“A Penny For the Guy?”

FPM have strongly advocated the rolling back of the private sector excesses and greater Government planned, controlled and implemented initiatives to rejuvenate a corrupt and festering economic wound. This is indeed sea-change in Government policy we are calling for globally. A reversing of the so called “market liberalisation” trend started during Ronald Reagan and Margaret Thatcher’s administration on either side of the Atlantic Ocean during the heady 1980’s, is our call.  Instead of the appropriate Keynesian countercyclical fiscal policies; policies developed at the height of the Great Depression in his “The General Theory of Employment, Interest and Money” and published in 1936, we have continuity of monetarist policies, introduced by economist Milton Friedman, yet wholly inappropriate for the circumstance and seemingly abstract to political legislature.

Structural deficits are not advocated by Keynesian economists, only that “deficit spending is desirable and necessary as part of countercyclical fiscal policy”. Maynard Keynes

So we are in a economic milieu where global Government ‘structural deficits’ are actually expanding through monetary expansion (QE / money-printing etc), as extolled by Friedman (see below excerpt from Wikipedia); in vain attempt to kick-start economies from the need to stabilise it after the financial crisis tremors of 2007/08, seems in the main to be showing Wall Street bubbles and disturbingly more ‘creaming-off’ of the wealth of the nations by corporate elite CEOs and directors pretending to work in the name of shareholder and pension benefits.

During the 1960s, Friedman promoted an alternative macroeconomic policy known as "monetarism". He theorized there existed a "natural" rate of unemployment and argued that governments could only increase employment above this rate, e.g., by increasing aggregate demand, only for as long as inflation was accelerating. He argued that the Phillips curve was, in the long run, vertical at the "natural rate" and predicted what would come to be known as stagflation. Though opposed to the existence of the Federal Reserve System, Friedman argued that, given that it does exist, a steady, small expansion of the money supply was the only wise policy. Friedman was an economic adviser to Republican U.S. President Ronald Reagan.              

In a situation of national debt default or other financial or military crisis it would seem an instinct to huddle together for security. That is an early evolutionary social communal ideology for self-preservation. Citation of North Atlantic Treaty Organisation (N.A.T.O.) formation after WWII as vivid example (elaborated below). So it follows that desperate unions and strange bed-fellows are made in stringent times. This is seemingly what's happening in the world order play-book of today: with Russia and Europe vying for that strategically important East-West frontier country Ukraine; Hong Kong Pro Democracy protesters independently resisting China's overlord efforts; Anti-American Arab countries in turmoil between pro-West democracy or theological retrenchment; BRIC Bank set-up to negate bias IMF and World Bank support of established EU and USA economies, and so on. 

Just in case we're talking through our 'hat and hot air', witness the recent "should I go or should I stay" clash between Scottish unionists and separatists, after a 300-years-old marriage. In the Scottish Independent Referendum of 18 September 2014, the pro-union voters tactically won by 55% to 45% majority. An election won by fear because the sizeable conservative elder voters were scared into believing that the 'apple-cart' being disturbed heralds 'worse-before-better' syndrome. Long-term ideals being sacrificed for short-term benefits would not be an accusation but personal reality.  

Towards forming a pivotal and strategic alliance, whether one believes in the “New World Order” with ambitions of elite families controlling One World Government, EU is increasingly under the influence of USA policy diktat. One world government, initially via the spread of ‘Commercial Globalisation’, is seemingly intent in that direction. From missionary-driven European colonialism of pre-World War II through to multinational corporations imposing American economic imperialism; such institutional regimes with exploitation as an aim initially corrupt and ultimately destroy social freedoms, independence of local decisions and control and also individuality of thought and action. FPM principals are collectively and vehemently against Orwellian order of society (of the all-controlling "Big Brother" state), which we are ALL as yet unremittingly or unwittingly embroiled in by degrees already. The great hope and event is that all great movements are eventually checked by unheralded forces which are almost divine in emergence. Bearing such forces, we cite Mahatma Gandhi resisting the military might and nous of British Colonial Imperialism. Another example of an earlier era of unheralded yet almost divine forces resisting a seemingly incorrigible exploitation of slave trade was William Wilberforce and friends. The abolishment of the slavery in the British Empire resulted in the Slavery Abolition Act of 1833. And so on and so on is history littered with such heroes of humanity.

FPM included the above paragraph of social-political economic commentary on our funds and investments forum originated enterprise, because of related phenomenon called Trans-Atlantic Trade and Investment Partnership (or TTIP) coming into our cross-fire sight. This means the global hegemony of today United States of America, whom are descendants of a former Europeans colonists and other diaspora of refugees, want to ally with their old world roots towards greater formidable business partnerships (from our survey, even effect to supersede powers of national Governments!). Clearly a path expected to lead to globalist ambitions. 

Of course, aside of Britain’s ‘special relationship’ with America, ‘Trans-Atlantic’ indicates closer economic ties between European Union and USA. At a time when the EU itself is having a crisis of existentialism, the megalomaniac globalist drivers are desperate or opportunistic to forge a thin-end-of-wedge shot-gun wedding! As was circumstances and timing of the creation of NATO, which was a military alliance of nations in 1949. Our ‘wet behind the ears’, yet people-elected from selected politicians (viz. Hong Kong Pro Democracy Protests), who visibly, necessarily and intrinsically are not wise like gerontocracy, are being apparently pulled on puppet strings. Corrupt politicians is not new but broken political machine where its members are self-vested puppets manipulated by powerful behind the scenes corporations and lobbyist using bogus statistics from unscientific polls conducted by public relations exercise, is in fact plutocracy i.e. rule of the wealth. Democracy, i.e. rule by the people, equals public relations propaganda.

Just in case FPM are accused of excessive fantasy and bemused ranting about real world events which get relegated to realms of conspiracy (as if bad things don’t actually happen clandestinely!), we cite below an easy to understand example from the venerated Private Eye - No.1377 late October 2014 edition:

Synopsis of Penny for the Guy (From Private Eye - No1377)

As activists in FPM 3-fold enterprise manifestation of 1) critical public relations of reputations, 2) promoting alternative M&A deals and 3) delivering mutual-alternative investment convergence, we are actively peaceful protest marching against unbound capitalism. If adherents of capitalism don't march then we must all be billionaires and super-wealthy!

Indeed we are meeting at 6pm at Trafalgar Square on 5^th November, 2014 to join Climate Revolution as part of the Amonymous organised annual event since 2011.

Notably in the English cultural calendar, 5^th  of November is the day celebrating Guy Fawkes and his group’s failed Gunpowder Plot of 5^th November 1605 to blow-up Houses of Parliament. "A Penny For the Guy?" is the begging bowl chant of children with a Guy Fawkes dummy, collecting money or fund raising to celebrate by burning the Guy Fawkes effigy on a bonfire and while letting off fireworks.

Implications of Operation Twist on Asset Allocation

While main stream media and popular press "bang on" about sovereign debt, economic slowdown and downgrades in unison head-scratching about mid-year market declines, the practical aspects of trading these volatilities in capital markets is the management expertise of leading investors.

Leading asset managers re inevitably embroiled with global policy makers to best ascertain future policy impetus and implications for asset allocation shifts. For every twist and turn of central bank and government policies market participants get their heads around it and react with asset allocation decisions. Such as the implications of August 2010 annual Jackson Hole speech by Federal Reserve head Ben Bernake, which paved the way for what became Quantitative Easing 2 (QE2).

Since the 2H 11 global economic headwinds reflect possibility of re-entry into recession if not a slowdown, Ben Bernake and company have this time introduced Operation Twist as the subtle tinkering tonic for the capital markets aiming to ultimately restore economic confidence. Operation Twist attempts to control long-term interest rates instead of the usual monetary tool to direct short-term interest rates.

FPM's read on the intended consequences of this policy impetus is that the debt maturities are being extended or cheap money is available with longer time to re-pay it. The policy implementation is via open market operations to sell short-dated treasuries and use the proceeds to issue long-term bonds. If this action were applied and compared to a corporate credit referenced by default swaps it would be deemed by the International Swaps and Derivatives Association, the trade body for the derivatives market ISDA as “credit restructuring event”. I am reminded of bond tender plans e.g.. by Anglo Irish Banks and ISDA's verdict.

FPM’s high conviction belief is that in the week beginning 19^th September and especially since Wednesday 21^st September’s FOMC statement at 2:30pm announcing Operation Twist, portfolio realignment is underway. A shift into accessing cheap long-dated credit is currently the modus operandi of select institutional investors. Equities, and even safe-haven gold and to some extent commodities have been sold off  in anticipation and reaction to the Fed’s “twist” on the policy of using its balance sheet to boost financial assets – QE3 became a no-go policy! FPM bases this market opinion on the liquidity cycle’s observation about the flow of money between asset classes.

Remember that QE2’s support for fundamental issues such as jobs growth and on wealth effects seem uncertain. The financial asset purchases created mini asset bubbles which peaked in late April for equities, as indicated by bellwether S&P 500 reaching 1363. Since July 22 the same benchmark has been down-trending.

Notwithstanding the distraction of the ongoing Greek tragedy, together with this week’s downgrading of Italy’s credit rating by S&P, and contemporaneous credit downgrades of bellwethers financial services Citigroup and Bank of America, a new uptrend in investment assets is in the offing, at least until there is a new twist from economy and markets.