Heidi doesn’t waste wax on her legs…

But tons of it gets used each year during the Kerzenziehen (“candle dipping”) season.

There are all these heated cylindrical reservoirs of molten wax scattered around the floor of the church hall, and swarms of children from about four years old run around dipping string into them. They hold the string with their bare hands (I kid you not, no safety goggles or protective gloves or signs on the wall saying the wax is hot).  After a dip the string is cooled in the air for a few moments (i.e. the children then run around with the waxed string) before being dipped again.

This procedure is repeated until a decent candle shape emerges. The candle is then improved and decorated in a dedicated area and then wrapped and weighed. The wax used is paid for by weight. The whole thing takes about an hour or more and the atmosphere is fanbloodytastic!

I love this time of the year but……. there is no wind in Zug. After three years I think I have only noticed wind two or three times. When it rains the rain comes down, cloud to ground, in a straight line, unlike in London where it will feel like being in a car wash.

But one consequence of this is a persistent mist throughout the city during the first half of many days in the winter.  So on misty mornings like today, when I am desperate to see Sammy sun, I switch to the TV channel which is dedicated to the Zugerberg webcam and check if the sun is visible there. More often than not, the cam will scan over Zug (you can’t actually see the city, only the blanket of mist covering it) and show the bright sunny uplands above it.

Twenty minutes later I am parked and walking, all sun-glassed up, with my kids to the play area. Another thirty minutes and I have a good fire going and the kids are working up an appetite for the Würst I am about to cook on it.

Lex – no point to make with a blunt pin

Lex, today attempts to prick the commodity bubble with a blunt pin.  In “Reading the commodity leaves”,  Lex suggests that the relationship between actual changes in  demand for commodities and the prospects for growth in world manufactures mean that there is scant justification for the current commodities price level.

But Lex could make this observation currentlyabout most other investment capital asset indices.  Neither does he show awareness that it is only relatively recently that the prices of commodities have been determined to a unquantifiable but significant extent by  ‘investment’  demand, and not just end-user demand.

The one year commodity index chart (S&P/GSCI), looks just like most  other capital asset indices one year charts, i.e. united by similar levels of capital asset price inflation.

Common sense suggests that the driver that links all investment asset classes price levels must be liquidity and credit levels.  Since Lex (nor anyone else) does not understand precisely how credit and  capital asset price inflation act on each other,  it would be helpful if Lex would just shut up.

Bun rating: 0 but waffles are available instead.

Crystal balls

Why do we deride crystal ball gazing, palm reading, and even (some of us), astrology, and yet base our investment decisions on the predictions of financial analysts? How accurate are forecasts? Why should we believe that one specific area of futurology is a science? And how much forecasting is really being done?

 Quoted companies are under an obligation not to knowingly allow a false market to develop in their shares. In practise this means that they issue frequent statements about current trading and outlook, and sometimes even issue a specific statement if they need to correct an over optimistic or pessimistic consensual view of their trading performance.

This means that if you are a financial analyst making a bad guess, you will have your work corrected in time to stop you looking foolish.  Here are a couple of examples out of many:

Which illustrious broker said of Barratt Developments in May last year when the share price was 177p “hold, price target 302p” and in May this year “sell, target 75p” when the price was 105p, and in September “hold, target 172p when the price was 172p?

Or which major international financial institution said of Land Securities in June 2007 whent he share price was 1557p “Buy, target 2250p”, and in November of the same  year when the share price was 1400p “Buy, target 1735p”?  The same institution that said in July 2009 when the price was 500p “Hold, target 500p” and last month when the price was 530p “Neutral, target 645p.

Land Securities share price closed at 725p yesterday- 13th November !

If analysts can continuously adjust their estimates of earnings to reflect changed actual conditions as they become apparent, what forecasting is being done? What is the difference between continuously updated forecasting and a continuously changing share price?

Ordinary mortals can’t place bets on a race once it has begun. The analysis game is different. Analysts can keep switching their bets to the horse most likely to win, right up until the last few furlongs, and then claim credit for prescience.

 Clever stuff?

Lex – who is being stuffed?

Lex writes about the proposed Lloyds capital raising –  the world’s largest – but misses the opportunity for deserved excoriating criticism on behalf of the poor bloody individuals who are the being plucked and stuffed by the fund managers gifting  their savings.

Here is a quote from yesterday’s “HM Treasury – Government Announcement on Banks. Implementation of Financial Stability Measures for Lloyds Banking Group and Royal Bank of Scotland”:

 “The remaining risks are better shared with private sector shareholders – for Lloyds, the private sector will provide £15bn of capital and for RBS, the first loss on the remaining £282bn of contingent liabilities has increased to £60bn. “

But the ‘private sector’ in this instance comprises mainly the same taxpayers who will now take on additional Lloyds liabilities via their pension and savings products which will be stuffed by their managers with unwanted bank shares. You can be certain that the individual pension and savings participants will not be asked if they want to support the capital raising, and if they were,  it isn’t difficult to imagine the answer.

Why would a rational investor buy new Lloyd’s bank shares?  There is no visible or certain investment return. On any criterion the rights issue from Lloyds would normally be considered a high risk investment.

The truth is the rights issue is an indictment of the present financial system, whereby a minority of savings controllers can misrepresent the interests of the majority participant investors , the disenfranchised suppliers of capital, to acheive their own narrowly profitable ends. See also https://fabooks.wordpress.com/2009/09/01/the-disenfranchisement-of-capital-%e2%80%93-how-the-city-stole-your-vote/

Bun rating: 100% the world’s largest stuffed bun