Witchcraft and/or Calculus

Well as Monday mornings go, this will be a day to try and make you giggle (actually not really). I have always been an advocate for science and common sense. I believe that there is great wisdom in applying science in most occassions, it is the easy path in defining truths. Yet, we cannot explain it all with science. We are all limited, it is a basic truth, it is what drives us forward. It also takes a while to get there scientifically, so from the Penydarren in 1804 to the Virgin Hyperloop in 2021 was not an easy trip. A little over two centuries and we have gone from 10 tonnes at 2.4 mph to 50 tonnes at 260 mph, we can see that there has been forward momentum. We all move forward, not all at the same speed, yet when we consider that I predicted on September 4th (at https://lawlordtobe.com/2018/09/04/democracy-is-dead/) after Reuters gave me the quote “Italian bond yields edged lower on Monday after Fitch left its credit rating unchanged at BBB, revising only its outlook to negative, though mixed news flow from senior ministers and manufacturing PMI data due later this morning could mean the rally is short-lived, analysts said“, to which I gave my personal view of “we need to focus on ‘manufacturing PMI data due later this morning‘ which gives me that the rating was done ‘just in time‘ to avoid having to lower it, which implies to me that it was not a reprieve, merely the application of time management to force an upped rating.

So as we move forward less than 3 weeks, we now see (Source: Forbes 2 days ago): “It is no surprise that Fitch has changed the outlook for Italy’s BBB credit rating to negative from stable“. It is not only ‘not a surprise’; it was clear three weeks ago that this was going to happen. The system was as I personally see it rigged, to give a false optimistic rating to a nation that did not deserve it. The question becomes: ‘Are we abandoning science for witchcraft? If that is true, then I would like to move the motion to make Rachel Riley the high priestess of all economic witches and warlocks on the planet!‘ You see if they abandon common sense, can that unruly mob get managed by someone intelligent and when we are on that setting, it better be a good looking one, so the number of optional choices dwindles down to …. one? And Rachel is her name!

What’s behind this?

You see, we have seen on how S&P played us in 2008 on a few sides and it took until 2015 until a ‘deal’ was struck and they got off with a $1.5 billion fine, so when I am stating that they got off whilst they were getting off, I might be more accurate than I am comfortable with. Moody’s got their load handed to them with a mere $864 million penalty. so whilst some sources (source: Huffington Post) give us that the The 2008 financial crisis cost the U.S. economy more than $22 trillion, we seem to forget the impact outside of it, the impact on Europe and how the overall quality of life returned to WW2 conditions (slight exaggeration),  and even as we see reported that the economy in in restoration, we all seem to forget that the quality of life compared to 20 years ago is still less then what is was in 1998 and in that setting we see Fitch play a managed setting of overly soft on some economies and delaying the downgrades by (what I personally see as) jumping the gun by hours, delaying the downgrade, so basically knowingly assisting in the selling of deflated bonds, that is how I personally see it.

So as we look back at the quote and we consider my view three weeks ago with: “This was done to stretch the game, not truly act on the reported value, if that was done the setting of ‘BBB’ could not have been maintained, it should have been dropped to ‘BBB-‘ (my speculated view). So whilst we think we are being told the truth, in my personal opinion, we are sold a bag of goods, because that is how the game is players and we are all being duped, just like in 2008” and we see again: “Fitch has changed the outlook for Italy’s BBB credit rating to negative from stable“, whilst I do not even have an economic degree, can we agree that if it was this obvious, we need to start doing something about Fitch and these like-minded credit rating parties?

In all this the bad news is nowhere near done. the Financial Times (at https://www.ft.com/content/f9fb99d0-bf23-11e8-95b1-d36dfef1b89a) gave us a mere 7 hours ago: “Italy’s technocratic finance minister Giovanni Tria is coming under renewed pressure to increase the country’s budget deficit to accommodate the expensive election promises of Rome’s populist coalition government“, we can understand that it happens. We get it that promises need to be kept and some spending can never be avoided. Yet at 132% of GDP, with a National debt of €2.3 trillion, one would consider that caution would not be the worst idea. In this, sources are treating us to: “a guaranteed universal income of €780 month for all unemployed Italians“, which in light of the cost of living is a decent idea, yet the fact that around 10.7% of the Italians are without a job, the pressure on government spending goes up and up and that means that the deficit increases and with the interests and budget issues in play, the setting of ‘BBB-‘ might have been a little overoptimistic in the end and the news is not getting better any day soon in Italy. Even as we see that the jobless rate is at a low point (lowest since 2012), poverty was up to 14%, so that number will go down, yet at the cost of the Italian governmental coffers. I get it, it is good if they can find any way to get poverty down, yet they need more, they need an actual economy and the EU is playing around in all the ponds, but they are not getting anything done here and the 3 trillion euro spending bill still needs to be paid for one way or another, so there is are long term pressures to deal with from that side as well.

In opposition

When we look in one way, we need to look in another direction as well. So as we accept the orchestration side, we need to disprove it as well (good luck with that). Yet I did look in other directions, I needed as much data as needed, and when we consider my part to downgrade on September 4th and Fitch to keep it stable (at that point) that whilst Bloomberg gave us on September 6thItalian Banks’ Outlook Cut by Fitch Amid Political Concerns‘ (at https://www.bloomberg.com/news/articles/2018-09-05/italy-banks-ratings-outlook-cut-by-fitch-amid-political-concerns) with the quote: “UniCredit SpA and Intesa Sanpaolo SpA were among five Italian banks that Fitch Ratings said could have their credit ratings cut along with that of the state, should the nation’s populist government relax its predecessor’s fiscal discipline“. This is merely one of the quotes and it was clearly stated as a warning which is fair, yet we also see there: “Last week, Fitch said there was an increased chance that Italy’s government will reverse some previous structural reforms, negatively impacting the country’s credit fundamentals. It also said the relatively high degree of political uncertainty compounds the risk“, so not only was there already the prospect of negativity before the government non-reforms. There was in addition the political uncertainty. So there were already two markers staging the negative twist before the setting to ‘stable’ and the non-change was (as I personally see it) falsely given. There is also the part (which was after the stable setting) the quote “While the banks’ shares were little changed, Wednesday, they have underperformed the national stock benchmark this year, with UniCredit and Intesa both down about 15 percent. While UniCredit is more geographically diversified than the other four banks, its risk profile remains highly correlated with that of Italy“. It is another negative impact, yet the downgrade would not impact Italy for another three weeks, is that not a little too strange for comfort?

I would in addition mention the quote: “Fitch said it believes that a disorderly Brexit (UK exiting from European Union) could significantly disrupt Jaguar Land Rover’s supply chain and affect the company’s earnings and cash generation. It affirmed the long-term issuer default rating of Tata Motors’ at ‘BB+’“, so it had no issues changing the forecast ahead of schedule here, whilst Italy was given an additional 3 weeks of easy does it options. And there are no questions here?

We can accept that there are timelines and that things are done at specific moments. No one will deny that, yet knowingly (according to all the sources) to set the stage whilst the stage was unrealistic is an issue and it seems that there is a need to consider that the Three rating agencies are American companies. In all this, when we consider the past US behaviour, and the fact that there is no call to get at least one rating company added that is either UK or European based is a matter for discussion as well.

From ratings to fashion

Yet it is not all about the rating company. To see the stage I need to take one leap to the far left (or far right depending on what side you are facing). The view was encouraged when we look at the Times 2 days ago. Especially with my lack of insight, is good to take that setting to the forefront. The times started with ‘Brokers can’t wait for Burberry’s success‘ (which could be read in more than one way), yet the text gives us clearly “Burberry left visitors to London Fashion Week in no doubt of the scale of its self-confidence: “Kingdom” was the grandiose title granted to the highly anticipated debut collection of Riccardo Tisci, its new creative director“, with the added “Analysts renewed their attack on the £8.2 billion company yesterday after executives indicated that it could take three seasons for changes to provide sales with a significant boost. Credit Suisse downgraded Burberry from “outperform” to “neutral,” citing a lack of potentially stock-boosting factors on the horizon.

Now, I am not debating the reality of the setting. Yet when we look at a place like Statista (at https://www.statista.com/statistics/263885/burberrys-worldwide-revenue/), we see that even as they are not reaching new heights, we see that they are still doing decently well (if one calls £2.73 billion revenue decent) and the year is not over yet. So yes, we do accept that revenue and profit are two very different types of cake and one must eat ones cake, doesn’t one? That was given to us by the independent last year in November, when they gave us: “adjusted operating profit soared 28 per cent to £185m from £144m a year earlier“, we do not know the profits for this year as the year is not done yet. Even if the profits are optionally lessened, it comes from a 28% high, as we see that, what exactly drives the attack on Burberry and how does it relate to the earlier non fashionable one (even though they have Ferrari, Maserati and of course the Ducati), they also have some fashionable brands and they might not be of the Burberry level, the ladies will still love the Italian stuff. When we consider ‘Analysts renewed their attack‘, it is my personal belief that there is a group of insiders in these places who seem to be pushing the planchette of the Ouija board on where they need it to be (optionally not in line where it realistically could be), which is clearly a foundation of orchestration. The problem is not merely on how it is done, the entire financial setting is one of close to zero transparency as analysts ‘hide’ behind their formula’s (read: magic spells) and refuse to give out the incantation that they are using. Now, that is partially fair enough, most magicians do not reveal their tricks, they did do that in ‘Deception‘, which is optionally why it got cancelled after one season. I touched on the subject before and it remains active because a lot of ratings do not seem to make sense, especially when you see the actions and the fact that in May Burberry did beat their forecast with 2%, and still they are under attack? The interesting part is that the media who should ask a lot more questions are not doing that, not even reporting on it and whilst we accept the Guardian giving us two months ago that sales were waning ever so slightly, we were also given “Instead, they have been shopping in Hong Kong, South Korea, Japan and mainland China, boosting Burberry’s sales in Asia Pacific by a mid-single-digit percentage“, as well as “Sales in the Americas grew by a high single-digit percentage as the improving US economy encouraged more consumers to buy Burberry products“. In this we could accept that analysts might decide to warn caution, the message of ‘attack’ seems too unwarranted at present, especially when it is preceding Christmas and optionally the impact of thanksgiving sales in the US. Yet is all this, we see to pussy foot around the clear dangers that the Italian markets are giving us?

In this, we need to consider that if it is all around science we need to see a lot more clarity and if they want to sell the magic like we saw last week, we might (or not) accept to some degree the dangers that Mark Carney points out. the Business Insider gave us: “Bank of England Governor Mark Carney has privately warned the UK government that a “no deal” Brexit could bring about a housing market crash and a surge in the UK’s unemployment rate, according to several reports“, this makes perfect sense. Even as I have not seen the data, there are companies overreacting and threatening that they would vacate the UK. Some will do that, it is unavoidable. There was always the premise that this would also stop new hires and there would be fewer jobs for a little while. That too makes sense. Now consider that commercial building in London is through the roof and even now we see that things are not great. They have not been great since January 2018 when the Guardian gave us: “Developers have 420 towers in pipeline despite up to 15,000 high-end flats still on the market“, so in all this there is a larger danger and we were given this in April this year with “number of empty homes in London now above 20,000”, all houses well above £1 million that for the most no one can afford. So as houses remain empty, what do you think happens to the commercial places being build? We focus on the Battersea Powerhouse and Apple new stomping grounds, whilst we need to realise that 99% of all businesses are SME’s totalling at 5.7 million of them. Where do you think they will go when houses remain empty? I am not sure that Mark Carney is wrong, he might be a little too negative, but it depends on that data he has (and the question that he was required to answer), which is going to be loads better than the data I have seen. So when we get back to the setting of politics, if given the choice by the optional ‘troll like’ person Jacob Rees-Mogg stating “Bank of England governor Mark Carney is a “wailing banshee” whose warnings about Brexit cannot be taken seriously” versus the ‘goddess’ Rachel Riley who might be known for her ‘Would you like a vowel or a consonant?‘, is no less of a math goddess, implying that the math will add up correctly is she ever replaces Mark Carney, whilst the math quality is already in doubt ahead of schedule in the peculiar case of Jacob Rees-Mogg.

It is important that we take a much deeper look at the math and even as I have great confidence in Mark Carney’s ability to do the math, we also need to consider that he has a job, a job to properly inform the government, especially when the worst case scenarios can be as dire as they would optionally be for the short term. So whilst we see the mention of “Mark Carney is a “wailing banshee” whose warnings about Brexit cannot be taken seriously“, we also see that at present 20,000 houses are not sold and some have been on the market for well over 6 months. I would suggest that JRM gives us his math and back those numbers up on a public place for everyone to scrutinise (hopefully by Rachel Riley).

The issues matter and they connect to each other, the scrutinisers seem to preload the stage in ‘their’ favour, which is understandable, yet the cold calculation formula has kept from us, so we cannot see which factors have been set on a sandwich that had been buttered too heavily; we all have a right to know those facts, do we not? In the end we accept that it is not merely about apples versus oranges and it is not about the amount of fruit we have, it is about the different scales and the setting of a stage where transparency seems to be always missing and that approach is never scrutinised giving us a growing lack of confidence as well as a level of growing mistrust in those ‘reporting’ the result; an issue that has been clearly noticed by many, and was addressed for the most by no one at all.

If you want to try magic with a money charm using green yarn and pine oil whilst chanting:

Knot of one, the spell’s begun
Knot of two, I make it true
Knot of three, prosperity
Knot of four, bring me more
Knot of five, the spell’s alive

If that does not work, try calculus and focus on spending less then you earn. Try 6 weeks of one and half a dozen weeks of the other and see which of the two gave you better results.

Have a great Monday!

 

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