|Now Capitalized Prudently|
Macquarie then watched the economy melt in the heat of the credit crunch, the congestion charge in London eat into parking demand and the servicing of the £500m debt it took on to finance the deal become impossible to meet.
|Now Capitalized Prudently|
“It is usually agreed that casinos should, in the public interest, be inaccessible and expensive. And perhaps the same is true of Stock Exchanges. That the sins of the London Stock Exchange are less than those of Wall Street may be due, not so much to differences in national character, as to the fact that to the average Englishman Throgmorton Street is, compared with Wall Street to the average American, inaccessible and very expensive”Times change and when JM Keynes wrote that in The General Theory of Employment, Interest and Money he did not anticipate the rise of bookmakers like William Hill, Ladbrokes, BetFair/Paddy Power and so forth.
What, then, to make of the same graphic (with LSE now in red) since August 2013?“When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done”
It is sometimes easy to treat economic policy in the abstract and overlook its human cost. Or make claims involving the Greater Good. Such claims always merit close scrutiny. This Bloomberg piece by Narayana Kocherlakota, former president of the Federal Reserve Bank of Minneapolis touched that nerve.
Negative rates provide as many questions as answers. But some things are clear. "Almost" retirees looking at annuity rates are major losers. As are serial savers, poor fools. Thrift is not cool, Aesop.
We know these things but they do not (or no longer) shock majority swathes of our ranks. Those that it does understand Bernie, Nigel, Marine, Pablo, Heinz-Christian and Donald.
|"So a debased currency will help?"|
If tomorrow there was a sand shortage in the Sahara it would befuddle many. A close second is how after many years of expensive oil prices Venezulea (highest proven reserves in the world) is now asking the ladies to stop using hairdryers so that the country can negotiate an awful energy shortage. How did they get here?
The short answer is most electricity capacity in Venezuela comes from hydro - and the country is suffering drought. So blame El Niño (as President Maduro does).
The longer answer is a striking lack of investment in power capacity: despite the knowledge that consumption has risen by half over the 10 years to 2012 planners have engineered an increase in capacity of under 30%. Cue a negative externality and pleas for wet hair ensue.
In what appears to be a story of deferred pain, investment by the private sector electricity companies (and others) dried up when the late President Chávez was elected in 1998. Subsequent nationalization actions did not encourage private capital. Concurrently, consumption subsidies and price freezes on electricity boosted demand.
Told this way current travails appear more a case of poor economic management by socialists.
However, dig a bit and it is perhaps most accurately a story of a divisive political history and corruption stretching back to (at least) the nationalization of oil companies in the mid-1970s. With the subsequent oil price shock in 1978 the Venezuelan economy became a very fine example of Dutch Disease.
Arguably the key consequence of a four-fold increase in government revenue following the OPEC prices rises was an increasing cancer of corruption eating into the two dominant political parties of the day. Worsening cronyism and patronage in electoral competition became the norm; and this in time led to Hugo Chávez coming to power on the very reasonable manifesto of anti-patronage, anti-corruption and anti-poverty.
So, as with statistics, the cause (and answer) to the problem depends on which section of the time-series one starts the analysis from.
Most if not
all advertising by financial services businesses is aspirational rather than functional.
That is, the quality of the product is secondary to what it can do for your image
Usually the spots that pass with numbing regularity on Bloomberg news are no more than metaphorical honey traps for the retail market. But today there exists one spot that takes it a stage further.
Interactive Brokers has a suite of products and services offering excellent functionality. Yet they have settled on this way to sell them:
An earlier entry pointed out how many sub-strategies there are under the title ‘long/short’. Take one step back and consider this table from the 2016 Preqin Global Hedge Fund Report (click for larger version):
Long/short – what could go wrong? Hedged positions, protection etc etc etc. And yet there are headlines like this one:
Here’s Why Long / Short Hedge Funds Are Getting Hammered
One of the problematic aspects of such an approach is that “long/short” is a hard category to define – and there is no consensus around the term. Which leaves plenty of room for whatever headline one wishes to shock and amaze with.
The IAM took a stab at the definition in cooperation with the LSE's Financial markets Group a few years ago. They produced the following classification table of hedge fund strategies:
“Just buying cheap stocks doesn’t do you any good unless they get less cheap soon”
The attraction of a set of fixed factor criteria that lead to trading out-performance is strong and perennial. Unfortunately, the factors underlying the out-performance are not.
Smart beta is a case in point. The smart beta approach gives greater weighting to companies manifesting factors deemed key to out-performance. These might, for example, be low P/E or P/S ratios, companies delivering earnings surprises, relative strength stocks and so on.
Sadly, stability is not a characteristic of any such factors. Their very popularity will see to that; and if it does not anything else leading to a change in market regime will. So “smart” should more accurately be called “alternative” (or even “dumb”).
Indeed, at least one study has shown they do not outperform their benchmarks on a risk-adjusted basis.
Alternative beta is no substitute to dynamic (and proprietary) strategies. Such approaches continuously monitor changes in relationships and shift to the most profitable. If you have one keep it proprietary!
- JM Keynes, The General Theory of Employment, Interest and Money, 1936. I forget which page.