I wonder if readers would help grad student Alexandre Gaillard who yesterday sent me an interesting email?

Alexandre is working on a masters degree in finance at the Institut d'Administration des Entreprises / Hautes Etudes Commerciales in Paris. What he needs are anglophone investors to take his online survey. The survey is designed to inform his thesis covering the impact of media influences on stockpicking by both private and institutional investors.

Alexandre is working with CNBC on this. Some readers may be familiar with the 2001 work of Jeff Busse and T Clifton Green on CNBC's impact amongst daytraders and momentum followers - it is a hugely interesting area. By participating in the survey (15 minutes) it is possible to sign up to receive the eventual results and Alexandre's final thesis.

The link to the survey is right here:

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Cartoon credit: Kipper Williams &
the Guardian newspaper

There was an unfortunate episode in yesterday’s one-day cricket match between New Zealand and England. England took advantage of a collision and injury to a New Zealand batsman to run him out. This is equivalent to scoring a goal whilst holding down the goalkeeper.

England declined to recall the batsman. The umpires declined to take responsibility and declare a dead ball which would have cancelled the act. And so the destructive characteristic within man's ‘will to win’ combined with officials' timidity to prevail over fairness.

Gordon Brown yesterday in parliament said:

"We do not want to do further damage to the Zimbabwean people, but when businesses are helping the Mugabe regime, they should reconsider their positions."

The UK's Prime Minister deserves praise for a classic piece of hollow political umpiring. Simple words, impossible definitions and pass the buck all in one sentence. But in case anyone accuses him of prevarication on a difficult issue only last week he was firmly against stripping the now Orwellian figure of Mr Mugabe of an honorary knighthood the UK gave him in 1994. This on the grounds that it would be a mere symbolic measure.

Some declarations are beyond ridicule. But let it at least be said that Mr Brown’s political antennae are not good enough to keep him in his job beyond the next election (due by summer 2010).

International businesses involved in Zimbabwe such as UK quoted Anglo-American and WPP plc find themselves caught between the search for profit and the desire to be considered moral entities. Both groups have somewhat sheepishly defended the do-nothing gambit. Their dilemma is not enviable; nor their reaction unexpected. But the beyond-our-control rationalisation is a piss-poor choice that most would be ashamed to teach a son or daughter.

In 2004 Australian cricketer Stuart MacGill declined to tour Zimbabwe on moral grounds. It was a brave decision despite the career risk and knowledge it would change nothing. A similar dose of (belated) political and commercial decisiveness on the other hand would produce results. Such, possibly, as the free and fair elections taken for granted by so many.

Don't hold your breath.

Footnote: New Zealand won yesterday’s game in an refreshing demonstration of natural justice. But that’s sport.

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There used to be certain events that, while not racing certainties, heavily favoured laying money on because they contained moments that were easy to predict or hedge: test match cricket involving Australia; the US Presidential Election; and any major international football tournament.

None of these are gimmees anymore (or maybe just for this year) but it is Euro 2008 that is especially upsetting (the others are merely intriguing). Don’t these Dutch, Turks and Portuguese understand that a fundamental precept to modern football hedging (or straight betting if you are a bit mad) is that 38% to 40% of all goals are scored in the first half?

Knocking in 10 or so in the last quarter of an hour makes a simple mockery of carefully planned hedges (and the target itself) in addition to bollocksing up tournament ratio totals. No longer are goals randomly falling over time in any given first or second half. Take your Poisson distributions and have a laugh instead.

Non-linearity in 2008, it seems, extends well past financial markets. Tough to hedge any of them.

NB: Photo credit, China Daily

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Related articles:

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CPDOs expose ratings flaw at Moody’s
Who rates the ratings agencies?
EU set to crack down on rating agencies

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Client feasted a shade too much on risk with no eye on the collateral? Credit burn? Black hole in the balance sheet?

This three step guide to Successful Underwriting may help.

Step 1:
Keep some noise about the greater good, the necessity to raise capital in an orderly fashion and the dangers of volatility during cash calls. Don't mention why your client needs to beg reluctant shareholders unwilling to take up the rights to do so.

Step 2:
Have PR call the Financial Services Authority knowing inaction is not an option for them (generally only a choice when it's not too late to take action) and studiously ignore all references to your insurance obligations towards rights left on the shelf.

Step 3:
Keep the aide-memoire below handy




Related articles:
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FSA Forces Disclosure of Short Sales in Rights Offers
Cleaning up the shorts, FSA-style
FSA to force short-seller disclosure to stop abuse
FSA tightens short-selling rules

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An alert for readers of French: due to industrial action by newspaper distributors LaTribune.fr and LesEchos.fr are offering free access to their entire websites today. LeMonde.fr will be uploading a free .pdf version of today's edition at 11h00 Paris time.

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Please consult your Kübler-Ross scale for Property Agents:

  1. Denial – What? Are you crazy? This is nothing – just a blip
  2. Anger – I can’t BELIEVE you think it’s over!
  3. Bargaining – C’mon, just let me sell a few more houses at last year’s prices
  4. Depression – Am I really pond-scum just like all those clients said?
  5. Acceptance – Nothing really wrong with selling tents, is there?
The last post here in April on property prices in France quoted the Fédération Nationale de l'Immobilier (FNAIM) in their quartely letter thus:

“the risk of subprime contagion is limited…the USA is not in France”
and:

“In spite of a decline in prices of -1.0% during Q1 2008, the market environment does not look positioned to enter a scenario of generalised price declines.”
The data for May came out today. Month over month the decline (including apartments) is –1.3%: quarter over quarter it’s -0.72%; year over year it’s –2.7%; and year to date about –2.5%.

FNAIM, however, use a rolling 12 month average which indicates a gain of 1.7%. This allowed them, despite the weakness of the recent data, to say:

“It is clear that, so far, the market is still in the process of stabilization”
For greater accuracy when reading this sentence please substitute "FNAIM" for "market" and "denial" for "stabilization".

How much more of the FNAIM's 'stabilizing' is required for normalcy to reign is not specified. As for the clarity referred to it can been best seen in the chart below from Kurt Saturax at bulle-immobilier.fr


The key point is that even on the FNAIM calculation (yellow) the trend is down (direct link to Kurt's chart here). Moreover, this latest data comes in a traditionally seasonally strong period. Given this, and the prevailing dearth of credit, it is foolish of FNAIM to continue to suggest an annual gain in property prices is on the cards.

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Only 3 weeks since the last showing of Exhibit 1 but a repeat seems appropriate.

Exhibit 1: Comparing the 2000 to 2002 collapse to now


What has changed? Longer term sentiment (perhaps) driven by (possibly) recognition that signs like banks agreeing (with prodding) to support a stricken peer rather than try to pick up its business are really not indications that the worst is over.

Bonus: Useless headline of the day - Bradford & Bingley shares: buy, sell or hold?

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What other international football squad is so enjoyable to watch as the Netherlands when they play as they did tonight against Italy?

Is there another squad capable of offering a a midfielder (Sneijder) who sarcastically applauds his defensive countryman (van Bronckhorst) for an errant pass into touch; and minutes later combines with the same to score a truly stunning end-to-end goal? And against the World cup holders. When they are good, they are sublime.

But when bad? Heard of the fox that, when caught in a trap, will gnaw its leg off to escape? Eleven Dutch footballers can do that without the assistance of the trap.

Enjoy it while it lasts.


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Oil Rises to Record on Weakening Dollar, Morgan Stanley Outlook - Bloomberg

Was Friday the first time Israel made its intentions towards Iran clear?

Was strong Asian demand for energy resources discovered overnight by brilliant Morgan Stanley (MS) research?

Has the dollar hedge of buying oil suddenly been dreamed up?

Israel has been keeping noise about a military strike very openly since (at least) 2002. One cannot even argue that the radical change in the US intelligence assessment last December that Iran (probably) halted its military nuclear programmes in 2003 has intensified Israel’s rhetoric.

Similarly, it is fairly certain that an analyst at MS conditionally predicting crude at $150/barrel has not based it on information hidden from the rest of the market. What is out there has been evaluated at length by a rich diversity of opinion. One report cannot have more insight.

And then the buck. Having recently checked the charts, since 2002 there appears – may have to look carefully, mind – a profound relationship between debasing that currency and all the commodities it is priced in.

No. What we've got here, Captain, is failure to communicate.



If buyers want to, in essence, double count Israel, Asian demand and the weak dollar when calculating an appropriate price for crude who is to stop it? But take a look at delivery prices to September (crude), April 2009 (heating oil) and May 2009 (Brent).

They are all higher than cash (ie contango). Which is a bullish sign (despite this contango not being particularly pronounced): some buyers at least are so convinced of future price increases that they want to enter the oil storage tank business. Others are buying as the price rise becomes a justification itself – momentum.

The combo of rationalisation and momentum faces a poor historic price appreciation precedent where oil contango is concerned - suggesting that the bull case is best played with Other Peoples Money and a handsome pension pot.

This does not question the the broader argument that fundamental demand is pushing oil up. But it does attack the idea that it accounts for a record spike like this. Contrarians will be watching how the contango moves during the peak US driving season this summer.

UPDATE: Oil shortage a myth, say industry insider Seems doubtful the contangonists read the Independent...

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As per comment on the prior post, there are still no hovering spacecraft over downtown Manhattan. But there is an item of data being greeted today as though it fell off one of them. US unemployment sits at 5.5%.

Of course, on recent form equities may go back to living the fine Ari Gold management rule that 'Bad news is not news'. Until today optimists drew comfort from the security blanket of older data showing consumer spending holding up despite a nightmarish housing market. ‘Weathering’ has been a key word used to describe what markets were perceived to be doing during the storm. And already, on this latest data, voices (including, worryingly, the statmeisters themselves at the US Bureau of Labor Statistics) are talking about how tough it is to seasonally adjust the May numbers - ie it's too big. Hmm. So is it noise or signal? Maybe the optimists have a point.

Or not. Some will not want to discount the bullshit factor the noise view might be shovelling: the notion that unwinding may simply take more time than optimistic churn traders plan for somewhat undermines the ‘weathering’ crutch.

UPDATE:
Barry Ritholtz seems, with some assistance, to have got to the bottom of it.

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I am short. Markets are inherently biased long. Short is not comfortable.

In a US market capitalised at circa $16 trillion (with a ‘t’) there is only $20-$25 billion (with a ‘b’) controlled by specialist short sellers. Many hedge funds go short and long of course. But specialist shorts are a rare, unloved breed. Long is strong.

Asset prices rise, that’s good. Everyone says so. Good central banks keep money cheap. Naughty central bankers, like Mr Trichet who in the last hour reminded everyone that dearer money is possible, are not loved (at least in their own time). Did Paul Volker get a medal at the end of his stint?

The fetish of rising asset prices, momentum, turnover and Cramer are not bad. The dearth of short sellers is. For when economic fundamentals go pear shaped; or systemic risks arise; or you are one of those spending half your wage on food and don’t “get” the buzz surrounding the commodity super cycle as it applies to agri; it’s then that timely price discovery suddenly looks desirable. Opportunity cost driven equilibrium alone is not ideal for an optimistic system during unstable times.

A reminder that European Central Bank rates can rise as well as stay put should not surprise anyone. How to explain it other than as another example of markets proving to be a place where wealth is moved regularly from the hands of the Panglossian active to those of the patient?

There is useful employ for more half-empty attitudes in the market. No one wants to know yet, though.


Related links:
European Bonds Drop After Trichet Said Rate Increase `Possible'
ECB on high alert over high inflation -Trichet

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Alistair Darling's Treasury team and Mervyn King's central bank squad are locked in quadruple extra time, it seems, over this hire. Yet a small sporting event you may have heard of kicks off this weekend and offers an easy solution process.




Mr Darling is under instructions when keeping not to move his eyebrows before the whistle blows.

PS/Some exotic gambles out there for the Euros: 'What will Ronaldo do first' offers 100-1 on 'Hire a transsexual prostitute' (although possibly the 'Marry Nereida Gallardo' bet is more likely if not of better value); alternatively one can guess 'What match will Ronaldo cry in first'.

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What fun! Click to make your own
Mr B&B used to be called Mr Mutual. But he did not like his old name. Everyone kept laughing at him. They would point fingers and call him a “provincial”. Whatever that was. So he changed name by deed poll in 2000.

Now, this story is about the time Mr B&B trusted co-worker Mr Spliff, the IT manager.

One day Mr Spliff, smoking a natural product, gave Mr B&B some papers with old numbers "Here, man".

“Thanks Mr Spliff. These look alright” Mr B&B said “After lunch I’ll go and show them to everyone”. So after a long lunch he set off to see everyone.

“Hello, everyone” he said when he arrived “as you can see from these numbers everything is fine.”

But everyone became quite cross. They said Mr B&B should fetch some cash from Mr Impossible Banker. So Mr B&B went to see Mr Impossible Banker.

“Hello Mr Impossible Banker” said Mr B&B “Why are you called ‘Impossible’? Can you do impossible things?”

“Haven’t come across anything yet I couldn’t do” said Mr Impossible Banker, modestly.

“How marvellous” said Mr B&B “May I have some money, please?”

“Of course! Let me see what I can do” said Mr Impossible Banker as he picked up his Blackberry.

Mr Impossible Banker knew a lot of people.

“It’s all arranged and guaranteed” Mr Impossible Banker smirked a short while later “And it will only cost you £9m – I’m robbing myself!”

“Wonderful!” said Mr B&B “Just wait till I tell everyone!”

“Do” said Mr Impossible Banker “Isn’t this better than being your old sleepy Mr Mutual self?”

“Oh, yes!” said Mr B&B “What fun! I just did a deal!”

Just then Tamjee the Turtle eased up next to Mr B&B. Tamjee worked for Mr Spliff.

“Why, hello, Tamjee” said Mr B&B “Have you met Mr Impossible Banker?”

“Yo” breathed Tamjee.

“What’s that you have?” said Mr B&B

“New numbers” said Tamjee slowly

Mr B&B took them “I hope they are good. Are they jolly good?” he asked

“Dunno” said Tamjee.

“Will there be more coming soon?” asked Mr B&B.

“Dunno” said Tamjee

“When will you know” asked Mr B&B

“Dunno” said Tamjee distractedly as he slowly ambled off.

Tamjee was a Turtle of very few words.

Mr B&B showed Mr Impossible Banker the new numbers. Mr Impossible Banker went pale.

“Are you feeling alright, Mr Impossible Banker?” asked Mr B&B “Whatever is the matter?”

“Give back some of that money!” snarled Mr Impossible Banker

“Of…of course – but I thought it was guaranteed” trembled Mr B&B

“And now you owe £37m too” snapped Mr Impossible Banker ignoring the word ‘guaranteed’.

“But, but…how can that be?” moaned Mr B&B “Isn’t that impossible?”

Mr Impossible Banker laughed “I told you I could do anything” as he sped off in his new £110,000 Alfa Romeo 8C Competizione.

“Oh well” coughed Mr B&B in the dust left by the Alfa “At least all’s well that ends well” as he traipsed off to give everyone the news.

“Hello again everyone!” he said when he got there “I’ve got the cash – isn’t it wonderful?”

But everyone became very, very cross for some reason and began abusing him with naughty words.

It was a very sad Mr B&B who got home much later that evening.

He had to face the fact that his life as Mr Mutual really had not been that bad. Maybe he was not cut out for this stock market malarkey after all.


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Midnight last Friday was the deadline for returning French 2007 tax declarations by ordinary post. It was a reminder that the country, frequently maligned by its own citizens for its perceived high level of taxation, also regularly ends up Number 1 on the annual tax Misery list compiled by Forbes (click on the graphic for a larger version).

The list, however, ignores the fact that compulsory social security costs in France are comprehensive (where it counts) in the coverage they pay for. So fairness decrees France's misery ranking be considered together with, for example, her otherwise free health and education services. From that angle the rankings are not apples to apples when looking at France alongside, say, the USA.

Take home wages should be looked at in that context too; and generally France comes out well in international comparisons for most domestic circumstances (although the being rich and single has some drawbacks).

But what of overall happiness? One set of researchers at the University of Leicester found that the three most important determinants of contentment in nations are (easily first) health, wealth and education (the latter two in a virtual tie). Attention, looks like France is shaping up for a blow-out score on these criteria.

Eh, non. According to the Leicester work the French, out of 178 nations, are only 62nd. And there is more bad news from another set of researchers at Rotterdam's Erasmus University: France 39th of 95 countries.

Two similar results by different researchers is bad enough. But a third, this from work begun in 2002 by the University of Cambridge, is terrible: France 11th of the (then) 15 European Union (EU) nations. And the study was run by Cambridge's Faculty of Economics who know a thing or two about dismality.

Why is this? The Cambridge study, by focusing on the wealthy EU, had to look beyond the diminishing marginal returns extra units of wealth, health and basic education conferred. Those are key factors where scarce but relatively less so in the well-off EU (or, for that matter, other OECD nations). Accordingly, they found whilst everyone in the study was relatively happy the deciding factor between them was trust - in both public institutions and social interactions.

The topic of such trust deficits is a dangerous one to broach. Yet the hypothesis may well ring true as the explanation for the French findings to many who have lived extensively there and elsewhere. A paradox is that the French Republic was conceived as collectivist: liberté - the cry "live free or die" rang during the French Revolution long before New Hampshire got hold of it and franchised the bumper sticker to out of state SUV drivers; égalité - "all men are by nature and in the eyes of the law equal" is written into the 1793 Droits de l'homme et du Citoyen; and fraternité which here serves as a proxy for "trust".

Whereas liberté and égalité were defined in writing during the First Republic (albeit as descendants of an older lineage dating back to England's Bill of Rights) and are relatively simple to script in legal language fraternité is a moral idea and was enshrined last, in 1795:

"Ne faites pas à autrui ce que vous ne voudriez pas qu'on vous fît ; faites constamment aux autres le bien que vous voudriez en recevoir"
"Do not treat another as you would not be treated; always bestow on others the good you would yourself receive"
That this biblical notion came two years after the others and was delivered by a regime (Le Directoire) known in its own time as morally and financially corrupt is odd. In that context the adoption of "brotherhood" sounds opportune and self-serving. If so it was an early example of two of the, arguably, primary impulses of the French psyche: idealism and cynicism.

Commentary on this count is by definition subjective and mostly best left to open minds at the bar. But one manifestation is itself the heavy tax burden seen in the Forbes analysis (which sits on a narrow base) in hand with an elevated role for the state (expected to take care of everyone).

The tensions this produces politically, socially and economically are a direct legacy of those suffered by people who - by revolution - cast the mould and vocabulary of modern European democracy where no one else even remotely looked like so doing. Being trusting could never have been part of that equation: a culture for whose politics the phrase "creative destruction" might have been coined does not usually go around agreeing with and slapping itself on the back contentedly. And history has shown this a not wholly bad trait.

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