Brewing up theories

A lot of people in Australia don't tip in restaurants, it's not traditional and the thought is that the staff is well paid and merely doing their job. It's a nice idea but they're dreaming, because 25 years ago this country made the decision to move to a more laissez faire type economic system and the gap between rich and poor has widened. More problematically, the gap between people of the same sort of background has widened too. For example, educated or experienced public sector and service workers have fallen far behind their peers in the private sector, or those who are business owners.

Twenty years ago, an American work colleague who had bought a motel in Australia was observing that the young, unqualified motel cleaners were earning $14 per hour while his middle aged bookkeeper got 20. I remember him wondering why you'd bother to miss out on earnings or leisure while you went to college in order to gain such a small financial advantage. The situation has changed dramatically since then with the award for cleaners being just under $20 per hour while a bookkeeper, on a contract basis, would get a minimum of 50 or 60 per hour.

The economic liberalisation has brought the community the promised gains but the cost to social cohesion is rising. At the moment, it's a murmur rather than a shout but it seems as if change is on its way. These movements often seem to be global and maybe Occupy Wall Street and even the Arab Spring (popular uprising because of a huge gap between rich and poor) is the most dramatic part of an upheaval in how society is feeling. The protests against capitalism seem reasonable when the wealthy have been protected from the GFC at the expense of the public. Certainly the financial TV channels I watch seem to misunderstand how capitalism workers. They appear to think capitalism is the same thing as the economy. It's not. It's the engine not the car. Someone has to steer, to apply the brakes, step on the accelerator, build in safety features etc etc.

Addressing the obvious imbalances is probably going to be enough in Australia where most people are employed but I doubt if it will be so painless in Europe and the US.

 

Apart from that, the day has seen a big bounce back of 2% at 12.30 pm as hopes rose for the EU summit despite an impasse between France and Greece over the extent of the hit that banks will have to take on Greek bonds.

It's seen me stop out of a couple of my short positions and ponder the usual problems of when to get out of a trade. Essentially, the shorts were largely counter trend positions so there's always a case to be made to get out once momentum has stalled rather than when the writing is on the wall.

BLD is one that I traded quite well but the last part of the trade was a triumph of hope over probability. Here's the chart.

I got short at a good level (365) on the assumption that it might make a lower high. The swings are overlapping now so I wasn't necessarily expecting a new low. Last Tuesday, the stock accelerated down and closed at 340 but the next day there was support and a minor breach of the high of the previous bar followed by another indeterminate day. I bought half back at 338 on that day, last Thursday but should have bought it all back. I bought the last half this morning at 356 so missed out on around 16 cents on that portion.