Wednesday, 18 December 2013

Xmas review . . . . Shoes

As we head into the holiday break I thought I'd review my new cycling shoes, the 2014 Sidi Wire "Iride" edition. I bought mine from Italian online specialist All4Cycling in Italy. They cost €261.48 including postage and I paid no taxes in Italy or Australia due to the fact that the government here does not collect VAT/GST for items under AUD1,000 unless you're running a business.

First Impressions:

The shoes come with a storage bag and allen key for adjusting the toe and heel pieces. The shoes themselves are about 50g's lighter than the outgoing Ergo 3 model even though they seem to be almost entirely constructed of patent leather as opposed to the leather / nylon mesh mix of the ergo 3's.

Aside from the no nylon mesh the other noticeable feature is the way Sidi dispensed with the forefoot velcro strap and the ratchet type instep strap in favour of twin Tecno 3 twist type ratchet dials. The soles are the same and have the usual functionality in that the toe and heel bumpers are replaceable. Additionally the toe bumper has a mini vent that can be opened for extra ventilation where and when required, though be warned this requires a phillips head screw driver . . . not something you want to be doing on the side of the road with a multi-tool in my view.

Sidi has continued with their adjustable heel piece that allows you to tighten the shoes heel enclosure to help with lifting. I've played with this enclosure on both my previous pairs of Sidi shoes, but never really felt any great benefit or hinderance from the piece. Given everyone's feet are different I guess it's better to have the adjustability than not have it.

The shoe tongue has a wire mesh panel allowing greater ventilation to the upper foot. You can see it in the below photo criss-crossed  by the wire enclosure straps.

I have to wonder how this might go in the rain, so if you know it's going to be wet I suggest you might want to put some overshoes in your back pocket just in case.

The shoes come with the usual Sidi cleat adhesive which has one side that seems to be some type of very fine sand paper. These are supposed to be affixed to your cleat to prevent movement between the sole and the cleat. I never use them. I ride Look Keo cleats and have never had a problem with them while wearing Sidi shoes. I use a torque wrench and adjust the cleat screws to 4.5NM which is mid point in the recommended range detailed in the very comprehensive cleat guide booklet.

The Fit:

I got my shoes in a size 45.5 and if you already had the previous Ergo3's or even the 2's I saw and felt no noticeable change in the shape or length of the shoe. Buy with confidence in your current Sidi size. I have a wide foot, but I didn't buy the specifically wide version which is available in some geographies.

At first look I was somewhat intimidated by the all-leather look of the Wires. I just felt that they might not give easily to the shape of my foot as standard running shoe nylon mesh is want to do. I put some heavy cedar shoe trees in them overnight hoping they would stretch out a bit before riding in them.

I slipped into them at 5:30am the following morning looking to do a hilly ride along Sydney's eastern beaches. Normally when I wear new running or cycling shoes I pick a slightly thicker pair of socks, but given that the ambient temperature in the dawn light was already 21ÂșC I went with the very thin Rapha Pro Team Socks giving me little room for error.

I like the ratchet type instep strap on the Ergo 3's and 2's because you're able to tighten or loosen the enclosure while on the move without putting yourself at too much risk. As a skier I like to start with tight boots and slacken or tighten dependent on conditions or aggression I'm skiing with. I do the same with cycling shoes and often on a long ride I like to loosen things off a bit to allow some extra circulation. The micro adjustment available on the wires through the dial system's side triggers does not in my view allow precise and safe on the go adjustment. Having said that I slipped into the shoes without any great problems and immediately got to some comfortable settings without too much trouble.

Hopping on the bike I had no problems with engagement and felt no immediate rubbing as I headed up  my street to the first descend of the morning.


The course I chose maybe only 30km in length, but it encompasses about 500m of climbing on suburban streets:

There are lots of short sharp climbs requiring the rider to constantly change position and rhythm on the bike. The shoes felt cosseting without being tight and I was surprised I didn't have to get off the bike and adjust any of my settings during the ride. For most of the ride I even forgot that I was wearing new shoes and only gave them a second thought when I happened to look down at the the road during a flat sprint.

At the end of the course I usually get breakfast at my local cafe. Cooling down I didn't feel the need to open the enclosures for comfort, so all good.

After the ride I purposely examined my feet for any signs of specific chaffing or pinching and could detect none. The thin socks new shoe combo worked. Obviously the fact that I had no sizing issues helped a lot, but the multi-faceted adjustable nature of the shoes gives even the fussiest wearer the scope to get comfortable.


My previous leather and mesh combo Sidis always gave me cleaning problems. The mesh always picked up oil and road dust and no matter what I tried I couldn't get them completely clean. I should mention I throw my running shoes in the washing machine every now and then. This always works for me. I never tried it with cycling shoes, more out of fears for the health of my front loader washing machine, than for the shoes themselves.

As the shoes are a synthetic patent leather I like to use a latex and rubber cleaner that was recommended to me by a Swiss friend when I lived in Geneva. A quick wipe and then a spray and wipe with the cleaner keeps the upper moist and removes any remaining dirt.


With only 2 rides and 60km's under my feet it's hard to be too emphatic, but my feeling is that these are likely to be as good as anything on the market. There are 5 standard colours and Sidi issues various team or special editions periodically. The normal retail price for these in Australia is about $500, but I suggest if you are confident of sizing, shop around. Lastly a warning for those with 1/2 size sensitive feet. I know in Australia and the UK it can be difficult to find the half sizes above size 45; they're like gold . . . buy them if you can because they don't seem to last.

Highly recommended.


Monday, 16 December 2013

Looking back: 1

We all have goals when we start a new year. For this blog it was a goal to try and remain a consistent and relevant part of investment discussions focusing on the macro economic environment. The trouble with that is that the evidence as to the success or failure remains somewhat anecdotal. I'm always pleased to get feedback, but always confounded as to what people see as good and bad in the blog. Luckily I can always rely on the metrics of my cycling to be blunt and to the point.

This year I had started with a goal to try and ride 10,000km. I failed. That doesn't mean I'm disappointed after completing my first full year back in Sydney, as I really haven't ridden in such an aggressive urban environment seriously in my entire life. 

Just over 9,000kms so far is good result given I live in the most densely populated area of the biggest city in Australia. One of my colleagues in Geneva once said to me when I upgraded to the Pinarello that you shouldn't spend more in CHF's on a bike than kilometres you do a year. Well I think that rule of thumb just about works. It seems to me that once you ride around 5000kms you can put yourself in the upper enthusiast category and get something nice. People who see my bikes as a folly of sorts usually are the same people that can contemplate buying a car for $200k and drive it less than 10,000kms in a year, but see me as wasting money on $10k bike that I used to cover 9,000kms in that same period. The insanity of that proposition beggars belief. Don't even get me started on golf club memberships that get used a couple of times a year . . . but I digress. 

This year I've been hit twice on my bike and survived both times with a few bruises. I've been yelled at, abused, buzzed by angry tradesmen and taxi drivers. I've been spat at, ignored and chased. I've argued with drivers of both sexes. all ages and been lectured to by people who you would normally think are very sensible liberal types, but who just can't stand you being on the road. The worst of these was one person who put forwarded the following arguments as to why you shouldn't cycle in Sydney:
  1. Bicycles scare me because I could hit one
  2. It's too hilly
  3. You don't have registration to be on a road
  4. Bikes slow me down on the way to the shops / school drop off
That same person probably is long debt to the eyeballs sand sees that 2008 financial crisis as something that happened in Europe and the US. You see because Australia got through the crisis with unemployment barely above 6% those type of people haven't had to rethink their lives, never mind their attitude to the boom in cycling in this city. 

World stock markets are back at all time highs thanks to ultra-cheap money supply. It's hard to value risk when the hurdle rate for capital is so low. Take for example an insurance business sold by Australian conglomerate Westfarmers yesterday to fellow Aussie IAG. The business had an internal rate of return of 6.6% on average over the last five years. When I was reading the details at my local cafe this morning after riding the beaches of eastern Sydney my first thought honestly was; that's not too bad. My second thought was: "What am I thinking." This is an insurance underwriting business . . . shit happens! We just saw the biggest insurance business in Australia QBE have to writedown  businesses because of a $US300m increase in prior accident year claims provisions, centred on long tail classes of business such as workers' compensation, general liability and construction defects risks." That saw them revise expectations from a profit of $700m+ to a loss for the year of $250m. On the day the stock was down 20%. My cappuccino was barely finished before I contemplated writing a well done letter to Westfarmers CEO Richard Goyder for getting $1.85bn for this 6.6% IRR business. The best part of the story though was Goyder saying the transaction represented a "win-win" for both his company and IAG . . . . LOL! I never want to play poker with Richard Goyder . . . LOL!

Following on from yesterdays blog and my rosy view of the US "real economy" we had confirmation of industrial activity. November US industrial production rose 1.1% beating expectations for 0.6%. That readers is the highest pace for the year and a repeat in December January confirms a tapering by the end of Q1 in this blogs opinion.


It's getting a bit more interesting . . .

China seems to bump along at just a strong enough pace to keep the world's economies ticking over. The problem remains that much of the activity generated in China is being fuelled by local government debt, shadow banking and trade finance. If President Xi Jinping and his government want to tackle this unofficial bubble they'll risk GDP growth slipping below 7%. Currently the official forecast is for 7.5%, but that looks already to have gone by the wayside judging from the softening up of media sources.

As usual the canary in the coal mine for China is iron ore. Below is iron ore inventory at port. Now partly there is be a bit of end of year restocking, but there's also some one offs including the shutdown for pollution related problems of some big steel producers.

And then here's whats happening in the six month forward market for rebar . . .  the construction end of the iron ore chain. 

Finally here's iron ore itself. Again you can see the forward v. the spot price opening up. 

Investors need to watch this . . . This blog has been bearish on Chinese GDP for 2 years and admittedly has been surprised by commodity prices during that period. With the big five miners backing off new projects and tightening their belts it seems that the fall in spot iron ore might be more of a slow grind than a crash, especially if you think the US is picking up some slack. Which brings me to . . .

This week we get two important meetings in the world of central banking. The first and most important is the Fed's, which should not see an immediate policy shift, but might lay the verbal ground for a January move to taper. This blog continues to believe tapering comes in March and should see a modest roll-back of the $85bn a month in asset purchases to (say $60bn). Therefore I remain a Dollar bull and am becoming bearish US financials due to valuation. The real economy needs to take over if the US wants to get into a sustainable job building GDP cycle of around 3%.

The other central bank meeting this week is Japan. The thing that interests me here are the possibilities for policy failure. Readers of this blog know that I am a long time Japan sceptic and continue to believe in the maxim that if anything can go wrong for Japan it will. Therefore I was interested to hear other people picking up on this line this morning while tracking back through various podcasts I missed on Bloomberg from last week. Vincent Chaigneau is the head of fixed-income and foreign-exchange strategy at Societe Generale SA in Paris and he reminded me of the recent weakness in the Japanese current account over the past two months.

Japan Current Account
M. Chaigneau sees these two months as somewhat of a blip, but rightly points out that any longer term trend could severely hamper Abe-nomics given that its strength lies in its ability to fund from internal savings. The alternative for Japan would be to become an international debtor reliant on foreign funding, a position that would be perilous. I suggest investors watch the Japanese current account both in relation to their short JPY positions and long equity positions, because if history has taught us nothing else since the collapse of the Japanese real estate bull market it is that Japan has a propensity to snatch defeat from the jaws of victory on a regular basis. The latest numbers will be out this week.

Meanwhile in Australia RBA Governor Glenn Stevens continued to jawbone the AUD down towards 85cents. This blog has been somewhat volatile when it comes to Stevens, but last week when General Motors decided to cease manufacturing cars in Australia and Qantas went cap in hand to the Government in Canberra asking for help it become apparent that the long time RBA insistence on frightening the housing market first and a helping the receding manufacturing sector second seemed to come home to roost. The budget deficit looks likely to blow-out further since the last set of national accounts and therefore in all likelihood the economy will need stimulation from a more creative RBA. It's hard to believe that the RBA, as I've alluded to previously hasn't used the dollar more aggressively. Too little too late looks likely to become the title for Glenn Stevens biography in this blog's point of view.

There's been a lot to ponder on my bike in the last two weeks. Having said that readers should know that since my last published blog I've become a bit gun shy in Sydney traffic. Lately I've had a number of close calls, the most recent being a tangle with the L94 Bus from the city to La Perouse:

I'd like to report an unsafe bus driver. Today at 1240hrs I was proceeding along Anzac Parade near Gubbuteh Rd on my way towards La Perouse on my bicycle when I was approached by the L94  bus (Plate 1381). The bus stopped at the nearby stop and I went around it. The bus, after obviously dropping off passengers then proceeded in the right hand lane to approach along side me and tooted his horn. I was in the left hand lane. For what reason I have no idea. As we approached the roundabout at Pine Avenue I held my line and in fact increased my pace as I saw a bus stop 10m ahead on my left so as to clear the stop for the bus. The bus decided to approach closely to me again as we passed the bus stop while I was in the now clearly marked bike lane. He pulled alongside me revved his engine and cut in front of me stopping at Jennifer St and Anzac Parade. I'm not even sure that there was a bus stop there. I rode ahead again and maintained my pace (approximately 35kph) 
and line on the left hand side of the single lane only to have the bus again come from behind me and this time he approached within a meter of my righthand side at approximately 60kph and purposely revved his engine. As we approached the junction of Bunnerong Rd and Anzac Parade for a left turn towards the LaPerouse bus interchange the driver purposely drove into the cycle lane on the left side of the lane in a threatening manner. I approached the driver at the interchange to ask what his problem was but was immediately yelled at. I obviously let the driver know (loudly matching his colourful language) that his actions were at the very least threatening and at worst dangerous. I am at a complete loss as to what this drivers problem was given it was a clear day with no traffic on the road except for himself and a few bike riders. This man is a menace to his passengers and other road users.

I actually got a reply to this from the government owned bus company promising to review the in-bus tape of the incident. Now I don't actually expect anything to come from it mainly because the transport workers union is just too powerful to let any form of disciplinary action be directed at one of its members. I mean in their mind it would be the thin end of the wedge.

Finally I might mention that I managed to change the bar tape on my bike by myself. That doesn't sound like much until you mention it to other cyclists who seemed to be amazed by the feat - at least my friends. The job I did isn't perfect, but it's passable.

The one thing I haven't decided on is whether I was right to wrap the tape clockwise on the right and anti-clockwise on the left or the reverse. If you google the subject and look up some of the guides on Youtube it seems like opinion is mixed. Also I decided that the thick 2.5mm Lizard Skin tape is probably not ideal for a beginner. I suggest that if you're attempting this bit of maintenance for the first time that you try a stretchy style tape from 3T as per this video:

I'd swap, but the Cannondale needs green tape and 3T don't make it . . . such are the perils of cycling fashion.

Tuesday, 3 December 2013

Thank God (if there is one) for Margret Thatcher . . . What we can learn from the UK . . . and I need a job . . .

Since Friday we've had the usual data dump of PMI levels for the market to consider. The one that really stood out for me was the UK. Manufacturing growth there hit its highest point in almost three years, in part helped by a high pace of job growth. The UK PMI beat expectations by coming in at 58.4 in November up from 56 in October.

The all suggests to this blogger that my previous view to invest in the UK was sound advice and remains so, I only wish that the people I spoke to about the Commerzbank UK property portfolio that went under the hammer a few months ago actually bought in at that stage.

A real live "no-brainer"
Such is the life of those of us acting as consultants. That's why I'm looking more seriously at getting a "real" job. You see without the institutional card I'm reliant on people trusting me more than I can expect given the years I've lived outside of Australia.

The reasons the UK has rebounded so strongly are:

  1. Flexible labour market
  2. Government commitment to disciplined action on public sector finances
  3. BoE QE 
  4. BoE/Treasury Funding for Lending Scheme

This last facility is very interesting in that it offers banks cheap financing partly linked to lending to the real economy. Since it started in summer 2012, 33 banking groups have secured £23.1bn in cheap funding and seen a rise in net lending of £3.6bn. It's a fascinating facility because as recently as last week when the BoE/Treasury got worried that too much of the facility was being drawn on to finance property they chose to take action to cease its availability to mortgage linked transactions. Once again this shows the key advantage of the UK: flexibility. The rest of Europe struggles with this and therefore the UK is first out of the economic hole. The ability to react to changing market conditions without tightening the money supply into the economy is something other economies could adopt as they grapple with exit from stimulatory policies.

Meanwhile for those of us currently living in the Asia Pacific region China also managed to struggle into positive territory in its PMI. There are two indices for Chinese PMI, firstly the HSBC/Markit that came in at 50.8 for November, overshooting economists’ forecasts of 50.4. Secondly the official government survey showing a higher-than-forecast reading of 51.4 for November. This kind of good news would usually help Australia as we continue to ride on China's coat tails. I wonder what RBA Governor Stevens would think of adding the type of facility the UK has to its' arsenal of tools so as to enable the RBA to pump money where it's most needed. This blog has for over a year called for a lower Australian dollar to be at the heart of the RBA's policy, but I'm starting to see the limits of the current structures to deliver this without causing a housing bubble. Therefore if I was parachuted into the halls of power I'd suggest the following:

a) The RBA should adopt the NZ type restrictions on banks mortgage books:

God defend New Zealand . . . 

b) The Government, together with the RBA should copy the UK's Funding for Lending Scheme

What the government should not do is start trying to pick winners. Currently the Australian Treasurer is being asked to save GM's (Holden) Australian operations via a direct AUD600m injection and incredibly, to this blog at least provide Qantas with a government guarantee so they can raise debt at or near the same levels as the country itself. This blog says that the available money should go through institutions who are better placed to take the risk and assess the chances of success. Qantas can have some cheap funding . . . but it's going to come through one or more of the banks and they better be prepared to justify what they do with it.

Investors need to watch closely the continued "work-out" of debts by various entities, institutions and companies. UBS is to buy back around SFr2.15bn ($2.4bn) of its own debt in an effort to cut its borrowing costs and shrink its balance sheet. They will go to the SNB and make a cash offer for five subordinated bonds, denominated in Swiss francs, euros and pounds, and six senior unsecured bonds, denominated in Swiss francs, euros, pounds and Italian lira. My point here is not that UBS is looking better placed in terms of balance sheet, but rather the people of Switzerland via the SNB have kept control of their own balance sheet by not allowing UBS to dictate terms to them. 

This blog believes for example that the Spanish are about to start making headway against their own problems, as the Irish have also done. The "bad" proper bank "Sareb" said in March that it was aiming to sell almost 42,500 housing units, about half of its current portfolio, within the next five years.  They started the process in August when they sold 51 per cent of a portfolio including 939 homes to HIG, in a deal valuing the assets at €100m. Investors need to focus on these tranches as they come to the market.

I'm starting to get excited about getting off the bike and getting on the snow. I didn't ski last year, but thanks to a large bank of air miles I'll be jetting off to Europe to have a few meetings with old friends and business acquaintances in Switzerland on my way to my favourite ski resorts. I had wanted to hold off to May so I could pack up the Cannondale and ride some races in northern Italy. 

One particular ride caught my eye this week: Colnago Cycling Festival, Lago di Garda, 2-4 May, 2014. It looks like a great event. Here's some highlights from the last event this team put together . . . 

Maybe someone will ask me to go and have a look at some Italian property . . . I promise to get a good look at the countryside.