Noise

Today I am going to write about financial markets and how the press reports financial news.

Sadly, I don’t write much about the markets because I need to be careful about what I say and what message I convey. Conduct of Business Rules and FSA Approved Persons, etc. There are far too many conmen out there and I cannot give you advice that suits your personal circumstances.

If you follow the news, today you will have read that S&P, the credit rating agency, has released a note on the outlook for UK sovereign debt.

The note was received in Bloomberg terminals at about 0924h.
The note is not available to the public but the BBC has a half-decent article about it.
http://news.bbc.co.uk/1/hi/business/8061019.stm

In the minutes just after the announcement, GBP went down against both EUR and USD.

Immediately, the newswires went mad and the media reported that the decline of GBP was a consequence of the S&P note.

Even my favourite financial blog –for now- reported the story at 1000h:

http://ftalphaville.ft.com/blog/2009/05/21/56114/united-kingdom-the-first-rating-alarm-bell-rings/

I want you to look at that Bloomberg graph very closely. Notice that the time in the screen is 0928h, merely 6 minutes after the note release, with the post being published at 1000, just about 30 minutes after the news became public.
The graph only covers the previous 12 hours trading.
At 1008h, yours truly humbly suggests to the journalist to change the time period of the graph to 2 days.

It would have shown something like this:

Yet, this did not stop the FT or the vast majority of the media to make a bit hoo-ha about how the markets were reacting very badly to the S&P note.
Even FT Alphaville (a blog for the pros) kept publishing posts about it, despite my best attempts.

So, in the immediate aftermath of the press release, GBP went down about 1.8% vs USD but rebounding back very quickly so that 2 hour after the press release, the decline was only about 0.8%. Still, it was somewhat above yesterday’s closing price.

And this is the problem with financial journalism: market noise is mistaken as market reaction and since the market just produces noise 95% of the time, lots of effort, time and energy are spent trying to concoct explanations about events that are, the vast majority of the time, just random movements.

Yesterday, Wed 20 May, between 14-17h UK time, GBP went up about 1.5% against the USD, but there was no S&P release or other news item to justify an explanation.

Check out this graph:

As I write this at 2115h UK time, not only has GBP not reacted negatively to this morning’s S&P note, but is actually higher than when the note was published!
And the questions is: will this “market reaction” generate as much media frenzy as was unleashed this morning and early afternoon? Probably not.

The problem I have is thus:
I would also expect the tabloids, or The Times, to have a go at the Government publishing misinformation.
I fully expect uninformed, malicious and politically-biased numpties like Guido Fawkes to post something like “S&P downgrades UK government debt” [link].

In fact, nothing of the sort has happened. Not even close.
S&P has merely updated the market saying that it sees the outlook for the UK economy as negative, and that it is worried about the state of public finances and public debt levels.
When I read the note this morning, the first thing that crossed my mind was: “tell us something we don’t know!”
So, to recap.
+ It is a revision in outlook.
+ Before a downgrade happens, first an issuer (normally) is placed in “negative watch”.
+ After a bit of time in “negative watch”, then the downgrade follows.
+ This has not happened today.

As for the S&P’s record on analysing public (or private) finances, I refer to the sub-prime mess, the CDOs, Enron, Parmalat, etc, etc. Just for the record, S&P did not alter its outlook on UK debt during the ‘90s hyper-inflation years, when debt as a % of GDP was slightly higher than today’s levels.

Notwithstanding the huge problems in the economy and the massive amounts of household, government and, particularly, corporate financial debt, today’s events and news coverage is a wonderful example of what Taleb describes as noise and the narrative fallacy.

Somehow, we have built a system of news coverage where there is an obsession to attach a narrative to events, to seek causality regardless of the logic or empirical proof behind it.

I have only been in this business for about 7-8 years, but being a sceptic has helped me a long way to differentiate between reasoned analysis and logic and crap. Today was a lesson on crap journalism by a lot of media outlets.

If we cannot get a FT or BBC journalist to expand a simple graph to show that, actually, nothing has happened compared to yesterday's trading session, can you imagine when they have to explain something mildly complex to the public?


For the record, I attach below GBP-USD rates for 5 days and 3 years.








Update 11/06/2009

I have officially given up on AV: what a bunch of twats.

Unable to cope with any criticism of their flawed narrative logic, they removed one of my comments on the whole GBP/USD rates saga.

And today, in a trivial story about the signings of Kaka and Ronaldo by Real Madrid, I get yellow-card and then blacklisted for no reason that to write something that is public record –and because some arsehole Real Madrid took exception to it. What a joke.

Campaign struggling to start...

Well, the campaign to stop shaking hands with the less-than-honourable members has not made the impact I was hoping for… never mind.

I honestly think it would be a historical event if it were to catch on and spread all over the UK ahead of the European election on 20 June.

Any way, if you have a blog and want to spread the word, perhaps it is not too late.

http://trenator.blogspot.com/2009/05/dont-shake-hands-campaign.html

I have posted in The Independent, The Guardian, even it that Guido Fawkes blog (apologies Tom & Graeme, I thought this could get traction that way...) and other blogs but nothing is happening.

BBC censorship of Speaker's criticism

Sometimes I cannot help thinking that the BBC’s reputation for objectivity, neutrality and high journalistic standards is more a myth than reality. Particularly when it comes to criticism of the Scottish Labour party. In Spain everyone if full of how great the BBC is and how it should be a model for all public broadcasters. I used to agree. Now, after living in the UK for over 10 years, I am not sure. Myth, perception and reality intermingle.

Yesterday, I posted the below text in the Blether with Brian blog.
To my amazement, it has been removed as it apparently breaks the house rules on defamation.

Can anyone let me know what is in this post that is defamatory?

I have posted it again with a toned-down version, let’s see if it makes the cut…


========================
Brian,

The Speaker of the House is not a mere class rep.
The Speaker is supposed to lead.

If the less-than-honourable members have been up to no good, it is the Speaker’s job to tick them off.

Michael Martin was an awful speaker: inarticulate, mumbling, discourteous and with a tendency to gag people down. Nothing to do with class or background or accent: all to do with competence.

Michael Martin committed far too many errors to deserve any sympathy:

1) He was the main force behind the push for exemption from the FoI Act. He wanted the expenses system to be kept secret and wasted thousands of our tax money on legal fees.

2) When it was clear that this was going to come out, instead of saying sorry, instead of showing contrition or remorse, he calls in the Police to investigate the leak.

3) When a couple of backbenchers raise the issue, he shuts them down in the most childish and discourteous manner. (Hoey)

4) When another backbencher raises the issue of the no-confidence motion, again the mumbles, fumbles and shows why he should have never been the Speaker in the first place.

All this after having had a number of years to do something about this mess.
So, you understand that most of us have no sympathy for the shop steward that became one of them. Good riddance.
======================

Don’t shake hands campaign

Since the extent of the expenses scandal became clear, I have been flabbergasted at the dishonesty and the lack of morality of the vast majority of MPs.

Today, I propose that the public takes a stance.

I know I am a total nobody in the blogosphere but I think this is worth trying. If you can spread the message, perhaps it will catch on and set a global trend. With the European Elections campaign in June fast approaching, the least-than-honourable Members will be out and about campaigning to get our vote. Before we give them our vote, we should give them a piece of our mind.

What I am suggesting is that elected politicians are given the cold shoulder by the voting public.
I advocate that we should not shake hands with them, let alone let them kiss our babies for that arranged photo-opportunity.

Before we do such a thing, we are entitled to ask:

“Do you have a clear conscience with regards to your expenses claim?”

Alright, the answer is obvious: many of them do not seem to have a conscience; but still we should ask this and other questions. For example:

“Have you claimed for any personal items such as furniture, luxury
carpets, garden maintenance, pool cleaning, TVs, pet food, etc?”

“How many times have you flipped your home since becoming an MP?”

“How much have you claimed under the expense system?”

Just look them in the eye and watch their face.

If they are not elected yet, then we should be asking what expenses they are intending to claim on. I personally think that travel and mortgage interest should be enough for anybody on a £63k salary -nearly three times the national average before perks.

Then, after listening to their answer, and remembering at all times that they are highly skilled at lying and deceit, we will decide whether we want to shake hands or hand them over our precious baby to be kissed.

Be wise.

When in a hole, stop digging

Perhaps, there was a point in Michael Martin becoming the Speaker of the House. Maybe the toffs needed to be told by a Glasgow shop steward without any academic qualifications. Maybe the point needed to be made that anybody can raise to the top, even someone like Michael Martin.

But it has not worked and it has backfired.

Instead of the Man of the People, instead of keeping his feet on the ground, he has become the worst of them all. It tends to be the case that those who find wealth without risking their own, and with little effort or application, become easily accustomed to their new found riches.

The Labour Party stalwart, the man from Springburn, only the other day whinged like a spoilt kid against the pro-Tamil protesters outside Parliament. If The Daily Telegraph, not a traditional ally of socialist guerrillas, writes that these was one of the most polite and well managed demonstrations seen in Westminster, I for one will believe it.

Michael Martin however, in his chauffeur-driven car, complained bitterly during one of his interventions that his car had to drive around the square because of the pesky protesters. Pity the man.

Today, amazingly still in the job, he put out a statement with the s-word. Once upon a time, “sorry is the hardest word” worked as a journalistic cliché. After the empty apologies of the bankers, and the unsincere apologies of the least than Honourable Members, sorry does not mean anything. He said today he is “profoundly sorry”. [statement]

I, and any other person I speak to, am very clear that they are only sorry they got caught out with their pants down. They are not sorry about what they have been doing, they are sorry it became public, despite the Speaker’s best efforts to prevent disclosure at a cost of thousands of pounds in legal fees.

But today, when an MP raised the issue of a motion of no confidence, he dismissed it out of hand. If he had any morals, he would stand down but what can we expect from the man who furnishes his home, and gets his wife and her mate taxied around at our expense?


The BNP are obviously loving this and I would be surprised if they don’t get a few MEPs at the European Elections in June.

I remember the “Things Can Only Get Better” campaign (watched from The Clansman pub in Barcelona), followed up in the book, and since living in the UK since January 1999, and I have met many a Labour party activist who sincerely believed that the party would clean up politics, tackle the causes of crime and focus on education. And what we got was the privatisation of the NHS, tuitions fees, the Iraq war, sell-off of Royal Mail, and a perverse infatuation with the banking industry that has landed the UK in an absolute mountain of household and national debt, and a banking sector that is mostly insolvent. And then this.

Then, they complain when the public say they are all in it for themselves, and that they are all, save a handful of exceptions, a bunch of thiefs.

La Perla - Calle 13 & Ruben Blades

Labour and the lost moral compass

There is a massive scandal engulfing British politics. It relates to the expenses system operated in the House of Commons, the British Parliament. It turns out that our elected representatives are milking the system and claiming for everything under the sun: not only mortgage interest but food, newspapers, toilet rolls, home furnishings, gardening, porn movies, swimming pool clearning, horse manure, anything and everything you can think of.

This story has been led by The Daily Telegraph, also known as The Daily Torygraph , since last Friday. When it started last week, I was a bit sceptical. I thought it was just the start to the campaign for next year’s General Election. I wrongly assumed the newspaper would only publish embarrassing revelations about the Labour party and would leave Conservatives MPs in peace. In case you are not too hot on British politics, this newspaper is a bastion of Conservatism, a proper right-wing, Euroskeptic, anti trade union, free-market newspaper. Nothing wrong with that: everybody is entitled to their own opinion. Apart from the crass Europhobia and its unrepentant Thatcherism, it is/could be a decent newspaper I would buy every now and then. But I don't.

Today however, it has been the first time in over 10 years that I have picked up a copy of The Daily Telegraph at Glasgow Airport on my way to London. Despite the flight being full exclusively of suited types, I was the only one to pick a free copy. The Daily Telegraph is not a popular read in Scotland, not least because of their Scottish Politics correspondent, a resentful, narrow-minded British Nationalist with a profound disdain for Scottish devolution.

Anyway, back to the story, I have been astounded at the lack of compunction by the shamed MPs. You see, what they did was within the rules, apparently. The rules that they themselves designed and policed. Reading these revelations made my blood boil. Had I seen any of these scumbags in the plane I would have given them a piece of my mind.

If you want to read about it, check The Daily Telegraph or BBC News.

But if that was not bad enough, just wait.

Yesterday, Tuesday 11 May, a Labour backbencher challenged the Speaker of the House about this issue. The Speaker is responsible for the office that manages the expense system. This parliamentarian raises her concerns about this mess. But this idiot, this disgraceful member of the Labour party, instead of acknowledging the scale of the problem, tries to bully the MP.

The following day, Tuesday 12 May, another parliamentarian puts it to the Speaker that he should consider the tone and the way he addressed his colleague.
The Ogre of Sprinburg declines:

http://news.bbc.co.uk/1/hi/uk_politics/8046601.stm

Right. But that is not enough.

Today as well, another of the Labour grandees, Lord Foulkes, [wiki] when challenged by a BBC journalist, instead of showing repentance, instead of apologising for the way MPs are screwing up taxpayers, furnishing their homes at our expense, tries to bully the journalist and retaliates back with a personal attack. Watch this:


The party of the people: Iraq war, backing of nuclear weapons on the Clyde (anyone remember CND?), ID cards, privatising NHS, tuitions fees, faith schools, PPP/PFI, privatising Royal Mail, infatuation with the banking industry, more tax loopholes than ever for the rich, and now this.

There is absolutely no policy difference between the Conservatives and Labour. None.

Somehow, even though I have never voted Labour whilst living in the UK, I do feel sorry for all the hardworking, if delusional, grassroots activists who can only witness in dismay how the party of the people has ended up being ruled by a spineless, warmongering, lying bunch of self-serving bullies.

The Labour party has lost its moral compass and the sooner there is an election the better.
After all, if we are going to be ruled by a bunch of self-serving arrogant twats, then I’d rather it was the genuine article. At least then we know where we all stand.

It is much more important than that

"Football is not just a matter of life and death: it's much more important than
that" - Bill Shankly

Regular readers of this blog will know that I do not write about football very often, particularly about FC Barcelona. That is even though I am a paying member of the club and have been so for many years. The issue is that FC Barcelona is an anomaly, the freak result of a series of historical accidents and social circumstances that would have been impossible anywhere else. As much as I love the club and enjoy the recent superb performances of the football team (always on Sky Sports), the truth is that the club has a perverse influence in the relationship between Catalonia and Spain.

Again, this was explained very clearly by Victor Alexandre (cat, eng). Barça is “more than a club” because Catalonia is less of a nation that it could be.

Anyway, today I am not going to write about the social role the club plays in the conscience of the nation. Today is about Chelsea and that game.

If you are interested in football at all, you will know that Barça went through on Wednesday against Chelsea to play in this year’s Champions League final in Rome against Manchester United.

There has been a big stooshie in the English (and some Spanish) media about the alleged referee bias against Chelsea. Conspiracy theorists claim that UEFA did not want an English final and the referee obliged.

Well, I have had a lot of fund winding up Chelsea fans since the end of the game in the different English newspapers. Very amusing.

Here is a selection of comments posted:
----------------------------------------------------
+ first leg: Henry's penalty and second yellow for Ballack
+ second leg: Dubious accidental handball by Piqué (hardly a clear-cut penalty) and sending off of Abidal for nothing.
I think the referee was poor indeed .

These other penalty claims only exist in the febrile imagination of some Chelsea fans or by some blinkered English journalists. The thing is that the English media wanted an English final (revenues are down this year) and it did not happen and hence we have to put up with the most stupid and ludicrous ref bashing ever. Chelsea's classless antics are bringing down (a lot of) the English media too.

I don't remember all this outrage at Collina's a few years back... remember the special one going to the ref's dressing room at half-time? That did word, didn't it?
Chelsea is the football equivalent of fast food: cheap nasty and tasteless.

Get over it folks: Chelsea are out and most people in the football world are happy about it.
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Brilliant: Drogba is so good at cheating that he even fooled his own manager!
Chelsea is proof that money does not buy titles, let alone class.
Against the thuggery and diving of Chelsea, the values of FC Barcelona.
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Chelsea is the football equivalent of fast food: cheap, nasty and tasteless.
Justice was done and karma does exist.
Remember the shocking refererring of Collina?Or even the Henry penalty denied last week or the blatant second yellow card for Ballack? And what about Ballacks handling of the ball early in the game before Chelsea's goal?
Well, what goes around comes around boys. Get over it.
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The vitriol coming back was quite remarkable. Poor souls.

But even after the debatable referering, football values and styles of the two clubs, which I admit are debatable as there is no shame in being a solid defensive unit (as long as your players do not constantly cheat and dive when they go forward); even after the different reactions over the two legs with regards to refereeing decisions, even after all that, there remains a fact:
On a moral and ethical basis, Chelsea CF are well, well below FC Barcelona.

Who are Chelsea? Chelsea is a London club, infamous for its minority of neonazi, BNP support. OK everybody has skeletons in the closet.

Chelsea is a club that should have gone down a few divisions, drowned by debt, until a Russian billionaire bought it for a token sum a few years ago.
And this man, in London to escape Putin’s attentions, has poured million and millions into this football club. And still they have players that are nothing more than thugs and cheating divers. And play shite, really shite football. And with their antics and behaviour, keep bringing the game into disrepute.

I hope UEFA takes some action against these bunch of overpaid whining, cheating, diving thugs.

Chelsea is a club whose ethos and whose modus operandi, on and off the pitch, is the antithesis of the values of FC Barcelona.

The sad thing here is that there must be, surely, some Chelsea fans out there hugely embarrassed about what has become of their club. The playground for Russian mafiosos, thuggish footballers and pathetic football. The day FC Barcelona becomes an plc or something similar and we become a “business”, I will give up my membership.