Blowing Bubbles

From time to time, I've had some small share stuff going on.  Nothing that's going to buy me as much as a spare tube for my bike, which I seem to need on almost an every-two-days basis at the moment (thanks everyone breaking glass in and around Dublin!) - but as a result of having shares here and there, I preferred to have them through a company that knows what they are doing.

Anyway, said company (Edward D Jones fact fans) occasionally send out letters explaining the state of the world, the markets, etc.  They don't offer to make you rich, which is one of the attractions (most people offering to make you rich actually intend to take your money and make them rich).  But I digress.  I've been trying to dig out one of the letters from Edward D Jones for ages, and I finally found it.

For context... the dot-com bubble in all stock prices Internet-related was exploding from about 1995 until 2000.  The massive collapse of this bubble in prices occurred in spring of 2000, with the NASDAQ peaking on Friday March 10th.  In the following three business days - Monday 13th - Wednesday 15th March, 9% of this peak value was erased.

In April 1999, one year before the cataclysm, I received one of the occasional missives from EDJ.  It still stands today as a spectacular example of someone keeping their heads when everyone else was losing theirs.

Future lessons from the past...

 

 

The debt and the defacit

I've got to admit, I don't get the IMF/EU bailout of Ireland. I mean, I understand it from the IMF/EU point of view - Ireland was about to take down the Euro due to systematic risk, sovereign default, bond jitters, etc.

What I don't understand, is why Ireland is taking the so-called "bailout". If the state needs to borrow in order to keep funding services, logic might suggest that there are too many services going on and that they need to be cut. To borrow in order to pay for them surely just means paying interest on the loans, as well as for services that we can't afford anyway.

So never mind the defacit (which I take to be the gap between annual revenue and expenditure) - if the overhanging total debt is not payable, would it not be better to default now, face all the consequences early and get it done with, rather than kicking the can down the road on a debt that will ultimately require default anyway - while we all make the money-lenders a bit richer via interest in the meantime?

Buy buy sell sell!

I've recently been having a gander at stockmarkets and the like. There's something that I find utterly fascinating about it - it's clearly a casino and a place to lose a stack of money.

But more and more I can't help but wonder, is there any way that you could take a little slice of money out of it, if you were prepared to trade really quickly, pay huge amounts of attention, and weren't hungry for big profits?

I've been taking a look at the trading options offered by GFC Markets (you've probably seen the banner adverts all over the internet - profit from the falling Euro!). Ignoring the gold, oil, and normal stocks that you can do through them, one of the main things they offer is trading in currency pairs (i.e. buying euros against dollars, or selling Swiss Francs against the Yen - whatever). Just to clarify, crowds like GFC offer you 'leverage' - i.e. for $10 of your own money, you might be able to place a buy or sell order of up to $2000. This has an upside and a downside - the upside is that those microscopic swings in the market that are happening constantly, might therefore be exploited to actually make a measurable amount of money. The major downside of leverage is, if you get stung, you get really stung. Luckily with GFC (and I'm not trying to advertise them), it appears that you are never risking more than the money you put in - so you can't end up owing what you didn't decide to risk in the first place. You can of course, lose everything that you do put in - never gamble with what you cannot afford to lose!

One other thing you need to watch out for, is the spread. The price you can buy at is 3 points higher than the price you can sell at. What this means is, if you place a buy order, the price needs to increase by 3 points before you can break even by selling at the same price you bought at. This is the spread, as as I've found out, it's a killer.

So I've come to look at this like a sort of quasi-maths/stats problem: if you work from a presumption that the rate/price of the currency pair you are purchasing is *totally* unpredictable, is there a way that you could intelligently place buy and sell orders, in such a way that you could be in-profit, on average?

The orders you place are effectively 'positions' that you are taking, which remain open until you decide to close them. When you close them, then you either recoup the profit if the change has been to your benefit, or you are due for the loss! There are two major tools when you have placed a buy (expecting a rise) or a sell (expecting a fall) order. They are the 'limit' (a profitable price at which your order will auto-close), and a stop-loss (a loss-making price at which your order will auto-close).

So if goats are $10, and you place a 'buy' order on 10 goats with a stoploss of $7 and a limit of $12, then if the price rises to $12/goat, then your limit orders execute, closing the position and you get 10 x $2 as profit. If however the price falls to $7/goat, then your stop loss kicks in, your position is closed, and you lose 10 x $3. Easy right?

Well, I've been trying for a little while on the GFC practice account, and I'll put my hands up - I've given up.

I tried a couple of different strategies...

Chasing Momentum
This strategy was to "chase the momentum" on a tiny scale - place buy orders as the price was rising, and try to sell to cover those orders when the price had risen far enough to be profitable (and the reverse on the selling side - sell during little collapses, and then try to buy back and cover at a lower price). Great in theory, the problem being that sometimes the price reverses and never returns. So, it's going up, you stick on 2 or 3 buy orders, then it reverses before your positions are profitable, and keeps going down. You're then left with a choice - do you liquidate the unprofitable 'buy' positions for a small loss - or keep them open as the price plunges, and hope that it comes back up again?

Adjacent Hedging
This was an attempt to basically simultaneously place a buy and a sell order, both with limits and stop losses, and therefore make a tiny profit slice no matter which way the market moved. So if for example, you bought at 1.3000, then you were simultaneously selling at 1.2997. The issue here was that a limit order needed a minimum of 8 points distance, so on the 1.3000 'buy', the lowest limit you could have would be to sell and cover at 1.3008. As a result, the stop loss you needed on the 'sell' order had to be 1.3007, but as that equates to a 10 point loss, you need to make at least 11 points on the 'buy' order to be profitable. Which means the buy at 1.3000 needs a stop at 1.3011. And the reverse on the sell side. Ultimately, what it means is that the buying price going up, is going to bump the stop-loss on the 'sell' at 1.3008, but won't hit the limit to take profit on the 'buy' until the selling price gets to 1.3011 which is 6 points later. Or to put it simply, your stop-losses on both orders are several points closer to your current price than your limit orders, so the statistical likelyhood is that all the micro-volatility in the price will mean the price just drunkenly wandering about, nudging your stop-losses and accumulating you losses, and only rarely getting a limit that will make you tiny amounts. A good way to lose money.

My final attempt was based on something I noticed about the way the price behaved during a day of trading. The exchange prices wobble around set levels for a good while, not doing too much, and then at certain points, they 'break out' of the range they have been wobbling in, and take a quite visible 'step' upwards or downwards, where they then recommence their small volatile wobbles at a different level. So I came up with a new idea:

Capturing Breakouts
The idea here was to wait for the pattern of wobbling to emerge over time - look for a price that had been within a fairly obvious range for half an hour, or longer. Then, set a significantly large buy order several points above this range, and a similar sized sell order several points below - both with limit orders a few points away. The idea was that upon the market price undergoing a 'breakout' upwards or downwards, these automatically placed orders would 'capture' the breakout (while I cancelled the order in the opposite direction) and then as the breakout in price proceeded, the limit would kick in, and I would automatically collect the money. The big orders were a way to limit the need for trading - so that I would only have to capture 2 or 3 breakouts in a day to make the money I wanted. Safe concept, right? No. What I actually learned, is that there is no way to accurately estimate the 'wobble range' that a price will exhibit, so there is no way to safely set the order levels for the buy and sell. Similarly, there is no way to know how big a breakout will be, which means that often what happens is you get a little bust out of the normal range, which triggers the buy or sell order (depending on the direction of the bust out) - and then the price settles back into the range before it reaches your limit, leaving you with a very big bet that may be about to go badly south, taking a stack of your money with it.

In short, I've been unable to come up with a way of securing your positions, without the risk of leaving positions behind as the market price moves. The only guard against leaving positions behind is to always use stop losses, but my experience has been that stop-losses combined with the 3-point spread, effectively mean that you will, on average, lose.

I'd love to know if there is a way to exploit the random movements, but I can't help but feel that the spread between the buy and sell prices is the thing that tilts the odds fatally away from you.

Ireland, the Housing Market, and the Future

I've been a bit of a keen watcher of the Irish housing market - well - ever since buying an Irish house. Sinking yourself face-deep into negative equity tends to focus your attention like that.

Without having a crystal ball, and setting aside the possibility of a black swan such as a sovereign default, breakup of or expulsion/exit from the Euro, or some sort of economic disaster driven by an IMF package to avoid one of the first two possibilities, here's some random thoughts on what I (as an untrained eye) see happening and coming in the Irish housing market:

• Prices - Achieved prices at the lower end of the Dublin market are probably now about 55% of peak asking prices.
  
  
• Activity - finally, yes. Some sales are starting to go through again at the levels prices have now reached - probably a combination of some stability in prices for the first time in 2 years, and a glut of first time buyers who (a) have been waiting, and (b) can get finance at these prices. The employment situation and continued pricing stability is the only thing that will keep that wheel slowly turning.
  
  
• The commuter towns - asking prices boomed fastest, and achieved prices have probably collapsed hardest in the peripheral counties to Dublin. It's going to be a long road back for equity in the area surrounding the city.
  
  
• The city and the country - rural areas physically removed from Dublin (i.e. once you get beyond commutersville) probably see price changes lagging Dublin timewise. As people move less frequently, less urgently, and in smaller numbers in the country, the fall in house prices has much further to go in the more sparsely populated parts of Ireland. The fall in equity and prices in Dublin will eventually drag the rest of the country into line, but it is going to take time. (If I had a big paid-for house in the country, and wanted to swap it for one in the city, now might not be a bad time to take advantage of this presumably temporary differential)
  
  
• No tradeup market - a lot of people are in negative equity, so anyone who owns a house not in the cheaper part of the market (i.e. not a first-time-buyers house) is going to be waiting a long time for someone able to trade up from below.

So if I had to bet any money, what would it be on?

The most likely scenario to me is a distinct two-tier market. As the housing market hits bottom (and there is always a bottom, though you probably won't know where it was until we're long past it), it will likely fracture into two sections

• Houses in good repair, solidly built, in good locations, together with the best of the apartments, will start to slowly stabilise or recover some value.
  
  
• Houses that are brand new, poorly built, insanely situated, and the vast tracts of apartments in the middle of nowhere (that never made sense), may never recover value.

I'm not sure that fracture has occurred yet, or that it'll even be a distinct event as opposed to a subtle, drawn-out process - but I can't see any other logical conclusion as to what's in our future.

The Irish housing market - another moment of truth?

I took a moment this week to update my ongoing tracker of asking prices in our area of Dublin, and staring at the graph that gets spat out by my figures every time I update them, a bit of a pattern seems to be starting to emerge.

As a disclaimer - you've got to be careful with patterns - too much staring and you see patterns everywhere, but this one does seem to be reasonably clear.

My figures are sorted by house size and street, so there's a trace on the line for every street in our area, and where there is more than one house size, an extra trace per street for each size of house too. So the actual graph spat out is a messy splatter, resembling a rats nest of cables... something like this:

So it seemed to me the longer I looked at this, that there was a fairly clear "stepping down" thing happening. I took the average of all the streets on a clean graph, and tried to get a "line of best fit" happening that would bring out the steps. In other words, could I find discrete sections where the price was quite stable, and discrete sections where it was plunging?

The totally unscientific messing about seems to reveal something like this:

2008
up to Jan - Stable
Jan to Apr - Falling
Apr to Augt - Stable
Aug to Oct - Falling
Oct to Dec - Stable

2009
Jan to May - Falling
May to Dec - Stable

Or in terms of the monthly length of the stages: falling (4), stable (5), falling (3), stable (3), falling (5), stable (7).

The falls are precipitous, and the stable sections are wobbly, but the pattern does seem to be there. Whether this indicates general human nature (when prices are dropping, you'd better undercut your selling neighbour if you want out fast), estate agent strategy (hold fire on price reduction every 2/3 months and test the market resistance to asking price) or something else altogether, I don't know.

What seems reasonably clear though is that every fall is ultimately arrested by at least a brief ledge - and every ledge for the last 2/3 years has eventually collapsed into another precipitous step down.

The question in my area now, therefore is - after a half-year of relative stability, is this something of a bottom - or another ledge?

The recent (2-year) record would suggest that after 6 months without a major fall, we're likely to find out soon...

Freefall and denial in the Irish Housing Market

The Irish housing market (and the ongoing attendant commentary) is pretty interesting.

I purchased a house with my better half (deciding that we couldn't wait forever) early in 2006. As luck would have it, that turned out to be very shortly before the peak of a historically insane price bubble, which is now in the process of bursting in an extended and messy fashion. They say the secret of comedy is in the timing.

Since 2006 or 2007, there's been an ongoing fall in the value of houses here, but recently there's been intermittent talk of green shoots of recovery, a bottoming out, a slowing down in the rate of descent (you always know you're in trouble when things getting worse at a slower rate is presented as an improvement), the start of a recovery etc etc.

For some reason connected no doubt to my interest in economic trends, statistics, truth, and a desire to view life-changing financial crisis through the prism of small, cute coloured Excel graphs, I started tracking the asking prices in our immediate neighbourhood in September 2006, about 6 months after we purchased.

Since then, every month (or thereabouts), I tap in the asking price for every house in about a half-mile radius that is on the market. While this doesn't give an accurate picture of prices achieved, it's a good guide to the trend. You can also make a reasonable assumption that when prices are falling, the achieved prices are below the asking price, and the opposite when prices are rising - in other words, the achieved price most likely drags the asking price around kicking and screaming behind it.

So based on the figures I have for my own area of Dublin (old settled low-density ex-council estate close to the town centre, for those seeking Irish context), from Sept 2006 to October 2009, here is what has happened.

Asking prices stalled in summer-autumn 2006, and remained static until Feb 07, when I recorded the first fall in my area. (My guess: achieved sale prices stalled somewhere around summer 06, and started to fall back prior to that Christmas.)

Between Feb 07 and May 08 asking prices fell slowly and steadily, shedding around 8.6% from the peak during this 15-month period (averaging a 0.7% drop per month).

Something went seriously to hell in spring 08, because around May prices started falling off a cliff. In the 17 months from May 08 to Oct 09, asking prices dropped 31% from the May 08 figure (averaging a 2.5% loss every month).

So where are we now?

Well my figures from the official asking prices (which come from a variety of estate agents) say this: we are currently in a situation as of Oct 09 where asking prices are 39% off their late 06 peak. So the next time you hear a news item telling you that house prices might fall by up to 40%, it's worth remembering that in reality, they already have. Not only that, there's nothing in the figures I've collected in my area to even hint that there's a floor in sight - the asking prices this month have fallen as much as any other month in the last 12.

Apart from the rash of unemployment in Ireland, a major reason for the continued express-elevator treatment house prices are undergoing, is the fact that the banks have abused their position as lenders, speculated wildly in markets and products in which they had no understanding of the risks, and now we the public are supposed to be paying through our taxes to keep them afloat.

As a result of the fact that the banks and financial houses are sitting on a carelessly stacked wobbling deck of completely opaque financial products, nobody knows where all the debt is. It's sort of like playing pass the parcel where everyone has a parcel, and a few of the parcels have booby-trapped bombs inside - except nobody playing the game thought to check before starting. The music has stopped, everyone has been left holding a package, and nobody wants to open theirs. Everyone wants to pass their package on, but nobody wants to take anybody else's. Endless stalemate - and the dissipation of trust that results means that the banks are not lending anything, to anybody.

In short, the banks totally irresponsible game of pass-the-parcel in the hope of astronomical profits has led them into a cul-de-sac where they are terrified to loan to anyone - they may need all the cash they can possibly lay their hands on when they are finally forced to take their grubby little grabbing hands and open their little parcels.

Without banks prepared to loan, there can be no mortgage approvals. Without mortgage approvals, the only way is down.

Minus 39 percent, and falling...

Green shoots, turkeys, and endless deleveraging

Back to the talk of “green shoots” in the economy – this is getting talked up a bit both in the US and Europe at the moment, and it’s worth taking a look at how valid it might be.

Counterpunch and many of the writers on it have really been hitting the nail on the head the last couple weeks – start with Dave Lindorff, who explains that the collapse in house prices in the US has destroyed the equity that consumers were able to borrow against. In effect, much of the economic activity in the US in the last decade was spending done with borrowed money – money borrowed against houses on the understanding that the price rises would stick, and money borrowed on credit cards on the understanding that jobs could be used to pay off the balance down the road. Now that jobs are being shed indiscriminately, and the real estate market is shelled, how can real spending-driven economic activity recover?

Where is the consumer spending supposed to come from that used to represent a whopping 70% of economic activity in a United States that long ago stopped making things? The answer is: nowhere.

Lindorff also refers to the fact that consumers simply could not borrow if they wanted to – the banks are not lending. Do they know something they don’t want to tell us? Lindorff again (my bold):

That’s why card companies like American Express and many Visa and MasterCard issuers, instead of just charging a late charge when card-holders miss a monthly payment deadline as in the past, are now just jacking up the interest rate they charge, --in American Express’s case to 28% or over 2% a month! That’s not the action of a bank that is expecting to get repaid by a valued customer—it’s the extortionate action of a usurer that wants to extract as much money as possible from a borrower that it expects to have go bust.

The ever reliable Mike Whitney also talks eloquently about the Federal Reserve in the US pumping money in to banks with the full knowledge that this will likely result in stock market speculation, driving the recent rally in the States. This means that the run up in the stockmarket stateside is not based on any fundamentals (employment, housing market, spending by joe public) whatsoever, but is simply the government funnelling money to financial institutions knowing that it will likely end up in the stockmarket, inflating values against the fundamentals – a game that can have only one conclusion. To add to that, Whitney highlights another problem that has been bubbling under for some time now – that is the trouble that the US is starting to experience in getting foreign governments and central banks to participate in the auctions of US dollar bonds. This (auctioning off US government bonds) is how the US has been funding its astonishing national debt for some time now, but unfortunately it does require confidence on the part of foreign governments and investors that the dollar won’t collapse, rendering the bonds they have purchased near-worthless.

As the fundamentals of the US economy get in to worse and worse shape, the likelihood of a dollar collapse gets closer and closer. Foreign governments would prefer not to have a sudden dollar collapse – they (China particularly) have so much money tied up in the US that a sudden collapse would be catastrophic for them also, so there is an element of chicken and egg. However, while nobody wants to be the one to cause the panic and run for the exits first, people (similar to the end of a large sporting event) are starting to put their things in their pockets and silently slip on their coats, hoping that nobody notices and they can be out of the door before they get trampled in the stampede and lose everything. The day of reckoning comes ever closer.

Finally, Whitney talks here about the roots of the destruction of the US economy – something that should have resonance in every other economy with over-extended consumers, rising unemployment and a housing market crash (here’s looking at you Iceland, Ireland, the UK, Spain, Eastern Europe, who knows where else):

A careful reading of the FRBSF's Economic Letter shows why the economy will not bounce back. It's mathematically impossible. We've reached peak credit; consumers have to deleverage and patch their balance sheets. Household wealth has slipped $14 trillion since the crisis began. Home equity has dropped to 41 per cent (a new low) and joblessness is on the rise. By 2011, Deutsche Bank AG predicts that 48 per cent of all homeowners with a mortgage will be underwater. As the equity position of homeowners deteriorates, banks will further tighten credit and foreclosures will mushroom.

In other words, the borrow-to-spend game relied upon the public having confidence that they would have the money from a job to pay back the borrowings, and that they would remain in a position of strength to pay back their mortgage in a house rising in value. There is now no confidence, for many people there are no jobs, and for many there is nothing but a vast collapse in house prices.

It’s going to take a very long time for the public to start to pay off the debts that they have personally accumulated, and until that time, it seems unlikely that they will be willing to stimulate the economy by spending unnecessarily. The game is up.

On a related tip, there’s a slightly heavy but quite interesting article here by hotshot of the month Nassim Nicholas Taleb, exploring the limits of statistics as a tool and parts of life where statistics are used with disastrous results. It’s particularly interesting because he talks at length about banks using statistics methods to analyse risk, without really understanding the statistics or the risks.

Here’s his somewhat hilarious metaphor for a turkey using statistical methods incorrectly to analyse it’s own risk:

A Turkey is fed for a 1000 days—every days confirms to its statistical department that the human race cares about its welfare "with increased statistical significance".

On the 1001st day, the turkey has a surprise.

Which begs the question - if we are the turkeys, is day 1001 in our past - or is it still to come?

Nationalise the banks!

It's pretty obvious at this point that the banking system worldwide is in a vast mess, and (despite what they may tell you), it's not looking any rosier for the near future.

The "green shoots" in the US seem to constitute a speculative stock market run due to the massive multiple stimulus actions (paid for by the taxpayer), which have underpinned a bounce (of the dead cat variety?) in the market which isn't based on any fundamental health in the economy. In other words, when this stock market bounce runs out of steam and investors (realising that there are no sound fundamentals) run for the exits again, hold on tight.

We've heard many times that the banks are "too big to fail" - that they are of such systematic importance to society as a whole, that they simply cannot be allowed to go bankrupt - and that this systematic importance is the reason that we (the taxpayers) have to underpin the banks balance sheet when push comes to shove. Now, I can accept the premise that the banks are so important that they cannot be allowed to fail, and therefore, that we as a society may have to support them, financially if necessary.

What I cannot understand is - if we as taxpayers accept there is a need to support a crucial industry such as banking with our own money when the going is tough for them, then why would we allow our interest in the banks to be sold for a moderate profit when the banks return to health, and leave the serious money to be made by corporate interests when the banks are back to printing money off our backs as we struggle to repay our own private debts to them?

In other words - if the banks are of such societal importance, why are they not permanently nationalised? This way, when times are tough, we back the banks. When times are good, the profits from banking would benefit all of society, not just shareholders and vastly overpaid board members. I guess the answer is in the italics.

If we are going to socialise the risk, can we at least socialise the profit too?

--

The other thought that occurred to me recently was that it is very odd that when there is a balance-sheet crisis in the health industry (the industry that keeps us alive), it requires either new work practices, more efficiencies, less/more management, or best of all, more privatisation.

Contrast this with when there is a balance-sheet crisis in the banking industry (the industry that keeps us in debt), - this type of crisis requires a eye-bogglingly vast bailout with your own money (and your children, and your grand children's money) to ensure its continued survival in its present form.

Across 110th Street on the Emerald Isle

Here's a stunning performance by Bobby Womack, with a double-header of songs - California Dreaming, and the incredible "Across 110th Street", which is as relevant today as it was the day it was written (1973).

I've always found something quite magnetic about "Across 110th Street" - it explains urban decay and what follows more accurately than any dry text is likely to, and it's an amazingly soulful song. With Womack's voice, it's even better, and this performance with just an acoustic guitar is about as good as it gets.

It's a timely song as well, and it's a warning following the insane property bubble and unhindered development that's been happening in Ireland for the last 15 years. This frenzy of development was one of the first things that struck me when I moved to Ireland in 2003 - building of shoddy housing estates, on the extreme periphery of cities, and some of the larger towns. This is exactly what happened in Scotland back in the 60s with the concrete tower blocks - which were the great new thing at the time. The problem is that the estates typically don't get finished, you can't walk to anything or anywhere, public transport is patchy, and viable and plentiful services such as schools, shops, and a proper sense of community are never developed.

Take a very poorly positioned housing estate that sprawls for miles and is walking distance to nowhere, fail to complete it, fail to put in public transport, fail to add shops, gardens, parks and community, and then throw in a price crash trapping owner-occupiers on the estate, and a recession with job losses sapping them of any money they might have remaining, and watch the inevitable outcome.

A lot of people in dream housing estates are going to find themselves across 110th street in the next few years...

Afghanistan, Slam, Money, U2, and Waves

It feels like a random Friday, so this post is just what it says in the title - a random collection of Friday thoughts.

Firstly, on the subject of the previous post, there’s fairly hairy account on Counterpunch of how things are breaking down in Afghanistan. Check it out here. It’s not very promising.

I’d like to thank Mr Steven Scanlan for his very nice comment on the post regarding Slam @ The Arches. I spent a long time waiting to see those amazing nights captured in words, and after convinced myself that nobody else had done it, I did it myself. It sat on my computer for 2 years unfinished because I couldn’t get it right, and only late last year did I finally find the inspiration to finish it off and get it posted. It’s great to know that someone I don’t know remembers it just like I do. I’m not tripping, my memory is not playing tricks on me, I’m not glorifying it unnecessarily – it really was that good.

Economics. Mike Whitney (again on CP) has a very interesting article on the problems Eastern Europe may cause the world financial system. Equating the fall of the current economic system to a potential resurgence in fascism seems a little bit far-fetched, but stranger things have happened, and as one of my great musical and political heroes Mad Mike pointed out in his legendary Jockey Slut interview back in 1994, “Every time it gets tight over in Europe the nationalists want to come out and blame all the foreigners for all their problems”, so go figure. The BBC this morning has the news that there’s a €24.5 Billion rescue package for the banks in Eastern Europe. How far that will go in very tight credit markets when Whitney quotes sources as saying they’ll have to repay or roll over €400 Billion in debts this year, is another question.

U2 – now there’s a current issue. Firstly, because they have a new album about to drop. Secondly, because they moved all of their tax affairs as a band to The Netherlands in 2006, depriving Ireland of quite a lot of tax, and that’s a decision that’s coming under quite a bit of pressure as the financial downturn starts to bite. So anyway, the new album can be previewed in 60-second chunks on the Irish Times, and there’s a brief interview with them here. I can’t wait for the album – the sounds and production are always fascinating, and no one has a voice (or lyrics) like Bono. I mean, if you look back over their albums, back to The Joshua Tree and before – every one of them has probably 3 or 4 tracks that any other band would kill to have written just one of. And this continues album after album – just amazing. I’ll have to come back to this another time.

As for the tax thing, they are on a bit of a sticky one here. Having moved their tax affairs to The Netherlands around the time that Ireland announced that it was (quite rightly) putting a cap on the tax-free allowance for artists, they’ve come in for all sorts of ungodly stick for robbing their native country of the tax which their global enterprise could bring to Ireland. As Bono would explain it in the above interview, Ireland has been the net beneficiary of tax incentives in the last 10-20 years, as so many companies have based themselves here as a tax haven, and so his point is that there is a lot of hypocrisy in targeting U2 for moving to a more advantageous tax situation. I think that’s a bit weak personally. While the Irish may not criticise other companies for coming in to the country to set up in a favourable tax environment, people in the countries that these companies originate do criticise the movements of these companies, and in the US Obama is now specifically financially targeting companies that ‘offshore’ operations and jobs to reduce costs and save taxes. So if it’s right for the US to criticise companies offshoring jobs and facilities to Ireland, then it’s certainly right for Irish citizens to criticize Bono and the lads for their avoidance of Irish tax.

I’m also extremely disappointed to hear that the debate that Bono promised Dave Marsh on the value of celebrity activism is now not going to happen. Apparently, Bono pulled out with no explanation, which is gutting, as I was expecting a stout defence of celebrity activism, which would have been extremely interesting to hear. I’ve always been interested as to why Bono insists on hanging out with world leaders – he does have a constituency of sorts, but he seems to always offer the carrot end of his fame instead of the stick, which doesn’t make very good negotiating sense to me.

Anyway, if you want more Bono, I’d highly recommend the book “Bono on Bono: Conversations with Michka Assayas” – you can find it on Amazon here, although obviously I’d recommend supporting your small local non-chain bookshop. It’s full of fascinating thoughts on music, politics, authenticity and artistry, and is a brilliant and thought-provoking read. It also pretty much explains exactly why Bono does all the activist stuff that he does, if you read closely enough.

To finish off the day, here are some waves. Surfers search and search for the perfect 'peeling' wave. South Africa has probably the most famous one, in Jeffreys Bay, and while it may not go for quite as long, Thurso East on the North coast of Scotland is pretty damn close to perfect.

Here’s a video of it looking both perfect, and frighteningly big. Happy Friday!

Hitting the wall?

This is a particularly interesting press release on the site of the US federal reserve.

It seems to suggest that the US attempted to shift US $150bn in bonds today - offering people the opportunity to purchase US government securities - which as they are priced in dollars, effectively prop up the dollar itself and finance the US national debt. This isn't news, it is a regular happening.

So what is different in this press release? What's different is, of the $150bn on offer, only $12bn was sold.

This may be nothing, or I may have misunderstood seriously - but if the willingness of the world to fund the ongoing debt of the US by purchasing dollars is coming to an end, then it is time to batten down the hatches...