Tuesday, 15 May 2012

Road Pricing

Today the propaganda bureau has a special report priming the public for the perennially unpopular idea of road pricing. Apparently due to the logical economic decisions of motorists to reduce fuel consumption future fuel duty and VED will decline as people move towards more fuel efficient and less polluting vehicles. Surely the point of high fuel tax is to curb demand – as demand falls it is a bit sour to raise more taxes and make it even more prohibitively expensive to travel in the UK. The current government policy seems to be to make all transport equally prohibitively expensive so this IFS policy could be appealing to them.

Now you know my feelings on VED but what of road pricing?

The way road pricing is presented in the IFS report is a disastrously stupid idea principally because it proposes using pricing to disincentive travel at peak times. If I spent my life in a pure land of economic abstraction I too would conclude that people not all travelling on the roads at the same time would be a good thing but the reality is that people have jobs. They have jobs and there is a circadian rhythm which means most people aren’t about to start working overnight or at other off-peak times. A road pricing proposal around pricing of peak demand would be just as arbitrary as the stealth tax already imposed on all people who have to use the train to get to work at a reasonable hour in the morning (peak fares!).

Now at the margin obviously some people would delay their travel in the car until off peak hours but most normal people do this anyway because nobody likes to sit in traffic jam for an hour at 8.15am when they can wait one hour longer to go to the supermarket of visit their family and enjoy clearer roads. However taxes on road use not fuel efficiency would take no account of environmental degradation caused by emissions nor fuel consumption.

This is another great example of regressive flat tax on jobs because most people who commute at peak times do so in order to get to work. Just as people who use the railways around London have no alternative to trains so do a huge number of people who live around say Greater Manchester require the roads to get to work. If they want to introduce road pricing they should also either (i) liberalise planning laws so people can actually build homes near where they work, or (ii) introduce labour legislation which permits all workers to unilaterally dictate their working hour patterns to their employers without fear of reprisal.

Fuel tax is more than adequate to capture congestion as it is because in traffic one achieves a low mpg and thus uses more fuel. In addition this shortsighted survey neglects to consider the fuel efficiency gains being made today across the economy which will be offset later by gains in productivity and GDP output per unit of oil and hence there may be a greater general tax down the line following this wider process.
However unlike the railways where commuters remain captives to government policy road pricing is always so hugely unpopular that it’s unlikely to be implemented nationwide. The government is already wasting a ton of money building high speed rail lines to places people don’t want to go (Birmingham? Ashford?) so they hardly have the cash left over to build a road pricing infrastructure anyway.

Friday, 11 May 2012

Tracking Failure

So I sold out of my short AUD/GBP the other day having bounced back into the black. The trend looking pretty stretched (blowout from 1.48 to 1.60) and the chatter on the AUD looks pretty popular (always a bad sign).

However during the precise time of my ownership the AUD depreciated around 5% to the GBP yet the fund at 3x leverage returned just 3%! It should have been 15%! Obviously some noise from relative yields, intraday moves and reblanacing, the application of leverage, illiquidity etc. However clearly this is not an investment for any long term view. I blame myself for a lack of due diligence but I cant see how ETFS can justify these products given the tracking error which on bloomberg is about 12! Hardly a genuine exposure.

Still I got out with a return roughly approximate to shoving my cash in a UK bank account so can’t complain too much.

This does worry me for the future of my short copper ETF where as far as I can see it has underperformed its underlying exposure by about 8% over the past year. Again my return is being eaten away by poor products. I do gain a certain satisfaction from being intellectually vindicated but I gain more from making money.

Caveat Emptor...

Thursday, 10 May 2012

Strike? What strike?

I had no idea but today there is a major public sector strike going on. I only found out when the mouthpiece of the people’s propaganda wagon for all moaners and NIMBYs decided to  report on the issue.

 “Disruption includes:
  • Business hit at the Welsh Assembly as Labour and Plaid Cymru members refuse to cross picket lines while National Museum for Wales closed to public, PCS says
  • Work on Royal Fleet Auxiliary ships in port in Birkenhead and Portland halted, the Rail Maritime and Transport union says
  • Seven national museums as well as Tate Gallery closed in Liverpool, PCS says”
Clearly without these vital services for 24 hours the country may grind to a halt. The real risk with going on strike is that the rest of us work out you aren’t doing something very useful in the first place. If you aren’t driving my train or nursing my egotism you are definitely off the map for those who I will be speaking of.

In fact developments are coming thick and fast so there is also a live forum to bitch about your pay cuts (public or private) and lambast the Bankers / Tories / Labour in the eternal game of British life which revolves around blaming other people for our problems usually using a clever catchphrase or grossly oversimplified argument.

Never one to bemoan my own situation in the private sector I won’t be harping on about my contracting real terms income (because it hasn’t been) nor my shrinking pension pot (it’s been growing). No I think I should go on strike for 362 days of the year. I should just come to the office on the other 3 days to rummage through the wardrobe of asset allocation and tweak a few trades. Attending work everyday in the land of investing is a seriously dangerous proposal which could lead to all kinds of short-term trading folly driven by an addiction to hysterical Bloomberg newsflow.

Less is definitely more.

Tuesday, 8 May 2012

In the short run...

NPR has a pretty straightforward summary of the problems facing Greece namely that when they finally vote for the umteenth time for a sufficiently radical government which rejects the obvious problem – the Euro – they will face an economic cataclysm.

Certainly the short run pain will be even greater than todays glacial austerity torture. However much like Argentina in 2001 once you drop the peg and drop off a cliff you can start the process of things getting better again, in the long run. NPR makes a good summary here that perhaps it summarizes the obvious;

“Some people think this is actually Greece's least-bad option in the long run. Leaving the euro would allow Greece to devalue its currency, making its exports more competitive. Defaulting on all its debt would allow the government to stop spending so much on interest payments.
Maybe. But in the short run, it would be an economic disaster for Greece. And it would require the government to cut spending even more, as the Greek economy continued to collapse, and foreign lenders abandoned the country.”
So to avoid short run pain the Greek government (whatever that is now) continue not to take the medicine even though the people are voting for it? However since Greeks plan to live in Greece in perpetuity at some point the long run is going to overtake the short.

Friday, 4 May 2012

Deliver us

“All of the great leaders have had one characteristic in common: it was the willingness to confront unequivocally the major anxiety of their people in their time. This, and not much else, is the essence of leadership.”

-         J.K.  Galbraith