Thursday, December 31, 2009
1. Dave Barry's Year in Review: 2009 - Miami Herald.
2. Dud of a Decade - Chart of the Day via Bear Mountain Bull.
3. A Hell of a Decade - Peter Schiff at Campaign for Liberty.
4. Marc Faber shares his 2010 outlook on CNBC - Investment Postcards.
5. Ultimate Guide to 2010 Investment Outlooks - PragCap.
6. James Howard Kunstler: Forecast 2010 - Kunstler.com
7. Decade of Disruption: 4 part series - FT.com
8. Reflection and Introspection: Quotes - Financial Philosopher.
9. My Decade...Economically Speaking - Howard Lindzon.
Enjoy these links and we'll see you in 2010. Have a happy and healthy New Year.
Wednesday, December 30, 2009
Is China's economy sailing along thanks to a skillful implementation of government-directed "stimulus", or is the country's current prosperity and stated economic output merely a mirage?
Jim Chanos is on record saying that China is "Dubai times 1000" and that the government-directed economy is being propped up with phony GDP statistics. His firm, Kynikos Associates, has also been influenced by a report on China's economy from Pivot Capital Management:
"The Pivot Capital report was extremely popular in Chanos’s office and concluded, “We believe the coming slowdown in China has the potential to be a similar watershed event for world markets as the reversal of the U.S. subprime and housing boom.” "
I thought it would be insightful to follow-up Monday's post with a look at this research, so I'm currently reading Pivot Capital's report, "China's Investment Boom: the Great Leap into the Unknown" (pdf).
If you're inclined to read along and share your thoughts on China's economy with us, we'd appreciate it.
Monday, December 28, 2009
"I am trying to remember now where it was, and when it was, that it hit me. Was it during my first walk along the Bund in Shanghai in 2005? Was it amid the smog and dust of Chonqing, listening to a local Communist party official describe a vast mound of rubble as the future financial centre of south-west China?
That was last year, and somehow it impressed me more than all the synchronised razzamatazz of the Olympic opening ceremony in Beijing. Or was it at Carnegie Hall only last month, as I sat mesmerised by the music of Angel Lam, the dazzlingly gifted young Chinese composer who personifies the Orientalisation of classical music?
I think maybe it was only then that I really got the point about this decade, just as it was drawing to a close: that we are living through the end of 500 years of western ascendancy."
Ferguson has been thinking and writing about the rise of China and the shaky state of the US' undeclared empire quite a bit lately. He now points out, citing economic research from Goldman Sachs, that China could surpass the US economy in terms of GDP by 2027.
The long-term trends of rapid industrialization in developing nations and the gradual transfer of wealth and economic influence towards Asia are undeniable. However, one has to wonder if the current strength of the Chinese economy and the effectiveness of its stimulus efforts are as solid as Ferguson seems to believe. On these points, he and hedge fund manager, Jim Chanos may disagree.
Sunday, December 27, 2009
Matt Davio at MissTrade recently interviewed Gregory Zuckerman, writer and author of, The Greatest Trade Ever, a new book about the "short" subprime real estate trade and the fortunes made by speculators and investors like hedge fund manager John Paulson through their persistent effort in carrying out that trade.
After watching this interview and hearing all the great insights on what made John Paulson's trade a breakthrough winner for his firm & for his investors, I decided that Zuckerman's book should be at the top of my reading list. Can't wait to check it out.
Related articles and posts:
1. Lessons from John Paulson - Finance Trends.
2. 'Greatest Trade Ever' podcast w/ Gregory Zuckerman - Slate.
3. MissTrade "Trader Talk" interviews - Vimeo.
Thursday, December 24, 2009
Season's greetings to all. And of course, as is the holiday tradition here at Finance Trends, we like to celebrate with a Peanuts special. So here's, "A Charlie Brown Christmas". Enjoy!
Merry Christmas to everyone celebrating and a happy holiday season to all our readers and friends in the financial blogosphere. We'll see you over the weekend for more financial news and insights. Have a great holiday.
Tuesday, December 22, 2009
For a few highlights from this discussion, see my Twitter page for yesterday's Faber related tweets. Or, watch the 3 part interview and get it straight from the horse's mouth.
Lots of interesting comments on investing opportunities in India, the US' standard of living relative to emerging nations, values in the commodities arena, the future direction of US government bond yields, and more. Enjoy the clips.
Friday, December 18, 2009
Rather than waste my time (and yours) regurgitating their nonsense, I thought we'd take a quick look at some of the more interesting reactions to, and accurate appraisals of, this news. A short linkfest of Bernanke & Fed realism follows:
1. Person of the Year, My Foot! Bernanke "Failed Miserably", Says Chris Whalen - Tech Ticker.
2. A More Honest Look at Time Person of the Year Ben Bernanke - Wall St. Cheat Sheet.
3. Time Magazine's Kiss of Death: "You!" - Mish.
4. Time on Bernanke: The Peak of Central Banking? - Minyanville.
5. Ron Paul on Bernanke and the Fed - Jesse's Cafe.
6. Impoverisher of the Year - Mises Blog.
We should note that the Senate Banking Committee is backing Bernanke for a second term as Federal Reserve Chairman, with the debate over his renomination heading to the full senate in January.
What do you think? Should Bernanke stick around for a second term? Ponder that, and enjoy your weekend
Wednesday, December 16, 2009
If you happened to check in with us on Monday, you'll know that we found some worthwhile presentations in this online conference archive.
Tardif's talk is no exception, and he offers the view that the much talked about inflation & deflation scenarios are equally valid. JF sees inflation vs. deflation as a nine round boxing match with either side winning alternating rounds over a longer-term period.
If you want to jump straight to his views on the inflation & deflation scenario, skip ahead to slide 5 in Tardif's online presentation. Food for thought.
Related articles & posts:
1. FSN inflation vs deflation debate updates - Finance Trends.
2. Doug Casey: 'Deflation is a good thing' - Finance Trends.
Monday, December 14, 2009
Judging from the conference title and the presentations listed, most of the discussion seems to center around the gold, energy, & the resources sector. However, there are some presentations that are differently focused; Barry Ritholtz' talk on our "Bailout Nation" is one such standout.
Stocktwits community members and MacroTwits devotees will surely recognize energy writer, Gregor Macdonald, who offers up his take on the future of energy transition and the likely impact that alternative energy and coal will have on our planet in the years to come.
Definitely something for all here, so do take a look at some of these free audio & visual slide presentations. You may find some actionable information or useful educational material within.
Friday, December 11, 2009
Jim Rogers is in New York, making the rounds on business television. Here's a great interview with Rogers on CNBC, talking with Maria Bartiromo about the Fed, Geithner, and the state of the US' finances.
He also shared his investment (and trading) outlook on the US dollar, foreign currencies, and commodities. Rogers agrees that gold has rallied strongly and is ready for a move down, but notes that he is keeping his gold for the long term, and he's still quite bullish on relatively undervalued silver.
Jim also sat down to talk with Tech Ticker and made some very interesting comments on the bogus economic recovery and the future of America.
Rogers feels that most of the phantom recovery has been based on more money printing, debt, and wealth transfers from taxpayers to failed banks and their creditors. He also makes some very serious comments about our stepped up involvement in Afghanistan and the long-term consequences for our nation and its economy.
More Tech Ticker segments with Rogers: "Audit the Fed, Then Abolish It", &, "Why Jim Rogers is Buying Dollars".
Enjoy the interviews (hat tip to Chris Nelder on Twitter), and let's hope that some of this serves as a wake up call to those still in thrall with our "leaders".
Related articles and posts:
1. Jim Rogers interview with FT.com - Finance Trends.
2. Marc Faber BNN interview - Finance Trends.
Wednesday, December 9, 2009
"If anyone still doubted that this administration’s foreign policy would bring any kind of change, this week’s debate on Afghanistan should remove all doubt. The President’s stated justifications for sending more troops to Afghanistan and escalating war amount to little more than recycling all the false reasons we began the conflict.
It is so discouraging to see this coming from our new leadership, when the people were hoping for peace. New polls show that 49 percent of the people favor minding our own business on the world stage, up from 30 percent in 2002. Perpetual war is not solving anything. Indeed continually seeking out monsters to destroy abroad only threatens our security here at home as international resentment against us builds.
The people understand this and are becoming increasingly frustrated at not being heard by the decision-makers. The leaders say some things the people want to hear, but change never comes..."
If you want to know what's happening behind the scenes, follow the money. We've got an escalating war in Afghanistan, but as Mr. Paul points out, the originally stated purpose of our military mission there (capturing Bin Laden and other 9/11 plotters) has somehow eluded us for the past eight years.
Meanwhile the debate over whether or not Bin Laden is still in Afghanistan continues, and another foreign war (or two) drags on as our new President weighs his options in light of a hoped for second term in office.
Monday, December 7, 2009
Here's an excerpt from that piece:
"Ben S. Bernanke doesn't know how lucky he is. Tongue-lashings from Bernie Sanders, the populist senator from Vermont, are one thing. The hangman's noose is another. Section 19 of this country's founding monetary legislation, the Coinage Act of 1792, prescribed the death penalty for any official who fraudulently debased the people's money.
If you want a great, article-length review of our money system and how we got to where we are today, definitely check out Grant's essay in full.
PS, if you'd like to know more about the country's monetary laws, you may want to seek out Edwin Vieira's very thorough book, Pieces of Eight.
Related articles and posts:
1. Jim Grant on CNBC: get set for inflation - Finance Trends.
2. Rothbard: The Founding of the Federal Reserve - Finance Trends.
Friday, December 4, 2009
As instructive as he can be on the gold and metals markets, I have to tell you that it was Jim's opening comments on Jesse Livermore and his father, Bert Seligman, that had me glued to this interview. If you are a fan of trading and market history, you won't want to miss it. Jim even discusses Livermore's last years and offers a contrary view of JL's circumstances at the time of his death.
Enjoy the interview, and if you like the broadcast, check out these past Eric King interviews with Rick Rule and Jim Puplava for more great insights on the markets and our world.
Wednesday, December 2, 2009
"In the great scheme of things—let's be frank—it does not matter much if Iceland teeters on the brink of fiscal collapse, or Ireland, for that matter. The locals suffer, but the world goes on much as usual.
Of course, some of us in the US might welcome an end to our militaristic global empire; maybe it will help bring about a return to our founding principles and a refocusing on national defense (in the the true sense of the word) and securing our borders.
Hat tip to The Weekly Standard blog.
Monday, November 30, 2009
Japanese shares closed higher on hopes that Dubai problems would not spread, while European shares closed lower Monday (likely due to fears over European banks' lending exposure to Dubai), and Dubai's benchmark index closed down 7.3 %.
Here in America, the major averages are still negative on the day, though the Dow and S&P 500 are climbing back towards neutral territory at 2:10 EST. As the NY Times points out, Wall Street is still trying to gauge the likely fallout from Dubai, along with the underlying meaning (if any) of post-Thanksgiving retail shopping figures.
"Wall Street shares fluctuated on Monday as investors gauged the fallout from Dubai’s debt crisis and weighed results from the first weekend of holiday shopping...
...But traders on Monday seemed more focused on the situation in Dubai, where Dubai World, the emirate’s investment arm, said last week that it would not be able to make on-time payments for some of its $59 billion in debt.
That rattled the markets Thursday and Friday, but on Sunday, the central bank in the United Arab Emirates tried to reassure investors by pledging to make extra financing available to all banks in the country, including foreign institutions with local branches.
Uri Landesman, head of global growth at ING, said investors saw danger in the potential ripple effects to other developing economies, even if American banks are not affected."
Judging (correctly) that the Dubai story would continue to be a big concern heading into this week, Gregor Macdonald and friends spent a fair amount of time on this topic in last Sunday's MacroTwits hour on Stocktwits TV. Here are a couple of interesting articles on Dubai that were shared in that macro discussion.
The first is a December 2008 Bloomberg article that I dug up from an old blog post. If you read through this year-old piece on Dubai's bursting real estate bubble, you'll notice many of the key names (Nakheel, Emaar Properties) and themes (a debt fueled building boom) which have figured so prominently in last week's Dubai World debt story.
The second is an article from The Independent shared by Gregor Macdonald called, "The Dark Side of Dubai". As those who kept up with the Dubai story this decade will probably guess, the piece focuses on the reportedly near slave-labor conditions that supported the rise of Dubai and the environmental and social problems which have accompanied it. It's a long piece, but definitely worth a look.
Friday, November 27, 2009
Specifically, markets around the world have been moving on news of Dubai World's debt restructuring (possible delay of debt repayments) and what that could mean for Middle Eastern and emerging markets in a larger sense.
More from Financial Times, "Dubai sends markets into turmoil":
"Stock markets around the world were convulsed yesterday as investors scrambled to understand the implications of Dubai World's restructuring and unexpected debt standstill.
The lack of information about Dubai's flagship government-owned holding company, made worse by a religious holiday in the Middle East, prompted indiscriminate selling of stocks linked to the region. The cost of insuring against default in emerging markets around the world also leapt...
With trading volumes low because of the Eid holiday and US Thanksgiving, investors moved into safer assets, pushing up prices of traditional havens such as government bonds...
Investors said that the lack of information about the debt standstill, announced on Wednesday, was the key factor sparking the wider turmoil. "
Adding to our earlier theme of sovereign debt default, Bloomberg notes that Dubai's debt problems may trigger a major sovereign default if the problems are not contained within the emirate's corporate sector.
"Dubai’s debt woes may worsen to become a “major sovereign default” that roils developing nations and cuts off capital flows to emerging markets, Bank of America Corp. said.
“One cannot rule out -- as a tail risk -- a case where this would escalate into a major sovereign default problem, which would then resonate across global emerging markets in the same way that Argentina did in the early 2000s or Russia in the late 1990s,” Bank of America strategists Benoit Anne and Daniel Tenengauzer wrote in a report.
A default would lead to a “sudden stop of capital flows into emerging markets” and be a “major step back” in the recovery from the global financial crisis, they wrote..."
Of course, this seems to be analysts' worst-case scenario for debt markets and emerging markets, but it seems all eyes are currently on Abu Dhabi to determine if there will be some sort of bailout for its neighboring emirate, Dubai.
Related articles and posts:
1. Dubai Debacle (linkfest) - MarketNut.
2. Investors to leave Dubai for Abu Dhabi, Egypt - Reuters.
3. Mobius says Dubai may trigger mkt correction - Bloomberg.
Monday, November 23, 2009
"A few weeks ago, Claudio Borio, head of research at the Bank for International Settlements, warned in a solemn note to Group of 20 leaders that modern financial policymakers are "driving while just looking in the rear-view mirror": western finance officials have focused so much on past risks that they fail to spot new dangers.
Worse still, as policymakers rush to implement reforms in response to one financial calamity, they are apt to create distortions that pave the way for the next disaster. Just such an unintended consequence could now be festering in the banking sector, as its balance sheets are increasingly stuffed with government bonds.These days, there is a near-unanimous belief among western regulators that one way to prevent a repeat of the 2007-08 crisis is to stop banks taking crazy risks with subprime mortgage bonds or complex instruments such as collateralised debt obligations (CDOs). Instead, banks are being urged to hold a higher proportion of their assets in the form of "safe" instruments, most notably sovereign or quasi-sovereign debt..."
Read on at the link above for Tett's explanation of why government bonds may prove to be more of a risky trap (a la subprime MBS) than a "risk-free" investment.
Speaking of subprime and the problems it hath wrought: if you want to take a quick jog down memory lane to the (relatively) innocent days of summer 2007, check out our post, "Asset backs, subprime: shades of 1990?".
You may also find some additional worthwhile reading on the subject of looming sovereign risk in our related articles section below.
Related articles and posts:
1. Sovereign risk and UK credit ratings - Finance Trends.
2. Sovereign bankruptcies will rise - Puru Saxena at FSO.
3. Marc Faber on sovereign risk (Bloomberg) - Finance Trends.
4. Jim Rogers agrees with Marc Faber (CNBC) - Fund My Mutual Fund.
Friday, November 20, 2009
The Paulson & Co. fund manager is set to launch a dedicated gold and gold mining equity-focused fund at the start of next year, in which he'll invest $250 million of his own money.
You may recall that Paulson's earlier forays into gold ignited a new rush into gold by hedge funds and investors piggybacking on the trades of sophisticated hedge fund managers. JP's new fund signals his continued positive outlook for the precious metals sector over the intermediate to long-term.
That's not all that's happening in the world of John Paulson. Investors have pored over his firm's recent 13-F filing and letter to investors, while his comments on Bank of America (Paulson & Co.'s largest position in the financials sector) have fueled publicity over a divergence of opinion with bank analyst Meredith Whitney on the stock's outlook.
Plus, there are gathering opinions on Gregory Zuckerman's new book, "The Greatest Trade Ever", which details the fund's (now legendary) short subprime CDS bet, and its role in pushing Paulson & Co. into the investment world limelight.
If that's not enough, you can also catch Zuckerman's recent Wall St. Journal piece adapted from that book, or check out Eric Jackson's fine article, "What John Paulson could teach us". This is one I'm currently reading, and it contains some great insights on the team (including Paolo Pellegrini) that put together Paulson & Co.'s housing trade strategy. Do take a look.
Related articles and posts:
1. John Paulson: The man who made too much - Portfolio.com.
2. John Paulson in Bloomberg Markets - Finance Trends.
Wednesday, November 18, 2009
Thanks to Prieur at Investment Postcards for highlighting this interview, which offers a nice glimpse into Berkowitz' value investing style.
Check out the clip to hear Bruce's rules on investing, his thoughts on Berkshire Hathaway, and why Warren Buffett may be making a "brilliant" investment with his Burlington Northern acquisition.
When you're done with that, you can peruse our related posts for much more with Bruce and the aforementioned Berkshire Hathaway value investing greats. Enjoy!
Related articles and posts:
1. Bruce Berkowitz talks with Steve Forbes - Forbes.
2. Lessons from Warren Buffett - Finance Trends.
3. Lessons from Charlie Munger - Finance Trends.
Tuesday, November 17, 2009
Hugh covers a lot of ground in this missive (I'm still trying to finish the letter as I write this), with comments on the great inflation-fueled rallies in commodities and stocks, the state of the global economy, the state of the Japanese, Chinese, and US economies, and more.
Here's the leadoff from Hendry's recent letter:
"This month I will attempt to answer the entrance examination for the Chinese civil service. That is to say, I will attempt to tell you everything that I know. In doing so, I will argue that this year's rally in inflationary assets, from emerging stock markets to industrial commodities to the fall in the US dollar, could be a FAKE. Let me explain why..."
Check the link above to read on for more. You can also view the November Ecletica Fund letter here on Scribd. See our related posts section for more interviews with Hugh Hendry.
Related articles and posts:
1. Hugh Hendry interview with FT.com - Investment Postcards.
2. Stocks, gold, & a legacy of debt: Hendry - CNBC.
3. Hugh Hendry on banks & govt. intervention - Finance Trends.
Friday, November 13, 2009
Market strategist and investor, Marc Faber joins Canada's BNN from Vancouver to talk about the economy and his outlook for investment markets.
Marc begins by talking about the growing disconnect between the real economy and the stimulus-driven speculative activity in various asset classes (commodities, share markets) worldwide.
You'll also hear Marc's thoughts on employment trends, US manufacturing, inflation, Ben Bernanke's role in destroying the US dollar, gold and commodities, and much more. Enjoy the clip.
Wednesday, November 11, 2009
If you missed last night's episode of Market Shrinkology (on Stocktwits TV) with Dr. Phil Pearlman, you missed a good one. That's why I'm posting it here for your archived enjoyment.
I've been recommending Phil's show lately to a few of my friends as I'm consistently impressed with the show's (and the channel's) no-frills, lo-fi, DIY approach. There are no fancy lights or makeup, no contrived set designs or teleprompters, just live web TV with a ton of interesting ideas and live feedback from the Stocktwits user stream.
As you'll see in this episode, poker and trading were actually secondary themes in a discussion on Prospect Theory, "rational aggression", and the relationship between fear and greed.
Still, there is some very interesting info here on position sizing and money management in poker and trading, with particular reference (from host and viewers) on the philosophies of poker player Doyle Brunson and trader Jesse Livermore. Plus, a few thoughts on the importance of keeping accurate and organzied trading records.
Enjoy the program, and check out Stocktwits TV for more shows done by traders, for traders.
Related articles and posts:
1. Poker investing: Jeff Yass of Susquehanna - Finance Trends.
2. Dasan on poker and investing - Finance Trends.
Monday, November 9, 2009
Specifically, the issue at hand centered on US tariffs imposed on Chinese steel goods and a resulting Chinese probe into US car imports. Of course, this is just the latest chapter in a growing list of Sino-US trade disputes.
However, Monday's news that a US trade panel has rejected an investigation into imports of Chinese steel fasteners may go some way to smoothing over latest tensions.
The timing of this trade debate is especially noteworthy as US President Barack Obama is scheduled to make his first trip to Asia next week, with stops in Beijing and Shanghai.
In the meantime, let's take a look at this post, "Is There a Trade War Between China and the US?", from Jim Gobetz (aka Aiki14) which examines trade practices between China and the US from both sides.
Sunday, November 8, 2009
Matt Davio at MissTrade interviews John Perkins, author of Hoodwinked and Confessions of an Economic Hit Man.
Some interesting ideas shared here on US foreign policy and the alleged role that economic consultants/"hit men" (as Perkins tags his former career) play in shaping the fates of many across the globe.
If you'd like to hear more about Perkins' life as an "Economic Hit Man", check out this Financial Sense Newshour interview from 2005 (soon after his famously titled book was released).
You may also want to check out some additional interviews from Davio's Trader Talk series. Discussions with traders Brian Shannon, Fari Hamzei, and Phil Pearlman are just a few that I have enjoyed.
Wednesday, November 4, 2009
Today's shocker: rates are left unchanged near zero, with talk (from the high priests in media and central banking) of some kind of unfolding economic recovery (one supported by "stimulus" and accompanied by high unemployment rates for the next couple of years).
Actually, I spent very little time focusing on this subject today, aside from catching up with some amusing and informative tweets on the market impact from the likes of Howard Lindzon, Tradefast, and others in my Twitter stream.
Good to know there are people keeping up with some of this stuff (Fed's impact on yield curves, equities) when you need a quick refresher and a bit of insight from those in the know. This is one of the areas in which my Twitter community and favorite blog lists really stand out.
I'm also checking in with BMB's market wrap (hot off the Wordpress) for an overview of the day's action and a look at what may lie ahead for the stock market in the coming days.
What I'd really like to do is revisit this January 2009 piece from Bronte Capital, "Zero in Japan versus zero in America", and find some more recent material on the differences between ZIRP Japan and ZIRP US in the late 2000's. This is an area I could stand to learn more about, so look for updated notes in the comments section (or please add thoughts/links of your own).
To hell with the TV news, I will be searching the blogosphere and online print and journals for more on this.
Monday, November 2, 2009
Rogers did not say which currency would be the focus of the crisis, but felt rather certain that such an event would occur due to global imbalances and the problems of the financial crisis being "papered over" rather than solved.
Jim also sat down with FT.com for a video interview on their "View From the Markets" series.
You can click the image or text link to hear Rogers discuss the US dollar, the next currency crisis, Chinese shares and the renminbi, and more with the FT. Enjoy the interview.
Friday, October 30, 2009
Since watching the Peanuts Halloween special is a Finance Trends tradition going back to 2006, I had to update the post's video link and, of course, watch it again for myself!
Let's all watch it together and find out if the Great Pumpkin appears this year. Enjoy the show!
Thursday, October 29, 2009
For a quick preview, here are some excerpts from Business Insider:
"The idea behind my forecast six months ago was that regardless of the fundamentals, there would be a sharp rally [to S&P 1000-1100]. After a very large decline and a period of somewhat blind panic, it is simply the nature of the beast. Exhibit 1 shows my favorite example of a last hurrah after the ﬁrst leg of the 1929 crash…
Today there has been so much more varied encouragement for a rally than existed in 1930. The higher prices preceding this crash (that were far above both trend and fair value) had lasted for many years; from 1996 through 2001 and from 2003 through mid-2008.
This time, we also saw history’s greatest stimulus program, desperate bailouts, and clear promises of years of low rates. As mentioned six months ago, in the third year of the Presidential Cycle, a tiny fraction of the current level of moral hazard and easy money has done its typically great job of driving equity markets and speculation higher.In total, therefore, it should be no surprise to historians that this rally has handsomely beaten 46%, and would probably have done so whether the actual economic recovery was deemed a pleasant surprise or not.
Looking at previous “last hurrahs,” it should also have been expected that any rally this time would be tilted toward risk-taking and, the more stimulus and moral hazard, the bigger the tilt. I must say, though, that I never expected such an extreme tilt to risk-taking: it’s practically a cliff! Never mess with the Fed, I guess…"
Catch the full report at the links above. Should be an insightful read, as always.
Related articles and posts:
1. Jeremy Grantham: first TV interview - Finance Trends.
2. Seasoned investors search for value - Finance Trends.
3. Grantham profiles in Barron's, Financial Times - Finance Trends.
Wednesday, October 28, 2009
We've got Paolo Pellegrini on US debt, an honest and brief overview of the global energy picture, a comparative look at China and the US, and much more. Enjoy the links.
1. Paolo Pellegrini says shorting US debt "attractive bet" - Bloomberg.
2. Capitalism, Socialism, or Fascism? - Washington's blog.
3. Leonard Kleinrock: Mr. Internet (interview) - LA Times.
4. The Truth about Energy - Puru Saxena.
5. The "democratization of credit" is over - John Rubino.
6. Why the Dreyfus Affair Matters: Louis Begley interview with Bloomberg.
7. Niall Ferguson: US on collision course with China.
8. Gore Vidal thinks the US is headed for dictatorship.
9. Milton Friedman makes the case for limited government (PBS).
Monday, October 26, 2009
There are some very interesting comments here on gold, farmland, and the "intriguing concept" of a permanent investment portfolio - if such a thing can ever really exist.
Rather than spoil the surprise (or front-run the excellent Bernard Baruch story), we'll let you read it for yourself. Enjoy the article!
Related articles and posts:
1. Tangible Investments - Financial Sense Online.
2. Unloved, Undervalued, & Underowned - Jim Puplava at FSO.
Friday, October 23, 2009
This story on proposed European regulations of the hedge fund and private equity industries and its likely effects may also reverberate here in the US. Here is an excerpt from, "ECB warns Brussels on hedge fund rules":
"Europe’s controversial plans to regulate hedge and private equity funds were dealt a fresh blow on Thursday when the European Central Bank warned the proposals would put the industry at a significant competitive disadvantage.
The opposition voiced by the Frankfurt-based ECB, which feared a go-it-alone approach in Europe would backfire, is likely to be seized upon by the alternative investment fund sector – and influence the extensive re-writing of the proposals that is already under way.
Hedge funds have warned that business could be driven out of Europe as a result of the plans to regulate the sector for the first time on a pan-continent basis."
As we read on, the article seems to convey the notion that the problem lies not with this new layer of burdensome industry regulation, but the possibility that other regions may not move quickly enough to join Europe in adopting similar rules and restrictions.
You can see where this is going: the now commonly-cited fear of "regulatory arbitrage" rears its head once again. In other words, Europe doesn't want to be the only one to pass potentially restrictive industry legislation; they want to make sure the USA and other nations will institute similar rules ("harmonize") so that affected hedge funds and LBO firms have fewer places to relocate.
"In a legal opinion published on its website, the ECB warned that funds could simply shop around to find a country where the policing of the sector was less stringent. “An internationally co-ordinated response is necessary given the highly international nature of the industry and the consequent risks of regulatory arbitrage and evasion,” it said."
We also see this trend towards incremental global regulation unfolding in a number of areas outside of finance, but our focus today is the current and future regulatory environment for hedge funds and private equity.
What is likely to happen in this area in the year ahead? Your thoughts and insights on this issue are certainly welcome here, readers.
Wednesday, October 21, 2009
On tap for this discussion: Robertson's views on US debt and our reliance on foreign creditors (especially China), lessons from the tech bubble, risk control and avoiding "the big loss", the future of the hedge fund industry, and even his outlook on gold and gold mining shares.
Speaking of the precious metal and its allure to savers and investors, Julian says, "I don't believe in gold". Despite being bullish on the outlook for gold mining shares, Robertson dismisses gold as a worthwhile inflation hedge.
Interestingly, he comments that gold is a "psychological store of value" and that a psychiatrist would be better suited to understanding its appeal. I say interesting, because this is exactly the topic Dr. Phil Pearlman (trader and psychologist) took on in a recent episode of "Market Shrinkology" on Stocktwits.tv. This is a very worthwhile discussion in itself, and it provides an excellent contrast to some of Julian Robertson's views on gold.
Enjoy the interview, and be sure to check out the related links below for more on Robertson's views and investment strategies.
Related articles and posts:
1. Julian Robertson: CNBC interview - Finance Trends.
2. Replicating Julian Robertson's CMS trade - Marketfolly..
Monday, October 19, 2009
For gold to surpass that peak in real (inflation-adjusted) terms, it would have to climb north of the $2,000 an ounce mark. More on that from Bloomberg:
"Gold’s rally to a record means prices are still 53 percent below the 1980 inflation-adjusted peak.
While gold rose 19 percent this year to $1,072 an ounce on Oct. 14, consumer prices almost tripled in the past three decades, eroding the metal’s value. Bullion hasn’t kept pace with the cost of bread, fuel or medical care. In 1980, gold hit a then-record $873 an ounce. In today’s dollars, that would be $2,287, according to the U.S. Labor Department’s inflation calculator..."
However, I take exception to the statement that "consumer prices tripled...eroding the metal's value". If anything has been eroded over time, it is the purchasing power of the dollar (and other fiat currencies like it). Those who study gold know that over long periods of time, the precious metal does remarkably well as a store of value and preserver of purchasing power.
The basket of goods or services that you can buy with an ounce of gold today, versus what you could buy with an ounce of gold in 1980, or in 1880, for that matter, remains relatively constant. There are changing tides in valuation, of course, when an ounce of gold will buy so many more (or less) barrels of oil, or so many shares in the Dow (figuratively speaking).
Unlike an inflated fiat currency, whose value is continually eroding over time, gold will retain its role as a store of value and maintain its purchasing power when the prices of a given asset or quality good come back in line with their historical mean. You can look to the Dow/Gold ratio chart for an example of this property illustrated over time.
One other quick point to mention. During the run of this current gold bull market, I've often heard comparisons made regarding gold's current price in relation to its inflation-adjusted 1980 high. What often seems to be missing from the discussion is the fact that the 1980 high was just that: a peak price high that came at the end of a parabolic spike in gold (as measured in US dollars).
Right now we are in the middle of a bull move in gold prices. We don't know when this current move will end, but for now it may be more instructive to use middle to latter portions of past gold bull markets (for example, 1975-1978 vs. 2006-2009), rather than past peaks, when comparing current nominal gold prices and inflation-adjusted prices.
At some point, gold may run up quickly to "catch up" with monetary inflation, but it's difficult to foretell such a move. In fact, noted gold watcher, Paul van Eeden points out that there may actually be too much of an "inflation fear" premium built into the current $1,000+ gold price.
I'm a little rusty and need to brush up on some of these points, so further study is needed here. If our readers have any insights to share on gold's purchasing power in relation to past highs or previous decades, I'd definitely appreciate their sharing them with us.
Friday, October 16, 2009
There is an interesting and lengthy discussion of the inherent worth of the US dollar and other fiat currencies, and why paper currencies are losing their purchasing power against most asset prices, especially gold.
You'll also find an update on Marc's view of Intel shares and technology, along with his views on natural resource shares and why you should try to focus on buying assets and shares when prices are depressed.
Related articles and posts:
1. Marc Faber on Lateline Business - Finance Trends.
2. Marc Faber: Another Case for Inflation - Financial Sense Newshour.
Thursday, October 15, 2009
So now we're back to the vaunted high number mark that serves to remind us of the glory days of the dot.com era & the possibility for an even higher 5 digit readout in the not-too-distant future. But what does Dow 10,000 really mean, if anything at all?
Noting the fact that inflation over the past decade has reduced our purchasing power by at least 20-30 percent, we should remind ourselves that a trip back to a nominal high in a widely followed market average does not automatically translate to money in our pockets.
Reflecting on these thoughts yesterday, I went off to dig up my old copy of the Wall Street Journal from March 30, 1999, the first time the Dow Jones Industrial Average crossed 10,000. I could not find that old paper, but I did find this interesting article instead.
Excerpt from, "Dow 10,000 and the Lost Decade":
"I have made it a habit to save the print edition of the Wall Street Journal on certain key dates including March 30, 1999, the day after the Dow Jones Industrial Average (DJIA) first crossed 10,000.
Although the DJIA is a flawed benchmark, no other index has captured the imagination of the public to the same degree. As we again approach the 10,000 level, there appears to be no shortage of commentators ready to discuss what this means for the overall market. It comes as no surprise that value investors attach no particular significant to round numbers for individual stock quotations or for market indices.
However, it is hard to avoid recognizing the obvious fact that the past decade has seen very disappointing returns for index investors given that stocks started the ten year period at very high valuations. This is true of many individual DJIA components as well..."
Read on for a very interesting look at the market's performance over the past decade, along with some worthwhile notes on the changes we've seen in media, business, and the debt and commodity markets over that time frame.
Related articles and posts:
1. The great "bear market rally" post - Finance Trends.
2. The Invisible Crash: book review - Financial Sense.
Wednesday, October 14, 2009
Some of the interview guests in the debate included Mike "Mish" Shedlock, Daniel Amerman, and Marc Faber. Earlier broadcasts included inflation vs. deflation arguments from Bob Prechter at Elliot Wave and Peter Schiff.
FSN host Jim Puplava recently concluded the debate series by replaying segments of these broadcast interviews, and offering his own views on the likelihood of a future US inflationary or deflationary environment. I won't hesitate to add that, in spite of Puplava's partiality to the inflation side of the debate, you'll be hard pressed to find a fairer or clearer treatment of these arguments.
If you caught any of the earlier broadcasts, or would just like an overview of this broadcast debate, check out this excellent macro overview (part one, part two) on the great inflation vs. deflation debate.
Monday, October 12, 2009
More from Alphaville on the implications for the US dollar:
"...Fine, but what would an increased debt limit actually mean for the US exactly?
Will we see a dollar devaluation in the not-too-distant future? Read on if you're up for a rather dour view on the US' ability to deal with its "gigantic and excessive levels of debt".
Related articles and posts:
1. Reasons to raise the debt ceiling - James Altucher at WSJ.com
2. Killing the goose - John Mauldin at Goldseek.
Friday, October 9, 2009
1. Jim Rogers chats with Pimm Fox about commodities, inflation, and the outlook for global equity markets - Bloomberg.
2. Hedge fund managers are cautious on market rally while real economy is shrinking; see liquidity driven market - FinAlternatives.
3. David Rosenburg fumes over the bear market rally - FT Alphaville.
4. The rise and fall and rise of US cities (interactive graphic) - Infectious Greed.
5. In depth interviews with Jim Chanos - Marketfolly.
6. Are gold and US Treasuries in conflict? - Gregor.us.
7. Don't miss MacroTwits discussion hour with GregorMacdonald, Sundays at 9 pm EST - Stocktwits TV.
8. Has anyone noticed that silver is up 56% year to date? - Reuters.
9. Be sure to check in with Upsidetrader and Abnormal Returns for more excellent weekend linkfests.
Thanks for reading Finance Trends Matter. You can also keep with us via RSS and on Twitter. Have a great weekend!
Thursday, October 8, 2009
Bill is also seen here in this Bloomberg TV interview, explaining why he is currently long gold stocks and looking for future short opportunities in the market.
He also makes a few choice points about the Fed's culpability in bringing about this financial crisis, and why we can't "print our way to prosperity". Check it out.
Related articles and posts:
1. Bill Fleckenstein on PPIP, inflation - Finance Trends.
2. FSN interview w/ Bill Fleckenstein - Finance Trends.
Wednesday, October 7, 2009
We spoke quite a bit about gold in yesterday's Twitter stream, noting that gold's latest upsurge has come amidst a global tide of inflationary worry and growing anti-fiat money sentiment. This is quite remarkable, as much of gold's rise this decade was, previously, widely perceived as a "weak dollar story".
Reuters shares this quote from gold watcher and newsletter writer, Dennis Gartman:
"Gold's rise is not a dollar phenomenon but an "anti-currency" phenomenon as money is flowing away from almost any and all currencies.".
Interestingly enough, today's coverage from the Financial Times seems to take an opposing tack, quoting an analyst who noted the lagging performance of gold in euro terms:
Eugen Weinberg of Commerzbank said: “The fact that the rally of gold prices is mainly attributable to the weak US dollar at the moment is clear if we look at the price of gold in euro terms. At €710 a troy ounce, this is still 10 per cent lower than the all-time peak recorded in February 2009.”"
However, Bloomberg's article coverage of gold's new price highs yesterday cited inflation as a mounting global concern, alongside quotes from analysts and investors who noted the metal was acting as "a hedge against all currencies".
It's been a while since we covered the gold market in depth, but then a round of all-time highs usually seems to get everyone's attention. For more on the subject, please have a look at these previous gold commentaries in the related articles section below.
Related articles and posts:
1. John Paulson, hedge funds move into gold - Finance Trends.
2. Gold's place as a reserve currency - Gillian Tett via Gata.org.
3. Gold hits all-time highs (Jan. 2008 roundup) - Financial Sense.
4. The Invisible Crash: book review - Financial Sense.
Monday, October 5, 2009
While I'm not much of a card player, I do appreciate the discussion of probability and rational decision making in trading and investing. We also get a glimpse inside the workings of one of America's more secretive trading firms, Susquehanna International Group.
Here's an excerpt from John's post:
"Jeff Yass (and his trading firm Susquehanna) is a prominent example of Texas Holdem Investing in action. Although Yass has been intensely secret about himself and his firm in recent years he first appeared in the popular investment media through an interview with Jack Schwager for “The New Market Wizards: Conversations with America’s Top Traders”.
However, just this week the Philadelphia Magazine has written a detailed background piece on Yass and Susquehanna – Beating the Odds – which demonstrates the extent of the close links between poker and trading / investing. Susquehanna already featured on this site where it was described how the firm had held a poker tournament earlier this year in Dublin to select trainee traders for its European operations.
The Philadelphia Magazine piece goes to greater lengths in explaining some of the inner workings of Susquehanna and the integral role that poker plays in the training and work ethic of the firm’s traders..."
Be sure to also read the Philly mag piece, "Beating the Odds", in full. Interesting profile, to be sure.
Related articles and posts:
1. Dasan on poker and investing - Finance Trends.
Friday, October 2, 2009
An excerpt from that piece:
"Paolo Pellegrini has a nose for trouble. He saw it in rising housing prices in early 2006, when he cranked through decades of home price data and concluded the bubble was poised to burst. Pellegrini then helped engineer a massive bet against subprime mortgages that catapulted Paulson & Co. hedge funds to 2007 gains of as much as 590 percent -- and firmwide profits of more than $3.5 billion.
Pellegrini, 52, pocketed tens of millions of dollars, allowing him to buy a couple of what he laughingly calls “entry- level supercars”: a silver Ferrari F430 with a base price of $168,000 and a black $109,000 Audi R8.
By April 2008, the Rome native smelled danger again. Nearly six months before the collapse of Lehman Brothers Holdings Inc. and the bailout of American International Group Inc., he and his colleagues saw that the unfolding crisis would trigger U.S. government intervention: bank rescues, a stimulus plan and yawning deficits. That move would eventually undercut the dollar and U.S. stocks, unleashing market havoc, Pellegrini reasoned.
“The losses would be massive,” he says. “I knew the policy response would be commensurate...”"
Read on for more about Pellegrini's investment strategy at PSQR, his thoughts on the Fed, the US dollar, and more.
You can also catch Pellegrini in this Bloomberg TV interview, where he makes some interesting points about inflation and the relative health of household balance sheets between 2007 and today.