Sweet FSA
Posted on:
18
Feb
2012
by James Farmer
Move over, Schwarzenegger. Frederick Smythe-Allinson admires the BoE Governor’s transformation
Mervyn’s Makeover
So farewell then, Merv the Swerve, and hail to Merv the Enforcer. The man who declared menacingly that if a bank was too big to fail it was simply too big. The man who’s been telling David Cameron a few home truths about why Britain can’t fend off the euro crisis with a few easy remarks about how wise we British were to steer clear of the euro in the first place. And a man with iron in his soul and steel in his jaw. Not a man John Vickers would like to encounter down a dark alley.
The Guvnor’s transformation over the last three months has been little short of magnificent. There was a time when making Mr King look uncomfortable was so easy it was almost like cheating. Fire a tricky question at him, and his earnest face would turn blotchy under the trademark desk-clerk specs as he sought to control what looked like a mix of anger and embarrassment. But his composure at the Conservative Party – and, lest we forget, under the searching scrutiny of the BBC’s own Stephanie Flanders – was a different performance.
There was the confident way he sat during the interview. There was the sublimely relaxed way that he coped with the TV floodlights, thanks perhaps to a particularly thick application of orange greasepaint which hid the standing-out veins nicely. Indeed, he didn’t even flinch when Ms Flanders took him to task for having previously underestimated the size of the euro problem. “When the world changes, we change our response,” he purred. Ms Flanders, defeated, changed the subject.
Somebody alert the X Files. Our Guvnor has been abducted by aliens and swapped with a doppelgänger from Alpha Centauri. The truth is out there.
More Monkey Business from the Random Walk
Last month, Allinson boldly investigated the theory that dumb animals might make better forecasters than most humans – not just monkeys with keyboards, but also creatures such as Bob Beckman’s dog, whose stock-picking skills earned him the 1970s equivalent of a million pounds. This month, Allinson takes the argument to its logical conclusion.
One of the largest ever random walk experiments came to an end in 2002, when the Wall Street Journal wound up a 14-year attempt to determine whether a blindfolded monkey with a dartboard could beat a panel of stock-picking experts. In 142 six-month trials, a suitable monkey (or rather, its nearest equivalent, a financial journalist) would fire blindfolded darts at a printed sheet of stock names on a wall, while a team of professionals made their own more considered choices.
Predictably, the monkeys underperformed the pros, but not by as much as you might suppose. The pros won 87 of the 142 contests, but rather remarkably the darts won 55. More embarrassingly, during the first 100 bouts the pros beat the DJ index by an unimpressive 51 wins to 49.
But the fun really started during the last 30 trials (between 1999 and 2002), when a team of WSJ readers was finally invited to join the contest. The amateurs’ average six-monthly loss of 4% was embarrassing enough – but it was positively cringe-making in comparison with the monkeys, which lost only 1%. Ouch.
So, the Challenge for 2012…
Now fair’s fair, of course, that was a highly untypical period of stock market history. The dotcom boom of the late 1990s gave way to the car-crash of 2000-2002, and all bets were decisively off by the time the contest was dropped. But popular legend has it that the monkeys’ stocks continued to be better long-term holds than the pros’ selections, many of which turned out to be skyrockets that quickly fizzled and died.
In these equally testing days, it is time to relight the touch paper. Allinson hereby issues a light-hearted FTSE-100 challenge to the industry. If you can do better than the publishing director’s two-year old daughters, who will each be armed with a great big crayon, the world will salute not just your ability but also your nerves of steel. Who’s offering?
