Thursday, 31 January 2013


Once again the economics teams at various investment banks and public institutions failed to predict the US GDP number. US GDP recorded a 0.1% contraction in 4Q12, the first contraction in three years. The best quote I've seen comes from Paul Ashworth, chief US economist at Capital Economics in Toronto:

“Frankly, this is the best looking contraction in GDP you’ll ever see,” . . . “First-quarter GDP growth is going to be pretty weak because of the expiry of the payroll tax cut. But there is nothing in these figures to change our view that US GDP growth will accelerate as this year goes on.”

Did he really say that?

Here's what's going to happen:

  1. The market will assume that this means that the Fed will keep printing money and continue buying MBS at the same rate
  2. Friday's non-farm payrolls will be either confirmation this is a blip or that the Fed needs to do more
  3. The cash bubble will keep equities relatively firm as people continue to rely on the central banking put option
If you think that we're looking at a double dip situation stay in bonds and sell equities, if not you should be selling government bonds now and not waiting for the Fed, BoE or ECB to stop QE. There's a lot to think about. 

I got out on the bike for a couple of hours today and really enjoyed the warm weather in Sydney. The traffic has increased again as the long summer vacation is now over and scores of the ubiquitous "mum bus" of choice, the Volvo XC90 line up around Sydney's leafier suburbs to ferry little Johnny or Janey to school. Some advice for riders brave enough to challenge these ladies of the road:
  1. At lights move to the front of the traffic line
  2. Make your turning intention clear
  3. If you can try and smile and make eye contact with the first driver in the line - hopefully they assume they must know you and so will try and avoid  running you over
  4. Avoid cycling between 0830-0930 and 1445-1600hrs unless absolutely necessary
  5. Assume all XC90's, Audi Q7's, BMW X5's and Mercedes M-series are being driven by someone who is distracted by children, mobile phone calls or pets
  6. If all else fails stop for coffee or a cold drink
Other than that enjoy your ride.


Wednesday, 30 January 2013

Marginal gains . . .

I wanted to get off Apple today but some news hit the tapes this morning my time. An updated iPad with 128 gigs will be available starting Feb. 5 priced at $799 for a Wi-Fi version and $929 with a mobile connection. Currently the top of the line iPads (with 64gigs) sells at $699 and $829. I'd have to look up the various component costs etc., but this is starting to crowd things in their product line up and I believe puts more downward pressure on margins. Also ask yourself this: how much storage do you use on your current Mobile device? The reason I mention this is I was thinking of upgrading my now ancient 3GS, so I was about to press the order button for the range topping 64gig model when I realised I only use about 8 gigs currently. I don't carry all my photos around with me, but I do carry all my music. So maybe 32gigs would be enough? I wonder how many people like me there are out there? Food for thought . . . #margins.

The Spanish province of Catalonia formally requested more than €9 billion in aid from the Spanish government liquidity fund overnight. Somehow I thought they needed  €7bn, but what's a billion or two amongst friends when you have the best football team in Europe to support. #marginalincrease

Of course part of the way the Eurozone hopes to get itself out of the debt swamp is via new taxes. Hollande is trying it in FRance and we know where that has gone so far. Within weeks we should have the revised draft of the proposed "Tobin" tax on financial transactions in the the region. The draft is being prepared by the EU tax commissioner Algirdas Semeta and it proposes a wider net by adding anti-avoidance measures to the original plan. Under the old plan many institutions would have scrambled for safe havens, but this looks like a no-go now. Leaked elements of the draft suggest a levy of 0.1% on stock and bond trades and 0.01 on derivatives and will be imposed on any transaction involving one financial institution with its headquarters in the tax area, or trading on behalf of a client based in the tax area. Semeta, a Lithuanian, like all good European leaders has limited experience outside the walls of  the public sector or academia and therefore fits in perfectly with the the technocrat takeover of Europe. His models indicate no drop off in turnover etc. from these new taxes and therefore they will raise about €35 billion. Good luck with that. #marginalreality

The US economy as I have been saying is starting to show signs of life. Durable goods orders rose 4.6 per cent in December, after a 0.7 per cent gain in November, the commerce department said on Monday. The market had expected a 1.6 per cent rise. #betterthanmarginal

A quick note for those of you who are expats . . . It's hard to quantify the time and expense of moving countries no matter how generous your employer; you'll always end up out of pocket. I must have changed 30 or 40 power plugs from european style to Australian in the last couple of months and I still have spare Swiss and UK power boards setup for those appliances where the AC adapter is an integral part of the plug itself. A new one hit me over the last couple of days. The last of the printer cartridges I had for my HP printer ran out and I took a trip to the local supplier only to find out that HP printers are regional specific. He could sell me a cartridge to fit, but I would need to call HP to get a code in order to change from European to Australia-Pacific so the local cartridges would work. This is annoying to say the least. More annoying was the fact HP in fact couldn't get the input menu for the code system to work under Mac OS 10.8 and therefore they are sending me a replacement printer. Thank you HP, but why do you have this stupid regionalisation policy anyhow?  The obvious answer is so they can have higher prices in some regions and therefore protect their and their vendors margins. No other printer maker I can find does this. It's crazy. #marginallystupid

The rain has no gone from Sydney allowing me the chance to ride again. It was cloudy so I rolled up my rain jacket and took it with me this morning as I snaked among the hills of Sydney's wealthier streets. One street that is a bit of a challenge is Latimer Road. I had a friend who lived here when we were growing up and it's one hell of a climb when you're ten and just missed the bus home.

As you can see from the Strava segment read-out Latimer is only a kilometre long, but it averages 7.5º with two short flat sections and a nasty 11º piece towards the 2nd roundabout. I haven't taken it with any gusto so I'm hoping to improve my time quite a bit when I'm in an attacking frame of mind. Try it next time you're in Sydney's eastern suburbs.


Tuesday, 29 January 2013

Is Apple the new Sony? Riding in the rain . . .

No consumer electronics company was hotter than Sony from the 70's through to the turn of the century. The success was built on continual innovation. My own first experience with Sony was with my father's portable transistor radio that was small enough to fit in his shirt pocket.

Dad's small orange unit came with a big fat ear piece that basically excluded 70% of the population from using it because you needed an ear (this was mono not stereo) big enough for it to fit in. Logically and somewhat famously in 1978 engineer Nobutoshi Kihara put together a unit for Sony co-chairman Akio Morita so he could listen to his favourite music on his frequent transpacific flights. This was the Walkman and it propelled Sony to the top of every consumer's wish list. You could go on about the "Trinitron" TVs, but it was the Walkman which gave Sony it's coolness and the cashflow that eventually led them to acquisitions that they hoped would "wall" their customers in a Sony "fortress" from which they would never venture from. Part of that business plan was Sony Music and to a lesser degree the equivalent investments in movie production and distribution. It all made so much sense, until someone invented the PC and all of a sudden some of the bricks in the wall started to crumble.

Apple now sits on approximately $135 per share in cash and seemingly in the post-Steve Jobs world lacking in inspiration. Building products smaller and more functional with beautiful design aesthetics may not be enough to cut it. The iPad mini is not a solution, it's a problem because it's a lower margin product that is very close to what you get with a full size iPad. That spells cannibalisation to me and although Tim Cook says it will drag in more revenue from new buyers I tend to think it eats away at the business and makes Apple more reliant on the content it can sell (apps plus entertainment). I also think it makes them an easy target for bankers looking for a big M&A ticket such as Apple buying Facebook or Disney. If they do that I don't want to own the stock because what does Tim Cook's team know about merging consumer electronics and entertainment other than how it didn't work for Sony. If they can't innovate then they'll become Microsoft-ish; one big fat dividend play.

So can Apple make sense here? Importantly the millions of smartphones that Apple sells are mostly subsidised by telecom companies keen to lock in consumers who they hope will spend, spend, spend on their voice and data services. The problem with this of course is that increasing competition in hardware means that the telco's may soon be able to take back some margin by reducing the subsidies. Forbes published a very simple but totally valid piece today: Fundamentals And Technicals Point To $340 Apple Stock Price. The writer Nigram Arora say's that ex-subsidies Apple makes about $30 per share. Therefore he puts it on a multiple of 7x and adds in the cash to value the company fundamentally at about $340. Why 7x? Well it's more art than science and I think is a little harsh, but assume he's about 50% right . . . OK so instead of losing 40% of it's smartphone sales it loses half that amount and then add on the cash. At 7x with cash added in I make that around $387, but at 10x that's $495. Therefore at today's $450 we're in about the middle of the range, meaning a 10% upside. I have said before that $450 - $475 is where I get interested. You make your own judgement, but clearly it's getting closer to where the stock has fundamental value and the innovation option is being priced cheaply.

Last week I mentioned the problems at Monte dei Paschi di Siena (MPS) and thought that this would blow over because the technocrats in Rome and at the ECB just wanted it to go away. That was then and this is now. The Italian election is proving a more effective critic of Monti, Draghi and the other technocrats than I had thought. Now the nitty gritty details of the latest derivatives scandal is coming out suggesting that contracts costing MPS some €700m were "found" by incoming management in a safe. Complete rubbish. The Bank of Italy knew about some these deals two years ago according to the FT. I hate conspiracy theories, but this stinks like the garbage in Naples during a strike. The Government and the ECB have granted MPS €3.9bn in bailout bonds. The real reason this is happening is that the City of Siena owns 30% of the bank and used the dividends and sponsorship of the bank to support a cosy lifestyle. If MPS had gone to the markets to raise the required capital the City would have lost control putting at risk many jobs and much largesse in Southern Tuscany. What politician could afford this to happen?

It's been a rainy couple of days in Sydney and I got caught in it yesterday when I got out early for a ride. Riding in the rain  in the city is never fun, but it can be a necessary skill. It did allow me to coach my sister in law on the finer points of using brakes in the rain. Thankfully neither of us was on carbon wheels, but even if you have aluminium rims it's worth pumping your brakes to dry the rims before you have to brake. Coming down the short but steep "Gap" run at 12º in the rain means you'll need to sit back and maintain some contact with your braking surface unless you're a pro used to riding in Alps during snow and sleet.

Also it's worth buying a rain jacket that folds up and can be carried in your back pocket. I use an Altura rain jacket that does the job reasonably well.

I wouldn't call it waterproof, it's more shower proof, so you'll get wet in a heavy downpour. The upside is that it does breathe a bit, so you don't get that sauna-like feel other jackets have. I'd like to have a tighter fitting piece, a bit like the Rapha version, but I got it on sale for about $50 leaving me little to complain about.


Wednesday, 23 January 2013

Birthday fun . . . marking madness

I didn't write a blog yesterday as I decided that given it was my birthday I deserved a day off from all things financial. I really enjoyed the day which included a late morning ride in Sydney's Centennial Park with my wife and dinner with friends. Among surprises on the day was a box from Cicli Mattio in Italy which I guessed due to it's lightness must have been a birthday t-shirt, but turned out to be something far more exciting. After nearly a year since I ordered my Cannondale Supersix Evo Team I finally received my compact spider rings and they truly are beautiful:

I haven't weighed them yet but when I say they are t-shirt light I am not kidding. I won't add them to the bike unless I go to Europe this year as I think the hills of Sydney can be easily tackled with the standard 53/39 setup. My real present on the day was a new set of training wheels thanks to my wife. I should receive these beauties next week:

Fulcrum Racing Zeroes Dark Label. It was toss-up between these and some Mavic R-sys. Mike and the guys at Atelier de Velo convinced me on the basis that they all rode these and the ceramic Ultra Smooth Bearings (USB) are the same as I have in my Bora One's. Originally I was going to order them from an offshore supplier and set them up myself. That would have been OK with the setup on the Dogma, but because the Evo has the non-Campagnolo rings up front you need to play around with a couple of spacers. I reckon me getting it wrong and having to take it in and pay AdV to fix it is probably worth 100 odd bucks. I'll post pictures next week.

I'm thinking of loading the new wheels with some serious rubber. Tyres of choice could end up being Vittoria Open Pave Evo CG Clinchers. The reviews are excellent and these are 24mm and can be inflated to 130psi. We bigger riders get more out of tyres if you can get them up over 120 with confidence. Thats why I find tubulars so much better than clinchers. Here's what the Vittoria's look like:

The green strip is cosmetic but should look good on the Cannondale.

So to finance and the Australian press is its usual bubbly self. BHP report record Iron Ore Shipments and that they were now at full capacity in Queensland coking coal. The cyclical rally seems to be good still and until we hit an air pocket during the negotiations over the US debt ceiling there's not much to stop it continuing. I noted in Murdoch's Australian today that ex-ASX supremo and old school stockbroker Maurice Newman had an opinion piece on the "global ponzi scheme". It seems that Mr. Newman is concerned with the unlimited amounts of money being printed by Central Bankers. Welcome to the club Mr. Newman.

Elsewhere another derivatives selling scandal has reared it's ugly head. One of the great names of banking Monte dei Paschi di Siena has had to open the books before their intended capital raising and in doing so has exposed a couple of dubious deals done to prop-up the balance sheet thanks to the investment banking teams at Nomura and DB.

It's said that they'll book a loss of 220mil v. the 2009 accounts. This readers is all about the back book accounting . . the board is claiming these deals were no approved, but someone at the bank wrote the ticket?? There's no doubt that these positions have been sitting there in dispute for sometime, probably being marked incorrectly. Remember what I've said about this sort of thing in connection with other banks? In the case of Citigroup the management of the back-book was crucial in bringing the new CEO to power. The opposite to things being marked in your favour is in the derivatives world when you have to mark them against yourself . . . in other words not everyone can be a winner.


Monday, 21 January 2013

'Tis the season . . .

The Press are going to town on Rio Tinto. The advice level is very high and there's more than a dollop of nationalism mixed in to the conversation. I don't thing anybody in the funds management community in Australia fully understood the creation of the dual listed company structured put together by a Macquarie Bank wunderkind back in the 90's. Infamously of course that same Mac banker later got caught out for insider trading when KPN took over the then Australian company TNT . . . but that's a story for another day. The WSJ's Australian Deal Journal  chose to lead with the details of a piece put together by the Commonwealth Bank which called for:
  1. Selling “non-core” assets like its North Parkes copper mine and its majority stake in ASX-listed uranium miner Energy Resources of Australia Ltd
  2. Close assets that provide only low returns and aggressively cut costs across the business
  3. Drop its progressive dividend policy and work out how to unlock value in the franking credits
  4. Focus on capital efficiency, and shouldn’t be afraid to record further writedowns if necessary
Point 3 is the key for Aussie shareholders who have had to play a game of supporting the UK line of the stock by allowing RIO to run a test of equality between the two even though the Australian line trades at big premium to the UK line. Clearly, as I said in my last blog, the pressure is on for the company to repatriate fully to Australia and start paying out the franking credits against special dividends etc. The Comm Bank piece clearly implies this.

And so to my favourite company on the planet. Proving that even the best and the brightest of industrial leaders can get it wrong Caterpillar announced over the weekend that take a $580 million writedown after discovering accounting “misconduct” at a Chinese unit acquired last year. Apparently managers at Zhengzhou Siwei Mechanical & Electrical Manufacturing Co. who were the culprits. The statement said they'd participated in “deliberate, multi-year, coordinated accounting misconduct”. The leaks around the statement also implied that these were relatively new employees at the group or i.e. not really CAT people. I guess thats better than the billions RIO have written off. 

The cycling season has now officially started and this week we'll get to see the guys at the Tour Down Under. I was scanning the maps of the rides and for the pro's there's not many real challenges with the majority of legs being what by European standards considered rolling country. Obviously by my personal standards the should be considered mountainous! So the Prologue was a Criterium in the centre of Adelaide on Sunday and it came down to a sprint between the Gorilla Andre Greipel and Matt Goss with the big German taking the prize. Here's the action via Orica GreenEdge's backstage pass:

Finally a quick note from me regarding an equipment failure. I managed to crack open the body of one of my Look Carbon Blade Titanium Axel Pedals. This makes the pedal next to useless and I found out as much in light rain here on Saturday when I rode out with my sister in law on her maiden ride on her new Bianchi. No idea how this could happen and I intend to send it back to Look for examination. 

A new set has been duly ordered for the princely sum of AUD242 dollars from an online supplier. 


Sunday, 20 January 2013

The back book and cycling in 46° Celsius

Friday: I did a 33k ride in Sydney at an average temperature of 40° Celsius but it was at least 46° as I coasted down the final hill towards my house. For my US friends that's 113° Fahrenheit . . . yikes!. I stayed out too long and was lucky that I was wearing my lightest weight cycling jersey. I made 3 water stops and had to drink a litre of the cold stuff from the refrigerator when I got home.

ON a day like Friday something always goes wrong. I managed to drop a chain when I erroneously back pedalled as I pushed off from a water stop a Watson's Bay.

I also manged to clip one of my carbon water bottle cages going up a short but steep climb. The cage is a write-off, so thats 60 bucks down the drain. Luckily I have a spare one, but given how this is the second time I've managed to do this I'll be replacing the cages with the Arundel Mandible Cage as it's the one people now recommend. I'll review it when I get around to ordering them.

On Thursday Citigroup reported. I f you remember my previous blogs you'll know Michael Corbat got the job of CEO by managing the "back-book", I wrote about this last year when the board appointed him. Citi reported quarterly earnings of 69 cents a share on an adjusted basis. Analysts had expected 96 cps on this basis. I found it interesting that Mr. Corbat's old fiefdom at the bank released only $86m (v. $1.5bn in the previous year) because regulators have expressed concern that some banks have been too aggressive in releasing such reserves. Anyone who's ever worked on a bank's "distressed" assets knows that the easiest thing you can ever do is mark-up an asset from say 10 cents on the dollar to 20 cents on a dollar on the basis that you found that a similar asset has traded away from you at 30 cents on a dollar, The hardest part comes when you've marked it all the way back up to the 80's and you realise you either sell it now or risk having to manage it until maturity during which time the releases become smaller and your own P&L and therefore influence within the bank starts to wane. Mr. Corbat got out of bad asset management at the peak of his influence and as I said at the time he probably knew the hard slog in the group was only just beginning. He now has to manage a bank the hard way and from this first bit of evidence he has a Herculean task ahead of him.

Bank of America also failed to hit expectations mainly due to the mortgage mess that is at least finally being cleared up. The market of course expected that BoA would buy back shares or return capital in another for, but the Fed as was the case with Citigroup is not going to be as lenient on such capital structure changes until the government has milked them of the cash it believes the mortgage consumer is owed. Fair enough, but I'd be looking toward significant dividend by the year end.

Finally a quick word about Friday's move by Rio Tinto to ditch CEO Albanese. He gets nearly 20bucks large to spend how he sees fit and no doubt will have plenty to offer business schools regarding buying assets during a bull market. I am stunned, yes stunned that they promoted Sam Walsh to run the group, not because he is a bad manager or person, but rather it's a complete surrender of the expansionist policies that this board has espoused for at least 15 years.

The board should en-masse offer themselves up for re-election at the next AGM. I now believe that the Rio UK / Rio Australia share class arbitrage will come back into play. If RIO retreats to a perth base then I expect them to collapse the UK HQ if possible and return to a single Australian listing. Maybe they could even drop the RIO name and rebrand as CRA (just kidding).


Thursday, 17 January 2013

Some bling and some adjustments . . .

Pictures arrived today of Team Cannondale's new kit for 2013. Here's couple of highlights showing the Vision wheels sets decked out appropriately in green decals:

To say these are loud is somewhat of an understatement. I've never ridden Vision's wheels before and although I'm in the market for some new training wheels I think I'll pass.

Greece got another $4bn overnight. Partly this is the payment for last May and the latest payment due. I have no idea why the May payment was held up as the excuse of non-compliance has such a hollow ring.

Maybe Greece could ask Goldman Sachs for some more help (they've helped before as we know from the fabulous Fab and the team)? I liked the GS result because it shows at least one bank is learning fast how to adapt the new regulatory environment. Goldman Sachs earned $5.60 a share in 4Q12, more than tripling the 4Q11. GS costs (ie. compensation and benefits) were just 21% of net revenues – down from nearly double that a year ago. For the full year, the compensation ratio fell to 38 per cent from 42 per cent. That's a fabulous result and speaks volumes about the buy-in by senior staff. Now if you ask me whether it's sustainable I'd say no. I cannot envisage staff taking another bullet of that size next year. Look for the compensation ration to edge up again soon. Having said that you certainly need to admire what they've done even if there's been some dubious arbitraging of tax risk for the payouts themselves.

Possibly the most intriguing news of the last 24hrs was that the Germans were looking to repatriate a chunk of their gold reserves. They're moving 54,000 gold bars worth €27bn from Paris and New York to Frankfurt. I have no idea why they were in Paris, but obviously the NY stash was put away back when the Russians were threatening to flood the Fulda Gap with T62's and BTR's.

I'd suggest reading Mohamed El-Erian's piece in the FT for a better insight into what the move means. He specifically refers to "domestic considerations", meaning that the German people are worried about their money. I guess given how the popular perception is that the EU/ECB is bleeding them dry that politicians felt like they had to do something symbolic that made up for their inability to stem the tide of power that was being transferred from Berlin to Brussels.


Wednesday, 16 January 2013

Anything is possible, but is it likely?

Sydney's roads are getting back to normal after the vacation and now I have to struggle out of bed shortly after 5am in order to avoid the various tradesmen making their way from the outer suburbs into the strip of suburbs running along the coast. I think if you live exclusively within Sydney's Eastern Suburbs that the thoughts of financial doom seem only a remote possibility. The only sign that things are not was they once were are the numbers of bankers and financial planners "taking a break" to look for new opportunities.

In the US the Republicans have started to steel themselves for a fight on the debt ceiling. I believe they will cave on the ceiling if given a chance to show the rate of increase is slowing. It's calculous for a world of straight line geometers. Obama clearly believes his administration should maintain their hardline and repay Republicans for last years "round 1". In my mind Bernanke has already indicated that he'll take appropriate action if called upon. Volatility should increase from the extreme lows we have seen.

Japanese volatility has been making a come back of late. As I write this the N225 is down 1.8%.  It could be a classic case of buy the rumour and sell the fact. The locals are blaming it on the debt ceiling negotiations, but to me it smells slightly of a market that got ahead of itself. The N225 still has room to move higher even if I don't believe in Abe and the BoJ.

Obviously this nervousness has led to a rally in the JPY. It's understandable given whats a play and some HF's who bet on a reversal last week should have done nicely out of this. 

Profits are there to be taken and I wouldn't expect HF's starved of returns to run this one to long given the mood of the US President.

During the last few months we've heard from the Greeks (as usual), the Irish and now the Spanish. It smacked of desperation:

“I think that in this moment, when there is a need for growth, those who are able to implement growth policies should do it,” the Spanish prime minister told the Financial Times in an interview. “What is clear is that you cannot ask Spain to adopt expansionary policies at this time. But those countries that can, should.”

Economic data yesterday suggested the German economy grew 0.7%, down from 3% in 2011. This means that the economy actually contracted in 4Q12. Maybe the Spanish expect the Germans to do something to save themselves from dipping back into recession. Of course the Germans themselves would prefer a weak Euro to to trade themselves out of the situation. 

Other than the odd email regarding the Apple share price (now $485, down 3% yesterday) I received some questions in regards to riding on carbon rims (such as more Campy Boras). For a start I'm no expert and I'd ask you to speak with a serious serious race rider before committing to a pair of these or other carbon wheels. I'd make the following points:

  1. You need to put in specific brake pads for these type of wheels. Swiss Stop is the brand most go to, but be aware some wheel companies will not honour your warranty unless you use their own specific pads.
  2. When you set up your brakes make sure they are correctly towed in. If you fail to do this on carbon wheels the noise alone will put you off the experience.
  3. Be careful wiping down the wheels and the braking surface in particular. Any oil residue could be fatal. I've heard guys saying to use rubbing alcohol as it evaporates and leaves the surface clean. I use water and a clean (and I mean a very clean) soft cloth. Test the brakes in a service stand before heading out. When you do hit the road I like to squeeze my brakes intermittently for the first couple of minutes before running hard. 
  4. Rain (or snow etc). Look you're going to have to understand that braking with carbon wheels in the rain is terrible. You have to use the squeeze method in order to squeegee the moister from the rim before applying the brakes fully. This is especially difficult on steep decants. I strongly advise as someone who's had the horror of literally counting to ten before getting any real traction to think before you attempt a descent in anything but the lightest rain.
  5. If you're going to the expense of full carbon wheels I really don't see why you'd go with anything other than tubulars. A properly set-up tubular tire is a wonder to ride on and the purpose of a carbon wheel is to race, rather than train on. I don't have pure carbon clinchers as my Cosmic Carbone SLR's have a coated aluminium brake surface and therefore are not a true test of a carbon clincher. 
Good luck - Ciao!

Tuesday, 15 January 2013

Can you say "Systemic Risk"? Can you say "lower margins"?

Houston we have a problem . . . 70% of funds held in ETF products globally are run by just three companies: iShares (owned by BlackRock), State Street and Vanguard. The market is worth about $2trn. What if one of the majors had a problem? Do you see where I'm going with this? You see just this last week BlackRock got control of another small chunk in the guise of Credit Suisse's ETF business without so much as a whimper by any regulator. How can this happen?

Leaving aside the ETF market there are only two things on peoples minds today. For investors it is that Apple now looks certain to break the $500 mark; for cyclists it's Lance Armstrong and his confirmed confession intentions.

Apple . . . get ready to catch the falling knife because we're within sight of the area I have said for a while makes the stock attractive again. It looks like channel checking by analysts has revealed (via the WSJ) that Apple had halved orders for iPhone 5 screens from suppliers for the period between January and March, to about 33m displays. The bulls will say that this suggests an iPhone 6 or at least a 5GS with a different size or type of screen. The bears will point back to October when Apple warned that margins (and maybe sales?) we're being compromised as mobile technology starts to converge. You also have to remember that Samsung and others are starting to get their act together with smart phones and I believe that the core franchise now with Apple may move towards the iTunes distribution platform and slightly away from hardware.

Of course Apples fall and the cyclical switch signal something we haven't seen for a while and thats a breakdown in correlations. I haven't looked the the various stats as it's been a while since I had access to some of the correlation trading markets. If that continues I'd be tempted to reverse into some vol trading opportunities. You want to stay away from longs in the various indicies, but I'd look at individual vol opportunities in stocks and be prepared to switch long holding into upside calls to protect from a down move. This idea of taking cash off the table could, for the bulls be supplemented by a leveraging effect of buying more notional value calls then stock you sell. Worth looking at in my oppinion.

I didn't mention it yesterday but the one thing that has spooked me was the UPS / TNT merger failure. The risk arb guys obviously got hurt. A 42% fall in the TNT share price will tell you that the long TNT / short UPS trade was on the books in size. It's amazing that the competitions authorities in Europe can take a hard line on this stuff but (and returning to my opening thoughts) fail to raise if an eyebrow at the thought of an ETF market compressing fast to less than a handful of major players. The only consolation I have from the deal is that part of the reason this happened was Fedex's refusal to play ball. If it had been a loss of confidence by UPS then I would have started to have the wobbles over the recovery in the US and Europe that we're just beginning to feel. Remember the how the old saying goes . . . it's the Dow Transports that lead the market.

Lance Armstrong . . . mmmm??? Cycling's own systemic risk? As a cyclist with nothing but the love of the sport at stake I believe that if he confesses the authorities of not only cycling, but also of all sports have a golden opportunity to take action. It's amazing how the NFL for example continues to avoid the many questions in it's own space while continuing to gain popularity. In Australia the tax laws are written like the criminal conspiracy laws, i.e. the law looks at your intentions, rather than at strict numbers to decide whether you're guilty. We the public might be better of if sportsmen cheats are treated as conspirators. After all with sports betting continuing to grow an un-level playing field is similar to theft and needs to be treated as such. I have my doubts over much of the athletics world, weight lifting, swimming and the major codes of oval shaped football played around the world. Additionally you only have to look at the many 50 year old plus hollywood stars sporting a chiselled six-pack now days to know that in all likelihood these people are also using some form of recovery enhancement in order for them to train for 4 hours a day for 6 months leading up to their latest action movie. I'm not a tin-hat wearing conspiracy theorist, but sometimes what you see in front of you is too good to be true.

On a happier note I took the Pinarello out for a ride today along the beaches of Sydney. I have now abandoned the use of the EAston EA90 SLX's as I've passed those to my sister-in-law. Instead I feel confident enough in my support team and a can of Vittoria tire sealant to be able to ride out on the Campy Bora tubulars. I've finally come to the conclusion that even if the Pinarello is a beautiful looking ride there is no way that it's as fast as the Cannondale Super Six Evo. What I would like to try is that same set of wheels on each, but because of some minor differences I can't as I'm not confident enough playing with the spacer setup that I have on the Cosmic Carbone SLR's to try reconfiguring myslef. I went to a local bike shop here today to discuss doing this and I came away thinking it's probably easier to hand it over to an expert rather than play with it myself. While I was there I also checked out some Mavic R-Sys SLR's. These R-Sys wheels are relatively new in the Mavic line-up and sit just above the Kysriums. The main difference seems to be in the bearings, where the R-Sys uses QRM SL (Qualité de and have tighter tolerances for optimised rolling efficiency. I believe the spokes are also different and stiffer . . . the end result is that for a around 400 bucks more you get a stronger, lighter wheel . . . but honestly will I notice? Maybe. It's fun to try though.

Finally we got to see the newly redesigned leaders jersey's for this years Giro d'Italia. Paul Smith of the ubiquitous multi-colured stripes is the man behind the simplification of this years shirts. I think getting rid of the multi-panel effect is a winner, even if I do own pink, red and blue jerseys from 2012. See what you think:


Monday, 14 January 2013

Friday music . . . Monday symphony . . .

As I write this the Shanghai Composite has regained the ground it lost on Friday. Iron Ore you see had fallen about 2% on Friday and if you remember this blog's recent posting regarding the correlation between the iron ore price and the Shanghai Composite (SHCOMP) then this, the biggest fall in the commodity since September 24th had caused a momentary crisis of confidence. No matter now as the market has taken the Chinese inflation numbers as being more important. Confusion continues. If you're already switching out of the yield stocks into the cyclicals than you like the Chinese inflation . . . If you're staying put you probably see a tightening of policy.

On Friday I had headed out on the Cannondale I had been pondering the news of which is more important: The Japanese stimulus package or the earlier than expect Q4 result released by Amex?

I'm not sure what's happening at Amex. The early release of the result spooked some people. Profit fell 47 percent in 4Q to $637m. $400m pre-tax charge on 5,400 layoffs, 8.5% of workforce. If you take away the restructuring expense then the stock beat the analyst f/c by 1.09 v. 1.06 expected. The funny thing to me reading through the release is that it would seem that they probably should have done this earlier as many consumers (including myself) have switched over to electronic statements making a lot of processing etc. redundant. Not important.

I think the Japan Stimulus was important, even though I remain a radical skeptic regarding anything that happens economically in Japan. At the core is a Y10.3trn package that Abe's new government says will lift the country’s GDP by 2% and create 600,000 jobs. Japanese debt is already 220% of GDP and the country has had 5 recessions in 15 years. There is absolutely no empirical proof that this will help. The basic facts are that an ageing society with low birth rate is producing too few new tax payers and far fewer entrepreneurs able to create wealth that will benefit the Japanese nation. Of the 10.3trn roughly a third will go towards rebuilding the Tohoku region and strengthening disaster prevention. The region of course was stagnating before being hit by the tsunami and to me the rebuilding has very little to do with a reasonable investment, but I won't win many friends for saying that so let's not go too deep here. Once the market realises that this package will be nowhere near enough as it lacked the Draghi "whatever it takes" clause the JPY will rally again. It will be at that stage that things may get really interesting. Will the Japanese buy European and US debt in an effort to debase the JPY? Is this 2005-06 again?

I think is probably more like 2004-05, a rally underwritten by monetary policy. For the 2005-06 scenario you'd need a lot of re-leveraging amongst consumers. 

The good news in the banking space in Europe (see last Monday's blog) has hit a small hurdle. Someone at EU central is re-floating the internal paper regarding country responsibility in the case of bank failure. Clearly ever since the ESM got a boost from Draghi the thinking has been that Europe was moving towards a single banking market where in the case of disaster the ESM would step in and assume responsibility, but clearly this is not everyone's plan. The idea is that countries are still responsible for financial institutions, even though they would be regulated from Brussels. The obvious conclusion is some countries (PIIGS anyone?) might now want to increase the insurance burden on banks in order to mitigate possible disaster scenario. In a way this becomes a reversal of what we just saw with the changing of the Basel III targets. What a mess. I think it shows the Germans (and the Dutch, etc.) are not fully on board with team Brussels and as such they are going to look at other ways to avoid another situation where they have to pay for other's mistakes. The canary in the coal mine on this one is Ireland who will run out of funding for their banking system without relief by November. Watch this space.

Highlight ride of the weekend was my 55km beach ride here in Sydney on Sunday. A great morning, even if it was a bit cloudy. The Cannonade was humming and I felt quite good. I didn't set any records, but sometimes you have to give yourself a break from hammering the pedals and sit up and enjoy the view. The only problem with Sydney at the moment is the return of the vacationing families. More mum-buses are back on the road as the school holidays hit their final 2 weeks. The problem is that kids activities are back in vogue as local sports centres (such as tennis clubs) have various camps ready to free up time for harassed parents. So be it. 

I managed to watch the Australian road race championships on Sunday. Luke Durbridge took the title from an early break away. All the time I thought he'd get caught. He must have ridden the last 12km's on his own, which unless your Tom Boonen usually ends in disaster.

Nice ride. 

Thursday, 10 January 2013

A long and fast road to ride . . .

When I mentioned the Kospi Index Futures trading error on Thursday I didn't expect to get the reaction from readers and casual googlers that I expected. It would seem that the merest mistake at the moment is likely to cause speculation about funds or other financial institutions closing down. There's a lot of unemployed pro traders out there happy to leap on things. After reviewing the stats regarding daily readers early this morning I decided to avoid quick conclusions and head out on the Cannondale for my first formal "bunch" ride with the Sydney Cycling Club (SCC).

As I've said on this blog a number of times Sydney roads are not renown for their safety for road bike riders. Most serious riders here are up at dawn and aim to be off the road by 0730hrs. SCC takes safety very seriously. I learnt this pretty quickly when I strayed out of lane on a roundabout in Malabar. I thought the ride captain was a bit over the top given their wasn't a car on the road . . but so be it and I'll be more conscious of it next time. In my defence I have to say that I did join the "steady" group which is supposed to be a little more evenly paced (i.e. slower) than group 1. I think I was probably the oldest and the heaviest guy in the bunch, but honestly the average speed was probably a km or so higher than I'm used to over this distance and I was probably lucky that the course had less than 400m of climbing. I got some support from a couple of lighter guys who were pretty effusive about the pace line we held along Anzac parade where we got into the mid 40's for a couple of km's. Well I guess I now know what is expected and I can ride accordingly. Feel free to check out the full details at my Strava page.

So back to finance. The news that Morgan Stanley was cutting another 1600 jobs, mostly from senior staff in NY put my pre-ride thoughts into perspective. The pressure on former 1%er's is enormous. I think a lot of guys are still very highly geared and if you're senior you probably have some type of family reliant on you for shelter, food and of course education. If 50% of those MS jobs go from the greater NY area they'll be a lot of private schools who'll suddenly have vacancies for the 2013-14 academic year. James Gorman (CEO of MS) basically said that this would happen when he took over and now clearly the board has given him a full hand to play with. Volumes are terrible and with some of the "fatter" margined products no longer palatable the only way to push up the RoE is to cut costs and as we know the major costs of an investment bank are its people.

So my pontificating on the oil price has preceded by one day a price target change in Brent by UBS. It would seem that in taking their Brent forecast to an average $107/bbl for 2013 (up $5 bbl) that they now see fundamentals only easing slightly while plenty of supply-side and geopolitical risks still abound. I haven't read the whole piece, but to me this almost says ".. look we just think anything can happen so we'll put the target around where the spot price now is and hope we're close." Maybe that's a little unfair, but it sure reads like that.

A friend asked me about the JPY. I hate trusting the BoJ, I mean how can you after nearly 20 years of getting it wrong and trying to cover cracks in its not so splendid walls. I'm sure HF world wants to reverse the short trade it has held for so long given the recent move in the currencey. The locals of course are behaving as you might expect buying properties (TSEREIT), banks (TPNBNK). JGB yields have hardly moved so far . . . the battle will be long and I fear the BoJ may get on the wrong side of things as usual.

Back here in Australia retail sales declined for the first time in four months in November.  Sales dropped 0.1% to A$21.5bn from a month earlier, when they were unchanged. The market didn't expect this and I be the RBA will look at this and the Xmas numbers and decided to drop rates again. If they do then the pair to watch will be AUDJPY as both banks will be in losening mode and the FX guys will quickly judge who is the more credible.

Finally one hot topic on the street is the new lows being set in volatility across a variety of indices. The Vix, or as the press all like to call it: the "fear index" . . .  hit a new 5 1/2 year low. The implied central bank put and a sea of cash waiting on the sideline is most of what you need to know. Of course as a pro this =type of signal should have you asking can it continue? What could change the situation? Think about it this way; we have the looming fight in the US over the debt ceiling an event that last year would have seen traders literally running for the exits and buying as much protection as possible suddenly having no negative mathematical effect of the market. There is now a comfortable bullish consensus amongst investors, with bears having given up back in August when Draghi said he's print until it hurts or the Germans invaded the rest of Europe . . .  whichever came first.

By the way, this is the VIX. Notice anything interesting? Do you see the patterns? I reckon you may see seasonal lows in February and then a rise. Watch the space carefully.


Wednesday, 9 January 2013

Everything is relative . . .

Copper down 0.3 per cent to $3.66 a pound, but Brent crude added 68 cents to $112.08 a barrel . . . everything is relative.

I've been an oil bull for over a year now and it really hasn't paid off perfectly. My rationale for liking the black stuff was that the continue debasement of the USD by the Fed would see oil, especially at the long end of the curve assume a "money-like" status similar, yet more useful than gold. As someone who's first economic memories was of the oil-shock and the lines of cars at US and European petrol stations in the early 70's I can remember the effect the dual forces of inflation and supply restriction had on the world. Of course now is different in that supply while tight is not really restricted and inflation remains for the moment dormant. Things have changed a lot on the demand side with the US Energy Information Administration predicting that net imports of liquid fuels, including crude oil and petroleum products, would fall to about 6m barrels per day in 2014, their lowest level since 1987 and only about half their peak levels of more than 12m during 2004-07. Thats an amazing fact when you consider where oil is. Therefore if we assume normal monetary policy can we also assume oil would be much lower? I think so, thus the difference in my mind is what we might call the hard money value of the commodity.

Let's think about oil as though we're still in a pre-money bartering economy; you can run a truck for how long on a bbl of diesel? In that time how many deliveries can you make? Therefore there is a store of value in the fuel. You can always burn it and realise a yield. That of course is not to say you won't lose some  money, but there's always value there. I know there's a lot of problems with this logic, mainly because it relies on demand to make the oil economically useful, but if you're a cyclical bull energy, such as oil may act as an inflationary hedge as well as an economic conduit. Take it one step further . . . traders will often price gold in various currencies in order to reveal hidden value. You can do the same thing with oil. Ask yourself questions like: How many ounces of gold does it take to buy a bbl of Brent? Look at it over the ages and at times similar to now. Draw your own conclusions. Is oil cheap or expensive?

Readers of this blog know how I feel about Japan and the long term effects of their Zero Interest Rate Policy (ZIRP). Well this morning we had the unseemly unravelling of the Ping An Insurance share sale by HSBC.

The Thai group that seemed to have the financing locked up to do the deal turns out to suddenly not be a suitable borrower for China Development Bank (CDB). Let's leave aside the possible nationalistic reasons that the state-owned bank may have had to pass on the deal and consider that Ping An itself may not be a great opportunity without extremely lenient credit conditions for CP Group, the acquirer. The RoE of around 15% looks good compared to many of the banking and insurance plays available around the world, but a debt to equity ratio of over 250% and a dividend stuck below 1% might not be the best use of available debt. Also you want to assume that China is still under insured because the 5 year earnings growth at 14.5% is a little underwhelming for an emerging market. Yes China is still an emerging market. Other than that HSBC now will be forced to mark the block to market and do so at each reporting period. Perhaps volatility will return to the share price and holders of HSBC might be able to resume an over-writing strategy to supplement their yield?

HSBC used to be special until we found out that their compliance procedures were not as air tight as investors once assume. What happens if a companyApple is no longer special? It's not a bank, so a compliance "blow-up" is only likely if we find out that Foxconn has been taking liberties with the workforce. But what we can assume is that a lot of the "special-ness" in Apple equates to sector leading margins. Well it will make you shudder to know the company is working of a commoditized version of the iPhone. A $300 iPhone may sound like good news to the cash strapped consumer, but to me it looks like another step to cannabalizing Apples own product lines. Much like the iPad mini, a iPhone mini has very few virtues that would help Apple re-capture a higher trading multiple. If you liked the Japanese consumer electronics groups who perennially show up at investor meeting hoping to hit net margins of 5% then you'll love Apple as well. The trouble is you are not going to pay 14 - 20x EPS for it. Stay under weight here.

I'm recovering after yesterdays short but exhausting ride in the Sydney heat. The weather has cooled overnight to a cloudy 22 degrees, but my legs still feel a little wobbly.

Lance Armstrong is going to come out of hiding to talk to Oprah Winfrey. There's a lot of theories going around about why he would do this. I tend to believe the guy is pretty smart and that he sees this as the best of what must be some horrible options. Americans and indeed a lot of us love a redemption story. If he can pull this off he wouldn't be the first guy to take himself to the edge of oblivion and return bigger, better and stronger. Who knows . . . I know I'll be watching.


Tuesday, 8 January 2013

It's getting hot here . . . mistakes happen

The Australian heatwave has finally hit Sydney and we're now officially heading over the century mark for the day. As you you can see from my weather app the midday temperature was hitting 37 degrees and the weather people here are looking for it to top out in the low 40's.

I'm heading out on the bike to do some light work near Centennial park and to grab a cooling smoothy. I won't be trying to set any records and I will be taking two water bottles.

Yesterday there was all sorts of shenanigans in Korea and specifically in the Kospi futures. I got some details of what happened via connections in HK. It seems an algo sent an order to buy a 1 lot 100k times. This means that at one stage there was a bid for USD15bn of Kospi futures.

As a result of all this Kospi futures turnover jumped by 30% and open interested went up by 19k contracts. It's likely that when margins are due at 1200hrs Seoul time today that the perpetrator will be forced to unwind . . .  quickly . . . if they haven't already done so. Orderly markets? Maybe?

I haven't mentioned Samsung much since I began this blog. Back in the early 2000's it used to be a favourite of mine as I was able to make a bit of money out of restructuring CB's and issuing various structured products based on the company for my old shop. I guess it's easy with all the iPhone hype to miss the market penetration of Samsung smart phones. Samsung's operating profit hit a record for the fifth straight quarter, rising 88% from a year earlier to about Won8.8tn ($8.27bn), while revenue rose 18% to approximately Won56tn. Analysts reckon the handset business accounted for about two-thirds of earnings in the previous quarter.

This is Samsung Elec v. Apple. Not as spectacular, but interesting nonetheless. The market is very long this stock even after its 46% run last year, so it would be best to sit back, do the numbers and wait for the moment.

I just got back from my ride and I can tell you the average temperature on my short 26km ride was over 41 degrees. That is seriously hot and I can tell you the air that hits you in the face is almost blistering in its effect. For the record here are the stats:


Monday, 7 January 2013

Scream long and hard enough and spoilt children learn they will get what they want . . .

I was just prepping the Pinarello for a lunchtime ride, but while doing so I opened up the FT to see something I've highlighted before as being necessary. It looks as though governments and regulators have rolled over on the Basel III rules and decided that it's in no one's interest to have banks actually secure an adequate capital base in the short term. The hypocrisy and realism this implies would have been totally untenable only last summer when Greece was on the verge of civil disorder, but now as the real state of bank balance sheets comes into focus the once emboldened politicians meekly go to ground and retreat from their "line in the sand" approach to Basel III. Banks will now only have to meet 60 per cent of the Liquidity Coverage Ratio (LCR) requirement in 2015, and not fully by 2019. You can read about the LCR in the BIS press release and annexes thereof, where importantly the type of "liquid" securities allowable has been expanded thus relieving the market of a continuation of de-leveraging in the short term. This is great news for European banks and I would now add to my portfolio Deutsche Bank and even some of the French majors. Happy New Year from the BIS!

There's still plenty of good things that come out of my old shop UBS and this morning I took note of their increased tactical weighting in US equities. It was a very cautious note, but worth reading if you get your hands on it. While we're at it UBS also said that Asian equities now traded on 11.46x Fwd P/E, 1.63x P/B. Now given the valuations we've seen in the region in past years this doesn't seem too stretched and probably goes to the reason we're seeing a rotation into high yield credit names in the region. The bond guys obviously think the yield gap is still too big and in my my mind as long as they're willing to push it then the equities are likely to follow. I don't know what a reasonable P/E is in Asia now that GDP growth rates seem ed to have steadied so much in the former market leaders China and India. Korea probably has the best safest leverage to global growth, but I'd advise caution as the Kospi rally has already been significant. Check your valuations with your own sources.

Having said that it still lags the SP500 significantly. Maybe the real cyclical switch will be out of the US into EM's?

One thing that does worry me is the opacity of debate surrounding the debt ceiling. Apparently the US Treasury has advised Congress that the country hit its $16.4tn debt ceiling on December 31, but the department is now taking “extraordinary measures” giving it extra funds to service US debts probably until late February. What extraordinary measures are these? Surely the department needs to list this out for the public to see. You can't keep playing with people like this . . . if you do you only give credence to the Tea Party and other libertarian groups.

The Australian summer heat wave is about to hit Sydney and the extra water bottles are filled and in the refrigerator ready for my rides. I decided to celebrate the real summer by getting out the Pinarello. Luckily i had recently cleaned the bike up and since then it's been hung from my new ceiling storage pulley system. When you haven't ridden for a while I suggest if can that you put the bike in a service stand and test the gears and brakes. As I ride the Pinerello on a full Campy Bora One wheel set I like to take off the wheels and wipe the braking surface with a clean cloth. A few guys have suggested wiping the brakes and wheels with a little rubbing alcohol as the liquid is a good cleaner and it evaporates away so as you're not surprised by brake failure. The Bora's are of course mounted with tubular tyres. Tubulars are magical. A tubular tyre can be safely ridden at 130psi or more. The ride this gives is fantastic, not so much in terms of comfort, but rather in terms of rolling resistance. Compared to the Mavic Cosmic Carbones that I have on the Cannondale the Boras have this amazing ability to roll away the effort in climbing the numerous short hills of Sydney.

If you do decide to try tubulars you'll need to get some form of back-up. I carry a canister or two (depending on the distance from home base) of Vittoria Pit Stop tyre sealant. Luckily I've never had to use this, but I have used a similar product on a car my father owned.

The most important point in the video is spinning the tyre after adding the sealant. This allows the latex to coat the inside of the entire tyre. Obviously if you don't do that the latex will settle on one side of the tyre and probably fail to seal the puncture. The idea then is to use a CO2 cartridge to top up the tyre to the desired pressure. You need to be careful topping-up because too much will leave you walking home.


Sunday, 6 January 2013

Happy New Year! Time for growth . . . unless the the politics gets in the way

Happy New Year to all readers. I obviously decided to take a break over the holidays, but I'm back ready to talk financial markets and cycling.

Lots of the mails I received over the Xmas / New Year break asked me about what might happen to equities in the case of a political bar fight that goes too far. My first thoughts have always been that as long as Bernanke remains committed then the politics will matter less than the printing of money. Time and again we've seen Washington seemingly paralysed in the the face of the bleeding obvious. As long as the GOP is worried more about the Tea Party fringe than actually governing we will be reliant on monetary policy to run the show. Unless the Fed suddenly discovered a new hawkish tone it's unlikely to stop the presses until the unemployment number falls in such a way as it forces their hand.

Now that tech stocks, primarily via Apple are starting to price in a pause in their growth the market has moved on to the cyclicals. Early indicators, such as the iron ore price have rallied strongly in the last weeks of Q4. One of the best charts I received was this one showing the correlation of iron ore and the Shanghai Composite:

The land auctions in the major Chinese cities have picked up and the leadership of China will soon be faced with yet another inflationary challenge. Of course that challenge is similar to the one faced by many of the Asia Pacific economies which remain in a somewhat two speed mode. Here's an example, Singapore:

For the last couple of months Singapore has seen contracting PMI, but the equity market there has chosen to go with the money flow and continue to rally. The market is clearly using data from the US and China, rather than the internal data. On Friday Chinese PMI showed signs of continuing to rally. China’s services PMI for the December was 56.1 compared to 55.6 in November. This could be dangerous for investors in those countries as the expectations are very high that the combination of lose monetary policy in the US and stimulus in China will eventually lift up their manufacturing industries to comply with stock prices.

The situation now remains somewhat cloudy, especially with the possible effects of the debt ceiling negotiations in the US at the end of Q1. One thing I'm surprised with, especially given the rally in key commodity prices in the AUD. I would have thought that a rally should have ensued, but the currencey remains mired in the 104 - 105 range. Clearly their is a feeling that the interest rate policy of the RBA remains in lowering mode, while US / China growth implies the bottom of the market for rates there. Here's the AUD:

If the FX traders have this right the bond markets in the US are extremely dangerous. Why hold bonds if you see rates going up? Lot's to think about then.

I managed to get on the bike a bit over the break. Yesterday I did a peloton skills morning with my club: SCC. It's worthwhile getting involved in something like this as you generally up your own output and learn a few things along the way. SCC is doing a trip to the Australian Alps in February and if I have the time I think I'll take the Cannondale down for some climbing. I also have committed to a century ride in Northern NSW in August. I'll be going up with a couple of newbies and I hope that by setting this goal early in the calendar year I'll be encouraging them to get bike fit sooner, rather than later. Here's the target ride:

If you'd like to join our team just drop me a line. If we get numbers we might even get our own team shirts.