Evil Diaries: Discounting The Future

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Evil Diaries: Discounting The Future

As it happens I first lunched with Master Investor’s John Cornford about forty-five years ago. The venue was a very successful Turkish restaurant in Great Portland Street. I think it no longer trades and in any event, even if it were to, I would not naturally gravitate to Turkish wines. But I certainly gravitate to John’s mathematical mind.

Thus I read his article of a week or two ago when he commented on discount rates applied to the present value of future cash receipts. Here he considered this application to energy trusts. And there is no doubt that a cheerful indifference to actuality can arise here. Equally there can be no doubt that the discounts arising on large numbers of investment trusts are absurd. The discounts do not make sense. This was carefully shown in a paper produced by Stifel on 25th July.

I myself have always thought that investment trusts are a rich source of reward. But it demands a great deal of time-taking patient work and unless it is paid for cannot be economically offered as a service. This precludes Master Investor from offering a consistent and methodical service since those useless FCA regulators will not allow it. I think this is pathetically sad and have no idea why such an imposition of incompetence is enforced by law. I had hoped that Brexit would cause the FCA’s rulebook to be reviewed but the disease that causes all this trouble is home grown and therefore, albeit ineffectually, democratically controlled. It is indeed a form of intellectual cancer.


Every day many companies announce buy backs of their share capital. For some, such as Logistics Development Group (LDG), such purchases are no brainers. For others it can be murky. For instance, when DarkTrace (DARK) announced a buy back some months ago and was authorised to expended about £75m I was unsurprised by management selling its own shares into this programme. What other shareholders make/made of this I do not know.

The programme is now much reduced, presumably because the authority to run it is expiring. Further, I see that Legal and General have reduced their holding below 5% this morning. It is not too late to short DARK.

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