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Trading and investing

Let’s Compare Bets gateway to trading and investing information. Learn how to trade sports bets and financial markets, or invest in financial markets and antepost betting markets. This section of Let’s Compare Bets is a sub section of our main website, Let’s Compare Bets.  Let’s face it, many things in life are a gamble, trading and investing are quite similar.  The outcome is unknown, but, Let’s Compare Bets aims to educate and provide visitors with the information needed to get closer to trading and investing goals.  Remember to bookmark Let’s Compare Bets or add us to favourites (ctrl D) so that you can find us again.

Trading

Trading what? Lot’s of things can be traded from, goats… if you are in the mountains of the middle east to financial assets.  Stocks, shares and commodities can be traded by normal people or people on the trading floor working in a high stress trading environment.  After the invention of the betting exchange even betting odds can be traded.  One in ten people trading online make massive profits.  Slightly more make small returns and the rest loss money.   This section investigates the types of trading and methods to make the path to successful trading easier whether it’s bet trading or financial trading. Better yet, join Let’s Compare Bets and get a free Betfair training document to get started on Betfair. Look right!

Investing

Investing is more long term than trading and favours a slower but more relaxed route to financial independence.  Investing  is more capital intensive but can be more rewarding in the long run.  Get investing help from someone making investing decisions right now. This section investigates investing techniques, publishes stock tips and has our very own portfolio.

Use the search box or the category list to search this section. Use the subscribe buttons to the top right to get the latest posts on Bet trading, financial trading, and financial investing.

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When will interest rates go up?

bank of england base rateInterest rates are the main tool of central bank monetary policy. Whether interest rates are increasing or decreasing affects many aspects of our lives.  What does the future hold for central bank interest rates?  For lay people it’s any ones guess.  For people who don’t want to rely what they are told in newspapers and financial media this post is for you.  Let’s Compare Bets.com loves uncertainty because ‘ Life’s a Gamble ‘, so let’s have a look on where we think interest rates are going.

Why is this important?

Governments, private individuals, private companies, institutions around the world have all come to rely on debt.  Europe (including the United Kingdom), USA, Japan, and China all fall into this category.  That fact is not necessarily a bad thing as these countries are all in the same boat relatively speaking, but, some of the numbers are still staggering.  Since the financial crisis global debt has gone up by nearly $40 trillion dollars, and rising.  That’s the number forty followed by twelve zeros.

Interest rates affect interest received from bank accounts, mortgage payments and hence house prices, commercial loans payments, how much lenders are able to lend, and the income that pensioners get.  In the UK and USA interest rates are at historic lows.

UK finances rely on the kindness of strangers to keep the wheels on the economy.  Foreign central banks, institutions, companies and private individuals invest in the UK because it is a good place to do business and they get a return on their capital.  This inflow of money plugs the UK Government’s current account deficit.  Interest rates play a central role in ensuring the UK government can keep foreign investors happy.

If something happens that makes a central bank rate rise necessary there would be negative consequences for certain types of asset.  Most notably property prices.  Property is the UK’s favourite asset.  Value of the housing stock drives large swathes of the economy, so, anything that effects it is worth watching. Owning a second property, is an implicit bet on house prices and interest rates to some extent.

A perfect storm for seriously bad implications for the UK economy would be something that forces the Bank of England to increase interest rates without their being a corresponding pick up in economic activity.  Rising interest rates are no problem for business when they have pricing power and can increase prices.  Increasing prices is difficult if peoples wages are not rising.  UK wages are not increasing enough to cause underlying inflation required for rates to rise.  So any rate rise would just make debt more expensive and leave everyone with less disposable income (or less net profit for companies).  More importantly it gives the Government a big head ache over how they will service their IOUs (gilts).   What could cause this to happen?  If the UK leaves the EU the value of pound sterling would likely drop (like it did after the UK left the European Exchange Rate mechanism in 1992).  A sudden drop in the currency could force the Bank of England to raise rates in order to protect it’s value to keep holders of Government IOUs happy.

Are we asking the wrong question?

Instead it could read will interest rates ever go up?  Economic dead lock may result if Governments are forced to do something called Helicopter Money.  Name by Milton Friedman’s metaphor of dropping dollar bills from helicopters for people to spend.  Japan is country expected to try this technique.

In reality it means Governments and central banks adding zero’s to their capital investment accounts with no intention of it being paid back to anyone.  Permanently increasing money in the system.  Which is basically what has already been happening for years.  The difference is that gilt maturities have just pushed back farther and farther, thus giving the illusion that it will be repaid.

Helicopter money is when money is created to directly finance public spending for things like infrastructure with no intention of paying it back.  High speed rail, schools, hospitals, motorways or nuclear power stations.

Low interest rates are a massive part of central bank policy around the world to keep debt under control.  Low rates are needed to help create the inflation required to erode the value of the debt as it is not possible to pay it back.

UK interest rates may not rise to normal levels for a generation.  Not going above 2% for some time.  It’s unlikely that rates will rise at all until Banks in the UK and Europe are fixed.   Experts believe that UK Banks will not have repaired their balance sheets until 2019 at which time they will be more willing to lend to business (which seems strange considering all the debt already out there).  However, lending to business should promote capital expenditure for expansion and new projects, as well as replacing assets.  This should help increase wage inflation.

European banks on the other hand only started realising the losses they hide in (or off) their balance sheets in 2014 / 2105 which is when the European Central Bank started quantitative easing.

The consequences of low interest rates include;

  • asset price bubbles in property and bond markets
  • the phenomenon of companies, especially in the USA, of borrowing to buy back their own shares to ensure their earnings per share go up. This help prop up stock market valuations.
  • reducing the incentives for people to save making the situation self full filling

Where would an informed investor consider putting money to get a good return now, taking into account the situation with interest rates?

For a bit of fun readers might want to check out our featured review. Fast, fun, and easy money my friends. Go to the review.

Infrastructure is a good theme because it should benefit directly from central back policy.  HICL Infrastructure Company Limited is a long term investor in infrastructure projects in education, health and transport. It is an investment trust and can be bought through a stock broker.  There is a good dividend history and momentum in the stock price.

Costain is an engineering solutions provider to the energy,water and transport sectors.  Among other things Costain is involved in the Government’s £15 billion road improvement strategy with funding secured for the next five years, and is a joint venture partner for delivering ‘smart motorways’.  Morgan Sindall is another company in a similar field more involved in construction, like social housing.

For how to deal with the coming interest rate and economic environment just follow the helicopters.  Life’s not so much of a gamble after all.

 

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Sprue Aegis profit go up in smoke, a gamble worth taking?

Time for another post in our investing series.  When choosing which company shares to invest in we use techniques similar to those used to select matches to trade on Betfair (the betting exchange).  Not all investments will be successful but by doing a bit of research we can select which are more likely to be successful.

Sprue Aegis is one of Britain’s largest manufacturers of smoke alarms and carbon monoxide detectors.  Tesco and B&Q are two retailers who sell Sprue Aegis’ product.

No doubt if you have a smoke alarm which most households will you will remember the annoying chirping sound they make when the battery is low.  Due to a fault with the battery there are now many families around the country annoyed by a constantly chirping smoke alarms when the battery is not flat.  Warranty claims are likely to wipe out a large proportion of the firms profits this year.  These products have a lifetime warranty which may further exacerbate the problem.

So the firms has got problem, so where is the investment opportunity?

Due to the falling profit expectations of the firm the share price has been wacked, halving in the last month.  That is a big decrease and seems over done.  Crowds can often be irrational with sentiment swinging from one extreme to another which is how stock markets seem to work.

Why do we like Sprue Aegis shares?

First lets deal with their problems.  The cost of honouring the warranty will be amortised over the next six years and should be £5.5M.  In the latest trading update it was marked as being exceptional, which generally means a one off event (exceptional in other words).

Other potential negative points are that one of the firms largest suppliers, BRK Brands, is also one of the company’s largest shareholders.  Whether or not BRK brands is involved has not been revealed.

Now for some of the positives.

  • Markets for home safety products is a strong market, which regulations are sympathetic too.  Private landlords have to ensure properties have smoke alarms and carbon monoxide detectors.  Local Authorities insist that safety products are fitted when carrying out a loft or attic conversion.
  • Properties with a wood burning stove are also required to have a carbon monoxide alarm.
  • UK Fire & Rescue Services use their products as a preferred supplier.
  • Revenue has grown each year for more than a decade, up 35% to 2015.
  • The company has no debt and a strong balance sheet with £22m in cash.
  • The dividend has not been cut and it is now at an attractive level.

Sprue Aegis is a small company having just £88M of revenue in 2015.  Small companies often have a volatile share price, shown by recent events, especially when something has not gone to plan.  Now the the share price has come down to earth now could be a good time to buy some shares.

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Deep learning got interesting… Watson and AlphaGo are coming for your job

Deep learning has been around for decades but it just got interesting. Investors could be at a watershed moment for productivity. There could be far reaching implications for economies and society as a whole. Imagine swathes of low paid labour and professional labour being replaced by machines. How will governments deal with this? A living wage might solve the problem. The results could be quite deflationary in monetary terms.

Known by various names such as machine learning and artificial intelligence (AI). Google and IBM have been deep learning for some time. Arthur Samuel programmed a computer to play checkers better than he could in 1959. How can he teach the machine to play better than he knew how to do? What he did was teach it how to learn. By running through millions of iterations of game tactics it was able to play better than it’s inventor.

Fast forward to 1996 Deep Blue beat Garry Kasparov (the Russian chess genius) at a game of chess under competition conditions. Chess has a huge number of possible moves to enable the player to win. Capturing the imagination of the public at the time because a computer beat a human, and, Kasparov wasn’t happy about it.

It’s no coincidence that the Tony Stark’s computer in Iron Man is called Wilson bearing resembling in name IBM’s latest super computer Watson. IBM’s Deep Blue evolved into Watson who’s feat extraordinaire was to beat beat two of the greatest champions of Jeopardy (the US quiz show) at the quiz. Watson had to play 100 past winners in order to prepare for the match against the quiz playing greats (the learning bit). Watson tackled the double Jeopardy question with ruthless efficiency as this is where the big money is.

IBM calls Deep Learning cognitive technology that is enabling new partnerships between people and computers. The concept has come a long way in the last few years, from the clever computer algorithms that Google use to help you with your search results, or how Amazon is good at suggesting other products you may want to buy, or how Netflix is good at suggesting programming you may enjoy after you’ve used the service.

As Editor of Let’sCompareBets we have written about how we chose investments, specifically for a self invested personal pension. Once such approach is by spotting big themes, one of which is the advancement of technology. Specifically, the concept of Moore’s Law, which simply put, is that the processing power of integrated circuits doubles about every 18 months. This is down to new materials and techniques used in manufacturing these circuits. Robots are getting more clever at an exponential rate: exciting stuff.

Google DeepMind’s AlphaGo (their supercomputer) has beaten Lee Se-dol one of the worlds best players of the challenging Chinese game of GO. Putting this feat into context, there are billions of possible moves in a game of chess. The number of possible moves in the game of GO, due to the large board size, is 577 digits longer than that of chess. So what you may ask? It has taken AlphaGo a few years to surpass the processing power of the human brain that needed a lifetime to lift it’s owner to the status of Grandmaster.

Developments in AI are enough to keep futurologists topped up with inspiration and material to make exciting predictions about the day machines take over the world. What we’re interested in is how AI and Deep Learning are being applied to the world today.

artificial intelligence reviewed

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