How did the commenters do in 2009

Yesterday we looked at the 3 bloggers of Capitalists@Work to see how we did for 2009. Pretty well overall, considering what a mess the year was!

Last January we asked the readership to leave in the comments their predicitions so below are the best and worst of that bunch.

Steven L -  well this regular commentator who has his own blog, did pretty well. He called Obama to spend trillions, the dollar to fall and the stock market to recover. Only the Pound dropping below the Euro was wrong. That is a lot of better calls than many media economists made!

Houdini - Another blogger who chipped in was Houdini, his predictions were oil to rise spectacularly, Obama to be a disaster. On the no tos good side, the FTSE was set to be mediocre and the far east to collapse.

Dearime - A fine commenter ton many sites, said to buy kiwi dollars. That would have proved to be a shrewd move.

Craig - A banker no less, had one pure home run among a set of pretty good predictions, that there would be another massive rescue of the banks. See any more of that for 2010 Craig?

newmainia, The loss to blogging that is newmania had seemingly prescient predictions for 2010 in 2009. Spot on with his comment that David Cameron would have to choose between the popular and the right policies.

Croydonian, blogger extraordinare, and all round fine fellow, did not think Russia would intervene in Armenia or the caucus region - a better choice than our own ND there...

Lilith - Did not get any right, but wins the best picture award, see above!

Overall it must be said there was far more accurate predictions than bad ones. Lots of people wishfully thought we may be rid of Gordon Brown but that is to be expected.

Time to pay closer attention to these come the end of this week!

How did we do on 2009 Predictions?

OK, here are our predictions for 2009 that we made on Jan 1. Now is a good time to see where we got to before coming up with our new set for 2010 on New year's day: We normally get 66% plus, can we keep up our accuracy?

ND is first up
1 - natural gas prices to fall dramatically. Well see this - pretty spot on to say the least. Hope you put the short on!
2- CPS and HMRC to struggle  - this is one that did not really happen.
3 - Obama to be tested by a series of events, well yes they did happen, but perhaps not on the scale of what may have been expected. Afghanistan and Climate Change not really distracting too massively form his domestic agenda.
4 - BHP to be in the news - well if you had followed and bought in, then you would have done well in this share this year, see here.

CU next, only 50/50 so far -
1. Oil as a massive investment opportunity with prices to end at over $50 and perhaps more. Home run.
2. US Dollar to fall dramatically, tick, China to allow Yuan to float, cross.
3. Gilts strike - well there was a minor one, but 2010 will see this prediction come to fruition.
4. UK inflation below 0% , well RPI has been for some time, but CPI never touched it in the end.

 BQ, next - work to do as we are only just over .5

1. Hundreds of bankruptcies - well banks decided not to pull too many plugs although there were quite a few nonetheless, no more big names followed Woolies.
2. Public sector pay to cause problems and a rebellion over Royal Mail - tick to both, the former maybe not in strikes yet, but they are all in the pipeline.
3. Election speculation, but no election - yup,.theme of the year.
4. ITV to struggle - another big yes, huge problems there , so much so they have struggled even to find a new management team!

So overall, BQ wins with 3/4, CU gets 3/4 (qualified) and ND 2/4

8/12 - 66% - so we just keep our mark. Tomorrow I will look at what the commentators said....

JJB gets the boot.

JJB the sports retailer said it will appoint administrators to its unprofitable Qube and Original Shoe Co. chains, two months after plans to sell the units collapsed. Original Shoe Co. is a retailer of branded clothing and footwear operating out of 64 stores, while Qube sells fashion footwear from 13 outlets. Together, the chains employ about 270 full-time workers and 540 part-time staff.


JJB acquired Original Shoe from larger rival Sports Direct International Plc in December 2007 for 5 million pounds. Mike Ashley must be wishing he hadn't spent so much on Newcastle United and had more spare cash to buy them back. He will need 30 - 50 million pounds. He still may well make a bid. David Whelan, the founder of the Wigan, England-based company is interested in buying the chain’s 50 health clubs too.



Back in April 2008 JB closed 72 stores and axed 800 staff after adjusted profit before tax fell to £33.8m from £47.2m. In January JJB said it would make a loss this year.
Net debt forcasts of £60 million by the end of the fiscal year is almost double its market value of £33 million and that just doesn't look good.



Completely unfairly to JJB, as this could apply to many companies, but there was a cartoon doing the rounds a while back of an MD asking his execs

"Can anyone think of a reason why we are down trading?"

An exec replied...

"I think the current situation was possibly caused by either, bad locations, lack of sales, poor product purchasing practice, poor positioning of the Brand, lack of targeted marketing, management taking their eyes off the ball, insufficient training of staff and middle management, poor retail management systems,rising interest rates or lack of availability of capital from financiers?
Or maybe all of the above?"

I noticed a supplier to JJB posted that in the comments in an article about them

Trading in Jan 2009: Oil

This site does not provide financial advice and anything that you read here should in no way be construed as financial advice.

Trading in shares and commodities has seen the average investor lose 50% of their money in 2008!

Ouch. Think before you click.

That is really painful. Sadly, I lost money too, although having got some better strategies together toward the end of the year manage to come way back up from the October low.

One of the things that turned it around was Imperial Energy. A Russian oil company that was long a target for India's OGNC. The share price was up and down, even a month before the deal closed at the year end the shares were 50% below the final offer price, which had actually been agreed in the Summer. The Indians tried to get out of the deal.

So for this year, I am looking far more at some macro level political economics (my master's degree finally comes in useful) for direction. Particularly for resources, which have been shot to pieces this past year. I can't see at all where oil is going, but unless the dollar collapses it will likely bounce around in a 50% range from where it is today.

In the long-term though, we all know the price of oil is going back up. Which is why owning the stuff still in the ground makes sense. If you are China and India or other cash rich, resource poor states, now is a huge opportunity to build a strategic stake fro a fraction of what it would have cost just 6 months ago.

As well as Oil, Gas too is a big player; as ND has been showing re Russia. Owning Gas assets is about to be a big deal and some UK firms are quite well placed. Indeed for oil and Gas the FTSE and AIM markets have a huge variety of options. Many are pure gambling bets at the moment as the small companies are as likely to run out of money and go bust as get bought by Sinopec et al.

Overall though, with valuations ruined by the current deleverage oil companies are very vulnerable. In any sector that is vulnerable there is consolidation.

(Except Banks obviously, they just get nationalised and given more money by global taxpayers. Another topic on macro political economy for next week.)

2009 Predictions

Going on the last 2 years results ND and I get about 2/3 of these right. This year we limit ourselves to just 4 each:

ND:
1- the wholesale price of natural gas will fall significantly, with big repercussions for producers and the opportunity for Europe at long last to kick-start a proper internal market for gas
2- both the CPS and HMRC will effectively collapse under the administrative weight of upsurging recession-related crime and tax issues. (The government will then spirit away the problems by moving the goalposts, and lying)
3 - Obama will quickly be tested by several outbreaks of international 'events', including the Caucasus (watch Armenia), Taiwan and South Africa
4 - BHP will be in the news (and not all publicity is good ...)

CU:
1-Oil will be the investment opportunity, with never to be seen again low valuations in oil companies. By year end oil will be at least $50 and possibly more; fill yer boots.
2- The US Dollar will fall dramatically by mid-year when the deleveraging will come to an end. This will force China off its dollar peg; overall it will cause another bout of mayhem in the world economy
3- There will be a Gilts strike (i.e. Government failing to sell its bonds) causing a large cut in public spending either by the budget or during an emergency budget.
4 - UK inflation will fall below zero very briefly, but shoot back up much to the surprise of the BOE and Treasury

BQ:
1- Retailers. Hundreds of bankruptcies are just around the corner. The January sales bounce will be very short lived. First 6 months will be awful for shops and many will be under real pressure by 3rd quarter. Debenhams and HMV look like the most shaky of the big names but there will be plenty more. The predicted collapse of 15 major chain stores looks optimistic if the terrible USA retail figures for 2008 are repeated here {Footfall 30 -40% down on 2007.}
Invest only in retailers with a strong online presence.
2- Public sector pay will cause big problems for the government as only a tiny increase to minimum wage is made. Strike outbreaks predicted. Union trouble and MP rebellion over privatisation of the Royal Mail.
3 - Election speculation will run riot right up to the local/European elections. Mr Brown will have to actually declare that there will be no election to stop the speculation as more and more evidence of secret campaigning leaks out. There will not be an election in 2009.
4 - Print media and television will have a torrid time as advertising revenue dries up and may well see the merger of some and end of others of the big giants. ITV will complain like mad about a level playing field. It won't do any good. Licence fee up.
Plenty of today's magazines won't be available next year.

Please leave your predictions in the comments, it was fun to track them this year.

Happy New Year.

Will China, Germany and Japan cause the Depression of 2009?

"Mercantilism, which reached its height in the Europe of the seventeenth and eighteenth centuries, was a system of statism which employed economic fallacy to build up a structure of imperial state power, as well as special subsidy and monopolistic privilege to individuals or groups favored by the state. Thus, mercantilism held exports should be encouraged by the government and imports discouraged."


The current trend in the soundbite political discussion of the current economic crisis is that it is all the USA's fault and to a lesser extent the UK's fault. We have had too much easy money and built up too much debt, created asset bubbles and ruined our own economic prosperity.
What is often overlooked is that it takes two to tango. Much of the money has been lent to the US/UK by those who seek to export their goods whilst seeking a high current account themselves. The three biggest culprits for this are China, Japan and Germany. All have employed policies which seek to boost export demand whilst not worrying about their own internal demand. This has created a lopsided world economy. Similar in a way to the 1930's - but then it was America who was the large exporter to the world and Germany was the main debtor country; oh, the irony!
China in particular has huge export subsidies to its industries, a controlled exchange rate to the Dollar financed by buying US government debt and a myriad of other taxes and charges which have aimed to build up its own industry. This 'competition' has destroyed the manufacturing base of the UK and US. Germany and Japan are also guilty of this, but using high-technology instead of low.
However, China and the other states now also face a terrible dilemma. Manufacturing is collapsing as fast as banking across the world as demand dries up. To stimulate demand in the deficit countries the Mercantilists' need to provide funds to their export markets; only now there is a big risk the money sent will not return home with the same value that it used to have.
In many ways, the Mercantilist countries have more to lose if international trade collapses.
Apologies for the long post, but the above needs considering carefully. Other countries are complicit in our mess, despite their high-handed speeches now.
In the 1930's the US decided to go the route of protectionism to try and maintain its industries. This had the opposite effect to that which was intended and the US suffered the worst meltdown of all the advanced countries. Deficit UK came off the gold standard and muddled through with much less damage.
If China continues to peg the Yuan to the Dollar (which hammers the biggest consumer of all too, the euroland countries), refuses to do more to stimulate demand and continues with export subsidies then the world WILL face a new Depression.

I have hope that the next G20 meeting will come to a new world trade agreement, that alone would ensure that we do not return to the 1930's.

UK house prices to fall 30%..or more

Much shock in the press todat that the senior exec at Barclay's could say house prices could fall 30% top to bottom.

As usual, those with a stake in the game are up in arms about this 'talking down' of the situation.

On the other hand, I am surprised that the pretence is still there that prices will remain so high. It is quite likely house prices will fall 50% (and this is for residents, if you wanted to buy a house in euro's or dollars then the price is alrady down over 50%). There are less mortgages, less jobs, less credit, there is less appetite for risk and less money on savings rates to allow people to build up a deposit; the outlook is bleak for the forseeable future.

Anecdotal information from Esate Agents say prices are already down 30% if you actually have to sell and this is before large numbers of foreclosures hit the market next year. Prices are after all what people want to pay, nto what people hope to sell for - a difficulty in doing polls on prices which has yet to be ironed out.

Even a 50% fall leaves prices at the top end of the long-run pricing index at 4.2x average salary.

When average the average house price gets closer to £100,000 than £200,000 will be the time to buy. Currently it stands at a 25% odd margin over this. Still much time to bide therefore...

Gold in 2009: Bullish or Bearish?

Gold has been the conversation talking point for many investors over the past year. This post is inspired by a conversation at FT Alphaville on the subject. The difficulty with Gold is that the world is filled with 'goldbugs.' These are a set of people who sell gold for a living and write ramping posts or columns to boost the price/demand for Gold.

Against this are arraigned the forces of..well....not many people; there are very few bearish views to be found on Gold which makes for a one sided debate.

And yet Gold has not been an unqualified success this year, even in the most unstable times of my lifetime which would suggest a flight to safety and 'traditional' stores of value. Gold started the year at $800 an ounce and looks like ending it there or thereabouts. It hit $1000 in March (I sold then!) and went as low as $710 (I bought back in at $715). Overall, the performance is much better than equities, down 40% odd compared to Gold's level pegging.

But next year, great things are expected of Gold. The Gold bugs proclaim huge inflation from the 'quantitative easing' (printing money to you and I) now going on in the West. Yet the deflation scenario suggests Gold will not do so well, it may even suffer as it gets dragged down by the end of the commodities bubble (which is after all, what has happened in recent months).

Finally, and most intriguing, is the dark conspiracy theory thrown out by the gold bugs. In a world of fiat currency, Gold is a threat. in the 1930's it was confiscated by US President Roosevelt. There are signs that something is awry, the paper price of Gold is very different to the price quoted if you actually want some delivered. The discrepancy by the conspiracy believers' is that the the Governments of the world are holding down the price by intervening in the paper markets. They are also not printing so many coins as they used to that is for sure.

Normally I am not a great believer in conspiracy theories; but the ramping of gold in the media all this year should have driven the price up more than it has. Deleveraging certainly has pulled it down, but I find it surprising its price has traded in such a narrow band throughout such a stormy market.

Deflation should mean next year is not a 'Golden one;' but my hunch is that the economists will be proven wrong on this and 2009 will be a good year to hold gold. What do you all think?