Wednesday, June 28, 2017

Trump's weird vocabulary

What's with Trump these days.  You read his Tweets and every other word seems to make little sense.  Is there something afoot here?  It is evident that Trump suffers from ADHD -- its been proven time and time again that he cannot focus on a subject for more than a few minutes at a time -- his calls with world leaders are often substance less.  Its not so much that he doesn't get stuff he just cannot focus.

His latest, which is to accuse Obama in the Russia election interference is probably the worse idea he's had (excluding the firing of Comey and the hiring of Flynn) he's now recognized that there was election tampering -- that got HIM elected!  Until recently, the party line was that there was no Russian interference -- now the leader of the free world say there was:  Who benefited -- Trump so he's scored another own goal, for no good reason, again.

Listing to his speeches there is something going on with his vocabulary, its shrinking.  Trump knows his audience's sweet spots (something Clinton was unable to find), and these days his supporters will applaud anything he says (kind of normal actually) but his vocabulary is shrinking from the pre-election times, his tweets are becoming stranger and stranger with a bizarre use of the English language (and I am not talking about the "Covfefe" incident)

It is evident that Trump is not having fun, hence the electoral rallies that are fun -- who doesn't like being cheered!  The job of president is difficult and endless, there are no easy solutions.  As an example he bombed Syria for "use of chemical weapons" a few weeks ago.  Turns out not even the US military believed that the Syrian Government had used chemical weapon, Trump decided that they had against the advice of his own military...

It would seem, for the occasional observer that I am, that Trump is increasingly isolated from reality. His support for Flynn, firing of Comey, his support and rejection of TrumpCare -- I mean in the same sentence Trump writes that its a shame that TrumpCare is not being voted on Tuesday, but at the same time (same Tweet) he writes that its a good thing because its a mean bill...

His Tweets are less grammatically structured than they were a few years ago, maybe its work pressure but again its not like he would spend hours in the past "crafting" his tweets.  Looking at how he wrote just a year ago, and today there is a strange shift in the use of the english language.  Something is up -- the "Kremlinologists" are looking at Trump's physique, he looks tired he seems to have put on weight, is this all part of health issues for the President?  I don't know, there is no doubt that the pressure must be intense, for a guy who's always had goodish press the past 200 days must feel like hell, but it could be something else.

Imagine, even FOX is starting to have doubts


Monday, June 26, 2017

Lying is the simplest solution!

The White House talking heads have been selling TrumpCare to the public and have simply resorted to lying.  Simple math tell you that if you cut a few trillions from Medicare then the service provided will have to be less than what it is today!  Its a little like the decision to allocate US$ 8 billion to people with preexisting conditions sure its a lot of money ( but its no where near enough for the reality of a country with 330 million inhabitants) -- the equivalent of US$ 23.00 per person.

The news story is that premium will go down (no mention of deductibles or exclusions) for self insured Americans and that Medicare recipients will not be affected (true insofar as the changes to Medicare are slated to be in place by 2021 only... after the next presidential elections).  In a sense, Trump and his allies are playing the game well, they will be able to tell their constituents that right now there is no change to their premium, and that it may even reduce -- not mentioning what is and what is not included).  The same for Medicare!  They will be able to reduce taxes for earners of more than US$200,000 immediately (a number of ObamaCare special taxes will fall away immediately) and will give away a massive reduction in income and corporate taxes -- that will be paid by 4% growth (in your dreams).

In reality, Americans that become sick will lose out immediately, but to the Republicans and Trump they are losers anyway so who cares.  Granted a lot of Americans will see the cost of elderly care rise after 2021 -- but that's a long way off.

So the sales job from the WH is in full swing, the Senate face few difficulties only 8 republicans face the electors in 2018, and the backlash against the congressmen has been minimal.  Proof that the Senate can weather the storm -- and hand Trump his first legislative win.  The bill has been crafted so that some "gime" can be provided to the 8/9 senators that are holding back -- they only need 6 and they win.

So lying is the tool -- there are no changes to the benefits, magic will be employed -- but most Americans don't care. until the day grandma needs money for here nursing home, but it will be far too late by then.

At then end of the day, you get the leaders you deserve.

February 14, 2018 -- mark your calendar

So over the weekend i was doing a bit of surfing the interweb to find on Zero Hedge, the Trump supporter financial news service, the date on which the end of the upsurge in the financial market will end...You got it, Valentine's day of 2018 -- unfortunately, ZH failed to share why that particular day was going to be the day of reckoning -- but in their world a massive correction would start on that day.

You got to wonder how they can predict the "end of the world" so very accurately!  I for one am amazed by their ability -- turns out its not really ZH but some hedge fund (i've never heard of) that predicts that day, as the beginning of the end.

Personally, I suspect that some trader at "unknown" hedge fund has some shorts that are about to expire on or around March 1, 2018, and is looking to boost the value of these out of the money positions -- but lets just say that some trader has some rather large put options that expire in 6 months -- and these are way out of the money (note to credit guys at hedge fund -- make sure your boys are marking their positions to market -- and not faking it with some Theta sensitive call options).

Anyway, ZH talks about a 40% correction to the S&P500.  Now we get to the meat of the conversation, because if you exclude the AAFAM (Alphabet , Apple, Facebook, Amazon and Microsoft) the market has been rather flat over the past 18 months (yep) 35% of the uptick for the S&P500 has been these 5 stocks.

So prepare for the end of the world, soonish because some guy's got some position he's trying to unload.

On other fronts I note that oil prices are still around $43/bbl which is the lower end of the price band. If Trump starts a war with Iran (not impossible -- since the crazies are talking about "regime change in Teheran") prices would spike as something like 30% of the world crude travels trough the strait of Hormuz.

I also note that two more Italian banks were shut down over the weekend -- total "cost" is US$ 5 billion US$ 20 billion to bail them out (you can bet that it will be far more than that).

No news about Greece, but Theresa May has made its deal with the Far right of Northern Ireland to gain a majority in parliament -- Theresa has made a deal with the devil there.

Good times

Thursday, June 22, 2017

Euro 120,000.00

That's the estimated cost of Nomura's "Platinum" Research!  Your firm pays US$ 200k per annum to hear all the best bits out of Nomura -- granted I like Bob Janjuah, he's not only a friend but a brilliant tactician.   Still $200k seems a lot.

Obviously, the real change in the analyst business in Europe (as the Jan 3, 2018 rules are to take effect) is going to have one massive impact -- the business of analyst is going to shed about 95% of its workforce.

I've said this before, most research is useless -- it used to be that you would get good data analytics -- but these days you get the same stuff of Bloomberg's basic plan so there is really no reason for that. Analyst get nothing more than you can, should you choose to listen to CEO's pronouncements, and read the company's filings.  Finally, and this is the kicker, most investors are closet indexers anyway (thinking of you Fidelity...).  So the impact of the new rule will be a massive reduction on the number of analysts in Europe -- and you can bet that the Americans are going to do the same thing when they realize that their research has zero value!

The US Bureau of labor statistics says (2014) that there are somewhat more than 250,000 analysts (avg salary $80k) -- I can see nearly 3/4 losing their jobs -- in Europe the number has to be equal so all told there are 500,000 analysts in Europe and North America, I can see about 400,000 redundancies plus about another 100,000 support staff.  That would translate into a US$ 3 to 4 billion savings for banks -- that certainly going to help bottom lines (a little).

In a sense, the new European rules are doing something the banks could not do themselves -- they could not afford to shut down their analysts departments, for while they were a loss leaders, they provided some bragging rights (#1 analyst in this or that), and could not be the first to say no more! Now, they can cut to the bone since their justification is that the market is no longer ready to pay for this drivel (some stats indicate that less than 1% of all published research was read -- I find that figure overinflated).  Although the banks are bitching in reality it allows them to justify real cost savings.

Are there more cost savings, yes a lot, some of these cost savings will be passed on to customers, some will arise from new financial products.

Wednesday, June 21, 2017

Oil Prices around $43...what's going on?

Oil prices are falling -- just as the "driving season" kicks off nobody knows what's going on.  Barclays has a novel idea -- America's illegal crack down is causing demand for gasoline to fall.  ICE (the US agency in charge of finding illegal immigrants) is hard at work, with routine stops that find illegal immigrants, they in turn have reduce their travel by car dramatically (its more complicated to stop people boarding a bus -- ICE still needs probable cause...)

In Western states illegals account for a surprisingly large percentage of the total population (between 3-5%).  Some dispute these figures, but then they cannot think of anything else either.  Equally intersting are farms in Iowa facing massive labor shortage -- around 75% of all "pickers" were illegal immigrants -- farms became a massive rally point for ICE to find illegal immigrants, the impact is that Iowa farms are facing a massive labor shortage and no idea how to fill the vacuum.  The labor is hard, but relatively well paid (according to some the average hourly earnings are around $15/18 which is almost $7.00 more than the Iowa minimum wages.  Last year already (yes in the days of Obama) farms were having a hard time with the pickers because of ICE would seem that 2017 will be even worse.

These two facts show that America is very serious about its illegal immigration problem (and yes it is a problem).  Trump has continued Obama's policy but may have move the bar into the even more cruel zone than his predecessor -- again its not clear because its all circumstantial evidence.

Where do oil prices go from here?  I would suggest that they have little downward strength, but I didn't think we would be below $45 this summer -- it speaks of economic malaise when demand for gasoline falls off the chart.

Friday, June 16, 2017

The Middle East an observation!

Trump's first Tour was a catalyst for many of those he met during his little jaunt in the Middle East and Europe.  The Europeans came out convinced that the American President understood absolutely nothing of the NATO alliance and was basically a Mercantile who viewed the world through 19th century trading rules (we export everything and you import nothing), so that we create jobs at home -- "beggar thy neighbour" policies.  The fact that Trump would not re-iterate NATO's article 5 is further evidence of his stubbornness and his lack of education (he did reiterate in speech at the White House -- but the damage was done).

In the Middle East he signed a $ 100 billion arms deal with Saudi Arabia -- that was no such deal!  It was a bunch of MOU some dating back to 2015 -- signed by Trumps' greatest enemy:  Obama!  When Saudi Arabia felt they could browbeat Qatar in towing the line, they embargoed the tiny state (for the second time in a decade) and Trump took credit. Since then, a $100 million arms deal to Saudi Arabia was blocked by Republican Congress... A $ 10 million arms sales to Qatar was authorized by the Secretary of Defence.  What is going on?

America has caused havoc in two blocks:  the EU and GCC in the space of a few weeks.  Out of this America has gained nothing, in fact the Saudi must be furious, the enemy (Qatar) got its gone while the Saudi themselves got nothing...Europe though that Trump was crazy stupid man child...and then he proved it.

Europe will downgrade the role and relevance of the Americans in their defence pact, expect the influence of America to dwindle.  First act must be to reduce the presence of American military personel in europe, a fist step is to ask America to downgrade (and eventually remove themselves) from their bases in the UK, Spain, Portugal, Italy and Germany.

America has become a destabilizing agent, it should be cordoned off to limit the damage.

Friday, June 9, 2017

Redux: The death of the middle man

In the endless list of things that go bang in the night, in 2011 I wrote about my experience buying a new shower head, the comment is here.  The end of shopping was already foretold in the stars.  However, and I mentioned this before, it is as bad to be early than it is to be late!!!

In a nut shell what happened is that through the internet I was able to save 60% of the cost of purchasing a new shower head by going on the internet!  First contacting my plumber who kindly told me that I should call the distributor directly only to find a true 20th century operation; 30 days delivery and cash only upfront.

Instead I bought the thing on the internet it was delivered two days later in my office.

Now if you live in a big city you face the consequences of shopping on a daily basis, driving, finding an expensive parking spot, and maybe not finding what you are really seeking...on the internet, its all done in the home, no need for excursion you buy everything from your living room.  I'm a tall guy and buying size 13 shoes is a challenge (even in NYC) so I go on Zappo and specify 13 EEE, and then the system only shows me these shoes -- no drama

Looking at the world of retail (there are way too many retail stores in America -- about 10 times more than in Canada, and 15 times more than Europe), so as the economy slows and expansion is no longer possible (to hide low profitability) the expansion is followed by contraction or collapse.  Add to the mix a shrinking middle class...

So the list of those in trouble is just below, not all will end up in chapter 7 (liquidation) but a visit to Chapter 11 is always a chance for retailer to trim the less profitable 20% of the franchises...

Boardriders SA  - sporting subsidiary of Quiksilver
The Bon-Ton Stores - parent of department store chain
Fairway Group Holdings - food retailer
Tops Holding II - supermarket operator
99 Cents Only Stores - discount retailer
TOMS Shoes - footwear company
David's Bridal - wedding dresses and formalwear seller
Evergreen AcqCo 1 LP - parent of thrift chain Savers
Charming Charlie - women's jewelry and accessories
Vince LLC - clothing retailer
Calceus Acquisition - owner of Cole Haan footwear firm
Charlotte Russe - women's clothing
Neiman Marcus Group - luxury department store
Sears Holdings - owner of Sears and Kmart.
Indra Holdings - holding company owner of Totes Isotoner
Velocity Pooling Vehicle - does business as MAG, Motorsport Aftermarket Group
Chinos Intermediate Holdings - parent of J. Crew Group
Everest Holdings - manages Eddie Bauer brand
Nine West Holdings - clothing, shoes and accessories
Claire's Stores - accessories and jewelry
True Religion Apparel - men's and women's clothing
Gymboree - children's apparel

Thursday, June 8, 2017

United Kingdom elections: How to blow a 24 point lead in 8 weeks

Theresa May's decision 8 weeks ago will haunt her and her party for years to come, for while she had a thin majority, she still had a majority.  As one newspaper said it, the first problem was to make the election about personality; when Theresa may has none! 

The hubris of a 24 point lead led to a poorly drafted, full of error manifesto, that was plainly mean!  End of life care, if you own a house the NHS would get that to pay off your health "debts".  Needless to say that for a majority of Tory voters this was not a winner!  

The number of time May seemed unprepared for relatively softball question still amazes everyone. She did, with the opposition, a town hall meeting and she was poorly prepared.

Also the answer to the problems with Brexit is not to say: "Brexit is brexit"

The Tories deserve to loose, granted Labor doesn't deserve to win, their leader is worse than May with numerous stupid statements that can only make governing harder.

Europe -- well they don't care who runs the UK, article 50 has been invoked, its time for the UK to put its big boy pants and start the ball rolling.

NOTE:  This is based on exit polls, and of late polls have been incorrect.  However, majority for Tories seems to be a long lost dream...

Wednesday, June 7, 2017

Qatar: is this the assassination of Archduke Franz Ferdinand

Most will remember that the first world war "the Great War" if there was ever such a thing, started when the Archduke Franz Ferdinand was assassinated by a Serbian nationalist.  Honestly, the pump was primed long before the Archduke was killed, but it is generally recognized that it was the final straw that lead to a war -- "to end all wars".

What is going on in the Middle East is equally strange and creating some strange behaviors.  There is no doubt that Qatar (a tiny gas rich country) has been saying and doing things outside the norm, the PLO and Israel both had offices there, and because it shares gas fields with Iran it is far less of an enemy of Iran (Shia) than is Saudi Arabia (Sunni), the conflict for leadership of the region has been on-going for decades (BTW this is not the first time that things got ugly between Qatar and SA).

Trump hand seems to be involved by strongly supporting the Sunni (aka Saudi Arabia) and making comments about Iran and the Shia threat, there is a possible reason for conflict to arise between Qatar and SA.  Some will say that this is about oil/gas other say its about a US$ 1 billion ransom that Qatar paid to Iran (or to other players) for some fun loving prince abducted in Iraq while on a Falconing (SP) trip... There rumors that the reigning prince said that Hamas was the legitimate ruler of Palestine or that Iran was a calming influence in the region... As the FT said, it may have been planted in the news, but it does reflect general sentiments in Qatar -- that wants to be friends with all.

In fact, it matters little what the reasons are but the changing dynamics of the GCC (the Middle Eastern equivalent of NATO -- without the guns).  How can this end?  Well not well for Qatar that is certain.  Qatar has a tiny army (a reflection of a tiny country -- there are only about 100,000 Qatari citizen -- and about 3 million resident)  but the overall impact is important; Qatar is the location of one of America's largest military base...

And there's the other shoe.  Today, in less than 7 days after meeting the head of Qatar -- where everything was fantastic, great, well today the US of A dumped one of its allies and seem to be keen to topple that regime.  What does that say to America's other "friends"  watch out; "my word is not my bond", and in the case of Trump it is well know that even a contract is not a contract.

The important point here, is in sync with what Germany and France have been saying about the USA lately -- that it has become a fickle friend and that on that basis -- you should plan without it. Needless to say that in the past 15 days Trump has managed to unbalance two important groups; NATO and GCC -- not bad for two weeks of work.  It is far from clear that this was in reality Trump's objective, assuming that he has an objective.

One thing for sure, it was Trump that decided to ditch Article 5 of the NATO agreement -- this was not some mid level error, this was the decision of the commander in chief, for what reason, what's his bargaining chip -- again we don't know.  But America has become a destabilizing agent, the impact is hard to figure out because there are too many possible outcome.

Finally, more intersting news the $110 billion contract between Saudi Arabia and the US, is not a contract, its a bunch of letter of intents -- that have been around for years, the helicopter deal has been in the works since 2015 (Obama signed of that deal in 2015).  Its a wish list, there are no orders, just lots of MOU...

Fake news is really here, just didn't know it came out of the White House (HaHaHa)