Mince pie futures

In these challenging times Grumpy Old Man has been relentlessly searching for undiscovered value and potential arbitrage opportunities.

We believe mince pies have been overlooked as a potential store of value. No longer is your average mince pie the product of an industrial stamping process somewhere in the Black Country

Quite conversely, we believe mince pies could now offer considerable upside potential.

Grumpy Old Man has been subjecting a range of these unique confections to a rigorous and scientific bench-testing process supported by selective and controlled use of microwave radiation.

He offers here some tasting notes to guide future investment decisions.

Sainsbury’s Deep Filled Mince Pies
Tall rather than deep-filled; filling rather bitter; pastry-style case, not very buttery; explodes after 40 seconds on high power
23p per pie

Sainsbury’s Taste the Difference
Light, buttery pastry which became somewhat floppy and chewy after 30 seconds in the microwave; filling offers fat raisins and plenty of brandy-type flavours
34p per pie

Sainsbury’s Connoisseur
Mincemeat of super-prime quality
53p per pie

Konditor & Cook
Well-structured, with some evidence that a rolling pin has been applied to the pastry; variable dimensions and slightly inconsistent sizing offer a good impression of artisanal provenance; available individually or in boxed tranches of six or a dozen
89p per pie

Gregg’s at the top end of Leather Lane
A rather volatile proposition, excessively sugary and highly liquid; suspiciously handmade; pastry somewhat limp and insufficiently acquainted with heat; cloying sweet mincemeat attempts to hide some sub-prime, Alt-A rated ingredients with emerging evidence of default or impairment.
27p per pie

In current market conditions we recommend eating fewer of the more expensive pies.

What was that girl doing on the 45 bus?

Travelling up to town, as you do, from the wastelands of South London past the Elephant, on the bottom deck of the 45, I notice this girl, sitting opposite, headphones in ears, fiddling with her mobile.

I was already feeling a bit sick, sitting on the bottom deck over the engine, getting a nice hit of diesel fumes, facing backwards, swaying from side to side as we went round the corners.

She was about 17, travelling with someone who looked like her mum, and she was using her phone like an iPod. What can she have been doing?

I'm told by our new media guru that she might have been doing any number of things from downloading her favourite song collection via GPRS to listening to some tunes that she had side-loaded earlier - whatever the hell that is.

She could have been perusing a collection of dodgy pics or be on-line playing an MMORPG. She could have been paying a bill (though at 17 that's unlikely as she's probably a student and doubtless sponging from her parents) or updating her profile on Facebook.

She could have been uploading a video to You Tube or reading her e-mail. It seems the opportunities to consume new media whilst on the move are now almost endless. God forbid she might even have been simply making a phone call!

That's great, but it still doesn’t stop other people’s musical tastes being imposed on my aural sensitivities.

I’m placing great hope on Boris’s plans – how about either silence or compulsory Verdi?

Safe as houses

So the FTSE 100 did get down to the 3,000's.

But have we seen the bottom yet?

Chateau Angelus 1996 is still available at the wine bar at the end of the road at the knockdown price of £195 a bottle. And if that doesn't quite stretch the credulity, then there's still the La Tache 1982, Domaine Romanée Conti, at £1,200 a pop.

On Channel 4, the 'phenomenally successful' A Place in the Sun is still promoting dream homes in Sicily where, apparently, there is much less organised crime than there used to be. Amanda Lamb, its presenter, also fronts A Place in the Sun Revisited, Celebrity A Place in the Sun and Top Twenty Best for Channel 4.

Born in Portsmouth in a spot that is now the M27, Amanda was an estate agent for four years and then a model for six years. Amanda has appeared in commercials for companies as diverse as Gossard, Oil of Olay and Remington.

Maybe TV companies feel these lifestyle programmes, fuelled by credit mania, must be shown because they're still in the can.

What else from the pre-October 2008 era is still in the can?

Websites with text in unreadable grey font and flash animations on the home page?

Must remember to ask my financial adviser about his modelling career.

And maybe the next series of A Place in the Sun will be hosted by Margaret Beckett from Mablethorpe Caravan Park.

Well I never…

In a week that is seeing the Republican Party turn the USA into the largest example of state capitalism in the western world, one might have thought that there could be no more surprises.

How wrong one can be. Last week also witnessed a competing event – the publication by the Grauniad of a slim volume entitled "The Guardian Book of English Language", including advice on common spelling errors.

Another defining moment of post modernist inory?

Where is James Crosby now?

Yesterday's fools are today's sages.

LloydsTSB were castigated in 2006 for not making their capital work hard enough, and were thought in January of that year to be about to receive a takeover offer from BBVA, Wells Fargo or Bank of America - or possibly all three.

But now staid institutions with robust balance sheets are being courted by world statesmen.

Maybe, to mangle one's aphorisms completely, schadenfreude is a dish best eaten cold.

Should we be reassured that James Crosby has joined Alan Greenspan's panel of car crash investigators? Maybe they should also enlist the help of Hank Greenberg, Richard Fuld and Adam Applegarth.

I suggest a visit to Dr Johnson's House will be in order later in the month - both to straighten out the aphorisms and also to ingest some renewed sagacity.

Cardboard box time

Despondent financiers have been seen foraging for empty cardboard boxes in the delivery bay behind our local Sainsbury's.

What is inside those boxes they are carrying out of the temples of steel and glass?

Is it just sweaty trainers and photos of loved ones, or is there anything else of real value to be retrieved from our collapsing investment banking industry?

The fall has been coming for some time - at least ten years, in our opinion. What is the legacy?

Difficult to assess just now, but our list would include: outstanding analytical skills; innovative applications of high-order maths; highly available, resilient and powerful IT systems; truly global organisational models; and memories of a highly committed and energised way of working.

The people carrying cardboard boxes are walking out with considerable knowledge, skills and experience. Our bet is that these competencies will get a retread and be back on the road before long. But within a considerably less favourable regulatory, fiscal and macroeconomic environment, we suspect.

Where’s the government now?

For 25 years or more our Chancellors, of either persuasion, have been on the side of the financial services world.

It’s true that they have enjoyed huge tax takes from the sector (though not anything like as huge as institutional profits would suggest) but they have also have basked in the reflected glory of the City of London, taken credit for its success, contributed to its growth through the encouragement of Public Private funding schemes, refused windfall taxation on banks, and have largely rejected proposals for taxation changes that might dissuade non-doms from making their dosh in London.

More importantly our governments have failed to sustain and develop alternative industry sectors (unlike most members of the EU and France in particular), they have allowed our skills base to deteriorate and they have sat on their hands while financial institutions grew fat on the strength of bogus liquidity and the over-extension of institutional and personal credit.

And now? What is the role of government in a recession?

• to engineer a recovery through reduced interest rates? Sorry Madam, but Mr Brown removed Government’s hand from that lever 10 years ago
• to restructure housing debt and its guarantees? A tiny bit of this has been offered in the wake of Northern Cock but now we see what’s happened to Fannie Mae and Freddie Mac there won’t be much enthusiasm for more of that I suspect.

And what does that leave? Yes, thank you that man in the flat hat at the back of the hall, all we’re left with is reductions in taxation. We’ll see.

Had that Georgie Soros in the back of my cab the other day

This geezer hails us in Seething Lane, steps off the kerb all abrupt like. He goes, “take me to the reflexive centre of finance”.

I answers ‘im, “I’ll take you where you like mate, you’re the guv’nor”, so I starts the meter and off we goes with a sharp left and then a cracking U-turn that holds up all the traffic – ‘cos you can’t do a right onto Byward Street from Trinity Square since they put that bleedin’ pedestrian refuge in the way. "

I asks him, “’ere, what’s all this reflexive centre stuff anyway?”

He says, “well, it’s like this. A company has a certain amount of assets and the current and future value of these assets gives its price. These are the fundamentals.

“These fundamentals can, however, be influenced by certain people (traders, fund managers, commentators). These certain people can increase or decrease the perceived future value of the company. When these people are doing this the market is being reflexive. Oh look, there’s Singer & Friedlander where I used to work.”

I looks at him, in my mirror, and says ‘I am reflexive?”

“Yep, you’re reflexive when you go out of your way to change something that may appear unchangeable, or fundamental to others. People are participants, not just observers.”

“Wot? Wot yer mean? Look at that prat doing a U-ie right in the middle of the traffic.”

And he says, “bear with me, I’m more used to explaining this in financial markets … but let’s give this a whirl …

“What if a series of events happened that reduced the number of people travelling on public transport? For example, strikes, terrorist attacks, smelly sewers … OK? So instead of taking the tube or the bus people wanted to take more taxis? As the demand grew, so would your fare income. With me so far?

“And what if your brother was Bob Crowe, your cousin was the East London Al Qaeda terrorist cell leader and your brother in law managed the central London sewers for Thames Water… So you’d all be conspiring to get more people to use taxis. And everyone would follow the trend. Do you get me now?”

And I went, “don’t be crazy, that would never happen. You’re crazy, is that what you get up to? Are you a terrorist, you’d better get out here mate, don’t bloody care if you took down the Bank of England in 1992, GET OUT!”

And he says, “hold your horses! This is an example, remember what we were doing? This is what has been happening in financial services for some time. In certain conditions the efficient market hypothesis no longer holds, leading to disequilibrium rather than equilibrium. Let me give you some more common examples, that you might recognize:

1. traders talk up a stock to sell it
2. banks talk down a stock to buy it cheaply
3. companies use their over-valued stock as collateral to buy an otherwise unassailable competitor, so that
4. that unassailable competitor’s market competitiveness is destroyed by the over-valued company, and then
5. the destruction of that company’s market competitiveness leads to a reduction in sales, which then leads to redundancies, a fall in house prices ….

Recognise any of these? Enron? WorldCom? HBOS may be suffering from a dose of this, who knows?”

And I goes, “some of that rings a bell. Sorry guv, did you say the Centre of Reflexive Finance? Can’t find it – they’ve changed all the one-ways round here … so I’m dropping you off at the College of Reflexology on Betterton Street instead, same sort of thing innit?

"Anyway you're not too far from the LSE where you used to study - and where that Anthony Giddens put out some remarkably similar ideas more than thirty years ago. I think you'll find that he called the two-tiered, interpretive and dialectical relationship between social scientific knowledge and human practices the double hermeneutic, if you look at his New Rules of Sociological Method (1976). Are you saying that Giddens' work is now becoming mainstream? That’ll be £54 please – you see the price of diesel’s killing us.”

Was the Senior Partner at Oxford Economics away on holiday?

The National Housing Federation (which represents 1,300 English Housing Associations) has today released annual Home Truths report, based on research by Oxford Economics.

Mortgage brokers Charcol dubbed last year’s Home Truths report as a “Dodgy Dossier” because of its questionable maths. Last year’s report asserted that the 7.5% growth in house prices in 2006 increased the average house price/ earnings ratio from 8 to nearly 11. But the fact that wages grew during that period makes the assertion arithmetically impossible.

And, while we are looking at last year’s report, it is always worthwhile comparing forecast with actual. In 2007 the Home Truths report forecast that “a housing market crash is unlikely” and that house prices would increase by 2.2% (a remarkably precise figure) in 2008.

But looking at the Oxford Economics website today we read that ‘the housing market is already in deep recession, with house prices down 8% or more since last autumn’.

Needless to say, the 2008 report makes no reference to the 2007 report, and indeed is nowhere to be found on the National Housing Federation’s site. I wonder why?

The 2008 report, itself unencumbered by the unbelievably poor forecasts of a year earlier, ploughs ahead to produce another prediction: “25% house price increases by 2013”.

Of course, the desired media response is obtained, on the required front pages:

• Daily Express (the world’s greatest newspaper) “House Prices to rise by 25%”, and
• Daily Mail: “House prices will rise by 25% over the next five years, say experts”.

Of course, “say experts” is the vital part of the headline.

Why does Oxford Economics make these assertions? And what assumptions is it making about the availability of housing finance, the relative attraction of investing in other assets, unemployment, immigration, wage inflation?

No clarification was forthcoming from either the National Housing Federation or Oxford Economics. Meanwhile, most of our national papers cover a 25% increase in house prices.

What can we conclude from this?

1. That forecasting the UK housing market is fraught with peril
2. That forecasts that help the housing industry (which includes estate agents, politicians, lenders, newspapers …) will be uncritically bandied around by our national press
3. That there is a deeply-held belief that house prices must always go up, that this is a good thing, and that everybody benefits from house price increases
4. That getting yourself heard is more important than what is actually heard, especially if it offers good news in a time of bad news
5. That most commentators do not have the time, energy or patience to challenge the reports that are being produced
6. That obtaining the supporting data, assumptions and algorithms behind these forecasts is a non-trivial exercise
7. That the Senior Partner at Oxford Economics was indeed away on holiday

And the next paradigm balloon to burst?

Evan Davis of the BBC apologised this week on behalf of all economists for failing to warn the world of the impending financial crash. Good for Evan, but economists have no monopoly of self deceit.

I dare say many of the bankers who walked away with millions in bonuses did so in the sincere belief that they were merely winners in a larger win-win game. The rating agencies were clearly wrong in some of their risk assessments and are accused now, at the very least, of having cut corners when rating the avalanche of collateralised debt obligations, but it’s not clear that they were knowingly dishonest.

The Chairman of Northern Rock’s Risk Committee was accused recently by a Commons Committee of ineptitude, but he is an honourable man and no crook. Similarly a Deputy Governor of the Bank of England was accused by another Commons Committee of being “asleep at the wheel”, but not of pocket-lining conspiracy.

Some of main actors in this sad drama probably are pretty shady characters. Some are clearly amoral if not immoral. Some would not have wished to question the validity of the golden goose when it was rewarding them so generously. But I suspect most of the players (and most of us investors) were simply stupidly credulous. We all bought into a crazy paradigm. And that paradigm balloon has burst.

It’s not the first; from the belief in alchemy, the South Sea Bubble, through actuarially justified pension holidays, and the dotcom crash we have an ignoble history. There are crooks involved but many more fools.

Which raises the obvious question, what ridiculous paradigms are we still accepting? I think there are a few contenders:

• that it's OK for governments to engage in massive off-balance sheet borrowing - which could well bite us in the bum in a few years time
• that the carbon trading market works well in providing effective incentives for reducing pollution - which has an economically dubious basis and looks ripe for abuse and the delivery of perverse outcomes
• that effective regulation of financial institutions is possible - when it seems to provide no better foresight of future hazards than looking in the rear view mirror while driving through fog at 70mph
• that free market capitalism has somehow proven its ultimate superiority to all alternative arrangements for running our economic affairs.

According to a newish school of academic thought (and George Soros in his latest book), the assumption of rationality in economic behaviour is probably the greatest false god. This certainly looks like a plausible hypothesis when I ruefully assess my future income in retirement.

A distasteful incident

I feel should draw to your attention, before any of our readers spots it, the coverage of the rather unsavoury happenings that have been taking place in Chislehurst recently.

Although I am seen in South London from time to time, it is not my habit to travel to the outer reaches of Bromley and indeed I have not been there for many years.

Of course at the time in question I was at home, safely tucked up in bed, as I am sure Samantha will testify.

Consumers flee in terror from killer bees

Excuse me, I thought retail banks weren't lending any more?

But my wife recently received a letter from Taina Uusitalo, Head of Core Credit Cards at Lloyds TSB, which enclosed four lovely credit card cheques.

The British Bankers' Association's Reporting Officer's Reference Guide tells us that a credit card cheque is “a cheque drawn against a credit card account that gives the cardholder another way of accessing funds up to their credit limit. This is usually to make transactions where credit cards are not accepted. Interest is normally charged from the transaction date. Important features include the following:

• credit card cheques may not provide the same level of protection as when you buy items with a normal credit card
• there is usually a transaction fee for each cheque you use
• the interest-free period of the credit card may not apply to the credit card cheque.”

Hang on a minute, aren't these the same credit card cheques the UK Government launched an investigation into in 2006? The Government was spurred into action because 326 million cheques were issued that year, of which 313 million were sent without being requested. It was calculated that, if consumers had actually used these 'cheques', it would have cost them £298 million more in interest and charges than if they had made standard credit card purchases.

With haunting music by Elena Kats-Chernin and original and touching contemporary 3D animations by animator/ director Marc Craste, LloydsTSB's award-winning TV advert tells us “no wonder so many people choose to bank with LloydsTSB. We’ve been voted Britain’s Most Trusted Bank for seven years running”

But who gives out these Most Trusted Brand Awards? Reader’s Digest. The 2008 study was conducted online in October 2007. Respondents were asked to name their ‘most trusted brand' across 37 categories and responses were unprompted. Respondents were Reader's Digest subscribers - so the respondents were dental receptionists and GP practice managers.

How are the other Most Trusted Brands shaping up? Virgin Media won the 2008 award for the most trusted ISP. And promptly had an ad campaign banned by the Advertising Standards Authority for misleading customers.

The Government in 2006 recommended that customer communications about credit card cheques should include a compulsory summary box aimed at explaining associated fees and charges.

May I propose additional wording to be provided in bold font at the head of promotional letters for credit card cheques?

"THIS PRODUCT IS UNLIKELY TO OFFER YOU BEST VALUE IF YOU HAVE ACCESS TO ALTERNATIVE SOURCES OF CREDIT OR OTHER MEANS OF MAKING PAYMENTS. IF YOU HAVE DIFFICULTY MANAGING YOUR EXPENDITURE, YOU SHOULD SEEK DEBT COUNSELLING ADVICE, FOR EXAMPLE FROM YOUR LOCAL CITIZENS ADVICE BUREAU, BEFORE USING THIS PRODUCT."

In the meantime, how can you safely dispose of your credit card cheques? I recommend wearing gloves while handling them carefully with a pair of fire tongs. They are insufficiently absorbent for other uses, but their glossy finish means they provide a useful lining for the cat-litter tray.

Not dead yet

Despite Thursday's 148-point fall in the FTSE, plagues of locusts are not yet swarming down Ely Place. We are still in the land of the £2 coffee. And the wine bar down the hill offers Chateau Angelus 1996 at the knockdown price of £195 a bottle