Tuesday, January 31, 2012
Monday, January 30, 2012
Jason Pride is bullish on EM
Jason Pride, Director of investment strategy at Glenmede, discusses opportunities in U.S. equities and why he likes emerging markets in Asia. "The balance sheets of the governments are extremely strong," he adds.
Harvard's New VC Fund
Harvard is now setting up its own VC fund to fund ventures, and you don't need to be a student at Harvard to qualify.
Charles Plosser: Fed's low-rate pledge is "not a commitment"
Philly Fed President, Charles Plosser, says that the Fed may need to raise interest rates in 2012 and that Helicopter Bernanke's lower rates for longer statement is "not a commitment." It should be noted that Plosser was the only (now that his buddies Fisher and Kocherlakota are not voting this year) at last week’s FOMC meeting.
John Mauldin: It's Time To Make The Hard Decisions
The debt supercycle has ended and with the inevitable de-leveraging cycle is staring us in the face, we will be forced to set priorities in a way that has been foreign to our society for over a generation.
Sunday, January 29, 2012
Donald Yacktman on Consuelo Mack WealthTrack
Yacktman is a well known value investor who runs two deep value mutual funds out of Austin, TX. Both funds have excellent long-term records. He sees outstanding valuations in today's market. Yacktman is a fan of Microsoft, Cisco, and News Corp, and his #1 stock pick is Pepsi.
Harry Dent: Sees ‘Stock Crisis’; Equities and Other Assets to Fall in 2012
Harry Dent, author of "The Great Crash Ahead," was on an interview with Dan Alpert of Westwood Capital, Jerry Webman of Oppenheimer, and Jonathan Tepper of Variant Perception.
Friday, January 27, 2012
Our view on Japan
The Yen has been on a tear after the financial crisis, but also long-term since 1971: from Y357.41 to the dollar in August 1971 to Y75.31 on Oct. 31, 2011. The WSJ reports today (The Yen’s 40-Year Win Streak May Be Ending), some traders think that we are at an inflection point.
Now Japan's fundamentals are abysmal to put it mildly:
[Disclaimer: this does not under any circumstance constitute investment advise. We are not Registered Investmet Advisors, and all investors need to perform their own due diligence]
Now Japan's fundamentals are abysmal to put it mildly:
- An aging and shrinking population
- 200%+ Debt/GDP
- A shrinking savings rate that has turned negative
- Debt service greater than tax collections
- A trade deficit for the first time in decades
[Disclaimer: this does not under any circumstance constitute investment advise. We are not Registered Investmet Advisors, and all investors need to perform their own due diligence]
Imran Khan: Hope in Pakistan
Famous Pakistani cricketer, Imran Khan, is at Davos, and comments on the situation back home.
"The nuclear weapons in Pakistan are safe, so that is the good news, the bad news is that the economy has nose dived, massive unemployment, inflation but the positive side is that for the first time in 40 years there is a mass movement for change, much bigger than what you see in the Middle East."
"The nuclear weapons in Pakistan are safe, so that is the good news, the bad news is that the economy has nose dived, massive unemployment, inflation but the positive side is that for the first time in 40 years there is a mass movement for change, much bigger than what you see in the Middle East."
BridgeWater is bullish on Gold
DealBook has a short article (In Punishing Year for Hedge Funds, Biggest One Thrived) on hedge fund firm, BridgeWater, that manages an astounding $120B, and has (so far) defied its ballooning assets to post truly astounding returns -- up 45% in 2010 and 23% in a treacherous trading environment last year, on the back of well-timed calls on Treasuries, Bunds, and the Yen.
They are bullish on gold for 2012 and apparently see inflation on the horizon. We at PriceSignals have been on a lonely vigil on inflation as well, and wonder if this is the year that the dam breaks...
"This year, Bridgewater is bullish on gold as a hedge against inflation. The managers are said to believe that governments will need to print more money to help reduce mounting sovereign debt, which could hurt the dollar but help gold. Bridgewater is also betting against the Australian dollar and several emerging-market currencies."
They are bullish on gold for 2012 and apparently see inflation on the horizon. We at PriceSignals have been on a lonely vigil on inflation as well, and wonder if this is the year that the dam breaks...
"This year, Bridgewater is bullish on gold as a hedge against inflation. The managers are said to believe that governments will need to print more money to help reduce mounting sovereign debt, which could hurt the dollar but help gold. Bridgewater is also betting against the Australian dollar and several emerging-market currencies."
Todd Harrison: More Room for 2012 Rally
Todd Harrison, CEO of Minyanville.com, speaks with the boys at Yahoo's Daily Ticker
Byron Wien: Oil Prices Will Surprise Markets in 2012
Lord Byron visits Yahoo's Daily Ticker
The Bright Side of the Fed’s 2014 Pledge
The Bright Side of the Fed’s 2014 Pledge
Peter Schiff interviewed on Capital Account
Capital Account interviews Peter Schiff of Euro Pacific, who remains true to his bearish (some say apolcalyptic) views. He appears at around the 8 min mark.
Thursday, January 26, 2012
Tony Cutinelli: Investing in Closed-end funds
CEFs are an under-followed area of the market, which make them interesting to us. CEF discounts/premiums often mean-revert, and as a result, can lead to profitable reversal trades. Smart Money recently covered CEFs in a nice piece that readers new to CEFs may find interesting.
Charles Biderman: "All markets trade their way to Perdition"
(HT: ZeroHedge) Nice big picture view of the sorry state of the US economy from Charles Biderman, CEO of Trim Tabs
Rare interview with Jamil Baz (GLG Altas Macro)
They continue to be bearish, seeing a Debt/GDP ratio above 100% as "the new normal," coupled with continued deleveraging and a growth slowdown in the developed world. [VIDEO]
With some positive signs out of China and even the Eurozone looking perkier than it was in autumn, is the world starting to look less risky? Jamil Baz, who jointly runs GLG’s Atlas Macro fund tells investment editor James Mackintosh why it isn't time for the bears to stop growling. The Atlas Macro Fund ended the year down 0.4%.
With some positive signs out of China and even the Eurozone looking perkier than it was in autumn, is the world starting to look less risky? Jamil Baz, who jointly runs GLG’s Atlas Macro fund tells investment editor James Mackintosh why it isn't time for the bears to stop growling. The Atlas Macro Fund ended the year down 0.4%.
Spar at the bar in Davos: Salmon v. Scaramucci
Reuters columnist Felix Salmon interviews Anthony "The Mooch" Scaramucci, the subject of a scathing column and a brutal but well deserved beat-down in September last year.
Wednesday, January 25, 2012
David Rosenberg: Volatility is the New Normal
ZeroHedge published David Rosenberg's note today, and it's a must-read. In it, Rosie contends that the volatility we witnessed in 2011 is the normal state of affairs for a deleveraging world and we are still in the early innings of this cycle. His investment themes for this state of affairs include (verbatim from ZH):
1. Market volatility is part and parcel of every post-bubble deleveraging cycle. This means an ongoing focus on long-short relative value strategies that have little directional exposure with the overall market but take advantage of the inherent mispricing across sectors during these periods of heightened volatility.
2. Deflation trumps inflation as the primary trend in a deleveraging cycle. This means an emphasis on defensive sectors with earnings stability and predictability characteristics. It also means a focus on squeezing as much income as possible out of the portfolio. This is why "income equity" strategies make so much sense.
3. Balance sheet quality becomes so much more important in cycles like these. Already, we have seen the amount of AAA-rated government paper plunge 70% in the past three years from $19 trillion to $6 trillion. As such, emphasis on good quality corporate bonds in noncyclical sectors, attractive spreads, high net free cash flow yields, low debt ratios, high liquidity ratios and light refinancing calendars make prudent sense. Our good friend and top-ranked credit analyst Marty Fridson told me yesterday that even in the high-yield space, spreads off of government bonds have more than 100 basis points of tightening potential based on the current set of fundamentals.
4. Always be on the lookout for assets priced for recession. Not only are wide swaths of the credit market priced for such, but so are parts of the commodity complex and segments of the ex-North American equity market where P/E ratios are in single-digits and PEG (P/E to growth) ratios below unity.
5. In this post-bubble environment, policy rates will remain near the floor for years. As such, the risks of any sustainable bear market in bonds are very low since the cost of carry is so vitally important to the fixed-income markets, especially for longer duration product (keeping in mind that yield curves are still steep by historical standards).
6. Keeping policy rates low means that real rates will remain negative. Even if the CPI turns negative, the central banks around the world will de facto ease policy by printing money. In this sense, the secular bull market in gold bullion remains intact and, as such, dips should be bought (especially dips below the moving averages).
7. Global deleveraging cycles almost invariably bring on heightened geo-political tensions. This is why the oil price has such a high floor established underneath it. Protectionism will continue to emerge as a new normal, as part of the globalization trend gets reversed. Exposure to crude oil and materials makes good sense from a strategic point of view.
8. Populist policies win the roost in these types of cycles. The 99% extract their pound of flesh from the 1%. Conservatives like Newt end up sounding like Krugman when debating the likes of Romney. Luxury retailing, or any other fashion that benefits from the spending trend of the upper class, is probably a good shorting opportunity.
1. Market volatility is part and parcel of every post-bubble deleveraging cycle. This means an ongoing focus on long-short relative value strategies that have little directional exposure with the overall market but take advantage of the inherent mispricing across sectors during these periods of heightened volatility.
2. Deflation trumps inflation as the primary trend in a deleveraging cycle. This means an emphasis on defensive sectors with earnings stability and predictability characteristics. It also means a focus on squeezing as much income as possible out of the portfolio. This is why "income equity" strategies make so much sense.
3. Balance sheet quality becomes so much more important in cycles like these. Already, we have seen the amount of AAA-rated government paper plunge 70% in the past three years from $19 trillion to $6 trillion. As such, emphasis on good quality corporate bonds in noncyclical sectors, attractive spreads, high net free cash flow yields, low debt ratios, high liquidity ratios and light refinancing calendars make prudent sense. Our good friend and top-ranked credit analyst Marty Fridson told me yesterday that even in the high-yield space, spreads off of government bonds have more than 100 basis points of tightening potential based on the current set of fundamentals.
4. Always be on the lookout for assets priced for recession. Not only are wide swaths of the credit market priced for such, but so are parts of the commodity complex and segments of the ex-North American equity market where P/E ratios are in single-digits and PEG (P/E to growth) ratios below unity.
5. In this post-bubble environment, policy rates will remain near the floor for years. As such, the risks of any sustainable bear market in bonds are very low since the cost of carry is so vitally important to the fixed-income markets, especially for longer duration product (keeping in mind that yield curves are still steep by historical standards).
6. Keeping policy rates low means that real rates will remain negative. Even if the CPI turns negative, the central banks around the world will de facto ease policy by printing money. In this sense, the secular bull market in gold bullion remains intact and, as such, dips should be bought (especially dips below the moving averages).
7. Global deleveraging cycles almost invariably bring on heightened geo-political tensions. This is why the oil price has such a high floor established underneath it. Protectionism will continue to emerge as a new normal, as part of the globalization trend gets reversed. Exposure to crude oil and materials makes good sense from a strategic point of view.
8. Populist policies win the roost in these types of cycles. The 99% extract their pound of flesh from the 1%. Conservatives like Newt end up sounding like Krugman when debating the likes of Romney. Luxury retailing, or any other fashion that benefits from the spending trend of the upper class, is probably a good shorting opportunity.
Bill Ackman on CNBC talking JC Penney
His tag team partner, Einhorn, has come under some fire with fines for Insider Trading levied by UK regulators.
Soros: Europe in Self-Reinforcing 'Spiral of Decline'
Soros is at Davos with the other 1%, and sporting some nice head-gear.
David Booth: Bullishness on the US Makes Him Nervous
Booth is the founder of Dimensional Fund Advisors (DFA). The University of Chicago named its Business School after him after a record $300M donation in 2008.
Howard Marks (OakTree): “What Can We Do For You?”
Howard Mark's latest memo to his clients is a frank admission that investment managers, including Oaktree, don't have crystal balls and shouldn't act as though they do:
"The main thing we can’t do is see the future, and particularly the macro future. That simple statement has serious ramifications. It means a lot that we’d love to know is beyond us:
- we can’t know what the economies of the world will do,
- we can’t know whether markets will go up or down, and by how much and when,
- we can’t know which market or sub-market will do best, and
- we can’t know which securities in a given market will be the top performers.
And what does the fact that we can’t know these things mean for our portfolio management? Simple: it means we mustn’t act as if we can."
In fact,
"The more you acknowledge you don’t know what the future holds:
- the more you should diversify, spreading your bets to make sure you don’t miss the winners or, more importantly, overload on the losers,
- the less you should attempt to augment performance through adroit short-term market timing, and
- the less you should employ leverage."
Marks thinks US equities are cheap:
"U.S. stocks are much cheaper than usual, selling at low absolute p/e ratios. The S&P 500 has failed to appreciate over the last twelve years, while corporate earnings have grown substantially. Thus its p/e ratio has tumbled. The average p/e in the postwar era was 15 or 16, and in 1999 it reached 30. Today it’s about 12 ... [Despite caveats] the one thing I know for sure, however, is that U.S. stocks are cheap versus historic norms ... In 1999, sky-high valuations and investor ardor positioned stocks for a “lost decade.” Today, low valuations and investor indifference just might mean they’re poised to surprise on the upside."
He also thinks junk bonds are cheap:
"History shows that if you invest in the high yield bond indices when spreads go above 550 b.p., you usually outperform Treasurys by a wide margin over the next few years. Thus it’s clear that with spreads at 700 b.p., they’re priced to outperform. High yield bonds – like stocks – could turn out not to have been cheap enough, but there’s no arguing with the fact that they (and senior leveraged loans) are relatively very cheap."
Overall,
"At the risk of oversimplifying, I see a long list of macro risks on one side of the scale, and low valuations and joyless investors on the other. Prices are neither so high that we must be hyper-cautious nor so low as to call for aggressiveness. Thus I think it’s time to balance defense and offense, and to move forward, albeit with caution."
"The main thing we can’t do is see the future, and particularly the macro future. That simple statement has serious ramifications. It means a lot that we’d love to know is beyond us:
- we can’t know what the economies of the world will do,
- we can’t know whether markets will go up or down, and by how much and when,
- we can’t know which market or sub-market will do best, and
- we can’t know which securities in a given market will be the top performers.
And what does the fact that we can’t know these things mean for our portfolio management? Simple: it means we mustn’t act as if we can."
In fact,
"The more you acknowledge you don’t know what the future holds:
- the more you should diversify, spreading your bets to make sure you don’t miss the winners or, more importantly, overload on the losers,
- the less you should attempt to augment performance through adroit short-term market timing, and
- the less you should employ leverage."
Marks thinks US equities are cheap:
"U.S. stocks are much cheaper than usual, selling at low absolute p/e ratios. The S&P 500 has failed to appreciate over the last twelve years, while corporate earnings have grown substantially. Thus its p/e ratio has tumbled. The average p/e in the postwar era was 15 or 16, and in 1999 it reached 30. Today it’s about 12 ... [Despite caveats] the one thing I know for sure, however, is that U.S. stocks are cheap versus historic norms ... In 1999, sky-high valuations and investor ardor positioned stocks for a “lost decade.” Today, low valuations and investor indifference just might mean they’re poised to surprise on the upside."
He also thinks junk bonds are cheap:
"History shows that if you invest in the high yield bond indices when spreads go above 550 b.p., you usually outperform Treasurys by a wide margin over the next few years. Thus it’s clear that with spreads at 700 b.p., they’re priced to outperform. High yield bonds – like stocks – could turn out not to have been cheap enough, but there’s no arguing with the fact that they (and senior leveraged loans) are relatively very cheap."
Overall,
"At the risk of oversimplifying, I see a long list of macro risks on one side of the scale, and low valuations and joyless investors on the other. Prices are neither so high that we must be hyper-cautious nor so low as to call for aggressiveness. Thus I think it’s time to balance defense and offense, and to move forward, albeit with caution."
Ken Rogoff: Europe Clearly Not Ready For Greek Default
"There's going to be an endgame to this and it's not going to be pretty."
Bills Gross speaks at Barron's 2012 Roundtable
Markets are caught between opposing forces of deflation, resulting from credit bust,and inflation, that may be stoked as central banks flood financial world with money.
Tuesday, January 24, 2012
Buffett gives an interview in a car
Buffett talks about the State of the Union speech andMitt Romney's reported 2010 income and tax rate with Betty Liu in Omaha
Jim Stengel analyzes Blackberry's brand
Stengel is the former CMO at P&G and a professor at UCLA's Anderson School of Management. He is also the author of "Grow: How Ideals Power Growth and Profit at the World's Greatest Companies"
David Stockman: 2013 Will Witness a Massive US Fiscal Crisis
It's difficult to find a market-watcher these days who isn't a self styled "macro expert." Almost all these experts continue to sip the soup du jour i.e. the European financial alphabet soup (ECB, EFSF, SMP), and very few have focused their short attention spans on the US. They would be wise to head cassandra's like David Stockman, Ronald Reagan's former budget director and a favorite of our's. The US is hardly in better shape than Europe is, and it's time we got our own fiscal house in order before the market forces us to...
"We have painted ourselves into a corner, we have had massive fiscal stimulus it has had very little affect, our economy has been structurally ailing for about a decade and then we are going to be facing at the end of this year a massive conflagration fiscally when all the tax cuts expire."
"We have painted ourselves into a corner, we have had massive fiscal stimulus it has had very little affect, our economy has been structurally ailing for about a decade and then we are going to be facing at the end of this year a massive conflagration fiscally when all the tax cuts expire."
Bob Janjuah: Hard Greek Default Likely This Quarter
"Nobody is convinced that the fundamental story has been dealt with, I think what we are talking about here is a liquidity fueled rally in risk assets, if that becomes a self-fulfilling prophecy, great but if it doesn't the ECB's balance sheet is going to look a real mess."
Patrick McMahon (MKP Capital): Avoid Sovereign Debt
This is a rare interview - certainly the first we've seen with anyone from MKP Capital, a 16 year old
hedge fund, and a very successful one at that. MKP manages $4.3B and was #21 on Bloomberg's list of top performing hedge funds. McMahon recommends investing in risk assets, such as Credit and EM Debt, as well as $ denominated assets from European financial institutions. He does not like Sovereign Debt.
Simon Johnson and Peter Boone debate the euro crisis.
The Peterson Institute hosted a meeting to discuss the euro area crisis on January 19, 2012, releasing two new papers on the topic at that time: a relatively pessimistic analysis by Senior Fellows Peter Boone and Simon Johnson along with a relatively optimistic piece by C. Fred Bergsten and Jacob Funk Kirkegaard. The authors presented both viewpoints followed by audience questions.
Monday, January 23, 2012
Joe Granville: The Dow will fall 4000 Points in 2012
Bloomberg dusted off crusty 89-year old Joseph (Joe) Granville, the top forecaster of 2011, for an interview today. He is not bullish to put it mildly.
Simon Lack on the Outlook for Hedge Funds
Lack is the author of the recently published The Hedge Fund Mirage. He has a rather dour (some would say realistic) view on the value the hedge fund industry adds after fees.
Lilico: Greece will default in March. Contagion follows.
Andrew Lilico of Europe Economics talks about the prospect for a Greek debt default (he expects that to take place by Mar 20) and contagion in the Eurozone. He also discusses Spanish and Italian bonds.
Megaupload: A Story of Dotcom Boom and Bust
Reuters has a fascinating article out on Megaupload, the popular file-sharing site, and it's larger-than-life founder Kim Dotcom. Kim was holed out in his NZ mansion and had to be cut out of his safe room.
According to German magazine Der Spiegel, Schmitz once boasted he would become one of the richest men in the world. How was he so sure? "I'm smarter than Bill Gates," he said.
According to German magazine Der Spiegel, Schmitz once boasted he would become one of the richest men in the world. How was he so sure? "I'm smarter than Bill Gates," he said.
He called himself Kimble after the wrongly convicted doctor-on-the-run in the film "The Fugitive," became well known for his lavish lifestyle as much as his computer skills. He briefly became a fixture in Germany's nouveau riche party scene and made his own film, shot with a hand-held camera, Kimble Goes Monaco.
A rare interview with Stewart Paterson (Riley Paterson)
Riley Paterson Asian Opportunities was up about 7.75% in 2011 after a dismal 2010. Stewart Paterson, the Singapore-based co-founder of Riley
Paterson, talks about the outlook for the U.S. economy. Paterson also discusses
Europe's sovereign debt crisis and his investment strategy. He sees a breakup of the single currency zone and a direct transmission of negative Eurozone growth to Asian economies via trade links, FX, and cross border capital flows. The US is also at risk of a signifciant slowdown.
Tom DeMark: S&P will top out at 1342
(Our previous DeMark post was the most popular in this blog's history)
DeMark's S&P target is 1338-1342 (currently at 1316). He sees volatility as set to turn and the Euro-bund set to fail. German stocks are headed higher. According to Bloomberg, DeMark "produces research exclusively for SAC Capital" and has advised Soros and PTJ.
DeMark's S&P target is 1338-1342 (currently at 1316). He sees volatility as set to turn and the Euro-bund set to fail. German stocks are headed higher. According to Bloomberg, DeMark "produces research exclusively for SAC Capital" and has advised Soros and PTJ.
Friday, January 20, 2012
John Taylor: We have forgotten the five principles
John Taylor, a professor at Stanford, is the creator of the famous Taylor rule that provides a rough rule of thumb on where a central bank should set interest rates based on economic growth and inflation.
"The five things: rule of law, predictable economic policy, reliance on markets and -- balance of supply and demand, free market. and limiting the role of government"
"The five things: rule of law, predictable economic policy, reliance on markets and -- balance of supply and demand, free market. and limiting the role of government"
Philip Coggan: Where Have Massive Levels of Sovereign Debt Come From?
Philip Coggan is the author of 'Paper Promises'
Ivy Zelman: Bottom in housing?
Zelman's one of the best housing analysts on the planet. It really does appear that housing is close to a bottom, but prices may stay muted for several years. I often compare housing to a supertanker - it takes a long time to change direction, but when it does, it stays changed for a while! [Disclaimer: I own XHB, the homebuilder's ETF]
"It's been six long years and believe the fundamentals are now at that inflection point that we have confidence that it is really starting to come to fruition and we're excited about it"
"It's been six long years and believe the fundamentals are now at that inflection point that we have confidence that it is really starting to come to fruition and we're excited about it"
Dick Bove: BofA May Double Over Next 12 Months
Dicky was flat-out wrong on banks in 2011. To his credit, he's not backing down and continues to pound the table for bank stocks. [Disclaimer: I own BAC and C common stock in my personal account, but fortunately I bought them fairly recently at depressed valuations]
Marc Faber: Equities are (relatively) attractive
"If you give me the choice between Spanish, Italian, and US bonds, I'd take US bonds, but if you give me the choice of assets of real estate, equities, bonds, precious metals, I would rather take precious metals than equities"
Thursday, January 19, 2012
Terrell Owens: Love Me, Hate Me, Just Don't Ignore Me
As you're planning your Super Bowl party this year, give a thought to TO. He's out of work, out of money, and currently in court with all four of his baby mamas. And now for the part that really depresses him: For the first time in his long, checkered, and spectacular career, nobody wants to throw him the ball ...
Love Me, Hate Me, Just Don't Ignore Me
Love Me, Hate Me, Just Don't Ignore Me
Alan Patricof: Facebook is a utility
Alan Patricof of Greycroft Partners says Facebook has become a fundamental part of society, but it's post IPO gains may be limited by current trading on the secondary markets
Bob Janjuah: The worst of the crisis is still ahead
It's always a pleasure to hear from Bob The Bear who's now peddling his unique brand of gloom and doom at Nomura. His key issues and outlook for 2012:
The worst of the Eurozone mess is still ahead (ECB can't fix Europe)
US mini business cycle is not the same things as a real recovery
Investors should expect QE3 from the Fed
Growth in Asia/EM continues to slow
The worst of the Eurozone mess is still ahead (ECB can't fix Europe)
US mini business cycle is not the same things as a real recovery
Investors should expect QE3 from the Fed
Growth in Asia/EM continues to slow
Tom DeMark sees 'Bull Trap' ahead (S&P to 1210)
[Update Jan 23, 2012: Latest DeMark interview here]
DeMark is a well regarded technical analyst. I started following him closely last year for short-term tactical trades, and he has made some good timing calls in the market recently.
DeMark is a well regarded technical analyst. I started following him closely last year for short-term tactical trades, and he has made some good timing calls in the market recently.
Wednesday, January 18, 2012
Marco Baghdatis goes nuts
Watch Marco Baghdatis destroy 4 tennis racquets in quick succession at The 2012 Australian Open (he lost the match).
David Rosenberg Sees a Weak 2012 (and a possible recession)
"When you smooth out the quarterly wiggles in the GDP data, we've got more than 1.5% growth in 2011. And when you take a look at the headwinds against the tail winds, I don't think it's going to be any better than 1.5% this year. It's still going to be quite a tough slog ahead..."
A David Stockman double feature
David Stockman, Ronald Reagan's budget director, is an old favorite of our's. He's outspoken, bipartisan, and lucid, and always worth listening to.
Capital Gains Tax at 15% a `Mistake'
US Debt Downgrade May Be 'Question of When'
Capital Gains Tax at 15% a `Mistake'
US Debt Downgrade May Be 'Question of When'
A rare interview with Sequoia's Bob Goldfarb (Morningstar)
The Sequoia fund is the legendary value fund that Warren Buffett recommended to his investors when he closed down his partnership over four decades ago. The firm has stayed true to its knitting over the years and performance has been impressive. The fund was closed for many years but opened to new investments fairly recently.
Full Transcript here
Full Transcript here
A rare interview with Tweedy, Browne (Morningstar)
Tweedy, Browne is a classy, old school value shop that has connections to Ben Graham and Warren Buffett, and I would recommend any of their funds without reservation. The firm's What Has Worked In Investing paper is a must-read for any serious investor.
Full Transcript here
Full Transcript here
Tuesday, January 17, 2012
John Brynjolfsson: China May Manage Soft Landing
John Brynjolfsson of Armored Wolf talks about the European debt crisis, China's economy and his investment strategy including commodities and high-yield bonds.
My review of Ben Bernanke's famous 2002 Speech
In November 2002, prior to becoming Fed Chairman, Ben Bernanke gave an infamous speech titled Deflation: Making Sure "It" Doesn't Happen Here that got gold bugs all over the world atwitter and led to the moniker 'Helicopter Ben.' I remember reading this speech and thinking that Heli Ben would be a worthy successor to Easy Al Greenspan. And he has indeed turned out to be as committed to Keynes and loose money as his predecessor was.
Overall, this is one of the most important speeches in Fed history since it laid out the template for how the Fed would battle a deflationary shock to the system. Bernanke actually followed through on many of his prescriptions by exploding the Fed’s balance sheet, buying non-Treasury collateral, engaging in QE, opening the discount window to banks, and through Operation Twist in 2011. The Fed hasn’t explicitly set a ceiling for long-term rates yet, but that may also follow should we see long-term yields spike to a level Ben deems uncomfortable (which eventually will be anything over 2%).
Bernanke saw the chances of deflation in the US as slim given the “remarkable” resilience and structure of the economy, and the potential actions the Fed could take (he would also see the subprime bubble as "contained" years later). However, in the event that deflation did occur, he saw the Fed’s price stability mandate as covering not just inflation but “definitely” deflation as well.
In his speech, Bernanke covered both measures for preventing deflation and also measures for fighting deflation if prevention efforts failed and deflation started to take hold. Measures for preventing deflation included having a buffer for the inflation rate (i.e. not trying to push inflation to zero during “normal“ times), being vigilant in protecting the financial system (fighting fire sales of assets, using the discount window), and being proactive and aggressive in cutting rates if the economy weakened suddenly.
More interesting are the measure he outlined for “curing” deflation. When nominal interest rates hit the zero bound, traditional ways of stimulating demand do not work, but deflation is still reversible by the following means:
1. Printing Money
“… the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.”
2. Expanding the scale of asset purchases as well as the menu of assets bought (a prescription that he followed to a ‘T’ in 2008/09 by massively increasing the Fed’s balance sheet to over $2T and buying non-Treasury collateral)
3. Bringing down long-term interest rates to stimulate spending by (1) committing to holding the short-term rates at 0 for a specified period or (2) by announcing explicit ceilings for yields on longer-maturity Treasury debt, or (3) buying agency debt. He also noted that explicitly setting ceilings had been done before: the Fed enforced a 2.5% ceiling on long-term bond yields for nearly a decade in the 1950s (as well as ceilings on 90 day and 12 month T-Bills).
4. Influencing the yields on private securities by lending to banks through the discount window and accepting a wide range of private assets (corporate bonds, CP, bank loans, and mortgages) as collateral [which he did during the financial crisis].
5. Intervening to target the value of the dollar (for example, FDR’s 40 percent devaluation of the dollar against gold in 1933-34).
6. Coordinating fiscal and monetary policy actions
a. Tax cuts coupled with open market purchases which would keep rates low but increase consumption.
b. Targeting asset values to lower the cost of capital and improve the balance sheet of borrowers.
c. Increasing government spending (class Keynesian stimulus that would warm Paul Krugman’s heart)
Bernanke also analyzed deflation in Japan and pointed out reasons why deflation had taken hold there: the problem with the financial sector (zombie banks) , the overhang of large government debt, and, most importantly, because of political deadlock in dealing with the situation.
Bernanke hinted at the importance of asset values to consumer balance sheets in his speech, and he expanded on some of those themes in an important op-ed in the Washington Post on November 4, 2010 (What the Fed did and why: supporting the recovery and sustaining price stability). In this op-ed he unofficially added a third leg to the Fed’s dual mandate of price stability and low unemployment: higher asset prices.
“… higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.”
Monday, January 16, 2012
Marc Faber: European downgrades already priced in
Some quotes:
"... the ECB is already monetizing. If the ECB wasn't monetizing, then the euro would be strong. They have increased their balance sheet, so I think that much of any downgrade is already priced in."
"... what you will have is negative real interest rates for essentially as far as the eye can see. and at that time you want to be in real estate and equities and you want to be in precious metals"
"... the ECB is already monetizing. If the ECB wasn't monetizing, then the euro would be strong. They have increased their balance sheet, so I think that much of any downgrade is already priced in."
"... what you will have is negative real interest rates for essentially as far as the eye can see. and at that time you want to be in real estate and equities and you want to be in precious metals"
John Brynjolfsson on Europe Debt and Strategy
John Brynjolfsson of Armored Wolf talks about the S&P downgrades of euro-area credit ratings and his investment strategy.
Here's an older interview from November
Here's an older interview from November
Friday, January 13, 2012
Greek Crisis: A Dire Warning From Argentina and Latvia
What should Greece do -
A. Move from the Euro to a devalued Drachma and undergo a painful recession, or
B. Try to muddle along in the European Union with austerity programs and low growth with no end in sight?
According to Uri Dadush, who has analyzed the response of Argentina (A) and Latvia (B) to their debt problems, the answer appears to be A. Argentina endured a sharp, painful recession in 2002 after it defaulted and the peso devalued by 70%, but bounced back subsequently with its GDP recovering to its 2002 peak in 2.5 years. It's real GDP growth rate has been faster than Brazil's ever since.
Latvia, on the other hand, is still stuck with an uncompetitive currency and isn't projected to hit its peak 2008 GDP until 2016 at the earliest. And it's debt has continued to grow.
Dadush's conclusion: ... abandonment of the euro and default, though an extraordinarily painful course, may eventually prove to be a less costly option for Greece ... [However] what may be a less costly course for Greece may be much worse for its Euro area partners. Devaluation and default would lead to further impairment of banks, unpredictable contagion effects on other countries, and a hit below the waterline on the euro project.
Read the original article
A. Move from the Euro to a devalued Drachma and undergo a painful recession, or
B. Try to muddle along in the European Union with austerity programs and low growth with no end in sight?
According to Uri Dadush, who has analyzed the response of Argentina (A) and Latvia (B) to their debt problems, the answer appears to be A. Argentina endured a sharp, painful recession in 2002 after it defaulted and the peso devalued by 70%, but bounced back subsequently with its GDP recovering to its 2002 peak in 2.5 years. It's real GDP growth rate has been faster than Brazil's ever since.
Latvia, on the other hand, is still stuck with an uncompetitive currency and isn't projected to hit its peak 2008 GDP until 2016 at the earliest. And it's debt has continued to grow.
Dadush's conclusion: ... abandonment of the euro and default, though an extraordinarily painful course, may eventually prove to be a less costly option for Greece ... [However] what may be a less costly course for Greece may be much worse for its Euro area partners. Devaluation and default would lead to further impairment of banks, unpredictable contagion effects on other countries, and a hit below the waterline on the euro project.
Read the original article
Neel Kashkari: Chaos Theory
I believe societies will in the end choose inflation because it is the less painful option for the largest number of its citizens. I am hopeful central banks will be effective in preventing runaway inflation. But it is going to be a long, bumpy journey until the destination becomes clear. This equity market is best for long-term investors who can withstand extended volatility. Day traders beware: chaos is here to stay for the foreseeable future.
Chaos TheoryLombard's Dumas on Europe Crisis
Lombard Street Research's chairman Charles Dumas talks with Tommy-on-the-spot about Europe's sovereign debt crisis and the euro-zone economy. He's not very optimistic on the whole situation unless policy makers can figure out an orderly exit of some countries (Greece, Portugal) from the monetary union.
Gordon Kerr: RBS has mucho problema
Gordon Kerr founder of Cobden Partners talks with Caroline Hyde about solvency of Royal Bank of Scotland. The real question is: Will RBS kick-start a wider shakeup this year?
Bill Gross: The (former) bond king pontificates
Trish Regan gets Bill Gross' take on everything from the economy to markets and treasuries in a 9 minute interveiw.
Thursday, January 12, 2012
Zillow CEO: Worst over for US housing
Zillow's CEO, Spencer Rascoff, tells CNBC that although 90% of the cities they follow are showing falling prices, the US has passed the worst of the real estate decline - but don't expect a big bounce anytime soon
Dick Bove and Chris Whalen discuss the financial industry
Dick Bove and Chris Whalen discuss the outlook for Citigroup and the U.S. financial industry with Tom Keene
Boaz Weinstein prefers Italian bonds over bank debt
Boaz Weinstein of Saba Capital is an ex-Deutsche Bank trader whose firm has seen strong inflows this year. His group at DB reportedly lost $10B in 2008!
“If you look at history, you won’t find too many examples where a country defaulted and its banks were OK, especially banks that have a lot of exposure to the sovereigns”
Sees `Confusing Year' for Markets
“If you look at history, you won’t find too many examples where a country defaulted and its banks were OK, especially banks that have a lot of exposure to the sovereigns”
Sees `Confusing Year' for Markets
Roubini: India Better Placed Among BRICs
Nouriel Roubini talks to Bloomberg about the outlook for growth India and the US
Wednesday, January 11, 2012
Stephen Roach: Recession in Europe but Asia will weather the storm
Stephen Roach of Morgan Stanley Asia talks with Bloomberg about the European crisis and its effects on Asia.
"The Eurozone will be in recession at least for the first half of the year ... but the recession will be contained [i.e. mild]"
"If it is a very severe recession [he sees low odds of this], then it's a much tougher situation for China and the rest of Asia"
"China is in a much place better than India [lower inflation and low budget deficit]"
"The Eurozone will be in recession at least for the first half of the year ... but the recession will be contained [i.e. mild]"
"If it is a very severe recession [he sees low odds of this], then it's a much tougher situation for China and the rest of Asia"
"China is in a much place better than India [lower inflation and low budget deficit]"
Paul McCulley: We are in a Liquidity Trap
McCulley was a big shot at Pimco and after a long stint at the firm left for reasons that are not entirely clear to me. Well, he's back on the circuit now - caveman style with long hair and a cool beard - and opining on everything...
Tuesday, January 10, 2012
Neel Kashkari (Pimco) talks Europe
Neel Kashkari, head of global equities at Pimco talks with Bloomberg about the company's new dividend-focused equity funds, investment strategy and the European sovereign debt crisis
Gonzalo Lira: interview on Capital Account with Lauren Lyster
Capital Account is one of my new favorite sources for informative interviews with people who know what they're talking about.
Monday, January 9, 2012
Sunday, January 8, 2012
Saturday, January 7, 2012
Friday, January 6, 2012
Jason Hsu: The nature of deficit spending
Jason Hsu works at Rob Arnott's Research Affiliates:
Macro Musings by jason hsu: The nature of deficit spending: As most of Europe struggle to refinance their now debilitating government debts, it warrants a careful examination of how “they”—by “they”, ...
Macro Musings by jason hsu: The nature of deficit spending: As most of Europe struggle to refinance their now debilitating government debts, it warrants a careful examination of how “they”—by “they”, ...
James Rickards on Capital Account
I recently started watching RT News' Capital Account show hosted by easy-on-the-eyes Lauren Lyster. Here are two recent clips from interviews with Jim Rickards, who recently came out with the book Currency Wars (which I'm currently reading, and recommend).
James Rickards on the Fed's European Bailout and a Global Central Bank (11/30/11)
Jim Rickards on Currency Wars, Real Wars and Gold (11/17/11)
James Rickards on the Fed's European Bailout and a Global Central Bank (11/30/11)
Jim Rickards on Currency Wars, Real Wars and Gold (11/17/11)
Hutchin Hill Capital's 2012 Outlook
Hutchin Hill Capital's 2012 Outlook: CEO Neil Chriss says they will focus on strategies to benefit from volatility
David Rosenberg: Recession possible in 2012
Rosie (chief economist at Gluskin Sheff in Canada) is one of the sharpest market commentators out there, and a person to monitor closely. Here's a 15 minute interview he gave in Dec 2011.
David Kotok: Positive on 2012
David Kotok, CIO of Cumberland Advisors, talks with Tom Keene about the outlook for the US economy and the European debt crisis.
Thursday, January 5, 2012
Bill Ackman's Pershing Square Reports 2011 Decline
Pershing Square Funds Report December Gains, But 2011 Declines
By Amy Or of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--The three funds run by Bill Ackman's Pershing Square posted gains in December but still reported losses between 1.1% and 2% for the year, according to investor letters.
Pershing Square LP, which manages $4.3 billion assets, gained a net 3.1% in December from a concentrated portfolio of 13 names, the letter said. For the year, it lost 1.1%.
The firm didn't mention any specific companies but said 78% of the fund's investments were in companies with a market capitalization of more than $5 billion, and 14% were in midcaps between $1 billion and $5 billion.
The $6 billion Pershing Square International fund gained a net 3% in December, while the smallest fund, Pershing Square II, which manages $82.9 million, gained a net 3.1% that month. For the year, the international fund lost 2%, and Pershing Square II dropped 1.4%. In comparison, the S&P 500 index rose 0.9% in December and was basically flat for the year.
(HT: Dealbreaker)
Ian Bremmer: Top Risks of 2012
Article: Top Risks of 2012
Ian Bremmer's Top Risks include:
1) The End of the 9/11 Era
2) G-Zero and the Middle East
3) Eurozone: The Muddle Is the Risk
4) United States: Right After Elections
5) North Korea: Implosion or Explosion
6) Pakistan: Turmoil Spillover
7) China: Regional Tension
8) Egypt: A Transition in Trouble
9) South Africa: Populism Ascendant
10) Venezuela: A No-Win Election
Red Herrings include:
1) 2012 Political Transitions
2) Eurozone Breakup
3) China’s Hard Landing
4) Mayan Apocalypse
Ian Bremmer's Top Risks include:
1) The End of the 9/11 Era
2) G-Zero and the Middle East
3) Eurozone: The Muddle Is the Risk
4) United States: Right After Elections
5) North Korea: Implosion or Explosion
6) Pakistan: Turmoil Spillover
7) China: Regional Tension
8) Egypt: A Transition in Trouble
9) South Africa: Populism Ascendant
10) Venezuela: A No-Win Election
Red Herrings include:
1) 2012 Political Transitions
2) Eurozone Breakup
3) China’s Hard Landing
4) Mayan Apocalypse
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