In 1961, an enlightened chap by the name of Stanley Milgram undertook a series of psychological experiments which were designed to test the human propensity for obedience, in light of catastrophic global events that had been experienced in the preceding decades.
In simple English the results showed that rather than question what they are told, around two people in every three would administer a lethal 450 volt electric shock to a random patient just because a bloke in a white coat tells them to.
Naturally, the implications of this when considered in the light of modern history are extremely disturbing.
The evil of war crimes is far too heavy a topic for an Easter weekend, but what the results of the Milgram experiments showed beyond any reasonable doubt is that humans are too obedient to authority and trust what we are told far too readily. It's a worrying trait.
We need as investors to be able to think and interpret information for ourselves, to question conventional wisdom, and certainly not take at face value everything we read or hear.
Grateful or grumbling
If there's one thing I've noticed over the years in investing, it's that where two polar opposite personality types are presented with the same environment, situations and choices, one will be optimistic and will see opportunities and abundance, while another will see unfairness, risk, worry and limitless causes for carping and complaint.
Easter, of course, is a time that we should show gratitude for our good fortune, not only for our sheer luck in being born in an age of peace, health, life expectancy, wealth, tolerance, employment, education and abundance...but also for being so darned lucky as to live the country which ranks as number one in the OECD for social and economic indicators.
Well, you'd never know it...not in 'straya!
Greg Jericho looked at exactly this subject in today's Guardian piece: in Australia we sailed through the global financial crisis better than pretty much any other country to become the world's wealthiest people, but you'd never believe this from what you read in the daily press.
There is a reason why books and courses on investment, personal finance and wealth creation stress the importance of mind-set so heavily - that's because the person who only ever chooses to see problems, concerns and risk, will never succeed in investment. You need to be able to see the opportunities which life always and everwhere presents.
If you want to convince yourself that the world is ending and indulge in groupthink you will surely be able to find friends and a forum to confirm your preconceived bias.
We were supposedly due to have 10-20% unemployment by now, but it never happened.
In fact, if you believe everything you read, Australia is destined to be mired in some kind of awful gloomy recession.
That's not what I see when I look at the employment data (click chart):
A cursory glance at this chart tells me two things:
(i) there must be some great opportunities to invest in wonderful companies in an economy which has doubled its workforce and is continuing to grow.
In a capitalist economy such as Australia, you don't even have to go into business to profit from the constantly growing wealth of our country, you can simply choose to own a share of the greatest companies we have; and
(ii) with the number of employed people growing apace, there must be some terrific opportunities to invest in certain property markets too.
Of course, some areas have higher rates of unemployment such as South Australia and Tasmania. This will always be the case in any economy, and I'd tend to steer clear of struggling sectors of the economy.
But if an alien landed in Sydney today, I reckon you'd have a darned hard job convincing them of our allegedly gloomy future.
The New South Wales economy is cruising along, we're heading into an unprecedented infrastructure and construction boom, the population is growing at around 80,000 persons per annum, the unemployment rate has fallen to just 5.3% and in recent years the state has been adding jobs for fun.
We've added 66,000 more jobs in the past 6 months too.
It's a truism that while a company such as Coles creating 16,000 new jobs rates only a passing mention, a mining company like Santos announcing that it will shed 100 positions will be an automatic headline generator. If it bleeds, it leads!
Whatever, people will always forewarn of a pending depression and suggest hoarding cash, issuing dodgy advice about selling your home or short-selling mining companies, but the economy is throwing up some outstanding investment opportunities if you care to look for them.
Naturally, individual circumstances always differ, so the Australian Bureau of Statistics aims to capture trends by state and nationally, by gender, and by public and private sector, and by industry.
In my professional career I worked in the accountancy profession and then in the mining industry, and thus am aware, for example, that the latter has fared better than the former over the past decade.
Indeed, it was this very trend which facilitated my shift in employment from the one industry sector to the other.
However, pushing the line that wages are falling is drawing a long bow, for over the past two decades earnings have been growing remarkably consistently at around a very healthy ~4.5% per annum clip (click chart):
3 - Share markets are risky
- Sydney median established house price: $189,000 (Source: Residex)
- Average male annual earnings: $28,912 (Source: Australian Bureau of Statistics)
- House price to income ratio: 6.5
- Interest rate: 17.00%
- Affordable loan $39,000
As the great Winston Churchill said: "A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty."