Can Turtles Fly?

If I get time, I'll try to write more but it looks the global free trade system is about to collapse after USA, under Trump administration, has switched to a policy of tariffs. Tariffs tend to leave long-term effects. The following WSJ clip shows the consequences of tariffs, including the historical chicken war between USA and Germany. Obviously the current tariff war will be much, much, bigger given that it impacts almost all exports/imports.

Real Estate Contribution to Canadian Provincial GDP (source: " In Home Capital’s Mortgage Mess, Blame the ‘Unlucky’ Brokers " by Katia Dmitrieva, Bloomberg, May 23 2017)

Not sure if this an isolated event or a symptom of a possible Canadian housing bubble, but Home Capital Group (TSX: HCG), just terminated its CEO. I don't follow Canadian financials so not sure but I think HCG may be the largest alternative real estate lender in Canada. CBC News reports  (Mar 28 2017): Home Capital announced Monday after stock markets had closed that that Martin Reid, its president and CEO, was out, effective immediately. Investors responded by sending shares of Home Capital down $2.66 to finish at $25.06 on the TSX. Reid has been replaced by Bonita Then, a member of Home Capital's board of directors, until a new permanent CEO can be hired. "Home Capital requires leadership that can bring to bear a renewed operational discipline, emphasis on risk management and controls, and focus on improving performance," said Kevin P.D. Smith, the chair of company's board, in a statement. In February, Home Capital said it had received an enforcement...

Not in any order, here are some articles I ran across recently that you may find interesting... I often link to old articles so if there are stock suggestions or macro speculations, pay attention to the date (thesis may have changed by now). The Oscars of Paper Currency (James Tarmy for Bloomberg Businessweek, Dec 1, 2016): Didn't know some entity actually gave out award for best currency design. Kind of fun to see the artistic style of various currencies. Horizon Kinetics presentation on indexation and ETF problems (Steven Bregman, Horizon Kinetics, for Grant's Fall 2016 Conference - Oct 4 2016): Pretty good presentation on some issues with ETFs and indexation. If you invest in ETFs, check it out. Bear case presentation on Home Capital Group (Marc Cohodes for Grant's Fall 2016 Conference - Oct 4 2016): Bearish thesis on Canadian mortgage lender. If the Canadian housing market falls, HCG might be one of the first ones to get hit badly. Contender for the worst t...

You're using Internet Explorer 7, upgrade to a faster browser. Show me how I'm stuck using IE7, please don't show this again Remind me later The Globe & Mail's Report on Business magazine had a short blurb on the current state of computer trading in Canada . As many readers are likely aware, a huge chunk of the trading that occurs on stock exchanges presently comes from computer trading (such as high-frequency trading and computer-driven arbitrage). I am not a trader and most readers of this blog likely aren't either, but you may be interested to see how the short-term traders act. Trading has always been tough—to make matters worse, many of the markets they operate in are zero-sum markets!—but now they are competing against computers following algorithms. I have never been a trader, and am not familiar with professional traders either, so it's not clear to me if the current environment is harder for the professionals. Instead of relationship...

Will China Ever be As Rich as USA? China's total GDP will surpass USA within a few decades simply due to its larger population. But will each of its citizens be as rich as USA soon? There is nothing to say China—or some other country—won't ever surpass the wealth of USA on a per capita basis, but it's not as likely as many assume. The Federal Reserve Bank of Dallas examined this question in their June 2011 Economic Letter  (bolds by me): So, is it likely that Chinese living standards will ever match those in the U.S.? To get a handle on this question, it is useful to look at other countries’ experiences over a long period. Many nations underwent development miracles in the latter half of the 20th century. Reviewing data on the evolution of global living standards over the period reveals two interesting facts. First, there are several countries where per capita GDP exceeds that of the U.S., often by significant amounts. Almost all of these nations are oil exporters....

Ontario, my home province, is startling to resemble a mini-Greece :( Moody's sends a warning shot by downgrading Ontario's outlook to negative. The Globe & Mail reports , Moody's Investors Services has turned its wary eye from the basket cases of Europe to Ontario, revising its outlook to "negative" from "stable" and issuing a stern warning on the province's hefty debt burden. The decision, Moody's said in a statement, reflects the risks surrounding the province's ability to meet its medium-term fiscal targets. It noted the recent slowing of economic growth. "The negative outlook on the province reflects the softening economic outlook, Ontario's growing debt burden, and the extended time frame to achieving a balanced budget," Moody's analyst Jennifer Wong said. In his November statement, Finance Minister Dwight Duncan revised his forecasts for economic growth for both this year and next, a significant downgr...

Here are some articles I read in the last few months that you may find interesting... (Recommended) " The second economy " (McKinsey Quarterly; free reg required): An insightful article on, what the author calls, the second economy. This is the largely invisible, rapidly expanding, economy that underlies the physical economy. Information technology, particularly digitization and automation, drives this second economy and the author suggests it may be as large as the physical economy in 20 or 30 years. The emergence of this second economy can potentially increase wealth on par with what the Industrial Revolution did, while also causing large unemployment due to its nature (i.e. automation of jobs). The author almost suggests that the biggest problem in the near future will not be creating wealth but distributing it. Very Peter-Drucker-like article that is worth reading. If you are interested in economic changes to societies, it's worth checking out. The Technology Batt...

Happy Canada Day to fellow Canadians... and Happy Fourth of July to my neighbours down south. Here are some articles that have been on my list that I have read or plan to read. As usual, unlike other blogs, I don't necessarily link to recent articles so do keep the timeline in mind when reading my posts. (Recommended) Bitcoins - a novel, virtual, currency (Bloomberg Businessweek): Interesting story of a virtual online currency. I don't know if the US government, and others, will start cracking down on this—it's a threat to the existing currency scheme—but it remains to be seen. It's also interesting to see how the value of fiat currencies—bitcoin is purely virtual but limited by an algorithm—is set. Bitcoin's value appears to fluctuate wildly but that is likely due to the small number of users. "Reinsurance explained" (Liarspoker for Gurufocus): A basic introduction to reinsurance companies. (Recommended) Retained earnings for net-net stocks (Geo...

Here are some articles that I found interesting and insightful... (Recommended) "Stephen Elop's Nokia Adventure" (Bloomberg Businessweek): This is a good article on Nokia and its CEO, Stephen Elop. This article touches on why Nokia rejected Meego, its internal operating system, and also why Google and its Android platform was rejected. Anyone interested should check out the accompanying video and audio as well. Unfortunately for Elop, Nokia stock has fallen off a cliff and things aren't pretty. Investigation of Muddy Waters' allegations against Sino-forest (James' Analysis): Not sure who this person is but he seems to have started a blog with good analysis of the allegations by Carson Block of Muddy Waters. According to 'James,' some allegations appear incorrect while others may be plausible. I think the Sino-forest saga is only in chapter 1 and there is likely to be more to all this. Fundamentally-weighted passive investing and pure passive in...

NOTE: Do not construe anything written below as implying that Sino-forest is a fraud. I'm simply repeating some who are presenting information that casts doubt on Chinese RTOs, including Sino-forest. Their opinions may or may not be correct. Future of stock price movements cannot be predicted with certainty. As I and others have mentioned, it appears that a big number of Chinese RTOs (reverse-take-overs) are dubious and in some cases, outright scams. So far, most of these have been micro-caps and small-caps. However, one of the bearish research firms, Muddy Waters Research , has tackled a bigger company, Sino-forest (TSX: TRE), whose market cap before the recent sell-off was around C$3 billion. Sino-forest is a forestry company listed on the Toronto Stock Exchange—it was actually a darling of some commodity investors a few years back—with operations largely in China, with some marginal stake in New Zealand. A few days ago, Muddy Waters Research published an extremely bearish 19...

I always like reading about how certain industries evolved over time—partly to see how the business economics had changed over time; partly to see how life used to be. I ran across an interview with the founder of the Four Seasons hotel chain and he briefly touched on how the hotel industry has changed.

Here are some articles I found interesting. Not in any order... Disclosed Fairfax e-mails show short-seller attacks on company (The Globe & Mail): More details from the bizarre situation from a few years ago. It's amazing what some short-sellers will do. Daniel Loeb from Third Point doesn't come out looking good, that's for sure. (Recommended) Jacob Wolinsky interviews Roger Lowenstein (Jacob Wolinsky for GuruFocus): Newbies may not be familiar with Roger Lowenstein but he is one of the top (business) authors of the last few decades. He is most famous for writing a biography of Warren Buffett. (Recommended) The high-profit-margin risk (Vitaliy Katsenelson for GuruFocus): Many who are bearish, including me, are most concerned, not with earthquakes, wars, and the like, but, with the seemingly high profit margins of American companies. This article runs down the author's view of the risk. WikiLeaks cables - US diplomats' view of BYD (Reuters via The Star)...

If you are already feeling information overload, let me make it worse and offer you the following articles ;) As usual, not in any particular order... GM changes its logo on its HQ building (The New York Times): Subtle but changes like this are important to motivate the employees and project a new brand image. The IPO was successful; the company has reduced its costs; new leadership; betting big on the Volt... Let's see if it re-invent itself, a la IBM in the 90's, or if it will continue its long decline into oblivion. Consulo Mack's Wealthtrack interview with David Einhorn (Wealthtrack; via Gurufocus): David Einhorn is a sharp, up-and-coming, value investor. If I'm not mistaken, he hails from the midwest and is kind of like a young Warren Buffett (less proven than Buffett though; also seems more shorter-term-oriented and doesn't employ strategies of 'Buffett Prime' i.e. 1970's+). He rarely gives interviews worth talking about but I thought I would l...

I was just looking at the list of top brands I posted on Sunday and I notice a lot of technology companies on that list. I wonder if technology companies were as prominent one or two decades ago, and whether the brands have staying power. Thirty or fourty years ago, I would imagine that these lists would have been mostly dominated by branded consumer goods companies. Will companies like Microsoft, Intel, Cisco, Google, Amazon, and so forth, stay near the top? It'll be an interesting situation to watch. Anyway, here are some articles I encountered in the last few months that you may find worth reading... Current state of Live Nation (Fortune): One of the companies on my watchlist is Live Nation (LYV), a ticketing and events promoter created out a merger with Ticketmaster. Fortune has a story updating the current scenario. Sal Khan's free online teaching modules (Fortune): Apparently a favourite of Bill Gates, Salman Khan's webiste, khanacademy.org , offers free online ...

Sorry about the lack of posts. Hopefully the linked articles will keep you busy :) (Recommended) Top-down look at Microsoft (Bronte Capital): John Hampton of Bronte Capital takes a detailed industry-level look at Microsoft. The comments by readers is also worth reading IMO. I haven't looked closely at Microsoft but my feeling is that it is probably an investment that will produce market(or maybe 1% or 2% more than market) returns. The problem for companies like these is that they are very large and its hard to see a big upside. As for the downside, it is probably exaggerated. As long as Microsoft produces high profits and reinvests a lot in R&D, its downside won't be that large. Microsoft's historical strength is in turning products, often after competitors get first-mover advantage, into relatively lower cost, mass-market, products... Investing in Microsoft is kind of like inesting in Coca-Cola in the 70's or 80's. That is, you really need some high growth m...