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Rational decisions #investments

Investment decisions must be rational

Shouldn’t we base our investment decisions on rational analysis instead of prejudice? If you drill a lot of holes in the process of making a living and need to buy a new electric drill. How do you decide which make of drill to buy? Do you look at the specifications and reliability or do you buy an American drill because the Germans bombed the chip shop 75 years ago and some Jap shot Great uncle Albert? Do we base our decisions on hate or logic?

Britain is going to decide in June whether to remain as part of the European Union or leave. The gutter press has coined the term Brexit for leaving. It sounds cool, we pull up the drawbridge and say sod Europe. The arguments for both sides of the argument are being put with Churchillian style rhetoric. I’m surprised someone hasn’t used the phrase ‘we’ll fight ’em on the beaches’. Historians might reflect on the fact that given the choice between bombing German synthetic oil   plants in WW2 and bombing innocent people in Berlin, that great British leader was guided by hate not logic. He decided with his jolly good mate Bomber Harris to bomb Berlin. Decisions based on hate and prejudice are not rational. If politicians were rational they would cut off the supplies of arms to terrorists instead of trying to bomb them when they hide behind human shields.

Making things

Some people will tell you that we don’t make things anymore in Britain, we are a nation of shoppers in debt up to the eyeballs. Others will warn that if we lose all those exports to Europe if we leave the common market. What are we exporting if we don’t make stuff anymore? We do still manufacture but in competition with other countries around the world. The truth is we spend only a small proportion of our money on manufactured goods. Most of our spending goes on housing, energy, telecommunications and taxation. That is mostly British stuff that we need. We have a choice about buying German cars, French wines and Chinese computers.

Rational

When we invest, we need to make rational decisions and leave racism aside and similarly, we need to make a rational decision before voting in the forthcoming referendum. It can be difficult to make that rational decision when we have some loyalty to the country we belong to. We all feel a little sadness when British companies are taken over by foreign firms. We ask if Tata has any loyalty to British workers in the steel industry. Probably not, but it was our failure that led them to buy it in the first place and we welcomed the investment. If we look at investment rationally, we, the British people don’t invest enough in out own industry and commerce. The investment industry is based on prejudice against the ‘lower classes’ and only seeks investment from the wealthy and pension funds. The private investor is a rare breed.

In or out?

Whether the referendum decision means in or out of the EU, Britain, in the long run, will survive. Our cities won’t collapse, members of parliament won’t have to start buying their own lunches and most things will stay the same. In the short term, the uncertainty could mean overseas investors withdraw investment sending the UK economy into recession. It could even mean more quantitative easing. We won’t all be better off in the short term. The uncertainty has already begun. Investors are being more cautious and waiting to see what happens. If share prices drop we will consider buying up cheap assets, but so will foreign investors. British companies could become targets and be gobbled up by global players and never be British again. That is one for the nationalists to think about…

Progress?

I’m watching and waiting. I have noticed that Graphene Nanochem, the Malaysian graphene company, has reorganised its debt and looks a better investment. Their share price has improved over the past couple of weeks and so there is cause for some optimism. Premier Foods is up and down depending on daily sentiment. Europe is a good market for them and so they could benefit from an ‘in’ vote. I am very positive about Solo Oil which could soar when they start selling gas in Tanzania and in the long term benefit from increased oil prices. It is a high-risk stock but a rational investment as part of a diverse portfolio. An exit from Europe could badly affect Tesco and stall their recovery too. I’m going to be very cautious until this referendum silliness is over.

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