leyton.org

In my previous financially focused post (link) I expressed frustration at how the media continue to misrepresent the perfectly legitimate practice of ’short selling’. As I was watching the news yesterday (with their on-screen live FTSE and DOW figures), and reading the newspapers again this morning, I was reminded that there are further examples of oversights and simplifications in financial reporting, that all go to make me concerned there are few places to go for solid news (Radio 4, Newsnight and Channel 4 news, largely).

One example is, perhaps, well known. It’s the reporting of the FTSE 100 index figure as some generic financial indicator. Remember, this is just a selected index of a basket of equities (ie. stocks), and it is adjusted over time. Whilst it constitutes about 80% of the total value of the FTSE shares, it is still an equity indicator, and a general purpose one at that. It’s of interest as many people invest in FTSE-100 trackers. Personally I prefer a FTSE-All Share tracker.

In the context of the ‘credit crunch’, equities are not really a particularly good indicator. Whilst it’s clear that share values fluctuates, it doesn’t in itself show very much about the underlying problem that faces financial institutions. Let’s not forget too that in times of doubt there is always a flight of money from equities to fixed income products and commodities (particularly gold). When people sell their equity investments in large numbers, share prices naturally drop (a surfeit of sellers), and it’s likely to see ’safer’ investment values rise (due to limited availability; commodities need digging/drilling!). Just compare the graph for last months gold price, particularly it’s big spike in September 2008, and last months stock market indicator graphs.

Oil prices are an interesting case – they were a solid investment earlier this year – it was doing nothing but rise – but with the doubt and fear about a global recession, oil prices drop over fears about reduced demand. A good thing too, clearly, as the knock-on effect on heating bills has serious consequences for societies most vulnerable members. But let’s forget the halcyon days of less than $25 barrel oil – many of the oil-rich Gulf states are funding huge investments on the basis of (relatively) high (>$75) oil prices. I for one was not in the least bit surprised by the news in early September that OPEC were cutting production. Let us not also remember oil is priced in US$, so as the US$-Sterling rate falls, so oil price rises for us. But it’s not really been mentioned in the media that oil prices are safely below $100 at the moment: It’s been ignored due to other financial events.

So share price drops are inevitable in days of doubt. Investors seek safer shores. In today’s Guardian it’s reported that is also happening with people’s savings, as they move from perceived ‘at risk’ banks to National Savings products and other government backed savings accounts. You’d almost think that the financial professionals are people too! On a side note, the term ‘Masters of the Universe’ used a lot at the moment (in reference to financial high-flyers) comes from The Bonfire of the Vanities, rather than the children’s cartoon series.

Equities are a good indicator of confidence, and the massive dives in recent weeks indicate the failing confidence. The problem was exacerbated, in my mind at least, by an inept US President. By making the announcement that something of that scale was planned so far in advance, expectations were set. Financial institutions felt the cavalry was coming. So when Congress refused to pass the bill in it’s proposed form, expectations were shattered, and confidence plunged.

The other key word is volatility. Prices are moving about as much as they are as investors take differing views on insufficient, inaccurate, incorrect information. Throw in a healthy dose of fear, and you’ve everything you need. One figure that seems to be missing from public resources is traded volume. Prices are naturally volatile when volumes are lower (fewer people competing to sell/buy assets), and I’m curious to find out how traded volume compares in September, with that of previous months or years. Although I suspect the confidence figures remain the dominant factor here.

But as far as measuring the ‘credit crunch’, it’s LIBOR (London Interbank Offer Rate) that’s king. These are the rates at which banks lend to each other over various periods of time. The credit crunch is all about this lending drying up, represented by spikes in the rate, which is normally closer to the Bank of England interest rate. Just yesterday the overnight rate hit 6.87%, compared to the 5% for the Bank of England. This rate is finally getting reported more often by the serious media, but it’s still difficult to find on market data websites.

As we all know the Credit Crunch is about banks not lending to each other, at least without a prohibitive premium. For the ‘real economy’ that means borrowing of any sort are going to be more difficult. As such borrowed money – vital in the short-term – dries up, we can expect to see in the coming months businesses struggling to find money to help them grow, invest or simply get through a difficult patch. When cash runs out, for whatever reason, businesses fail, and jobs start to go. If the complete grid-lock in the finance sector isn’t eased soon, the bad news from successful businesses will start to grow in numbers. Sadly it’s a delayed consequence, which doesn’t sit well with the 24 hours news cycle that seems to demand cause-and-effect to be observable.

So if you want a figure that indicates how the credit crunch is affecting lending, LIBOR is the one to look to. If you want an indicator of confidence and fear, the FTSE figures. Whilst confidence remains so low, and the US government struggles to find the rescue package it needs, I’d expect prices to remain volatile, and many valuable commodities, will rise.

But it’s not all bad news. If, like me, you’re some years away from retirement, take the pragmatic view that lower prices can make for a good buying opportunity. A complete economic meltdown is unlikely as fundamentals are, I think, still quite sound and the crises is still solvable if fingers are extracted and US politicians get a grip and stop playing, er, politics. But look to the other figures for a better indication of what’s going on. It’s certainly not all about what the FTSE or DOW is doing day to day.

There seems to be some bizarre hysteria blowing through the country at the moment: The fear of shorting stocks, and the companies that practice it. The newspapers seem to be all over the mechanism, and journalists seem to be failing in their duty to provide accurate information. Also in the firing line seem to be pension companies, who loan their stock and thereby allows this to happen in the first place, companies that do it, and even various characters who naively stepped in to condemn traders without first checking their own portfolios. 

Unfortunately it seems that a huge amount of misunderstanding is going about, and I fear it may be a similar as with science reporting (See badscience.net, from Saturday Guardian column of the same name). The media is full of journalists (many of whom will necessarily be english/media/journalism graduates) with very little understanding of technical subjects. They are asked to write pieces on subjects they may not have much knowledge or interest in, and then proceed to clamber about the subject with painful naiveté. Unfortunately, their naiveté goes on to misinform huge numbers of people, and hysteria results. 

I’ll give an example of one of most horrifically tenuous pieces of journalism I’ve read in a long while. The Sunday Herald tries to throw some mud at Alec Salmond who made headlines with his “Spivs and Speculators” comment. The Herald has this to say in a piece (link) trying desperately to throw some mud at the SNP:

One of the companies that “short-sells” shares, Morgan Stanley, last year received a £6 million grant from the SNP Government to boost jobs in Glasgow. It has also emerged that the Scottish Government is funding another business, Timberpost, which creates artificial intelligence for short-selling firms.

What can we conclude? Er, Alec Salmond’s government gave grants to companies who employ people and operate on the stock market, or develop software, in a perfectly legal way. I really struggle to understand how that is a problem, or implicates the SNP in anything. It does, however, speak volumes about a journalist who’s trying to eek out a story and latch on to a misplaced fear (largely of their own creation) of a perfectly legal practice.

Can we also (Sunday Herald journalists please pay attention) try and remember that the current ban on short selling applies only to bank stocks and not the practice as a whole. It is NOT inherently bad practice. Quite the contrary, it’s a valuable tool in markets that enables downwards pressure on stocks that may be overvalued for some reason. Look at the hype that surrounds IPO’s and companies that hit the headlines. What if you, as somebody taking a position on the market, disagrees and think there are fundamental problems? Shorting a stock is one of the fundamental ways to do this.

Also, let us not forget that the banks that have been torn to pieces had (it’s now clear) fundamentally poor business models when cheap credit dried up. High risk loans without sufficient deposits, or self-certified mortgages, or even (dare I say it) falling asset values. But house prices never fall, do they? Whilst there is clearly a wider crises exacerbating many of the problems, it’s clear there was and is a shake-out required. 

Pension companies (largely) invest for the long term. Certainly if I’m investing in a fund, I’m indirectly holding an asset (shares) for a period of time. Now that can either sit in the fund, and grow in value and no more. Or the pension company can lend it out and earn money from it, which in turn can be reinvested. It may even add to the yield that helps pay out income funds. There is no risk to the pension company, as the value is associated with the asset itself, and the loaner must return the stock. They’re just oiling the wheels, and making money for their investors in the process. If the value of the asset falls as a result of the shorting, so what? That’s the position the investors took, largely with a longer term view than a 5 year stock market chart in mind. Personally, I’m losing no sleep over the drop in value of my ISA’s, pensions and so forth. I’m taking a 30 year view. I’ll also phase money into bonds as time passes. Because putting all your eggs in one basket (the stock market) is a Bad Thing. 

Now I’m certainly no financial expert. I may have worked in finance for a good few years, and enjoy reading the financial pages of newspapers. There may have been dubious practices going on with some of the short selling. That’s not for me to judge. But what is for me to judge is some of the atrocious reporting going on associated with regards financial issues, not least the inappropriate demonisation of short selling as a practice.

So if relatively simple concepts such as shorting are being mis-reported, stigmatised and pilloried, what hope have we that the really significant financial news dealing with almost $1 trillion of government intervention, is to be accurately portrayed?

I despise the Daily Mail. It’s a horrifically biased newspaper, with a particular agenda to push (and push it it does relentlessly) that I very rarely find I have any sympathy with. It seems to relish winding up and massaging the prejudices of the people of Middle England (and Middle Scotland) who buy the paper. I believe it’s incredibly important to challenge everything that we have presented to us as fact, or as some irrevocable ‘right’, and there seems scant evidence this particular newspaper does that. I worry that the readership doesn’t either.

One of my favourite quotes, that succinctly captures my approach here, is from Mark Twain: “Whenever you find yourself on the side of the majority, it’s time to pause and reflect.”.

Back to the Mail. They’ve been doing what they, sadly, do well, and that’s misrepresent somebody. Now I’ve been interviewed for a (technical) publication on at least one occasion, and found that the words attributed to me didn’t quite match my recollection (or typical usage), and it left me with a bit of a sour taste, although I was still quite chuffed. The experience, no doubt, of sub-editors tweaking words and selecting, then condensing, my statements to make it ‘flow’ better.

But that’s one thing. Wholesale misrepresentation is another, and this seems to be something the Mail excels with. I’m angry, but not ultimately surprised (via Gordon), to read about a particularly awful piece of journalism from this excuse for a ‘news’ paper that has portrayed a fellow blogger in a particularly inaccurate way.

So, read her response, then please: Stop. Buying. This. “News” Paper.

I’m very proud to be able to say that a few months ago I was able to meet Harry Patch, who is currently making the news as he revisits the trenches from World War 1. It was a brief meeting – my mother introduced Frances and I to him when we were at the care home she ran until recently. He was waiting for a journalist or photographer from one of the national newspapers.

There’s is something very poignant about meeting Harry. He’s very sharp and witty, but meeting him is tinged with a sadness for what he represents: He’s the last known British trenches veteran, and one of only a few surviving veterans of the war. As they decline in numbers – Harry recently celebrated his 109th birthday – we’re faced with losing touch with representatives of a generation who sacrificed so much for us. Whilst incredible efforts have been made to capture their experiences, there’s still – for me at least – an incredible sense of something remarkable and moving passing out of sight. We can still hear, still read, and even still see recordings of their experiences, but we will soon not be able to see and meet them in person.

Another thing that strikes me is the universality of the remorse that appears to be shown by veterans. There is no distinction between “us” and “them”. All the soldiers in that horrific war suffered. Simply because “we” won shouldn’t ever degrade the suffering of all the people involved, merely because they were (arbitrarily) on one side or the other.

Whilst there will always be a national memorial day, I think it’s important to take a moment to listen to this generation, and all that they can still offer us whilst we still can.

Two laugh-out-loud moments today. Both – you might be worried to read – involving other people’s deaths. But why not judge for yourself… You can’t take everything too seriously, after all. Life’s just too short.

First, I read in the ‘In Fact’ column of May’s issue of Prospect Magazine

An estimated 7,000 Americans a year die as a result of doctors’ bad handwriting. [Harper's, April 2007]

And earlier I read about what must surely be the most popular cat in town on the BBC website. Supposedly it cuddles up to residential care residents who are close to death.

Ahhh. Nice kitty.

I’m a bit of a gadget freak. People that know me know this. I very much like shiny things, and for some years now I’ve been a huge fan of Apple computers. It has everything I want (in particular Unix under the hood, but also the great user interface and superb reliability), and with the new Intel chips, I can even run a few Windows programs to make supporting one of my clients a bit easier. They also make an MP3 player which you might have heard of… iSomethingorother…

Anybody vaguely following the technology news will have heard about the iPhone, Apple’s long expected entry into the mobile phone market. Ever since the rumours were confirmed, I’ve been quite excited by the prospect. Not simply because I’m an Apple fanboy, but also because I’ve found almost every phone I’ve ever owned a frustrating experience in some regard. With the iPhone, it finally appears as if somebody has sat down and thought through the user experience, and done it properly. At the very least, it’ll shake up the established manufacturers. At best, it’ll turn the market upside down and give us all a great new phone.

Either way, my existing phone (a Sony Ericsson k750i) is rapidly approaching the end of it’s life. I’ve lost the charger, and need to use the USB connector to charge it. It’s battered, the “joystick” (ahaha) is barely functional, and the camera comes on at random points. It’s been a good phone, but not a great phone (other than the few days after I first received it, when any new gadget it in a Special Place in my affections). So an iPhone was always going to be on the cards.

The story was “Autumn 2007″ for the iPhone entry into European market, but rumours abound about who the partner was going to be. Analysts thought Vodafone was likely, given it’s large network. Then T-Mobile seemed likely. But The Times is now reporting that O2 are leaders in the race to sign with Apple, at least here in the UK (via Mac Rumours, and also on the BBC: So it must be true!). Have to admit I was hoping for T-Mobile, as I know they have good signal strength at home here. I’m on Orange right now, and a little fed up with some of their customer service. Vodafone’s signal in Glasgow was pants. So O2 is a bit of an unknown quantity. Given I work from home, I’m a little nervous about picking one up only to find that the signal quality is non-existent on the O2 network here. But there are ways and means through that. So if you visit, and I ask strange questions about your phone provider, now you know why

Of course, rumours are just that, but it’s fun stuff none the less. Also rumoured are 3G functionality, but that’s not something I’m too fussed about all said: Wireless does it for me most of the time. I’ll be relieved they’ll have a chance to settle any manufacturing issues by the time they get launched over here, but the reports seem good so far, but manufacturing problems can take a while to appear. Apple have had a few historical problems, although generally minor ones, and ones they’ve been happy to fix.

But anyway, providing I can put my network worries to bed, the iPhone is very much on my shopping list for this year. Providing I can keep my existing phone going for a few months longer.

I’ve subscribed to Prospect for a good few years now. Whilst I don’t always get around to reading my copy as regularly as I would like, I always find it’s articles challenging, well written, and informative, with a good amount of humour (in particular the small cartoons) and interesting facts to keep the mood a bit lighter than it might otherwise be.

They’ve finally fired up an editorial blog, which has made its way to my weblog feeds. More about what it’s focus is here. I’m looking forward to seeing how it develops over the coming months.

I didn’t see the seemingly infamous Panorama programme itself, but have certainly come across plenty of scare-mongering and atrocious reporting in the last few months regarding the supposed “danger” posed by Wi-Fi network routers. Somehow, at least in deluded and panic-stricken sections of the media, these devices are a new menace unseen before and that Action is required. Now. Think of the babies! I hear them cry.

What puzzles me in so much of this is how basic physics seems to get ignored as media-trained journalists no-doubt copy and paste the press-release from excitable pressure groups who could do with spending some more time studying GCSE and A-level physics books. The Inverse Square Law in particular. If you’re hurried, then these pages might be of interest:

• The truth about wireless devices
• Dr Ben Goldacre’s excellent Bad Science column from last Saturday’s Guardian. That schoolkids saw through what was being claimed is marvellous.

I’m really beginning to worry that media hysteria and delirium on specific issues (frequently with no actual foundation other than one or two pressure groups) is an increasing problem that detracts from coverage of genuinely important issues. MMR is the classic case. It’s so important to think critically and objectively about what’s been said, and remember that – in science and technology issues in particular – the reporter is rarely going to be an expert, and perhaps therefore over-inclined to listen and give equal time to people and organisations on the fringes of generally accepted science.

Imagine the situation where a young child finds themselves being abused by an authority figure. If that authority figure was a child carer, a relative, or a public figure of some sort there would – when it was discovered – be outcry and almost certainly criminal prosecution.

Yet if that public figure is a religious authority figure different rules apply, as this current example demonstrates. Listening to ‘Today‘, we had the pathetic bleatings and script-reading/question avoiding from Pearl Luxon that ‘Robust polices are in place‘ and ‘it wouldn’t happen today‘. Hardly the reassuring statements I would expect, and demonstrating, to me at least, that these organisations are so far up themselves with their own inflated sense of importance and demands of special treatment, that they really aren’t to be trusted. There seems to be an endemic historical and organisational attitude problem that they are above the law and appropriate practice.

Supposedly the church is “committed to the safeguarding, care and nurture of the children within the church community“. I have great difficulty with this. Quite simply they should, on discovery of crimes such as this, notify the appropriate authorities – police and social services would be a good starting point – rather than naively attempt to forget all about it. They certainly don’t seem to be in a position to claim they are safeguarding the children in their ‘protection’. Needless to say, I have grave concerns about the ‘nurturing’ too.

The argument against this is that ‘not all Priests are bad’ and this sort of thing is a ‘rarity’ (Although Irish priests don’t help such a claim. 3% of priests in a region?). Indeed, generally, they’re not bad people. I actually have fond memories of the village vicar when I was a child. But in a wider setting not everybody is a criminal, but we have a set of rules that are supposed to apply to everybody. Churches, and the people who hold authority within them, should NOT be exempt from the rules and practices that every other member of society is required to adhere to, especially when the welfare and safety of the vulnerable is concerned.

And these are sorts of organisations this government is encouraging to run schools… Worried? I certainly am.

Regular readers will know I’m something of a fan of Richard Dawkins’ excellent books (see here; My ‘God Delusion’ review is a work in progress). You may therefore be interested in an Independent ‘You ask the questions’ special (also as pdf here), with him. It’s an entertaining and interesting read.