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.
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.
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…
- 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
- 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
- Jack Bogle on buy-and-hold and diversification [Video] – WSJ@Ritholz
- Don’t invest without discipline – Swedroe / ETF.com
- 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”.” [↩]