The Long and the Short of it

I've just finished reading The Long and the Short of it: A Guide to Finance and Investment for Normally Intelligent People Who Aren't in the Industry by John Kay. Of all the investment books I've read recently it's a star performer. why?

Like any book in this area it gives a background to investing and the process - which has been handled very well. It covers the efficient market debate quite well, and gives a very good insight into the CAPM (capital asset pricing model) and SEU (subjective expected utility). There are points where I felt it could have done with some more charts/illustration, but on the whole its an easy enough read.

The reason it's a star performer is simple: it's shows you why & how you can outperform the big trading shops, traders and analysts (specifically that they have to target short-term results). The coverage of how to put together a portfolio based on overall low risk (from having uncorrelated risky investment), rather than the classic "perceived" low-risk portfolio (from selecting correlated low risk investments) is very enlightening.

So well worth a read and deserves a place on any investors book shelf...

Heres to you Mrs Watanabe

The last few days have been quite busy with starting a new job and the arrival of my first child, so I've been running a bit behind schedule writing wise.

One of the articles I've finally got round to reading was the FT "Hunting Mrs Watanabe" a lovely piece on Japan's housewife speculators. I'm intrigued as to whether there could be a "Mrs Smith" in the UK, and how far are we from a Sterling Carry Trade...

Hopefully I'll be able to write a bit more often again now that things are settling down.

Merv Focuses on quantitative easing

Merv, or Mervyn King to those who don't know him well is the main man at the Bank of England. His job is to make sure that inflation is kept under control, and a bit of financial stability as well.

Here is a lovely picture used by the FT in their article "Bank set to deploy quantitative easing":

[copyright bloomberg.com, 2008]

I like to think that it would have been titled "Merv Focuses on printing money" by The Sun (a tabloid/racy sports/babes/gossip newspaper).

Of course "printing money" is not quantitative easing, but then again we don't have any useful terminology for this complex concept so all the newspapers and TV programs keep using "printing money". For some reason it's better to give it a name that seems simple but is completely wrong, rather than explaining what quantitative easing is.

And a little side note [pun intended] is that the Bank of England does not print money.. they outsourced that ages ago ;-)

Obama: Start?

A moving event, and great speech - hopefully there will be substance to follow:

(picture created using http://obamiconme.pastemagazine.com/)

 And to misuse a quote "It's the economy, climate, energy security, healthcare, etc, stupid"

IMF bails out Iceland, Dublin being renamed

So in answer to my previous post How long can the IMF afford to wait? the answer appears to be two weeks.

On a related note, my brother is convinced he invented the credit crunch joke:

"The capital city of Ireland has been renamed from Dublin to Halving" [due to Ireland's technical recession]

a reference to the previous joke of "Ireland having Europe's fastest growing city - its doubling every year"

omg

Banking jokes

some news my brother found funny..

"I hear that the Japanese banks are in trouble.

Origami Bank has just folded and there is something fishy going on at Sushi Bank,
we are hearing that Sumo Bank has gone belly up and Bonsai Bank plans to cut back some of its branches.

Karaoke Bank is up for sale and is going for a song.

Meanwhile, shares in Kamikaze Bank have nose-dived and 500 back-office staff at Karate Bank got the chop."

omg

Investing now? a few words from the unwise

Fibonacci resistance leads us to believe that the golden ratio is shining, but there is a risk of oscillation as the Ichimoku cloud could be coming in Elliott waves.

Stick that in you markov chain and smoke it...

Finance a science? methinks it looks like art.

How long can the IMF afford to wait?

GDP: $20billon
Banking Debt: $120billion
Population: 304,367
Banking debt/person: ~$400,000

Outcome: Iceland either lets the banks fail, or it takes on a massive national debt and promptly defaults, or its trading partners are going to have to allow it to deflate its debt (of course I'm sure that the Netherlands, Germany, UK and USA have lots of spare cash)

not a great set of options...

the question is: can other countries remain solvent? and how long before the IMF has to start propping up countries? of course since they sold most the gold they will have to use.... (wait for it) US government and corporate bonds. Truth is stranger than fiction.

Economic worries fixed *cough*

hmm markets and late interventions, reminds me of the rhyme..

All the King's horses and all the King's men...



all images sourced from FT.com, their copyright

Where did all the money go?

A bad week if you are invested in any equity market:





Where did the money all go?



Looks like its all flowing back into the states, a flight to quality, or just a need to liquidate positions? either way this does not look good for equity markets anywhere

all images sourced from FT.com, their copyright

Economic smiles

This picture from the Economist made me smile, it's the perfect summation of Europe Vs. Russia

[Copyright © The Economist Newspaper Limited 2008, Illustration by Peter Schrank]

Oil over bar the shouting

with oil near $115/barrel its looking good for a short now, so unless something odd happens in the next day or so I'm going with this option...

why? well because I think the world-wide economy is due a period of slow growth (optimistically) or is about to go into at least a mild recession... and who needs oil in a recession?

I don't buy the "emerging countries will make up for the US drop in demand" story, we are all more connected then ever, if anything we are leveraged against each other.

so thats my thoughts today, I will review on Monday and place the short if I'm still happy with the idea...

Brownian motion: is Gordon Brown the right person to be preaching to the banks?

The irony of Gordon Brown telling British
http://www.ft.com/cms/s/0/39805ecc-0a41-11dd-b5b1-0000779fd2ac.html

and American bankers
http://news.bbc.co.uk/1/hi/uk_politics/7347995.stm

to tighten their belts, come clean on their hidden debts and pass on the interest rates reductions to account holders is amazing to see....

considering that the bank that Gordon now owns has not passed on these rates
http://news.bbc.co.uk/1/hi/business/7346081.stm

that his government wanted to keep this debt off the books
http://www.guardian.co.uk/business/2008/feb/07/northernrock.economics

and that the regulatory environment that he created failed to cope with the situation on a fundamental level:
http://www.economist.com/world/britain/displaystory.cfm?story_id=10978416

actually maybe he is the best person qualified to talk about these issues!