A Whiff of Cordite
September 25 2008
Forgive me this week for a bit of personal commentary – but the events and feelings of the past few days I think should be recorded for more proper recollection once the dust of this destruction has had time to settle. more...

Ding Dong – not so merrily
September 19 2008
It was with some concern that I sat and listened late last year to an investment adviser extolling the great benefits of some of the more exotic emerging markets. As a broader sector it has of course been one of the top two stars over the past four years – a total turnaround from a decade earlier when they were the dogs of the asset class list – but as the phrase goes “every dog has its day”, and so did this one, Vietnam. more...

Oriental Discounts
September 11 2008
“Its growth Jim, but not as we know it” would be the Trekkie’s description of what has been happening in Asia. Asian stock markets, excluding Japan, have for the most part been the darlings of the equity investment world over the past few years. The mantra from advisers has become almost a creed and as a result I have heard of some significant investments being made based on the view that this was a one way escalator going up and that one would be a fool to miss out. Such blind complacency never ceases to amaze me, especially when dealing with other people’s money! more...

Indebted UK
September 8 2008
If there is one area where we have managed to beat our American cousins in a league table it would appear to be with our accumulation of debt – unsecured personal debt. Nearly two thirds of our economy is based on consumer spending and this has expanded as we were all encouraged by dim-witted politicians and greedy bankers to pile up debts and to keep the national spending spree going – after all “It’s good for the country!” more...

“There will be blood”
August 29 2008
What an apt title – this recently released film about an early rapacious American oil magnate has provided a most pertinent title for some comments this week. The film may be about the oil industry but it is the banking and financial services area that really concerns me. more...

“China Lite” – on a plane from Paphos
August 29 2008
Is it being at 35,000 feet, or is it the second Bloody Mary, but thinking on a plane allows one to take a broader view on the global economy. No doubt by the time I land any insights I may have had could well have become considerably more fuzzy. more...

When In A Maelstrom
August 29 2008
It is difficult to achieve any form of perspective when sitting in the midst of a maelstrom; it is thus all the more important to check the charts to see through the day to day short term buffeting of a financial storm. We are in such a storm and it will take some time not just to blow through but also to assess the destruction, damage and detritus that has occurred. more...

US Pump Punishment
August 29 2008
So we enter the US “driving season” when middle America leaps (possibly a little exaggerated) into their SUV’s and cruise around at 50 mph for days on end. This national pastime however, has one draw back this year – the price of gasoline has just gone through the $3 a US gallon barrier and even beating the previous peak seen after the hurricanes in 2005 decimated the refineries on the coast of the Gulf of Mexico. more...

Too Good To Be True?
August 29 2008
“Jobs figures bring welcome relief” was the leading headline – but in my view not so much relief as astonishment. Last week’s unemployment figures for the UK were heralded as the lowest for thirty years at 5.1% (down 0.1%) with even the numbers claiming jobseekers’ allowance declining. Our “working” population has risen by 465,000 in the past year to a total of 29.51 million and apparently this is the biggest increase for a decade. Just to add to the unremitting joy, vacancies were also at their highest since the current records began in 2001 and even redundancies were at their lowest, 106,000, since 1990. Surely a wondrous day for the British economy? more...

Three Strikes and You’re Out!
August 29 2008
It was supposed to be a celebration of talent across the sporting world. England was supposed to be triumphant in football, be mighty and victorious in rugby, and the young Hamilton was mere points away from the coveted world championship. However, it all proved too elusive and many endured a sporting weekend of what can only be called a hatrick of horrors. Sadly City workers who came into work on Monday morning hoping to put said weekend (and perhaps losses at the betting shop!) behind them were treated to another trio of horrors – only this time concerning UK housing. more...

The Wrong Harvest
August 29 2008
I can recall the dark and dire warnings of the Reverend Thomas Malthus from my school days, which managed to scare us all into thinking that we were all doomed. Now they seem to have been recently resurrected with all the gloom and fear of a Boris Karloff film. Back in the 18th century, his infamous book “Essay on the Principle of Population” postulated that the growth in the citizenship of Europe would quickly outstrip its available resources and thus we would see widespread famine and starvation – and we did; but not for the reasons put forward by the good Reverend. As of last week however, the demagogues of the media seemed to have decided that the spirit of Malthus may have returned and that again there is not enough food to feed ourselves. Doomed once more! more...

The Search for Silver Linings
August 29 2008
With the reverberating sounds of creaking property values, many investors have felt the fear of falling investment values. If market sentiment runs on the high octane of fear and greed, then we have swapped over from one to the other with great rapidity in just a few months. I can still recall the bullish statements of the late Summer from certain stockbrokers talking the stock markets up to the new “Elysian Fields” of all time highs (not to mention their trading commissions and year end bonuses). more...

The Refined Art of Rock Knocking
August 29 2008
Oh what a chorus of half baked ill informed wingers. Since the decision to “nationalise” the Rock last Sunday, we seem to have suffered the rants and ravings of anybody with a view about the apparent impending demise of this institution. more...

The next “dead cert”
August 29 2008
Investment markets thrive on fashion fads and betting on the next “sure fire” investment winners. At the time their investment arguments seem totally compelling and few seem able to identify any fatal flaws and fallacies that may lurk within. Mind you this is not very surprising as such investments are normally sold hard by excited and motivated (commission motivated, that is) salesmen who are somewhat unlikely to point out the pitfalls. more...

The Gift of Giving
August 29 2008
The British Retail Consortium (BRC) reported this month that retail sales fell for the second month in a row. Like for like sales fell 1.5%, apparently hitting depths of gloom not seen since 2005! Even the icon of British retail, Marks and Spencer, warned of ‘weak trading conditions’ ahead whilst simultaneously announcing profits of £821m earlier this month. Why aren’t we spending? more...

The 5th Labour – The Augean Stables
August 29 2008
Whilst the financial upheavals continue, perhaps it is a suitable time to look at the background of the greater global economic position. Although some are calling profound doom and gloom and forming queues for the windowsill, with deep recession being predicted, it is interesting to note how long we have gone on without one. more...

The 'L' Word
August 29 2008
As a single female heading into the weekend, some of you may think that I am talking about the four letter ‘L’ word – Love. Alas, I am however talking about a certain other nine letter ‘L’ word that has been on everyone’s lips this week – Liquidity! (Incidentally, I might not say no to any gentleman bearing both love and liquidity!) The latter, if you have been following the financial press this week, has been seen in a range of combinations ranging in severity from ‘liquidity squeeze’ to ‘liquidity crisis’. Although investors, analysts and commentators have differed in their opinion as to how acute the situation is, they are all agreed on one thing – liquidity is without a doubt draining out of the system. more...

Survival of the Leanest
August 29 2008
Last week may not have been the final capitulation, but it certainly sent a shudder through many, normally quite stoic, investors. Although warnings of difficult times ahead have been well signposted and warned of, it took the dreadful sales figures from some of the retailers and builders to ram home the effect of what has been developing over the past few months. more...

Sunshine and Roses
August 29 2008
Here at the headquarters of Seven Investment Management, we in the investment management team are renowned for our rather pessimistic economic views and are affectionately called the ‘doom and gloom corner’. Mostly we wear this badge of honour with some pride and take comfort from the fact our cups are always half empty (incidentally, what’s the difference? Half empty, half full, at least we can all agree that the cup isn’t full yet!) However after spending the last two days trapped in a building (where I just happened to be attending the Euromoney Bond Congress) with fellow bond investors, chief investment officers and chief economists of some large investment managers, speakers representing the OECD, the Treasury of the United States, Central Bankers (the list is endless but distinguished), I came to this conclusion. We in the investment team are now faced with an identity crisis! Compared to the doom mongering I have listened to, we are positively full of sunshine and roses! more...

Summer Storms and a Summer Sojourn
August 29 2008
Unfortunately the very mention of global trade talks normally results in a glazed expression appearing across people’s faces. The Doha round of talks has been going on for seven years now and despite the headlines, most seem to have been resigned to their resulting in an impasse and with all the probability of final failure. more...

Suffering Storm Damage
August 29 2008
As the unfortunate population of Jamaica and Belize will attest, meteorological storms cause far more immediate physical damage than financial ones. However, as we will identify over the next few weeks, financial storms do also cause considerable losses but their effect and impact may not be so obvious. As I am writing, rumour, hearsay and tittle-tattle is flying around about which banks and hedge funds have been hit hardest. Given the speed of events, I will leave comments on this to others with far more erudite and expert brains than I. more...

State of Denial - Put Off Yet?
August 29 2008
On both sides of the pond it appears that there is an increasing division of views between the enthusiastic bulls pointing to certain encouraging corporate Q2 results and those bears who stare with increased nervousness at the burgeoning credit and debt market worries. Still that makes a market – two way views - but for some it could well be argued that they may just be in a state of denial. more...

Somewhere over Sumatra
August 29 2008
Singapore I regard as my second home – tidier, warmer and generally better organised than West London. Although there are sometimes criticisms about the staid and reliable nature of Singapore’s operations, frankly I would regard that as great compliment. In Singapore things work – and work well. For a still young nation, they have a lot to teach many more patronising older nations. After all if you turn on a switch the lights come on – there are many areas of the region and the world where that does not happen all the time – including on occasion in my house in London. more...

Safe As Houses
August 29 2008
Probably the best decision they never made. I am referring, of course, to Barclays and their failed bid for ABNAmro. After a policy of generally organic growth, apart from their significant £3billion Absa acquisition in South Africa, Barclays’ leap at another global brand name came as a shock. However, as the Barclays share price fell, the paper bid was always likely to fail against a higher cash offer from the RBS consortium, and whilst the Dutch will be happy with the cash, the prospect of selling some of their national silver to a Belgian bank won’t be popular with any of the Dutchmen I know. more...

Rain Rain Go Away
August 29 2008
It wasn’t just the gloom of dark rain clouds hovering ominously overhead that the City had to contend with this week. A dreary shadow of foreboding and loss loomed over credit markets and by the end of the week it truly had rained all over the Leveraged Buy Out (LBO) parade. An initial despair descended upon bond markets when news came that Banks gave up the attempt to sell $12bn of high yield, high-risk debt as part of the loan deal for the purchase by Cerberus Capital Management of Chrysler Group. Banks led by JPMorgan Chase will assume $10bn of that debt and Cereberus and DaimlerChrysler agreed to hold the remaining $2bn. A similar fate also weighed on KKR with banks failing to sell the $10bn of loans needed to fund the leveraged buyout of Alliance Boots, sending clear signals that higher interest rates and sub-prime contagion are starting to take its toll. Speaking of contagion, how’s this for some scary numbers? Defaults on so called “Alt A mortgages” (where borrowers have a better credit score than sub-prime borrowers but are still somewhere below those with a top credit score) are outpacing those of sub-prime loans. The three month default rate for 2006 Alt A adjustable rate mortgages is 2.3% compared to 2.2% for sub-prime adjustable rate mortgages, says a Citigroup report. more...

Pride before the Fall
August 29 2008
Only a few weeks ago, and quite justifiably, some of the attitudes and behaviour of certain investment participants could have been described as arrogant – they were hugely successful as they headed off for their Summer holidays, basking in the knowledge that they had made all the right investment decisions. The rest of us were mere mortals who hadn’t been able to divine or find the elixir of, well if not life, then at least the secret of investment success. Those who didn’t understand the intricacies of portfolios run by magic black boxes with indecipherable formulae and exotic algorithms were probably just not worth talking to. Funnily enough, I haven’t seen many of the most patronising ones recently but I suspect they may well have changed their tune by the time they return from Tuscany. At moments like this it is always worth remembering that wonderful phrase from JK Galbraith which I make no apologies for having quoted before, “There are two kinds of forecasters: those who don’t know, and those who don’t know that they don’t know.” Of course nobody actually knows what will happen in the future - and those who claim to have the gift of foresight are more than likely proven to be charlatans more...

Powerless
August 29 2008
Powerless in the face of the water companies, powerless in the face of the cable companies and in fact shortly - just powerless altogether. more...

Please Sir, Can I have some more?
August 29 2008
What do Chinese pork, Indian rice, Australian wheat and U.S. corn have in common? Unfortunately right now, a great deal! Their prices have relentlessly marched upwards in the past year and they have the dubious honour of contributing to the current plight of food price inflation that is gripping the world. more...

On Hold! Well……. maybe.
August 29 2008
So the Monetary Policy Committee of the Bank of England left rates on hold last week, thus leaving the exasperated bulls straining for the next move to be a cut. The next Quarterly Inflation Report is due out on the 14th November and no doubt the MPC members will be have been aware of the primary elements of it. It will certainly therefore be interesting to see the minutes in a couple of weeks to see how they voted and whether they feel the outlook for inflation is really that benign. Maybe in the short term it could ease but it would be wise to be more sceptical further out. more...

More money – less value
August 29 2008
Good news - we are earning more: Bad news - we’ve got less to spend. I had better explain. It seems that the average gross household income has risen from £34,796 to £53,835 over the past ten years however, by the time we take off those “essentials” such as tax, national insurance and the mortgage (but excluding claret for some reason) we are left with just 32.6% of our gross income. more...

More fun at Doncaster?
August 29 2008
It’s that time of year again for the second half of that old adage “Sell in May and go away, and don’t return until St Leger Day”. As the St Leger was run last Saturday, welcome back. If you haven’t been away then you probably would have had much more fun at Doncaster than watching the markets over the past few weeks. After all, what is watching a bunch of nervous and pampered animals chasing each other round in circles compared to going out for a good day’s horse racing? more...

Maybe not just a passing problem? Inflation
August 29 2008
Damn statistics and damn politicians don’t blend well together. After highlighting some of the obfuscation around the unemployment numbers recently, it makes sense to move onto another vexed question – what exactly is the rate of our inflation? more...

Lies, Damned Lies, and Statistics
August 29 2008
If Mark Twain were alive today uttering these now famous words, I wonder just how amused he would be with how we have become subservient to a plethora of numbers. From exit polls directing the strategy of a presidential campaign, to TV shows entitled ‘8 out of 10 cats’ and politicians citing figures to convince us the economy is in fact quite healthy in their capable hands, statistics are now inescapable. more...

Keeping a look out for Birnam wood
August 29 2008
So here we are – back where we were, with UK interest rates now higher than US ones, and with every likelihood of going higher still. Is this the return of the bad old days of the British economy? Or more likely it may herald of the end of the boom period that we have been living in. (The trouble with “booms” is that you never know you have had one, until it’s gone!) Low interest rates and reasonable growth but at a price – and that price has to be paid for in the form of the debt that has been piled up by both the nation and the consumer. This debt has been encouraged quite deliberately by the governing authorities as it has fuelled the growth over the past decade. So we have benefited from it but we also have to pay for it. more...

Joining the dots of history
August 29 2008
Searching for a specific piece of economic data can be likened to going on a journey. You never know where you might end up. In this job, I can go on several of these journeys a week, some more interesting than others. A while ago while looking for country growth statistics, I ventured on a very Robert Frost-esque trip of the path less taken down and stumbled upon numbers charting the GDP of countries since the birth of Christ. more...

It’s that word again – Stagflation
August 29 2008
For those of a certain age, this is a word that induces a depressing recall of a failing British economy lampooned as the sick man of Europe. Stagflation is the evil concoction of a stagnating economy blighted by persistent inflation – or in other words rising prices in a weakening economy. more...

Is this the world’s biggest hedge fund?
August 29 2008
What do you call a hedge fund with a government? Probably Iceland. For a country with the population approximately the same as that of Scunthorpe, this little nation has made a remarkable amount of noise over recent years. Better known for its turbulent geology and hot springs, it has more recently become known as a purveyor of equally hot money into various areas and especially the UK economy. As an example, the investment business Baugur has included an eclectic range of relatively small holdings in a variety of assets and reads more like a list of the typical British high street or shopping mall. more...

He huffed and he puffed and he.....sent a repossession order!
August 29 2008
As a first time home-owner, I am nothing if not tired of picking up my daily newspaper only to be repeatedly bombarded with truly terrifying headlines concerning house prices. Among the recently spotted - ‘House Prices to fall by 33% by 2010’, ‘Home-owners facing negative equity’, and ‘House prices post biggest fall since 1993’! more...

Hacienda Horrors
August 29 2008
Last week the pain in Spain had nothing to do with the rain. The pain was all to do with house prices and before we smirk at all those unfortunate people who may have seen their property valuations subside, perhaps we should be wiser to consider the rate at which our own domestic house prices have been rising. more...

Going to “L” in a hand cart
August 29 2008
“Well what shape is it?” has been one of the most recent questions I have been faced with. “Is it going to be a V or U shaped recovery, or maybe a long bath shape?” Of course one would love to come out with a firm and clear idea of how the market will come bouncing back, but of course one can’t because not only would it be an irresponsible guess but also because nobody actually knows. more...