Category Archives: Past the Post

Bogus philanthropy: ‘The Giving Pledge’

The world’s most famous financial ‘activist investor’ is at it, again. Good old Carl Icahn clearly loves the media. However, his latest shot appears to have misfired. Carl wants to see the money: hard cash, that is. And he knows where the biggest piles are stacked away. So it makes perfect sense to press Apple for that special divi via a $150 share buy-back and then using a vastly inflated share price target of $1,250 as a tool to get fellow investors on side.

Oh dear… the dust settled rather too quickly for his liking and so he’s having another go. This time presenting him as the great philanthropist saying Pacific Investment Management Co.’s Bill Gross should join him in pledging to give at least half his wealth to charity, after Gross urged Icahn to dedicate more time to helping people instead of pushing Apple Inc. to buy shares.

The ‘Giving Pledge’ is a rather strange animal… Pinkers suggests readers should visit their website: the home page looks like a wall out of Legoland inscribed with the names of the super-rich and… of course… super-generous souls!

The Oxford Dictionary defines the noun ‘philanthropy’ as follows: “A person who seeks to promote the welfare of others, especially by the generous donation of money to good causes”.

Pinkers would like to point out the main thrust: the welfare of others!

Sorry… but ‘The Giving Pledge’ stinks. It was clearly set up as a promotional tool for the social climbers of this ‘gated community’. All these names… why can’t they give quietly? Because it’s not about others but about themselves: very much reflecting the spirit of this society.

US fiscal battle and… boys & girls!

Today, the next phase in the US’s fiscal war begins. Does anybody care? The issues remain the same and Pinkers can only refer to the post dated 20 October 2013: ‘Kicking the can…’. There really isn’t noting much to add… or perhaps there is?

I would like to refer to the brilliant Ralph Atkins in today’s FT, making the important point that the “ECB is instinctively more conservative, less activist than the Fed, its deliberations influenced by Germany’s famously cautious Bundesbank…”. As opposed to most analysts, Mr Atkins also points out that the strength of the Euro is not just due to the weakness of the Dollar. Pinkers being a fan of contrarian thinking likes this comment.

Also, in today’s FT, Tony Barber, Europe’s FT editor, states that “The EU would be best led by Merkel and Lagarde”. Pinkers couldn’t agree more! Merkel solid as a rock and Lagarde a real visionary: remember.. only a couple of years ago or so she was the first to go public with her serious concerns regarding the serious dangers of the under-capitalized European banking sector and the perilous state of the EU as a whole. What followed was an outcry of condemnation and ridicule, accusing her of recklessness. Well, the rest his history… and, regrettably, present: no fiscal union, no survival.

So… Pinkers really owes an apology to the female readers of the site, constantly referring to the “boys” when in fact the girls are now taking over! Just as well, it has worked wonders in the art & museum world! Must be that instinct… no doubt, the female ‘instinct gene’ will soon be found!

Eurozone

The brilliant Ian King, business editor of The Times, kindly allowed Pinkers to paraphrase from his excellent column in today’s Times. Please refer to it via the Times website or… get out and buy the paper!

But Pinkers would still like to publish the main point – quote: “The recent US budget chaos has meant that the eurozone’s structural problems have been largely overlooked by investors”. Mr King elaborates in an e-mail:”This is a very important issue that really does have the potential to reignite the eurozone crisis, though, as it will re-establish in the minds of investors the link between sovereign debt and the parlous state of the eurozone banks…a problem made worse, of course, by the ECB’s own ESM that encouraged eurozone banks to load up on sovereign debt!”

This perceptive analysis exposes another major issue: The problems connected with the recent dramatic appreciation of the euro against the dollar; not because of euro strength, of course, but dollar weakness and the (for now!) diminishing prospects of the US Fed winding down its asset purchases.

Really odd!

Today’s FT carries yet another headline of the S&P 500 closing at record high on QE hopes. Yawn! All of us know by now that the intravenous drip will not be pulled for another few months or so: the Fed will remain “accommodative” until next year or that at least is the prevailing consensus. For heaven’s sake, let’s stop harping on about it – really rather tedious by now.

However, Pinkers is really baffled by one interesting phenomenon: Markets are driven by anticipating future developments, not present conditions. Even the central banks have now adopted the policy of ‘forward guidance’. It makes perfect sense, of course. After all, who in their right mind would refuse the crystal ball? A bit like watching the weather forecast.

So why is it that in this instance the markets simply ignore the inevitable: that the drip will be pulled. Not a question of IF but only WHEN. Perhaps it’s because KNOWING that it’s going to happen implies a PRESENT condition? Or is it just stupidity? Pinkers leans towards the latter… sorry.

It’s party time!

And so the party continues… the champagne is flowing!

The same old story: when the party is in full swing, good economic news is good news, and bad economic news is… well: good news, too! Right now, sentiment rules the roost.

The release of US data clearly pleased the markets: payroll figures well below expectations and, best of all, with it modest earning growth: all very helpful to keep the Fed’s massive bond buying progamme in place for some time yet; tapering still a long way of, the printing presses churning out extra liquidity coming very useful to drive equity valuations ever higher. Goldilocks galore!

Sorry, Pinkers again playing party pooper! But this artificially driven rally will only intensify the divergence between equity valuations and the true underlying performance of the economy. With the S&P already trading 0.7 points above the 10 year average price to earnings ratio, the shock when tapering finally starts (and it will!) will be even greater. Eventually, stock prices and fundamentals will converge.

The first warning signs are emerging: Bank of America yesterday warned of Netflix’s “elevated price”, describing it at “difficult to justify”. All Pinkers can add: this applies to the vast majority of current equity valuations in all markets. Poor old Netflix certainly isn’t alone.

And, last but not least: most analysts now don’t expect tapering until at least spring 2014 or even later. There is one thing the markets simply don’t like: going with the herd! Pinkers reckons there could be a most unpleasant surprise when least expected… the very nature of a surprise, of course. The subsequent hangover will require a full English breakfast washed down with a double strength Bloody Mary!