Showing posts from July, 2010

At least we still have some Euro bulls, albeit from some shady corner of the universe

From The Wall Street Journal: Gangsters, drug dealers and money launderers appear to be playing their part in helping shore up the financial stability of the euro zone. That's thanks to their demand, according to European authorities, for high-denomination euro bank notes, in particular the €200 and €500 bills. The European Central Bank issues these notes for a hefty profit that is welcome at a time when its response to the financial crisis has called its financial strength into question. The high-value bills are increasingly "making the euro the currency of choice for underground and black economies, and for all those who value anonymity in their financial transactions and investments," wrote Willem Buiter, chief economist at Citigroup, in a recent research report. The business of issuing euro notes, produced at almost zero cost, is "wildly profitable" for the ECB, Mr. Buiter wrote. When euro notes and coins went into circulation in January 2002, the val

China Debate: Bull vs Bear

Not sure how many others already saw this but I just ran across it recently. It's a debate (appears to be conducted on May 4th of 2010) between a China bull (Stephen Roach) and China bear (Jim Chanos.) Nothing earth-shattering for China-followers but it is still good to get the viewpoints of both sides. (BTW, does anyone know where I can find the full Jim Chanos interview with Bloomberg that I mentioned in a prior blog post . Apparently the video was supposed to come out on June 25th but I never saw it anywhere. Maybe only available to Bloomberg subscribers? If anyone knows where I can find it, please let me know.)

Sunday Spectacle LXXX

Corporate America - Buy High, Sell Low? (source: " It's all about managing for value " by Michael Mauboussin. LMCM, June 11, 2010)

Grantham shifts ever so slightly towards the deflation camp

Well, I, for one, am more or less willing to throw in the towel on behalf of Infl ation. For the near future at least, his adversary in the blue trunks, Deflation, has won on points. Even if we get intermittently rising commodity prices, which seems quite likely, the downward pressure on prices from weak wages and weak demand seems to me now to be much the larger factor. Even three months ago, I was studiously trying to stay neutral on the “fl ation” issue, as my colleague Ben Inker calls it. I, like many, was mesmerized by the potential for money supply to increase dramatically, given the fl oods of government debt used in the bailout. But now, better late than never, I am willing to take sides: with weak loan supply and fairly weak loan demand, the velocity of money has slowed, and infl ation seems a distant prospect. Suddenly (for me), it is fairly clear that a weak economy and declining or fl at prices are the prospect for the immediate future. The above quote, by Jeremy Grantham,

Hugh Hendry's all-time best "investment" book

Sticking with his outside-the-box thinking and contrarian persona, Hugh Hendry picks an obscure novel as the best investment book of all time... From The New York Times , The inspiration for his investment approach comes from an unlikely source: “The Gap in the Curtain,” a 1932 novel by John Buchan. The plot centers on five people who are chosen by a scientist to take part in an experiment that will let them glimpse one year into the future. Two see their own obituaries in one year’s time. Mr. Hendry calls the novel “the best investment book ever written” because it taught him to envision the future without neglecting what happened leading up to it , a mistake many investors make, he said. Probably not helpful to investors who rely on fundamental analysis but I can see some merit for those who are more macro-oriented and rely on technical analysis. Can you pluck a security's value at a point in time and take it for what it is; or is it important to know what led it to the curren

After a long absence... Articles of interest

It's about time I did another list of articles... Haven't posted a list of insightful articles in a long time so this is to catch up on some stuff... As usual, not in any particular order... The curse of being too successful: Can John Paulson handle bigger portfolios? (Fortune): John Paulson has been one of the most successful investors in the last few years; actually he was very good in the past too but it wasn't as bold or spectacular as his bet against subprime mortgages. Now that he is successful and has one of the biggest hedge funds in the world, can he adapt his strategies to handle all this capital? As an example, this Fortune article points out how he is unable to exit his AngloGold Ashanti (AU) position with apparently no takers for his stake. IEA downgrades oil demand growth forecast (Financial Times; h/t Infectious Greed ): I don't usually pay much attention to these analysts but this time it's worth noting. The interesting thing this time around is

Sunday Spectacle LXXIX

Baltic Dry Index & Dr. Copper (source: )

CALPERS - An example of the situation facing many pension funds

As if we didn't have enough problems as is, an additional big problem to worry about over the next few decades are the pension funds and their poor performance of late. Fortune has a nice recap of what happened to CALPERS , the largest pension fund in USA, that I belive is representative of the problems faced by other funds. Here are some of the key points that were brought up: Before clocking a $100 billion loss in early 2009, the California Public Employees' Retirement System, known as Calpers, had the swagger of a hedge fund and the certainty of a saint. Other pension funds followed its lead, loading up on leverage, investing in unrated CDOs, shoving money into high-priced private equity deals and barreling into commodities and real estate. The question now is whether a loss of nearly 40% of its market value -- the worst loss in the system's 77-year history -- has brought Calpers sufficiently back down to earth to avoid another such debacle, and whether other chaste

Sunday Spectacle LXXVIII


Google Insights analysis of Nokia and competitors

I have been researching Nokia (NOK) lately and while I wait for the annual reports to be mailed, I have been thinking about their competition. Anyone that has looked at history knows that new industries start off with many competitors and within 10 years, many of them fall off the earth, including some of the early pioneers. I suspect that is what is happening in the mobile phone industry. Mobile Phone Industry It's hard to correctly interpret the shift in the market that is unfolding in the background, let alone try to predict the future. Nevertheless, if one is considering investments in companies like Nokia, I think it's important to think about the industry (this incidentally is one reason Graham-oriented value investors stick to stable industries.) My guess at this point in time is that the losers are Palm and Motorola. These two companies were pioneers in the mobile phone industry—in fact, I may be wrong but I believe Motorola invented the modern wireless networking t

Super-bear Robert Prechter calls for monumental stock market crash

Some of you may have heard him say it before—there is a reason Robert Prechter is considered by some to be a perma-bear—but his opinion seems more apocalyptic than before. The New York Times catches up with Robert Prechter and gets his latest take on things: WITH the stock market lurching again, plenty of investors are nervous, and some are downright bearish. Then there’s Robert Prechter, the market forecaster and social theorist, who is in another league entirely. Mr. Prechter is convinced that we have entered a market decline of staggering proportions — perhaps the biggest of the last 300 years. ... His advice: individual investors should move completely out of the market and hold cash and cash equivalents, like Treasury bills, for years to come. (For traders with a fair amount of skill and willingness to embrace risk, he suggests other alternatives, like shorting the market or making bets on volatility.) But ultimately, “the decline will lead to one of the best investment opp

Sunday Spectacle LXXVII


Are we seeing a change in retail sales behaviour in America?

As the so-called Great Recession—I prefer to call it the Long Recession, since I liken it more to the Long Depression in the late 1800's than the Great Depression in the 1930's—was unfolding, one of the big uncertainties was over the structure of the US economy. Since the US consumer was the over-leveraged party going into the credit bust, the big change is likely to lie with the consumer. One of the big question marks for me, and to many others as well, has to do with the type of products consumers will purchase in the future. To put it bluntly, will American consumers pay up for higher-end products or will they trade down? By higher-end, I am referring to products that have a premium attached to it relative to similar products from competitors. This differs slightly from the definition used by some, where higher-end refers to luxury goods. For instance, I would consider, say, Colgate toothpaste to be a higher-end product within its market. I ran across a Bloomberg articl