing out corporate predators.

Qatar Holding, an arm of the gulf state’s sovereign wealth fund, is planning to create a standalone investment vehicle to buy stakes in, or take over, gold companies.

A good product

I just read here that Praye Tenten has left Praye, my favourite hiplife group. Leads me to reflect on the amazing dominance of hiplife on the local music scene. It wasn't that long ago that local music was frowned on in certain circles in Ghana. These days, our leading lights such as Sarkodie are genuine stars, putting out music that everyone enjoys and relates to. Very nice!

I'll be most disappointed if Sarkodie's "U Go Kill Me" doesn't win Song of the Year at the next Ghana Music Awards, if only for the Azonto dance that it's made popular.

Something to think about...

Surely users of Facebook, Twitter, etc receive some value in return else we would not so easily give up our content?

William D. Cohan wonders what we receive in return. See here.

"One of the dirty little secrets of the current social-networking mania is that users of services such as Facebook, Twitter and Tumblr give away their content while the shareholders of the companies are busy getting obscenely rich."

Our attitude to mining

I had the honour to give a presentation on capital raising for junior mining firms at a Mining Summit in Accra last week. Mining contributes about 24% of tax revenues in Ghana and 6% of GDP. I gave an overview of early stage mining ventures, what the typical sources of capital are and the best financing strategies at each stage in the life cycle. I concluded by comparing the GSE, TSX, AIM and the ASX.

The Business Development Director of the Nigerian Stock Exchange and her team were at the conference, aggressively looking for listing transactions. The Ghana Stock Exchange could not be bothered to attend. Even the Deputy Minister disappeared soon after he gave his address and would not wait to listen to industry feedback.

No wonder we don't understand the industry.

Beautiful writing...

I read Jeffery Archer's To Cut a Long Story Short (ISBN 0-00-226149-9) years ago. It starts with a fine example of storytelling, a concise story titled "Death Speaks", an excerpt from W. Somerset Maugham's Sheppey. For some reason I've looked it up and read it again this morning. The irony strikes you like a punch! Reproduced below:


"There was a merchant in Bagdad who sent his servant to market to buy provisions. In a little while the servant came back, white and trembling, and said, "Master, just now when I was in the market-place I was jostled by a woman in the crowd and when I turned I saw it was Death that jostled me. She looked at me and made a threatening gesture. Now, lend me your horse, and I will ride away from this city and avoid my fate. I will go to Samarra and there death will not find me. "The merchant lent him his horse, and the servant mounted it; he dug his spurs in its flanks and as fast as the horse could gallop he went. Then the merchant went down to the market-place and he saw me standing in the crowd and he came to me and said, "why did you make a threatening gesture to my servant when you saw him this morning?" "That was not a threatening gesture," I said, "it was only a start of surprise. I was astonished to see him in Baghdad for I had an appointment with him tonight in Samarra.""

Dan Carter

The biggest star in the Rugby World Cup, Dan Carter of New Zealand, is out of the tournament with a groin injury. It hasn't been a great year for all the sportsmen/team that I follow. And to think that this is probably the All Black's best chance to win!

Left digit bias

Ever wonder why your supermarket will price at product at 1.99 instead of 2.00? It's based on the observation that we often place the greatest weight on the first number from the left and focus much less on numbers to the right. This has a serious real world impact, especially in financial transactions (purchases). See here for some research on this interesting phenomenon.

Blood on the financial streets!

Global financial markets have gone crazy! Every investor will say this is the best buying opportunity but it takes real steely nerves to invest liquid funds at this time. If you have the funds and can commit to a 2 to 3-year holding period, there are real nuggets out there. If you know a company that has a great product, plays in a growth market, it has a proven management team and Board, I'd say buy!

Many have jumped on the commodities bandwagon. There are good stories there, no doubt. But look beyond commodities; consider small caps; and if you have a very healthy heart, a lot of patience and strong nerves, consider the banks.

Excellence

Among those that profess a trade

Many are barely good enough to grade

Just as many practice an ordinary claim

All reputed to the crowd by the brilliant trifle

Forge application and skill in tedium,

To win your place on the reputed podium.

Borrowed glory only lasts so long,

An unworthy mare never ran a furlong;

Genuine talent will endure.

Stroked dispassionately by Time,

Failure sharpens to a keen edge.

Success is monumental; why do you fudge?

Yet another from my collection. My amateur attempts at poetry is a relaxing way to pass my spare time.

When times are good...

...that's when you think ahead.

The World Bank estimates that Ghana's economy will grow by 20% on the back of crude oil, gold and cocoa (See here). What are we going to do with it? It would be good if we spent our new riches on platform services such as infrastructure, health and education which will yield sustainable returns in the long term. However, with our penchant for waste and an election around the corner, I have my doubts.

Here's to hoping against hope!

The Greatest Ponzi Scheme Ever

The beauty of social insurance is that it is actuarially unsound. Everyone who reaches retirement age is given benefit privileges that far exceed anything he has paid in - exceed his payments by more than ten times (or five times counting employer payments)!

How is it possible? It stems from the fact that the national product is growing at a compound interest rate and can be expected to do so for as far ahead as the eye cannot see. Always there are more youths than old folks in a growing population.

More important, with real income going up at 3% per year, the taxable base on which benefits rest is always much greater than the taxes paid historically by the generation now retired.

Social Security is squarely based on what has been called the eighth wonder of the world - compound interest. A growing nation is the greatest Ponzi game ever contrived.

Paul Samuelson

I would say that this is relevant to all aspects of economic growth. Inherently, assumptions of long-term economic growth will assume a growing population AND increasing productivity. What if one or both of these factors don't actualise? Then, like the USA, the economy will be in deep-seated trouble.

Just like any individual is supposed to manage his affairs, those who control national economies should be conservative in their long-term projections, set as much as possible aside for a rainy while they work smart and hard in the present.