A good read from Christopher Mayer (2012), writer of the Capital & Crisis newsletter. It’s basically an investment travelogue, covering some 20-odd countries that Mayer visited – in many ways, an updated version of Adventure Capitalist, just with greater emphasis on identifying the investable ideas. The title itself is a reference to the fact that emerging and frontier markets are catching up with the West, which is a return to equilibrium if one looks historically. Anyway, a treasure trove of memorable lines about investing:
-“A good investor is a worldly investor who has an understanding and appreciation of how the world works and how it came to be.”
-“Capital flees from abusive relationships and seeks out environments where it can be fruitful and multiply.”
-“Whatever starts out as a good idea is almost a sure thing to be overdone eventually.”
-“…you will do well to invest in the commodities that the big emerging markets are short of.”
-“There are not problems, there are only opportunities.”
-“Look for the gaps in these emerging markets. Find what they don’t have but want or need. Invest in the companies that fill those gaps.”
-“That’s one of the benefits of doing trips like this. When people begin to repeat ideas, themes emerge.”
-“…what sounds great from a macro perspective can be tough to implement in a micro way.”
-“Young people are economic catalysts.”
-“The returns are highest where capital is scarce.”
-“He’ll manage the business as an owner because he is an owner himself. I can’t stress the importance of this kind of orientation enough.”
-“It has loads of coveted natural resources, and the trend is toward unlocking that wealth.” (He is talking about Canada, but clearly the idea is broader than one country.)
-“Maybe the only gift is a chance to inquire, to know nothing for certain.”
-“I’ll keep writing, thinking, traveling and asking questions.”
Friday, October 26, 2012
Wednesday, October 24, 2012
Hill Runner
I have happily returned to my running ways, spending a lot of time lately in the Central Park loop. Incorporating the forefoot/mid-foot strike into my stride, I am causing myself much less lower limb discomfort.
Anyway, I came across a pretty nifty conversion formula for figuring out how to simulate certain hills in the park onto a treadmill. To use it, you need to know the change in elevation that you’re experiencing and over what distance – a GPS watch allows me to keep track of both. As for the formula:
-In Central Park, what is known as “Heart Attack Hill” near 110th street and CPW is about .4 miles long. The first step is to convert that distance into feet, so multiply it by 5,280 (2,112 feet).
-Next, divide the change in elevation from bottom of the hill to the top (96 feet) by its length (2,112) and multiply that answer by 100. The result (4.55) offers a smoothed out approximation for the percentage incline of the hill.
-In order to capture the wind resistance that comes with running in the elements while on a treadmill, add 1 to your guesstimate above.
So, if I want to run “Heart Attack Hill” at the gym, set the treadmill to 5.5%, pick the appropriate pace, and get going.
Anyway, I came across a pretty nifty conversion formula for figuring out how to simulate certain hills in the park onto a treadmill. To use it, you need to know the change in elevation that you’re experiencing and over what distance – a GPS watch allows me to keep track of both. As for the formula:
-In Central Park, what is known as “Heart Attack Hill” near 110th street and CPW is about .4 miles long. The first step is to convert that distance into feet, so multiply it by 5,280 (2,112 feet).
-Next, divide the change in elevation from bottom of the hill to the top (96 feet) by its length (2,112) and multiply that answer by 100. The result (4.55) offers a smoothed out approximation for the percentage incline of the hill.
-In order to capture the wind resistance that comes with running in the elements while on a treadmill, add 1 to your guesstimate above.
So, if I want to run “Heart Attack Hill” at the gym, set the treadmill to 5.5%, pick the appropriate pace, and get going.
Tuesday, October 23, 2012
Yen Update - Part 101
A week ago I said that the Yen had broken above the 78 level and out of the descending triangle formation. That continues to be the case, as shown in the chart below. The next key hurdle is the 80 level.
Monday, October 22, 2012
Quote of the Day
"You can look at things and say this is the way they've always been done. I like to look at it and say, well, if everybody's been doing it this way, that's not where the future is. You have to look somewhere else. And, you know, if that pisses people off, that's their problem."
-Mark Cuban (2011)
-Mark Cuban (2011)
Thursday, October 18, 2012
Read the Subtitle of this Blog
-First up is some analysis from Mark Hanson on the housing data out of Sacramento. Not good. Of course, it stands in stark contrast to all the hyperventilating that goes on whenever people see new housing start numbers. Hanson writes it, but it bears repeating, creating new supply does not mean that there is actual demand for it. Moreover, he notes that stimulus around mortgage rates has simply pulled demand forward, which means you end up in a tricky spot where you always need to do more in order to sustain it. My guess: developers and homebuilders bought the land at a very low basis at the depths of the recession. Now, with interest rates at ultra-low levels, they feel compelled to act before they move up. So, in a sense, they have gone from warehousing land to warehousing supply.
In the past few months, Hanson has also written more specifically about how the shadow inventory is often understated and misunderstood. Demand for distressed properties has been shown to be about 1.5 million units per year (or about 25% of total demand). But, the supply is not just the 300k to 400k foreclosures per year that we see – you also need to factor in the 5 or 6 million units that are 60-days late or in foreclosure, the 600k short sales per year, and the 6 million modified loans which should still be viewed as high-risk. Then on top of all that, you have somewhere in the neighborhood of 25 million homeowners who are stuck in homes bought during the bubble years because of negative equity. Hanson notes that this last group is (historically) the key driver of demand, but they are a non-starter right now. And until they are back above water, don’t expect any true recovery.
-I have said before that I don’t think a return to the gold standard is baked into the cake. In fact, I would argue that even if the chance of a return is some non-zero percent, it’s probably not much higher than that. Nevertheless, it feels like I still read a lot of skepticism about gold as investment, separate and apart from whether it will ever return to a formalized currency role. And I am stuck wondering why. Perhaps because it represents a disavowment of the mainstream. Regardless, even if jokers like Krugman, Sumner, DeLong and Glasner are right about whether the Ponzi charade can go on endlessly, all that means to me is that the climb in gold will carry on as well. In other words, I am willing to concede many of the points that Keynesians make about how the economy works and why their particular version of economic theory is the right one, but will still feel it is vitally important to own the yellow dog. Of course, if a funding crisis does come, and it turns out that you can’t print your way to prosperity…well, they’ll be wrong and I’ll still be happy to own my gold.
-Speaking of gold, I enjoyed this piece over at Zero Hedge (confirmation bias?) which looks at the gold coverage ratio. The historical average is 40%, we are currently at 17%, and when you have periodic bursts of no-confidence in fiat currencies, it can go to 100% and beyond. All this as the monetary base continues to grow…
-After mentioning it the other day, I bought a small position in the water desalination company that trades in Singapore. I also dumped the GG October $45 calls on Monday. As it stands, they are even lower today. But, lesson learned.
In the past few months, Hanson has also written more specifically about how the shadow inventory is often understated and misunderstood. Demand for distressed properties has been shown to be about 1.5 million units per year (or about 25% of total demand). But, the supply is not just the 300k to 400k foreclosures per year that we see – you also need to factor in the 5 or 6 million units that are 60-days late or in foreclosure, the 600k short sales per year, and the 6 million modified loans which should still be viewed as high-risk. Then on top of all that, you have somewhere in the neighborhood of 25 million homeowners who are stuck in homes bought during the bubble years because of negative equity. Hanson notes that this last group is (historically) the key driver of demand, but they are a non-starter right now. And until they are back above water, don’t expect any true recovery.
-I have said before that I don’t think a return to the gold standard is baked into the cake. In fact, I would argue that even if the chance of a return is some non-zero percent, it’s probably not much higher than that. Nevertheless, it feels like I still read a lot of skepticism about gold as investment, separate and apart from whether it will ever return to a formalized currency role. And I am stuck wondering why. Perhaps because it represents a disavowment of the mainstream. Regardless, even if jokers like Krugman, Sumner, DeLong and Glasner are right about whether the Ponzi charade can go on endlessly, all that means to me is that the climb in gold will carry on as well. In other words, I am willing to concede many of the points that Keynesians make about how the economy works and why their particular version of economic theory is the right one, but will still feel it is vitally important to own the yellow dog. Of course, if a funding crisis does come, and it turns out that you can’t print your way to prosperity…well, they’ll be wrong and I’ll still be happy to own my gold.
-Speaking of gold, I enjoyed this piece over at Zero Hedge (confirmation bias?) which looks at the gold coverage ratio. The historical average is 40%, we are currently at 17%, and when you have periodic bursts of no-confidence in fiat currencies, it can go to 100% and beyond. All this as the monetary base continues to grow…
-After mentioning it the other day, I bought a small position in the water desalination company that trades in Singapore. I also dumped the GG October $45 calls on Monday. As it stands, they are even lower today. But, lesson learned.
Wednesday, October 17, 2012
Turning Tides
Bill Fleckenstein mentioned that there is growing evidence of a move away from the deflation trade. Specifically, he focused on the 10-year treasury, where we are seeing higher highs and higher lows on the yield (if he is right in his intuition -- and I think he is -- then I should credit myself for pointing out recently that it might be time to start a small short position).
In any event, as further evidence that inflation will become the dominant force that drives markets, the Japanese Yen appears to have broken out of its range, moving above the 78 level (oft-discussed on this site). The daily chart below tells the story.
In any event, as further evidence that inflation will become the dominant force that drives markets, the Japanese Yen appears to have broken out of its range, moving above the 78 level (oft-discussed on this site). The daily chart below tells the story.
On Voting
Doug Casey responds to the idea that people who do not vote do not have a right to complain about the results of the political process, since they have chosen not to raise their hands…
“But I do raise a hand, constantly. I try to change things by influencing the way people think. I'd just rather not waste my time or degrade myself on unethical and futile efforts like voting. Anyway, that argument is more than fallacious, it's ridiculous and spurious. Actually, only the non-voter does have a right to complain – it's the opposite of what they say. Voters are assenting to whatever the government does; a non-voter can best be compared to someone who refuses to join a mob. Only he really has the right to complain about what they do.”
“But I do raise a hand, constantly. I try to change things by influencing the way people think. I'd just rather not waste my time or degrade myself on unethical and futile efforts like voting. Anyway, that argument is more than fallacious, it's ridiculous and spurious. Actually, only the non-voter does have a right to complain – it's the opposite of what they say. Voters are assenting to whatever the government does; a non-voter can best be compared to someone who refuses to join a mob. Only he really has the right to complain about what they do.”
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