The run on sterling

A couple of readers have emailed me on the topic of currencies, and whether they should diversify out of GBP. Always remembering that your guess is as good as mine when gazing into the future, and that I am not offering investment advice (cont. page 94), let's look at GBP against a basket of other currencies since 1990:To sum up, if you're thinking about diversifying out of GBP, you've left it a bit late - GBP has already lost 25% of its value in the last year-and-a-half. I have no idea how much further it will fall, but I personally doubt that it's got much further to go.

But let's jump in a time machine back to 1995/96, the last time that GBP was clearly undervalued*. If your 'home' currency was anything but GBP, you could have made a 25% profit in two years by buying GBP in 1996 and bailing out in 1998. And what would have been the best strategy in 1998? The answer is, sell GBP and buy JPY:
Then in 2000 you should have banked a 30% profit on your JPY and bought EUR:
With the right timing, you could have made another 20% on top of the interest you are earning in the years to 2004. Things were then quite dull and uneventful for three years, but whatever currency you were in for those three years, the strategy in 2007 would have been to buy JPY again (see second chart) and make over 30% in the space of a year.

Which brings us back to today's date. If you subscribe to my theory that currencies always revert to the mean, the two currencies that appear most likely to be undervalued* are GBP (trading at 83% of its long run average value) and AUD (trading at 88% of its long run average, up from a seven-year low of 82% that it reached at the end of October).**

Alternatively, if you believe that GBP can genuinely go into free fall, like the Zimbabwean Dollar, by all means ignore everything I've said and diversify out of GBP.

* Currencies are neither 'strong' nor 'weak'; they are either overvalued or undervalued.

** As luck would have it, I shifted out of JPY and into AUD at the end of October, which has since clawed its way back from 39 pence to 44 pence. Sweet.

Just for completeness, here are the charts for USD and CHF:You can make up your own mind about whether USD will continue to rise, but CHF seems to be at the very top of its trading range, and I wouldn't bother:

Crunchmas

I'd very much like to claim copyright* in this word, but of course somebody has beaten me to it.

* Strictly, there is no copyright over words or phrases, but hey.

Obnoxio's Manifesto

OTC makes the sensible case for scrapping large chunks of the quangocracy; buried away in the comments is his fuller manifesto, which is pretty much the same as my own:
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First step would be to leave the EU.

Second step would be to repeal every law based on EU directives. We can always re-implement later. Mass repeal of every law introduced by Labour since 1997. (Probably a lot of overlap!)

Third step would be to shit-can every consultancy contract with the government and renegotiate.

Every single drop of government funding for quangoes and charities stopped dead.

Massive tax simplification: flat tax of 25% on everything above £12,000 per annum. Dividends untaxed. Corporate tax abolished*. All duties abolished**. VAT abolished. National Insurance either abolished or replace the current Ponzi scheme with actual insurance.

Sell off the NHS.

Renationalise the trains and resell them in such a way that you don't have oligopolies on routes. Same thing for buses.

Deregulate schools and introduce vouchers.

Introduce citizens income, end ALL welfare programs. Implement program to gradually phase out citizen's income***.

Sack the entire civil service, district and town councils. Review the entire governance requirement.

Go to the market to get us out of the bank ownership business.
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* I'd quibble with this. It would be far better to have a 20% flat tax on all income, personal or corporate, than 25% on personal incomes and 0% on corporate.

** 'Duties' that equate to user charges, such as fuel duties to pay for roads; a modest tax of a few percent on new goods to cover refuse collection costs; or indeed taxes on land values seem like 'good' taxes to me.

*** I'm not sure where this is going. A higher effective income tax-free personal allowance is an important corollary of a Citizen's Income-style welfare system; as nobody can be sure which is preferable, why not give people a choice?

Outbreak of commonsense ...

... in Ashford.

The town is embracing the concept of “shared space”, which was invented in the Netherlands and is based on the principle that creating uncertainty on the roads makes them safer... Ashford is the first place to introduce the purest form of shared space, under which traffic lights are considered not only unnecessary but a potential cause of collisions.

I wish them the best of British luck, and I hope that the idea catches on.

1984(16): Prostitution

From "Nineteen Eighty-Four" by George Orwell: 
Consorting with prostitutes was forbidden, of course...*

Harriet Harman, 2007:
Paying women for sex should be outlawed...

* I like the flourish "of course", old Eric saw that one coming a mile off.

Number crunching

Christina Speight sent me this from the Private Eye:

- 42% Drop in Labour vote in Glasgow East by election, which was apparently Gordon Brown’s worst moment in June.

- 37% Drop in Labour vote at Glenrothes by election, which was apparently Gordon Brown’s finest moment last week.

Tee hee.

Problem is, although Labour did indeed poll about 40% fewer votes in the Glasgow East by-election than it did in 2005, in Glenrothes it obtained 19,946 votes (55.1%) in 2008 and 19,395 (51.9%) in 2005. So that second statistic is complete hogwash.

Black 2008

Here's a chart showing GBP's progress against the same basket of other currencies. The blue series covers the two years 1 January 1992 to 31 December 1993; the red series covers 1 January 2007 up to today's date:
So, if the value of a nation's currency is a measure of its government, yet again, Nulabour have shown themselves to be worse than the Tories.

* Fans of technical analysis will no doubt spot the impressive Symmetric Triangle in the blue series. Rather surprisingly, there was no break out in either direction in 1994. GBP fell a further three or four per cent in 1995, but that was that, after that it started picking up again.

"Metropolitan Police to investigate Didier Drogba coin throw"

Typical. You wait ages for a coin-throwing story, then two* come along at once.

They showed the clip of Drogba throwing the coin back into the crowd on the telly, and I would have described it more as "lobbing" (despite what you'd guess from the photo' accompanying the Times article), plus he was a good way back from the stands. Nobody appears to have been hurt, the chap has muttered the usual stilted apology, end of, you might think.

But no, along comes The Met, always keen to investigate this sort of crap** at a safe distance long after the event, rather than getting out on the streets and preventing proper crimes.

* See also.

** See also Shilpa Shetty BB race row, for an example of modern British policing at its finest.

Irish* angered by Czech President

From today's FT, with no apparent deliberate irony:

Micheál Martin, Irish foreign minister, said "the very political [i.e. EU-sceptic] comments" Mr Klaus made at a dinner given by Declan Ganley, a leading campaigner against the [Lisbon] treaty, were "an inappropriate intervention" at a time when the "Irish government is engaged in discussions with our partners in the European Union".

* That should read "Certain members of Irish government ...", of course.

Won't somebody think of the children!?!

From yesterday's Daily Hatemail:

The tradition of dignitaries throwing coins for excited children to scoop up at the St Ives Michaelmas Fair dates back 80 years. But times have changed and it is set to be scrapped amid fears that someone could be injured. Instead, the mayor and councillors of the Cambridgeshire town have been advised to tamely roll the coins towards the scores of kids who line up to scramble* for the bounty.

Throughout the history of the event there has only been one freak injury - when someone's glass eye was broken by a coin in the 1940s.

* By next year, that will no doubt be "walk forward one at a time, accompanied by a suitable adult who has a current valid CRB licence"