finance

Stock Market Collapse

So, the sky is falling in, blood on the streets, brokers leaping from buildings in a single bound.... The world is shouting 'sell'.

I think to myself two things: 'What's fundamentally changed in these businesses compared to last week?' and 'buy'.

I don't mind (other than psychologically) if the price drops further - I'm buying for the next 40 years..... though it's nice to buy at the bottom, the only way to reliably do this is to be lucky.

If I'd have bought something last week, I'm even happier to buy it now. If I'm holding something, I'm happy to buy more (if I can!)... what's better? Two cans of baked beans for 20p, or two cans for 10p? Everything else being equal, the latter. So it's a bit amazing to see joe public happy to buy shares when they're expensive, but scared when they're cheap.

Essentially, the share price is (short term) governed by emotion, long term by results. The trick is to buy good business from panicky investors, and then wait, or alternatively be really, really, good at spotting the way they're about to panic and buying the emotion - the latter is virtually impossible to do reliably, in my opinion.

The long and short of it is that I quite like periodic market tumbles, as long as they happen when I've got some cash!

Unfortunately, that isn't really the case right now.

Bash Problem - sorted

With thanks to those who tried to help, the final script for my Bash problem is below. Problem:

To grab the fund price from the L&G website for an index tracker. To email the price to me, and to store that price in a CSV file to allow easy import to Quicken. There is no ticker available for auto download to quicken that I could find, so the ticker is made up. (LGTRKFTSE). This means the prices are associated with the correct share.

The script may not be the most elegant of solutions, but it works. There is a slight modification from the version I arrived at in the previous post - that is I needed to shift the decimal point, as the price is quoted in pence, but I need it in pounds.

Note that ^M is entered as ctrl-V ctrl-M

# Get the fund prices for L&G tracker and email me daily

# Get the file cd ~ wget -q http://www.legalandgeneral.com/investment/fundprice1_index.jsp --output-document=fundprices.txt

# Find the data I want grep --after-context=10 "UK Index Trust (Acc) (R)" fundprices.txt | sed -e :a -e 's/<[^>]*>//g;/ ~/fundprices.txt

# Trim Excess tabs tr -d '\t' < fundprices.txt > fundpricesout.txt

# I only want the closing price grep -m 1 '[0-9]' ~/fundpricesout.txt > fundprices.txt

# Shift the decimal point cp fundprices.txt fundpricesout.txt sed 's/[0-9][0-9]\./\.&/g' fundpricesout.txt | sed 's/\.//2' > fundprices.txt

# Output the CSV record for easier import to Quicken echo -n "LGTRKFTSE," >>fundprice.csv cat fundprices.txt >> fundprice.csv echo -n $(date +%d/%m/%Y) >> fundprice.csv echo "BRK" >> fundprice.csv

# Strip off the ctrl M characters sed 's/^M//g' fundprice.csv > fundpricesout.txt cp fundpricesout.txt fundprice.csv

# This bit reformats the file cat fundprice.csv | tr '\n' ',' > fundpricesout.txt sed 's/BRK,/\n/g' fundpricesout.txt > fundprice.csv cp fundprice.csv fundpricesout.txt sed 's/,LG/\nLG/g' fundprice.csv > fundpricesout.txt # The above is only needed as for some silly reason I couldn't get # rid of the newline in the file containing the price # It's not pretty, but it works

grep '[0-9]\.[0-9]' fundpricesout.txt > fundprice.csv # This bit cleans out any lines without a price. # It sometime happens if there is a network problem, and I am happy to miss a datapoint # as long as the file is in the right format.

# Mail me the price for the day mail -s "Prices for `date +%Y-%m-%d`" myemail@foo.bar < ~/fundprices.txt

# Tidy up a bit rm fundpricesout.txt rm fundprices.txt

This is set to run as a cron job on weekdays. Monthly, I am emailed the csv file.

Gotta Have a bit of Bubbly at the Shareholders'....

It's really bugging me how, in popular culture, shareholders are being painted as rich fat cats with evil intent. A classic example is the Nationwide adverts. A woman complains of being charged for taking her money out while abroad, and is told that that's like their 'tip' which pays for 'The Bubbly at the Shareholders' meeting'.

There are other examples, e.g. when a company makes a profit, there seems to be implicit disapproval (e.g. Tesco). This forgets that if a company with a turnover of a 100billion making a 1billion profit is equivalent to a company with a turnover of 100million making a million.

Now, all things being equal, I'm perfectly happy to concede that if Company A pays dividends to shareholders, and Company B has no shareholders to pay, then Company B is likely to provide better value to customers. It's common sense. However, all things are not equal.

Let's take a look at the best buy tables for financial products right now

The top three results for an instant access savings account are HSBC (6%), Citibank (5.84%) and Bradford and Bingley (demutualised BS) (5.8%). The Post Office comes fourth. Nationwide, offers 4.7% on their Instant Access account. (Based on saving £3000)

True, if you can put aside 200 quid a month, their regular saver account looks attractive, at 6.5% - until we see the Halifax at 7% (admittedly, that's a one year term though). We can do even better, with Alliance and Leicester at 12%. To be fair, it's not as straightforward as that, and here's where my argument is undermined. The higher rate is for one year, and after that you have to start from scratch, transferring the total to a regular account (6%). I think the 6.5% with Nationwide can be over a longer period. So assuming it's not fixed term then after about 20 months the 6.5% from Nationwide would be better (if I've done my sums correctly).

However, interest rates can, and do, change - 20 months is a long enough timeframe that the 'best solution' shifts, and 12% over one year could well be the better route in that case.

It doe annoy that Building societies, for example, regularly play the "we're not paying shareholders" card, but the interest rates, especially for 'starter' accounts, can be appalling, e.g. the Britannia offer 2.55% with their flexible savings account on amounts over £100000... okay, they offer more on their 'direct savings' account, but still, there are a significant number of people who want the 'security blanket' of a passbook.

In other fields, Pharmaceutical companies are sometimes castigated for the prices of their pills (and I'm completely behind the argument that prices should be lower when it comes to countries in places like Africa, supplying these nations at cost is good PR for the company too). When paying for the pills the implication is often that the company is profiting from illness and that this is inherently bad. It is true that the company profits from illness. However, it's conveniently forgotten that though each pill costs pence to produce, the first pill cost billions, and that has to be recovered in order to make the next wonderdrug. Yes, the shareholders are making a profit from illness, but without their investment that cure would not have been developed at all. There are also issues about third parties making 'copycat' drugs once someone has paid the development costs. That's a whole other issue.

Putting the nitty-gritty arguments about individual sectors of the economy aside, what really annoys me about this tendency to see shareholders as evil is the fact that it's share dividend and capital growth that pays for things like pensions. If you have a pension, you are indirectly a shareholder.

It's true that there are corporations which do not 'play nice' and seem to exhibit the short term view of maximising shareholder profit only. Guess what? These are corporations which, unless they have a monopoly (which is another matter) tend to die. Whilst it is the long term aim of a company to maximise shareholder return, this in turn gives rise to the aim of 'pleasing the customer'. It's in shareholders' interests for the company to please it's customers. Though the sole aim of the company is to maximise shareholder returns and a company which fails to supply what customers want, in the way they want it, will soon not have customers and fail. The message here is that if you want better interest rates and terms from your bank, be prepared to move your account - it's easy these days, they do all the paperwork for you.

Of course, I'm not saying that organisations with shareholders are whiter than white. Of course not, I'm simply saying that they're not necessarily evil.

This 'shareholders are fat cats' outlook allowed Gordon Brown to remove some tax benefits for dividend income on shares around a decade ago. This was reasonably popular at the time, presumably as it was seen as targeting the rich. However, it had a direct impact on the success of pension funds, and the subsequent difficulties which some have experienced.

As you've no doubt realised, the demonisation of shareholders is really annoying me. Shareholders are regular people, like you and me - even if they haven't bought shares directly. It's real people, investing in businesses which provide jobs and pay taxes. It's people putting their own money at risk - of course, they're doing it in the expectation of a reward - and why not? After all, that's why people save money in savings accounts...

Giving money to a good cause is called 'Charity'. Companies are not charities, nor should they be.

Disclosure: Yes, I have shares. The only company mentioned above that I directly have shares in is Tesco (though I will have an interest in FTSE100 companies via a tracker).

How Taxes Work

How Taxes Work . . . This is a VERY simple way to understand the tax laws. Read on — it does make you think!!

Let's put tax cuts in terms everyone can understand. Suppose that every day, ten men go out for dinner. The bill for all ten comes to £100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men — the poorest — would pay nothing; the fifth would pay £1, the sixth would pay £3, the seventh £7, the eighth £12, the ninth £18, and the tenth man — the richest — would pay £59.

That's what they decided to do. The ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement — until one day, the owner threw them a curve (in tax language a tax cut).

"Since you are all such good customers," he said, "I'm going to reduce the cost of your daily meal by £20." So now dinner for the ten only cost £80.00.

The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still eat for free. But what about the other six — the paying customers? How could they divvy up the £20 windfall so that everyone would get his "fair share?"

The six men realized that £20 divided by six is £3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would end up being PAID to eat their meal. So the restaurant owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so the fifth man paid nothing, the sixth pitched in £2, the seventh paid £5, the eighth paid £9, the ninth paid £12, leaving the tenth man with a bill of £52 instead of his earlier £59. Each of the six was better off than before. And the first four continued to eat for free.

But once outside the restaurant, the men began to compare their savings. "I only got a pound out of the £20," declared the sixth man who pointed to the tenth. "But he got £7!"

"Yeah, that's right," exclaimed the fifth man, "I only saved a pound, too . . . It's unfair that he got seven times more than me!".

"That's true!" shouted the seventh man, "why should he get £7 back when I got only £2? The wealthy get all the breaks!"

"Wait a minute," yelled the first four men in unison, "We didn't get anything at all. The system exploits the poor!"

The nine men surrounded the tenth and beat him up. The next night he didn't show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered, a little late what was very important. They were FIFTY-TWO POUNDS short of paying the bill! Imagine that!

And that, boys and girls, journalists and college instructors, is how the tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up at the table anymore.

Where would that leave the rest? Unfortunately, most taxing authorities anywhere cannot seem to grasp this rather straightforward logic!

via Snopes and Division of Labour, following a post from a Drunken Wasp

Card Cloned

I was in Tesco yesterday and my card was not accepted. Odd, I resolved to ring the card company when I got home. I forgot. Today I had a call - and I rang them back on their number (they were fine with that, unlike a previous company).

Yesterday there was a payment to someone like totaljobs.com for a few hundred pounds. This was following a transaction for 78p to some obscure place. It triggered some alarm bells with the card company and they froze things until they could talk to me.

The 78p was a test to see if the skimming worked.

I didn't authorise these transactions - somehow the card had been skimmed (amazing really, I never let the card out of my sight in shops and restaurants as I am aware of skimming possibilities).

Fortunately things had been caught, no money changed hands - unfortunately I now have to get a new card.

Tesco Credit card handled the whole thing pretty well.

Mizuho Error

A typo has cost the Japanese Mizuho Corporation some 27 billion yen. Losses may rise to 100 billion yen. Essentially, they wanted to sell one share for 610000 yen, but instead sold 610000 shares for 1 yen.

27 billion yen is around 128 million pound sterling at today's rates.

Whoops.

What makes the story particularly amusing is that they sold 42 times more shares than are actually in existence and "since the number of sold shares exceeded the number of existing shares, there is a possibility that Mizuho may not be able to hand shares over to the investors who bought them."

Boringly, it isn't quite that much of a discount as the Japanese market has rules which limit price fluctuations.

Story via Slashdot See also: East Asia Watch and Barking Moonbat

Letter to Card Company

Let's see what this gets, it's a letter prompted by the card fun this evening.

My particular card is a Tesco one, but it's run by Royal Bank of Scotland. I wonder what they'll say? Probably something bland and non committal.

Dear Sir/Madam

I am writing to express a fundamental concern about your security systems.

This evening I arrived home to find a message asking me to ring the "credit card centre" as soon as possible. The number given was not one I recognised.

When I rang the number, I was immediately asked for my card details and I was a little surprised. To give out card details, including security details to someone who phones up and asks for them is a fundamental security flaw.

Even if in this instance it was legitimate, this approach is open to abuse as you are effectively suggesting to your customers that these details should be given out to anyone who phones up and leaves a phone number.

The man I spoke to tried to find out from my name why the message was left, but could not get into the system without these details.

I tried to explain my concern to him, and asked whether I could simply ring the number on the back of my card. As I was trying to explain this he was saying that if I could not give him my security details then he'd have to terminate the call and I would not be able to use my card.

This is most definitely not appropriate. There was no way that I was going to give these details to someone when I could not verify who I was talking to – and I should not have been pressured to do so.

What should have occurred is that the original message on the answering machine should have asked me to telephone "the number on the back of my Tesco Personal Finance credit card, or on the top of the statement". In this way I could have been sure who I was talking to. In the end I rang this number and the issue was dealt with. I mentioned this to both people I talked to on the phone, but did not get the impression that they even understood the issue.

I appreciate that you need to validate spending from time to time, but in an era of "phishing" scandals I feel that to be left an unusual number on the answer-phone is a huge error, as it could be repeated by the dishonest without raising alarm bells in the customer's mind – especially when the solution mentioned above is so easy. The customer should be told never to give out these details except when they phone the number on their statement/card.

Credit Card Madness

I had a phone call on my answerphone when I got in today. Paraphrasing: 'Hello, it's the credit card centre, please can you ring us on <number I didn't recognise> as soon as possible?' (Essentially they wanted to confirm that my spending today was done by me).

Okay... so I rang. 'Royal bank of Scotland credit cards, can I have your card number, please?' (I have no RBS accounts, but it looks like Tesco use these guys for their card)

'Erm... no.'

'Why not?'

'Well, I'm ringing to return of a message left on my answering machine, and I don't recognise the number, so I'm not giving you my card details. There are lots of scams out there'.

'Okay, perhaps if I could have your name?'

They used my name in the message, so no harm done. I told them.

'Can I have the first two numbers in your security code, please?'

'No'

'Why not?'

Arrrrghghghhghhh!

I tried explaining that giving a phone number that bore no relation to anything on the card was not a good thing as it encouraged punters to give their card security details to cold callers. This makes it really quite awkward in a world of 'phishing' scams. I suggested that the message should have been 'please phone using the contact number printed on your card'

The guy eventually said 'I can't access any details unless you pass clearance, so I am going to have to terminate this call.'

He was not listening to what I said, and I got the distinct impression that he thought I was being awkward for the sake of it. True, I was being awkward, but this is a fundamental flaw in their security procedures. It may not open up problems immediately, but it is exploitable.

I said to him 'if I ring back using the number on my card, will I get through to the same place' - and he responded 'yes'... so why give out a different number?

I'm not impressed. The financial institutions should have a basic rule that customers should not give out details unless they can be sure that they're talking to the bank. - and here they were positively encouraging me to do so.

Idiots.