Thursday, May 31, 2012
Monday, May 28, 2012
(Brief) Week in Review
As mentioned, I spent the week away investigating a sunbelt city for potential investment opportunities. From that standpoint, I think this city, which is cyclical, is closer to the expensive end of the cycle than the point where a real timing play exists. However, from a longer term perspective, even at these prices, if you have patience, you'll probably do well by focusing on a certain subset of areas within the MSA.
My other takeaway kind of follows from the Ehrenhalt book. To me, in order to really be a city, you need to have some semblance of areas where pedestrians can walk around. Without it, you're really just talking about a more urban suburban area, and the term "city" is being misused. At least as a New Yorker, that's how I feel.
Finally, came across this interesting tidbit from the Capital & Crisis newsletter by Chris Mayer: "In my experiences from Mongolia to Colombia, the best opportunities in these situations often come not from mining, but from owning real estate first of all, and also simple consumer businesses and the stock exchange (if you can)."
My other takeaway kind of follows from the Ehrenhalt book. To me, in order to really be a city, you need to have some semblance of areas where pedestrians can walk around. Without it, you're really just talking about a more urban suburban area, and the term "city" is being misused. At least as a New Yorker, that's how I feel.
Finally, came across this interesting tidbit from the Capital & Crisis newsletter by Chris Mayer: "In my experiences from Mongolia to Colombia, the best opportunities in these situations often come not from mining, but from owning real estate first of all, and also simple consumer businesses and the stock exchange (if you can)."
Saturday, May 19, 2012
Urbanism
I will be traveling for work this week, going to investigate one of the larger sunbelt cities to see whether opportunities might exist. To get in the right frame of mind, I picked up and read The Great Inversion and the Future of the American City by Alan Ehrenhalt. He identifies and seeks to understand the demographic inversion that he sees as the trend these days – that is, the move of the affluent to city centers, with the suburbs becoming home in greater degree to the less wealthy and new immigrants. It boils down to convenience, both in terms of travel time to work and the cost of gasoline, but also about a certain preference that exists in the younger generation for something that resembles the capital cities of 18th century Europe. A certain sense of community that comes from the density and amenities of a metropolis. I tend to agree and think that it has important implications for real estate investors going forward.
Friday, May 18, 2012
Tuesday, May 15, 2012
Breakout Nations
An interesting read by Ruchir Sharma, the emerging markets guy at Morgan Stanley, with each chapter tackling one or several emerging nations, from the BRICs, to Mexico, to Turkey. The book also includes some of his rules of the road when it comes to assessing a country and determining whether its growth prospects are favorable. To wit:
-Pay attention to whether a once productive leader is simply trying to hang onto power for too long.
-A mix of strong companies and a strong market doesn’t necessarily make for a strong economy if it happens within the context of oligopolies.
-Be wary the country where prices feel expensive, even to someone from a rich nation.
-Look at the list of top billionaires. If there is little turnover, and the wealth is in the many billions of dollars for each, the threat of economic stagnation could be on the horizon.
-Find the nations that consistently make the wise political and economic reforms when times are good, as opposed to when they are forced to because the proverbial shit has hit the fan.
-Note the size of the second city as compared to the capital/first city. A healthy ratio is that it should be one-third to one-half the size. And, generally, the more cities in a country with over a million people the better. It all speaks to economic balance.
-Follow the money flows of locals more closely than foreign investors. The former are likely to know first when there are problems, and will either be bringing money home (in good times) or pulling it out (in bad times).
-See whether local companies are going global. While it can be a sign of achievement, it might also be a “vote of no confidence for the local economy” when it is happening in great size.
-Lastly, rules are made to be broken. So while it may be true that when a nation crosses a certain per capita income level (like $4,000 or $10,000), or that when manufacturing becomes 25 to 30 percent of a country’s GDP, that growth could begin to slow, but it is not guaranteed. And, as is always the case, exceptions will exist, so look for them.
In a subsequent post, I may cover some of his country specific observations that I found interesting.
-Pay attention to whether a once productive leader is simply trying to hang onto power for too long.
-A mix of strong companies and a strong market doesn’t necessarily make for a strong economy if it happens within the context of oligopolies.
-Be wary the country where prices feel expensive, even to someone from a rich nation.
-Look at the list of top billionaires. If there is little turnover, and the wealth is in the many billions of dollars for each, the threat of economic stagnation could be on the horizon.
-Find the nations that consistently make the wise political and economic reforms when times are good, as opposed to when they are forced to because the proverbial shit has hit the fan.
-Note the size of the second city as compared to the capital/first city. A healthy ratio is that it should be one-third to one-half the size. And, generally, the more cities in a country with over a million people the better. It all speaks to economic balance.
-Follow the money flows of locals more closely than foreign investors. The former are likely to know first when there are problems, and will either be bringing money home (in good times) or pulling it out (in bad times).
-See whether local companies are going global. While it can be a sign of achievement, it might also be a “vote of no confidence for the local economy” when it is happening in great size.
-Lastly, rules are made to be broken. So while it may be true that when a nation crosses a certain per capita income level (like $4,000 or $10,000), or that when manufacturing becomes 25 to 30 percent of a country’s GDP, that growth could begin to slow, but it is not guaranteed. And, as is always the case, exceptions will exist, so look for them.
In a subsequent post, I may cover some of his country specific observations that I found interesting.
Monday, May 14, 2012
Two Choices
With the absolute beating that precious metals and mining stocks have taken lately, it definitely has given me pause and forced me to consider whether I have it all wrong. And after a little reflection, I have come to the conclusion that there are really only two ways to think about what's going on.
1) The bull market in gold is over and buying on the way down would only be throwing good money after bad.
2) The reasons to own gold remain as strong as ever, and we are simply in the midst of a brutal correction, but one which presents a great opportunity for those with the fortitude, even if the bottom is not here yet.
That's it. As far as I'm concerned, those are the only two options. And I think you know where I stand.
1) The bull market in gold is over and buying on the way down would only be throwing good money after bad.
2) The reasons to own gold remain as strong as ever, and we are simply in the midst of a brutal correction, but one which presents a great opportunity for those with the fortitude, even if the bottom is not here yet.
That's it. As far as I'm concerned, those are the only two options. And I think you know where I stand.
Tuesday, May 8, 2012
Days Like Today
Are when the contrarian should think about buying. And so I tried. Some AUY LEAPS (filled) and a small mining services company that I like a lot (not filled, but perhaps I called the bottom by placing an order). There's always the possibility that I am too early, but that's why I don't spend all my dry powder at once.
In other news, I continue my research on frontier markets and am looking into what you need to do to open a brokerage account in some places that are pretty far afield. When I pull the trigger on anything, I'll talk about it some more.
In other news, I continue my research on frontier markets and am looking into what you need to do to open a brokerage account in some places that are pretty far afield. When I pull the trigger on anything, I'll talk about it some more.
Thinking Cities
Mostly because of who recommended it, I just finished up The Economy of Cities by Jane Jacobs. It seeks to explain the role that cities play in the growth and development of an economy. And Jacobs’ answer seems to be that they are the engines.
In making the case, she points out that cities actually precede rural development in the timeline of economic expansion, as they function as an aggregation of people, skills, and creativity, resulting in the innovations that lead to progress. They are laboratories for development work, and that is why they are the birthplace of new ideas and technologies.
It starts out that cities have a base commodity or skill that generates exports, such that the city can buy imports. Eventually, as wealth continues to grow (as well as population and jobs to support the varied business areas), innovation and experimentation lead to import substitution (thereby removing the need to buy certain externally-generated goods), creating demand for a new set of goods. At the same time, exports are growing from the newly burgeoning businesses internal to the city, all of which leads to explosive growth. It is a virtuous cycle that encourages a sustainable cycle of growth and continued development. Of great importance is that new work is always building off of older work and that there is not any dependence on a single industry. All of this is contrasted with cities where efficiency comes to dominate, and the entrepreneurial trial-and-error spirit is seemingly lost, and thus stagnation sets in (think of any company town in the United States or elsewhere).
Overall, when placing the book in the context of my day job, the author’s line of reasoning gives me something else to think about when contemplating markets.
In making the case, she points out that cities actually precede rural development in the timeline of economic expansion, as they function as an aggregation of people, skills, and creativity, resulting in the innovations that lead to progress. They are laboratories for development work, and that is why they are the birthplace of new ideas and technologies.
It starts out that cities have a base commodity or skill that generates exports, such that the city can buy imports. Eventually, as wealth continues to grow (as well as population and jobs to support the varied business areas), innovation and experimentation lead to import substitution (thereby removing the need to buy certain externally-generated goods), creating demand for a new set of goods. At the same time, exports are growing from the newly burgeoning businesses internal to the city, all of which leads to explosive growth. It is a virtuous cycle that encourages a sustainable cycle of growth and continued development. Of great importance is that new work is always building off of older work and that there is not any dependence on a single industry. All of this is contrasted with cities where efficiency comes to dominate, and the entrepreneurial trial-and-error spirit is seemingly lost, and thus stagnation sets in (think of any company town in the United States or elsewhere).
Overall, when placing the book in the context of my day job, the author’s line of reasoning gives me something else to think about when contemplating markets.
Sunday, May 6, 2012
Faith Rewarded
"Sometimes people deserve to have their faith rewarded."
-Bruce Wayne
On this day, Carmelo saved Gotham.
-Bruce Wayne
On this day, Carmelo saved Gotham.
Friday, May 4, 2012
Friday Funnies
Came across this one on Zero Hedge. Pretty sure that Charlie Munger just implied that Jews are not civilized. As to his other point, as someone in the comments section notes, the proof is in the pudding...
My Treasury Trade
Here's what I am looking at that has me thinking there is a trade to be had on the short side (which I initiated yesterday using TLT). Bear in mind the play is for rates to move up.
Yen Up, More Money To Make When It Goes Down
Time for my periodic check on the Japanese Yen. A few weeks back I thought a head and shoulders could be forming and the exchange rate would go down (implying strength against the US Dollar). Below is the chart which seems to suggest that I might have been on to something. As an added bonus, in Marc Faber's newest monthly piece, he also calls for a bullish move in the Yen (it's nice to have smart people agree with you on occasion).
Thursday, May 3, 2012
Who's right?
This guy or this guy? I'll go with the one who has feet on the ground over the one outsourcing his argument.
Wednesday, May 2, 2012
A Small Speculation
I think the set-up looks good, so I am planning to buy some TLT $114 puts (6/16/12 expiration) tomorrow morning. You've been warned.
My Summer Blueprint
With a season that looks to be over in about a week, I've been thinking through what the Knicks can do in the offseason to get better. And my attention has turned to the Brooklyn Nets.
As it stands, the Nets will probably lose Deron Williams unless they can get him some better teammates. However, they have a lot of cap space and can take back more in salaries than they give up in order to make it happen. Which brings me to my suggestion: sign-and-trade free agent Kris Humphries to the Knicks for Amar'e Stoudemire. Stoudemire could be the type of running mate that gets Williams excited to stay, would have more room to operate than he does currently, and presents an interesting pairing at forward with Gerald Wallace.
For the Knicks, Humphries is a much better fit. He's a really good rebounder, a good defender, and gets his points the same way that Tyson Chandler does. Which is to say that he doesn't need plays run for him. And that makes him a great teammate for Carmelo Anthony. (Of course, there is the Page Six issue that Anthony's wife is supposedly friends with Kim Kardashian, but we digress.) If it happened, I would be very happy.
As for other issues, the Knicks have a bunch of free agents to deal with themselves. The list includes Jeremy Lin, Landry Fields, J.R. Smith, Steve Novak and Baron Davis. My preference would be to get Smith and Novak back, and then spend time trying to sign a reliable point guard for the mid-level exception (Steve Nash, anyone?).
If none of this comes to pass, my contingency plan is to move Stoudemire to the bench, and turn him into the frontcourt version of J.R. Smith.
In the mean time, hopefully game 3 goes New York's way.
As it stands, the Nets will probably lose Deron Williams unless they can get him some better teammates. However, they have a lot of cap space and can take back more in salaries than they give up in order to make it happen. Which brings me to my suggestion: sign-and-trade free agent Kris Humphries to the Knicks for Amar'e Stoudemire. Stoudemire could be the type of running mate that gets Williams excited to stay, would have more room to operate than he does currently, and presents an interesting pairing at forward with Gerald Wallace.
For the Knicks, Humphries is a much better fit. He's a really good rebounder, a good defender, and gets his points the same way that Tyson Chandler does. Which is to say that he doesn't need plays run for him. And that makes him a great teammate for Carmelo Anthony. (Of course, there is the Page Six issue that Anthony's wife is supposedly friends with Kim Kardashian, but we digress.) If it happened, I would be very happy.
As for other issues, the Knicks have a bunch of free agents to deal with themselves. The list includes Jeremy Lin, Landry Fields, J.R. Smith, Steve Novak and Baron Davis. My preference would be to get Smith and Novak back, and then spend time trying to sign a reliable point guard for the mid-level exception (Steve Nash, anyone?).
If none of this comes to pass, my contingency plan is to move Stoudemire to the bench, and turn him into the frontcourt version of J.R. Smith.
In the mean time, hopefully game 3 goes New York's way.
Tuesday, May 1, 2012
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