Mary Meeker's USA Inc. - an update

An updated video presentation of Mary Meeker's "USA Inc." that views the United States's revenues and expenses through the lens of a corporation.
Slides here

Michael Burry on Bloomberg

"Investing without investors is the most freeing thing"

Michael Burry is one of the heroes of Michael Lewis's excellent The Big Short, and is profiled on this Bloomberg segment. Despite making his investors a ton of money on his subprime shorts, Burry took a lot of abuse and eventually wound down his fund to manage his own money.

Ray Dalio interview in The New Yorker

A must read interview with Ray Dalio who runs BridgeWater has been making the rounds , and is a must-read. BridgeWater now manages $100 Billion, which is simply remarkable for a hedge fund, and a number that I would have never thought possible, especially after the financial crisis.

http://www.newyorker.com/reporting/2011/07/25/110725fa_fact_cassidy?currentPage=all

Outlook

Dalio, like all successful predators, is concentrating on the business at hand—the markets and the global economic outlook. This spring, he told me that economic growth in the United States and Europe was set to slow again. This was partly because some emergency policy measures, such as the Obama Administration’s stimulus package, would soon come to an end; partly because of the chronic indebtedness that continues to weigh on these regions; and partly because China and other developing countries would be forced to take drastic policy actions to bring down inflation. Now that the slowdown appears to have arrived, Dalio thinks it will be prolonged. “We are still in a deleveraging period,” he said. “We will be in a deleveraging period for ten years or more.”

Dalio believes that some heavily indebted countries, including the United States, will eventually opt for printing money as a way to deal with their debts, which will lead to a collapse in their currency and in their bond markets. “There hasn’t been a case in history where they haven’t eventually printed money and devalued their currency,” he said. Other developed countries, particularly those tied to the euro and thus to the European Central Bank, don’t have the option of printing money and are destined to undergo “classic depressions,” Dalio said. The recent deal to avoid an immediate debt default by Greece didn’t alter his pessimistic view. “People concentrate on the particular thing of the moment, and they forget the larger underlying forces,” he said. “That’s what got us into the debt crisis…”

Dalio’s assessment sounded alarmingly plausible. But when one plays the global financial markets a thorough economic analysis is only the first stage of the game. At least as important is getting the timing right. I asked Dalio when all this would start to come together. “I think late 2012 or early 2013 is going to be another very difficult period,” he said

Pure Alpha Fund
… the Pure Alpha fund typically has in place about thirty or forty different trades. “I’m always trying to figure out my probability of knowing,” Dalio said. “Given that I’m never sure, I don’t want to have any concentrated bets.” Among the bets the Pure Alpha fund placed last year were long positions in Treasury bonds, the Japanese yen, and gold, and short positions in the euro and European sovereign debt. A potential problem with this type of global investing is that these days many markets move in the same direction, which makes it hard to achieve real diversification. Bridgewater’s solution is to place a lot of “spread” bets, purchasing one security it considers undervalued and selling short another one it considers overvalued.  So far in 2011, while the average hedge fund has struggled to make any money at all, the Pure Alpha fund is up more than ten per cent.

Sean Egan on CNBC

An excellent interview Sean Egan who runs his own ratings agency, Egan Jones.
- Recovery rates for Greek bonds will only be 10% vs. market expectations of 30%.
- The Fed is effectively the lender of last resort for the PIIGS through its Swaps lines and also because it will be the quickest to react and take action.
- Euro debt needs to be guaranteed by a "currency printing agency" but there are always risks of a weimar situation.
- Egan Jones cut the US Govt debt rating over the weekend
- The US Debt to GDP is on par with Portugal, while Canada is at 35% and is a "true" AAA.
- Debt has gone from $8T to $14T over the past few years via 3 wars ($3T) and the financial crisis
- On the debt ceiling: delay is not the same thing as default. The most likley scenario is that the ceiling will be raised, but the more important thing is to get Debt/GDP down.

Jeff Gundlach (DoubleLine Capital) on CNBC, Part 2

Jeff Gundlach of DoubleLine Capital on CNBC, Part I

Jeff Gundlach of DoubleLine Capital was on CNBC today.