by ilene - November 16th, 2015 12:45 pm
Courtesy of John Rubino.
This weekend’s Paris attacks, occurring in the middle of one of history’s largest mass-migrations, has the feel of uncharted territory. But it’s actually an eerie echo of something that happened nearly two thousand years ago in more-or-less the same place.
According to some historians, the fall of the Roman Empire wasn’t pre-ordained. By AD 300 it had its problems, including far-flung, hard-to-defend borders and recurring currency crises, but was generally stable and prosperous. Then a new power arose in the East. The Huns were horse archers who could out-ride and out-shoot their neighbors, and they terrorized the Vandals and Goths who lived in what is now Germany and the Balkans, driving them west to Rome’s borders.
Rome chose to let half a million “barbarians” enter, hoping to use them as soldiers and laborers. Instead, it found itself with invading armies and unstable, uncontrollable political coalitions. The complete story is winding, convoluted and full of unfamiliar names, but it ends with the division of the Empire into two parts and the destruction of the original, Italian half. Here’s a History Channel synopsis of the process:
The Barbarian attacks on Rome partially stemmed from a mass migration caused by the Huns’ invasion of Europe in the late fourth century. When these Eurasian warriors rampaged through northern Europe, they drove many Germanic tribes to the borders of the Roman Empire. The Romans grudgingly allowed members of the Visigoth tribe to cross south of the Danube and into the safety of Roman territory, but they treated them with extreme cruelty. According to the historian Ammianus Marcellinus, Roman officials even forced the starving Goths to trade their children into slavery in exchange for dog meat. In brutalizing the Goths, the Romans created a dangerous enemy within their own borders. When the oppression became too much to bear, the Goths rose up in revolt and eventually routed a Roman army and killed the Eastern Emperor Valens during the Battle of Adrianople in A.D.
by ilene - November 15th, 2015 12:12 pm
Courtesy of John Rubino.
One of the challenges of managing money is the (increasingly-frequent) need to translate non-financial tragedies into action to protect clients and, yes, profit from the broader world’s horror.
So while most people react to events in Paris with stunned sympathy and/or impotent rage, the financial community is deciding what to buy and sell. And right now it looks like “sell” is winning.
(Telegraph) – Global stock markets are headed for a sell-off on Monday after the deadliest attacks to hit France since the Second World War left more than 100 people dead and dozens injured.
Stock market futures pointed to falls in Asia, Europe and the US, as bourses across the Middle East recoiled on Sunday amid warnings that the terrorist attacks in Paris could spark a renewed bout of volatility.
The Dubai stock market fell 3.7pc in afternoon trading on Sunday to a fresh 2015 low, while stocks in Saudi Arabia lost 2.6pc and Egypt’s benchmark index dropped to a two-year low. Markets in Kuwait and Bahrain also fell.
Sustained oil price weakness has already prompted concerns about the region’s outlook.
Analysts said the attack was likely to hit tourism in Paris, which could have consequences for the rest of France and Europe.
“The truly awful events in Paris could certainly have a significant negative impact on consumer confidence in the near term at least,” said Howard Archer, chief UK and European economist at IHS Global Insight.
“There could also be an adverse impact on tourism in some European countries where people think attacks are most likely to occur – not just in France…Volatility should rise for Europe and for the Middle East.”
Several things to consider going into next week:
First, the global equity markets were already correcting before the Paris attacks. Last week was the worst for US stocks since August, and the plunging price of oil combined with truly horrible numbers from major retail chains pointed towards more volatility in any event.
by ilene - November 14th, 2015 5:44 pm
By John Mauldin
One of the most successful investors in the world is Howard Marks of Oaktree Capital Management. One of the things I look forward to every quarter is the letter he writes to his clients – it goes right to the top of my reading list. Not only is it always full of generally brilliant investment counsel, Howard is also a great writer. He has an easy style that pulls you through his letter effortlessly.
I have never sent his letter to you as an Outside the Box, as the copies I get are clearly watermarked and copyrighted. So I was surprised and delighted to learn that the letter is free when I listened to a speech by Howard in which he encouraged everyone to get it. Unlike another hundred-billion-dollar hedge fund company that shall go unnamed, Oaktree evidently thinks that brilliance should be shared.
I am especially pleased to be able to pass on this latest issue, in which Howard returns to a theme he has used in the past, which is the parallels between investing and sports. He recounts the career of Yogi Berra, who sadly passed away in September. Yogi was always a fan favorite, and he was certainly one of mine; but it was his consistency, both on offense and defense, that made him great.
Marks goes on to defend the seemingly indefensible: in last year’s Super Bowl, Pete Carroll, coach of the Seattle Seahawks, called for a passing play on the one-yard line as time was running out, which as anyone who watched that game would remember, was one of the most spectacularly unsuccessful decisions of all time. But Howard asks us, “His decision was unsuccessful, but was it wrong?”
Can we judge a career on one play? I am grateful that my investment and writing careers are not judged solely by my many mistakes.
This past weekend at the T3 Conference in Miami was enlightening. Todd Harrison put together a great lineup of speakers who represented a wide range of investment styles and strategies. Perhaps because I have been looking at alternative income…
by ilene - November 12th, 2015 9:05 pm
A search for "Theranos" on Business Insider brings a long list of recent developments, so go here for the play-by-play history as a prequel to the Zero Hedge post below.
Looking back at the build up and the let down on the Theranos story, the recurring question that comes up is how the smart people that funded, promoted and wrote about this company never stopped and looked beyond the claim of “30 tests from one drop of blood” that seemed to be the mantra for the company. While we may never know the answer to the question, Aswath Damodaran offers three possible reasons that should operate as red flags on future young company narratives…
1. The Runaway Story: If Aaron Sorkin were writing a movie about a young start up, it would be almost impossible for him to come up with one as gripping as the Theranos story: a nineteen-year old woman (that already makes it different from the typical start up founder), drops out of Stanford (the new Harvard) and disrupts a business that makes us go through a health ritual that we all dislike. Who amongst us has not sat for hours at a lab for a blood test, subjected ourselves to multiple syringe shots as the technician draw large vials of blood, waited for days to get the test back and then blanched at the bill for $1,500 for the tests? To add to its allure, the story had a missionary component to it, of a product that would change health care around the world by bringing cheap and speedy blood testing to the vast multitudes that cannot afford the status quo.
The mix of exuberance, passion and missionary zeal that animated the company comes through in this interview that Ms. Holmes gave Wired magazine before the dam broke a few weeks ago. As you read the interview, you can perhaps see why there was so little questioning and skepticism along the way. With a story this good and a heroine this likeable, would you want to be the Grinch raising mundane questions about whether the product actually works?
by ilene - November 11th, 2015 3:48 pm
Phil's Weekly Must-Watch Webinar is now available on YouTube (subscribe on YouTube).
Watch below. Enjoy!
Major Topics Timeline:
00:01:50 - Quick look at the market, futures and various indexes.
00:02:45 – Crack spread, wider than usual. VLO. Natural gas. Commodity futures. Consumers are cutting back.
00:09:15 - It's the perfect time to buy natural gas, UNG. Natural gas is cheap. Natural gas is generally a local product because it was previously inefficient to move it around. It's a fairly clean burning fuel but it's not always easy to get and it's hard to store. But now that liquidified natural gas has been perfected, gas can be moved and stored efficiently. Price of natural gas should go higher. We're like the Saudi Arabia of natural gas. Energy, coal, natural gas. UNG spread strategy.
00:28:50 – Discussion of how a weak vs. strong Dollar affects the price of indexes.
00:30:00 – UGAZ — too much decay for a long term trade.
00:31:20 – Gold discussion. New trade idea, bull call spread on GLD. Gold is not likely to fall below $1,000, though it's possible.
00:41:00 – UNG spread, example.
00:42:20 – IBM: PSW's stock of the year for 2016. Phil's expecting a substantial move over in the next two years. Cloud services, Watson (which will replace millions of jobs). Long term position.
00:47:30 – AAPL example. AAPL kept going lower, and Phil kept saying buy more. IBM is in a similar position to AAPL before its big move higher.
00:57:40 – AT&T: T's a very boring stock to own. Bull call spread – not the best strategy because the price of the spread is not high enough. Try something else, e.g. buy stock, sell call and sell put. Collect the dividend with this strategy.
01:03:30 - FXI, China and Hong Kong.
01:06:00 - UNG position.
01:07:00 – NRF position.
01:07:35 - LL: Long LL in the long-term portfolio. Hanging on to LL.
01:09:15 – More on the T long-term dividend play.
by ilene - November 10th, 2015 5:55 pm
Today, U.S. fast-food workers will strike across 270 cities in a protest for higher wages and union rights that they hope will catch the attention of candidates in 2016 elections, organizers said.
The walkouts will be followed by protests in 500 cities by low-wage workers in such sectors as fast food and home and child care, a statement by organizers of the Fight for $15 campaign said on Monday.
The protests and strikes are aimed at gaining candidates’ support heading into the 2016 election for a minimum wage of $15 an hour and union rights, it said.
The strikes and protests will include workers from McDonald’s, Wendy’s, Burger King , KFC and other restaurants, the statement said.
And while we sympathize with their demands for higher wages, here is the simple reason why they will be very much futile.
Dear fast food workers of the US – presenting you nemesis: the Momentum Machines burger maker.
According to a recent BofA reported on how robotics will reshape the world, San Francisco start up Momentum Machines are out to fully automate the production of burgers with the aim of replacing a human fast food worker. The machine can shape burgers from ground meat, grill them to order with the specified amount of char, toast buns, add tomatoes, onions, pickles, and finally place it on a conveyor belt.
The robot is shown below. It occupies 24 square feet, and is much smaller and efficient than most assembly-line fast-food operations. It provides "gourmet cooking methods never before used in a fast food restaurant" and will deposit the completed burger into a bag. It does all of this without a trace of attitude.
According to public data, the company's robot can "slice toppings like tomatoes and pickles immediately before it places the slice onto your burger, giving you the freshest burger possible." Unlike human workers, the robot is "more consistent, more sanitary, and can produce ~360 hamburgers per hour" or a burger every 10 seconds.
by ilene - November 9th, 2015 3:12 pm
Courtesy of James Howard Kunstler
The economic picture manufactured by the national consensus trance has never been more out of touch with reality in my lifetime. And so the questions as to what anyone might do can hardly be addressed. How can I protect my savings? Who do I vote for? How do I think about where my country is going? Incoherence reigns, especially in the circles ruled by those who guard the status quo, which includes the failing legacy news media.
The Federal Reserve has morphed from being a faceless background institution of the most limited purpose to a claque of necromancers and astrologasters, led by one grand vizier, in full public view pretending to steer a gigantic economic vessel that has, in fact, lost its rudder and is drifting into a maelstrom.
For more than a year, the fate of the nation has hung on whether the Fed might raise their benchmark interest rate one quarter of a percent. They talk about it incessantly, and therefore the mob of financial market observers has to chatter about it incessantly, and the chatter itself has appeared to obviate the need for any actual action on the matter. The Fed gets to influence markets without ever having to do anything. And mostly it has worked to produce the false narrative of an advanced economy that is working splendidly well to the advantage of the common good.
This is all occurring against the background of a larger global network of economic relations that is quite clearly breaking apart. The rising tensions between the US, Russia, China, and the Euro Union grew out of monetary mischief “innovated” by our central bank, especially the shenanigans around debt monetization, which have created dangerous distortions in markets, trade, and perceptions of national interest. Nations are rattling sabers at one another and bluster is in the air. The world is bankrupt after thirty years of borrowing from the future to throw a party in the present, and the authorities can’t acknowledge that.
But they can provide the conditions for disguising it, especially in the statistical hall
by ilene - November 8th, 2015 8:33 pm
Courtesy of Wade of Investing Caffeine
The game of investing would be rather simple if everything moved in a straight line and economic data points could be could be connected with a level ruler. Unfortunately, the real world doesn’t operate that way – data points are actually scattered continuously. In the short-run, inflation, GDP, exchange rates, interest rates, corporate earnings, profit margins, geopolitics, natural disasters, financial crises, and an infinite number of other factors are very difficult to predict with any accurate consistency. The true way to make money is to correctly identify long-term trends and then opportunistically take advantage of the chaos by using the power of mean reversion. Let me explain.
Take for example the just-released October employment figures, which on the surface showed a blowout creation of +271,000 new jobs during the month (unemployment rate decline to 5.0%) versus the Wall Street consensus forecast of +180,000 (flat unemployment rate of 5.1%). The rise in new workers was a marked acceleration from the +137,000 additions in September and the +136,000 in August. The better-than-expected jobs numbers, the highest monthly addition since late 2014, was paraded across television broadcasts and web headlines as a blowout number, which gives the Federal Reserve and Chairwoman Janet Yellen more ammunition to raise interest rates next month at the Federal Open Market Committee meeting. Investors are now factoring in roughly a 70% probability of a +0.25% interest rate hike next month compared to an approximately 30% chance of an increase a few weeks ago.
As is often the case, speculators, traders, and the media rely heavily on their trusty ruler to connect two data points to create a trend, and then subsequently extrapolate that trend out into infinity, whether the trend is moving upwards or downwards. I went back in time to explore the media’s infatuation with limitless extrapolation in my Back to the Future series (see Part I; Part II; and Part III). More recently, weakening data in China caused traders to extrapolate that weakness into perpetuity and pushed Chinese stocks down in August by more than -20% and U.S. stocks down more than -10%, over the same timeframe.
While most of the media coverage blew the recent jobs number out of proportion (see BOOM! Big Rebound in Job…
by ilene - November 7th, 2015 5:59 pm
- Activists are all different, some are more short term and some are more long term.
- Buy when no one wants to buy, and hold for a decade or so.
- Many of our companies are not run well.
- Valeant's business model. Overstating earnings. Day of comeuppance. ETFs.
- Friendships with William Ackman and Larry Fink.
- Lots more. Watch the whole thing.
Courtesy of Joshua M Brown
This week Carl Icahn discussed activist investing and his career with Andrew Ross Sorkin as the closing event at the annual DealBook conference, which I’ve renamed “Earning Man”
Definitely worth watching and absorbing, it’s insightful and hilarious.
“The 2008 Crisis Didn’t Come From Nowhere,” Jim Grant Slams The Fed’s Utopian World Of “Economic Sleepwalking”
by ilene - November 7th, 2015 1:00 pm
Central bank’s experimental policies are only hurting America instead of leading the nation into financial prosperity, exclaims James Grant, editor of Grant's Interest Rate Observer. "The Fed is a relic of the age of command and control. The Fed is an anachronism,” Grant tells Bloomberg TV in this excellent interview, "The Fed ought to get out of the business of masterminding ‘the American enterprise,’ what we call the U.S. economy." Central bankers, Grant adds, by pressing rates to nothing, have given rise to this "very pleasant kind of inflation we call bull markets." While bull markets are great insofar as they reflect what is actually going on, "they are very dangerous to the extent that they are the artificial creation of artificial interest rates."
"We are in a regime of price administration. Price control is a policy that has failed for millenia. When prices are manipulated, manhandled, and otherwsise distorted, real decisions follow and the real decisions are distorted… there's bricks, mortar, and human lives attached to these [interest rate decisions]… and that's why they matter"
"How do they know the funds rate ought to be zero?"
The world's central bankers went to the same schools, talk the same language, have the same world view.
They have shared conditions. They believe, for example, that an average of prices, which they believe they can calculate, must rise at two percent a year unless the world fall into something they choose to call deflation.
They believe that they can see into the future. They believe that they have the knowledge and the dexterity to manipulate interest rates to the benefit of society.
The central banks no more than the rest of us can see into the future. They are managed by human beings who do their best but who cannot — underscore — cannot see into the future and improve it before it happens. That's their conceit. But it is not given to mankind to do such things.
They try. They have every good intention. But they are appliers of an outdated scheme of command and control. They don't know what they do."