Farmer Diaries

So when I bought my first iPhone in 2009 for about $500 I thought it was a lot of cash for a phone.  Now the new iPhone X is coming out in a few days and it will cost just about $1,300 -- under the system in which assets are calculated there has been no "inflation" in the cost of an iPhone because the telephone is so much more powerful... Its just that there's a problem with that analysis (i understand how it started)  in fact, your phone doesn't do anything more than the first version (slight exaggeration).  But overall you check your emails, you make your calls...new programs such as WhatsApp and Skype were introduced, but that's just a different way of communicating.  In fact the only real benefit is that images are better, its got a faster processor, which is all good, but to say that the value added is worth an increase in the price of the phone of nearly $800...I find that hard to stomach.  The whole value adjustment (bigger screens for your TV) started i...

So a few weeks ago the American government, at the behest of Boeing Aircraft decided that Bombardier was a worthwhile target, filling a complaint that led to the imposition of 300% tariff on Bombardier  C- Series aircraft. Now for a start you've got to understand the tariff thing, the initial complaint was drafted by Boeing with a very clear intent -- to kill a non-competitor.   Not entirely clear what their idea was, it maybe that Boeing is thinking of getting in bed with Embraer and getting rid of the Canadian would be a good deal for them...I just don't know. You see Boeing complained that Bombardier was using unfair advantage in the 90 to 150 seat category of aircraft (this is important).  You see the C-Series aircraft is a 125 seat aircraft (trust me its a big big difference) and therefore is not competing with ANY Boeing aircraft product.  The smallest Boeing aircraft (737NG) is 150 seats (and its a pig). So the complaint will eventually (this is the key he...

I mean, its been almost a year, Hillary Clinton lost the election to Donald Trump, and yet she's in the news all the time.  She gets the kind of free publicity that did so much good for Trump. There's even a senate investigation committee, that started yesterday and is in full swing, if you consider that the Russia Senate investigation committee has been at it for nearly 9 months with virtually nothing accomplished: One is about a sitting Presdient! The other is about a private citizen! Guess which one is being followed with the more zeal... It starts with Fox News asking almost every day: What would Hilary do, in Trump's place -- when the real question is what would Mike Pence do in Trump's place!  Anyway that's what the constitution says, and Clinton is not in any succession plan to the White House. Very strange, the GOP won but is acting like a loser.  Its hard to fantom what's up with that.  The only thing I can come up with is that the GOP is havin...

The capital market are by definition optimistic in their outlook, until reality or a crisis or just fear take over, since as in 1927, 1987, 2001 and 2008 (there were others...but these are either recent or well known), the market is looking expensive.  The most well know index for valuation of the market is the CAPE which stands for cyclically adjusted price earning ratio;  It stands today only second (in level) to that of 1927 and 2000) First the market has been uneven for a long time; the majority of the S&P500 has generated pedestrian returns for investors -- aside from Tech the market has done little to impress  Five companies account for fully 30% of the market's rise over the past 3 years.  So is the market in a bubble?  I don't know anymore because ALL asset classes have seen massive increase in value (reduction in yield).  From housing, to bonds to equity -- everything is up.  In fact, since January 1, the market is up nearly 14% -- n...

So Trump & friends have finally delivered on their tax cut promise, as expected the bulk of tax cuts go to the richest 1%, but then again they do pay the bulk of all taxes -- yes they do!  However, for a gang (looking at you Paul Ryan) who were so anti deficit just a year ago the new tax cuts are unfunded with promised reduction in tax loopholes. Lying liars:  Trump & his advisor say that most of the tax cuts are going to the middle class.  Fact, 50% of all tax cuts will go to the 1%. Loopholes:  Certain (unspecified) tax breaks will be removed.  Since its corporation that benefits from these tax cuts (and their advisors) it is unlikely that the White House will have a smooth sailing on that one.  The other big shift was to remove the deduction for state taxes (after all its not income if you've paid it to the state government!).  That would do two things (a) screw the blue states (e.g. California, NY, Connecticut and New jersey) and (b) it...

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 i...

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 ...

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

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...

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.

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...

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).  G...