David Cowell’s Weekly Rant – 10 Feb

Dubai was good apart from the cricket. I met a guy wot does amazing things with QNUPS. Let me know if you want an introduction. Now that the pheasant and partridge season has ended, thoughts turn to what else, apart from politicians, one can shoot. In contemplating this conundrum, my mind strayed to an interesting philosophical question: why is it called the tourist season if we can’t shoot them?

Progressing from bashing a banker to restricting a railwayman, our politicians keep on looking for something to distract the lumpen electoriat from realising that they, the politicians, have no idea whatsoever of what to do in the current financial situation. As the bard might have said, “Yea verily it maketh one want to pewk.” Or mewl. A perfect example this week was ‘Dave’ going to Sweden to see their ‘More Women in the Boardroom’ initiative. The criterion for a good director has nothing to do with sex so presumably it’s yet another example of taking his eye off the ball. SocGen’s Dylan Grice, whose latest letter on Popular Delusions is a call for “honest fools” – “Frequently, when we make mistakes we try to correct them not by changing the flawed thinking which led to the mistake in the first place, but by reapplying the same flawed thinking with even more determination. Behavioural psychologists call it the “lost pilot” effect, after the lost pilot who tried to reassure his passenger: “I have no idea where we’re going, but we’re making good time!” Policy makers on both sides of the Atlantic are treating today’s malaise with the same flaky thinking which created it in the first place. How can that work?” Simple answer: it can’t. Reminds me of the FSA/FCA nonsense.

Monday’s NYSE volume was as low as Zero Hedge could find on Bloomberg data. It is the lowest non-holiday trading day volume in over a decade. This is 26% below last year’s post-Superbowl trading day volume. ES, the e-mini S&P 500 future contract, which has tended to be the most liquid and heavily traded instrument reflective of the equity markets, traded around 1.19mm contracts versus a 50-day average of 1.83mm (down 35%). No wonder volatility has been so high. The main players are standing on the sideline.

Dow Jones reports that Papademos has asked the Greek Finance Ministry to examine the economic consequences of Greece leaving the euro, according to comments by a member of the Greek socialist party. Meanwhile, Greek EU Commissioner Maria Damanaki said in an interview with To Vima that the implications of a Greek eurozone exit are being studied by the private sector. I must admit to a less than quiet titter on reading yesterday that officials were blaming ‘losing the paperwork’ for the delay in finalising the debt package.

E-mail message received on Tuesday: ‘Download Russell Investments’ 2011 Global Outlook’

According to Financial Express, the majority of the largest fund providers have delivered mediocre performance over the last five years, the latest study from shows. Just 46 per cent of funds run by the investment management industry’s 20 largest asset managers outperformed their benchmarks in 2011. Over three years 52 per cent of funds outperformed and over five years the proportion rose to just 58 per cent. Moral: let us do it for you!!

More fun & games with the US employment figures. I quote part of the comments made by a blogger on Zero Hedge: “…..with the benchmark revision & 3 different adjustments, I cannot have confidence in anything in this report…Absent the seasonal adjustment, the actual number for January non-farm payrolls was a loss of 2,689,000 jobs; knowing that the BLS confidence interval is on the order of plus or minus 100,000; seasonally adjusting that job loss to show 243,000 jobs gained leaves plenty of room for an error in the methodology…” You may think so, I couldn’t comment.

China’s exports and imports fell in January, raising fresh concerns about the impact of a global economic slowdown on its economy. The BoE stokes future inflation by creating another £50bn to throw at the gilt market. It already owns nearly half the nation’s debt; isn’t that just a touch incestuous? British retailers suffered their second weakest January since records started in 1995 as shoppers reined in spending after splashing out on December discounts, a British Retail Consortium survey showed on Tuesday.

Just in case you start to think that I am all doom & gloom, we are mildly optimistic for the next six months. The world economy will grow by 2.5% in 2012 and 3.1% in 2013, according to the World Bank, well below its original forecasts of 3.6% for both years which it published in June but nevertheless, growth. If the eurozone crisis spirals further out of control, it says global growth would be around 4 percentage points lower. High income countries will grow 1.4% in 2012, while those in the euro area will shrink by 0.3%. These are sharp downward revisions from June forecasts of 2.7% and 1.8% respectively. It also cut growth forecasts for developing economies to 5.4% for 2012, from a previous forecast of 6.2%. That’s 13% down. Growth in Brazil and India and to a lesser extent Russia, South Africa and Turkey, have slowed already, the report said. The message being be careful in emerging markets.

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