Good reads from around the Web.
This week saw the media, the pundits, and even the politicians come alive to the fact that the 300-year old United Kingdom might imminently be torn asunder by what seems to be a chess gambit gone wrong.
Even more amusing/tragic is that this fight is being waged by leaders who boast all the gravitas of the Mr Men in a pillow fight.
I’m not going to get into the politics or even the economics of the situation. There are plenty doing a better job than I could, including what it might mean for investors.
Personally, I started considering the impact of Scottish independence years ago.
And so did the market.
Odd behaviour
As a whole, the market is clever enough to have spotted this referendum was coming, even if most of us seemingly forgot about it.
The moves we saw earlier this week in the pound and in some UK shares – especially on Monday – reflected the market adjusting to a surprisingly tight poll, not a sudden awareness of the possibility of Scottish independence. That’s long been priced in.
I’ve noticed some people struggle with the idea that something can be ‘priced in’ and yet there’s still volatility and uncertainty.
For a colourful analogy, you might think of a horse race – only one where hidden somewhere in the stands is a sniper with a grudge against horses.
As the race begins, the odds are whatever was determined by the betting at the bookies. They reflect the sum total of the best guesses of everyone who has put their money where their mouth is.
Once the race begins and horses begin to drop, the odds of winning change. Some victims are out of the running. Other horses now look better placed. Eventually some gamblers might even spot – or think they spot – a pattern as to which horse the sniper will turn on next. This could give them an edge.
If a 33-1 outsider gallops over and away from its competitors to victory, it doesn’t mean such a victory wasn’t priced in.
It was priced in – at 33-1.
The initial odds priced in what was known, to the best of everyone’s conflicting interpretation.
But things change. It’s not about black or white, but rather lightening and darkening shades of grey.
We’ll see
Luckily, horse racing isn’t a blood sport and nor – as much as both sides might deserve a custard pie in the face – is the Scottish Independence campaign.
Besides, despite all the media narratives and panicking politicians, the FTSE 100 index doesn’t seem very much more bothered by the prospect of Scottish independence than whatever was priced in last week.
I just watched a CNBC presenter wrap up a piece on the ‘mayhem’ in UK share prices with a cut to the closing figures for the UK, French, German and Italian markets for the week. She was shocked – the UK was the best performer.
Now admittedly that’s probably partly because the coincident weaker pound is so good for so many UK companies.
But still, if you think what we saw this week in share prices was panic then you’ve forgotten what it was like in 2008.
For what it’s worth I strongly suspect “No” will carry the day, and I think the market does too.
But that doesn’t mean it’s complacent. It means it’s handicapping the odds, and those are the way they stand right now.
Odds are not certainties. That’s what the vote is for.
Note: I’m compiling the links early, so there’s no Saturday papers in this week’s roundup. If you come across something good, please do share it in the comments below!
From the blogs
Making good use of the things that we find…
Passive investing
- Stick to the plan – Ben Carlson
- Be humble and become wealthy – The Psy-Fi blog
Active investing
- FTSE 100 valuation and projection – UK Value Investor
- Richard Beddard reviews his portfolio after five years – iii blog
- Magazine covers as sentiment indicators – Investing Caffeine
- Countries ranked cheap-to-expensive by more than CAPE – Meb Faber
- Why the US might not be quite as dear as it seems – Brooklyn Investor
- The Alibaba IPO is valued right, but is it priced right? – Musings on Markets
Other articles
- Great news! You’re allowed to have only one kid! – Mr Money Mustache
- Talk to strangers – The Value Perspective [Although someone tried…]
- The pyramids and the oxygen mask – The Escape Artist
- Lots of Apple Watch / iPhone 6 links – Abnormal Returns
Product of the week: Barclaycard’s new 0% balance transfer offer has a record-breaking 34-month initial term, reports The Guardian. The paper also names the best 0% card for purchases and the best card for rewards.
Mainstream media money
Some links are Google search results – in PC/desktop view these enable you to click through to read the piece without being a paid subscriber of that site.1
Passive investing
- Jack Bogle on buy-and-hold and diversification [Video] – WSJ@Ritholz
- Don’t invest without discipline – Swedroe / ETF.com
Active investing
- Failed hedge fund managers should say: “I was wrong” – Housel / Fool US
- Did you miss the $1 trillion post-2008 US bond boom? – Bloomberg
- Apple Pay could be more important than iPhone 6 in the long run – Slate
- 90% of hedge fund managers overpaid, says hedge fund investor – Bloomberg
Other stuff worth reading
- The cost of investing: Lessons from the Woodford saga – CityWire
- Cardiff is top for quality of life, but Dorset is best for retirees – ThisIsMoney
- 20 insider tips to getting more money for your house – ThisIsMoney
- Things investors should know the difference between – Housel / Fool US
- You have much more free time than you think – Fast Company
- Networking makes people feel physically ill – Science of Us
Book of the week: New readers continue to make their way to Monevator, which is great. It does however mean repeating some old answers to the same questions, such as “What’s the best book about index funds?” We always reply with Smarter Investing by Tim Hale. It’s not my personal favourite, but the UK’s passive massive swear by it. Read my co-blogger’s review.
Like these links? Subscribe to get them every week!
- Reader Ken notes that: “FT articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”.” [↩]
I agree and think Scotland will come out firmly ‘No’ – maybe 55% to 45%. I suspect many from the no camp will have been intimidated or embarassed to voice their opinions openly in recent weeks which has skewed the opinion polls towards ‘yes’.
Personally I have no strong preference either way and will just be glad when the whole shaboodle and media hype is over.
From a purely economic perspective, my guess is that the loss of Scottish Labour MPs would make policy in the rest of UK more laissez faire and liberal (as in Adam Smith and John Stuart Mill liberal) over the long term. So I think we’d probably end up richer (financially) without the Scots.
However it would be a shame if life started to imitate Game of Thrones and we had to upgrade Hadrian’s Wall. Money is not everything and I hope the Scots do the right thing and stick with the UK.
As Cardiff resident, I feel rather pleased with The Daily Mail saying “Cardiff: Welsh town named the best city to live in the UK”. A warm smug feeling, and a laugh at The Daily Mail’s expense, all in one sentence.
As to the Scottish question … it seems a hell of a jump into the unknown. The fact that such a high percentage of the voters are ready to make that jump means that most of the UK have underestimated how pissed off the Scots were. A narrow victory one way or the other sounds like years of frustrations & recriminations ahead.
Agree with TEA, I feel readers of this blog will be better off if YES win because if Scottish Labour MPs cannot vote in our parliament there is less chance of a socialist government. I never understood why they are allowed to vote on matters that does not affect there own constituents – like tuition fees ! Hoping for a YES victory, who doesn’t want to be free and independent and master of there own destiny – just like the majority of people who read FI blogs.
Personally the sight of a bunch of English rich public school boys toodling up to Scotland to ballyhoo about how wonderful the Scots are, made me feel sick. I suspect a UK without Scotland will be poorer because otherwise all those politicians wouldn’t have bothered. Maybe there’s more oil left than we think or they know it will be easier to frack the Highlands than the Home Counties.
But ALL politicians should reflect on the closeness of the polls as a symptom of the complete failure of the political system. People who feel that their views are listened to and considered and that they get a fair share of a country’s wealth and attention don’t generally up and leave. That so many want to should be seen as shameful. That all the Better Together’s campaigning has been negative doesn’t help. They should have been pointing out what the Scots gain from the Union, not how things will be worse without it. That they seem to be unable to point out the gains, makes you wonder if there really are any. Telling a bunch of people that they are too useless to manage on their own is guaranteed to get their backs up (well, would you like it?). Cameron’s arrogant decision to not allow the Devo-Max option on the ballot paper is now coming back to bite him on the arse.
Perception outside London and the South East is that all wealth and investment goes there e.g CrossRail, Heathrow, even HS2 is so you can get quicker to LONDON.
Yet when the Welsh Government ask for investment money to improve the M4’s appalling bottlenecks or to electrify the Valleys rail, it’s sorry we can’t afford that – you’ll have to find it out of the Barnett formula.
I really hope the Scots stay in the Union but sadly I can understand why they want to leave.
The politics and macro-economics are fascinating (terrifying?) but closer to home, what about the millions with personal pensions bought and paid for with outfits like Scottish Widows? I assume that a contract made (in my case, 23 years ago…) under UK law, and in Sterling, will stay that way. But…. a Scottish government might have very different views about taxation.
I for one would wish to see the assets backing my pension moved south smartly. Multiply by several million policies and you have a hell of a lot of £££s crossing the Tweed. Implications? I rather think no-one has worked them out….
“a contract made (in my case, 23 years ago…) under UK law”: I’ll bet if you read that contract you’ll find it was made under Scots Law, that is to say subject to the jurisdiction of the Scottish courts. What is this “UK law” of which you speak?
“Networking makes people feel physically ill”: given that we used to refer to the phenomenon as bum-sucking, arse-licking, or brown-nosing, is that any surprise?
(I read once that “brown-nosing” was originally a Canadian term for the phenomenon: bless them.)
Dearieme: scotwid’s policy states “the proper law of the contract and the jurisdiction to which the Society is subject in respect of the policy is that of England.”
Scotwid has of course been demutualised and taken over, and are now owned by lloyds. So it is possible that they have slipped in a change to the terms & conditions and altered it to scots law. We will see.
C
As a Unionist living North of the Border I am firmly in the No camp. However there is enough heat expended elsewhere for me to not want to debate it here.
However for those who are interested in which way the polls point here is the FT’s take on it (polls later than this could obviously shift things.
http://blogs.ft.com/ftdata/2014/09/13/scottish-independence-polls-margin-of-error/
It´s impossible to say whether independence for Scotland will be good or bad for us. Increased autonomy for both Scotland and the rest of the UK could essentially increase specialisation and be good for both sides. The fact that Britain believes so strongly that Scotland needs us, is not neccessarily a beneficial attitude for either. However, decreased mobility within the UK for all Brits is definately a major drawback.
“Even more amusing/tragic is that this fight is being waged by leaders who boast all the gravitas of the Mr Men in a pillow fight.”
You are too polite.