Saturday, September 5, 2009 0 comments ++[ CLICK TO COMMENT ]++

Articles for a Labour Day weekend

Most of the world celebrates Labour Day on May 1st but in Canada and America it's the first Monday of September. Labour Day is going to be quite ironic and possibly unfortunate for me and I'll briefly mention why next week. In any case, on to investing...

Here are some articles you may find worth checking out...

  • (Recommended) Andy Grove of Intel, a legend (The Economist): The Economist published its Technology Quarterly—you can purchase a printable PDF for $4.95 if you wish—which is always interesting for the stories it picks up on cutting-edge technology. The linked article profiles one of the giants of the computer industry, former CEO of Intel, and probably employee #3, Andy Grove. Gordon Moore will always be thought of as the #1 techie at Intel but Andy Grove is, and will be, more famous for his business vision. He is definitely one of the top American businessmen in history. Interesting thought in this article well worth reading.

  • (Recommended) Potential liquidation of Aspen Exploration (OTC: ASPN) (Greenbackd): Guest writer, MCN1, pens an article presenting the potential liquidation of Aspen Exploration (OTC: ASPN). Looks like an interesting opportunity. The stock seems to have rallied—are we seeing the Cramer effect with Greenbackd? :(—but worth keeping an eye on... Oh, I wondered if MCN1 meant anything so I Googled and supposedly MCN1 is an acronymn for "Modulatory Commissural Neuron 1." Only a loser like me would do something like that and I highly doubt that's what the alias means but just thought you would like to know ;)

  • I can't believe we are still debating shareholder democracy (Dealbook via ValueHuntr): Debating shareholder democracy is kind of like debating political democracy in the 1600's—A ludicrous debate with the "right side" being so obvious to everyone, including the opponent. Unless one was entrenched and profitted off the system at others' expense, it is kind of hard to argue for a totalitarian-type system. What is happening with board of directors is very similar in my eyes. Just like democracy in politics has downsides, such as being inefficient, some without knowledge or studying politics voting at will, etc, and so will shareholder democracy. Some companies will indeed be worse off. Nevertheless, it's kind of silly to be arguing against shareholder democracy in the name of stability and the threat of some evil short-term-oriented hedge fund taking over a company.

  • (Recommended) Jim Rogers - The Banking Conversation (The Banking Conversation; h/t Alex Garcia on GuruFocus): Given the chain of references and sources for online material, I have no idea how to properly credit sources so someone correct me if I'm doing something wrong. Right now, I generally just credit the author/institution/business responsible for the material, and the person/website that brought it to my attention. This series of excellent video interviews with Jim Rogers is conducted by Emmanuel Daniel from The Banking Conversation. I never heard of The Banking Conversation, a site that seems to have been launched recently, in May 2009, but it appears to have quality interviews on their website. I took a quick look, and as the name may imply, it is primarily useful for bankers and not investors per se. Anyone working in the banking industry may want to check out The Banking Conversation... Going back to the video, it is quite detailed and covers various thoughts by Rogers. There are some insightful tidbits such as his comment that the fundamentals for oil flipped—production greater than consumption—in 1978, yet oil kept rising for the next two years (for some reason, his comment is not consistent with the data I sourced for a chart in a post a while ago. Maybe he is talking about a specific area of the world?.) In any case, good interview.

  • Wells Fargo CEO, Dick Kovacevich, interview (The Banking Conversation): Dick Kovacevich is through-and-through a capitalist. Like many capitalists in novels, he is very brash and buts head with the government quite often. An interesting fellow. I remember Jim Grant referring to someone from the 1930's who resigned from a bank board because he didn't want a government "bailout" and "oversight". Well, Kovacevich is the modern version of someone like that.

  • Japan's new chapter...maybe (The Globe & Mail): Does the election of DPJ signal a new Japan? As with many things in Japan, appearances and highly detached from reality so it remains to be seen.

  • Difference between being sold fraudulent securities vs your broker being a fraud (Bloomberg): This Bloomberg news story describes a subtle difference between losing your wealth in a fraudulent security; versus losing your wealth when your whole account turns out to be a fraud. I'm paraphrasing here so my terms may not be exact but it makes sense when you think about it. Basically, SIPC, the insurance fund that protects you in case your broker collapses and leaves you with nothing, has provided some help for investors that suffered under Madoff but not under Stanford. The difference is that Madoff investors ended up with nothing (never had possession) after their broker collapsed. In contrast, Stanford investors took ownership of securities (CDs issued by Stanford's bank) that turned out to be worthless because the bank was a fraud. In other words, say you own 10-year US government bond with bank ABC. If the bank/broker collapses due to fraud or whatever else, SIPC will attempt to compensate you for your 10-year bonds. In contrast, if you own a CD issued by bank ABC and it collapses, SIPC won't cover your loss. In the latter case, you are taking losses on the security itself; whereas your holdings were lost or misappropriated in the first case.

  • Two deflationists' views of gold under deflation (Mish's Global Economic Trend Analysis): Two divergent views of what will happen to gold during deflation. I personally would stay away from gold, either long or short, if you expect deflation. The outcome is very difficult to fathom. We don't have enough historical data to be confident in any call. I have linked to gold in Yen during Japanese deflation of the 90's and it didn't do well. In contrast, gold did well during the Great Depression (there were a lot of crazy things happening in the 30's, including banning of private ownership of gold in America, so it's hard to say how much politics or loss of faith in banking contributed.)

  • America and its jobless decade (Calculated Risk): America, which was supposed to be a beacon to the capitalist world, is looking more and more like an emperor missing its clothes. The linked article, as well as the original Marketwatch article cited, points to a startling fact that there have been net negative jobs created in the private sector since December of 1999. Now, it should be noted that we are looking near the trough of the employment cycle, while it was near its peak in 1999. So the start and end points play a role. Nevertheless, I am sure most, in 1999, looking at the next 10 years, would never have imagined how badly the private sector has done—basically created no new jobs. Although politicians don't have total control over the economy, those at the highest levels do influence matters. I have said many times, perhaps not on this blog, that the George Bush presidency would end up being one of the worst in American history, and if it weren't for Nixon, it would be the worst in over 50 years. On top of all the bogus wars and other side distractions, the economic policies (tax cuts for the wealthy, one-time repatriation of overseas profits, war spending, etc) certainly haven't helped.

  • (Highly Recommended) Paul Krugman's thoughts on how economists failed (The New York Times Magazine; h/t The Baseline Scenario via Seeking Alpha): In this lengthy piece, Paul Krugman tries to answer the question of how economists completely missed the financial and economic problems that almost caused the earth to stop spinning. Regardless of what one thinks of Krugman—I know the right is not a big fan of him—one has to admit that he is one of the top economic writers in America. This is a very good essay chronicling the history of economics and changes in economic thought.

  • Some tax questions about MLPs (Elliot Gue for The Energy Strategist; via Seeking Alpha): I'm not into them but some readers have probably invested in them, following some of Seth Klarman's picks.

  • Long-term bonds quite risky if the future resembles the last 30 or 40 years (The Wall Street Journal; h/t Inoculated Investor via GuruFocus): Writing for the always-interesting ROI column, Brett Arends quotes some analysis by a fund manager that suggests long-term bonds are looking like risky investments. I'm not as bearish on long bonds and am even thinking of taking a position. I think the crux of the argument comes down to whether the future will resemble the last few decades or not. The past few decades were marked by inflation but if we end up with very low inflation with bouts of mild deflation, then bonds aren't as risky as they seem. It's a judgement call one has to make.

  • Albert Edwards of Societe Generale is bullish on long bonds (Zero Hedge; h/t Inoculated Investor via GuruFocus): Just to present a dissenting view from the prior link, here is someone, a long-time bear, who thinks long-term government bonds will do well. Based on the excerpts by ZeroHedge, it appears he is suggesting that long bonds will remain in a bull market because commercial banks will start buying government bonds rather than loaning out money to consumers/businesses. I think this is highly likely. During the Great Depression, a similar thing happened, with banks hoarding government bonds and avoiding giving out loans, and in fact started dumping almost all their holdings. I would expand this and say that citizens will also switch into government bonds as they curtail their risky behaviour. People are worried and asking who will fund the US government debt? I'm not worried about that; instead, I'm worried about who will fund private businesses and consumers :(

  • Financial Post's financial jokes of 2009 (Financial Post): Quite frankly, I don't find them that funny but maybe some of you will...

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