Investment update 15 January 2018

Last week in the markets

Over the past week Australian shares were down 0.9% while small company shares were down 1.7%. Shares in developed countries rose 1.3% with the US market up 1.6%. Shares in emerging markets were up 0.6%. The Australian dollar increased 0.7% to 79.17 US cents. The Australian 10 year bond yield increased to 2.75% along with the US 10 year bond yield, which rose to 2.55%. The oil price was up 4.7% to 64.30 US dollars per barrel.

Rita Hayworth and Mine

The New Year is in full swing. Share markets have begun 2018 well and Christmas seems a long way behind us. The chocolates are finished, the better wine is hidden away, the gift cards are jammed into wallets and those dubious ties are buried in the sock drawer - but not the better books. If you were lucky enough to receive a good book, then your present might still be revealing itself. Even if you have seen the movie already!

Stephen King has written many stories. One short story, Rita Hayworth and the Shawshank Redemption, was the basis for a very popular movie, The Shawshank Redemption. The film centres around Andy Dufresne, a man wrongly convicted of murdering his wife and her lover, and serving two life sentences.

As a free man Andy was a banker with an interest in geology. Andy suffers many hardships in the Shawshank Prison walls, but his life becomes considerably easier when he assists the Warden with his prison labour scams.

The movie depicts Andy helping the warden by filtering money into a bank account set up using a false identity. Using his geology knowledge he tunnels out of his cell to leave Shawshank Prison. On the run, he adopts the false identity and acquires the Warden's $370,000 to begin his semi-retirement in Mexico. 

The book tells a slightly different tale, especially when it comes to how Andy builds his retirement balance. Before his wrongful conviction Andy Dufresne transfers his assets to a false identity and a trusted friend manages his small nest egg. When Andy eventually escapes prison, nineteen years later, he finds his well managed investments have grown considerably.

The study of geology involves understanding the impact of time and pressure. Good investing also involves a consideration of time, and of course, diversification. A lesson on long term investing from the innocent Andy Dufresne; former banker, amateur geologist and patient investor (and a nod to his trusted friend).

Happy New Year from your Investment team at Mine.

Signing off

Sean Anthonisz | Senior Quantitative Analyst (Asset Allocation)

Past performance isn't necessarily an indicator of future performance.

Data sourced from Bloomberg.