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Showing posts from February, 2012

I love Rick Santorum

First, I've got to be more precise, I love his honesty about his mid 17th century opinions, and be upright about his insane views.  This guy who clearly didn't understand Kennedy's speech about the separation of church and state -- that by the way allowed Santorum, a catholic, to run for president.  He doesn't understand why the founding fathers wanted separation (so that the European state conflicts would not appear in America).

This is a man who is against contraception (probably also against vasectomies?), against abortion at any cost, against women at work, and now against education for Americans (a guy who has BA, MBA, JD...).  Get this, America's right is eating it up, they love this stuff.

I love Santorum for his honesty, unlike his friends (those who are running, and those who are not) that speak in code, the kind of code that gave us "separate but equal" and "intelligent design".  No Santorum would gladly bring 'merica back to the …

Credit crunch in Europe is just starting -- again

My favorit line yesterday from Commerzbank's announcing 4th quarter profits up from Euro 257MM to Euro 316 MM, including in this marvellous performance was a profit from buying back its own bonds in the secondary market of Euro 735MM; so more than 100% of Commerzbank's fourth quarter performance was driven by the ECB's largesses -- in the form of LTRO borrowings; think about it the reason that the bank's debt was prices so low was because the probability of repayment was low, now with the help of the ECB's money, Commerzbank was able to retire that debt at a substantial discount.
At the same time Commerzbank will boost capital by Euro 1 billion, and the bank will improve performance by reducing risky assets (i.e. read here fewer loans).  You can bet serious money that what Commerzbank is doing is also being done by DB, SocGen, BNP.  So companies looking to borrow will find it increasingly difficult, if you cannot borrow you cannot invest -- especially in Europe we…

Slow writting

its not a lack of material, but a lack of time.  I am now the General Partner in a new hedge fund... its a lot of work...

On that, my partner and I decided that will not accept any US money in our fund, we are much too concerned with the new Dodd Frank rules.  A hedge fund manager recounted to me that they've just received a 300 page questionnaire to fill out.  300 pages (that's phone book thick).  I though he was exaggerating -- until I read The Economist that mentioned that same document (apparently my friend was exaggerating its only 298 pages long...).

In Canada, hedge funds have a closer but more discrete supervision.  Fewer rules but tighter regulations.  It seems that America is doing its best to kill capitalism...


Anyway, now you know!

Basel III, European and American banks

As a Canadian living in Canada, where the Bank of Canada continues to warn of extremely dangerous financial times ahead, I watch in amazement the action of American and European banks -- maybe they know something we don't in Canada, but it remains that these institutions are trading as if Basel III was not going to happen -- ever.  Entering into trades that will soon be prohibitively expensive (because of capital requirements).
This was gleaned not through some great market insight on my part, rather a discussion today with some three "old bankers" who've worked the entire planet -- as bankers (you know, a few years in NY, Tokyo, London and maybe even some stranger outpost such as Shanghai...).  Bottom line these guys were telling me at lunch today (they now all work for Canadian banks) that they are observing what's going on in the market and are surprised!  First off, because all of Canada's banks effectively operate following Basel III rules, the loose lo…

Greece, the end of the Euro and Risk mitigation

An article in today's FT drew my attention, how clients are asking their investment banks to create investment products that will protect them when/if Greece falls out of the Euro or the Euro ceases to exist (two option, one outcome).  Asking investment banks for this kind of advice smacks of stupidity.  First, because in the past, protection products have been better at generating fees for the arranger than at protecting the investors; think of portfolio protection in the early 90s.  Secondly, and more importantly, the issue with the failure of Lehman was not the direct consequences but the indirect ones!  It is the "Unknown, unknowns" that kill you, and that cannot be protected against.
A simple example, many companies would be looking at protecting core assets and revenue streams, but what if your bank goes belly up, not because it did anything really stupid, but because it had exposure to other banks that had stupid exposure -- the loops are endless.
The one protect…

CAD and WTI

Ok, so most of North America is shut down today, family day in Ontario, and I'm not too sure what's the holiday in the U.S. But, what is interesting is the direction of oil prices -- not too sure what is driving them today, it is hard to believe that with Europe's economy is taters, China lowering interest rates (by 50 bps) because of the weakening housing market (although inflation is still sky high there), that the driver for higher oli price is a seemingly recovering U.S. economy... no, I suspect it is the neo-con (and evangelicals) trying real hard to start another war -- this one with Iran.
The most amazing commentary this weekend was that from a close confident of GW Bush (the young one) whose decision to invade Iraq was partly driven by a desire to see the apocalypse that woud eventually lead to the rapture (I wish I was joking), that and the ideal of finishing "dad's war" were the prime drivers -- despite what everyone say's in the GOP today ther…

Canadian inflation going up again!

Not a huge surprise (a little surprise), still CPI for January 2012 is going up again, although a small increase (from 2.3% to 2.5%), underlying this inflation is higher food prices +4.2% and higher gasoline prices +6.5%, and February is looking dodgy on the fuel side, as oil prices (Brent crude hit the $120/bbl yesterday).  

So StatsCan shows that inflation that had shown a positive trend for the past few months, is now on a reverse course.  Canada's reality is that the economy did relatively well in 2011 with GDP growth of 2.1% (very very early estimates of Q4/11 are for GDP growth of 1.3% annualized).  The rest of world had a bad time in 2011 -- Europe seems to be  in a slow down mode -- Greece GDP shrank by 7% in Q4/11 -- not annualized data, real absolute shrinkage.  However, since so little of Canada's export are destine for Europe...
The first "reality" is that January 2011 saw gasoline prices at a 40 month high (yep we go to go "pre-recession" to s…

If Greece had exited two years ago

At the time the media claimed that such an exit would cause terrible dislocation:

Massive GDP contraction
Massive layoffs
Social unrest.

How exactly is the situation now any better for the Greeks, Check GDP contraction, Check massive layoffs and social unrest.  In fact, and BNP's quarterly results are the proof (if any was needed), the game of shell being played in Greece was to give European banks the time to write off, or selloff their risky assets. BNP first wrote off 20% of its exposure to Greece, then to 50% and now 70% write down.  They have also reduce USD denominated assets by 30%.
BNP is certainly not the only bank that has done this, several have also taken the hard decisions... but Greece is still failing; Over the past three years GDP is down 16% and unemployment has risen from 7% to 20%.  The latest demands -- 30% reduction in minimum wages and further cuts in government programs are certain to make things worse; and there is frankly no optimism to be had.  You can be…

I love my Apple eco-system

I suspect that what Bill Gates and window were trying to do, Apple has in large accomplished. I own:
(1) MacMini
(2) Macbook Air
(3) Iphone
(4) Apple TV
(5) Apple Router

So first off I listen to all my music on my stereo via Apple TV, I use my MacMini DVD driver to load software onto my MacBook Air and finally, I now print on my old Canon printer with no wires attached to my MacBook Air. Of course I can access all my files that are on my MacMini hard drive -- useful because it is backed up by timemachine that backs all my files every night... I have no idea if I had a different wifi router all this would work?  I will try to print this weekend at the cottage -- maybe it will work, there too
Are you kidding me.

The only shortfall is the synchronizing of calendar and address book.  That is really is not working very well yet., although I seem to have found a solution with Fantastical...

There's an App for that!

Sunday morning, reading some tech writer on new and interesting things, I fell across an new GPS traffic app (been around for a while but I'm an old foggy!).  The app is called WAZE and it simply amazing, driving down to Montreal from the cottage it alerted me twice about minor accidents (that was slowing the traffic), and of congestion on two alterative routes to my place.
Think about this, this was freeware -- and about 20x more useful that the Garmin (also installed -- and not working well at all -- it refuses my address in Montreal).  First, Waze worked from the very first, finding my location in a few seconds (mix of GPS/GSM antena) then it gave me useful information, in understandable english.
For those who like to have accidents, you can also easily add hidden camera warnings (it is a Traffic social media), cop cars that are checking traffic.  The best bit, it figures out congestion just by watching other users that may be circulating slowly on a major road.
BTW no service…

Europe's endgame?

Reading last night that the Greek parliament had voted to support the Troika's demand for renewed and deeper austerity measures, with 20% unemployment and nearly half of those between the age of 16 and 25 unemployed you know this is going to end well! (sarcasm).  This morning, the leader of the New-Democracy Party (the likely winner of the April elections), said that he wanted to renegotiate the deal with Europe... less then 24 hours after the deal was inked.
Reminds me of an old story; a friend started his working life at ACDI (Canadian developmental agency -- working mostly in Africa), he was dealing with a rather unsavoury type (President for life kind of guy) and as soon as they had signed a loan agreement; this President asked:  "Is it too early to start renegotiating the repayment schedule?" To his credit my friend soon left government employ -- since he had reported his conversation, and his boss had told him to "leave it alone".
Back to Greece, it woul…

Canadian exports rising

On Friday, StatsCan published the merchandise trade numbers for December 2011 -- and despite a strong dollar, Canadian exports did very well indeed!  Canada generated a $2.7 billion trade surplus for the month, imports rose, but exports "exploded upward", in numbers imports rose 0.8% but export rose 4.9%.


The big winner was equipment and machinery and the auto sector.  Will this continue?  Hard to say, because the US economy, which is Canada's export market prime driver seems to be in recovery mode.  On bit of statistics that worries this writer is U.S. gasoline consumption; which is now lower than in 1980 -- 32 years ago.  BTW this not driven by a reduction in inventory, gasoline is a just in time business, no one keeps stocks, because it doesn't keep.



The problem is that historically, gasoline sales have been highly correlated with economic growth (or the lack thereof), and so this could be a important marker.  For Canada, the risk of a downturn in America is cruc…

Sino-Forest end of the saga?

Well the outside auditors published their final report February 1st on the on goings at Sino-Forst and the result are:  They found nothing, clearly the short sellers were wrong... one little problem; the outside auditors had very poor access to data in China.  It seems that the stone walling worked just fine.  I guess its in the hands of the RCMP now.
RCMP: Sir, we are investigating the Sino-Forest problems

Chinese officials:   你为什么不戴你的滑稽装备(1)

RCMP: Sir, we are trying to find if Canadian investors were defrauded

Chinese official: 我不在乎 - 但你能唱这首歌“我是一个伐木工人......”(2)

(1) why are you not wearing your funny outfit?
(2) I don't care -- but can you sing that song "I'm a lumberjack..."

And for those who don't know Monthy Python here it is



This woud be funny if were not so sad

Apparently the Russian authorities are still prosecuting Sergei Magnitsky -- you know the lawyer who died in police custody (after torture).  I wish the FT's account was fictional (it is a little) but it turns out its true.  Earlier this week a tribunal sat (and cited Magnitsky for contempt, because he didn't show up at the trial -- apparently dying in police custody is not good enough)

Read it here

Rio Tinto takes a $9 billion hit on Alcan

Rio Tinto announced its results for the year, the numbers were good, except for one tiny little problem.  They also took a write down on Alcan.  Rio bought Alcan at insane valuation in 2007 (just before the crisis), the figure if memory serves was $100 per share.  No other buyer could come up with a figure near that (rumours are that Alcoa was near $85).  So the company that Rio bought for $44 billion in 2007 is now worth slightly more than $36 billion.  BTW its not like Rio has been standing on its hands in terms of investments into Alcan.
On the bright side the CEO has agreed not take a bonus this year... 
Looking at the stock (up nearly 25% since mid December), shareholders seem largely unconcerned.  Granted that in the greater scheme of things $9 billion is peanuts, still its nice to see reality come knocking.  This was a bad deal, it is hard to say what will be the long term impact to Alcan going forward (in terms of capital allocation).   One thing for sure, Rio is selling alum…

Why doesn't the news translate into the markets?

This morning the stock price for Societe General is around Euro24.00 up 40% from its January 15 low of Euro 17. UniCredit saw its stock price double to Euro 4 from a low of Euro 2, granted the whole mess around its rights' issue clouds the picture a little bit but...
This morning looking at the VIX (Volatility of the S&P 500 -- or the fear index) is at a post crisis low (low 20s), yet none of the news is particularly good, the only explanation is that the ECB's LTRO program is working as planned -- boosting stock prices despite rising real uncertainty.  The reality of Greece is hard to escape -- Greece's tax revenus are collapsing, the Greeks are reluctant to push reform any further (there is no doubt that Greece is very unproductive, it has been for years).  Bottom line, we are looking at a very messy exit by Greece of the Euro -- if there is no new cash coming (budget deficit of 9.5% mainly because revenues have collapsed) then default will occur.
I don't think …

Borring but interesting -- building permits up 11%!

Ok, so yesterday I spoke of The Economist article about how expensive Canadian homes had become, after a 13 year housing boom that reality was about to catch up with the theory:  All performances (eventually) revert to the mean.
So imagine my surprise when this morning StatsCan published the new building permit for December 2011 that showed an 11% rise in permit requests...

(Source: StatsCan)

Now what's interesting here is not the trend but the level!  Frankly in building permits the trend is far from clear, but the level is important here, it is the first time that the number exceeds the June 2007 peak (not shown here -- take my word for it).  That means that despite all the statistical analysis, the view that Canadian are overly indebted (they are) construction is booming in Canada.  The increase was from "multi-family" units in Ontario and Alberta -- in fact that Ontario data is minde boggling, it represents a 28.9% increase to $1.9 billion.
Is the a representation o…

When even Canadian don't give a rat's ass about French translation

Forwarded by a friend this morning:



Now, that's simply careless and frankly insulting, that someone in Ontario would translate text from English to French, and clearly have no idea what he/she are writing.  For those who don't understand French; a loose translation would be a colloquial expression for  male self pleasuring... 
You got to give it to the people of Windmill Sausage Co., Ltd.   These people must be glad they don't have a web site!
Frankly, this next one is just funny:



Now, in both cases neither the label manufacturer, the client or for that matter the store notice that this wording was rather incorrect -- BTW the second one is the wrong translation they used "nuts" as in "nuts and bolts" Vs nuts to eat (which would be "noix").
I know that people in Ontario generally dislike French Canadians (especially if they are from Quebec), bust still both of these errors are rather glaring, even for some one who's only gotten the most bas…

Job creation in Canada: East Vs. West

If you are male between 15 and 24 and live in Montreal you are screwed!  Unemployment in the gender/population  segment is the worse in Canada -- on the other hand if you are a female, unemployment is not a problem!  In fact, in the 24/65 age bracket women in Canada are near full employment -- they are mostly service industry jobs, so probably not the best paying position, but at least women are working near or at full employment level.
The second trend is that a huge line divides between Ontario and Manitoba between job growth and job losses -- Ontario and Quebec, Canada's central manufacturing hub are suffering whereas Canada's resources based economy (yes oil and Gas but also mining) are doing great, and there is a deeper change too,, in that Western Canada's labor force is younger -- as Canadians are attracted to the job market there, so not only are there fewer jobs in Eastern Canada the demographic implications are severe.
Canada:  Employment Level


















Canada's labo…

And the there was one!

One of my favorit Australian blogs is Steve Keen's Debtwatch.  This is a sceptic, but in the right way.  His view on Australian housing is systematic and his 2011 call what right on the money -- Australian house price have begun falling (Australia has a lot of inflation compared to US and Canada), so for 2011 house prices fell (in nominal terms by 4.8%), but adding inflation and the figure becomes 10% -- I was not kidding!
His view for 2012, more of the same, another 10% drop.  Canada and Australia were the last two OECD countries that had not seen a real correction in house price, in both regions house prices have been growing faster than national income, and so eventually, the wall had to be hit.
It now leaves Canada as the only OECD country still seeing rising home prices (although the price creep has slowed apparently).  As of November 2011 house price (YoY) were 7.4% higher than in 2010 -- but for the month the prices had fallen by 0.23% for October (Teranet - National Bank …

Facebook

Is it just me, but looking at Facebook's market valuation (around $75 billion) its revenues ($3 billion) you wonder what kind of growth is being factored in here.

From Facebooks's S-1:

We had 845 million MAUs {monthly average users} as of December 31, 2011, an increase of 39% as compared to 608 million MAUs as of December 31, 2010. We had 483 million daily active users (DAUs) on average in December 2011, an increase of 48% as compared to 327 million DAUs in December 2010. We had more than 425 million MAUs who used Facebook mobile products in December 2011 And  During the month of December 2011, we had on average 360 million users who were active with Facebook on at least six out of the last seven days, providing perspective on the number of people for whom Facebook is essentially an everyday activity


Think about these numbers for a minute in terms of total world population!  Lets say there are 7 billion humans on earth, that means that 12% have a Facebook account, and that 1/…