Money
Those of you with longer-than-average memories may recall that I put some money into Vodafone sometime last year when they were at, well, a little bit of a higher price than they are at now (and a lot higher price than they were eight weeks ago), on the grounds that the new management might spot that Vodafone was now in a mature industry, and that Vodafone would sell of its US and Japanese stuff and return a bundle to its shareholders in the form of a special dividend.
As usual, timing is everything and, as usual, I was ahead of my time. As Stravinsky said to Diaghilev of The Rites of Spring, "it's years ahead of its time!". To which Diaghilev replied sagely "Yes dear, so why do it now?"
It would appear that Vodafone has, at least in part, come round to my way of thinking. If I had timed my assessment of the situation as did a certain French lady (who does have the advantage of being a senior Vodafone executive) who bought shedloads of Vodafone shares at 110p at the end of January, then I could have cleaned up. As it is, after the special dividend, I shall just be minorly in profit. Bastards.
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Here's an interesting piece from this week's Hedgeweek. Now, first you must realise that these people are investment managers. And you know my opinion of investment managers. However, of more interest is the immediate analogy to how some people play cash games.
Merrill Lynch Investment Managers has launched "Target Driven Investing" for defined contribution investment schemes. I won't go into the fluff surrounding the justification for this, which basically says that the predominant "lifestyle" approach is too risky (this is the one that gradually reduces your exposure to equities as you approach retirement age). The interesting part is MLIM's "solution".
"DC Target Return has twin objectives: generating a target return of cash plus 3% and preserving accumulated capital. ... DC banking works on the principle of setting a long-term target rate of return measured over a member's career and includes a regular banking mechanism whereby a proportion of the risk assets is switched into safer assets every time the return target can be locked in.
Now, read that carefully, because this is what in poker is called "eating like a mouse and shitting like an elephant". What, for example, do you do when you are way short of cash plus 3%? Logically, you have to shift into riskier assets.
In fact, this is either the strategy of "quit when you are up by a certain amount" or "play weak-tight when you are up by a certain amount".
If I had an investment manager who told me that whenever a particular asset class had performed well enough for the year he would immediately switch into safe assets to preserve the gain, my first question would be "and would you switch into riskier assets if I was down? Or would you just increase the stakes? And, if I may ask, what's wrong with taking your locked-in profit and smacking it into something really risky, provided you are plus EV on the deal?"
Target-driven investing just about makes some sense if you are getting very close to the end of the investment period (i.e., the member is nearing retirement); because, in a very real sense, it is getting close to the last hand that you will ever play, so 52% edges aren't that good an idea. But for someone in their 40s, a TDI approach is madness.
Still, it's Merrill Lynch. People will fall for it because they haven't got a clue. I just hope some of the guys working at MLIM are playing on Party Poker.
As usual, timing is everything and, as usual, I was ahead of my time. As Stravinsky said to Diaghilev of The Rites of Spring, "it's years ahead of its time!". To which Diaghilev replied sagely "Yes dear, so why do it now?"
It would appear that Vodafone has, at least in part, come round to my way of thinking. If I had timed my assessment of the situation as did a certain French lady (who does have the advantage of being a senior Vodafone executive) who bought shedloads of Vodafone shares at 110p at the end of January, then I could have cleaned up. As it is, after the special dividend, I shall just be minorly in profit. Bastards.
++++
Here's an interesting piece from this week's Hedgeweek. Now, first you must realise that these people are investment managers. And you know my opinion of investment managers. However, of more interest is the immediate analogy to how some people play cash games.
Merrill Lynch Investment Managers has launched "Target Driven Investing" for defined contribution investment schemes. I won't go into the fluff surrounding the justification for this, which basically says that the predominant "lifestyle" approach is too risky (this is the one that gradually reduces your exposure to equities as you approach retirement age). The interesting part is MLIM's "solution".
"DC Target Return has twin objectives: generating a target return of cash plus 3% and preserving accumulated capital. ... DC banking works on the principle of setting a long-term target rate of return measured over a member's career and includes a regular banking mechanism whereby a proportion of the risk assets is switched into safer assets every time the return target can be locked in.
Now, read that carefully, because this is what in poker is called "eating like a mouse and shitting like an elephant". What, for example, do you do when you are way short of cash plus 3%? Logically, you have to shift into riskier assets.
In fact, this is either the strategy of "quit when you are up by a certain amount" or "play weak-tight when you are up by a certain amount".
If I had an investment manager who told me that whenever a particular asset class had performed well enough for the year he would immediately switch into safe assets to preserve the gain, my first question would be "and would you switch into riskier assets if I was down? Or would you just increase the stakes? And, if I may ask, what's wrong with taking your locked-in profit and smacking it into something really risky, provided you are plus EV on the deal?"
Target-driven investing just about makes some sense if you are getting very close to the end of the investment period (i.e., the member is nearing retirement); because, in a very real sense, it is getting close to the last hand that you will ever play, so 52% edges aren't that good an idea. But for someone in their 40s, a TDI approach is madness.
Still, it's Merrill Lynch. People will fall for it because they haven't got a clue. I just hope some of the guys working at MLIM are playing on Party Poker.