In Steven Spielberg’s film, The Post, Meryl Streep plays Washington Post CEO Katharine Graham, who famously faced down the Nixon White House over the Pentagon Papers in 1971.
Graham risked going to jail by publishing them, but by doing so completely undermined the case for the war in Vietnam. Once these facts became clear, public opinion shifted. High stakes and great real-life drama.
London offers tremendous theatre, from marquee West End shows to excellent fringe venues, including my favourite the Finborough. But even these pale in comparison to the political theatre of 2016. “Brexit” and “Trump” both seem to offer a kind of 21st century mercantilism, seeking to gain national advantage, though not necessarily global benefit, by ripping up existing trade agreements and starting all over again.
China’s seemingly modest 2% devaluation against the dollar in August has drawn attention to the immense challenges of rebalancing their unwieldy economy. This is crucially important to investors as it has over the past 20 years led to a “super cycle” run-up in commodity prices (China was once consuming 65% of the world’s iron ore) as well as a deflating finished good prices.
The global investment fund industry managed around $38 trillion at the end of 2014. Of this, $14 trillion, or about €11 trillion, is managed in Europe, which nearly €8 trillion is in UCITS funds (Chart). These “undertakings for the collective investment in transferable securities” are EU regulated investment funds which have also been very popular outside Europe, especially in Asia. Importantly, UCITS also opens up hedge fund strategies to a much wider audience.
Imagine two surveys on the same topic by highly competent statisticians which find opposite results. The 2011 UK census found no increase in cycling in London since 2001. Another by Transport for London (TfL) found a more than 3 fold increase from 2000 to 2014. For what it’s worth, I cycle to work every day in London and can say categorically that TfL is correct.
If cycling presents a measurement challenge then the modern economy must be exponentially more difficult, especially if it is undergoing rapid change. CEBR Chairman Douglas McWilliams’ new book The Flat White Economy takes a very important look at modern economics with a focus on London’s booming tech sector. His findings suggest that nothing short of an entirely new framework may be in order.
As usual in 2015 most managers seem upbeat on their own strategy, with nobody offering to return capital to us although some managers are close to capacity. This illustrates a hard wired human bias that most people consider themselves to be “above average” drivers, amateur sportspeople, and of course investors.
Britain’s Chancellor of the Exchequer announced on 31 October the call of the 4% Consolidated Loan or Consol. While only £218 million face value, this utterly fascinating bond with no maturity date was originally issued in 1927 by then Chancellor Winston Churchill. It actually consolidated various government debts all the way back to the early 1700s, including that of the infamous South Sea Company. As such, this Consol is a big slice of financial history and a vast time series of the long term interest rate.
If gyrations in the US Treasury market settle the ongoing bull versus bear battle to determine the long term interest rate, then this year’s substantial rally in bond prices suggests the bears have the upper hand. Investors now require substantially less yield today to part with their cash, though the current 1-year yield of 0.1% still makes 2.2% on the 10-year look quite generous.
For those worried about earthquakes, it’s probably best not to live on a fault line. The gradual build-up of pressure between the earth’s tectonic plates tends to give way rather suddenly in areas with high seismic activity. Really large earthquakes thankfully occur less frequently and massive ones only about every 100 years. But the probability rises over time rather than falls.