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Showing posts from April, 2016

American Elections & the Republican conundrum

I remember about a year ago, the chairman of the GOP saying that they had a deep field of candidate for the 2016 presidential election; and then Donald Trump thru his hat in the ring...We are now in April 2016, and within the next few weeks (maybe days) the presumtive nominees for the Democrats and the Republican will be finalizes.  Ms Clinton with all her faults, real, perceived or simply made up, will almost certainly head up the Democrats.  For the GOP its still a choice between Trump and Cruz, but in reality neither are acceptable to the vast majority of the electorate -- so it really doesn't matter.
What is truly interesting is the impact on November's voters; some will vote only the down ticket, but in reality voters almost never vote the bottom of the ticket.  So my best guess is that a lot of Republicans will stay home in November, will hand the Democrats a victory on par with what Reagan got in the 1980's a 30/40 state victory -- this will be a historic defeat fo…

Greece: Episode 9 -- I've not lost my bet yet!

The head of the European Union has rejected Greece’s request for an emergency meeting aimed at ending an impasse over the country’s bailout. Greece agreed to a third rescue package worth €86bn (£60bn; $94bn) last year and faces a looming debt payment. However, it has been unable to unlock the next loan instalment after clashing with its creditors over more reforms. The International Monetary Fund and other European partners are demanding that Greece implement further austerity measures. They are looking to generate nearly €4bn in additional savings or contingency money in case Greece misses future budget targets. But the left-wing government led by Alexis Tsipras has said it will not agree to any “additional actions” to what it had already signed up to last summer. A special ministerial meeting was supposed to be held on Thursday, but Dutch Finance Minister Jeroen Dijsselbloem, who is in charge of the Greece negotiations, called it off. Source: BBC

For all those who though that the G…

The logic of Uber & Lyft

Article today says that business travellers are increasingly user Uber instead of rental cars...what a surprise.  What makes Uber so much better than a taxi is that you know who your driver is -- joking aside many times the guy driving the taxi was not the guy on the picture, had no idea where he was going (aside from the major streets). But why car rentals?  In a sense people rent cars because often they cannot trust the local taxi service -- if it rains or its shift change or some other reasons.  This is not nearly so much a problem with Uber/Lyft because you know the state of the market; you can visualize the number of Uber/Lyft in your area.  Cannot do that with taxis.  Information has made Uber superior to taxis but also to car rental.  
So you go to a meeting from your hotel having booked your Uber on your way out -- go to the meeting and as you sit comfortably in the lobby of your meeting wait for your Uber to show up...that's so much better than finding a parking space an…

Oil prices at $44 -- Dennis Gartman must be dead!

In January, Dennis Gartman, a market prognosticator (and a bit of a right wing nut) said to Bloomberg that "we would not see oil prices at $44 in his lifetime" -- so Dennis my boy you must be dead (he's not dead...).  You see if you are going to be a good pundit (aka Trump is done, or Trump is gona win), you have to be categoric and aggressive with your opinions.
Denis of late has been a bit of YoYo and somewhat exhausting one at that!  On Monday he's "Short the dollar then go long gold" on Tuesday he's sell gold by dollars.  You may see a trend there.  
Anyway, I have always been a good economist: I have no idea where gold or oil prices are going.  I contemplate that there's a lot of oil siting around, but there too you have to be careful; yes oil reserve levels are high but its not like there's 20 years of oil sitting around doing nothing, no we are talking a few weeks that's it; as an example "there is 100 million barrels of oil sit…

Two weights two measures: Labour Vs. Capital

Over the past 20 years, as a results of the NAFTA agreement (North America's free trade agreement) and the entry of China into the World Trade Organisation there has been a  completely changed the economies of Canada and the US.  Blue collar America got killed; Canada and the US have lost a massive number of "high paying" manufacturing jobs to China and Mexico.
Its all well and good, and frankly for Canada's economy it has been excellent. 
Yet I have not heard a word about compensating those who have lost their job and their trade. Because in our economic system people are disposable (maybe not on the scale of China and India, but you all get my point).  If you lose your job because you were a welder at Ford and it was cheaper for Ford to get its car welded in Mexico -- well good luck buddy; here are a few months of salary (usually not that much) and unemployment benefits for a few more months.  That's it!  A life is worth 6/8 months of near starvation cash.

Tesla Model 3

325,000  400,000pre order where $1,000 deposit we necessary.

Honestly, Tesla challenge when it introduced the Model S was indifference.  That's not the problem here.  Tesla could be a game changer in the industry, like the iPhone was for the cellular business -- remember Nokia, anyone?

Tesla has a lot of competition (which is good) because it means there's demand for the product.  The technology has been smoothed out with the S and the X models.  Now the challenge is building 500,000 cars a year.

The car, with its 350 km range is more than sufficient for 90% of driver's requirements.  In reality the average commute is 100 km per day (50 each way) so a 350km range should do the trick.  Granted that's in ideal conditions still battery technology is moving very fast not only is it cheaper to produce, they are more performant.

The answer from the car industry:  We're not worried, this is just a guy... that exactly what the CEO of Nokia said in 2007

Italy's Euro 360 billion NPL -- a Euro 5 billion Band-aid

So the Italian finally made their plan known to address the country's commercial banks' mounting Non Performing Loan problem.  So far the total bad loans is around Euro 360 billion -- one bank is responsible for nearly Euro 80 billion.  The proposed capital is Euro 5 billion, so just a big more than 1%, giving the bad bank a total leverage of 100:1.  That's really going to work.  Not only that but the loans that have already gone under have total losses of more than Euro 5 billion.

To say that the market was underwhelmed would be an exaggeration; to be honest the market expected this kind of lame answer.  First, because the ECB has made it hard for the Italian government to save its banks, and secondly, because the Italian government is broke and third so are the banks that need every penny of capital they can lay their hands on.

Over the past 12 months, the Italian market has lost nearly 1/3 of its value (so not as good as the US markets...).  Italian banks remain in the …

Inflation -- core or imported

Canada is an unusual country, it has since the signing of the Free Trade Agreement changed in ways that make it an oddity within the OECD.  nearly 1/3 of Canada's economy is accounted from the production and export of natural ressources (grain, metals and energy).  
It has made Canada rich when China was in first a development and then credit fed construction boom without precedent.  Look at the New South China Mall or Ordo one of the most well know ghost cities.  Economic growth has now collapsed in China (data doesn't give a scale of the drop in GDP growth) -- Canada being a second derivative country has been suffering a collapse in commodity prices, which include oil.
The Canadian dollar that peaked at 1.06 to the US dollar fell all the way to 0.68 to the US dollar; it has since recovered to 0.76.  But Canada is a cold place and in winter all vegetables are imported from the US -- this year there were apparently cauliflowers being sold for C$12 each.  Now that's real i…

Rates, Yield and Returns

So this morning out of boredom I looked at the markets; 5 years ago the 30 year T-bond generated a yield of 4.5%, today its 2.6%, the S&P 500 on the other hand went from 1,332 to 2,064 -- so clearly being long the market over the past 5 years was a good idea!  Frankly, owning 30 year bonds too was a good idea.  If memory serves the GOP stated that Obama's second term would be terrible for investors -- so they go that really wrong since the market is up by nearly 55%...
But that's not the real issue, the issue going forward is that as interest get closer and closer to zero the upside diminishes; because the option of zero interest rates is to keep cash at hand.  Banks if they pay no interest provide limited services.  In terms of earning quality, its been poor for some time -- the magic of accounting trickery still ensures that companies generate greater profits -- from non core activities.
The banks will survive -- they've made sure by payoff the politicians -- it may…

The Panama Papers

Talk about major breaking news!
Probably the most interesting part of the whole "shit storm" is the role of Nevada (yes yes the state -- next door to Las Vegas), which has become one of the primo cash hiding place in the world.  The Americans, playing their usual sanctimonious bullshit games, failed to ratify the bank disclosure rules they imposed on everybody (starting with the Swiss) and so that, today, one of the most attractive haven for hot money is the US.  Really that's so amusing  
The slow trickle of named names that will now come out and where all their trades are exposed; how they hide the money they stole; starting with "Putin" and going on down the list.  It reminds me of Mit Romeny's generous contribution to his church, nearly 15% of all his income went to the Mormon Church -- except he didn't really.  What Romney did, and this is perfectly legal, is set aside 15% of his gross revenues (before taxes) and put them in a trust -- that had as…