Market timing

Conventionally, we are told that market timing is impossible and that you'll miss short,sharp gains by staying out, etc.

But the market is no longer conventional. The swings have become much greater, there's all sorts of jiggery pokery behind the scenes (how is co-location legal?) and debt is a sword of Damocles over the whole system.

Rob Arnott at PIMCO (htp: Wall Street Ranter) recently contrasted US equities with emerging markets stocks, thus:

Reversion to the long-term US mean would involve a 29% drop  in value - and usually there's a significant overshoot. Let's not forget that the market has halved twice since the year 2000, and the recoveries seem to be down to monetary life support rather than healthy fundamental economic growth.

There's a San Andreas Fault running under this financial edifice. And the US market and economy are so large that a fall there would surely shake the foundations in other parts of the world.

Doubtless there are some traders who will make, are making, fortunes on short-term speculation, but the odds against outsiders managing to do it make the game one not to join.

All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Does Monsanto engage in cyber warfare against its critics?

An article by Marianne Falck, Hans Leyendecker and Sylvia Miebrich published in Germany's Süddeutsche Zeitung on 13th July 2013 asks the question. Translation here:

http://sustainablepulse.com/2013/07/13/the-sinister-monsanto-group-agent-orange-to-genetically-modified-corn/#.UeMjl9LVB8F

All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Arguing The Toss On Climate Change

Following hard on his purposeful assault on Michael Fallon two weeks ago, the redoubtable Andrew Neil had a go at Ed Davey this time around, and only peripherally on energy policy per se. His main thrust was an outright challenge to a simplified version of what one might call the warmist-scientific consensus. Of course, Neil is the better debater in every dimension than Davey - a Jesuitical novice could have mounted a better defence without raising his voice above a conversational level - but it's just a low-grade spectator sport with carefully-briefed sophistry on both sides. Taken at face value, there are rarely any knock-down points scored in such encounters, and I can't imagine many viewers changing their minds.

But points of interest still arise.

• The days when the Beeb's policy was for active suppression of climate-change skepticism are, it seems, over. (Davey was more than just called upon to defend his position: Neil made it clear that in his view, Davey had failed to do so.) That's not a trivial development. 
• Davey's principal fall-back arguments were (1) a Pascal's wager: even given uncertainty, it's still appropriate to insure against the downside of possible climate change (2) "a lot of our policies are 'no-regrets' policies" - we should be doing them anyway. 

Lots of people relish the fight over forecasts of temperatures - hockey-sticks at dawn - but I don't find that fruitful at all (go to Bishop Hill if you want to vent steam, though as one contributor says there, it can become a "back-slapping echo-chamber"). Better by far is a practical approach, where knock-down points can truly be scored. (1) and (2) above are perfect cases in point. Because it's trivial to demonstrate that current UK / EU policies don't represent any type of insurance policy against climate change: they don't even reduce CO2 emissions, thereby failing against even the most basic of their own criteria.

(The only thing that might represent insurance is adaptation and, as we know, UK expenditure on flood defences is pitiful.)

As for 'no regrets' policies, Minister, You Are Having a Laugh. Only self-financing, unsubsidised energy conservation measures and small-scale biomass / waste incineration could conceivably fall in this category: everything else is a massive gamble on rising gas prices - a huge speculative long. With our money.

At best, the other steps being taken might contribute to a bit of security of supply, and to Keynsian job-creation. But there would be cheaper and more effective ways of doing both. Nope, it isn't remotely difficult to paint the 'regret' scenarios.


This post first appeared on the Capitalists@Work blog


All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

PRISM follow-up: I was right

Last month I said about PRISM, "the FS is denying that GCHQ is breaking the law without denying that we have all our telecommunications spied on, thus confirming that the law here already permits what the Americans are doing."

Now it's official:

It has been alleged that GCHQ circumvented UK law by using the NSA’s PRISM programme to access the content of private communications. From the evidence we have seen, we have concluded that this is unfounded.
 
 We have reviewed the reports that GCHQ produced on the basis of intelligence sought from the US, and we are satisfied that they conformed with GCHQ’s statutory duties. The legal authority for this is contained in the Intelligence Services Act 1994.

 Further, in each case where GCHQ sought information from the US, a warrant for interception, signed by a Minister, was already in place, in accordance with the legal safeguards contained in the Regulation of Investigatory Powers Act 2000.

All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Game of Drones

Hooray for Americans!

The farming and ranching town of Deer Trail, Colorado, is considering paying bounties to anyone who shoots down a drone.

Next month, trustees of the town of 600 that lies on the high plains, 55 miles east of Denver, will debate an ordinance that would allow residents to buy a $25 hunting licence to shoot down "unmanned aerial vehicles".

The measure was crafted by resident Phillip Steel, a 48-year-old army veteran with a master's degree in business administration, who acknowledges the whimsical nature of his proposal. But the expansion of drones for commercial and government use was alarming, he said.

"We don't want to become a surveillance society," he told Reuters in a telephone interview.

- http://www.guardian.co.uk/world/2013/jul/18/colorado-town-ponders-drone-bounty


All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Diligent

When we want something done in daily life, from a haircut to a new house to a holiday, we prefer to deal with diligent people. Not so much diligent institutions, but diligent people.

The person who cuts our hair, the people who build our new house or those whose personal diligence makes a memorable success of our holiday – these are the people we want to deal with aren't they?

Diligent institutions? Possibly, but institutions are not what we prefer to deal with when things go wrong. We prefer people, yet so often institutions usurp the diligence of their people and substitute processes. We want diligent people – they want processes. Processes which are supposed iron out the vagaries of personal diligence, because people sometimes screw up.

So do institutions of course, but when they screw up their people can’t always draw on their own diligence to put things right. Most would like to I suspect, but can’t. It’s the rules, the tick boxes. Sometimes diligence seems to have been extracted from them by the corporate machine and thrown away.

I’m reminded here of an issue I once had with my father’s gas bill. He paid by direct debit but suddenly received a bill for over £5000 and naturally I was keen to sort it out for him. On day one I got nowhere with corporate robots at the gas supplier, but overnight it snowed heavily and many people couldn’t get into work.

So I phoned the gas supplier again the following morning and spoke to a very pleasant lady who knew immediately that there had been a problem when my father changed supplier. She sorted it all out in no time. In fact it turned out that the supplier owed my father a refund because his direct debit was set too high.

I’d realised that anyone diligent enough to make it into work through the snow would be a better bet for sorting out my father's absurd bill and so it proved. I made a particular point of thanking her and she was pleased to have helped. Of course she was – being diligent.

All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Fighting the Government for savers and against inflation (4)

We have new, again not wholly satisfactory, replies from the Treasury:

 

MP's covering letter (dated 10 July 2013):

 

"Please see enclosed the response from the treasury regards the two Parliamentary Questions which you requested be put to the Treasury.

 

"I trust that the answers are of interest."

 

My comments:

 

1. One of my questions has been materially altered and this has destroyed a vital point, namely, the moral case for protecting the value of savers' deposits - an argument that was clearly accepted when Index-Linked Savings Certificates were introduced in 1975.

 

2. The answers are certainly "of interest" (I have to hope that the MP is being ironic) as both fail to resolve one or more substantive issues in the questions as originally proposed.

 

FIRST QUESTION

 

My version:

 

"Is the [Minister/PM] aware that National Savings Index-Linked Savings Certificates were introduced in 1975 as a form of social justice to savers affected by inflation, as is made clear by exchanges in this House on 10 July 1975, and will he now instruct NS&I to make them permanently available again without further delay?"

 

Version as put to Minister:

 

"To ask Mr Chancellor of the Exchequer, if he will instruct National Savings and Investments to make National Savings index-linked savings certificates permanently available to savers with immediate effect."

 

Treasury written answer, from Mr Sajid Javid MP (08 July 2013):

 

"National Savings and Investments (NS&I) purpose is to provide cost-effective debt financing to the Government by issuing and selling retail savings and investment products to the public.

 

"In meeting this objective NS&I follow a policy balancing the interests of their customers, the taxpayer and the stability of the wider financial services market. In line with this remit NS&I do not anticipate new sales of Index-Linked Savings Certificates this year."

 

My comments:

 

It is particularly disappointing that the reference to proceedings in Parliament was excised, because they show that the Government and the Opposition accepted the MORAL case for protecting the value of savers' money. I had thought the editing was done by the MP, but he seems to be suggesting that it was done by the officials who handle the questions submitted.

 

I have Tweeted Mr Javid:

 

 

From the Daily Telegraph, 15 March 2010:

 

"NS&I Index-linked Savings Certificates are also known as Inflation-Beating Savings and are designed to give savers a guaranteed tax-free rate of return, higher than the rate of inflation measured by the Retail Prices Index (RPI), if held for the full certificate term.

"The certificates were launched in 1975 and were initially available exclusively to pensioners as a way of protecting their savings against high inflation. In 1981 the exclusivity of the certificates was dropped and they were made available to all savers."

And from Part 1 of this series on my blog, an extract from my email to my MP (03.03.2013):

May I also draw your attention to two passages in Hansard from 1975 that make it perfectly clear that Government recognises the moral obligation to protect the value of savers' money?

Hansard record of House of Commons debate, 10 July 1975:

Mr. Neubert

 

Does the Minister accept that the opportunity to invest in inflation-proof schemes is an act of belated social justice to millions of people who have seen their savings irreversibly damaged during the recent rapid rise in the rate of inflation? Will he make recompense to many of them by easing up on his vindictive attacks on the principle of savings embodied in the capital transfer tax and the wealth tax?

 

§Mr. Barnett

 

The hon. Gentleman has put his supplementary question at the wrong time, because National Savings are rising very well at present. I am sure he will be delighted to hear that. As to what he called "belated social justice", I am sure he will pay due attention to the fact that the scheme was introduced by a Labour Government and not by a Conservative Government.

 

Mr. Nott

 

Is the Chief Secretary confident that a further extension of index-linked schemes—which are welcome to savers—will not cause a diversion of funds away from deposits with building societies, leading to a rise in the mortgage interest rate?

 

§Mr. Barnett

 

We are, indeed, aware of those problems. That is precisely why we introduced the scheme in this limited way.

 

Hansard record of House of Lords debate, 4 November 1975:

Lord LEE of NEWTON

 

My Lords, does my noble friend agree that while the index-linked schemes are extremely good value for money, it would be a good idea—as inflation has been rather rampant—to increase the maximum amount that can be invested in them?

 

§Lord JACQUES

 

My Lords, the Government have two conflicting obligations. One is an obligation to the taxpayer to buy goods and services as economically as possible, and secondly there are certain social obligations. The Government believe that by the action they have taken they have got the right balance.

 

SECOND QUESTION

 

My version:

 

"Will the [Minister/PM] give a guarantee on behalf of the British Government that savings covered by the terms and limits of the Financial Services Compensation Scheme will be fully protected against ad hoc restrictions of access, bank bail-ins and other forms of expropriation or forced conversion?"

Version as put to Minister:

"To ask Mr Chancellor of the Exchequer, whether savings covered by the terms and limits of the Financial Services Compensation Scheme are protected against (a) ad hoc restrictions of access, (b) bank bail-ins and (c) other forms of expropriation or forced conversion."

Treasury written answer, from Mr Greg Clark MP (09 July 2013):

"The Financial Services Compensation Scheme (FSCS) provides protection for deposits up to £85,000 per depositor, per authorised institution."

My comments:

I have tweeted Mr Clark:

We have seen that savers in Cypriot banks originally faced partial loss of even their insured deposits. Now the proposal is to convert some of account amounts above 100k Euro into bank shares, and some of the rest is to be lost or frozen or ineligible to receive interest.

But it doesn't stop at Cyprus. A Russian journalist, Valentin Katasonov, sees this as a global trend towards "Open Bank Reconciliation", and there is now Europe-wide agreement on making not only bondholders but depositors pay the cost, as Bruno Waterfield reported in the Telegraph.

Here in the UK, the Bank of England has set up a "Special Resolution Unit" for failing banks; the SRU Director Andrew Gracie gave a speech to the British Bankers' Association (pdf) in September 2012, outlining what might happen and how it would be carried out and the media coverage appropriately managed. Among the public announcements he envisages (pp. 4-5) are:

"any insured depositors would be fully protected - as is always the case; and [...] the final extent of creditor write-downs, and rates of conversion to equity."

Now, an ideas speech to bankers is not a binding commitment or a statement of official policy. If push comes to shove, can we be absolutely sure that some of our "insured" money won't be frozen, or compulsorily swapped for shares in a bank of established dubious quality? This is why we need very specific assurances - or to get our money out.

If that last sounds alarmist, note the rumour on John Ward's blog, that JP Morgan is now sending people into Portugal to help big investors get their cash out of the country ahead of a bank bail-in there. And Barclays is among several banks recently downgraded by S&P.

The issues may soon turn out to be far more than merely theoretical.

UPDATE

The following email exchange with the MP today may be of interest.

Me: Thank you for your letter and enclosures of 10 July. I assume that your concluding remark about the answers being "of interest" is tinged with irony. I have Tweeted the Treasury ministers concerned to get more relevant, more specific replies.

He: What they are basically saying is that they don't want to issue any more index linked debt at the moment. They are also saying the 85K is safe.

Me: I understand that. Please don't think that you're the only grammar-school-educated boy in South Birmingham. I also have a degree in English from Oxford.

My point - and it would have been clearer if you hadn't edited out one of the most important parts - is that it is not only my view that they are morally obliged to offer index-linked securities, but the view of the Government that introduced them in 1975, and also that of the Opposition at that time.

As to "safety", this too needs clarification. Argentinian depositors' money was safe during the 2001 corralito, but it wasn't accessible.

I am on Day 398 of this enquiry via yourself and think it might be better if we pursued the case in parallel from now on.

FURTHER UPDATE

Let's see if the Press can help. Andrew Oxlade at the Telegraph called for a return of "Thatcher bonds" back in April, now I've Tweeted him:

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All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.