Friday, July 30, 2010

Features of the week

We've got some great items for you on the economic recovery, the story of the Weimar hyperinflation, strategies and outlook of top-performing hedge funds, and more in this Friday's "Features". Enjoy the links.

1. Top performing hedge funds that dodged the crash & rode market rally back turn gloomy - Bloomberg.

2. BBC interviews Adam Fergusson, author of When Money Dies.

3. Read Adam Fergusson's history of the Weimar hyperinflation, When Money Dies, along with Jens O. Parsson's Dying of Money online for free - Prudent Investor.

4. Anthony Boeckh on The Artificial Recovery (pdf) - Financial Sense.

5. The Ruling Elite Called... (James Quinn) - Financial Sense.

6. AR TV on the state of the financial world - Abnormal Returns.

7. Breaking down 2Q earnings season - WSJ Marketbeat.

8. Humans are "slightly smarter, pants-wearing primates": Monkey Economics - Big Picture.

9. Why America locks up too many people - The Economist.

10. Geoff Gannon interviews Jon Heller of the Cheap Stocks blog - Controlled Greed.

Have a great weekend and stop back soon!

If you'd like to keep up with Finance Trends updates throughout the week, you can also subscribe to our RSS feed and follow us on Twitter.

Wednesday, July 28, 2010

Victor Sperandeo warns of hyperinflation

"Trader Vic" Sperandeo is on CNBC describing the historical pattern for the onset of hyperinflation, and says the conditions for such a runaway inflation are now here in the US.

We're getting more familiar with these types of extreme forecasts as our economy drifts into unchartered territory. It seems market watchers are almost growing accustomed to hearing predictions about a coming hyperinflation or a looming deflationary depression.

Still, it should be noted that Sperandeo is a serious guy and a very serious researcher (my observations based on reading his work and listening to his interviews). His knowledge of economic history and the nature of money creation and business cycles is profound. So while the forecasted event is an extreme and rare event, don't dismiss Vic as "just another scaremonger".

It is striking to note that while Vic is arguing his case for the likelihood of hyperinflation, in effect the spiralling collapse of a society and an economy, he is interrupted by the CNBC girl who wants to know "what the trade is" in this scenario. Cable TV never ceases to amaze.

Related articles and posts:

1. Dying of Money: causes of inflation - FSN broadcasts via Finance Trends.

2. Interview: Victor Sperandeo on hyperinflation -

Monday, July 26, 2010

The History of Economic Cycles

Just a cool video I found on YouTube.

A short, "History of Economic Cycles" from 1800-2000, focusing on the contributions of Sir Willilam Herschel, Clement Juglar, William Stanley Jevons, Simon Kuznets, W.D. Gann, J.M. Hurst, R.N. Elliott, Joseph Schumpeter, and more.

Enjoy the clip!

Friday, July 23, 2010

Matt Simmons interview on BP Gulf disaster

King World News recently interviewed Matthew Simmons for his latest take on the BP Gulf disaster.

You can hear Matt's alarming warnings about the coming fallout from this environmental catastrophe, along with his view of what's really happening in the Gulf and the region, in the interview linked above.

In addition, we also want to examine some of Matt Simmons' claims and his motives for speaking out on this disaster. There's been a lot of talk about Simmons' short position in BP stock (which Matt spoke about in a recent Bloomberg TV interview), along with some questions (including my own) about any conflicts of interest he might have as founder of the Ocean Energy Institute, "a think-tank and venture capital fund addressing the challenges of U.S. offshore renewable energy".

Earlier today, Chris Nelder pointed to this Robert Rapier piece entitled, "Is Matt Simmons Credible?". Rapier outlines what he feels are some of Simmons' more outlandish or incorrect claims regarding the BP disaster and why Simmons may not be the authority on the spill that he presents himself to be.

While I have respect for Simmons and am always interested to hear his views on energy matters, the Rapier post does provide some useful food for thought, especially given the more uncritical questioning Simmons has encountered from many interviewers who are not energy specialists, to say the least.

Wednesday, July 21, 2010

Monday, July 19, 2010

Interview with Jack Schwager at CIO

Aiki14 points us to this excellent interview with Jack Schwager at Capital Ideas Online.

If you're a fan of The Market Wizards book series and the trader interviews Schwager has compiled over the years, you'll definitely want to check out the distilled wisdom in this piece. Here's an excerpt from the discussion:

CIO: Thank you Mr. Schwager for taking out time and talking to us. Over your long career in the markets you have interacted with some of the greatest traders. Could you share with us what you perceive are the qualities of great traders?

Jack Schwager: There are really very many. I will give you a few key ones. First on the list would be discipline. I can't think of anybody I have interviewed or met as a trader who has been very successful but has not been disciplined. I think that's probably an absolute essential.

Secondly, money management and risk control is certainly critical in one form or another. Most of the traders that I have interviewed will be the first to acknowledge that they consider money management actually more important than the methodology.

The other thing that is definitely worth mentioning is that successful traders find an approach that fits their personality. Time and time again, I see that the method that a trader is using very much reflects that person's characteristics or natural tendency.

For example, when I interviewed Paul Tudor Jones, he set a time that was during market hours. At the same time I was interviewing him, phones were ringing, people were coming in with messages, and he was watching multiple monitors around his office and yelling out orders on open phone lines to a number of different floors. It was almost complete bedlam, but he actually thrived in that type of atmosphere. That's the way he traded..."

There are some very fine insights on risk management and trading discipline here, along with some discussion on the efficiency of markets and the role human behavior has in shaping market conditions and individual returns. Certainly a worthwhile read; check it out.

Friday, July 16, 2010

Features of the week: Finreg+ edition

As you all know, the Dodd-Frank financial reform bill passed the Senate on Thursday and is set to be signed into law by President Obama next week.

What will the future hold for us as a result of finreg, and how will we live in the months and years ahead? Let's look at the week's events and the shape of weeks to come in our, "Features of the week".

1. Senate passes landmark financial reform bill - US News & World Report.

2. The best financial reform? Let bankers fail - Jim Grant.

3. Stocks tumble, yen, treasuries advance on recovery concern - Bloomberg.

Jim Grant confident QE 2.0 is just around the corner - Zero Hedge.

5. Goldman Sachs' $550 million SEC settlement summarized in 140.

6. Barry Ritholtz feels SEC case is "a painful loss for Goldman Sachs, with expensive repercussions" - Big Picture.

7. The $4 Trillion Question: Dhaval Joshi provides an illuminating look at housing supply and strategic default - Big Picture.

8. Fed gets more power, responsibility from Finreg -

9. Jeffrey Tucker's new book, Bourbon for Breakfast: Living Outside the Statist Quo is available in hardcopy and free PDF download at

10. Lessons from Irwin Yamamoto - The Kirk Report.

Have a nice weekend, and remember, you can tune in with all our updates and posts via Twitter and our RSS feed.

Wednesday, July 14, 2010

CEOs won't invest in America, why should you?

Remember what we said in our last post about the dangers of corporatism and crony capitalism taking hold in America? Frederick Sheehan, writing for Credit Writedowns, has a few things to say on that point.

From, "Corporate CEOs won't invest in America, why should you?":

"American CEOs are voting with their feet. Since they aren’t investing in the United States, does it make sense for the individual stockholder or bondholder to do so?

One armchair columnist told his readers to ignore corporate whiners. Those overpaid stuffed shirts will always gripe, goes his argument. The columnist may have a point, but also an inconsistency. The columnist, who is also an economist, has skewered CEOs in the past for cashing out their stock options as quickly as possible. There is much truth to that.

But, it is not in a CEO’s interest to publicly denounce the Obama administration, which still has over two years to hand out and withhold favors. It is the favoritism that the CEOs are denouncing, either directly or by implication.

Corporate managers lived through the last episode of blatant favoritism, during the final months of the Bush administration. In the fall of 2008, when credit was scarce, the Treasury Department and Federal Reserve decided which companies would receive loans and government guarantees. Those that fell under the umbrella paid around 5% interest on their debt. Those not so blessed paid 15%, or went broke..."

As Sheehan explains in his post, many American CEOs and investors are looking for options outside the US when it comes to making new capital investments. Large manufacturers are looking to Asia as a place to move their business, as mounting regulations and ever-increasing costs of doing business make the USA an unattractive place to do business.

Read on to learn why those whose businesses are more rooted locationally are left to stay and fight for a less intrusive business climate, and why even formerly willing corporatists (like GE's Jeff Skilling) are chafing at the new environment of over-regulation in the US.

The Markets and The Economy

The economy is much worse than the financial markets. The Fed's release today of their lowered expectations for the economic recovery is simply one more marker that this recovery is unlike any other except during the dark days of the 1930s. Even Obama has acknowledged in recent days that maybe the government is part of the problem, as his press aide Gibbs acknowledges that the public may take out their frustrations on Obama's political allies.

The markets are likely to sell off during the next few days and weeks, but look for a strong rally as the stock market factors in the end of heavy Democratic majorities in Congress. The political climate for business is bound to improve after November and it is highly likely that Obama will, finally, shift course from stifling economic recovery to, at the very least, removing himself as the main obstacle to recovery.

The truth is: Obama and his anti- business agenda (and rhetoric) are the problem. Obama thinks job growth is a simple matter of getting the government to hire more people. He doesn't trust the private sector, partly because he doesn't understand it, but mostly because he is ideologically opposed to free markets.

But when the stock market sells off again, and it will, buy it when all the talking heads tell you to sell. There will be a "political change" rally as we get closer to election day.

Monday, July 12, 2010

The Economist: future of Europe and the EU

Worthwhile read from the latest issue of The Economist on the future of Europe and the EU.

It is too soon to write off the EU. It remains the world’s largest trading block. At its best, the European project is remarkably liberal: built around a single market of 27 rich and poor countries, its internal borders are far more porous to goods, capital and labour than any comparable trading area. It is an ambitious attempt to blunt the sharpest edges of globalisation, and make capitalism benign.

The problem is that the “European social model” has become, too often, a synonym for a very expensive way of doing things. It has also become an end in itself, with some EU leaders calling for Europe to grow purely in order to maintain its social-welfare systems. That is a pretty depressing call to arms: become more dynamic so Europe can still afford old-age pensions and unemployment benefits.

Europe is in desperate need of good ideas and leadership. Too many EU leaders have tried to secure voter consent for bailing out weak links like Greece by murmuring darkly about “Anglo-Saxon” conspiracies to destroy the euro, and presenting bail-out mechanisms as a way to impose the will of the state over “speculators”. Imaginary enemies are a desperate ruse to provide the union with coherence..."

As you read on, you'll note the story's warning about the shadow of corporatism, or "crony capitalism", hovering over Europe. Americans might do well to take note here and think about how this same cloud darkens our own future.

Lots more in the full article link above. Be sure to check out the interactive graphics on the EU nations' economies; educational for those of us in North America and outside the Continent.

Friday, July 9, 2010

Jim Rogers FSN interview: lessons on life & investing

The Financial Sense Newshour recently interviewed famed investor and author, Jim Rogers on lessons in life and investing.

If you'd like to gain some key insights and life wisdom from one of the great self-made thinkers and investors of our time, listen to this very fine interview. Host Jim Puplava talks to Jim Rogers about the importance of doing your own thinking, living your own life, and doing the things you love, which, as Rogers points out, are key to living a very happy life.

Enjoy the discussion, and if you get something out of it, be sure to pass this interview on to your friends or a young person starting out in life. They may appreciate it as much as you have!

Related articles and posts:

1. Jim Rogers on life, travel, and investing - Finance Trends.

2. Jim Rogers: The Calculating Cowboy - Finance Trends.

Thursday, July 8, 2010

Hedge funds scale back trading

Hedge funds have scaled back their trading and are favoring cash over pressing their convictions in big directional trades.

Bloomberg reports that it may amount to more than the usual summer lull, as the uncertainty hanging over global markets has left many a trader wary of unseen risks.

Reeling from the worst second-quarter performance in a decade, hedge funds have scaled back trading as they struggle to figure out where markets are headed amid sometimes vicious crosscurrents in stock, commodities and other markets, according to brokers and managers.

“There’s a degree of being frozen in the headlights, of not knowing what sectors to emphasize, of what securities to emphasize,” said Tim Ghriskey, chief investment officer of Solaris Asset Management LLC, a firm in Bedford Hills, New York, with $2 billion in hedge funds and conventional stock funds.

Hedge-fund managers, who oversee $1.67 trillion in assets, are reluctant to put money to work as they are buffeted by a wide range of often conflicting political and economic forces, from fiscal policy in Europe and the U.S., to what regulations will be imposed on the financial-services and energy industries, to the growth prospects in China. In turn, smaller and fewer trades may make it harder for funds to rebound from losses incurred since May, when the industry suffered its worst decline in 18 months..."

More on the worries over economic slowdown at the link above, plus comments on the recent paring back of long stock trades by Barton Biggs versus John Paulson's convictions about a US economic recovery and his firm's large positions in US financial shares, gold mining shares, and gold.

91 European banks face stress tests

Toni Straka at Prudent Investor has the details on "Europe's 91 Potentially Bad Banks":

"After weeks of intra-Eurozone haggling the
Committee of European Banking Supervisors (CEBS) has finally published the list of 91 banks currently undergoing stress tests whose results are eagerly awaited for July 23.

The 91 banks (list below) represent 65% of Europe's banking business, in itself an indication that domino theories, where one failure will lead to others, may develop into a harsh reality, keeping Europe's extensive cross-border business in mind.

Such scenarios do not appear to be part of the stress tests which display a silk glove, business-as-usual approach..."

See the full post for a list of the 91 banks facing "stress tests" and a breakdown of their national origin. In terms of sheer numbers, it seems Spain and Germany lead the list. Also, some thoughts from Toni on the assumptions built into the tests, as well as a link to the CEBS report.

Tuesday, July 6, 2010

Joe Fahmy on Stocktwits TV: cash for corrections

Catching up with the latest episode of "The Next Big Move" with Joe Fahmy on Stocktwits TV.

If you keep up with Joe on Twitter or through his blog, you probably know that he has been cautious on the stock market in recent weeks and sitting mostly in cash.

In this July 4th episode of his Stocktwits TV show, Fahmy outlines his reasons for why you'd want to wait for factors to line up in your favor before reentering the market on the long side, and why preserving your capital and confidence while you wait is paramount to success in trading the stock market.

Sunday, July 4, 2010

Happy Independence Day! Thoughts on American liberty

Happy Independence Day to all!

You may want to check out these excellent links from our past July 4th post on the Declaration of Independence and the struggle for liberty. You'll note the special emphasis on two leading figures in the cause for American independence, Thomas Jefferson and Thomas Paine.

Enjoy these informative and historical links, and have a great July 4th holiday.

The Economy and the Markets

The V-shaped recovery isn't happening this time. Private employers are not adding new employees. Nearly 15 million jobs have been lost and they are not coming back anytime soon. The stock market has made a knee bend to this new, jobless reality. Only the Obama Administration seems to be oblivious to the absence of private sector job creation. Everyone else is all too aware of the problem.

In time, economics will trump politics. Companies will find a way to get around the roadblocks that politicians place in front of them. There will be a growth of off-the-books, black market activity to circumvent the enormous increase in rules, regulations and mandates faced by small to middling businesses. In the meantime, American business will continue to outsource activities that, thanks to the Obama Administration, are no longer economically feasible in the US.

What this means is that very high, long term unemployment will be a permanent feature of the new America created by Obama and the Democratic Congress. We may have several generations that grow up in a world of high unemployment and diminished opportunities. Only in the public sector will there be opportunity for young, highly educated Americans. All of this is the familiar landscape of Europe, where young people with education and talent must hop on a boat to somewhere else to find jobs that that fit their talents.

America has become much more like Europe, just at the very moment that Europe is beginning to realize that their model does not work. The G-20 meeting in Nova Scotia two weeks ago spotlighted the gaping difference in attitude between Barrack Obama and the newly chastened European leaders. The latter have simply run out of money. There is no way to provide stimulus when the markets are questioning your ability to roll over existing debt. That's where Europe is; that's where the US is heading.

The basic premise of the welfare state is that you can borrow from future generations to provide the good life for folks living today. To do that, bond markets have to play along. What is happening now is the beginning of the bond market saying "no." CDS's on European sovereign debt continue to widen; interbanking lending in Europe is collapsing. These are the realities, no matter what strange world Paul Krugman might live in.

Within a few months, perhaps a year or two, the bond markets will begin to question the viability of US debt financing and the debt financing of numerous states within the US. What then? Who bails out the US Treasury? Only then will the Obama Administration begin to realize that the game is over. Fattening the pocketbooks of public employees is not an economic program. It won't create private sector jobs.

To get the American economy going again, you have to loosen the noose that is around employers' necks -- something the Obama Administration is not going to do. It took World War II to convince the FDR Administration to lighten their attacks on private business. As a result, the economy boomed for the next five decades. Sooner or later a new and different American administration will face the realities, reign in entitlements and begin to provide an environment where business can thrive.

Until then, the main program for private business is to find ways to get around the rules and mandates and new taxes. This means don't add new employees unless absolutely necessary. Take no unnecessary risks and keep your head down. That's the Obama legacy and it won't produce an economic recovery of any substance.

Saturday, July 3, 2010

FT on BP spill: "Anatomy of a disaster"

That's the title of the Financial Times' weekend piece on the BP Gulf oil spill, at least for my print edition.

Check out the online version, "BP: the inside story", which looks back on the still-developing disaster in the Gulf and its likely financial and environmental outcomes:

"...The Deepwater Horizon accident has been one of the most shattering disasters ever to hit a large international company. Not because of the 11 deaths on the rig, terrible though they were. Not because of the
environmental impact, or even the economic damage to the fishing and tourist industries of the Gulf. The devastating blow to BP comes because of the way the disaster has pitted the company against the US government and the American people. The story of the spill is how the fury of a nation was turned on a single company.

Less than a year ago, Deepwater Horizon seemed to have set BP on a very different course. Last summer, the group drilled the deepest well ever developed for a commercial operation and struck oil. On September 2, it announced it had discovered a “giant” field, christened Tiber, which was likely to hold more than 500 million barrels of recoverable oil.

BP’s shares rose by 4 per cent in a single day, a rare event for a company of BP’s size. Moreover, it seemed that the initial reaction was, if anything, understated. Tiber was a harbinger of a new dawn for the company, in which production from the deep water of the Gulf would drive global growth..."

Lots more here on the political nature of the Gulf disaster and the possible outcomes for BP, its shareholders and employees, the future of offshore drilling, and the environmental impacts for the Gulf coast.

Related articles and posts:

1. BP spill estimates upped again: interviews and insights - Finance Trends.

2. Macondo sends offshore drilling insurance into stratosphere - Upstream Online.