Skip to main content

Posts

Showing posts from 2016

Will Italy kill the European Union?

The only real impact of Italy's referendum was the resignation of Italy's Prime Minister -- The Democratic party was the ONLY pro-European party left in parliament and with the departure of Renzi, it too may decide that Europe is not worth the trouble.

Europe could easily live without Greece, the Greek rescue plan really was the European banks and insurance company rescue plan, over the past 60 months, virtually all the debt that was owned to European banks, pension funds and insurance companies have been repaid at par with new loans from the European Central Bank -- quietly, the Europeans have nationalize a private debt burden at par, considering the health of Europe's bank this was the least the could do.

Italy is another problem entirely, nearly 12% of Europe's GDP, the second largest bond market it is a large economy that sits at the heart of Europe.

The Prime Minister's resignation means that elections will soon follow, and the topic of "interference in I…

India's crazy solution to graft & Trump's cabinet picks

A few weeks ago, the Indian government decided that it would withdrawn all Rs500 and Rs 1,000 (respectively $7 and $15) as a means of combating graft in the country -- it turns out that that Modis' government had neither consulted the Ministry of Finance or the Central bBank of India.  The plan was to remove cash from society, the impact has been brutal.  There is simply no cash available in India!  Business are failing because nobody can pay, the idea would be that everyone would use electronic transfer for payment ensuring that graft cannot occur (as if!).  However, India's problem is somewhat different; nearly 600 million Indians don't have a bank account -- their entire life is cash based with little savings (a cow here and there).

BTW its the kind of crazy off the cuff solution I expect from Trump.  Last week he blasted the replacement of Air Force One -- already at 17 year old aircraft, getting on in age -- because its built of the frame of a B747-200 parts are incre…

The New New Economy -- Where theory goes to die!

Increasingly we are hearing stories about using big data into comprehensive working tools especially with the idea of AI (granted its more intelligent systems that the AI of Scify) will contribute to the world economy.

Already big data and intelligent systems are crowding out trading rooms at an unprecedented rates; why have expensive traders when a computer can do the job 24/7 at little cost. Bond desk have been decimated over the past decade, the same for F/x desk, and virtually all trading that is trough ETF is done via computer systems.

That's the easy part, now come the doctors and the lawyers -- already we are seeing the medical profession being overwhelmed with data, diagnosis was easier when the doctor had only 10/20 data points, but medical technology has come a long way, already the number of data points has increased by nearly an order of magnitude than what was available 10 years ago, lets assume you suddenly have 400 data-points, the human mind is unequipped to deal w…

Trump, Carrier and Tax breaks!

And so it has started!

Those in the know, now have a blueprint for getting government tax breaks -- with a bit of publicity added to the mix!

Of the 1,300 jobs that were saved the real number apparently is far lower.  The official number is now in the region of 600 -- once you remove the jobs that were never going to leave anyway.  Now I am very happy for the 600 who actually kept their job, the cost to Indiana's tax payers is at least $7 million -- and I understand that there are further goodies such as lower corporate taxes.

The blueprint is now for a company that wants to shift 5,000 jobs to Mexico/Vietnam (you get the picture) to announce 10,000 jobs being cut, and then wait for the government to give you your goodies bag, and then cut the 5,000 jobs you were going to eliminate anyway.  If you do it right you can even get a undertaking from Trump that he will not impose tariffs on your imported production.  The only looser is the tax payer, and considering Trump's objectiv…

OPEC agrees to cut production -- Futures go wild!

Three pieces of news this morning:

1) The US dollar keeps on rising
2) OPEC agreed to cut 1.2 MM/BBL per day
3) Cushing inventory at an all time high


All three of these news are about the same thing; first the agreement to cut oil production (yeah sure) by 1.2mm/bbl day should improve the over capacity issue that is in the market today.  Of course with higher prices there will be a HUGE incentive to cheat (that's always been OPECs problem -- and non-OPEC players can do what they want).  The rise in the US dollar follows from a sense that the problem of OPEC (and of most countries in the middle east) are solving themselves and we can get back to making money...not.

The rise of the US dollar is driven by a fear of world event; the world is very worried about Europe and its banking system -- hence its currency.  In reality, with inventories at all time high (in the US and in Europe) there cut of 1.2mm/bbl per day is probably not enough to change the situation.

The rise of the dollar …

The meaning of a new republican administation

There is no doubt now that the GOP's goal will be to demolish what is left of Obama's meager contribution to America's wellbeing -- his most ambitious achievement the ACA (aka Obamacare).  In a sense, the new Republican administration is confident that they will hold Congress and the White house for the next four years, and that within the next 100 days some rather aggressive changes will be implemented:

1)  Keep the good stuff from Obamacare and dump the stuff they don't like.  They like pre-existing conditions and that children can stay on their parent's insurance until they are 26.  Of course its unclear who will pay for all this -- pre-existing conditions were covered because of a larger insurance pool.

2)  Tax reform:  It is a certainty that massive corporate and personal tax reform will take place with the vast majority of tax reduction for the wealthy and corporation.  This will lead to a massive repatriation of offshore revenues, that will result in massive…

Someday

The names and place of these events have been changed...


A friend of mine had married an older man, who had a previous family in Europe.  This man, had children and an ex-wife, but these people ceased to exist when he moved to North America. He was a dreamer, he was an explorer, he had in his previous life worn black ties but now would only wear jeans and t-shirts.

I think that by now you suspect that this man had issues, but he was fun, he was interesting and he was, it would appear, a loving husband.

For some reason this friends decided to sell their downtown apartment and buy a house in the country.  My friend still had a job in the city, she was earning wages and he husband was planning some trip, exploration of the far North...

In reality he was a dreamer; he dreamed of a better chicken coop -- and so he demolished the chicken coop to build a new one, but his musing and the weather got in the way of his building a new chicken coop, the sheep needed more pasture, but again the wea…

DJI hit 19,000 -- historical all time high!

Is this the last hurray is this for real (sounds like a song from Queen).  Nevertheless last night the DJI hit an new all time high of 19,000 (its a bit off today).  Market sentiments are hard to judge and understand.  It is still unclear if Trump will be full of hot wind, will be a game changer or a complete and utter disaster.

From his meeting, and lambasting of the US new network one would suspect that Trump will be looking at Congress to reduce the strength of the first amendment; because apparently they've been mean to Trump and his friend (what they did to Obama was far worse), and also that the actors in a play would sound their discontent -- that and his for ever fight with SNL.

His "A Team" looks like a bunch of crazy right wingers from Jeff Session as attorney general who see's nothing wrong with the KKK, to Mike Pompano (CIA) -- one of the most aggressive Benghazi attackers of Clinton with numerous investigation -- that showed no wrong doing to Michael Fl…

Warren Buffet: Investing in US airline industry

There's an old joke: How do you make a small fortune in the airline industry -- start with a large one!
Granted its not particularly funny, but in view of WB's $1.3 billion investment into Delta, United and Southwest, it would seem that WB has gotten over his fear of investing in the airline business.  Part of the problem of making money in the business has always been the low barriers to entry, and the generally identical (if unpleasant) experience of flying commercial.

Any guy/gall could start up an airline with leased (grounded) aircraft and "steal" the business from the established carriers.  People's Express was the first in the late 1970s but a string of players have made the airline business largely unprofitable -- for most of the last 20 years the industry generated net losses.  What has changed?

In the US, the three above airline now account for 3/4 of the country's total traffic -- the US airline industry is back at the oligopoly it had many decad…

Market reaction to Trump's nomination

So far not much!

Everyone predicted that the market would drop 100 to 200 points (the S&P 500) and in fact nothing has happened.  So far Trump has made unsurprising nomination -- his real chef of staff will be Steve Bannon, whilst Reince Piebus will be the nominal chief of staff.  For starts RP is a good friend of the GOP, whiles Bannon is a sworn enemy of Paul Ryan.

Its not clear what Trump will do on Obamacare, while the GOP wants to abolish the thing, Trump has said that he will abolish Obamacare when Congress sends him a replacement plan...it could take a while since the GOP has never moved beyond a white paper that was very short on details (it had none).

The big moves now afoot are to pass Trump's agenda as fast as possible -- there are some ways it can be done, it seems that the GOP in Congress is keen to privatize Social Security and replace Medicare with vouchers (that would increase in value at the rate of inflation while medical costs are rising at three or four tim…

America's democracy is being tested!

I’ve been thinking about the election of Trump for the past 48 hours.  Its hard to judge, but its clear that after today’s meeting between Obama and Trump that most of Obama’s achievements will be canned by Trump.  He may even have an agenda; although its hard to figure out what it is from his comments over the past 12 months — has it really been that long.
My fear is that with the assistance of Congress, Trump may make some major changes to the “America of our forefathers”  I suspect that any issues that were on the GOP agenda (EPA clean energy etc etc) is on the block.  There is no doubt that he is pro- “clean coal” and fracking and against alternative energy.  Although the latter probably requires less help than the first two (its not only federal regulations here).  I think that within the next four years we will see some major shift in the American legal framework — this is the GOP’s chance to full the numerous vacancies on the bench, starting with the top (Supreme Court) all the …

What the Fu$k

Talk about getting it wrong...again


What happened last night was a repeat of the Brexit vote a few months ago, hundreds of polls showed that Clinton was winning, and then she lost.  America and the world face the great unknown now.  What will Trump do how will he behave.

I guess he's lost his twitter privileges for ever!

The establishment candidate was rejected by the electorate, and Trump's winning was crushing.  We can talk about vote suppression but Trump won, handily the popular vote.  The electorate decided "this is not working for me, it has not worked for a long time, lets try something new...I will probably not be worse off and I could be better off too!"

One thing for sure, all these judges that needed to be nominated will now have a strong conservative flavor, Roe Vs Wade will be re-opened.  The markets will freak-out and but will eventually stabilize. Matt Taibbi wrote a funny (not so funny now) article about Trump moving into the White House.

Vote early, vote often!

A very very old joke when ballot stuffing was still a thing...

Anyway, today is the day where America chooses between a women and a crazy guy (I make no bones of disliking Trump).  Again a historic event whereby for the first time in American history a women will hold the highest office.  It will be interesting to see how she deals with Congress?

My guts tells me that she will not work the same way as Obama -- she's got a whole lot of stuff to take care of, first of which is dealing with the problems around the ACA.

As for the electoral process although Trump talks the talk I am relatively certain that he doesn't walk the walk.  Of course if the races are very close, there will be legal challenges -- I would hope that the winner is crowned by 9:05 tonight -- that Clinton wins enough from the east coast to make victory a sure thing.  We shall see. There is a strong likelihood that this will be a long drawn out affaire, that we will not know the result before the morning and it …

Oil at $43 Trading implications

Two weeks ago a friends were telling me that they were thinking in investing in the oil market -- either via derivatives or investing in service companies -- because "Oil is going up".  That's when oil prices were around US$50/bbl for WTI.  Today oil prices have crashed -- they've been on a downward spiral for a few days now, there was a miss read of the market and draw downs of strategic reserves -- which were not that much anyway.

Still oil is now down to $43 which is nearly 15% lower than its recent high of 10 days ago!

The problem is OPEC and those outside of OPEC agreeing to production quotas.  As you may suspect there are very good reason why these types of agreement tend to breakdown -- the incentive for cheater is just too great.  If everyone agrees to certain production levels prices should increase, but these higher prices are incentive enough to exceed the quotas -- a vicious circle.  Now many have faced lower oil prices and wish to rebuild their reserves.…

Energy cost, energy usage and price trends

1. Change in markets:

One of the more interesting aspect of the energy complex is how things change over time.  If I had written two years ago that solar energy would be cheaper to operate than a natural gas power plant, most would have found this comment as crazy; when in fact the cost of operating (including building and decommissioning) a gas fired power plant is about 3 cents per Watt per hour.  A few months ago, in Dubai, a new solar power plant was build and it sells its power at 2.99 cents per Watt per hour. Now the two are NOT equivalent; gas power station work 24/7, whereas solar plants only work during day time -- so the cost/benefit analysis is somewhat false.  Still this is a huge milestone.

The aggressive installation of solar panels in Australia and in certain other parts of the world has had a massive impact on energy prices.  In certain cities in Australia (where the power market is deregulated) power prices durning the summer at 2 pm in the afternoon (5 years ago that…

One more week and it will be all over...maybe

It certainly looks like the presidential election will be over in a week (joke), although the fight for highest office is certain to continue.  Already the "impeachment" phase against Clinton has started -- it will be Benghazi, it will be the selection of supreme court justice, it will be the emails it will be a continued civil war between the White House and Congress.

The GOP's "decision" to select Trump as the candidate for the presidency remains one of the most mystifying outcome of the GOP's primary season; Trump is not really a Republican -- DJT is for DJT, and very little else, has a limited grasp of reality and zero understanding of foreign affaires -- some with say that he has zero understanding of domestic policy too!  In fact, Trump is the kind of guy the Democrats were praying to have as an opponent.  Reasonably, it was the GOP's turn to hold the highest office, but the 12 that ran for the GOP few had the "mettle" required for highe…

Pssst! -- the best trade in the world; an insider's track

First off the title is a bit of a lie (ok one huge lie).

Yesterday the oil market was at a flutter because draws against reserve where higher than anticipated.  Guess what happened today, oil prices crashed right back down to the $48.99 level -- when they had been as high as $50 yesterday.

You ask:  What's going on?
The answer:  No body knows!

The oil markets are nearly fungible; there is a bit of a spread between Brent and WTI but the difference in price is more cause by technical issues (when the spread is substantive) than anything else.  In fact, as reserves rise the cost of adding to reserves rises exponentially, hence the prices of crude drops (its a zero sum game).


Now look at the price of oil -- yesterday there was a panic because the draw from reserves was about 2MM bbl higher than anticipated.  Today, well today the market took stock and realized that it meant nothing.  Because it was the same issue that I mentioned above about Brent Vs. WTI -- oil was at the wrong plac…

November 9th: The state of America's democracy!

It seems increasingly clear that Clinton will be elected president on November 8th and as soon as the partying has stopped some hard questions will need to be asked by both parties.  The Republican will probably face the hardest review:  How can the GOP continue when its policy seem to be aimed at uneducated white males?  The rejection of all others and the spectacle that was DJT is certain to force the party to have another difficult review.
Another aspect of the review is the marriage that the GOP made with talk radio and groups such as Fox.  This has led the party to more and more extreme positions, not based on any specific drive but as a rating driver for talk radio and FOX.  On the other hand the shine seems to have come off FOX over this election cycle -- it may save the network!
We can already see some important changes:
The monolithic Christian rightis no longer a sure thing for the GOP.  Granted the the break could be temporary should Cruz come back in 2020 (or Paul Ryan) then …