“All men dream: but not equally. Those who dream by night in the dusty recesses of their minds wake up in the day to find it was vanity, but the dreamers of the day are dangerous men, for they may act their dreams with open eyes, to make it possible." T.E. Lawrence; Seven Pillars of Wisdom 

The Dog Days

Terrifically well crafted piece on summer markets by friend, Stephen Lewis:


The day-by-day countdown to the hundredth anniversary of the outbreak of the First World War should serve to remind us there is no firm historical foundation for the common assumption that nothing significant ever happens in the dog days of August.  The markets’ old-timers will recall it was in August 1990 that Saddam Hussein invaded Kuwait, beginning the train of events that led to the Gulf War.  More recently, it was BNP Paribas’s halting of withdrawals from three funds it managed, in August 2007, that first alerted investors to the global scale of the fall-out from the US subprime mortgage crisis.  We would be yielding to superstition if we adopted a fearful view of the next few weeks simply because they will constitute another August month.  After all, while the war in 1914 began for the UK in August, hostilities had broken out between Austria-Hungary and Serbia on 28 July. Similarly, in 2007, Bear Stearns’ revelation on 16 July that two of its subprime hedge funds had lost almost all their value was warning enough that much was amiss in the US capital markets.  Troubles rarely come out of the blue.  Usually, the signs of impending disaster are long visible before the debacle occurs.  It is tempting, during the period of denial before the final cataclysm, when markets seem calm, to believe that the negative aspects of the situation must already be fully discounted.  But there is a world of difference between a notional catastrophe and a real one, and the full dimensions of a real catastrophe are seldom imagined beforehand.

Rarely in the writer’s experience, stretching back forty-five years, have the world’s capital markets been afflicted by so pervasive a sense of unfocused foreboding.  This is not reflected in the behaviour of securities prices which continue to be well underpinned, too well maybe.  Rather, the mood is evident from the volume of comment drawing attention to a host of extreme market values seeming to betoken an unsustainable stability.  In bond markets, ultra-low yields appear to deny the chances of the economic recovery that forecasters are standardly projecting. In equities, parallels are widely drawn with the metrics that prevailed in 2000 or 2007.  But, whereas on those previous occasions when equities stood on the brink of collapse, investors had an idea from which direction the destructive flame would come, there is now no consensus on what should be most feared.  What is universally agreed is that markets would not be where they are today if central banks had not spent the past five years so energetically rigging them.  Where they might be standing if central banks had not had recourse to unconventional policies, while pushing their conventional policies beyond their historic limits, is anyone’s guess.  What makes market sentiment sensitive to this question now, as it was not a year ago, is the expressed resolve of the US Federal Reserve and Bank of England at least to reduce the degree of accommodation they will provide, without indicating when this process will begin.  The malaise runs deeper than this, though.  It is not merely a case of market uncertainty that could be dispelled by some clear ‘forward guidance’.  For beneath the surface of day-to-day transactions lies the suspicion that the global crisis and the measures the authorities have taken to prevent a recurrence have wrought permanent damage to market structures.  In short, the market mechanism may now be even less well able to cope with sudden changes in sentiment than it was pre-crisis.  If this should be revealed to be the case, the shock to business confidence when sentiment does turn in capital markets could well be deeper and more long-lasting than after the 2007-09 meltdown.

There is no shortage of threats to market stability.  They have been accumulating while central banks have applied their anaesthetic.  Politically, the state of the world is much more menacing than it was five years ago, when bond and equity valuations were lower than today.  Successive rounds of sanctions against Russia have set the seal on that country’s exclusion from ‘the international community’.  But it seems very unlikely that China will allow its BRICS fellow-member to succumb to Western pressure.  In the past, China would not have had the resources to defy the West, even had it a mind to do so, but now it does.  The Beijing authorities may shrewdly judge they will never be subject to sanctions.  Western nations have consumed ‘a peace dividend’ they may now feel they must regurgitate.  That could impose a severe handicap on their future economic performance as resources that might have supported debt reduction or capital investment are diverted to defence spending.  Then there is the growing instability in the mid-East.  Though disruption of energy supplies from that region may seem a less serious threat to the world economy in light of shale developments, there have been few signs that shale producers, most notably the USA, are willing to share their bounty with those countries dependent on imported energy.  If the US ban on crude oil exports were to persist in the face of disruption in the global crude market, Western political unity might not survive long.  Alongside these risks, we need hardly labour the point that the EU and the euro zone look far less cohesive than they did five years ago.  Fresh strains are likely to affect the euro as the region’s economy appears headed for renewed weakness.

The most dangerous forces, though, may be those generated within the markets themselves.  As in the past, market excesses may bring disorderly correction.  Arguably, the very levels of market prices represent excess.  But in judging where excesses lie, it has always been most useful to examine where market activity has been growing most rapidly.  Thus, it seems unlikely that trouble will arise, at least in the first instance, from bank lending to non-financial corporate customers because, for years past, demand for such loans has been weak and the banks have been careful in granting credit.  The BIS, in its annual report, identified the massive substitution of bond finance for bank borrowing and the growth of non-bank asset management funds in recent years as potentially problematic.   It also warned against the concentration of risk in some ETFs.

Ebola; Risks

Click to view interactive version

Click to view interactive version

Ebola, or Filoviral hemorrhagic fever (FHF), is a scary, scary thing. One minute the victim thinks he has a mild dose of flu, the next his insides are turning to mush. It usually has a fatality rate north of 90%, (this particular strain is around 56%), and is one of the most deadly and virulent known viral diseases. Worryingly, it is on the move. The current outbreak, which started in February in Guinea and is the largest in history, has claimed some 729 lives out of 1323 known cases so far. It has struck in  Guinea, Liberia, and Sierra Leone and has now killed a 40-year-old man who travelled through a Lagos airport. The incidence of Ebola viral diseases (EVD) has been growing in the past 20 years and has been striking this year in previously unaffected areas in West Africa rather than Central Africa which has been the norm. 

Trying though, to work through the shrill media headlines is becoming more tricky as the media herd sense a “big new story,” to fill their endless airtime. The reality is that while its obviously not much of a winner for the people unfortunate to catch the virus, the probabilities of a pandemic remain low.

The World Health Organisation are obviously on the front foot in terms of the current outbreak which they describe the epidemic trend in their latest update as “precarious,” with 122 new cases between the 24th and 27th with 57 deaths.

The death reported in Lagos is unhelpful. The individual arrived there by air on the 20th via Togo and Ghana. 59 contacts, (15 airport staff and 44 from the hospital), have been identified so far. More are probable and the movement of the disease to Nigeria is a significant development.

The World Health Organisation doesn’t yet recommend any travel or trade restrictions to Guinea, Liberia, Sierra Leone or Nigeria nor does our own National Travel Health Network ; (obviously they’ve had a letter from a gentleman in Lagos telling them everything there is fine). The default position to manage these things is to tell everyone not to panic while quietly ramping up surveillance and biorisk security. Our own Foreign Office are masters at this; “This is not an issue that affects the UK directly. We have experienced scientists and doctors – the Royal Free Infectious Disease Unit, the Liverpool School of Tropical Medicine and the London School of Hygiene and Tropical Medicine – and a lot of experience of dealing with dangerous diseases. The risk of this disease spreading fast in the UK is much lower because of that.” 

That though is very probably the case. Previous outbreaks have been characterised with an increasing localised death toll but which has turned down steeply as precautionary measures, principally health worker biosecurity and patient isolation, have been deployed. The disease usually starts in rural areas where the population have close contact with wildlife and burial customs usually include handling the dead. With underequipped clinics and porous borders it is unsurprising that it spreads. In recent years, the disease has failed to get a hold in urban areas where the threat of animal to human transmission is much lower and medical facilities more advanced. Also, the disease is not highly contagious, it’s simply deadly if you are unlucky.

 The disease has an incubation period of between 2 and 21 days but one bit of luck is that people infected with Ebola cannot infect others until they have the symptoms. This makes it markedly easier to track and control. Fortunately, one of the few areas of slick international cooperation in the world appears to be that of disease control and the WHO and CDC appear to be all over this one. Nonetheless, many humanitarian organisations are pulling their people out of the at-risk areas and travel restrictions are beginning to come into force at the local level. My favourite travel advice incidentally is from the CDC who helpfully recommend that “travellers to these areas avoid contact with blood and body fluids of infected people to protect themselves.” Seriously? 

In summary, the pandemic risk of a virus is the result of its ease and rate of transmission which makes Ebola a very different kettle of fish to say, the Spanish Flu epidemic after the Great War. While it is possible that a case could enter the UK, Europe or the US, expert virologists expect the worst that can happen would be clusters of infection and death that would be quickly and efficiently contained. Just to give you some perspective, AIDS has killed 30m people so far and Ebola has, so far at least, killed less people than does Malaria every two days. 

Market impact is likely to be similar; localised hits on companies that have specific trading or manufacturing links with these areas but which are unlikely to have an impact at the broader asset class level. As it is, equities are so fragile they are quite capable of displaying the symptoms and characteristics of the Ebola virus on their own without any outside help.

 

If you want something to worry about which is far more likely to affect British and American citizens then consider this flesh eating nasty in Florida…………

There, as the old head of the anti-terrorist squad George Churchill-Coleman used to say on the news after PIRA had blown up another London postcode, “There is no cause for alarm..”

 

Outrage, disappointment and defeated resignation

Disaster on the 05:57hrs from Petersfield this morning as outrage, disappointment and defeated resignation rippled through the ten carriage train as the early wave of City bound commuters learned from Pat, OC the Tea Trolley, that, “sorry, no teabags; they forgot to load the teabags.” There is nothing guaranteed to more upset the dutiful equilibrium of the early morning commuter than no tea on the tea trolley. No tea trolley at all would be better than watching the approach of the trolley with quiet satisfaction, knowing that a hot brew is moments away, only to be thwarted by sloppy loading at the depot. This is the sort of lost nail that can lead to the loss of a pretty important horse.  Were markets to crash later today, the cause may not be the US GDP or the FOMC statement falling short of market expectations but rather the lingering sense of disbelief and hopelessness of the CIO’s, fund managers and traders on the 05:57hrs from Petersfield.

What Not To Love?

Warning! be careful with these blighters......

Warning! be careful with these blighters......

Now, in the first of what is about to be a regular feature of roving restaurant and pub reviews, (that’ll be mostly pubs with the odd restaurant), we’re going to break new ground. I’m fed up with all the Whinging Wendies on Tripadvisor and the like so I’ll do it myself and find something nice to say about everywhere I go. This shouldn’t of course be difficult given no proprietor sets out to give his guests a bad time, that would just be insane, so let’s accentuate the positive starting with Gaucho in Richmond.

Now Gaucho in Richmond is a wee bit off my beaten track but a family birthday celebration necessitated the trek down there. I totally misjudged my timings though and I arrived at the pretty riverside location a full 70 mins early, having found the over ground from Waterloo a pretty swift 16min journey. What then to do?

Fortunately, help was at hand at the bar where I decided to get into the South American spirit of the thing and ordered a Mojito. Warning! Be bloody careful with these blighters for they go down rather more swiftly than might be considered wise on a Monday evening. In fact, so refreshing was the first that I had a couple more. That, and the fact that the restaurant appears to have more helpful and pretty waitresses per square metre than most set the evening square and good. The rest of the evening is something of a blur but the food was apparently good; Mrs Flashbang said so.

There you are then, if peckish or thirsty in Richmond, wheel down to Gaucho, do the whole “Our Man In Buenos Aires thing,” and the Mojito’s, the waitresses or the food will put a smile on your face. What not to love?

Where Crumble goes.........

One of the really cool things about this summer, and the unusually hot weather, is the way our girls have thrown themselves into the current fashion for all things Sixties with unbridled enthusiasm. I'm observing from afar with similar unbridled enthusiasm, for the Sixties that I remember growing up in as a child was just about all in black and white in my memory........... I kid you not. Even so, as a five year old the last thing I was interested in was what clothes girls were wearing. I lived in a world of lace up leather shoes that hurt like buggery for the first three months, shorts, balaclava's and two-sizes-too-big duffel coats and avoiding the big boys in 4b.

But, and I'm just putting it out there, the Fashionista's weren't the first to generate this revival, no Sir. May I draw your attention to the epic 2011 "Ken & Barbie," Haslemere Rugby Club rugby tour to Gloucestershire and the proud winner of the Best Dressed Tourist Award, (my first sporting award and quite fairly awarded I thought because I took a change of dress for the evening).

Cracking fashion the Crumble way

Cracking fashion the Crumble way

Quick tip for the girls here loves; the high heel thing doesn't really work with short skirts, well not unless you have legs like Cyd Charisse. Follow my lead and stick to flats as I'm demonstrating above.

Where Crumble goes, the fashion world follows.

Mayfly - US v UK

Shephard Smith goes over the top about Mayfly on a quiet news day at Fox. 

After a long dark, dreicht winter most trout fisherman can hardly contain their boyish enthusiasm as the new season approaches which on most British rivers is in April / May. Most hope for their opening days to coincide with the Mayfly, that transitory entomological phenomenon that live for a year or so as nymphs on the river bed before emerging as an adult to mate and die, usually within a day. The trout, having endured a winter every bit as barren and boring as the fishermen, gorge themselves on the swarms of Mayfly in what is known as “Duffers Fortnight.” For the Mayfly, it’s a short, wistful existence predicated on breeding but they have a charm and elegance for lovers of river life that passes as soon as it arrives leaving us with long sultry and tough days of summer fishing when the sated trout lose interest. 

Of course in America they do things differently. Somewhat predictably even the Mayfly come Super Sized and this year the town of La Crosse in Wisconsin is enjoying not so much a hatch as they are an invasion. As far as I can surmise huge swarms of Mayfly are far from unusual but to have them so numerous that they show up on weather radar and block out the sun is going a wee bit too far. Still, the good people of La Crosse can at least go about their business safe in the knowledge that all the Mayfly will soon be dead and their town has suddenly become famous across the world.

Jack Hargreaves, (Legend), on the Mayfly

Back to the gentler waters of the chalk streams of Hampshire and indeed gentler times. Here’s the late, great countryman himself, Jack Hargreaves telling us about the Mayfly in his Out of Town television series. We’re blessed that at least one man took the time to explain and teach us all those years ago about a pre-war countryside way of life that has all but vanished. Top man, top programme.

Go Glasgow!

Well, I sat down last night in front of the television with a bottle of red aggravator looking forward in a ghoulish sort of way to laughing and cringing my way through the Commonwealth Games Opening Ceremony in a re run of the bloody awful Olympic Opening Ceremony. Strangely.... I found myself getting drawn in and enjoying it.

Ok, some of it was a bit shortbread tin and heather kitsch but actually, that's what most people want and expect. There were some low points, obviously there were. Susan Boyle managed to leave most people with bleeding ears and the Pipes & Drums could have done with another 50 mins of exposure but then that's just me. Most teams looked as if they’d dressed themselves after ram raiding TK Max or clearing the shelves of a closing down charity shop. The biggest home nations obviously won gold and silver here. The English team came out looking like a bunch of cheap 1970’s gigolo’s and the Scots were apparently dressed by an art student working on a theme of “throw up you can wear” and a healthy supply of Perthshire tearoom curtains. Odd isn’t it that the best dressed teams seemed to come from the smallest countries.

The highlights for me included that amazing violinist, Nicola Benedetti (who goes straight to the top of the TMC list), and most of the girls in the Welsh team who just looked terrific; I may now have to support Wales except in rugby sevens were I sincerely hope they crash, burn and fail to score a single point and exit the competition never to play the game ever again. Actually, I shouldn't knock the Welsh, if only because they brushed all the winging about the accommodation aside at the Dehli Games, got on the plane and got on with the job.

I thought the charity thing was a cool idea and was happy to chuck a fiver in the pot. All in all, its set the stage really well and has to be the best Commonwealth ceremony ever. Big congratulations to Glasgow who everyone seems to agree this morning are the knock down winners of the Games and deservedly so.

The best thing about the Games though, which I genuinely hope are a massive success, is that they deliver a healthy poke in the eye with a sharp stick to most of the self obsessed and cynical short term Charlies in Westminster who have done the square root of bugger all to support the Commonwealth over the past fifty years. The Commonwealth only exists because of the dogged perseverance and patience of the Queen whose vision for the Commonwealth has seen off generation after generation of doubting politicians to the point where we might rightly ask, "has it indeed ever been stronger and is not its role more relevant today than ever it has been?" The second biggest Commonwealth supporter is of course the Duke of Edinburgh and I'm putting my stake in the ground as the third. With so much tension and strife in the world the Commonwealth is an interesting and useful diplomatic back channel outside the usual power blocks but one which retains individual State independence and importantly, integrity through the leadership and patronage of HM. Its a family of shared blood, history and values which very much ought to be celebrated and not ignored or treated like some embarrassing anachronism. 

The opening parade of the massed pipes and drums at the Edinburgh Military Tattoo, August 2008.

Oh and just in case anyone else felt short changed by the Ceremony organisers and their parsimonious use of the pipes & drums here you go, enjoy!


Wagons Ho!

Crumble Towers

Crumble Towers

And sadly the Crumble Crew have, with heavy hearts, bid a fond farewell to Crumble Towers and moved the family lock, stock and barrel + 3 Labradors down to Compton, about 15 miles south of Haslemere. This of course will provide a new and rich seam of blog material but my, the South Downs; who would have thought one could enjoy a Big Sky so close to Haslemere - I feel like its Montana. Truth be told, it's 15 miles and about fifty years; what is there not to like about a pub with dog biscuits on the bar or another that does take away fish & chips of a Friday.

Big Sky

Big Sky

Mrs Flashbang and I were, for once, in agreement that change was required after nearly twenty years in the Haslemere area and are enjoying the move despite some emotional resistance from the Crumble Kids; which is rich given they've all but permanently left home less the youngest who anyway is off to the Arctic tomorrow for a month. The dogs meanwhile put up sterner resistance. Well, Gunner at least did. In fact he was the only one to mount a display of defiance, lying down on the path resolutely defending his home as the removers wisely stepped around him. Gurkha meanwhile treated them with bored indifference while Diesel thought a bunch of new playmates had come to play.

The movers by the way, were a local firm called Colwin Removals and a better bunch of lads you won't find. They worked like Chinese Coolies, were very considerate of home and goods, were good humoured and importantly, priced themselves very competitively. I couldn't recommend them enough and incidentally, ours was a pretty big move out of a quirky ancient listed house into........ well another quirky remote house!

Wednesday thunder storm......angry sky

Wednesday thunder storm......angry sky

and my, we do get some interesting weather!

This is Jim Rockford

Jim Rockford: This is Jim Rockford. At the tone leave your name and message, I'll get back to you. Sales Rep.: [Beeep] This is Globe Publications. Our records show you have not returned your free volume of the Encyclopaedia of Weather, so we'll be sending you the remaining 29 volumes - you'll be billed accordingly.

Jim Rockford: This is Jim Rockford. At the tone leave your name and message, I'll get back to you.
Sales Rep.: [Beeep] This is Globe Publications. Our records show you have not returned your free volume of the Encyclopaedia of Weather, so we'll be sending you the remaining 29 volumes - you'll be billed accordingly.

The Rockford Files, (I remember thinking how cool it would be to have a telephone answering machine when first I watched it), all 124 wonderful episodes, 1974-1983,  and how good was Stewart Margolin as Angel and Joe Santos as Sgt Dennis Becker. All the greats are checking out……………..

…. Jim Rockford; “You know what's wrong with karate Jerry? It's based on the ridiculous assumption that the other guy will fight fair.”

Flight MH 17 row continues to escalate

The Defence Ministers of Norway, Sweden, Netherlands and Germany and their Russian opposite number, Sergei Shoigu

The Defence Ministers of Norway, Sweden, Netherlands and Germany and their Russian opposite number, Sergei Shoigu

The Flight MH 17 row continues to escalate; why is it so difficult for someone to get on a plane and go and talk to Putin? The traditional mediator at such times, Germany, has excused and absented themselves from the process. Mrs Merkel must swing into gear, far from protecting Germany's interests she will achieve the opposite in sacrificing the long term good for short term industrial interests.

My view from the beginning of the Ukrainian crisis is that I wouldn’t trust either side as far as I could throw them and propaganda and misinformation continues to stream from both sides. The EU are absolutely culpable in precipitating the crisis in making impossible demands while making unfulfillable promises. Like it or not, EU meddling resulted in the overthrow of an elected government and having lit the fuse the EU stood back, turned and ran away. Now we have nigh on 300 innocents dead, and many thousands more in Ukraine itself and the European economy under threat of being destabilised.

Meanwhile, the rest of the world has accepted at face value the assertion that rebels downed the civilian aircraft. That may transpire to be fact but should be left to clinical investigation. Russia’s Defence Ministry is challenging the allegations and has produced evidence suggesting a Ukrainian fighter jet had tracked the airline despite early assertions from the Ukrainians that no fast jets were in the air. The Russians have also challenged the Americans to produce the satellite imagery they say they have showing that the missile was launched by the rebels. There are many more conflicting assertions and pieces of supposed evidence out there, such as the report of a Spanish air traffic controller working in Ukraine who said the Boeing was under escort by two Ukrainian fighters, and I know not which may or may not be accurate. I would simply encourage a healthy scepticism of the output of both sides. We’ll get the truth, eventually.

As an aside, I'm no fan of John Pilger and am diametrically opposed to just about everything he stands and has stood for but its a funny old world. So warped and pliable have political principals become in our modern world and so diluted has the integrity of journalism become that I find myself in almost absolute agreement with his thoughts on the Ukraine in this pretty searching and articulate piece from his blog. Worth a read.

One further point. Much has been made of lack of respect for the dead. If looting has taken place its unforgiveable but amongst the swaggering gangsters it is also clear that many local volunteers, firemen, miners and the like, have collected bodies and body parts. That is a traumatic experience. My old company was at Lockerbie, (after I had left them), and did just that job. The legacy of social problems and PTSD among those men lingers on and in fact I attended a funeral just two weeks ago, the cause of which may well stretch back down the years to Lockerbie. People who haven’t been handed a plastic bag and been asked or told to “go and collect” shouldn’t be so quick off the mark to criticise. It’s not a nice thing to have to do.

Scotsie 100

The Scottish independence debate has so far been characterised by a poverty of original clear thinking.  The paper below by Paul Marsh, Emeritus Professor of Finance at the London Business School and Scott Evans of Walbrook Economics, about the merits of Scottish independence from a stock market perspective, changes the tone somewhat. In it, they soberly de-construct how Scotland would have fared since 1955 with its own stock exchange and how it would fare as an independent country.

With the clock running down we urgently need more input of similar calibre. One could be forgiven for thinking that the actuality of the situation is that Salmond & Co are dreading the "Oh bugger, that wasn't supposed to happen, what now?" moment if they actually do win while one might be left to think that Cameron & his playmates, latterly supplemented with a squadron of clickty-clack heeled media friendly thirty-something women junior ministers, won't shed a tear because the embedded Labour majority at Westminster will be gone forever.