I was on Bloomberg earlier to day discussing Glencore and its problems. The video is below.

The last 10 days have been fascinating in particular with reference to 2 stocks that have dominated the headlines. Volkwagen (Cars) and Glencore (commodities)  VW has suffered a major hit it was a €220 stock 3 months ago, today it closed at around €106 per share with much of the collapse in the last 10 days. As fear about US fines, product recalls and lawsuits rattle investors. See chart below:

Next we have Glencore a commodities all rounder collapsing in price - 3 months ago 250 pence a share today closing at 80 pence a share with a complete rout in the last month (140 pence to 70 pence yesterday). Of course the bigger story is it came to the stock market at 510 pence in May 2011. So you are crying if you bought then!

Well these share prices might be justified in worst case scenarios. Yes Volkswagen might be fined $34,000 per car times 500,000 units in the US, it might be sued by dissatisfied car buyers in the US and Europe  that were misled about its emmisions. There will be product recall charges and tighter controls meaning more costs going forward. Similarly with its mountain of £30 billion of debt combined with the current low pice of commodities then Glencore might be worth 80 pence a share in a worst case scenario.

However, these are really worst case scenarios which may have a 10-15% chance of happening. You can also make out a positive cases for both companies arguing they are at least 50% undervalued (eg Volkswagen fines are a lot less and commodity prices rise).. Hence, as a long term investor you want to buy at low prices for these two great companies which  are now pricing in only worst case scenarios. There is an 85% chance that they are significantly undervalued. So it is simple, buy low and sell high. In one year's time neither of these companies will be bankrupt and both have good long term business models and good prospective profits. The worst case scenario for VW will not happen and the same is true of  Glencore. Also commodities won't get much cheaper and Glencore can be restructured, assets sold off to reduce the debt and raise their profits. So yes both are a great risk return investments for the next year or two at today's market price.

In a speech entitled "How low can you go" to the Portadown Chamber of Commerce the Bank of England's Chief Economist Andy Haldane has looked at ways that central banks could basically get us to spend a bit more and therefore boost a flagging economy LINK1. I am not at all happy with the attitude of central bankers these days, they think that keeping real interest rates low and printing money out of thin air helps the economy - well I have news for them it does not. It undermines confidence in the currency and by artificially inflating housing and stockmarkets distorts the economy and the income and wealth distributions in favour of the rich. Haldane thinks we will be stuck at or close to the zero lower bound (ZLB) for some time as the global economy is in a critical state.

What is worrying is he is thinking we may need to have negative real interest rates in the future this can be achieved by (1) raising the inflation target from 2% to 4% this would make real interest rates negative (2) Making some banknotes invalid for example it they have certain serial numbers (3) Switching to digital money that can then have a negative interest rate applied by the central bank (i.e. they the central bank just take some money out of you digital wallet). All of these ideas are barmy !!!! We do not need negative real interest rates, we need positive real interest rate so that savers are rewarded and investors make wise decisions which they do not do when interest rates are artificially low.

It is the job of central bankers to provide confidence in the currency not to tell the public how central bankers might steal your money or reduce its purchasing power through inflation or actually take it from your digital wallet. Market economies do not need central bankers arbitrarily distorting them or stealing peoples money,  that does not stimulate the economy it depresses it and creates unnecessary uncertainty. I think with this speech we can safely rule out Haldane as a future central bank governor - this speech will come back to haunt him for years to come.

Look I don't mind a bit of redistribution of income, I believe there is a valid role for the State to help the worst off in society to get a chance in life so basically I am a socialist. Also I don't think markets work perfectly and so some government intervention can at times be beneficial. Finally, to be frank I want to see some redistribution of income and wealth from the top 5 % towards the bottom 20%. However, I am suspending my membership of the Labour party under the new leader Jeremy Corbyn as I don't support far left wing policies, exiting Europe, leaving the Nato alliance or unilateral nuclear disarmament. So while I will not be voting Conservative, Liberal or the Greens or UKIP (yuck), I will also not be voting Labour until it come back to it senses and elects a leader that is electable with proper economic and politically sane policies in place. Good luck to Jeremy in his bid to win the next election, he was elected fair and square and he also speaks his mind which I admire and has attracted new labour members. However, you win some and lose some and I am suspending my party membership as I can't support these idiotic economic and other policies he espouses.