E Boxing Day

Our Canada contributor Martin Ferera wrote last night from Britain where he too is catching up with family:

“As most of your readership are probably eating latkes or turkey, economists/forecasters should probably be eating humble pie or at least nothing more than cold turkey. How many of them will in all honesty look back over the year 2016 and admit their errors?

“As Roger Bootle put it in the Telegraph earlier this week: 'In truth, at the end of this year, economics and economists have much to be embarrassed about. Coming so soon after the largely unforeseen financial crisis of 2007-9, 2016 should surely be remembered as the year when economic forecasting finally lost any claim to being regarded as a scientific pursuit.'”

Doom-laden economic prophecies about the result of Brexit and Trump's triumph have yet to come true or even close—although to be frank we are not yet home clear.

This year in Britain we are near to having 12 days of Christmas. Like many other countries, the UK added Monday as a holiday to make up for Christmas falling on Sunday, already a day off. The trouble is that Britain traditionally celebrate the day after Christmas as Boxing Day, another holiday when it is said apocryphally that the Christmas presents are put back into their boxes for the following year or for re-gifting. So Britain also had a holiday on Tuesday. Then, in preparation for the New Year holiday next Sunday, markets will only be open for a half day on Friday. That leaves a week of only 2 ½ days and a 4 day weekend followed by a 3-day one which will also be 4-days long in Scotland.

I have written about the amazing sight of swans on the Thames outside our windows, but haven't yet reached my target of 7 swans a'swimming. And worse yet, a report from Greece says that they found a swan infected with Bird Flu, so maybe I never will.

Next Monday, France will raise its financial transaction (or Tobin) tax to 3% from 2% before, which apparently can be done without any input from the National Assembly or Senate. The tax is a main reason why UK bankers needing to become accredited within the European Union after Britain leaves will not take the easy and pleasant option of moving across the Channel to Paris.

More from the UK, Israel, Grecce, Egypt, Russia, Uzbekistan, Azerbaijan, Finland, Germany, Italy, Sweden, Canada, Norway, Spain, The Netherlands, Hong Kong, India, Turkey, Japan, Argentina,The Bahamas, and the USA. And we have a new stock pick which you cannot buy until tomorrow as it is British!

Fund-amentals

*I am beginning today's blog with an exposé a reader sent me via Spain from the New York Times, about the crooked way that profits are shared at Pershing Square Holdings (PSHZF), the Bill Ackman-run closed-end fund which copies the moves of his older hedge fund for institutions and fatcats. We have owned PSHZF for about 3 years but have sold half because its performance has disappointed. I had hoped to learn something from Ackman's picks which proved bad. The payout was further nipped by the way the Ackman team was paid for alleged “performance” with a seemingly lowball management fee of 1.5% and 16% of annual profits, vs an industry standard of 2% and 20%. But the devil is in the details, helping me find a fairer fund for 2017, also UK listed, discussed below.

According to the NYT, in the year to end-Nov., PSHZF had lost 13.5% in Net Asset Value (NAV) vs a gain of 7.6% against its benchmark, the S&P 500. Over the 4 years since it was launched, it has gained 20.5%, which sounds better except when compared to the index which was up 67%.

Now here is the rub. The main reason for my selling is those fees, which wind up taking all but 5.7% of the 4-year gain away, because the performance is calculated annually, with no penalty in years where there was a loss, and without a “high water mark” which requires that funds regain losses before taking performance fees again. The newspaper estimates that the fund managers kept about 72% of all the gains over 4 years, mostly to pay staff and Mr. Ackman. In fact, despite the name, the fund was not hedged against losses—they were paid by by investors in PSHZF.

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