In light of my comments last week about the Yen and Treasury yields, I am looking to open a position in each that will put my theory to work. Needless to say, I deem them highly speculative (though they won't always be) and therefore will size them very conservatively. The most obvious way is to get short the TLT or FXY, but I am also looking to see what else might be out there that limits my downside.
I am trying to get my feet wet (not scorched) and this move will get me to focus on these ideas daily (increasing my feel for them). The stock market, generally, is boring. These ideas intrigue me.
Monday, February 27, 2012
Friday, February 24, 2012
Sage Advice
From the old-school work colleague who I have mentioned before:
"The only way you learn to run real estate is by dealing with problems you can't buy your way out of."
"The only way you learn to run real estate is by dealing with problems you can't buy your way out of."
Update
After complaining yesterday about my current read, The Economics of Inflation by Constantino Bresciani-Turroni, and struggling through another chapter last night, I made the decision to put it down and pick up something new. I have moved on to The Scramble for African Oil: Oppression, Corruption and War for Control of Africa's Resources by Douglas Yates which looks at the resource curse prevalent in Africa. I read the introduction and it seems pretty interesting. His approach is to identify a host of important elements and factors that create the problems and to choose a country as a case study to examine each. He notes that his method is slightly heterodox, as it does not take a broad brush approach and try to isolate a single factor. At the same time, he thinks the traditional method is flawed, often running into problems of violating ceteris paribus. In that way, he sounds a bit like Steve Keen, which is probably a good thing. In any event, I'll report back when I'm done.
As for the book about German inflation, I will return to it at some point. But a break was needed.
As for the book about German inflation, I will return to it at some point. But a break was needed.
Thursday, February 23, 2012
More to Consider
For a while I have suggested that the low (actually zero) interest rate policy out of the Fed would have consequences. Courtesy of Eric Sprott's not-so-regular newsletter, here are a few data points to chew on:
-From Reuters, of companies listed on the S&P 500 with defined benefit pension plans, 97% were underfunded at the end of 2011, triple the number as in 2002. Since so many of these plans allocate heavily to fixed income, the reason is clear.
-From the WSJ, since the implementation of Operation Twist in October, the Fed has purchased 91% of treasuries issued with 20 to 30 year maturities. Could it be that external demand is drying up without a move to higher yields?
-From Reuters, of companies listed on the S&P 500 with defined benefit pension plans, 97% were underfunded at the end of 2011, triple the number as in 2002. Since so many of these plans allocate heavily to fixed income, the reason is clear.
-From the WSJ, since the implementation of Operation Twist in October, the Fed has purchased 91% of treasuries issued with 20 to 30 year maturities. Could it be that external demand is drying up without a move to higher yields?
More Charts
Bill Fleckenstein has influenced many of my views on investing over the past few years. Summarizing some of his best advice, even if convinced that events will play out in a certain way, you need to be patient and always on the lookout for clues that things are changing. With that in mind, I offer one year daily charts for 10-year and 30-year treasury yields. There has been some conversation lately about whether the trend has changed and we might expect to see higher yields going forward (I think that outcome is inevitable, but the question for debate is whether yields have actually bottomed yet).
On both charts you'll notice a narrow trading band since last summer, following a steep decline that roughly coincides with the debt downgrade. But that's not the interesting part. What I'm noticing is the lower of two trend lines that date back to the beginning of the time horizon captured. On both, but more recently for the 10-year, what was upward resistance has become support. Although subtle and maybe just temporary noise on the chart, we may be entering a period where the trading band is starting to move up -- in other words, higher yields. Not conclusive, but definitely worth paying attention to.
On both charts you'll notice a narrow trading band since last summer, following a steep decline that roughly coincides with the debt downgrade. But that's not the interesting part. What I'm noticing is the lower of two trend lines that date back to the beginning of the time horizon captured. On both, but more recently for the 10-year, what was upward resistance has become support. Although subtle and maybe just temporary noise on the chart, we may be entering a period where the trading band is starting to move up -- in other words, higher yields. Not conclusive, but definitely worth paying attention to.
Random Musings
At some point I plan to proceed with a series of posts about the Steve Keen book, I just haven't focused on it yet. In the mean time...
-I started a new book about the hyperinflation in Weimar Germany. The topic is one that I've always wanted to learn more about. Unfortunately, the particular book in question has yet to suck me in. It seems it will be a chore to get through.
-I continue to read through my regular mix of econ, investing and sports sites on a daily basis (a group that extends beyond those listed off to the right). Unfortunately, particularly with respect to the first group, the topics covered lately have generally been on the drier side. Hence, not much to grapple with and to inspire blog posts here.
-With that said, one of the econ blogs that I follow had a recent post about the gold standard during the interwar period, which of course led to the author throwing out the standard meme that owning gold is silly and that the asset class is in a bubble. One of the readers made a comment in response that I quote below:
"Do you see something wrong with the structure of this argument: I cannot see why asset X is so expensive, or has gone up so much -- although I am not an authority on X, or on bubbles -- and I therefore declare X a bubble?"
Sounds about right.
-Finally, another game, another win. Lin looked more under control, but he was playing a team without its two best players. Tonight in Miami should make a stronger case one way or the other about whether he's for real.
-I started a new book about the hyperinflation in Weimar Germany. The topic is one that I've always wanted to learn more about. Unfortunately, the particular book in question has yet to suck me in. It seems it will be a chore to get through.
-I continue to read through my regular mix of econ, investing and sports sites on a daily basis (a group that extends beyond those listed off to the right). Unfortunately, particularly with respect to the first group, the topics covered lately have generally been on the drier side. Hence, not much to grapple with and to inspire blog posts here.
-With that said, one of the econ blogs that I follow had a recent post about the gold standard during the interwar period, which of course led to the author throwing out the standard meme that owning gold is silly and that the asset class is in a bubble. One of the readers made a comment in response that I quote below:
"Do you see something wrong with the structure of this argument: I cannot see why asset X is so expensive, or has gone up so much -- although I am not an authority on X, or on bubbles -- and I therefore declare X a bubble?"
Sounds about right.
-Finally, another game, another win. Lin looked more under control, but he was playing a team without its two best players. Tonight in Miami should make a stronger case one way or the other about whether he's for real.
Tuesday, February 21, 2012
More Yen
I posted the the FXY chart (proxy for the Yen) on Friday wondering whether a new trend might be afoot. That was a daily looking back 6 months. I decided to stretch the analysis out further and now present a monthly chart going back about 5 years. You'll observe that there could be some support around 123 (where it is now), but more likely some downside left to the 120-121 level (for the short term trader). At that point, it gets very interesting from a long term perspective. A break below might signal the real change in trend that many are expecting. In the end, though, caveat emptor -- it's still just a chart read and anything might happen in this world of crazed monetary policy.
Monday, February 20, 2012
First Take
Perhaps sacrilege around these parts, but tonight's Knicks game (now the third in succession that I've been able to watch) has given me my first real sample of the Jeremy Lin experience -- and I'm not totally sold. He could be a good point guard, but at this point he always teeters on the edge of being out of control. He drives into the lane and guaranteed that at least one defender is going to get his hands on the ball. He's reckless. The flip side is that the team has started to win on a regular basis. And at the end of the games, I have yet to see him miss a big 3. But, with a roster chock full of scorers, the point guard needs to be a settling force. And, so far, Jeremy Lin ain't that.
Friday, February 17, 2012
Thursday, February 16, 2012
I Hate Jim Dolan
With the Jeremy Lin phenomenon showing no end in sight, it feels rather timely that I recently finished When The Garden Was Eden by Harvey Araton about the Knicks of Clyde and Willis. In many ways, and Clyde recently noted the same in an interview, there is a similarity between the Lin/Carmelo storyline and the Frazier/Monroe dynamic back then. Who would sacrifice and could it work? Now, to be honest, it is almost absurd that in order for the parallel to work that Jeremy Lin, with 6 starts under his belt, is either a modern day Walt or the Pearl. Nevertheless, if the assumption is allowed to stand, we see that what is ultimately required is sacrifice. And, to me, that's what 6 shots and 13 assists represents. Jeremy Lin is not just a flash in the pan. He is a talented player that needed a chance, and he can be a legitimate starting point guard. And if I'm right, that should be enough to allow Carmelo to come back into the mix and be the dominant player that he has always been.
As for the title of this post, I remain one of 2 million New Yorkers without the MSG network. And, since every story needs to have a bad guy, and given that nepotism is something I am intimately familiar with, my nominee is the guy who was born on third base and thinks he hit a triple.
As for the title of this post, I remain one of 2 million New Yorkers without the MSG network. And, since every story needs to have a bad guy, and given that nepotism is something I am intimately familiar with, my nominee is the guy who was born on third base and thinks he hit a triple.
Thursday, February 9, 2012
See I told ya...
They just needed a point guard to help right the ship. Hopefully Lin can keep it going. And maybe at some point I'll get to watch a game again.
Wednesday, February 8, 2012
Time to Debunk
While on vacation last week, I had the opportunity to plow through Debunking Economics by Steve Keen. It is probably the most interesting and informative book on economic theory that I have read to date. At its core, it is a textbook for the layman, covering many of the technical aspects of economic theory, but without getting bogged down in complex math and other such things that would cause the non-economist to stop reading and give up. I would recommend it to everyone.
As for the nitty-gritty, Keen is a Post-Keynesian. In his world, the money supply is endogenous (i.e., private banks are the source of debt creation, not the Fed), which fits in with Hyman Minsky's theory that capitalist systems are inherently unstable, the neoclassical framework for economic analysis is bunk, almost all economic models assume equilibrium (and, largely for that reason, were not able to see the crisis coming), and Keynes is greatly misunderstood and misapplied by the folks who are termed "Keynesians" now.
Going forward, my plan is to dedicate several posts to some of the important points that Keen makes in his book. For now, I will simply jot down a couple of points:
-I have a much greater respect for Keynes as a result of this book and would like to re-read The General Theory now that I have better context.
-The Minsky theory is intriguing, arguing that capitalism is inherently unstable and leads banks (who profit by making loans) to make more and more loans that are more and more risky. In a broad sense, that's plausible, as that's seemingly what happened. But, there is still a missing ingredient (at least from my read of it) that triggers this cycle of reckless behavior. After finishing the book, I did subsequently read some articles by Minsky, but still feel like there is a missing causal link in the progression of events that he describes. Happily, I know Professor Keen is working on a book covering the Financial Instability Hypothesis to be published in 2013.
-My thesis that most economists are ideologues remains in tact.
-While Keen says a lot of things that I agree with, there are still items that I remain skeptical about.
Anyway, that's it for the moment.
As for the nitty-gritty, Keen is a Post-Keynesian. In his world, the money supply is endogenous (i.e., private banks are the source of debt creation, not the Fed), which fits in with Hyman Minsky's theory that capitalist systems are inherently unstable, the neoclassical framework for economic analysis is bunk, almost all economic models assume equilibrium (and, largely for that reason, were not able to see the crisis coming), and Keynes is greatly misunderstood and misapplied by the folks who are termed "Keynesians" now.
Going forward, my plan is to dedicate several posts to some of the important points that Keen makes in his book. For now, I will simply jot down a couple of points:
-I have a much greater respect for Keynes as a result of this book and would like to re-read The General Theory now that I have better context.
-The Minsky theory is intriguing, arguing that capitalism is inherently unstable and leads banks (who profit by making loans) to make more and more loans that are more and more risky. In a broad sense, that's plausible, as that's seemingly what happened. But, there is still a missing ingredient (at least from my read of it) that triggers this cycle of reckless behavior. After finishing the book, I did subsequently read some articles by Minsky, but still feel like there is a missing causal link in the progression of events that he describes. Happily, I know Professor Keen is working on a book covering the Financial Instability Hypothesis to be published in 2013.
-My thesis that most economists are ideologues remains in tact.
-While Keen says a lot of things that I agree with, there are still items that I remain skeptical about.
Anyway, that's it for the moment.
Subscribe to:
Posts (Atom)