The FIA appears to have waded back into the ‘F-duct’ debate, indicating that the Mercedes-style solution is fully legal.

We reported on Monday that the saga looked set to continue into China next weekend, with some teams – notably Red Bull and Lotus – questioning the legality of the aerodynamic innovation.

It had emerged that Lotus technical director James Allison has come up with another argument against the technology that will be posed to the FIA’s Charlie Whiting ahead of scrutineering in Shanghai next week.

Christian Horner insists Red Bull and Lotus’ concerns are shared by others.

“Believe me it’s not just Red Bull, I think there’s half the paddock that’s been looking at this,” he told British television Sky Sport’s The F1 Show.

The Red Bull team boss revealed that Whiting left Malaysia wanting “to have a think about it”.

So, the latest development is the re-release via the FIA website of an “edited version” of the technical briefing that Whiting gave to reporters in Australia last month.

It is believed the complaining teams’ main objection to the Mercedes system is that it arguably uses ‘driver movement’ – the pressing of the DRS button – to be activated.

Under the heading “Pressing the DRS button and the issue of ‘driver movement’”, the media briefing quotes Whiting as stating simply: “This is specifically allowed (in the rules).”

Mercedes’ Ross Brawn is quoted by the BBC: “We call it the DRS, because that’s all it is. The purpose of the DRS is to improve overtaking and that’s what we’re trying to do.”

Whiting’s stance in China, however, may not be the end of it.

“Then the teams are faced with alternatives,” Horner explained. “Either accept it and get on it and maybe look at your own solution if that fits your car.

“You’ve got the opportunity to protest if we were to feel – or any other team were to feel – that we didn’t agree with Charlie’s interpretation,” he added.

It did not take long for F1′s first technical controversy of the 2012 race season to erupt.
Asked about Mercedes’ F-duct system that reportedly works in conjunction with the deployment of DRS, Red Bull team boss Christian Horner said: “Are they allowed?”

The FIA’s Charlie Whiting says yes. “I cannot see a rule that prohibits it,” he said.

“What is not allowed is the movement of the driver to generate an aerodynamic effect,” he is quoted by Brazil’s O Estado de S.Paulo.

So at least for now, the other teams will have to react, amid talk the concept is worth several kilometres per hour in a straight line.

“We’ll have to have a look at it,” confirmed Horner.

But according to BBC analyst and former F1 designer Gary Anderson, Red Bull and Ferrari – and maybe others – have reacted already.

They “appear to have a different system and I’m struggling to understand how it complies with the rules”, he said.

“I’m sure we’ll be hearing more about this subject”, Anderson added.

Also legal for now are all the teams’ different interpretations of the new exhaust rules — even the controversial Red Bull’s.

“As far as we’ve seen so far, they all do comply with the rules,” confirmed Whiting.

The current peace in formula one may be short-lived.
That is the view of Niki Lauda, referring to the relative quiet at present in terms of teams accusing their rivals of cheating.

There have been rumblings about some teams’ interpretations of the new exhaust rules, while others led by Mercedes are reportedly experimenting with promising new F-duct solutions.

“You can never trust peace in formula one,” triple world champion Lauda said in a pre-season interview with the broadcaster RTL.

“Each team tries to take the regulations right to the limit, which is perfectly legitimate. We’ll have to see if the FIA needs to intervene at some point.”

 Amid all the ‘ugly’ talk, Alan Jones doesn’t mind the look of F1′s field of 2012.
With McLaren the notable exception, every team has incorporated an awkward ‘step’ into its nose design as the optimum solution to new FIA rules.

Paul Hembery, Pirelli’s motor sport director, recently decried the look as “pig ugly”.

But 1980 world champion Jones doesn’t think so.

“I don’t think aesthetics matter, and anyway I don’t really find them (the 2012 cars) particularly ugly,” the Australian told GMM.

“There’s a couple of interpretations of the new nose that aren’t as nice as some of the others, but there are a few out there that don’t look too bad at all,” said Jones.

“And I’ve never seen an ugly car in the winner’s circle,” he smiled.

Meanwhile, another former world champion – 1982′s Keke Rosberg – described McLaren’s solution as aesthetically pleasing, but hopes the British team has not made a mistake by going a different route to the rest of the grid.

“At least it’s nice looking and I wish the others would have done the same,” said the Finn.

“Jenson Button is quite a big guy and he has said he is sitting significantly lower than last year.

“If it (McLaren’s solution) suddenly becomes a problem for them, with the chassis already homologated then that’s just what they’ve got,” he told the MTV3 broadcaster.

 Charlie Whiting has given the 2012 cars at the Jerez test this week an early clean bill of health.
It was reported the FIA’s technical delegate decided to attend the opening test of the 2012 pre-season amid speculation the teams may have overstepped the mark with their new exhaust layouts.

Exhaust-blown diffusers have been banned for this season, but the early signs were that teams had been clever in their interpretation of the new rules to maintain an aerodynamic benefit.

“At the moment they’re all legal,” Germany’s Auto Motor und Sport, following Whiting’s inspection of all the team garages on Wednesday, quoted the Briton as saying.

Red Bull’s Adrian Newey also played down all the speculation about 2012 exhaust interpretations, insisting there is unlikely to be a “bright idea” from this year’s restrictive rules similar to the double diffuser or blown exhaust innovations.

“We do not see any big differences between all the possible solutions,” he said. “The rules are very specific and very restrictive.”

That could, of course, be great news for Red Bull’s rivals, particularly with the FIA having also clamped down on flexing front wings — another area perfected recently by Newey.

“That rule change,” said Newey, referring to the halving of the allowable wing flex for 2012, “came very late.

“The result is that the wing has gained a lot of weight, making it harder to achieve the optimum weight distribution.”

Newey said the FIA’s new stance on wings was “probably” powered by the violently fluttering components on Ferrari’s car late last season.

Indeed, between Ferrari and Red Bull, there already appears some tension.

Spain’s Marca newspaper claims Newey suspected Ferrari’s initial exhaust solution on the F2012 was not legal.

Then on Wednesday – the day of Whiting’s pit visits – the Maranello based team hastily cut into its exhausts and fairings, ostensibly to meet the new rule about top visibility.

“Honestly,” Ferrari designer Nikolas Tombazis said, “I haven’t seen anything out of the ordinary. We have analysed what everyone is doing and I do not see a great innovation that we have not studied already.”

The saga will continue to run.

“They will still be able to use the exhausts (aerodynamically) this year,” predicted Remi Taffin, engine supplier Renault’s track boss.

“So we will see changes in this area in the Barcelona testing and probably also in Melbourne,” he is quoted by France’s Auto Plus.

Fernando Alonso is concerned the banned high rear wing seen in Barcelona this weekend could have given Ferrari’s rivals some clever ideas.
The FIA moved to ban Ferrari’s interpretation of the rules when its new rear wing, debuted in Friday practice, was 3cm higher than normal due to a loophole about gurney flaps and slot-gap separators.

“The wing was one of the new parts we introduced here but the FIA decided that we couldn’t use it,” Spaniard Alonso is quoted by AS sports newspaper.

“It gave us a small improvement, maybe a tenth or a tenth and a half, so it is not something dramatic.

“There is nothing more to say; in F1 the rules are interpreted to the limit and sometimes you are allowed and sometimes you are not,” he added.

Alonso insisted: “The important thing is that no one comes to Monaco with something similar and they are allowed to use it.”

Red Bull’s Christian Horner this weekend accused a “naughty” Ferrari of breaching the “spirit” of the agreement by testing its new exhaust layout at Fiorano last week.

Ferrari argues that the run was allowed because “filming and promotional” activities were taking place, and FOTA chairman Martin Whitmarsh on Saturday said the teams association will react.

“I didn’t think they (the rules) needed clarification, but for some they clearly do,” he said.

“It isn’t ambiguous in my English interpretation of it, but others obviously thought it was.

“That’s why we have to remove that ambiguity, and I think we are going to do the correct and honourable thing.”

Whitmarsh made clear that, like Ferrari, teams including Mercedes and Renault have also made “some arguable decisions” with regards to the rules about in-season testing.

“Once one does it then everybody feels ‘well, if that’s how you are going to interpret something, then I’ll push it to the limit’,” said the Briton.

He made clear that when McLaren tries its Red Bull-like exhaust layout next week, it will do so with one of its allocation of straightline test days.

Whitmarsh also thinks it is time F1 relaxed its approach to in-season testing.

“We had to take significant measures given the crisis involving the economy and formula one,” he said.

“I think now, as we can see signs of the economy improving, we can go back to testing.”

Williams will try a developed version of its F-duct system at the Valencia street circuit this weekend.

The British team’s interpretation of the McLaren-like concept first appeared in China, but technical boss Sam Michael said then that he expected it to take “a couple of months” to perfect.

Very little about Williams’ F-duct – called the ‘blown rear wing’ by the Grove based team – has been heard since.

But on Monday, the team announced that the innovation will feature on the FW32 alongside some other new parts at the European grand prix.

Williams, however, referred in the media statement to its Valencia-spec F-duct as “the development blown rear wing”, indicating that the component may not be fitted for qualifying or the grand prix.

“We’ll have more new parts for this race but we’ll have to wait and see what improvements they bring to the car,” said driver Nico Hulkenberg, whose teammate Rubens Barrichello won at Valencia in 2009 at the wheel of a Brawn.

Hulkenberg added: “We are inching a bit closer to the top ten, as we showed in qualifying in Montreal, but we have to continue pushing and gain more tenths to get into the top ten consistently.”

(GMM)

Robert Kubica and Montreal – that’s a Hochschaubahn: 2007 pilot of the accident, the then BMW Sauber F1 Team at the hairpin difficult, but escaped miraculously with minor injuries. A year later he led a complete surprise double victory of his team ahead of Nick Heidfeld – it was the only win for the Bavarians in the premier class. Last year there was no race in Montreal – Kubica this year but returns to the Ile de Notre Dame. “The Grand Prix of Canada is something like my destiny race,” says the poles ‘Auto Bild motorsport’.

And so he feels: This year a sensation in the air – “with little luck.” Because: “The course our car will be. It’s fast on the straights and is as wonderfully out of slow corners. It is these properties are required in Montreal.” The strength in tight corners is based on the small wheel base of the Renault R30 – no current Formula 1 racing car can compete in this discipline with Kubica’s car. It showed the team had in Monaco, where the 25-year-old is the sharpest of the superior competitor Red Bull pilot was.

And although the Renault engine has a power deficit, Kubica and Vitaly Petrov scores are in the top speed is always at the front – reason is the low air resistance of the R30. Moreover, the French have for the Grand Prix of Canada, a secret weapon in the quiver: the first time is given to an in-house interpretation of the F-shaft system, which turned out on the long straights of the Circuit Gilles Villeneuve as a great advantage. Now the only question is whether the system works right away, or if you have it like Red Bull in Turkey to expand after the first test.

That will leave Robert Kubica after just one season, the team Renault is unlikely. After Felipe Massa contract extension with Ferrari in Maranello in 2012 the door is closed. Even if the pole for 2011 is not linked to Renault, there are few other enticing options. This Renault boss Eric Boullier had managed to retain its number-one pilots in 2011 and to his team. The Luxembourg wants to build the Renault racing team to head the Polish pilots around.

(MotorSportsTotal)

Mercedes has decided not to appeal the Monaco stewards’ decision to penalise Michael Schumacher.

As per FIA rules, the German team lodged notification of its intention to appeal within an hour of the publication of the decision.

The actual appeal application then had to be filed within 48 hours.

In a media statement issued on Tuesday, the Brackley based team said it “cannot be happy with the outcome” but has decided not to appeal “in the best interests of the sport”.

Mercedes explained that the governing body recognises “the reasons” for informing Schumacher and Nico Rosberg to race in the final corner of the race, adding that many teams have the same opinion.

The team said its interpretation of the rule will be discussed at the next meeting of the Sporting Working Group, with the FIA also agreeing to listen to Mercedes’ view that the 20-second time penalty was “disproportionate”.

Mercedes also seemed to comment on reports that Damon Hill, Schumacher’s former title nemesis, now feels “uncomfortable” with the concept of former drivers having full voting powers as stewards.

1996 world champion Hill revealed earlier on Tuesday that he had received “hate mail” from those who believe he acted with prejudice.

“Mercedes would like to emphasise that we fully support the inclusion of past drivers on the stewards panel and are completely satisfied that the Monaco grand prix stewards acted professionally, impartially and properly in this matter,” read the statement.

(GMM)

Subsequent to the first two testing days where the single-seaters were seen, there are aerodynamic solutions for all tastes.  During these days, it has been surprising how the engineers have hurried to cover the diffusers when the single-seaters enter the boxes.  Funny, because some moments later they’re back in the racetrack and it would be difficult to run after the car to cover the diffuser, wouldn’t it?

Leaving the “funny” note aside, let’s take a look at how the aerodynamics of the seven scuderias that have been presented in these official tests at the Valencian circuit have evolved.  I must say that it’s not an analysis of the aerodynamics, but of some visible changes.

FERRARI

The engineers of the Italian ‘scuderia’ chose to change the nose and wing in a significant way.

The nose seems to be lower than last year’s increasing its descending curve, with a softened V form (below, in the photo gallery you can enlarge the picture to see in more detail.)

For 2010, Ferrari has initially chosen to include a sharp fin, similar to the one that became fashionable with Red Bull, last year.

MERCEDES

No doubt, one of the cars with more changes, if we take the Brawn GP as reference.  The nose is even lower than Ferrari’s, with less tip and more rounded.  Very similar to last year’s well-known Red Bull design.

Contrary to the rest of the scuderias, they have selected a short tail behind the air inlet over the pilot (engine’s lid).

RENAULT

Renault does not contribute with any extraordinary changes in its front, following its aerodynamic philosophy of a robust appearance, “rough” nose. It has a descending angle, but lacks the famous V shape that can be seen in other single-seaters.

Just as it finished last season, Renault uses a great sharp fin as engine lid.

MCLAREN

The MP-4 follows an evolution from its previous model, without the V shape used by Ferrari or Mercedes.  Its nose is rounded and seems higher than others,’ even though, the front double wing is wider and have joined the “sharp fin” fashion.

Peculiar interpretation of the sharp fin, since it almost finishes in the rear aileron.  However, we’re still investigating the camera options on the single-seaters.  Note that Ferrari, McLaren and Williams “have an integrated periscope.”

WILLIAMS

Aside from the periscope, its possible the single-seater with less changes of all that we have seen (a priori).  The characteristics that stand out the most are a very flat and high nose, together with a front double aileron.

Hopefully, tomorrow we’ll go to another place where we can see the rear of the car, because we’ve heard that’s the part of the single-seater with more changes.

BMW SAUBER

As you can appreciate in this photograph, aerodynamically it seems like a completely new single-seater.  A nose with little drop, and a long but mostly high “sharp fin.”

When I say ‘high’, I mean that it does not fall as other scuderias’, but it’s rather a great extension of the air intake.

TORO ROSSO

The new Toro Rosso’s nose follows the trend of its previous model with only some slight touches.  However, the rear section is the one that has had the most evolution in 2010.

The sharp fin is an innovation joining with the rear aileron of the racing car.  The idea is to transfer the most quantity of air possible to the rear aileron.  Is that a solution to get extra grip?

Awaiting to see “the revolutionary USF1″ that according to the North Americans breaks with anything ever seen, this year the scuderias have changed a great deal the exterior of the racing cars.  Enjoy the gallery.

One question almost every investor asks at some point is whether it is possible to achieve above market returns by selecting a diversified group of stocks according to some formula, rather than having to evaluate each stock from every angle.

There are obvious advantages to such a formulaic approach. For the individual, the amount of time and effort spent caring for his investments would be reduced, leaving more time for him to spend on more enjoyable and fulfilling tasks. For the institution, large sums of money could be deployed without having to rely upon the investing acumen of a single talented stock picker. Many of the proposed systems also offer the advantage of matching the inflow of investable funds with investment opportunities. An investor who follows no formula, and evaluates each stock from every angle, may often find himself holding cash. Historically, this has been a problem for some excellent stock pickers. So, there are real advantages to favoring a formulaic approach to investing if such an approach would yield returns similar to the returns a complete stock by stock analysis would yield.

Many investment writers have proposed at least one such formulaic approach during their lifetime. The most promising formulaic approaches have been articulated by three men: Benjamin Graham, David Dreman, and Joel Greenblatt. As each of these approaches appeals to logic and common sense, they are not unique to these three men. But, these are the three names with which these approaches are usually most closely associated; so, there is little need to draw upon sources beyond theirs.

Benjamin Graham wrote three books of consequence: “Security Analysis”, “The Intelligent Investor”, and “The Interpretation of Financial Statements”. Within each book, he hints at various workable approaches both in stocks and bonds; however, he is most explicit in his best known work, “The Intelligent Investor”. There, Graham discusses the purchase of shares for less than two – thirds of their net current asset value. The belief that this method would yield above market returns is supported on both empirical and logical grounds.

In fact, it currently enjoys far too much support to be practicable. Public companies rarely trade below their net current asset values. This is unlikely to change in the future. Buyout firms, unconventional money managers, and vulture investors now check such excessive bouts of public pessimism by taking large or controlling stakes in troubled companies. As a result, the investing public is less likely to indulge its pessimism as feverishly as it once did; for, many cheap stocks now have the silver lining of being takeover targets. As Graham’s net current asset value method is neither workable at present, nor is likely to prove workable in the future, we must set it aside.

David Dreman is known as a contrarian investor. In his case, it is an appropriate label, because of his keen interest in behavioral finance. However, in most cases the line separating the value investor from the contrarian investor is fuzzy at best. Dreman’s contrarian investing strategies are derived from three measures: price to earnings, price to cash flow, and price to book value. Of these measures, the price to earnings ratio is by far the most conspicuous. It is quoted nearly everywhere the share price is quoted. When inverted, the price to earnings ratio becomes the earnings yield. To put this another way, a stock’s earnings yield is “e” over “p”. Dreman describes the strategy of buying stocks trading at low prices relative to their earnings as the low P/E approach; but, he could have just as easily called it the high earnings yield approach.

Whatever you call it, this approach has proved effective in the past. A diversified group of low P/E stocks has usually outperformed both a diversified group of high P/E stocks and the market as a whole.

This fact suggests that investors have a very hard time quantifying the future prospects of most public companies. While they may be able to make correct qualitative comparisons between businesses, they have trouble assigning a price to these qualitative differences. This does not come as a surprise to anyone with much knowledge of human judgment (and misjudgment). I am sure there is some technical term for this deficiency, but I know it only as “checklist syndrome”. Within any mental model, one must both describe the variables and assign weights to these variables. Humans tend to have little difficulty describing the variables – that is, creating the checklist. However, they rarely have any clue as to the weight that ought to be given to each variable.

This is why you will sometimes hear analysts say something like: the factor that tipped the balance in favor of online sales this holiday season was high gas prices (yes, this is an actual paraphrase; but, I won’t attribute it, because publicly attaching such an inane argument to anyone’s name is just cruel). It is true that avoiding paying high prices at the pump is a possible motivating factor in a shopper’s decision to make online Christmas purchases. However, it is an immaterial factor. It is a mere pebble on the scales. This is the same kind of thinking that places far too much value on a stock’s future earnings growth and far too little value on a stock’s current earnings.

The other two contrarian methods: the low price to cash flow approach and the low price to book value approach work for the same reasons. They exploit the natural human tendency to see a false equality in the factors, and to run down a checklist. For instance, a stock that has a triple digit price to cash flow ratio, but is in all other respects an extraordinary business, will be judged favorably by a checklist approach. However, if great weight is assigned to present cash flows relative to the stock price, the stock will be judged unfavorably. This also illustrates the second strength of the three contrarian methods.

They heavily weight the known factors. Of course, they do not heavily weight all known factors. They only consider three easily quantifiable known factors. An excellent brand, a growing industry, a superb management team, etc. may also be known factors. However, they are not precisely quantifiable. I would argue that while these factors may not be quantifiable they are calculable; that is to say, while no exact value may be assigned to them, they are useful data that ought to be considered when evaluating an investment.

There is the possibility of a middle ground here. These three contrarian methods may be used as a screen. Then, the investor may apply his own active judgment to winnow the qualifying stocks down to a final portfolio. Personally, I do not believe this is an acceptable compromise. These three methods do not adequately model the diversity of great investments. Therefore, they must either exclude some of the best stocks or include too many of the worst stocks. It is wise to place great weight upon each of these measures; however, it is foolish disqualify any stock because of a single criterion (which is exactly what such a screen does).

Finally, there is Joel Greenblatt’s “magic formula”. This is the most interesting formulaic approach to investing, both because it does not subject stocks to any true/false tests and because it is a composite of the two most important readily quantifiable measures a stock has: earnings yield and return on capital. As you will recall, earnings yield is simply the inverse of the P/E ratio; so, a stock with a high earnings yield is simply a low P/E stock. Return on capital may be thought of as the number of pennies earned for each dollar invested in the business. The exact formula that Greenblatt uses is described in “The Little Book That Beats the Market”. However, the formula used is rather unimportant. Over large groups of stocks (which is what Greenblatt suggests the magic formula be used on) any differences between the various return on capital formulae will not have much affect on the performance of the portfolios constructed.

Greenblatt claims his magic formula may be used in two different ways: as an automated portfolio generation tool or as a screen. For an investor like you (that is, one with sufficient curiosity and commitment to frequent a site such as this) the latter use is the more appropriate one. The magic formula will serve you well as a screen. I would argue, however, that you needn’t limit yourself to stocks screened by the magic formula, if you have full confidence in your judgment regarding some other stock.

These four formulaic approaches (the three from Dreman and the one from Greenblatt) will likely yield returns greater than or equal to the returns you would obtain from an index fund. Therefore, you would do better to invest in your own basket of qualifying stocks than in the prefabricated market basket. If you want to be a passive investor, or believe yourself incapable of being an active investor, these formulaic approaches are your best bet.

In fact, if I were approached by an institution making long – term investments and using only a very small percentage of the fund for operating expenses, I would recommend an automated process derived from these four approaches. I would also recommend that 100% of the fund’s investable assets be put into equities, but that is a discussion for another day (in fact, it’s a discussion for Tuesday; my next podcast is devoted to the dangers of diversification). If, however, you believe you have what it takes to be an active investor, and that is truly what you wish to be, then, I would suggest you do not use these approaches for anything more than helping you generate some useful ideas.

If you choose this path, you need to be clear about what being an active investor entails. Read this next part very carefully (it is correct even though it may not appear to be): I have never found a screen that generates more than one buy order per hundred stocks returned. Even after I have narrowed the list of possible stocks down by a cursory review of the industry and the business itself, I have never found a method that can consistently generate more than one buy order per twenty – five annual reports read.

Here, I am citing my best past experiences. In my experience, most screens result in less than one buy order per three hundred stocks returned, and I usually read more like fifty to a hundred annual reports per buy order at a minimum. You may choose to invest in far more stocks than I do. Perhaps instead of limiting yourself to your five to twelve best ideas as I do, you might want to put money into your best twenty – five to thirty ideas. Do the math, and you’ll see that is still quite a bit of homework.

That’s why remaining a passive investor is the best bet for most people. The time and effort demanded of the active investor is simply too taxing. They have more important, more enjoyable things to do. If that’s true for you, the four formulaic approaches outlined above should guide you to above market returns.