Obviously I am not talking about enormous ships here - rather I am referring to the second round of Quantitative Easing currently being openly discussed by, among other Central Banks, the Federal Reserve in the U.S. The QE2 name it has been given seems tragically appropriate.
To nail my colours to the mast (see - another nautical reference), I whole-heartedly supported the first round. There was no choice other than to see the financial system crumble under the twin burdens of uncertainty and ever-dwindling liquidity. Since then we have seen the vast majority of QE go directly into bolstering the balance sheets of commercial banks (a good thing), boosting capital available for Proprietary Investment Banking activities (Do I need to call this a bad thing? Have we already forgotten how we got here?) and very little go into boosting the real economy other than by creating a fantasy world where large corporates with strong balance sheets can borrow more at close to zero interest rates while medium-to-small businesses are unable to pry capital (the very capital provided by our governments) from the banks who have appropriated it.
The recovery is weak - but is in existence. QE2 is not necessary at the moment and would, in any case, be subject to the law of diminishing returns - even if (which I doubt) it were to be modified to avoid the abuses I have just described. We need to keep such a blunt weapon ready against urgent need.
The reaction of markets in the last few weeks has been particularly difficult to fathom. Good news (and there has been some) is a sound foundation on which to base market strength, but the present arguments related to further stimulus frighten the willies out of me.
In essence the argument goes that we are close to flat-lining economically, with growth around 1% in most sectors. Large corporate earnings disguise this as the whole post-QE world skews results in their favour and they make up the major indices. To bolster the majority of the economy that does not have these advantages, yet more money needs to be injected (and remember that so little of it reached the right destinations last time) to "help" them. So we are doing so badly that we need more help - and that is a good reason to be bullish - because we are doing so badly?
The words honest and Corporate America may not sit easily in the same sentence, but this is a magnificent exhibition even by the standards previously set. "Please give us more money to help the economy - we will try to make sure none gets as far as it's intended recipients, but you have to do this."
Without divorcing "Real" Banking from Corporate Banking, this will be a spiral that can only end in tears. Ultimately the money pumped in via QE can only be reclaimed by much higher interest rates or depreciation of fiat currencies.
Dum Spiro Spero.
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Wednesday, 13 October 2010
Tuesday, 12 October 2010
Education - a right, not a privilege. Certainly NOT a commodity.
My own educational background is not so different from many others. I attended a tiny private school from an early age and then I was obliged to attend the local state primary school for one year as my parents moved house. It was at that primary school that I became aware of the streaming process that marked out a child's future for life. In the intuitive and irrational way that children have, I became aware that the "D" set were not only abandoned by themselves (and presumably their families) but that they were also allocated significantly inferior resources. At 11+ stage the "sorting hat" - not of Harry Potter, but of the system, would set each and every one of the boys I was with on a largely inescapable path.
I then went to a superb school and onwards to Oxford - all on scholarships, but even without those, with the support of the state. I quite simply could not have afforded to do this without the best education I could get being offered to me by my country as an investment in my future and in anticipation of the millions of pounds I have paid in taxes over the years.
Later in my life I earned the right to call myself a farmer ( a conceit really - I owned the land whilst others did the work ) and learned important lessons about, among other things, preserving seed corn and nurturing a growing crop.
Perhaps the segue into my analogy is fairly obvious - but our children, our youth and even our adult population who wish to learn are our seed corn. Words were cheap to Blair, but how I wish he had meant those three - "Education, Education, Education" - as his priorities. To borrow from a political philosophy I despise much less that Blairism, I can see no greater aspiration for an educational system than "From each according to his abilities, to each according to his needs". The crop must be nurtured to the best of our abilities.
Education is, perforce, a pyramidal structure - with a broad base of nursery and primary education narrowing to a smaller University sector. Throughout this pyramid, inequalities of resources come in all forms. Wealthier parents can not be expected to eschew the opportunity to give their offspring more, but only if this does not mean detracting from the less fortunate, Cultural imperatives play their part - many asian and oriental parents support their children (and why, in this context, is the perjorative term "pushy" used so much? - I admire it) more, it seems, than the great majority of WASP parents. I have known some abysmally dim kids from wealthy families or the ethnic groups mentioned above, just as I have known some to be razor-sharp from the local sink estate. As with any crop, the first growth stages are the most important and all should be fertilised with the manure of knowledge (I do hope you don't think I kept a straight face as I typed that phrase!).
Private eduction benefits greatly from the state - not only via charitable status for tax. Most teachers were trained at the expense of the state and the framework from which private education hangs is in essence that of the national system. Even the inspection and regulation system is that of the nation. It works, so let us not dismantle it, rather let us use it or emulate it in the manner of the traditional Grammar School. At the very least let the state reclaim some of its investment in terms of much higher scholarship or free place levels.
Then the pyramid narrows - and narrows sharply. University education can range from the aethereally academic to the brutally practical, but it must be the tip of the pyramid, rather than a mere extension of presence in a system than real education. Three years of hard work at least (many degrees in Germany can take up to 6 years) are the slope a student faces and his reward is to be at least potentially a more valued and valuable member of society. The corn grows and society reaps it in turns of contribution and even taxes.
I regard the concepts of Tuition Fees and Student Loans as being so ill-conceived as to be positively dangerous. Today's students are the leaders of tomorrow. It is insane to think they might have bought that position rather than earned it.
Education to the highest level deserved and properly used should be totally free to all.
Dum Spiro Spero
I then went to a superb school and onwards to Oxford - all on scholarships, but even without those, with the support of the state. I quite simply could not have afforded to do this without the best education I could get being offered to me by my country as an investment in my future and in anticipation of the millions of pounds I have paid in taxes over the years.
Later in my life I earned the right to call myself a farmer ( a conceit really - I owned the land whilst others did the work ) and learned important lessons about, among other things, preserving seed corn and nurturing a growing crop.
Perhaps the segue into my analogy is fairly obvious - but our children, our youth and even our adult population who wish to learn are our seed corn. Words were cheap to Blair, but how I wish he had meant those three - "Education, Education, Education" - as his priorities. To borrow from a political philosophy I despise much less that Blairism, I can see no greater aspiration for an educational system than "From each according to his abilities, to each according to his needs". The crop must be nurtured to the best of our abilities.
Education is, perforce, a pyramidal structure - with a broad base of nursery and primary education narrowing to a smaller University sector. Throughout this pyramid, inequalities of resources come in all forms. Wealthier parents can not be expected to eschew the opportunity to give their offspring more, but only if this does not mean detracting from the less fortunate, Cultural imperatives play their part - many asian and oriental parents support their children (and why, in this context, is the perjorative term "pushy" used so much? - I admire it) more, it seems, than the great majority of WASP parents. I have known some abysmally dim kids from wealthy families or the ethnic groups mentioned above, just as I have known some to be razor-sharp from the local sink estate. As with any crop, the first growth stages are the most important and all should be fertilised with the manure of knowledge (I do hope you don't think I kept a straight face as I typed that phrase!).
Private eduction benefits greatly from the state - not only via charitable status for tax. Most teachers were trained at the expense of the state and the framework from which private education hangs is in essence that of the national system. Even the inspection and regulation system is that of the nation. It works, so let us not dismantle it, rather let us use it or emulate it in the manner of the traditional Grammar School. At the very least let the state reclaim some of its investment in terms of much higher scholarship or free place levels.
Then the pyramid narrows - and narrows sharply. University education can range from the aethereally academic to the brutally practical, but it must be the tip of the pyramid, rather than a mere extension of presence in a system than real education. Three years of hard work at least (many degrees in Germany can take up to 6 years) are the slope a student faces and his reward is to be at least potentially a more valued and valuable member of society. The corn grows and society reaps it in turns of contribution and even taxes.
I regard the concepts of Tuition Fees and Student Loans as being so ill-conceived as to be positively dangerous. Today's students are the leaders of tomorrow. It is insane to think they might have bought that position rather than earned it.
Education to the highest level deserved and properly used should be totally free to all.
Dum Spiro Spero
Tuesday, 5 October 2010
Corporate and Government Bonds - All Risk from now on.
It is possible that a few Trobriand Islanders, some Siberian indigenous natives and even some saffron-robed monks perched high in the Himalayas may have missed the news - but the rest of us are only too painfully aware of the financial troubles of the last three years.
My first observation is the staggeringly comical ability of some "think-tanks" to produce research such as this - http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8040090/UK-tiptoeing-towards-Japan-warn-consultants.html - where the reasoning is exactly that which was eschewed during the boom years. I am reminded of the words printed on rear-view mirrors in the USA (where they are obviously not bright enough to think for themselves) that "Objects seen in the mirror may seem closer than they are". So it is apparently with financial crises. Despite the 4-sigma Black Swans being just that, it seems that all financial commentators are now permanently living in Western Australia. (For the hard of understanding, this will explain my reference - http://en.wikipedia.org/wiki/Coat_of_arms_of_Western_Australia ).
Whilst happily ignoring the "fact" that the metrics recently rediscovered for financial prudence are far from new and that moves were in place - Basel 2, 3, 432 and so forth - to use (while blissfully ignoring) such metrics, it is now so clear to these sages that we are doomed to undercapitalised financial institutions and multiple-dip recession. To quote the greatest sage of all, Frankie Howerd, "Woe Woe and thrice Woe!!"
Our political masters have dealt with the crisis by injecting into the system so much money that interest rates are functionally zero or negative in the wholesale market. I contend this was right and the only course of action. The major banks have accepted this largesse with glee and stuffed their balance sheets with this free money whilst keeping retail rates sky-high and feeding large quantities back into their investment banking activities, what Vince Cable calls "Casino Banks". Almost the only positive side-effect has been to allow larger corporate borrowers to refinance at wholesale (i.e. almost zero) cost. As a result both Government Bonds and Corporate Bonds are trading at record highs.
This situation is unsustainable. The only two end-game scenarios (and they may well be two faces of the same coin) are either to suck back the surplus liquidity once the world economy is adjudged to be "safe" or to attempt (which it seems is covertly happening already) to depreciate a currency enough that the resulting inflation acts as a counterbalance. Timing is everything here - and is it really possible to trust Central Banks or Governments, with a tradition of centuries of acting to late, to get it right. In any case - inflation here we (eventually) come.
Whether one believes that we will all be double-dipped in the brown and smelly stuff or that things are painfully inching back, the time can hardly be more that 2 years away before the punch-bowl is taken away from this party and rates start to rise rapidly. Please note. I make no issue with whatever may befall in the interim.
With the exception of the insane mentality that promotes Gold as an "investment", there are fewer safe havens than Government Bonds and I would even argue that some Corporate Bonds provide more security in that supra-nationals are a spread of risk against sovereign default. Even so, there is really little or no more juice to be sucked from the Orange of yield and my fear is that Mr. Market, with his love of discounting future events, will soon see over the horizon to the gloomily-lit downlands of higher interest rates.
Where does that leave us? Probably the 4%+ yield on major indices (avoiding the risks and rewards of stock-picking - I am talking indices alone here) in equity markets. The fear/greed ratio seems to be so high these days that sell-offs of an illogical nature (or, in the interests of even-handedness, equally silly rallies) and major short-term moves can reasonably be expected. Of course this argument will also be subject to the idea of markets discounting forward events, but historically inflation has been far less destructive of equity than bond markets.
Dum Spiro Spero
My first observation is the staggeringly comical ability of some "think-tanks" to produce research such as this - http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8040090/UK-tiptoeing-towards-Japan-warn-consultants.html - where the reasoning is exactly that which was eschewed during the boom years. I am reminded of the words printed on rear-view mirrors in the USA (where they are obviously not bright enough to think for themselves) that "Objects seen in the mirror may seem closer than they are". So it is apparently with financial crises. Despite the 4-sigma Black Swans being just that, it seems that all financial commentators are now permanently living in Western Australia. (For the hard of understanding, this will explain my reference - http://en.wikipedia.org/wiki/Coat_of_arms_of_Western_Australia ).
Whilst happily ignoring the "fact" that the metrics recently rediscovered for financial prudence are far from new and that moves were in place - Basel 2, 3, 432 and so forth - to use (while blissfully ignoring) such metrics, it is now so clear to these sages that we are doomed to undercapitalised financial institutions and multiple-dip recession. To quote the greatest sage of all, Frankie Howerd, "Woe Woe and thrice Woe!!"
Our political masters have dealt with the crisis by injecting into the system so much money that interest rates are functionally zero or negative in the wholesale market. I contend this was right and the only course of action. The major banks have accepted this largesse with glee and stuffed their balance sheets with this free money whilst keeping retail rates sky-high and feeding large quantities back into their investment banking activities, what Vince Cable calls "Casino Banks". Almost the only positive side-effect has been to allow larger corporate borrowers to refinance at wholesale (i.e. almost zero) cost. As a result both Government Bonds and Corporate Bonds are trading at record highs.
This situation is unsustainable. The only two end-game scenarios (and they may well be two faces of the same coin) are either to suck back the surplus liquidity once the world economy is adjudged to be "safe" or to attempt (which it seems is covertly happening already) to depreciate a currency enough that the resulting inflation acts as a counterbalance. Timing is everything here - and is it really possible to trust Central Banks or Governments, with a tradition of centuries of acting to late, to get it right. In any case - inflation here we (eventually) come.
Whether one believes that we will all be double-dipped in the brown and smelly stuff or that things are painfully inching back, the time can hardly be more that 2 years away before the punch-bowl is taken away from this party and rates start to rise rapidly. Please note. I make no issue with whatever may befall in the interim.
With the exception of the insane mentality that promotes Gold as an "investment", there are fewer safe havens than Government Bonds and I would even argue that some Corporate Bonds provide more security in that supra-nationals are a spread of risk against sovereign default. Even so, there is really little or no more juice to be sucked from the Orange of yield and my fear is that Mr. Market, with his love of discounting future events, will soon see over the horizon to the gloomily-lit downlands of higher interest rates.
Where does that leave us? Probably the 4%+ yield on major indices (avoiding the risks and rewards of stock-picking - I am talking indices alone here) in equity markets. The fear/greed ratio seems to be so high these days that sell-offs of an illogical nature (or, in the interests of even-handedness, equally silly rallies) and major short-term moves can reasonably be expected. Of course this argument will also be subject to the idea of markets discounting forward events, but historically inflation has been far less destructive of equity than bond markets.
Dum Spiro Spero
Wednesday, 29 September 2010
Milibands and even more Balls
I often find myself defending my political views as it seems to be assumed that "City Types" are inherently of the right. My tendency is towards the left (as my tailor will confirm) in many ways and I have voted for a Labour candidate more often than a Conservative one.
I regard my enfranchisement as a rare and precious thing and strive with all my heart and (more importantly) mind to decide after as much and as deep contemplation as I can. I have canvassed for local Lib Dem councillors and have been, in my time, Deputy Chairman of my local Conservative Constituency Party. I regard this with pride as rational and not as vacillation. If circumstances change, so do my opinions - to paraphrase John Maynard Keynes.
As a result of this, I find the current tribal nature of British Labour politics all the more galling. In the aftermath of the style-over-substance reign of the image-obsessed Blair and the horrrific incompetence of Gordon Brown, who inherited from Ken Clarke an economy stronger than any time in the 20th Century, I find it inconceivable that anyone could have voted Labour, other than for a significant number (who exist on all sides) of exceptional constituency MPs. With a few shining exceptions, the present Parliamentary Labour Party is so clearly intellectually, morally and financially bankrupt that I found myself angry at the vox pop television interviews with lumpen morons who were proud to say "We are Labour in this family and have been for generations" Do we now have to worry about voting behaviour as a genetic disease?
Strangely enough, this pattern does not seem to be repeated on the right. Despite the lampoons of the percieved stereotype, the affluent (OK - I hate the phrase but let us call it middle class!) voting block seems much more prepared to move its allegiance according to issues. The anti - Iraq War movement was very much a middle-class one for example.
The recent election of a new leader for "New Labour" only serves to illustrate my worries further, The Miliband brothers are the sons of an infamous Marxist academic and although it might be disingenuous to expect the apples to fall too far from the tree,it seems to have been quietly brushed under the carpet in presenting their public images of late.
One can only hope that by the time the new leader of New Labour is old enough to start shaving he might have the maturity to eschew some of his inherited views. With an election process that so heavily involves the Trade Union movement, I will not hold my breath. I was very amused at this piece from The Daily Mash http://www.thedailymash.co.uk/politics/politics-headlines/miliband-to-organise-anti%11apartheid-disco-201009273118/
I was, not entirely out of malice, rather hoping the clever and articulate Ed Balls would become the new leader - if only for the "Balls" headlines in The Sun.
While all this is going on we have a group of capable people running the country whose internal divisions and debate are public and transparent. Vince Cable is my neighbouring MP and a very clever man, with whose opinions on UK Banking I disagree strongly. He can however, while running counter to the message of the ruling coalition, express those views cogently and to the great credit of the open system adopted by (or possibly forced upon) Downing Street by the realpolitik of coalition. The UK Press clearly have a problem with coalition, however. I wonder if the newsworthy attributes of adversarial tribal politics are a lot easier that doing some real thinking for the journos?
One final question. Am I alone in thinking that the order-paper waving, mooing and "hear-hear"ing pantomime that is parliamentary behaviour is odious and as much as an insult to the electorate as even the expenses scandal? I would like to respect our elected representatives and feel they at least respect each other. Perhaps we need to physically remodel the Commons (for God's sake - the lines on the carpet are to keep MPs a sword's length apart!!!) and censure disruptive behaviour.
Above all, can we try to end tribal voting?
Dum Spiro Spero
I regard my enfranchisement as a rare and precious thing and strive with all my heart and (more importantly) mind to decide after as much and as deep contemplation as I can. I have canvassed for local Lib Dem councillors and have been, in my time, Deputy Chairman of my local Conservative Constituency Party. I regard this with pride as rational and not as vacillation. If circumstances change, so do my opinions - to paraphrase John Maynard Keynes.
As a result of this, I find the current tribal nature of British Labour politics all the more galling. In the aftermath of the style-over-substance reign of the image-obsessed Blair and the horrrific incompetence of Gordon Brown, who inherited from Ken Clarke an economy stronger than any time in the 20th Century, I find it inconceivable that anyone could have voted Labour, other than for a significant number (who exist on all sides) of exceptional constituency MPs. With a few shining exceptions, the present Parliamentary Labour Party is so clearly intellectually, morally and financially bankrupt that I found myself angry at the vox pop television interviews with lumpen morons who were proud to say "We are Labour in this family and have been for generations" Do we now have to worry about voting behaviour as a genetic disease?
Strangely enough, this pattern does not seem to be repeated on the right. Despite the lampoons of the percieved stereotype, the affluent (OK - I hate the phrase but let us call it middle class!) voting block seems much more prepared to move its allegiance according to issues. The anti - Iraq War movement was very much a middle-class one for example.
The recent election of a new leader for "New Labour" only serves to illustrate my worries further, The Miliband brothers are the sons of an infamous Marxist academic and although it might be disingenuous to expect the apples to fall too far from the tree,it seems to have been quietly brushed under the carpet in presenting their public images of late.
One can only hope that by the time the new leader of New Labour is old enough to start shaving he might have the maturity to eschew some of his inherited views. With an election process that so heavily involves the Trade Union movement, I will not hold my breath. I was very amused at this piece from The Daily Mash http://www.thedailymash.co.uk/politics/politics-headlines/miliband-to-organise-anti%11apartheid-disco-201009273118/
I was, not entirely out of malice, rather hoping the clever and articulate Ed Balls would become the new leader - if only for the "Balls" headlines in The Sun.
While all this is going on we have a group of capable people running the country whose internal divisions and debate are public and transparent. Vince Cable is my neighbouring MP and a very clever man, with whose opinions on UK Banking I disagree strongly. He can however, while running counter to the message of the ruling coalition, express those views cogently and to the great credit of the open system adopted by (or possibly forced upon) Downing Street by the realpolitik of coalition. The UK Press clearly have a problem with coalition, however. I wonder if the newsworthy attributes of adversarial tribal politics are a lot easier that doing some real thinking for the journos?
One final question. Am I alone in thinking that the order-paper waving, mooing and "hear-hear"ing pantomime that is parliamentary behaviour is odious and as much as an insult to the electorate as even the expenses scandal? I would like to respect our elected representatives and feel they at least respect each other. Perhaps we need to physically remodel the Commons (for God's sake - the lines on the carpet are to keep MPs a sword's length apart!!!) and censure disruptive behaviour.
Above all, can we try to end tribal voting?
Dum Spiro Spero
Tuesday, 21 September 2010
Predictions, Crystal Balls and Total Balls
When I first came into the financial world of "The City" in the 1970's, it seemed in that far off time before personal computers and direct market access that the world was ruled by wise old heads whose wisdom was dispensed in bite-sized aphorisms of such blinding clarity and confidence that all I, a mere rookie, had to do was to look and learn from my betters.
It took me a very short period of time to realise that those same venerable grey heads were the ones that were being quietly ignored by the people doing the real work of poring over accounts and financial statements - and yet the equivalent is still the order of the day in the modern financial world. The main financial news services (and especially the full-time ones like Bloomberg and CNBC) would rather have a good story presented by some excitable doomster telling us the world is about to end or (more rarely except in the case of fringe investments, we all know that Gold is going to $10,000 don't we?) that everything is going to triple by thursday. Entertaining it certainly is, valid comment it might be, but a philosophy on which to base one's investments it most certainly isn't.
My post today is inspired by the number of otherwise credible people who have warned me that October is coming (duh? it is September, isn't that a fairly safe bet?) and that everything is going to crash at 2:36 pm on October 19th. 2010. The reason for this? - because 23 years ago on October 19th 1987 the US market plunged 23% in a few hours. The reason for this comparison is ... err ..... sorry, I will have to pass on that as there is clearly no correlation between markets or conditions then and now. I am also warned of the Hindenberg Omen - a wonderful title for a bad spy thriller perhaps, but in this case a pattern on the charts that presages the end of the world. I could go on ( do I hear some of you say that I always do? ) but I am in equal parts amused and quite angry at the total b*lls that I read as serious predictive research. This includes sunspot cycles, the Mayan Calendar, and numerology. To read simple astrological analysis seems quite sane by comparison.
A problem for many of us is that these dark arts do have a sane (well saner at least ) constituency - that of pattern recognition, usually called Chartism. For any historians among you, I would hate Chartists to be confused with the rabble-rousing mob that tried to overturn the social order in 1848 and who nearly brought the country to the same state of chaos that pervaded Europe during that year. Oh no, I would not want that to happen - the modern chartists are far worse and far more dangerous to your wealth.
Every Christmas a broker sends me a thing called the Stock Market Almanack (actually I think it is spelt almanac, but I do think my spelling brings out the occult aspect rather better). It looks at patterns and trends and quite clearly there are some that have validity at times, the famous and most reliable being "Sell in May and go away, don't come back 'til St. Legers day". Unfortunately however, this is far from clear in meaning The Saint's day is in March, the St. Leger race is run in early September. Even more annoyingly, although there is a statistically clear trend (assuming we are talking about the race day in September), the number of years on which this does not happen are so violently counter-trend that there is a significant risk of losing much more than could be made.
In case anything else I say is falling on deaf ears, let me state very clearly that in all my years of experience I HAVE NEVER MET A CHARTIST THAT HAS MADE MONEY - NEVER, NEVER. NEVER. Clear enough? I could go for King Lear's five consecutive "never"s - but even I can sometimes exercise restraint.
Predicting financial markets is a fascinating and frustrating business. There have been many gurus over the years and the only ones that ever seem to be consistent are those that follow money flows and look for value. Research the facts and the fundamentals. Simples!!
Do I hear (I ought to) some say that I should put my money where my mouth is and that it is easy to be negative about others without offering something better. If so, here goes...
My view is that current financial thinking among major economies is to prevent a double dip at all costs. The weapon of choice - a second round of quantitative easing or QE2 - is less effective now that the first shot has been fired, but it will be used even if less profligately that the first round. The objective of major western economies moving forward a little either side of 1.5% GDP growth is all that is required for at least 3-5 years. (I ignore the BRIC economies in this argument). This will mean interest rates staying artificially low for that period and devastating the yield still further on government and corporate bonds. Such stimulus will feather-bed some industries and the current yield of around 4% on equities will, in my opinion , ensure a reasonably firm equity market during this period - there is almost nowhere else to go! At the end of this period there is a clear inflation risk, but one we can address when it arises.
I doubt it will be an easy ride - the worries of the last few years have built a spookiness into the market that is quite remarkable. A few bad figures can spark of falls of 10% or more, but I see these as great buying opportunities. Markets are generally driven by changes in perception and it would be hard to ignore the negative perceptions abounding in some quarters. The bad news is, again in my opinion, overly discounted.
In any case, the Moon is in the 7th. house and the entrails of a freshly disembowelled goat clearly show that when Neptune aligns with a 200 day moving average of the sunspot activity, then the 5th Elliot Wave will likely be shown clearly through the Tarot.
Or am I just talking through Uranus?
Dum Spiro Spero
It took me a very short period of time to realise that those same venerable grey heads were the ones that were being quietly ignored by the people doing the real work of poring over accounts and financial statements - and yet the equivalent is still the order of the day in the modern financial world. The main financial news services (and especially the full-time ones like Bloomberg and CNBC) would rather have a good story presented by some excitable doomster telling us the world is about to end or (more rarely except in the case of fringe investments, we all know that Gold is going to $10,000 don't we?) that everything is going to triple by thursday. Entertaining it certainly is, valid comment it might be, but a philosophy on which to base one's investments it most certainly isn't.
My post today is inspired by the number of otherwise credible people who have warned me that October is coming (duh? it is September, isn't that a fairly safe bet?) and that everything is going to crash at 2:36 pm on October 19th. 2010. The reason for this? - because 23 years ago on October 19th 1987 the US market plunged 23% in a few hours. The reason for this comparison is ... err ..... sorry, I will have to pass on that as there is clearly no correlation between markets or conditions then and now. I am also warned of the Hindenberg Omen - a wonderful title for a bad spy thriller perhaps, but in this case a pattern on the charts that presages the end of the world. I could go on ( do I hear some of you say that I always do? ) but I am in equal parts amused and quite angry at the total b*lls that I read as serious predictive research. This includes sunspot cycles, the Mayan Calendar, and numerology. To read simple astrological analysis seems quite sane by comparison.
A problem for many of us is that these dark arts do have a sane (well saner at least ) constituency - that of pattern recognition, usually called Chartism. For any historians among you, I would hate Chartists to be confused with the rabble-rousing mob that tried to overturn the social order in 1848 and who nearly brought the country to the same state of chaos that pervaded Europe during that year. Oh no, I would not want that to happen - the modern chartists are far worse and far more dangerous to your wealth.
Every Christmas a broker sends me a thing called the Stock Market Almanack (actually I think it is spelt almanac, but I do think my spelling brings out the occult aspect rather better). It looks at patterns and trends and quite clearly there are some that have validity at times, the famous and most reliable being "Sell in May and go away, don't come back 'til St. Legers day". Unfortunately however, this is far from clear in meaning The Saint's day is in March, the St. Leger race is run in early September. Even more annoyingly, although there is a statistically clear trend (assuming we are talking about the race day in September), the number of years on which this does not happen are so violently counter-trend that there is a significant risk of losing much more than could be made.
In case anything else I say is falling on deaf ears, let me state very clearly that in all my years of experience I HAVE NEVER MET A CHARTIST THAT HAS MADE MONEY - NEVER, NEVER. NEVER. Clear enough? I could go for King Lear's five consecutive "never"s - but even I can sometimes exercise restraint.
Predicting financial markets is a fascinating and frustrating business. There have been many gurus over the years and the only ones that ever seem to be consistent are those that follow money flows and look for value. Research the facts and the fundamentals. Simples!!
Do I hear (I ought to) some say that I should put my money where my mouth is and that it is easy to be negative about others without offering something better. If so, here goes...
My view is that current financial thinking among major economies is to prevent a double dip at all costs. The weapon of choice - a second round of quantitative easing or QE2 - is less effective now that the first shot has been fired, but it will be used even if less profligately that the first round. The objective of major western economies moving forward a little either side of 1.5% GDP growth is all that is required for at least 3-5 years. (I ignore the BRIC economies in this argument). This will mean interest rates staying artificially low for that period and devastating the yield still further on government and corporate bonds. Such stimulus will feather-bed some industries and the current yield of around 4% on equities will, in my opinion , ensure a reasonably firm equity market during this period - there is almost nowhere else to go! At the end of this period there is a clear inflation risk, but one we can address when it arises.
I doubt it will be an easy ride - the worries of the last few years have built a spookiness into the market that is quite remarkable. A few bad figures can spark of falls of 10% or more, but I see these as great buying opportunities. Markets are generally driven by changes in perception and it would be hard to ignore the negative perceptions abounding in some quarters. The bad news is, again in my opinion, overly discounted.
In any case, the Moon is in the 7th. house and the entrails of a freshly disembowelled goat clearly show that when Neptune aligns with a 200 day moving average of the sunspot activity, then the 5th Elliot Wave will likely be shown clearly through the Tarot.
Or am I just talking through Uranus?
Dum Spiro Spero
Friday, 3 September 2010
Norman Tebbit, John Prescott and Integrity in politics
I have long wondered as to whether or not there has ever been personal warmth between Norman Tebbit and John Prescott. Despite apparently occupying positions at the extremities of the political spectrum, I have long regarded these two as beacons of integrity in that their positions and views are clear and forthrightly expressed. Their elevation to the House of Lords does make me believe a little more that there is hope for the bicameral system yet.
One observation that I feel is highly telling is that when asked a question, both will say "Yes" or "No" and then defend (who am I kidding? - they both only know how to attack!) their respective views. Not for them the Alastair Campbell approach of telling the questioner they are asking the wrong question (or more often answering a different question altogether).
When looking at the various reptilian Blair clones attempting to oil their way to leadership of the Labour Party at the moment, I am filled with despair for the future of that Party. Even the Beer and Sandwiches of the Wilson era is better than the sterile synthetic image-obsessed way they wish to do things. I am no socialist, but would rather the passion and honesty that generally informs that world-view than the cynical manipulation behind "Nu-Labour". Prescott at his pugnacious, English-mangling best had the fire and vision I want to see in politics, not the tedious junior middle-managers we are stuck with.
I have never met Prescott (although I would rather like to) - but I have met Tebbit a few times, first in the 80's when I was briefly involved with the Conservative Party and I seem to continually cross his warm tracks to a rather eerie extent - even to the point of nearly buying the house he now lives in, only rejecting it for reasons that included the kitchen units hand-painted with blood-red emulsion paint. I have also consoled the lovely Patrick at whom a kick was aimed by Lord T - the local restaurant owner is the last person I would knowingly alienate!!
My overwhelming impressiom of both men (especially Tebbit) that they actually listen and weigh - a rare thing in these days of political style over substance.
Suffering fools gladly is not the hallmark of strong men or women. We need more like them.
Dum Spiro Spero
One observation that I feel is highly telling is that when asked a question, both will say "Yes" or "No" and then defend (who am I kidding? - they both only know how to attack!) their respective views. Not for them the Alastair Campbell approach of telling the questioner they are asking the wrong question (or more often answering a different question altogether).
When looking at the various reptilian Blair clones attempting to oil their way to leadership of the Labour Party at the moment, I am filled with despair for the future of that Party. Even the Beer and Sandwiches of the Wilson era is better than the sterile synthetic image-obsessed way they wish to do things. I am no socialist, but would rather the passion and honesty that generally informs that world-view than the cynical manipulation behind "Nu-Labour". Prescott at his pugnacious, English-mangling best had the fire and vision I want to see in politics, not the tedious junior middle-managers we are stuck with.
I have never met Prescott (although I would rather like to) - but I have met Tebbit a few times, first in the 80's when I was briefly involved with the Conservative Party and I seem to continually cross his warm tracks to a rather eerie extent - even to the point of nearly buying the house he now lives in, only rejecting it for reasons that included the kitchen units hand-painted with blood-red emulsion paint. I have also consoled the lovely Patrick at whom a kick was aimed by Lord T - the local restaurant owner is the last person I would knowingly alienate!!
My overwhelming impressiom of both men (especially Tebbit) that they actually listen and weigh - a rare thing in these days of political style over substance.
Suffering fools gladly is not the hallmark of strong men or women. We need more like them.
Dum Spiro Spero
Thursday, 2 September 2010
Is Patriotism the last refuge of a scoundrel?
Recently I have posted (and argued most strongly elsewhere) that the British national characteristic of pretend self-deprecation has developed to the point that a trickle has become a torrent of criticism out of all proportion to reality and has started to pervade thinking at a dangerously deep and subliminal level, especially where the economy and investment markets are concerned. Above all, this habit is developing in the face of comment from countries where optimism and hope are not regarded as somehow unsophisticated. Having said this, I remember lines from The Mikado (written in 1885) to be found in the "I've got a little list" song that bemoans the same thing. Perhaps it is wrong to stir this particular pot, but nevertheless it raises a few points that I think are interesting.
Having lived and worked in a number of countries, I am astonished by how much it is taken for granted that self-interest on a national level is part of the commercial mix. In Frankfurt there was an earnest adherence to the German stereotype where business was concerned, in Paris it was less earnest (and possibly less honest), in Brussels it was more about ripping off the Fleming/Walloon (delete as appropriate) and in Tokyo the assumption of racial superiority was frighteningly a product of being taught it in schools. The Brits? - we quote Dr. Johnson that Patriotism is the last refuge of the scoundrel.
Living as I do for some of the year in Provence , I do have to say that the expat community is one I generally try to avoid. One of the commonest syndromes is to bang on about how awful the UK is and how it is finished. I can only speak for myself when I say that I can wake to a Cerulean sky, walk my clinically insane Springer in primeval woodland and eat/drink far better on a daily level than in the UK. This is, however, the hinterland of Jean-Marie LePen, where it is cheaper to hire a Moroccan/Algerian lad (a donkey in local speak) than to hire a digger; where one can encounter corruption in local government on even the smallest levels. (Want a new building? Just discuss with the mayor over a michelin-starred dinner!!!).
I have friends in the EBRD, the OECD and all over the Brussels beaurocracy who have for many years told me the same story - that figures and reports are quite deliberately weighted against the UK for political and/or commercial advantage.
I would assume Mr Expatriate's evident sense of superiority is the result of his education in the UK, his ability to enjoy it as a result of his treatment in the UK health system and his knowledge of things financial as a result of experience gained in the single most intensive and knowledgeable financial system in the world. (Why else do the pretenders to the throne keep knocking it?). Having seen three children through the UK school system, one stepson through an international hybrid and two through abitur, I know a little more than most about the pros and cons I feel.
When I return to the UK - normally colder, wetter and greyer than Provence (who am I kidding? - always!!) my sense of coming home is almost tangible.
I suppose this post is not really an investment topic - or is it? Our(?) country invests in us collectively, we take its benefits and work to improve it and to give something back, in tax, in education and possibly by charitable works. We also invest time in spreading knowledge in fora such as this.
I intend to work and die (hopefully in good health at a ripe old age and, if all my wishes were to be granted, with a beatific smile on my face in a scenario involving identical 18 year-old red-headed twins) in the UK. Am I thus one of Dr. Johnson's scoundrels?
More in sorrow than in criticism.
Dum Spiro Spero
Having lived and worked in a number of countries, I am astonished by how much it is taken for granted that self-interest on a national level is part of the commercial mix. In Frankfurt there was an earnest adherence to the German stereotype where business was concerned, in Paris it was less earnest (and possibly less honest), in Brussels it was more about ripping off the Fleming/Walloon (delete as appropriate) and in Tokyo the assumption of racial superiority was frighteningly a product of being taught it in schools. The Brits? - we quote Dr. Johnson that Patriotism is the last refuge of the scoundrel.
Living as I do for some of the year in Provence , I do have to say that the expat community is one I generally try to avoid. One of the commonest syndromes is to bang on about how awful the UK is and how it is finished. I can only speak for myself when I say that I can wake to a Cerulean sky, walk my clinically insane Springer in primeval woodland and eat/drink far better on a daily level than in the UK. This is, however, the hinterland of Jean-Marie LePen, where it is cheaper to hire a Moroccan/Algerian lad (a donkey in local speak) than to hire a digger; where one can encounter corruption in local government on even the smallest levels. (Want a new building? Just discuss with the mayor over a michelin-starred dinner!!!).
I have friends in the EBRD, the OECD and all over the Brussels beaurocracy who have for many years told me the same story - that figures and reports are quite deliberately weighted against the UK for political and/or commercial advantage.
I would assume Mr Expatriate's evident sense of superiority is the result of his education in the UK, his ability to enjoy it as a result of his treatment in the UK health system and his knowledge of things financial as a result of experience gained in the single most intensive and knowledgeable financial system in the world. (Why else do the pretenders to the throne keep knocking it?). Having seen three children through the UK school system, one stepson through an international hybrid and two through abitur, I know a little more than most about the pros and cons I feel.
When I return to the UK - normally colder, wetter and greyer than Provence (who am I kidding? - always!!) my sense of coming home is almost tangible.
I suppose this post is not really an investment topic - or is it? Our(?) country invests in us collectively, we take its benefits and work to improve it and to give something back, in tax, in education and possibly by charitable works. We also invest time in spreading knowledge in fora such as this.
I intend to work and die (hopefully in good health at a ripe old age and, if all my wishes were to be granted, with a beatific smile on my face in a scenario involving identical 18 year-old red-headed twins) in the UK. Am I thus one of Dr. Johnson's scoundrels?
More in sorrow than in criticism.
Dum Spiro Spero
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