Tuesday, December 28, 2010

Finance Trends: The Best of 2010

We're wrapping up some of your favorite posts (and mine) for this Finance Trends "Best of 2010" features edition.

You'll find key interviews with leading businessmen and investors, along with the best of this year's posts emphasizing the strong trends and events that are shaping our country, our investment markets, and our world.

Without further ado, here are some key posts highlighting the big picture trends we've witnessed in 2010, some of which may continue to unfold in 2011 and beyond.

1. On a Return to Classical Education. Your educationally-deprived editor muses over the benefits of a Classical education, and how such a foundation in thinking might help us as investors and as citizens of the world.

2. Marc Faber: Final Crisis Yet to Come. Wonderful presentation by Marc at this year's Mises Circle in NYC, offering a crucial take on US monetary policy and the likely outcomes of the Fed's "quantitative easing" experiments. Video and presentation slides included.

3. Niall Ferguson on Fiscal Crises and Imperial Collapse. Must hear presentation from Ferguson offers a historical overview of government debt crises. Highly relevant back in May and only more so now that the developed nations' sovereign debt crisis continues to unfold here at year-end 2010.

4. LTCM and the Lessons of Failure. Thoughts on hedge fund collapses (and fund manager resurrections), the money manager merry-go-round, risk management, and the dangers of overconfidence.

5. Must Hear Interview with John Burbank of Passport Capital. Part of our series on global macro investors and hedge fund managers, this excellent discussion with John Burbank comes to us via Benzinga podcast.

6. Michael Burry: An Up & Coming Macro Star? An in-depth look at Michael Burry's gradual transition from a US stock-focused value investor to an international, global macro investor.

Includes an unedited transcript of Bloomberg TV's interview with Burry, in which he offers his views on the economy, investing, and his famous subprime short trade.

7. Jim Grant, John Hathaway and Peter Munk sit down with Charlie Rose to discuss gold as money, the causes of the recent final crisis, and likely outcomes of Fed and government intervention in the markets.

8. John Allison on "Leadership and Values". The former CEO and Chairman of BB&T bank speaks to Virginia's Darden School of Business on the importance of adhering to a sound ethical framework and engaging in "win-win" business transactions. Excellent talk on the spirit of true capitalism and personal responsibility.

That's all for 2010. Please join us for more in 2011, as we explore the coming year's macro investing themes and future economic events.

You can keep up with us in the meantime through our real-time updates on Twitter and StockTwits or via the Finance Trends RSS blog feed. Have a Happy New Year!

*Photo credit: Floor of the New York Stock Exchange via LOC.gov.

Sunday, December 26, 2010

Trader Vic and Market Wizards on Scribd

I've recently updated the Finance Trends "Classic Trading Books" collection on Scribd to include two personal favorites from Victor "Trader Vic" Sperandeo and Jack Schwager.

You'll now find Sperandeo's, Trader Vic: Methods of a Wall Street Master, along with the first volume of Schwager's classic interview series, Market Wizards in the collection.

You can find the scanned e-books and pdf downloadable versions by clicking on the titles in the Trading Books collection widget (RSS readers may need to visit our site to see the Scribd widget) or by visiting the collection shelf at the text link above.

You'll also find a widget embed code included, so feel free to grab it and paste it onto your site or your Facebook page. The widget will be updated automatically to show all newly added titles in the Trading Books collection.

For those of you who'd like a hard copy or Kindle version of these classic texts, visit Amazon (see title links above) to order Sperandeo and Schwager's books. Enjoy!

What's Ahead in 2011?

2010 was not all bad, by any stretch.

Probably the best news of all was that problems that have been swept under the rug(s) for generations have now surfaced and are regular conversation topics. It is now quite apparent that the Western economies' love affair with entitlements may be coming to an end. They now know, as they should have known earlier, that there is simply no way these entitlements are affordable. That discussion is now front and center. That's good.

Public employees are finally coming under scrutiny as virtually every one of the 50 states in the United States faces bankruptcy under the weight of the benefits that have been promised to these public employees. Teachers, for one, have long been showered with guaranteed job security and extremely generous pension and health care benefits. All of these public employee benefits are now in play. Unions are in the middle of this because almost all of union organizing successes in recent years has been in the public employee sector. Unions are not really a factor of any significance in the private sector, since everywhere they have had a major presence, the companies have gone bust.

This is all good news, because failure to notice the impending disaster of entitlements and public employee largesse was moving the US and its 50 states into certain bankruptcy. Now, there is truly some hope. No solutions, but hope.

Other good news is that President Obama seems, at long last, to have awoken to the fact that his economic policies are a serious impediment to economic recovery. The tax agreement forged between the President and Senate Republicans was a foolish package, but better than the alternatives. For the first time since January, 2009, there was some recognition in that compromise that business matters. Finally!

So, there is hope that 2011 will be a better year than 2010. There will be continual reminders as 2011 unfolds that virtually every Western European nation will eventually default, in some manner, on their public debt and that several states in the United States are headed in the same direction. But, bankruptcy can be therapeutic; bailouts are never therapeutic.

Tuesday, December 21, 2010

Amazon's Jeff Bezos chats with Charlie Rose

Amazon.com chief, Jeff Bezos sits down to an interview with Charlie Rose from earlier this year. This is a very good discussion of the company's philosophy, its future plans, the growth of e-readers & user adoption of that technology.

It's also a great insight into the thinking of one of our generation's great entrepreneurs, Jeff Bezos.

As you'll see from the interview, Bezos understands his customer base and what they want, and he trusts his instincts and Amazon's strengths (as an e-retailer and gadget manufacturer) enough to act on that understanding and not get swayed by suggestions & criticisms from outside voices.

Last week I was thinking about Amazon's decade-plus rise in online retailing. Back in the dot com bubble days, we knew Amazon was an emerging powerhouse in online book selling and later, CDs & music. What some of us didn't realize (myself included) was that Amazon.com would successfully expand into many other areas of retailing. Boy, was I dumb to doubt Bezos' company.

Now, when I want to look up info or reviews on anything from books to backpacks to internet routers, I'm likely to turn to Amazon.com because I know I'll probably find what I need. A lot of other people must feel the same way, because I've heard numerous comments this past month about the ease of shopping for Christmas and holidays on their site. The bubble may have burst back in 2000, but shopping online has become increasingly standard every year since.

There are probably a few main reasons why Amazon has become a go-to option for online shopping, and Bezos outlines them here. He also touches on some of the reasons why Amazon can outshine some physical + online retailers like Wal-Mart. The focus is largely customer-centric and there are some interesting details from Bezos on how they view the retail landscape.

Of course, given the recent Wikileaks hosting fiasco, there's bound to be some serious skepticism over the Amazon web services portion of the discussion, but we'll see how their credibility stands up in this area over time. In the meantime, this is a great interview overall. Check it out.

Friday, December 17, 2010

Cotton, palladium, silver lead futures gainers YTD

Did some charting on Finviz yesterday and came across this relative performance chart of the year's top futures gainers (year-to-date).

As you can see from the chart, cotton, palladium, and silver lead the performance YTD. We all know gold's been having a headline-grabbing year (+25%), but silver futures have handily outpaced the yellow metal (+71.5%).

Interesting to note that lumber is up 40% YTD, second only to top-performing cotton (+93%) in the soft commodities group. Lumber futures had a very poor showing in '06 - '08 as the housing bubble collapsed and the homebuilders fell on hard times. However, we saw a pickup in '09 and the rebound seems to have gathered steam all through 2010.

Natural gas futures were a bottom-dweller this year, down (-)27% YTD. There were a few other poor performers, but for the most part we see green on this chart, reflecting a year of strong commodity demand and QE (money printing) operations in the US.

As Jim Rogers has pointed out many times in recent interviews and talks, cheap money will only fuel advancing prices of in-demand commodities in the months and years ahead. Stay tuned for 2011.

Wednesday, December 15, 2010

Charting the BP Gulf oil spill lawsuit

The US Department of Justice today announced its lawsuit against BP and eight other companies involved in the disastrous Gulf of Mexico spill.

We added some charts of BP and other firms involved to the Chart.ly and StockTwits streams today.

Here's how the big 4 oil names reacted to the official news of the suit in today's trading session. Note that Haliburton (HAL) was not named in the government's suit, but still moved notably to the downside.

There's a lot of talk about BP's being kept alive in order to bleed it nearly dry to fund government spending programs. I'll let the BP and legal/political experts weigh in on that, as I'm not as familiar with the company's assets vs. liabilities picture.

However, we do know that BP has been moving to sell off assets and reposition itself as a leaner company in order to survive. Will they succeed? That is the (current enterprise value) $164 billion dollar question.

Tuesday, December 14, 2010

Anthony Bolton defies China bears with new fund

Bloomberg Markets profiles Fidelity fund manager, Anthony Bolton, the British investing star who recently backed away from retirement and has now "staked his reputation on China".

More in Bloomberg's article, "Fidelity's Bolton defies China bears with 27% return":

"...In Britain, Bolton’s reputation as a stock-picking genius was analogous to that of Peter Lynch, the manager of Boston- based Fidelity Investments’ Fidelity Magellan Fund from 1977 to 1990. Fidelity Investment Managers, formerly known as Fidelity International, is an affiliate of Fidelity Investments.

Now, at age 60, Bolton is in China partly to explain to clients why he has made a comeback to bet he can pick winners for the 625 million-pound Fidelity China Special Situations Fund that made its debut in April. Bolton says he’ll be able to find winning stocks that other fund managers have ignored.

So far, that self-confidence has been justified. Anyone who bought into the closed-end fund when it was introduced in April and sold on Nov. 9 would have enjoyed a 27 percent return in less than seven months. Two of his picks, The United Laboratories International Holdings Ltd. and Brilliance China Automotive Holdings Ltd, have almost quadrupled in value since the beginning of the year.

Now shares in Bolton’s fund have become so sought-after that they are trading at almost a 10 percent premium to their net asset value, prompting Fidelity to issue a statement on Nov. 9 saying it plans to sell new shares next year, giving priority to existing shareholders..."

Oftentimes, a glowing article like this can serve as the kiss of death for a fund manager (at least temporarily, as they usually follow an unusual winning streak).

Still, it's early days for Bolton's new fund and we have to imagine that an investor with his experience is probably experiencing more than just dumb luck in this latest success. Especially given that this year's outperformance comes as the benchmark Shanghai Composite Index is down over 4% year-to-date.

Mr. Bolton faced skepticism over his China fund early on, as Controlled Greed points out in this post from January. It seems that even with a lengthy & successful investing career behind him, some people thought he would be "risking his reputation" by starting anew in China.

We shall see how it turns out, but for now, I'll be reading on for more of Anthony Bolton's insights on investing in China and meeting new challenges and opportunities.

Related articles and posts:

1. Lessons on investing from Anthony Bolton - Controlled Greed.

2. Interview with Anthony Bolton - The Telegraph.

Sunday, December 12, 2010

Jim Rogers at Reuters 2011 Outlook Summit

Jim Rogers said that the US government's inflation data was "a sham" and that interest rates would be heading "much, much higher" in the next few years while speaking at the Reuters 2011 Outlook Summit.

You'll find video of his chat w/ Chrystia Freeland at Investment Postcards or you can check the related video links in this Reuters article to see the full panel discussion.

As usual, Jim pulls no punches while discussing Ben Bernanke's foibles as Fed Chairman and the difficulties facing the US and European economies as inflation and runaway deficits take their toll.

He also points out some potential bright spots that could come about if the US government were to reduce its out of control spending and simplify (or do away with) the tax burdens on its citizens. Long term strength of the developing economies, commodities, and the rise of Asia are also highlighted.

Saturday, December 11, 2010

Reconciling Tax Cuts with Long Term Debt Issues

Hail to the Wall Street Journal! In one short paragraph the Journal has summed up the heart of the US debt problem and why keeping all of the Bush tax cuts in force make sense as well. In today's Journal and I quote:

"While in a hopey-changey mood, let's note for his (Obama's) benefit that the real fiscal problem today is not the immediate deficit, which does not call for radical action. The real problem is a system of health-care and retirement finance that deters us from saving and budgeting for our own needs while at the same time piling up disencetivizing taxes on those who work and whom we expect to pay for us in old age. Fix this and the government is solvent again."

Wow! The WSJ nailed it. .

Wednesday, December 8, 2010

Interview: James Grant & Co. talk gold with Charlie Rose

James Grant, John Hathaway, and Peter Munk sit down with Charlie Rose to discuss gold and the nature of our monetary system in this important roundtable discussion.

I was surprised and delighted to find that Grant & Co. would be Charlie's guests on Monday's program. The topic of discussion became even more newsworthy as the US dollar gold price hit a record high (in nominal terms) that same day.

But this is more than just a chat about a commodity hitting a new high. As you will see from James Grant's opening statements to Rose, gold is money and it has been for centuries. What we see in the rising gold price is a concurrent loss of faith in the viability of all paper currency systems worldwide.

This is the basic truth about gold and silver as real money and store of value that Rose and his audience need to hear.

Plus, John Hathaway, subject of one of our earliest posts, and James Grant provide some much needed counterbalance to the prevailing narrative of the 2007-2009 financial crisis and the Fed's ongoing money printing operations (aka "quantitative easing" & QE2). It's all here in this interview, one of the most important discussions I've heard at Charlie Rose's table.

Related articles and posts:

1. Lew Rockwell interviews James Grant: Austrian economics & the classical gold standard - Controlled Greed.

2. Jim Grant: Requiem for the dollar - Finance Trends.

3. The Gold Standard: an interview with Guilio Gallarotti - Finance Trends.

4. Quantitative easing explained (plain English) - YouTube via Finance Trends.

A Beginning

The compromise between the President and Mitch McConnell on taxes represents a new beginning for the President and, perhaps, for the country. The compromise will definitely help the economy. The economy needs it.

There are still problems, especially on the unemployment front. Employees are still too expensive, laden down by government-imposed mandates and implied litigation liabilities for businesses. But capital expansion should pick up dramatically in 2011.

It's not perfect, but this deal is definitely an improvement over the policies of the past two years.

The looming debt problems are still there -- both for the US and for Europe. Hopefully, the idea of "workouts" and "defaults" will soon take the place of "bailouts." The debt problems have no easy fix.

Monday, December 6, 2010

Monday links: The Bernank, Macro view, & more

Came across some worthwhile links from the blogosphere and Twitter today, and thought I'd point you to 'em.

We've got some videos and posts on The Ben Bernank, a macro view of the economy and markets, interviews with Bruce Berkowitz and David Einhorn, and more for you in today's links.

1. Bear Mountain Bull wraps up some recent interviews and links on The Ben Bernank.

2. Abnormal Returns brings us 3 non-Bernanke videos, including interviews with investors Bruce Berkowitz and David Einhorn.

3. Catching up on the Macro view with Gregor Macdonald and the health of the stock market with Joe Fahmy.

Peruse what you like, leave the rest. Remember, our ability to process and retain information is finite, so focus on what's most important to you in your pursuit of market education and limit your exposure to extraneous "noise".

Thanks, as always, for stopping by.

Wednesday, December 1, 2010

10 questions for Mark Cuban - Forbes interview

Thanks to Leroy Gardner and Get Rich Slowly for highlighting this Forbes interview with highly-visible entrepreneur and billionaire, Mark Cuban.

Here are a few lessons on "building and keeping a self-made fortune" from, "10 questions for Mark Cuban":

You have $100,000--where do you put it?

First I pay off all my credit card debt and evaluate paying off any other debt I have. What I have left I put in the bank.

Then I try to create as much transactional value as possible from that cash. I look at my annual budgets for everything and anything, and I look to see where I can save the most money on those items. Saving 30% to 50% buying in bulk--replenishable items from toothpaste to soup, or whatever I use a lot of--is the best guaranteed return on investment you can get anywhere.

Then whatever I have left I keep in the bank and let it earn nothing. Why? Because then its available for when I get a good opportunity.

Every five years or so there is a bubble bursting or amazing deals available because of a change in the economy. Anyone who just kept their cash in the bank rather than in stocks over the past five to 10 years could be buying the home of their dreams for half price in most of the country..."

Pay close attention to Mark's thoughts on essential reading for entrepreneurs and the difficulties associated with starting a business in the US right now. Some key insights packed into a quick interview.

Photo credit: Mark Cuban via Portfolio.com.