Ocado and Horsehair

July 30th, 2010

Congratulations to the three founders of Ocado, the online grocery delivery business, who last week managed to get their company listed onto the London exchange (with a helping hand from their former employer Goldman Sachs).  The shares listed at 180 pence and have since fallen to a low of 155 pence before closing at 167 pence today.

In the process Ocado raised £200 mln of fresh money which will help to keep the company afloat until the day arrives when it actually reports a profit (a feat it has not yet managed in its entire 10-year corporate life to date).  Ocado’s Unique Selling Point is that it delivers Waitrose groceries (and whilst these may be “honestly priced”, we all know that Waitrose is one of the most expensive supermarkets in England; in fact how Waitrose gets away with its high prices deserves a whole separate essay – deterring the riff-raff shopping under-class undoubtedly helps to create a more pleasant shopping experience for its well-heeled customers).  Ocado hoped to avoid the fate of Webvan by using the higher profit margins on Waitrose products to pay for the cost of pickers, drivers & vans.  The hope is that if Ocado can grow its sales further then eventually it will make a profit.

The pension fund of the John Lewis Partnership still owns 10.36% of Ocado (down from 26.44% pre-IPO).  JLP were a backer of Ocado from the outset and went through several funding rounds with Ocado and are now looking to exit, having injected their OCDO stake into the JLP pension fund in November 2008 to help with an underfunding situation.  At this point in time, JLP have a vested interest in seeing Ocado do well for just long enough to allow their pension fund to sell the remainder of their stake.

Beware the day when the JLP pension fund sells its remaining stake in Ocado.  This will fire the starting gun on the race for Waitrose to ramp up its own online delivery service.  The next likely step will be for Waitrose to stop supplying Ocado with its grocery products, which will leave Ocado hung out to dry without a USP.  The earliest JLP can terminate the Sourcing Agreement is March 2017, although Waitrose is allowed to start competing against Ocado to deliver groceries to customers located inside the M25 from next year.  The M25 undoubtedly encircles the area of the UK with the highest density of well-heeled shoppers and it is no coincidence that Ocado located its first warehouse at Hatfield, close to the M25, so as to service its target marketplace.

The Ocado IPO reminds me of the Partygaming IPO.  Both stocks have the Sword of Damocles hanging over them.  The difference is Partygaming were generating vast amounts of cash from US gamblers before the States finally passed legislation outlawing online gambling (and PRTY shares collapsed).  Ocado is not making a profit and the day will come when JLP cuts that single strand of horsehair.

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England Exit Another World Cup

July 2nd, 2010

To mark England’s exit from the 2010 World Cup, here are some hints for the manager (it really doesn’t seem to matter who manages England or what language they speak as the England team never seems to live up to the nation’s expectations)…

1.  Never make a player play out of position.  They play all season long in one particular position for their clubs, get selected for the England squad for their exceptional club performance and then the England manager asks them to play in a different position.  Its asking for trouble – the player ends up drifting back across the field to his usual club position and leaves a huge gap which the opposing team exploit.  So don’t play Gerrard on the left wing and don’t play Terry at right back.

2.  Only playing players in their club positions instantly solves the “can Gerrard & Lampard play in the same team” debate.  They both play in the same position for their clubs and score lots of goals by picking the ball up just outside the penalty area.  As Gerrard is the team captain, the manager should be brave enough to leave Lampard on the sub’s bench.

3.  Choose a naturally left-footed player to play on the left wing.  Even if this means selecting a player who is not quite world-class.  At least they will stay in position out on the left wing, be able to link up with Ashley Cole, and put crosses into the box rather than cutting inside each time as right-footed players who play on the left wing tend to.  Then the team will not be wholly reliant on crosses from the right wing (whether from Beckham in prior years or from Milner currently).

4.  Players who call themselves “Strikers” are supposed to score goals, frequently.  Rooney has not scored for England in eight consecutive games and, whilst he is clearly a superb player for Man Utd, he seems to lose his mojo every time he dons an England shirt.  The manager should be brave enough to leave Rooney on the sub’s bench until he finds his England-goal-scoring-mojo again or, better still, send him on a Walkabout to go and find his mojo.

5.  Only playing strikers who score goals frequently would also rule out Heskey.  I am afraid that in a one-on-one situation (Heskey vs the goalkeeper), my money would be on the goalkeeper every time.

6.  So play Crouch up front because he has an admirable goal scoring record for England, provides a target for the long ball and can hold onto the ball whilst waiting for support.  So what if Franz Beckenbauer accuses England of playing Kick-and-Rush football - Klose scored for Germany in their 4-1 rout of England with one touch from a goal kick, the epitome of Route 1 football.

The result of only playing  players in their club positions would be an England team which plays 4-4-2 (with a diamond-shaped midfield formation) and looks roughly as follows:

Goalkeeper – James or Green.

Left back – Ashley Cole

Left centre-half – John Terry

Right centre-half – Rio Ferdinand

Right back – Glen Johnson

Holding midfield – Gareth Barry

Left wing – A naturally left-footed winger, e.g. Matthew Etherington

Central midfield – Stephen Gerrard

Right wing – James Milner or Shaun Wright-Phillips

Strikers – Peter Crouch and Jermain Defoe.

To those who say 4-4-2 is a tired formation then simply re-brand the diamond-shaped midfield as a 4-1-3-2 or even a 4-1-2-1-2 formation!


To finish my quadriennial football blogpost I am re-printing an article originally written to a fanzine by a Sheffield United supporter; it may contain plenty of very strong language but it is the funniest article I have ever seen about English football.


“Sir,  I’m feeling all angry about these modern day footballers, I know why they have gone all soft – It’s because of poncy names. That’s what it is. Remember in the old days, when football players kicked a brown ball made out of ten pound of clay stitched inside a steel-reinforced leather shell which was laced up with piano wire?

Well, in them days players could only survive the rigors of the game because they were called things like Albert, Arthur, Bert, Harry, Bill, Eddie, Bob, Jack and Tommy. Fucking tough names for tough men, them were. And what do we have now? Jason, Wayne, Dean, Ryan, Jamie, Robbie. Fucking tarts’ names, they are. Great big fucking puffs.

No wonder the ball’s like a fucking balloon and shin pads is like slices of bread. In the old days you never saw a Len Shackleton or a Billy Wright with a puffy little Sondico piece of paper down his little thin socks. Fucking shin pads in them days was made out of library books, and socks was like sackcloth.

Same with the jerseys. Fucking shirts with holes in now so they can breathe. Yes, so that little Jody’s hairless chest can breathe and he doesn’t get a chill. Fuck off. Stanley Matthews used to dribble round Europe’s finest wearing a fucking tent and shorts cobbled together from the jacket of his de-mob suit. Aye, he fucking did.

No wonder players fall over all the time whenever an opponent comes anywhere near them. And they never used to show their arses at one another either. Can you imagine what might have happened if Don Revie had flashed his ring at Nat Lofthouse during a City-Bolton Wanderers game? He’d have got one of them size 10 hobnail fuckers up his bastard chuff.

Fucking therapy for stress my arse! Stan Collymore slaps his missus about and he takes three seasons off with stress counseling. What the fuck is that all about? In the old days it was expected for footballers to belt the old sow about a bit, specially after a bad defeat. And the women used to expect it, and so they should have. They were lucky to be married to footballers.

Ha! Trevor Morley got a kitchen knife in his back off his wife and was out of action for three month. Soft twat. Archie McShitt of Port Vale got run over with horse and cart one Friday night and he still turned out against Bradford the following day. And he scored two goals. That’s cos his name wasn’t “Trevor”. Good old Archie. Broke his hip, both his legs, murdered his wife and buried her under the patio and still made the England team for the Home Internationals. Did he have any “stress counselling”? Did he bollocks!

And drugs? There was none of that in the old days. Oh, no. In them days it was a quick shot of morphine before kick-off and you were lucky if you got that. By half time it had all but wore off so they pumped you full of laudanum. None of this cocaine sniffing and shooting up class A narcotics.

Goal celebrations? Don’t talk to me about goal celebrations. Crawling on the floor and thrusting their hips at the crowd. Huh! I’d like to have seen Cliff Bastin do that after a run down the left flank and crossing for Alex James to fire home a winner. Handshakes…and that was all you got. That and a wank in the showers afterwards. But it was a proper wank…all man stuff. None of these puffy wanks between blokes that you get nowadays with players like Greame Le Saux and Stephen Gerrard, allegedly.

In them days, there was nowt wrong with it cos it didn’t mean nowt. They used to say there was a “gay atmosphere” in the dressing room after the match. But it didn’t mean owt mucky. Just a bit of harmless spanking the plank among healthy young sportsmen. Aye. I know. Me dad told me.

Sixty grand a fucking week! Ha! I wouldn’t pay ‘em tuppence. Two bob Tommy Lawton used to get…a month! And Tom Finney still worked as a plumber four days a week when he was playing for England. It’s true, you know. Fucking is. Players had to work them days just to make up their money. Not like today. Stan Pearson had to clean sewers and doubled up as Old Trafford shithouse cleaner. He had to go off during one game because someone had built a log cabin and blocked the U-bend. And that Eddie Hapgood was a male model…though he never liked to talk about it.

So I say we start calling kids real male names again. If you’re having a kid, don’t even consider puffy names and shite names like what people call their kids these days. Otherwise what we gonna get in twenty years’ time? The England team full of players called Keanu, Ronan, Ashley and fucking Chesney. Fuck that! Call your kids Alf, Herbert, Len, Frank, Fred and Wilf. And then just maybe England will stand a chance of winning the World Cup again.

I thank you.”

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NOT Dealing on Inside Information

June 18th, 2010

Dealing on inside information is illegal in the UK and yet many share prices still move mysteriously sharply upward ahead of a formal announcement that company XYZ is in talks with a bidder who wishes to take them over.  Cue an investigation by the FSA which hardly ever results in charges being laid.  Is the FSA just incompetent or is something else going on.

The answer is a bit of both.  It is very difficult to prove insider dealing and the few people who have been prosecuted thus far are usually not professional market participants but rather the relative of a director who buys ahead of a takeover and then splits the winnings with the director and thereby leaves a very visible paper trail which results in a successful prosecution.  However trying to win a case in the following scenario is far trickier – when asked why he bought call options for his Personal Account in Consolidated Goldfields ahead of them being taken over in 1987, the market professional pointed to the back cover of the Stock Exchange’s 1986 yearbook (which had a full page advert for Cons Gold) and said that was where he got his inspiration to buy Cons Gold from. No chance of proving guilt beyond reasonable doubt.  Hence the market professional makes out like a bandit and so the regulators concentrate on catching the small fry.

There is also a more subtle effect at work.  Namely not dealing whilst in the possession of inside information.  No law is broken because no deal has taken place.  By simply not selling a share which is shortly to be taken over, supply is removed from the market and the lack of sellers leads to a rise in the share price.  This outperformance is then jumped on by momentum players who push the share higher still and the resulting parabolic rally in the share price eventually forces the Takeover Panel to insist the target company makes an official announcement that they are “in talks which may or may not lead to a bid for the company”.  Now finally there is a level playing field and the losers are those who didn’t know and sold ahead of the formal announcement.  C’est la vie - no market is ever going to be perfect.

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Tested Bottom of Trading Range at Dow 9869

May 28th, 2010

This week saw the market test the bottom of its recently established 9869-11258 trading range.  The low end of this trading range was put in place during an extreme spike down in the US indices on 6 May 2010.  This time the support level (roughly equating to the 50-week moving average) was tested during more normal trading conditions and we closed the week above the support level.  This time around there was sufficient trading time around the support level to allow sensible long-term investors to buy additional stock.

The Dow probed its 9869 support level on 25 May 2010 and fell to 9774 intra-day.  Hence the low end of the trading range now becomes a band of support in the 9774-9869 region.  Only two possible outcomes now exist for the markets – either we will break down through this band of support or eventually the markets will rally to test the top end of the trading range, allowing sensible investors an opportunity to bank some profits and top-slice their holdings once more. 

This may sound a bit simplistic but really that is all there is to do once a market enters a trading range.  Options traders have plenty of fancy strategies to pursue regarding selling volatility and entering strangles based around the trading range levels but long-term investors following the Anatomy of a Secular Bear Market roadmap should simply wait for one of the two outcomes mentioned above.

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My Twitter Feed
  • 11 June - the Dow and S&P are still inside their trading ranges and could stay within their trading ranges for some time yet... 2010-06-11
  • 4 June - The Dow and S&P are still trading within their recently established trading ranges, near the low end of their respective ranges. 2010-06-04
  • Reading: "This is Going to Hurt - the General Election Hangover"( http://twitthis.com/zzt7kz ) 2010-05-06
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Disclaimer
These are my own thoughts and opinions. They are based on considerable experience but in no way constitute investment advice and should not be taken as such, ever. This content is intended solely for the diversion of the reader, and me.