Is it madness or fear at work?

Tuesday, 16th August 2019

Is it madness or fear at work?

I need a favour and I wonder if you can help me out….

I’m a little short of the folding stuff at the moment and it would be a great help if you could see your way fit to lending me £5000….

Don’t worry. I will pay you back. That’s for sure….

And better still, I won’t charge you an exorbitant rate of interest for giving me the loan….

You can lend me the full sum and it will hardly cost you any money at all….

Does that sound like a good deal?

No, I didn’t think so….

But that’s the kind of deal that’s being done with increasing frequency in bond markets right now….

  • What’s happening?

Under normal circumstances when investors lend money to governments, the government will not only undertake to pay the principal capital back after a fixed-term – but will also pay what is called a ‘yield’….

That yield is the interest – the price the government pays for the privilege of borrowing the capital in the first place….

As I say, that’s what happens under normal circumstances….

But circumstances are anything but normal right now….… Click here to read more

Better the devil you know….

Tuesday, 2nd July 2019

Better the devil you know….

Avid followers of the financial news cannot help but be aware of Facebook’s plans to enter into the world of cryptocurrencies….

Acres of column inches have been devoted to the subject over the last fortnight….

Mark Zuckerberg and his corporate apparatus are calling their new cryptocurrency Libra…. 

It will be introduced with the intention of enabling users to spend and transmit money all over the world at next to no cost….

If Libra catches on and achieves significant take-up amongst Facebook’s huge user base, the time might not be far away when online life becomes impossible to negotiate without a wallet replete with Libra coin….

In my book, that would be a dangerous and undesirable state of affairs….

  • How it will work….

Libra will be what people who know about these things call a ‘stable coin’….

It will be pegged-to – and purchased with – a tranche of fiat currencies like the dollar or the pound or the euro….

The idea is that this connection to stable (relatively) domestic fiat currencies will render the Libra coin less volatile than something like Bitcoin, for example – a crypto that isn’t pegged to anything and suffers from extreme volatility as a consequence (as the last week amply demonstrates)….… Click here to read more

When value and magic run out….

Tuesday, 18th June 2019

When value and magic run out….

Fly too close to the sun and you run the risk of the heat melting the wax that attaches the wings to your body….

The subsequent fall to earth will be both spectacular and devastating….

Students of Greek mythology will know that Icarus found all this out for himself via painful experience….

Students of the markets will recognize that Neil Woodford is currently experiencing an ‘Icarus’ moment of his own….

  • A star turn….

For a long time, fund-manager Neil Woodford could do no wrong. He flew high – a mere small dot circling in the blue sky overhead….

He banked big profits for his investors at Invesco between 1988 and 2014 – profits well ahead of those posted by the opposition….

So much so, he was seen in financial circles as a man with the Midas touch….

His performance was widely feted, his sage pronouncements much-coveted, and his every market move pored over, analyzed and frequently duplicated….

Woodford was ‘smart money’. The man it paid to follow. A luminary among lesser money-managers. A ‘star’ in the financial universe no less….

When he branched out to form Woodford Investment Management in 2014, he enjoyed the backing and support of Hargreaves Lansdown – the  largest investment platform in the country….… Click here to read more