Presentation on theme: "11 Crisis means opportunities Mindaugas Valuckas Member of the Board Hanner AB Riga, 04/20/2012."— Presentation transcript:
11 Crisis means opportunities Mindaugas Valuckas Member of the Board Hanner AB Riga, 04/20/2012
22 It is very risky to follow experts’ forecasts
33 Economists in most cases tend to provide inaccurate prognoses Research shows that prognoses follow facts not vice versa as it should be
44 The same inaccuracy is seen in analysts’ prognoses of company earnings…
55 … and the same problem is with bond yields prognoses
66 Not surprisingly the forecasts of stock prices follow the actual prices
77 Factors of fear and greed in investing
88 After very successful period of 1990-2000 USA stock market survived two big downfalls of prices Low prices means good time to buy, but… In 1999-2000 (just before market crash) cash flow to stock market was 422 billion USD. While in 2001-2002 (at the bottom) cash flow was 107 billion USD In 2006-2007 (just before market crash) cash flow to stock market was 464 billion USD. While in 2009 (at the bottom) cash flow was negative -40 billion USD
99 During 1989-2009 period due to inconsistent investing (fear and greed) an average statistical investor earned only 3.2% annual return in the USA ; That is 2.5 times less than the market average How much does an average statistical investor earn? Or how much do they lose due to fear and greed?
10 What do the great investors do?
11 Warren Buffett is called the greatest investor of all times; Over the last 20 years he has managed to generate the return twice higher than the market averages (remember that an average statistical investor generated the return 2.5 times lower than the market averages); Two main strategies used by Warren Buffett: Buy and hold for a long period of time – he virtually does not sell his investments at all; He spends most of his money for investments when others don’t (at the bottoms of cycles) – he says “I am hungry when the others fear and I fear when the others are hungry”;
12 What about real estate in Latvia?
13 Apartment prices are at the level of 2004-2005 and near the absolute bottom over the last 8 years; Fear does it’s work – the number of transactions is lowest over the last 10 years Apartments numberPrice EUR/sqm Transaction number of apartments in RigaAverage price EUR/sqm