Skip to main content


Showing posts from September, 2017

Could American populism turn into authoritarian rule

A few months ago, a poll showed that most Republicans though it was a good idea to delay the next presidential election until the electoral rolls were cleaned up and the "millions of fake voters" were purged.  A recent study by Oxford professor equate a substantial level of support by Republican state ("Red States") for autocratic rule -- in a sense, it's an extension of the vision of an orderly society (very homogenous that is often found in the Republican states -- either because most resident are white or via social and economic segregation  -- what percentage of white Texans live in gated community?).

Listening to Trump's "fight" with the NFL -- where the whole flag thing is a 2009 tradition -- and a tradition adopted by the NFL only once they got paid by the US government (seriously, the US government paid the NFL so that players would stand at attention during the signing of the national anthem).  Joking aside -- its only a tradition when it…

ETFs: Dicing mouse turds

The above expression is from Mauldin Economics about the ridiculousness of some ETFs fees. When I started my career many moons ago (like 25 years ago) brokerage fee were substantial, granted virtually no trading was electronic (Don't want to exaggerate either) but the reality is that until the "Big Bang" of 2007 brokerage cost were a substantial numbers.

To this day there remain closet indexers (Vanguard, Jarulosky & many many others) that will charge clients more than 1% in annual management fee, they will not on the other hand charge for each transaction.  The idea was that it would reduce churn (the number of time your broker sells shares from your portfolio to generate commission), but with fees becoming so low the cost of churn is also falling on ordinary (non-ETF) share transactions.  So the question investors have to ask is why bother with fixed commission since even if there is churn in your portfolio the costs are minimum.  Anyway, we are getting away from t…

Earthquake in Mexico City

Lots of friends in Mexico City have had an "exiting" time of late.  Two weeks ago, a small earthquake woke everyone up in a hurry.  The city installed precursor sirens that give the population a few minutes of warning.  Yesterday it was far more brutal and several hundred residents lost their lives yesterday.

The overall comments, 32 years day for day after the massive 1985 quake, was the feeling of community.  Most of my friend rushed to the donation centres to give blood, food and clothing for those who have lost everything -- or who cannot go home until their building has been fully inspected.

Mexico City is a very big city, at times dangerous, but at the end the Mexican are a people of heart.

God be with you in these trying times

Toys R Us

Well its official, Toys R Us declared bankruptcy yesterday -- the market was taken by surprised (no not really) the market lost its shirt (no even close, its a private company).  You see Toys is a private company owned by KKR and some other private companies.

I've not been in a Toys R us for many years.  Last time I was there it made Walmart look exiting.  The cost cutting made it a place you didn't want to go, it was depressing, and more importantly, its key demographic were people who were already shopping at Walmart -- which it turns out has a rather nice toy section.  No joke, no help, but no joke it has a good but limited selection for the discerning uncle/godfather!

Don't get me wrong, none of these stores are appealing, in fact, they are the very opposite.  However, if you objective is to make the purchase as plain and painful as possible then Toys R Us is the place for you.

Owners, such as KKR, are specialist in downsizing re-structuring and making things more cost…

Explaining market prices -- the new solution

You know a market is overheated when traders/brokers are looking for new metrics to justify the stratospheric prices of stocks, in the '00 it was "clicks" remember those -- its like saying "we lose money on every sale, but will make it up on volume!"  Anyway, some brokers that I can of respect have decided that the standard p/e is no longer a good measure (considering we are at historical highs -- or very near there) and where companies profitability is also a historical high levels -- these things have a way of returning to the mean!

However, if your job is to sell the market, then you find GAAP adjusted models, or using future statements as good metrics.  There are a number of ways to show that the market is not yet fully valued.

However, as a prudential investor the rule has to hold -- if it looks expensive it probably is expensive; better to leave some money on the table than being steamrolled out of the market.

Electric cars everywhere!!!

Ok so Germany, France and China have all announced the end of the internal combustion engine.  Needless to say that the American twitter's sphere has been agoog about that change, once again missing the point:

What are you going to do with an electric car in Florida?-- the answer is the same as a gasoline one -- not be able to use it when it runs out of juice...  The usual issues, there are not enough charging station, or that the electricity comes from coal/nuclear etc etc.  Again missing the point!

Because the same people who are against the introduction of electric cars would have (did) voice the same issue with the internal combustion engine...look how wrong they were.

Part of the problem is that people's view of the world is static, they cannot conceive that the wold will change, and now they don't remember not having a computer in their shirt pocket...

The Europeans know that the electric grid is at an inflection point as is battery technology, and factor of massive …

Bank of Canada raises rates!

Colour me pink, I wrote a few days ago that there are no barriers to central banks tightening considering the total absence of inflation (wages) where as asset prices are into the stratosphere.  Well this morning the bank of Canada raised rates by 0.25% --

BOC statement reveals that according to [Steven] Poloz [Governor of the BoC], "removal of some of the considerable monetary policy stimulus in place is warranted" given stronger than expected economic performance while adding that "future monetary policy decisions are not predetermined" and will be guided by economic data and financial-market developments as they "inform the outlook for inflation."
The short term impact is that the Canadian dollar rose by 3c within a few minutes of the announcement.  The market was of the view that the CAD was a one way sure bet towards weakness. I still think that the trend is weakness (for the CAD) it could be that they are just the first to move (not unheard).  Germa…

100, 500 year flooding (which actually occurs just about every three years)

There's been a lot of information from the US government about the floods that have afflicted Houston.  To give you a sense of proportion -- the weight of the water in Houston, lower land levels by it was a lot of water.

The 100 and 500 benchmarks are used to illustrate a point that in any one year there is a 1% and a 0.2% probability that there will be a certain specified flooding level.  It doesn't mean that it will not happen every other year (which is the case now).

The model making these prediction makes no assumption about how often this will happen, but how often in a year this will happen (1% chance).  Of course all this stuff is based on assumption -- that can be wrong.

If the weather patterns change -- then the assumptions on the amount of rain by each storm has to be revised.  The problem is that the "right" has been using these 100 years and 500 years as a reason to do nothing -- while at the same time stoping any analysis as to climate change.


Trump's tax trial balloon -- cutting taxes to the middle class for the 1% and corporation!

The idea that the administration will cut 401k deductions and cut the ability of tax payer to exclude , as income, the taxes they have paid to the states, are almost certainly complete B.S.  This would be tantamount to raising the taxes on the middle class to give to the 1% and to corporation -- this would kill the GOP's 2020 prospect -- dead!

The removal of deduction for state income taxes is clearly a little "Fu#k You" to all the democrats states -- its not the red states that will suffer from that since state taxes tend to be lower -- although the red states are by far the biggest beneficiary of the largess of the Federal government...something to remember!  It would be tantamount to a declaration of war with NY, California, Washington, New Jersey and Connecticut (to name but a few).

Taxing the 401k at the source (rather than when people retire) is impractical, it could become a huge windfall for those who've already retired (yeah I get it -- if you are 70 you are…