30/05/2006 - 22:00

Pick your strategy but make it quick

30/05/2006 - 22:00

Bookmark

Save articles for future reference.

The investment world is loaded with theories about how to get rich. This week, Briefcase will explore three. Quick, slow and easy – in that order.

Naturally, should you ever be asked by an investigating officer from the Australian Securities and Investments Commission, Briefcase doesn’t expect you will remember having read this column.

‘Quick’ is the preferred route for most investors, preferably by next Thursday. Sadly, there isn’t a suggestion that will achieve your goal inside a week. But, here’s one that might (or might not) work over a period of three months.

It hasn’t got a name, but to aid with your note taking let’s call it ‘Diggers Roulette’. As the name implies, it involves closely following the annual Kalgoorlie gabfest known as Diggers & Dealers when 30, or so, mining and exploration hopefuls spruik their wares before about 1,100 delegates in the Goldfields Arts Centre, the nearby tent, and in bars and coffee shops along Hannan Street.

The event itself is a bit of fun; the talks can be interesting (sometimes) and the quality of gossip of the highest order. However, much more fun than indulging in idle chatter is watching how the companies perform before, during and after their presentations.

Briefcase, which has been sentenced by assorted editors to serve the full three days at Diggers on more occasions than it cares to remember, has been running a sort of private book on the speakers at Diggers for a number of years.

In part it’s a game. In part it might be an investment strategy. But, if it is a strategy it falls into the ultra-high risk category, and has certain similarities with attending a three-day horse-race meeting that starts by studying the form guide, and then splattering cash across the runners that catch your fancy.

To better explain, consider what happened with last year’s field (sorry, speakers’ list). In the weeks leading up to Diggers ’05 a list of 33 possible ‘investment’ candidates became available. It comprised locally listed stocks, minus the internationals, such as Canada’s Barrick Gold and Placer Dome.

First speaker on day one was LionOre Mining. Using a yardstick of June 1, about the same time this year that you’re reading this column, LionOre was trading at $6.63. By the time LionOre’s chief operating officer, Glenn Jardine, got up to speak on the morning of August 8 the stock was $7.15.

It is drawing a somewhat long bow, but it is possible that, in the pre-event excitement, a few punters put a bit on LionOre in expectation that something new would be announced at Diggers. It wasn’t, but there is always an expectation that something will come out of the hothouse environment created when you cram 1,100 delegates and 33 corporate spruikers into the same isolated country town.

To test the theory of Diggers Roulette, Briefcase conducted a post-event analysis – a bit like swabbing a horse after the event. Admittedly, last year was a time when the bull market was running hard, but there is no denying that of the 33 companies to present in 2005, no less than 27 rose in price between June 1 and August 8, five fell and one was steady.

Anyone who simply backed the field was a winner, and those who chose stocks like Jubilee Mines ($5.89 on June 1 to $8.38 on August 8) did very well indeed – as did the supporters of Oxiana (86 cents to $1.08), Western Areas ($1.33 to $1.80) and Avoca Resources (30 cents to 43 cents).

To play Diggers Roulette this year Briefcase suggests you get a list of speakers off the event’s website at www.diggersndealers.com.au and start compiling you own get rich quick list, or just back the field.

Among the rules of the game, which may result in a bonanza or a complete wipe-out, it is important to remember that it is best to sell on the day before a company is scheduled to make its presentation (known as the better-to-travel-than-arrive rule), and to also recognise that no-one is actually allowed to say anything at Diggers that isn’t first reported on the company’s website – some ASIC nonsense about keeping the market informed.

Good luck.

•••

Needing no luck whatsoever in the ‘get rich slowly’ category are the seven ‘guardians’ in charge of the federal government’s new $18 billion Future Fund, which is supposed to close the embarrassing gap between what the government has to provide for future superannuation obligations, and the cash it now has.

By some estimates the gap could be as much as $120 billion by 2020, hence the need to start a special ‘savings’ fund now.

But imagine the sheer joy of getting this job. Your duty is to run a monster investment fund with the job of achieving a return of between 4.5 per cent and 5.5 per cent a year.

As Homer Simpson might say: “Doh, even I can do that”. And guess what? Homer is right, because the target is so low as to be laughable. On the day the first details of the fund where announced (May 4) the cash rate – that is simply depositing the money overnight was 5.75 per cent – yippee, a winner already.

Popped into a 180-day bank bill and the return was 5.99 per cent – wow, already 0.49 per cent above the ceiling set by the government. Even putting the full $18 billion in 10-year Commonwealth Bonds earns 5.8 per cent.

When Briefcase needs a new job it knows exactly where to apply, a guardianship on the Future Fund where life is easy, and the key performance indicators are so low that even Blind Freddie’s dog could come out a winner.

•••

‘Making it easy’ is the final category, and for that it is impossible to go past being born into it. Difficult to arrange after the event, but with careful planning it might be possible, and is strongly recommended.

For your next life you should choose someone like Lang Hancock for a father, because over time you might become the next Gina Rinehart, looking down the barrel of a $10 billion fortune.

•••

“The meaning of life is that it stops.” Franz Kafka

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

Subscription Options