2010 will not be remembered fondly by many - especially those in the financial industry.
Although Stock Markets are ending the year on a high, there is little cheer to be found elsewhere. Bond yields are still way too low in many cases (with a few notable exceptions on the Corporate Bond side of things), deposit rates are effectively zero - and all this is happening as inflation is most definitely raising its ugly head once more.
I am deeply frustrated in that my model derivative portfolio is up 99.4% on the year - I would have sold my first-born into slavery to have got that 100% figure dammit! Interestingly, about 70% of the positions have been quite bearish. It is a testament to volatility that such success was achieved in a rising market.
The cash required to margin these positions was held primarily in Corporate Bonds and Bank "must pay" Preference Shares, with around 30% in cash at any time.
My only stock position of size to be held throughout the year was Indigovision (IND.L), which I still think is going to triple at least from here. In terms of trading, my biggest position was in BP which was bought heavily around 335-360p. as the market reacted to the iniquitous and unfair way in which Obama looked for any way of distracting his fellow morons from his failure. A nice quick 20% turn there.
If anyone wants details, please feel free to ask.
Next year? Avoid the US $ and US investments like the plague. If the debt chickens come home to roost - and China. not the US government has the keys - then we could see a major problem. Not more than a possibility - and one that would possibly take European markets some of the way with it - but one to be VERY cautious over. I fear we have a maximum of 200 points on FTSE to go, and with 500 points of "Noise" (see my thoughts on "Crevasse Investing" in an earlier blog) entirely possible, I will probably continue to play the main derivative element of my model portfolio from the short side.
More likely predictions are that by the early hours of the New Year I will see many Black Swans.
I will also most likely be seeing Pink Elephants, Green Hippos and Flying Pigs.
A Happy and Prosperous New Year to you all
Dum Spiro Spero (for the year ahead Dum Spiro Sperabo)
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Friday 31 December 2010
Wednesday 15 December 2010
Investment horizons and the paradigm for 2011 onwards.
Oh Dear! What a pompous title!
One of the things that upsets me continually is the sort of editorial comment that pushes a particular line as indisputable fact and makes no attempt at balanced debate. Recently I got an advertising supplement for "Money Week" that was well beyond laughable in its doom-laden predictions that we would all be in mud huts by the end of next year. As good fortune would have it, it was so silly and badly written that it would be very unlikely to be taken seriously by anyone and perhaps more likely to lead to cancelled subscriptions than new ones - so perhaps little harm done. This sort of comic and the less creditable discussion fora are being clogged up by extremist bears, which makes rational discussion rarer and rarer. In the interests of fairness however (see - I am trying!) I must add that they do get equally clogged by silly rampers in the good times. Bubble or bust? Didn't anyone point out that investment horizons tend to be between the two and that trend growth is positive in most time scales. Roubini is a clever man, but I think he regards his Black Swans as hybridised Golden Geese that sell books rather than more simple birds. I think the markets have had enough avian flu for one decade in any case.
Time to be concerned when you get this sort of drivel...
http://www.telegraph.co.uk/finance/personalfinance/investing/8202251/Investors-told-forget-savings-accounts-think-of-shares.html
I tend to read the online versions of newspapers, partly because it avoids the inanities that are used to fill in the gaps in "rolling news" and partly because the content is cross-linked more easily. In the case in point, this was the main "story" for about 12 hours overnight. If one reads it, there is little or no attribution of this startling hypothesis other than the usual rent-a-quote stuff from third-line investment firms grateful to get their name printed in The Beano. Just step back and think about this - the nation's one remaining newspaper of record since Murdoch destroyed the Times TELLS YOU - not suggests, not comments - that "Investors told forget savings accounts, think of shares". To add insult to injury we are then told "experts said". Do these "journalists" have an IQ above room temperature? and are there competent editors in place to send them to cover fish prices in Grimsby until they learn their art?
2010 has generally been a year of Central Banks and Governments trying desperately to force interest rates lower, mainly by Quantitative Easing. Many nations, particularly the US, have spectacularly ignored Gresham's Law and tried to beggar their neighbours by devaluing their currencies. In the Antipodes and Far East we have seen the reverse happening, especially where a currency, such as the Australian Dollar is effectively commodity-backed. Towards the end of the year we have seen the Euro-bloc shaken as the inherent contradictions unwind. Much hysteria has been generated, but my feeling is that Germany, France and Benelux - the real core of the EU - have invested too much, and not just financially, to see the project fail. My feeling is that the PIIGS are more likely to be booted out than the core countries secede from the project. I do, however, think it is a close call and I would avoid exposure to this game until things are clearer.
For most of 2010 I have propounded the view that where equity markets are concerned, the "nowhere else to go" argument was the best I could come up with. We have seen layoffs and cost-cutting used to engineer much dubious bottom-line improvement, especially on Wall Street, and a yield of between 3-4% has been achievable in most markets. Compared to falling Bond Yields this was a no-brainer. I suspect things might be different in 2011. QE has planted the seeds of inflation in many economies and the USA, UK and Eurozone are all massaging their figures to try not to show it. Low rates are a key factor in the beggar-my-neighbour policies, but unsustainable in the context of a massive surge in money supply. Rates will undoubtedly rise considerably in 2011 and an outflow from equity markets may take place, particularly if fiscal tightening hits the "consumer" - an indicator I have always had little faith in as a serious economic measure (I think the "producer" is the one to watch!).
For a saver (and an ISA saver in the UK only has a 5 year maturity minimum) or investor, I would think that Corporate Bond yields are going to become very attractive relative to other asset classes.
Currency levels will take an unwontedly important place in the decision-making process. Not only do I think the US market may turn out to be one of the weakest, but with Moodys looking at stripping the US of its AAA+ status and an avowed policy to devalue the dollar, I fear the potential collapse in the US Dollar would more than outweigh yield considerations. I would avoid all US or Dollar-denominated investments in 2011.
I further think that Gold and Silver bugs will be in for a shock in 2011. The two factors driving the bubble - low interest rates and Far Eastern demand could evaporate in a moment as rates move up and India and China tighten even further. Yes - the "survivalists" will always argue for Gold, but those of us with waistcoats whose arms do not fasten behind our backs will, I think, see it otherwise.
As I look forward to 2011 as ever - Dum Spiro Spero
One of the things that upsets me continually is the sort of editorial comment that pushes a particular line as indisputable fact and makes no attempt at balanced debate. Recently I got an advertising supplement for "Money Week" that was well beyond laughable in its doom-laden predictions that we would all be in mud huts by the end of next year. As good fortune would have it, it was so silly and badly written that it would be very unlikely to be taken seriously by anyone and perhaps more likely to lead to cancelled subscriptions than new ones - so perhaps little harm done. This sort of comic and the less creditable discussion fora are being clogged up by extremist bears, which makes rational discussion rarer and rarer. In the interests of fairness however (see - I am trying!) I must add that they do get equally clogged by silly rampers in the good times. Bubble or bust? Didn't anyone point out that investment horizons tend to be between the two and that trend growth is positive in most time scales. Roubini is a clever man, but I think he regards his Black Swans as hybridised Golden Geese that sell books rather than more simple birds. I think the markets have had enough avian flu for one decade in any case.
Time to be concerned when you get this sort of drivel...
http://www.telegraph.co.uk/finance/personalfinance/investing/8202251/Investors-told-forget-savings-accounts-think-of-shares.html
I tend to read the online versions of newspapers, partly because it avoids the inanities that are used to fill in the gaps in "rolling news" and partly because the content is cross-linked more easily. In the case in point, this was the main "story" for about 12 hours overnight. If one reads it, there is little or no attribution of this startling hypothesis other than the usual rent-a-quote stuff from third-line investment firms grateful to get their name printed in The Beano. Just step back and think about this - the nation's one remaining newspaper of record since Murdoch destroyed the Times TELLS YOU - not suggests, not comments - that "Investors told forget savings accounts, think of shares". To add insult to injury we are then told "experts said". Do these "journalists" have an IQ above room temperature? and are there competent editors in place to send them to cover fish prices in Grimsby until they learn their art?
2010 has generally been a year of Central Banks and Governments trying desperately to force interest rates lower, mainly by Quantitative Easing. Many nations, particularly the US, have spectacularly ignored Gresham's Law and tried to beggar their neighbours by devaluing their currencies. In the Antipodes and Far East we have seen the reverse happening, especially where a currency, such as the Australian Dollar is effectively commodity-backed. Towards the end of the year we have seen the Euro-bloc shaken as the inherent contradictions unwind. Much hysteria has been generated, but my feeling is that Germany, France and Benelux - the real core of the EU - have invested too much, and not just financially, to see the project fail. My feeling is that the PIIGS are more likely to be booted out than the core countries secede from the project. I do, however, think it is a close call and I would avoid exposure to this game until things are clearer.
For most of 2010 I have propounded the view that where equity markets are concerned, the "nowhere else to go" argument was the best I could come up with. We have seen layoffs and cost-cutting used to engineer much dubious bottom-line improvement, especially on Wall Street, and a yield of between 3-4% has been achievable in most markets. Compared to falling Bond Yields this was a no-brainer. I suspect things might be different in 2011. QE has planted the seeds of inflation in many economies and the USA, UK and Eurozone are all massaging their figures to try not to show it. Low rates are a key factor in the beggar-my-neighbour policies, but unsustainable in the context of a massive surge in money supply. Rates will undoubtedly rise considerably in 2011 and an outflow from equity markets may take place, particularly if fiscal tightening hits the "consumer" - an indicator I have always had little faith in as a serious economic measure (I think the "producer" is the one to watch!).
For a saver (and an ISA saver in the UK only has a 5 year maturity minimum) or investor, I would think that Corporate Bond yields are going to become very attractive relative to other asset classes.
Currency levels will take an unwontedly important place in the decision-making process. Not only do I think the US market may turn out to be one of the weakest, but with Moodys looking at stripping the US of its AAA+ status and an avowed policy to devalue the dollar, I fear the potential collapse in the US Dollar would more than outweigh yield considerations. I would avoid all US or Dollar-denominated investments in 2011.
I further think that Gold and Silver bugs will be in for a shock in 2011. The two factors driving the bubble - low interest rates and Far Eastern demand could evaporate in a moment as rates move up and India and China tighten even further. Yes - the "survivalists" will always argue for Gold, but those of us with waistcoats whose arms do not fasten behind our backs will, I think, see it otherwise.
As I look forward to 2011 as ever - Dum Spiro Spero
Tuesday 7 December 2010
What a gig! - who needs Glastonbury?? Drugs at Covent Garden!!
I recently pondered as to whether I might be regressing to my (distant) youth or just going through a mid-life crisis. Well here I go again.
I have been far from well for at least two weeks now. One week is more than enough - after two weeks everyone has run out of sympathy, my own feelings of cabin fever and not getting out are equalled only by the frustrations of Beau who turns from cute Springer to a lean, mean, ADHD machine.
So when, on Saturday I was offered a ticket to one of the hottest gigs around - I had to at least try to get out.
There follow a few lines that I might regret in times to come - but there I was sitting and soaking in some of the best music I have ever heard while stoned out of my head. Now, before they come to get me, I ought to offer a quick explanation. The gig was at the Royal Opera House Covent Garden and the pharmacological enhancement was enough Benylin/Strepsil cocktail to anaesthetise a moderately belligerent Ox.
At least I didn't get the giggles. The Opera - Adriana LeCouvreur - is by a follower of Puccini, one Francesco Cilea, whose obscurity is quite undeserved. Covent Garden threw the heavyweights at this one - Mark Elder in the Pit and Angela Gheorghiu opposite Jonas Kaufmann on stage. Uttterly captivating from Gheorghiu and even Kaufmann, who was clearly having throat problems (could he have got my bad chest that quickly from all the way up in the balcony?) towards the end was spell-binding. Why did I mention the giggles? Well it is the plot actually. If one were to ask non-Opera fans why they don't like Opera, one of the reasons commonly given is the utter stupidity of the plots. I can't argue with that in this case. At least we were not asked to believe that a hefty mezzo was an emaciated and tubercular teenager dying in a garret - but the dying, dear God, the dying!!!!
One of the aspects at Covent Garden that I remain unsure about is the surtitles. Having the English words above the stage is quite useful in less familiar cases or where the libretto is far from in sync with what is happening onstage - but can otherwise be distracting. Saturday was the first case where I saw them as an aid to comedic timing. In the last act of Adriana LeCouvreur, I regret to say that every cliche is taken out of the bag, dusted down and re-arranged for the big death scene. One could almost imagine the supporting members of the cast bringing in sandwiches and thermos flasks of hot tea as they settle in for the inevitable. The grouping, like a wicket-keeper, four slips and a gully around the heroine (and the only one who didn't know she had been poisoned) as she informed us she was dying in a significant and ever-more inventive number of ways was necessary so that the cast could indeed confirm that she was and that the process was far from over yet. As this went on ( let me try and be fair - the music and singing were sublime ) and I had got to the point of looking for the telephone number of the printer of the program, the typeface used and the flavours of ice-cream available during the intervals, suddenly there was a dramatic crash of orchestral noise and a stiffening of those on stage.
Unfortunately the critical moment was to have been announced by a baritone recitative "E Morta - She is dead"- instead it was up there above the stage first and a definite titter ran through the room.
I shouldn't be critical - even Beethoven couldn't do Opera - I mean am I alone in thinking I would rather spend a year in Guantanomo than sit through Fidelio?? Cilea's weakness to the cliches is forgiveable and forgiven. Cartoon-caper scenes apart, one hell of a gig!
Dum Spiro Spero
I have been far from well for at least two weeks now. One week is more than enough - after two weeks everyone has run out of sympathy, my own feelings of cabin fever and not getting out are equalled only by the frustrations of Beau who turns from cute Springer to a lean, mean, ADHD machine.
So when, on Saturday I was offered a ticket to one of the hottest gigs around - I had to at least try to get out.
There follow a few lines that I might regret in times to come - but there I was sitting and soaking in some of the best music I have ever heard while stoned out of my head. Now, before they come to get me, I ought to offer a quick explanation. The gig was at the Royal Opera House Covent Garden and the pharmacological enhancement was enough Benylin/Strepsil cocktail to anaesthetise a moderately belligerent Ox.
At least I didn't get the giggles. The Opera - Adriana LeCouvreur - is by a follower of Puccini, one Francesco Cilea, whose obscurity is quite undeserved. Covent Garden threw the heavyweights at this one - Mark Elder in the Pit and Angela Gheorghiu opposite Jonas Kaufmann on stage. Uttterly captivating from Gheorghiu and even Kaufmann, who was clearly having throat problems (could he have got my bad chest that quickly from all the way up in the balcony?) towards the end was spell-binding. Why did I mention the giggles? Well it is the plot actually. If one were to ask non-Opera fans why they don't like Opera, one of the reasons commonly given is the utter stupidity of the plots. I can't argue with that in this case. At least we were not asked to believe that a hefty mezzo was an emaciated and tubercular teenager dying in a garret - but the dying, dear God, the dying!!!!
One of the aspects at Covent Garden that I remain unsure about is the surtitles. Having the English words above the stage is quite useful in less familiar cases or where the libretto is far from in sync with what is happening onstage - but can otherwise be distracting. Saturday was the first case where I saw them as an aid to comedic timing. In the last act of Adriana LeCouvreur, I regret to say that every cliche is taken out of the bag, dusted down and re-arranged for the big death scene. One could almost imagine the supporting members of the cast bringing in sandwiches and thermos flasks of hot tea as they settle in for the inevitable. The grouping, like a wicket-keeper, four slips and a gully around the heroine (and the only one who didn't know she had been poisoned) as she informed us she was dying in a significant and ever-more inventive number of ways was necessary so that the cast could indeed confirm that she was and that the process was far from over yet. As this went on ( let me try and be fair - the music and singing were sublime ) and I had got to the point of looking for the telephone number of the printer of the program, the typeface used and the flavours of ice-cream available during the intervals, suddenly there was a dramatic crash of orchestral noise and a stiffening of those on stage.
Unfortunately the critical moment was to have been announced by a baritone recitative "E Morta - She is dead"- instead it was up there above the stage first and a definite titter ran through the room.
I shouldn't be critical - even Beethoven couldn't do Opera - I mean am I alone in thinking I would rather spend a year in Guantanomo than sit through Fidelio?? Cilea's weakness to the cliches is forgiveable and forgiven. Cartoon-caper scenes apart, one hell of a gig!
Dum Spiro Spero
Friday 3 December 2010
Dinsdale the Urban Warrior!
Sorry to have been off the air whilst suffering from "Man Flu". For those of you not familiar with this ailment - it is illustrated perfectly here.
http://www.youtube.com/watch?v=Hk5wScFGCjk
In the mean time the Wikileaks saga has rumbled on, giving me something else to think about when not clutching my throat or brow and whimpering pathetically like a puppy with a sore paw.
In particular, one thing to rouse me from my torpor today was the realisation that the company that holds the registration for Wikileaks - EveryDNS.net in California - has today cancelled their registration. I am, of course, entirely sure that this was in no way connected with an unprincipled attempt to stifle criticism on the part of the US administration - whose total commitment to honesty, integrity and the rule of law has been made totally clear over the last few days. How can anyone think that?
In my new role, which sits more than a little uneasily with the vision in the mirror of a paunchy middle-aged man, as Urban Warrior (do I have to get a nickname? Will Stampy do? - an in joke for those that know me well) I felt I would do my best to help those wonderful champions of democracy in the White House by doing my bit to undo the damage.
Losing their registration is not the end for Wikileaks - their servers are still going in Sweden with mirrors in other country. What has happened is the equivalent of tearing up the index card in the library - the material is still there - as can be seen here.
http://wikileaks.info/
or try the IP address
88.80.13.160
I am not a fan of what Assange is doing, but on balance I feel that gagging him is the greater evil. To misquote the X-files, "The Truth should be out there"
Dum Spiro Spero
http://www.youtube.com/watch?v=Hk5wScFGCjk
In the mean time the Wikileaks saga has rumbled on, giving me something else to think about when not clutching my throat or brow and whimpering pathetically like a puppy with a sore paw.
In particular, one thing to rouse me from my torpor today was the realisation that the company that holds the registration for Wikileaks - EveryDNS.net in California - has today cancelled their registration. I am, of course, entirely sure that this was in no way connected with an unprincipled attempt to stifle criticism on the part of the US administration - whose total commitment to honesty, integrity and the rule of law has been made totally clear over the last few days. How can anyone think that?
In my new role, which sits more than a little uneasily with the vision in the mirror of a paunchy middle-aged man, as Urban Warrior (do I have to get a nickname? Will Stampy do? - an in joke for those that know me well) I felt I would do my best to help those wonderful champions of democracy in the White House by doing my bit to undo the damage.
Losing their registration is not the end for Wikileaks - their servers are still going in Sweden with mirrors in other country. What has happened is the equivalent of tearing up the index card in the library - the material is still there - as can be seen here.
http://wikileaks.info/
or try the IP address
88.80.13.160
I am not a fan of what Assange is doing, but on balance I feel that gagging him is the greater evil. To misquote the X-files, "The Truth should be out there"
Dum Spiro Spero
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