The Best of Money Talk 2012

Published in Investing on 27 December 2012

David Kuo looks back at 2012 with some of the many great guests who have joined him on Money Talk this year.

David Kuo looks back at 2012 with some of the many great guests who have joined him on Money Talk this year. He revisits the American and European debt crisis, looks at investing opportunities in the east, delves into the secrets of dividend investing and finds out whether anyone can learn to invest. Among the guests included in this show are Justin Urquhart Stewart, Motley Fool founders Tom and David Gardner, Hugh Young and Rodney Hobson.

You can listen to or download the full podcast here.

David:

This is Money Talk, the weekly investing podcast from The Motley Fool. I am David Kuo, and today I am going to wind the clock back, and take a look at some of the best bits of Money Talk 2012. In January, I asked Justin Urquhart-Stewart from Seven Investment whether the US would be able to tackle its debt problems.

Justin:

America hasn't started yet. It's astonishing. Are we in complete denial? The trouble is, I feel very sorry for Obama. There he is; he can't get anything effectively through Congress, because he's up against the pig-in-lipstick lady with the rifle from Alaska.

David:

She's out of the scene now, isn't she?

Justin:

Yeah, but all her chums in the Tea Party, they're all still there. So the Republicans obviously are blaming the Democrats for everything, and the Chinese, and the Democrats just blame the Chinese. I was actually writing something the other week, which probably didn't get on terribly well, actually accusing the Americans of being vaguely racist. I realised that was rude, so I went back and crossed off the word "vaguely". It is quite astonishing, and the trouble is, when you've got these members of the House of Representatives who've only got a two-year lifespan, therefore a one-year attention span, they are behaving like bovine beasts, and not realising that their country's got a huge problem. So who's actually going to address it, and when? The answer is presumably, after the election, and we know what they've got to do, which is save more, earn more, and spend less. But that's somewhat anti-American, given what's happened over the past few years. So they've got a huge issue.

David:

I then asked him whether the euro has a future.

Justin:

Well, the thing about the euro, and I find it quite funny when you get some of these lovely Tory MPs, you can see them virtually just about to burst a blood vessel every time you mention the euro, and of course they say, "The euro's wrong!" There's nothing wrong with the euro. What's wrong is how the euro's run, because you can't run a currency with 17 finance ministers. It's just ridiculous. We have a single currency in Britain. Money is saved into a bank in Benbecula (if there is a bank in Benbecula any more), and it would get lent out in those halcyon days when banks used to lend out to a computer company outside Reading, and we then have to pump money back up to Benbecula again, otherwise all the money comes from the outer areas, and it all ends up in Reading. Also, we have to have a harmonised tax system, which is what we have in Britain. We have local taxes, but basically we all pay the same income tax. You have harmonised banking regulations all roughly the same, and we have to make sure that areas don't borrow too much. It'll be interesting to see what happens actually in Scotland, but that's another issue.

But across the eurozone, most of this was in the Treaty of Maastricht, but every single country decided to break the rules, including Germany, apart from Luxembourg, and who gives a rat's about Luxembourg? But also, when you look at the history of what's happened with the euro, from the days of the ERM, when you had the West Germans – remember they were West Germans, a very different attitude, because they were still spending their time apologising to the French, "I'm sorry, three times – we'll try not to do it again" – it's just habit. Now, of course, it's different. Now you've got Mrs Merkel. She's a Pomeranian (not a dog), but that's where she comes from. She has a different view on life. We've benefited hugely from the euro, in terms of all the Mercedes. Did you see that lovely figure – what's the greatest focus or concentration of Porsches in the whole of the eurozone? – it's in Greece, because obviously they can afford it. So what you've got is, the Germans have benefited from it, but have quite rightly turned round and sit there saying, well hang on – why should I be subsidising a Greek system where you retire at 50 or 55 or 60 or whatever happens; no, no, no – we're going to play by the same rules.

David:

So maybe we need to look east. So I asked Hugh Young, managing director of Aberdeen Asset Asia, how difficult it would be to invest in eastern companies.

Hugh:

I think investing in companies is the same wherever you go, so the fundamentals behind it are exactly the same whether you're investing out of London, or here into Asia, so you've got to look for decent businesses run by honourable people with clear and transparent accounting, so those basic issues are universals, I would argue. Does Asia have different characteristics? – yes, it does. So certainly, when you look underneath the bonnet a bit, you find companies that are typically, there'll be more companies run by families, so more family ownership. The ownership of companies has not become as diversified as, say, for example, ownership of companies in the UK, or the US, so that is an extra wrinkle. Government intervention also can be very heavy in parts of Asia, so most of China is owned by the government, which is again very different from your Nestlés, your Procter & Gambles, your IBMs.

David:

So what are some investors doing? – I asked James Bartholomew, a columnist at the Telegraph, and a long-term Asian bull, whether he liked Asian stocks because they had a good story to tell? Or was it because they were just simply not European?

James:

It's both. It's long term in the sense that I've always looked to the Far East more, because I've lived in Hong Kong in 1980 and 1981, and I also then lived in Japan, and I travelled round the region a lot at the time, and became a fan of the growth and development that was taking place there. But the percentage that I've had there has varied quite substantially, and has been virtually nil at some stages in terms of direct investment, but I've now increased it from 5% to 25% in the last five or six months, because I just want to get well away from Europe. Even when you're in ... I mean, the frustrating thing is, that even if you're investing in a Hong Kong company investing in Chinese property development, somebody in some Greek negotiations go badly, and those shares will still go down. It is astonishing how the reaction takes place. I've been trying to think, where can I go that's so far away, so unconnected, so uncorrelated with the Europe situation, that it's relatively immune if Europe explodes. So I resorted to a finance company in Australia, which only does Australian businesses, as far as I can see, and also Vietnam, I've been investing in recently, which seems to be less correlated than places like Hong Kong, for example, which is very much, it's part of the global village.

David:

So is James right to lose confidence in the west? Here is Justin Urquhart-Stewart again.

Justin:

Again, they're back to this issue of confidence, but what as investors have to remember as well, is a lot of these companies, of course, are actually throwing off very nice dividends.

David:

They are.

This is the one of the bits, it always infuriates me. You and I end up sometimes doing these radio interviews, and you get the interviewer who may not know a great deal about money, because they haven't got any, saying, oh Justin – the FTSE 100 dropped today, wiped off £62 billion off the stock market – what do you make of that? To which the logical answer is, well that leaves us with about £1,340 billion left – what's your point? So it's not the market going up and down that's the issue, because, of course, our market at the moment is what – where we are at 1999 effectively; it's the compounding of those dividends, those old figures which – do you remember those old Barclays Capital equity return figures over 65 years? A hundred pounds, and the market would actually now be, what, £8,000? If you'd had the dividends compounded, £136,000. It's dull, and I know it's 65 years, but in terms of financial family planning, actually realising ...

David:

Family planning? – are we moving into that area, now?

Justin:

Well, it gets a bit personal, this, you know, but depending on how good your financial family planning is, your money goes further, but that's what you need to think about.

David:

So dividends are the key to successful investing, but what is a good yield? According to Rodney Hobson, author of Shares Made Simple, we should look for companies with rising dividends. Here's why he thinks so.

Rodney:

Because of inflation. See, your one problem with putting your money into a bank account, even allowing for the fact that these are exceptional times and you're getting an absolute pittance on the interest rate, but say you got 3 or 4% interest rate on your savings account, which we would all like to have. That's fine, but with inflation, that 3% is worth less and less. Now, the great thing about investing in good solid companies that grow the dividend is that, as the dividend shrinks with inflation, adding more onto the dividend then gives you the same kind of return that you're getting, your money will go further. So the rising dividend's important, because it offsets inflation.

David:

But how can companies afford to pay rising dividends, if we are to believe everything we hear in the news, that western businesses are off to hell in a handcart. What did Justin Urquhart-Stewart think?

Justin:

And I do find it fascinating, because I have spent quite a lot of time going round the country and giving talks at business parks, science parks and things like that. I can't remember the last time I came across a business saying, aye – I'm doomed! They don't say, we're booming; they say, we're surviving. We're okay, we've skinnied down, we've changed, we've adjusted, because that's what smaller companies have to do. We're nowhere near the banks, we're absolutely clear of any of their facilities, but I've come across not only that, but there's some great successes. I've come across manufacturing coming back to Britain, and that's another issue – "Britain doesn't manufacture things anymore." Oh no? – we're the seventh-rated largest manufacturer in the world! We make quite a lot of stuff. "Well, as a percentage of our economy, it's been reducing" – no, it's been increasing. What's the other one? "Half of Germany's economy is based on manufacturing" – no, it's not. "Well, the percentage of the German economy based on manufacturing is increasing" – no, it's been decreasing. "Well, of course, there was a time when we had more manufacturing than Germany" – oh, when was that? – "1860". Germany didn't exist in 1860. You have to sort of knock these things over, and say actually, Britain's doing quite well. We've got a lot of things which are damaged, but the great thing about damage is, you can repair damage. We're not doomed.

David:

But – many people are afraid to invest. Are they justified to be fearful? I asked Tom Gardner, CEO of Fool.com.

Tom:

Well, it's natural. It's a natural tendency to be afraid at times like this, when there's so much uncertainty in Europe, but obviously in each decade there's some different great concern that shows up on the stage for investors. It's only natural to shy away. The interesting thing is that the stock market is an auction market, so in fact when other people are nervous about buying, that's when you want to step in and look very carefully at the merchandise, and listen closely to the auctioneer, and start seriously considering making actually larger investments during that period of time. So it's very contrary to think that way, but the greatest investors certainly of our lifetime, certainly of American history, maybe right up alongside Ben Franklin, Warren Buffett has said, "Be fearful when others are greedy, and greedy when others are fearful." Buffett said that the single greatest thing he did as an investor in his lifetime was to learn how to manage his temperament, and to go contrary to the essence of the day. So when there is uncertainty, you actually should be excited. When there is no uncertainty, when it feels like free money is being made, whether that's in flipping houses, as happened across the US a couple of years ago, or it's in buying internet stocks, you can't miss internet stocks in the late 1990s – that's the time when you want to be actually either be pulling your money off the table, or we are more just more inclined to continue holding, but not get so enthusiastic that you're piling money in at those times. So uncertainty should actually be your friend as an investor, which can be obviously difficult to embrace, when you're starting as an investor.

David:

So how do we go about finding good shares to buy? I asked David Gardner, co-founder of The Motley Fool.

David:

Well, I think, David, that it's important for each of us as investors looking for shares to understand our own timeframe, and I think the way that I've succeeded finding shares that have been rewarding for me, and for my services and our Motley Fool investors here in the US in particular, is by making sure that my own timeframe is a little bit longer than Wall Street, that of the professional world, the City's timeframe, because I do find that, if you're trying to play the City game, you're probably going to lose if you're not in the City. For most of us at The Motley Fool here in the US, we're not in the City at all. We're trying to make the best decisions we can, with the savings that we've racked up over the course of our lives, whether we're 24 years' old, or 64 years' old, and we want to invest that money well.

So the good news for all of us as investors, and I don't care if we're talking about the City or Wall Street, which side of the pond, the good news is that individual investors like us, by looking for shares that will do well over a three- or five-year period, all of a sudden you find that you are fishing at a different pond than the rest of the professional investment community, and in fact it's a stock pond, in my opinion, and very few other fishermen have their poles in that particular pond. So I will continue to advocate, on both sides of the pond, that we do fish in this stock pond (I think I'm mixing metaphors – I apologise for that; you shouldn't do that, it can blow up a podcast). But I think that it's very important for us to take advantage of our timeframe, and if you're looking beyond a minute or a day or a week, you are in fact advantaging yourself. So I find it easier to look for shares when I'm thinking three year intervals.

David:

So do these great companies really exist? I asked Guy Thomas, author of Free Capital.

Guy:

I have this bit of rather weird metaphor, but accurate metaphor, so I'm going to – if you'll indulge me for a moment?

David:

I will indulge you, yes.

Guy:

I'm going to inflict this on your listeners. I think of this distinction as the distinction between diamonds and flower bulbs. Diamonds are truly exceptional companies which you can hold for years and years and years. Diamonds are great, but diamonds are rare. They are hard to recognise, and if you're not very skilled, it is easy to be fooled by fakes.

David:

Or pick up a piece of glass instead?

Guy:

Pick up a piece of glass instead, yeah. Now, flower bulbs are much more common than diamonds. Anyone can recognise a flower bulb. You can take it, you know that if you plant it it's going to grow, the share price is going to go up, and after a while it will wilt, the price will perhaps drift down. So if you buy flower bulbs, you only want to hold them for six to 12 months, a couple of years, whatever, and then when they flower, you want to sell them. Flower bulbs are easy to recognise, they're more common than diamonds, so if you buy them you'll probably end up holding a portfolio of 50 or 60 stocks.

David:

Wonderful. I mean, there is, of course, the danger that you could mistake a flower bulb for an onion, in which case you would end up with something that wouldn't flower at all?

Guy:

I suppose that's possible, but I think you need to read The Motley Fool and do your homework, so that you can at least recognise a flower bulb. It's easier than recognising a diamond.

David:

Diamonds and flower bulbs. What kind of stock-picking skills do we need to find these diamonds and flower bulbs? Here is Tom Gardner again.

Tom:

Well, I guess my analogy is, and there's so many different cuisines, and so many different ways of cooking each dish. So naturally, if you think at the outset as an investor in your early years, that you're going to need to master the complexity of all these different cuisines, and if you don't, you're going to fail, you're going to feel completely overwhelmed. There are entire culinary schools dedicated just to French cooking, or just to pastry cooking. So I would say, if you can, delight in the fact that there's so much complexity out there, that there are so many varieties, because what it has meant for us over the last nearly 20 years of running The Motley Fool is that it's so endlessly fascinating. It's such a wonderful subject that unfortunately doesn't get taught, even studying an organisation, not even the investment in the organisation, studying organisations at the high school level and university, to really understand, how do these things grow and change, adapt, succeed and fail? So to me, as an investor, I would say, if it's possible, delight in the fact that there are all these different cuisines and there's so many different pathways you can go down, but you need to start somewhere pretty simple and pretty clear. I mean, I do love the Einstein quote: "Make everything as simple as possible, but not simpler." I would say that you should always be embracing the fact that there is a little more complexity to every investment decision you're making, there's a little more you can learn, but you need to get your boat out there in the water, and learn. You need to learn by doing. I think very many people who may have an interest in investing feel like they should sit on the sidelines, and make sure they don't make any mistakes.

But the way to really learn in life is to get out there, set yourself up to be able to make mistakes that won't damage you. Everybody, in my opinion, because everybody in the UK, we have a service office in the Australia, everybody in Australia should be getting started with a few hundred dollars, a few hundred pounds – just get a stock, get a second stock, and begin to learn and draw some conclusions. The beauty of The Motley Fool is that you can just, as they're doing in The Collective, you can ask questions at every point, and you'll be able to learn from people, some of whom will have been doing this for decades; others of whom will be starting just like you. But if it's possible at the outset to look at the complexity of a subject and say, this is going to be fascinating – I'm going to learn so much about the world. Odds are I'm going to make money – if the market on average goes up around 9% a year, that's better than keeping your money in a bank, and unfortunately it appears like it may be safer to keep your money in equities than in the bank, but I think it's a big learning adventure. You're never going to master every cuisine as a chef. You just need to go out and follow your own passion and interests, ask questions and learn as you go. I think what you'll find at The Motley Fool are, there are a lot of people who have learned how to be successful investors, and who can help you up that learning curve faster.

David:

But how do we know what stock-picking style is best for us? Here is David Gardner again.

David:

I think the important thing for the service is that it clearly articulates its respective styles, so that, square one, I can get there and understand the purpose of each of them. I would say that that's always a challenge, period, because there are lots of different styles out there, David, as you know. There are hybrids of hybrids. So it's going to be important for your service, any service, to clearly articulate for new members exactly what it is pursuing. Then your question also asks, should I do something that stretches me a little bit, or that is a different flavour than I was expecting, or should I stick with same old, we might say? I guess my answer is, it largely comes down to degree of engagement and energy that each of us brings to a service from The Motley Fool. A lot of our members just want the facts, and tell me what I should do – I don't have a lot of time, I'm a busy professional. I'm not trying to make a hobby of this. For those people, I would say, go with the one that seems aimed at you, that, as it's articulated, seems to be speaking to you, and just stay there. You don't have to spend a lot of time being effective as an investor, and obviously if we're doing our job at The Motley Fool, then we're making the best use of your time and keeping things convenient.

On the other hand, if you are somebody who really loves the subject of investing, or you, like Tom and I do, love business – we enjoy being entrepreneurs every bit as much as we do being investors – if you can't get enough of this, then I certainly suggest that you spend some extra time looking at that other approach, that doesn't naturally fit with you at the outset, but rather that you can learn a lot from. Tom earlier talked about his progress as an investor. The only way you progress, as an investor, I think, is if you're open to new ideas and new viewpoints.

David:

But can anyone learn to pick shares? I found out when Ben Golland joined The Motley Fool as an intern. Here's what Ben told me about his perceptions of investing, before he came to The Fool.

Ben:

Well, I'd like to go back even further, say to about last year, when I first got in contact with you, when I really didn't know anything, and before I'd started reading about investing, and my perceptions were that it was only something really for professionals and that when I spoke to anybody about it generally, my parents or some of their friends, the idea was that you'd lose all your money, that it was playing on the stock market, and that it wasn't good.

David:

So how good an investor are your parents, then?

Ben:

Well, my parents have never invested in a share.

David:

And yet they were able to tell you that it was like losing money in a casino?

Ben:

Which seems bizarre, now I think about it, because they were giving me advice on actually something that they themselves had never done, but once I started reading about it, I realised it was something that you could grasp, and I realised people do very well, and they're not professional investors.

David:

Are Ben's parents right? Is it down to luck, if you want to be a successful investor? Here is Guy Thomas again. Were the ISA millionaires he wrote about in his book just lucky?

Guy:

Before I answer that question, I think it's just appropriate to acknowledge that there is an element of luck in achieving these sort of results. Everyone in the book has been lucky. They've reached middle-age with better results than they expected, at least in a financial sense. I am aware that there are people, sceptics who will tell you that investment results are all luck. With an academic background, I'm very familiar with that sort of argument. But the way I prefer to think of luck is that there are two types of luck in investing: there's lottery luck and there's Pasteur luck. Lottery luck is the wholly random sort of luck, where you buy a lottery ticket and you win, nothing to it; Pasteur luck is the sort of luck which references a quotation attributed to Louis Pasteur, the French microbiologist, who is supposed to have said that, in the field of observation, chance favours the prepared mind, and I think that's a very good description of what luck is, in investing.

David:

Maybe we should just trust professional money managers, but before you hand over your cash, let's hear what David Norman from TCF Investment has to say.

David N:

There was a newspaper story a couple of years ago about an investor who'd put in £70,000 over fifteen years into his pension pot. Over that time, the FTSE had gone from 3,000 to 5,000, so he'd seen 66% growth in the market. When he got to retirement, his £70,000 of contributions was worth just under £70,000, and the journalist had written, how on earth can this possibly happen? The reason it happened is because the charges were about 3.1% per annum. 3.1% per annum over fifteen years is 66% - that destroyed the growth. That seems quite high? – well, the average total expense ratio was 1.7; trading costs of 1.3, 1.4 in a fund, it's quite easy to achieve those, so there's your 3.1%, being eaten away. If we made those costs just a little bit smaller, so let's make them 1.4, instead of 1.7, and we make those turnover costs 0.6 instead of 1.4, that makes his pension pot 24% bigger. So it's not just his pot is 24% bigger, his income for the rest of his life is 24% bigger. We could do that for the whole industry, quite simply.

David:

Let's go back to Ben Golland, to find out how he got on after learning about investing.

Ben:

I think I've realised that it's not really as difficult as I'd first imagined, that it is possible, and that I think the amount of information is really quite daunting, when you look at a company or you have to make a decision, but you've just got to take it bit by bit and break it down and know what's important, know what's important to you, depending on your investment style, and then make a decision and commit.

David:

Does Guy Thomas agree that personality matters in picking a suitable investing style?

Guy:

That is really the key lesson of the book. It's not spelt out in large print, but it's the lesson I want people to draw from the book. There are 12 very different people here, with different backgrounds. Those backgrounds have been set out in the book in a certain amount of detail, which is not there just for fun, or just for padding. It is there so people can see what type of person becomes each type of investor, and to look for the one which they can model themselves on, given their own background and their own personality.

David:

OK, so before you came to The Fool, you said you were very hesitant, and not at all confident about investing. Now you've been here for two weeks, how confident are you that you could build a portfolio from scratch, if I asked you to do one today?

Ben:

Very confident.

David:

Very confident?

Ben:

Very confident.

David:

OK, impressive to hear!

Ben:

Whether it would work, whether it would be right, is completely different, but I'm confident now that I could look at companies, and make a decision as to whether I would want to put them in a portfolio. If you'd asked me that two weeks ago, a week ago, I probably would have said no. If you'd asked me that a year ago, I would have asked you what a portfolio is. But yeah, I'm much more confident now.

David:

Now here's a question: how many stocks should you have in your portfolio? Here are Tom and David Gardner again.

Tom:

I don't think you should have three stocks or five stocks. My feeling is, in the first decade of your investment career, you should be getting your portfolio up to 40 stocks, because you want to learn from as many situations as possible, and you want to set yourself up that, if anyone of them goes bankrupt, or any four of them go down 60% over your investment period, that's not going to shake the foundation of your overall portfolio. I know it may sound like a lot to follow with 40 stocks, but you don't have to be on top. In order to be a fan of a sport, you don't have to watch every minute of every game. Some fans go to a few games a year, and just take a look at the standings every couple of weeks, and they don't change their team, just because they had a bad season. So to me, I think having a stock portfolio with enough stocks so that, if a few go down, you're not going to be shaken away from investing, is a great way to get started.

David:

Would you agree with that, David? – in this spirit of duelling Fools, to have 40 stocks in your portfolio?

David G:

I'm more than happy to get new members to The Motley Fool from zero to 15 as fast as possible, so I don't think, I appreciate Tom's point, and I think it's a great point. I think I myself have about 35 as an investor, and that's about all I want. But I think the real point is, go much more above two or three, which is, I think, what most people do, and it's a real mistake they make. Tom makes such a good point. Every investment you make is a lesson. If you're only going to bet on two stocks, two shares or three shares, then you really sap your own chance of learning.

Tom:

This has been my approach to dating.

David G:

And Tom remains a single man!

Tom:

The ultimate mistake!

David:

Well, it's my approach to eating, which is why I like tapas, so you can actually have lots of things on the table all at the same time.

David G:

Indeed!

David:

What does Rodney Hobson think about diversification?

Rodney:

Everybody can make a mistake. Now, if you put all your eggs into one basket and you get it wrong, then you're getting no income. It's true that, if you make a spectacularly good investment, that's terrific – it's all magnified, but the whole thing is to hedge your risk, spread across several sectors. If one sector does badly, or not as well as you had hoped, you've got something else in compensation. This is the great advantage of the stock market over other kinds of investment – you can spread your risk, and you can do well on the sectors that do well. You're not all into one type of investment. So your chances of maximising your income, or at least making sure you do get some regular income, are increased if you spread your risk.

David:

But how should we handle volatility? It's something that bothers investors right now, watching share prices bounce around like a yo-yo. Here is Justin Urquhart-Stewart again.

Justin:

Well, two things here: either you are a long term investor, in which case you've bought good quality stocks, and you're looking straight through this, and as far as you're concerned, I know the sort of return I'm expecting over time. That's where your compounding comes in, so the volatility is irrelevant to you. It is just background noise. However, alongside that, for the traders, and it's always nice to be a trader as well, I think you can actually have a combination of the two, but there are two different pots – one's the long term one, the other one is the trading one. You've got your stocks which you follow, and hopefully they're good liquid stocks, nice newsflow, ones you can become expert in, and you know those prices. So when these prices are being pushed down to low levels, you buy, and equally, when it's going back up again, and you've made a nice profit, you sell, because that's your trading profit. Use that volatility, but not on every stock. In my view, you can only follow half a dozen stocks. I've got a limited brain capacity anyway, but six stocks, and know all about them. Nice liquidity, good newsflow – you can be expert in those very quickly indeed. Use that volatility to your benefit. For those that haven't got the time to do that, or, for your longer-term pension money, then ignore the smell of cordite and the smoke of battle. You just carry straight on through that, because as far as you're concerned, you're building up value over time.

David:

Now for a final word from Justin Urquhart-Stewart about what we have to worry about today.

Justin:

There are lots of things. You can be a worrier from day to day. Robert Peston will remind you on a regular basis, so that you'll be worrying about it. Most of it, you can ignore. No, the global economy is still growing. The global economy will grow probably a little bit slower next year. Is it Armageddon? If it is Armageddon, then don't worry about it, because we're all finished – just grab your case of Scotch. So the global economy will muddle through. I hear a lot of people actually saying, it's just like the Depression. Well hang on – the world's a bit different from when the Depression was on. There are lots of similarities, I grant you. In the Depression, China and Japan were at war; Russia was shut; India was pink (I don't mean it was gay, it was part of the Empire); and Germany was getting up to what the Germans were doing at that time, unpleasant things. So a lot of the world wasn't participating. Now, all those countries are not only participating, but doing rather well, thank you, so the dynamics have changed. So it's going to be a difficult year. Yes, of course, it may economically feel like a lousy year. Stock markets and economies do not actually necessarily link together. You can see the logic between them, but actually what you'll find is, at the darkest moment, you'll find that that's the time you'll want to buy. Remember dear old Warren Buffett, and his usual lovely little trite phrases? – but they're right! Buy when others are frightened, and sell when people are over-confident. People are very frightened at the moment, I can understand it, but I would urge people to say, the global economy's still growing. Yes, there are some serious issues, particularly with regard to what happens to the American debt, what happens to the euro, and how the UK repairs itself, but all of those are perfectly achievable. It'll take time, though. We've got a lot of debt to be able to unwind over this. Go back to those ten years of boom, ten years of lean. It's got a seven year span on this to try and get out of this one, but in the meantime, stocks will provide value.

David:

I love Warren Buffett. I think they should make little Warren Buffett dolls, so you can actually put them on your desk.

Justin:

Yeah, I think you should have scratch'n'sniff Warren Buffetts, so you can join in every day, and find out today's suitable tome to encourage you.

David:

So in the words of Elmer J Fudd, "That's all, folks!" On behalf of the Money Talk team, and The Motley Fool, I want to wish you all a very Merry Christmas, and a successful New Year. But before I go, here's a final thought from Anon, who said: "We cannot direct the wind, but we can certainly adjust the sail." This has been Money Talk, I have been David Kuo, and until next time, happy investing!

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Comments

The opinions expressed here are those of the individual writers and are not representative of The Motley Fool. If you spot any comments that are unsuitable hit the flag to alert our moderators.

goodlifer 29 Dec 2012 , 9:54pm

"You've got to look for decent businesses run by honourable people with clear and transparent accounting."

Ho hum.

goodlifer 30 Dec 2012 , 10:20pm

Many thanks for providing a transcript.

And wish you a happy New Year!

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