Degrees of credit

There's nothing the mainstream press hates more than Wikipedia.

Every so often there's a column in the Times which says: shock, horror, probe, not everything you find on Wikipedia is true.

Wikipedia is written by amateurs! They are rubbish! They are unprofessional, biased, and tell lies!

As one of Wikipedia's many contributors, I find that really quite offensive. I contribute on matters that I do know about and quite often spend some time checking sources before writing. Many of the other people I know who contribute to Wikipedia are scholars, journalists, or practitioners (eg investment bankers) who believe in 'giving something back' in terms of pro bono work.

Admittedly, they are probably contributing to a post on Robert Herrick, Wagner's Die Feen, cosmatesque marble work or the Black-Scholes formula, and probably not to one about Britney Spears.

Yes, there are problems on Wikipedia. But let's look at how it addresses them.

• Requesting references, whether from news media, authoritative web sites, scholarly research, or other publications.
  
• 'Talk' pages. I actually believe in some ways Wikipedia does a better job than other media. On the question of Western Sahara, for instance, publications like the CIA world factbook will tell you who 'owns' Western Sahara. But the Wikipedia discussion page tells you what the issues are. There is no 'right' answer - in that way I believe Wikipedia represents the real world more fully than many more authoritative sources. (And anyway - if we can't trust Wikipedia, what makes you want to trust the CIA?!!)
• Continuous editing. Okay, that can descend to flame war. But at least it means errors can be addressed in real time - not next time the book goes into print in a couple of years' time.

It's interesting that so many journalists refer to peer-reviewed academic publications as 'good' and 'reliable' when Wikipedia is referred to as 'bad' and 'unreliable'.

Hm. Like the Lancet, which was responsible for deeply flawed research on MMR jabs being published.

What is Wikipedia if not a peer-reviewed publication? It's just the definition of 'peers' that is different.

And quis custodiet ipsos custodes in the matter of peer reviewing?

(Let's remember that it was professional, accredited, peer-reviewed psychologists and psychotherapists in the 1950s and 1960s USA who defined homosexuality as a disease. Not just that - women who did not conform to feminine stereotypes were often 'treated' for their 'gender misalignment'. From today's perspective that looks like a mumbo-jumbo rationale for a full scale assault on the individual's human right to self-determination.)

I am still waiting for a mainstream journalist to point out the real truth of Wikipedia - which is that information cannot be polarised into 'good' and 'bad', but comes in an almost infinite number of degrees of creditworthiness. And that we should actually learn to interpret and evaluate information - not be encouraged to trust one source absolutely and distrust another.

Perhaps because, if we all learned to evaluate and interpret information, we might not trust what was in the newspapers...

For me, it's the fact that Wikipedia accepts its own fallibility, and signposts it by flagging up disputed terms and statements, that makes it such a potent force. (The only UK newspaper I can think of that does this is the Guardian, with its readers' editor. It's not a matter of 'corrections', right/wrong, as in other papers, but of 'How should we have reported this'... and it makes the assumption that readers are grown-ups with critical minds of their own.)

Docx

This wretched format is really a massive step backwards for Microsoft.

First of all, it crashes Open Office. I am not going to invest in a £350 software package to read two or three documents a month, so I tell people; if it's not RTF or TXT, I'm not touching it.

Secondly, it's not even compatible with other versions of Microsoft Office. Now that is really dumb.

Suppose I have 1000 employees and I give 50 of them new computers, with the new version of Office. Either

(1) they all have to turn OFF the default option for saving documents, which is docx, so that other employees can actually read what they are writing, or

(2) I have to spend thousands getting new software for the other 950 staff.

In either case it's going to be a PITA, which does not stand for an oval shaped type of bread that goes with doner kebabs.

I've noticed an increasing number of publications now saying that they will only accept RTF or a specific flavour of DOC file - they are actually specifying 'Microsoft Word 97' or whatever.

Which means RTF is practically becoming the default. And 'Microsoft Word' is no longer a gold standard.

Microsoft has managed to destroy its own currency. That is not clever.

Overpay? A misselling scandal in the making

I've been told a number of mortgage lenders are advising borrowers to use the low interest rates they're getting to make overpayments on their mortgages.

Normally, I'd say fine - it will reduce the total interest paid (though are all these lenders calculating the monthly payment on a daily basis, or will they apply the proceeds only at the end of the year?).

But in the current economic climate, householders with small equity and small savings should avoid it.

If you lose your job, I doubt the bank will take 'but I overpaid last month' as an excuse for missing a payment. Borrowers could lose the house - AND the overpayments.

Far, far better to put the difference in a savings account, even at minimal rates of interest. At least then, if redundancy does come, there's a few months' mortgage payment in the pot.

I almost wonder whether non-personalised, general advice to repay constitutes a misselling scandal in the making.

Why do so few people understand markets?

There's an awful lot of comment in the papers and elsewhere at the moment that demonstrates how many people who are quite economically literate still don't understand markets and the way that they behave.

For instance, a number of commentators have noticed that 'affordability' criteria according to the house price / income ratio have now got back to 'normal' historical levels. Therefore, they suggest, the housing market will now stabilise.

Now, I reckon there are several things wrong with this assumption anyway.

• If I'm a first time buyer but I don't have a 25% deposit, the house price to income ratio might tell me I can afford to buy a house, but I can't get a mortgage.
  
• If I'm afraid that I'm going to lose my job, I don't care about the house price / income ratio - what I care about is the worry that the 'income' bit might turn out to be nowt rather than owt. Look at consumer confidence indices and they do not tell you that everything is going to be hunky dory.

But for me, with 15 years of market experience, the thing that's really wrong with this is the assumptions made about market behaviour. These commentators believe that markets are rational, and accurately reflect conditions in the 'real' economy.

Excretory product of the bovine herd!*

Benjamin Graham got it right when he invented 'Mr Market', the manic depressive. Markets will always tend to overreact. In a boom, property investment trusts will trade at a premium to their net assets on the basis that 'they'll be worth more next year', and houses will be gazumped. In a bust, the market overreacts in the other direction - trading every stock as if it's about to go bust, buying assets at a huge discount (because 'they might still go down'). It's like an elastic band - as every schoolkid knows, if you extend an elastic band over your forefinger and stretch it, it doesn't 'stabilise' once you release the pressure!

The housing market will not stabilise in an orderly way because houses reach their 'right' value. It is likely to overshoot considerably on the downside. Until I see houses selling on a house price to income ratio that is much less than that prevailing during most rising markets - that is in the lowest quartile previously achieved - I will not be putting funds into that market.

On the other hand, 70% discounts on commercial property stocks are making me feel modestly bullish. That discounts a further 35% fall in values this year. It will still be important to pick the right portfolios - outside the City and without too high a retail component - but I'm feeling that things might not get a lot worse. I see Hammerson is raising a rights issue, too - usually a sign of the bottom of the trough. And the yields on commercial property compare very well with other sectors - most of the true 'defensives' have been heavily overbought - so it may be time to diversify back into commercial property. (I sold all my property shares in 2005 and 2006 - a bit early, but better early than never!)

By the way, can I have a little rant about the way the words 'property market' have come to be interchangeable with 'housing market'? It is as if a major national newspaper used the word 'people' to mean only men, or 'stock market' to mean only banking shares. The property market includes office space, land, industrial buildings, and retail - which seem hardly ever to be reported on. A 12% fall in the housing market needs to be compared with a greater fall in the property market as a whole - 30% plus, according to most, already, with many trusts and property stocks trading at a 70% discount to net assets.



* bullshit

Bond Bears

I've held off from the temptation to buy corporate bond funds, despite the appealing 7-9% yields and recommendations from people whose recommendations I normally trust, like Mark Dampier at Hargreaves Lansdown.

Now I tend to be a bit ahead of the market in my timing. So it was that I lost my money when in 2005 I made a bet against house prices, in the shape of a covered warrant. So it was that I had to sit through six months of inactivity when I called the bottom of the tech market just a tad early. Yet again, I'm sitting watching other people make money...

My worry is that UK bond funds look good right now, with low inflation and low interest rates. But can low interest rates last?

Let me state the bear case briefly.

• Low sterling has reduced the euro value of our money. So far the press has talked incessantly about how European holidays will cost more. They're missing the real elephant in the room - imports from Europe. French Golden Delicious, Dutch tomatoes, German software will all cost more. That puts pressure on inflation. (Incidentally I'm amazed how inflation is continuing to hold up despite the fact that mortgage costs have fallen dramatically and energy prices are headed downwards. There is some real cost pressure there already, and the sterling impact hasn't been felt yet.) We are importing inflation. Not a good thing to be doing.
  
• Increased government borrowing requirement will lead to increased gilts issuance as well as a perception of higher risk. If the government wants to fund more, riskier debt, it's going to have to increase the amount it's willing to pay for it - in other words, it will have to pay a higher interest rate. That's the case in the US as well. Most of the arguments I've seen for buying corporate bond funds focus on the spread between government debt and corporates. But the bulls' assumption is that corporate rates will come down (and consequently the price of the bonds will rise). I fear it's more likely that government rates will rise.

Now I started thinking this about November last year. And now, at the beginning of February, I'm beginning to see a few fund managers crawling out of the woodwork with the same ideas. Intriguing.

Tech companies - a quicker death

If you doubted that this is a real recession, unlike the stock market mini-crash of 2001-2, one thing should change your mind.

In 2001-2, despite the high levels of competition and failure to create revenue, tech companies kept staggering along as long as they could. There was continued investment in online from 'bricks and mortar' businesses. And while valuations fell, many online businesses continued to see high growth - and gradually extricated themselves from the red ink.

This time round the thousand flowers are not being given time to bloom. Scoopt has just closed. That was the site that provided amateur photographers with a chance to sell their snaps as photojournalism. Great idea - citizen journalism meets business smarts - but didn't work. Quickly and effectively closed down.

HeadlineProperty, a service that distributed PR around property journalists, has also closed. Needless to say the property market is hardly easy right now; a number of clients have not renewed accounts, and the service has become unprofitable. Centaur Publishing launched it on Feb 15, 2007, so it has been slaughtered before it gets to two years old.

I wouldn't mind betting on consolidation and closures among some of the Web 2.0 businesses, either. The winners will be polarised - either huge all-encompassing networks like Facebook, or really, really niche ones, together with those like Last FM that have a special appeal, something they do that others don't. LinkedIn might survive; eCademy might not.

In media, I don't think we're seeing increased integration between print and online media for any idealistic reasons. It's purely a matter of cost cutting. No one can afford to produce separate content for separate media any more. We'll see more of this, I am certain.

But it's going to be very difficult for online businesses to survive on their own. The knives are out.