Farmer Diaries

The Covid pandemic has been going on for some months now  It will be interesting to find out how long it will be (if ever) until I get contacted by health Canada about my Covid-19 test results.   Granted that I got the results at 1 AM so it's still a little early, and it would be insane if I already got an email from them So DAY 0: no contact... So DAY 1: no contact... Funny enough a friend who got tested in the public sector (96 hours to get results) was contacted by health Canada within hours of receiving his test results.  So I've now been free of ANY and all COVID problems for 5 days -- in fact, the whole thing was a bit of a non-event for me.  Taste buds were fine, no fever, very slight coughs, and half a day of sniffles. I've been very lucky in deed Still no contact from the government -- after 7 days with no symptoms (especially fever) I'm out of quantantine  

 Several years ago, actually shortly after 9/11 (so almost 20 years ago now) the US passed a law that forced additional discloser of operations when Americans were depositors in your financing institution.  In effect, America imposed its rules on banks in other jurisdictions. The intent had been to make it harder for terrorists to finance their activities -- and it worked, almost overnight the armed conflict in Ireland came to an end, as its massive "guilt" funding dried up from the US (there were other causes to -- but timing in life is everything). One impact has been to massively increase compliance costs for foreign banks -- their solution was simple -- if you are an American citizen your business is no longer welcomed!  What's interesting here is this occurred in 2002/03 and therefore Americans living abroad have found ways around the problem -- certain who were American because they were born there -- and had no further interest in the country simply could terminate...

Soooo! Got tested yesterday for Covid-19 had a little cough was feeling a bit under the weather; so a 1 pm went to a local clinic and got the test. At 1 AM I checked my email and got the bad news; I'm positive for Covid19 -- It's now 8:30 am and I am feeling just fine, cough is gone, sniffles are mostly gone, no temperature sense of taste still there, no tummy problems; actually as they say I am feeling great!   So now I am part of the statistics.  I am one of the half-million Canadians who got covid.  I'm not recovered yet still; it will be interesting to find out when/if my government gets in touch with me!   

So here I was in late 1990 sitting in my office (really more a desk in a trading room) when I get a call from the CFO of Thai airways.  They wanted to talk!   A few days later I was sitting down with the CFO and CEO and they indicated that they were looking to finance a large order of Boeing aircraft, and had seen the work I had done --- in producing a comprehensive information package for the potential financiers.  Since we were an investment bank they knew we had no interest in arranging the financing!   To be honest, producing these documents is a massive pain because they have to cover all aspects of the airline -- this goes well beyond SEC documents and is somewhat different than an IPO document because the disclosure and information is far more detailed.  Today it would be a data room, but that was not convenient then, since the bidders were all over the world...that was then, this is now! so I agreed to bring a team of bankers to Bangkok for a f...

 In the late 1990s, during the Asian Financial crisis, one of the oldest airlines in the region faced, like many of its neighbors' financial difficulties-- it needed to reorganize because its core business was being gravely affected and it had virtually no dry powder.   One evening at home (then in Singapore) I get a call from the head of US Eximbank's aircraft finance division, we didn't know each other but through my colleagues, in NY he knew I was "his guy".  I had at that time a long experience in dealing with airline bankruptcy, manly regional carriers -- still.   They were aware that Philippine Airline was about to stop lease payments on its aircraft because cash flow was severely depleted, caused by a sudden and dramatic reduction in its revenues -- mostly visiting friends and families that were at the core of its business model. The next morning, after a 4-hour flight I was in the offices of Philippine Airlines, with its CEO, president, and finance ...

 Yesterday Musk indicated that there was no good reason for Tesla's share to trade at their current valuation.  In fact, Tesla's share price is so out of the realm of the realist that it's almost certain that there will eventually be a backlash.  Tels is trading at US$ 567 today, dow from a higher of US$ 607 a few days ago (November 27) why is Tesla so expensive....because investors have decided that momentum trading is the thing, that once the shorts were covered (when the price rose from $100 to $300) there was pent-up demand for this most shorted stock ever. Short sellers still believe their theories, they just cannot afford to hold their positions!   The fact of the matter is that Tesla introduced something amazing, that will revolutionize the car industry.  I still expect a lot of great things out of Tesla, I still think its a very interesting company, but nothing in what they do can justify the company's current P/E of 1,124x which is simply idiotic....

 There was long talk of a "Blue wave" but in reality despite his character and his failures Trump remains strong in the race to remain in the White House.  Trump's biggest success has been the rise of the national debt from US$ 19 trillion to US$ 27 Trillion.   Under Trump we have seen the single largest increase in the national debt -- at a time when the economy was "doing well".  that is what made Americans vote for Trump in 2020 -- I'm I better off today than I was 4 years ago!  A surprisingly large percentage of the population 45% have said they are better off with only about 35% saying they are worse off.  That kind of cash injection into the economy will create wealth! The reality is that this a tremendous advantage.  people vote with their wallet and their conscience -- you may not agree with your neighbor he may be an immigrant completely against immigration, it can be a neighbor who sees only one factor affecting their voting decision:...

 Talk about a shit show where the highlight is "Will you shut up Man!".  Trump made the whole debate about the debate and not about policy!  It's brilliant since Trump knew he could not win based on his program (what he has he will never admit:  Kill Social Security, Medicare, and Medicaid).  He made the debate about him being a prick!  and it worked, none of the newspapers talk about policy they all talk about how Trump was "not Presidential" -- news flash -- he doesn't care nor do his supporters. In a sense, it was Trump's opportunity to reach out, but he doesn't care!  His objective is to disenfranchise Democrats, minority and women so that his core support group makes him win (by hook or by crook).    Trump has never followed the script -- and again he confounded his critics and made his supporter happy -- not sure how well it will work with White Suburban Women -- but hey he could not win on the issues (he has no plan) his economic plan ...

Sometimes life imitates art, sometimes the news is hyperrealist, and other times it's more like surrealism.  First off, what are China's US Treasury holding?  The answer about US$ 1 trillion (a lot but in reality its only about 4% of the total US debt outstanding) so a lot but not that much either.  Because the amount of US debt outstanding is so high the impact of selling this debt to third parties will have an impact. First, the US Government is under no obligation to buy back its debt, but under what consideration would the treasury do so?  The US treasury values stability of the US dollar -- it goes up a bit and goes down a bit, but it operates in a range.  So the US Treasury may purchase some of its debt to "maintain the value of the US dollar" to do so it will sell other countries treasury bonds( with tons of market effects) and monetize some of these purchases.   What is the impact of China declaring that it wants to sell its US dollar holdings ...

 In early March 2020 the world took on a "strangeness" that only the most pessimistic science fiction writer would have considered.  although, looking back at certain movies the wearing of masks has already been predicted.   The past 30 years have been something of a mixed blessing for the airline industry.  In 1985, I flew People Express from NYC to Paris -- ticket price about C$600 for a round trip leaving in early June.  Gasoline was cheap and (trust me) salaries were lower than in 2020.  People Express launched (yeah ok Braniff before them) the cheap and cheerful direct flight to Europe from North America (Iceland Air with a stopover in Reykjavik was even cheaper!).   This was the massive change that was expected by the FAA deregulating the airline industry.  If you could buy or lease an aircraft and find a willing airport operator you could start your airline.  The US (still dominant market) was not ready, main airlines treated...

 The FDA emergency approved a $5 test for Covid-19, together with an App that Abbott developed t will give a Date stamped health passport. This means that within 15/20 minutes you can know if you are infected.  This test is cheap enough 9the price of a drink) that there is really no reason not do "do one before date night" or taking a flight to an exotic location.  Together with the App, it will provide clearance that travelers and revelers will want. The truth of the matter is that despite the high number of deaths, its still less than 1% of the population that has been affected.  This test will ensure that effected people know quickly and self isolate, thereby reducing the risk of transmission dramatically.   Normality should return quicly (it also reduces the need for a vaccine). This is huge game changer.

 For the past 4 years, the GOP has ruled the US, they've done a little governing, but mostly they've bitched and moaned about the world in which they hold all the reins of power.  Why they've done nothing about Social SEcuiryt, Healthcare, Medicaid, European Union, China (ok but what they did do was mostly ineffective). Now, after a campaign rally, were Biden said that he would follow the advice of scientists, then suddenly COVID is the Democrats problem, why is it that the highest instances of COVID are all in GOP states.  Sure things were bad in NY and NJ, and they are still very bad in California -- but they don't come close to Texas, Florida, Arkansas and many many other red states! The idea of the GOP has, since Obama, been the ideal of victimhood, not so much as a political party (with you know policies and solutions) but a branch of FOX news -- because victimhood plays well with the crowd.  I mean Trump has been in charge for four years you think that by now h...

 I am a huge fan of Tesla, but the recent price action on the stock confirms that the world has gone mad!  Tesla is trading at a multiple of 1,038x earnings...Yep, it will take 1,000 years for Tesla to earn its profits.  Now I always thought that for the manufacturing sector a p/e of 17 -- 25x was well priced and justifiable, and even you could say that Facebook and Google (in brand new sectors) would justify a P/E of 50 or even 100 times --- these were new sectors completely undiscovered and with tons of low hanging fruits.  Facebook proved again and again that theirs was a very lucrative niche.  But cars have been around for a while, it's not like Tesla has discovered the holy grail of a car that will last forever and cost nothing to run.  Sure it is better than virtually all ICE vehicles. A few weeks ago a friend asked me if I would buy Tesla at $1,700 -- I thought no, I agree with the Motley Fool that there's some kind of craziness with the pricing of T...

America burns, to the point that America's commander in chief had to go into a bunker, for his safety, 40 million Americans just lost their job, companies right left and center are shutting down, and the future is uncertain for many...and yet the market is priced for perfection as if such thing was in place.  The trade war seems to be warming up with China (and probably others), and the market goes up. No need to look deeper than the US government's decision that the only sign of health is a rising market, they will do anything to keep that fiction going for as long as they can

Mexican industrial investments in renewable energ ies , like private micro-grids , wind/solar farms supported by storage infrastructure such as batteries are economically justifiable investment decisions by the owners and CEOs.  The economics of solar at less than $0.015 /Wh make them a far more efficient, but timing-sensitive technology – today new affordable green and long-lasting storage is available – efficient and price competitive A few weeks ago t he Mexican government confirmed its intention to focus on coal and oil fired power plants reducing the role of renewable “disruptive” energies like solar and wind power , because of perceived grid instability.  The government cited the  coronavirus  pandemic as a justification for new rules that will prevent businesses to use the grids to transport renewables.  This announced shift is not anything new, since within the fine lines in the 2018 published   Prodesen 2019-2033 development progra...

Markets have been on a tear over the past few days, taking back virtually all the losses of March, the reason is simple, Quantitative Easing:  the truth is for the past 6 years the correlation between the market rise and quantitative easing has been 97%. The algos got the message, when the government pumps liquidity the markets rise, independently of what the economy is actually doing.  Unemployment at a 30 year high, markets rise, Neman Marcus bankruptcy markets rise.  The truth is that market is no longer a predictor of anything but that the government is pumping liquidity; for Trump, it has been a sign of his success -- and therefore a good thing.  It has for the past few years been a given that rising market are a sign of good economic health -- don't let the main street get in the way of the message. The truth is that as of today, the average p/e is around 20x  (an all-time higher).  The truth is that earnings guidance has been poor for the past ...

Total losses for the global airline industry, so far, is around US$ 100 billion -- with the prediction that the total could be as high as US$ 330 billion for 2020. There is a real "shift" in the business model; Lufthansa, Air France, and Alitalia are all getting state support in the form of a 15% to 25% capital injection.  Alitalia is always getting free stuff.  British Airways may also get help, but the non-state players not so much (Virgin).  South African Airways is back into the African Chapter 11 (actually its the 6th time that SAA has gone bust). Numbers show airlines cutting capacity with Singapore 97% cut incapacity, and at the low range, North America with a 60% cut in capacity. In terms of aircraft, the biggest losers are the A380/A340 and B747 -- many of those aircraft are gone for good.  The future would seem to favor the 787/777 and A350 -- the biggest winner will probably be the 737 and A320 -- but there is a dark dark cloud over the 737MAX -- n...

Summary Yesterday, Boeing launched a $25 billion bond issue -- it was snapped up by investors, not because the company is sound, but because its too big to fail, its part of the US military complex (Yeah) and investors are convinced that the government will bail them out (maybe).  Investors have made the cynical bet that the US government will bail them out...  The one certainty is that until a vaccine is found international travel will be curtailed and complicated. I strongly believe that business travel will reduce appreciatively after a few months of “Zooming” and that most business people will appreciate this new reality.  I suspect that this crisis is going to make things for Boeing very uncomfortable, and may even push the company into Chapter 11.  A fitting end to a company that has been grossly mismanaged over the past decade. Airbus has its own challenges, the write off of the A350 would make a massive hole in the company’s balance sheet (and t...

On the 15th of April total Canadian death from COVID-19 was just north of 1,000 (population 35 million) and US death was 30,000.  7 days later the total respectively is 2,000 and 45,000. The power of numbers expressed in human lives.  Here in Canada, a fast-growing proportion of those deaths are in their 70s and 80s -- and mostly in long term residential centers with a number (obviously) of health concerns.  In the last 24 hours, in Quebec, fully 90% were in these long term care facilities -- which speaks volumes on the scope of the tragedy and the fear fo those who live in these long term care facilities. Across Canada, the governments have taken notice and action...Canada's infection rate seems to have peaked -- news out of NYC is still inconclusive...that's why Canadians are so "happy" that the US/Canada border will remain closed but for essential traffic -- there is a strong concern that the pandemic is only beginning to explode in the rest of the US, the Mid ...

The estimates are in and demand seems to have collapsed by nearly 40 million bbl per day.  No wonder the OPEC agreement to cut 20 mm bbl per day went nowhere (aside from the cheating), the demand has collapsed.  At one point today, Canadian [Edmonton] prices dipped in the negative territory (it was a short thing). Overall the price curve is in contango (future oil prices are cheaper than spot) which is rare in the commodity world. 36 million bbl per day, and we are not talking natural gas...

Recently published in a number of Canadian local papers -- certainly looks coordinated!!! Sir, Not to appear xenophobic, but the US president’s desire to re-open the Canada/USA border fills me with anxiety. Canada has been a serious, united and largely acquiescent of most governments’ decisions vis-a-vis covid-19, we may disagree with the speed of re-opening the economy, but we all seem to agree that the governments took the right decisions and in general we have abided by the new and sometimes difficult rules that were put in place. The US response has been, something else, and now it appears that the Federal government’s leader, President Donald Trump, is keen to foment rebellion in certain states – it may all come down to nothing, but it seems too well-coordinated – its smells like big money pushing “idiots gun-fodder ahead”. It also appears that China, Korea and Singapore’s new cases of Covid19 were largely caused by people traveling back to their country or visiting family....

What grim numbers to evaluate.  What did Canada do right (yes a 1,000 is still a lot) so that its death toll is such a small fraction of that of the US.  Canada's population is about 1/10 that of the US (more or less) so either Canada should have reported 3,000 death or the US has 20,000 too many dead people. There is no doubt that Canadian have been inconvenienced by the social distancing and the shutting down of business.  That is simply the reality -- as far as I've seen no one has tried to have church stay open, also stupid rules have been few and far between. The time frame for Covid cases are about identical (early March for both countries -- in Canada, it was in BC and in the US it was California and NYC).  The response in Canada has been aggressive with most of the country completely shut down since mid March.  So why are so many more Americans dying?  Different in general population health? medical system (socialized in Canada) government res...

There was always something "special" about Americans and their religion.  For years, working with Mid-American fundraisers coming to Canada I had to actually tell them that "no, you cannot start your presentation about your religious beliefs"  -- seriously they were appalled that they could not discuss their belief in JC! Now in a number of states are having constitutional fights with churches (not catholic you will note that since Gallileo are slightly more pr-science) that want to be able to "get together to pray.  Some "moron" even said that "she did not believe that you could catch Covid-19 in a church.  There no comments to that level of stupidity As a not particularly aggressive guy with regards to religion, I take the view that if they have a death wish -- who am I to stop them.  It is well documented that a number of Koreans were infected in a religious service (supercarrier) -- at the time no one knew of the risk of covid019 still......

There has been a view expressed by the GOP that "companies have to be saved" people can die, but it turns out that some "people" are more equal than others.  Enter two "entities that really do not deserve the taxpayers' larges":  Boeing and the Cruise ship industry. Let's be clear, Boeing used nearly US$ 20 billion (some say $30 billion) to buy back share and not invest in its aircraft.  The lenders (about half the amount) knew very well what the money was going to be used for -- reduce the level of equity and raise the price of the equity.   If tomorrow Boeing declares bankruptcy what happens?  Really not that much, it goes into Chapter 11, who loses the equity owners and the unsecured bondholders -- the same guys who were happy to lend money to Boeing to reduce the amount of capital.  Workers -- not so much, they will have a job and a pension, why should they pay for management stupidity...even their pension is safe since its now illegal for pe...

Over the past few days, there have been a number of economists and market prognosticators looking at the future of America and the world in a "post" CV-19 world.  In the ultra short term, a deep recession is certain to hit.  After all, economic activity has basically stopped entirely, aside from basic food goods everything else has been shut down.  At the very least we are looking at a 20 to 30% GDP contraction.  Some of the more interesting commentaries were made when comparing the current economic problems with the second world war:  (1) a large percentage of the population became absent from daily economic life (joined the Army) (2) most economic activities stopped since much nonwar economic activity was transferred to war production, (3) a large percentage of economic life was dedicated to "unproductive:" activities (e.g. making bombs and guns and ammunition). Right now, in many economies (like up here in Canada) a large percentage of the workforce has bee...

How many science fiction books have I read where the entire population wears gloves and makes when in public...a few to say the least!  SO now we are in the middle of the beginning of the coronavirus.  Here in Quebec we are at around 95 (stats indicate we should be around 170...) with the aggressive program of separation and shutting down all public venues (goodbye restaurants, cinema etc) they hope to keep the peak infected bellow 2,000 by the end of March and that by the end of April this will all be a distant memory...we shall see! There is no doubt that shutting down the country as they have (although you still see a lot of people outside doing exercise) it should help -- travel will be an issue for the foreseeable future -- let say by the end of the year. Well interesting time

There has been a substantial amount written about the systemic risks that ETF can cause when they account for a certain percentage of the total market.  The benefits of ETF are obvious, as large money managers (charging hefty fees) have increasingly looked like local index investors.  Fidelity Canada's Canadian fund is effectively a replication with a 93% correlation to the TSX60 and as such with fees of nearly 1% of AUM, the attractiveness of buying a simple TSX60 ETF is almost overwhelming.  Who would not want to reduce its money management fees by 99%... Back to our problem, ETF investors are not "investors" they ride the coat tail of the publicly listed index -- taking no investor selection position (aside from being in or out of the market).  In fact, the ETF investors invest in sectors, not companies. As long as ETFs were a small percentage of the market it was not too serious, and a substantial body of research has been written on what is the right level o...