The insanity of university degrees

I noticed an article in LSE (London South East): “Tuition fees would drop to £6,000 under Labour”. (

This news shocked me, as back in my days, students weren’t expected to to pay tuition fees. Picking Birmingham University pretty much at rnadom, for example, revealed that their undergraduate fee per year is £9,000. Other universities are similar. Why do they charge such high figures? My guess was “because they can”. It turns out I was wrong, though, and it is because “the University of Birmingham is committed to providing the highest quality of teaching and learning, and delivering sustained investment in your wider student experience. ” ( In 2012, Sheffield University said that the maximum £9000 would be levied, saying that the decision was made “in the context of an uncertain higher education environment”, adding: “We now face a real challenge not of our choosing, but one which we owe it to future students to accept.” ( The last phrase of that sentence doesn’t even make any sense. It appears to be saying “it is in the students best interest that we charge them as much as possible”.

And yes, I am being sarcastic. The quotes are real, though.

I’ll be honest here. I can’t even begin to think why anyone would be prepared to spending that kind of money. That’s £27k, before they even nickel-and-dime you on extras like graduation fees, and to say nothing about living expenses. It’s insane. The standard argument is that graduates earn more. Still, that’s a hardly a sure thing, and starting the game 30 grand in the hole strikes me as mad. The politicians and talking heads don’t seem to call this out for the lunacy it is, though.

The whole situation was better when I was a lad. Back then, having a university degree meant something. Nowadays it is just a foot in the door for a middle-class job. It was also recognised that there were two streams of tertiary education: universities for the academically inclined, and polytechnics for vocational studies. It is a system that needs to be brought back. It feels more “honest” to me. Polytechincs had a bad wrap for being “for the thickos”. Some people are just smarter than others. Deal with it.

Having said that, the polytechnic system makes perfect sense to me. The world still needs vocationally-trained individuals. Polytechnics can provide the kind of environment that isn’t available elsewhere. So they serve a noble goal. Different people have different skills. Everybody in particular, and society as a whole, is best served by being given the opportunites that suit them best. Not everyone is a genius, and it’s dishonest to pretend that we are all equal intellectually.

In my view, we should return to basics. Schooling to 16 years of age should give you all the education you need for life. Then, if they feel so inclined, they should do A-levels if they want to pursue academic studies, or else study for vocational subjects like City and Guilds. If they are not interested in study, then they should not be pressured into it. In my admittedly limited contact, I think C&G qualifications are an excellent way of training people where they actually have to learn something in a particular area.

Here’s Peter Schiff’s take on college: Schiff usually talks about gold, and is an advocate of the Austrian School of economic thinking.

Aswath Damodaran has also written about colleges:

College is a Scam:

That’s my spleen vented, then.

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Don’t be bored by stocks which go nowhere

It is tempting to dump stocks that move sideways for a couple of months, assuming that they have nowhere to go. You just become bored with the stock.

Such an attitude may not be a productive one, though. Looking for stocks that have done nothing may be beneficial. I am referring to stocks with a market cap of say, at least £100m, maybe £150m. I exclude very small-cap stocks from this behaviour.

An example that springs to mind is REDD. It recently reported its interims, sending the shares up 20% over 2 days. Prior to that, the shares had been consolidating for a couple of months, as you can see from the chart below.


I had previously seen this chart pattern before in RGS (Regenersis), which paused before its continued upwards ascent. The prior trend may continue, or may reverse. You have to make your own judgement based on fundamentals. SGP (Supergroup) was a company I invested in at the time when the market had dumped them due to their logistic issues, and a period of consolidation followed. The company then issued a bullish trading statement, and the shares rocketed.

Trading statements seem to be what often trigger re-ratings. It happened in all three companies I mentioned. The shares seem to “mark time”, as the market was looking for information in order for it to make its next move. The trick is, you’ve got to buy before a major move, not after. You also need to consider valuation levels and whether you expect the story to be positive or negative in order to know if it’s a buy, or not. If you had looked at REDD, for example, it had a Stockopedia value rank of 75. Positive news was also building in their RNS releases, so if you had bought, say, in mid-February, you would be sitting pretty. You probably would have seen your purchase in an initial loss, though. Sometimes you have to be a bit patient in order for your ideas to work out.

Note that when a share does make a move, it tends to either be overbought or oversold. You can see in REDD, for example, at the start of its latest consolidation, the share price was well above its 50dma. Investors might therefore want to think about a small short as a quick trade (no more than 5 days, say). Sometimes the pullbacks can be minor, so you’ll probably need a stop-loss system, and some kind of realistic guage as to when to take a profit. I don’t short shares – so this is just an idea for people who like doing trading and are looking for some trading suggestions. Maybe some will consider it a good trade, whilst others will consider the risk/reward unfavourable. You’re on your own.

I have a long position in REDD, BTW.


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Market stats

Market looks fairly valued

$ python3
NUM= 675
00% 100.12
10% 133.75
20% 191.70
30% 258.96
40% 380.80
50% 613.91
60% 964.35
70% 1472.31
80% 2963.19
90% 6404.62
100% 114981.00

NUM= 672
00% -76.52
10% -28.33
20% -16.45
30% -8.93
40% -3.33
50% 2.48
60% 7.15
70% 11.78
80% 16.74
90% 25.53
100% 329.13

NUM= 675
00% -4946.63
10% 0.81
20% 1.17
30% 1.44
40% 1.86
50% 2.36
60% 2.88
70% 3.70
80% 5.06
90% 8.09
100% 272.59

NUM= 675
00% -422.42
10% 6.16
20% 10.67
30% 12.69
40% 14.17
50% 15.62
60% 17.48
70% 19.86
80% 22.84
90% 29.95
100% 483.83

See also

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$TATE – Tate and Lyle – I pass

TATE (Tate & Lyle) make sweeteners. I noticed the company issued a profits warning recently, its third in the last year. The shares fell by about 14%. The shares also nosedived on the previous warnings.

I had noted in September 2014 ( that the problems were “supply chain issues, weather affecting corn plant production, an an industrial incident at its Singapore facility.” The problems this time are capacity constraints in the wider US transportation network (really, they’re going with that one?) and weakening EU sugar prices.

If you had bought on the last two warnings, you would have had opportunities to bail out at a profit. It’s difficult to know if, and how much of a profit you would have made without the benefit of hindsight.

I found Stockopedia’s article on “What should you do when a stock plummets” ( to be very interesting, and I am experimenting with putting it into action. I’m creating a decision matrix, which I will report on in a future blog post. TATE has something of a middling momentum, with value straddling neutral/undervalued. I would therefore rate it as “keep”: no point selling if you hold it, no point buying if you don’t hold it.


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$BABA – Alibaba – a cursory glance at their latest 6-K

At the end of last month, BABA (Alibaba) filed a 6-K
(, announcing their financial results for the quarter ended December 31, 2014. BABA started trading on the NYSE on Friday 19 September, 2014.

Let’s take a look at the consolidated income statement. All figures are in million RMB, except for percentages and unless otherwise stated.

Compare revenues for 3 m/e Dec 2013 with 2014. Revenues increased by 39.7%. So far, so good. Cost of revenues to revenues increased from 22.2% to 28.7%. So there’s been some deterioration there. Income from operations only increased by 6.2%. So all that revenue increase did not translate into operating income. Operating income to revenue declined from 47.5% to 35.7%. Frankly, I find those numbers to be too high to be credible.

Carrying on down the income statement, there’s some interest and investment income, and other income, whatever that is. I see that interest expenses have increased from 387 to 1344. So there’s some borrowing going on there. Income tax expenses has gone up, as we might expect. Then we hit the line “Share of results of equity investees”, showing a loss that goes from 160 to 805. It’s a curious item, and I don’t like the look of it. Presumably they’ve invested in a bunch of other stuff, and that other stuff isn’t doing well. A skeptic might say that equity investments is a convenient cabinet to stuff the skeletons in.

So, we eventually get down to Net income attributable to ordinary shareholders. That goes from 8266 to 5936. Oh. It’s going the wrong way. I doubt that can be good.

Now let’s look at the balance sheet.

Cash has ballooned from 17253 to 107050. Seems difficult to believe that the company is paying so much more in interest, doesn’t it? Then we have a bunch of other notworthy items in current assets: short term investments 23691, loan receivables 23679, and investment securities 2570. What gives? Is BABA supposed to be a trading company, or a financial institution?

In long-term liabilities, unsecured senior notes of 48803 has appeared on the books. It seems that the company has repaid US$8b of bank borrowings with these senior notes. Surely I can’t be the only one to think that an $8b loan is rather a lot of money to be loaned to a company that was only founded in 1999 in an apartment.

It will all end in tears.

Needless to say, I have no holding in BABA.


Update 07-Feb-2015: The New York Times reported earlier this month: “Alibaba and Lending Club to Form Financing Partnership” ( The idea is that US manufacturers can buy supplies through Alibaba on unsecured credit, rather than relying on traditional forms of financing. The monthly interest rate starts at 0.5 percent. It doesn’t take much imagination to see how this can all go very wrong. Banking is such a tough business that even banks have trouble doing it right.

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Artist Jeremy Mann

I cam across an artist that I quite like: Jeremy Mann. A couple of his paintings are below.


sunset by union square

I guess you could call his style “impressionism”, or maybe “post-impressionism”. He does produce other styles. His cityscapes are very popular. I am not particularly a fan of impressionist painting, although I do like some of their work.

Check out more of his work on Google images.

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Magic Hat Portfolio February 2015: LAM+SHOS in, REDD out

Another month for the Magic Hat portfolio (, so it’s time for another selection of shares. The portfolio’s returns have been disappointing. It is trailing the indices over 1 year, slighly outperforming over 2 years, and about neck-and-neck over 3 years. It is beating the FTSE350 over the formation of the portfolio. There has been no convincing demonstration of skill on my part so far.

REDD (Redde) gets kicked out of the portfolio on a rotational basis. It has climbed about 57% since purchase, which is a nice result. REDD has a Stockopedia Stock Rank of 94, so holders may want to think twice before deciding to eject from their portfolios. The dividend yield is 6.4%, and in their trading update on 16 December 2014, they announced “a significant increase on our expectations”. So there could be plenty more fuel in the tank.

LAM (Lamprell) was added to the portfolio. LAM will, no doubt, be familiar to many value investors, and are well known as a manufacturer of oil rigs. Sentiment has been hit hard in this sector, and the shares are down 21% over 1 year. But the company has net cash of around £167m, against a market cap of £367m. It generates about £650m in revenue. Stockopedia has an EV/EBITDA of 2.63, which is very cheap. Other data sources show a higher figure, though. Directors have bought over £900m worth of shares over the last year. The shares look cheap. Typical of my inept timing, the shares were bought at 117p, and now trade at 112p.

SHOS (Sears Hometown and Outlet Stores) was also added to the portfolio. It’s an American retailer which was spun out of Sears in 2012. The attraction here is that it is a net-net, with an NCAV of $288m, and a market cap of $273m. That’s not something you see every day. Shares reached a peak of around $55.62 in May 2013, and had been added to the Magic Hat portfolio at $12.37. SHOS showed a stinking loss in the 13 weeks ending Nov 1, 2014, which obviously goes more than a little way to explain why the shares are so cheap. With these Deep Value stocks you have to hold your nose and buy, trusting that the odds or on your side. It only scrapes through as a net-net, so it is by no means guaranteed that we’ve hit the bottom. The company is discussed in an article (csinvesting, on John Chew’s blog. John has created one of the best value investing blogs out there. His focus is on technique, not tips.

Other shares that have appeared on my radar recently, which others might want to check out, are: FLYB, LMI, MGR, NUM, RBS, QR.

Prosperous investing to you all.

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