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Archive for the ‘Currencies’ Category

Sorted Weekly Tweets

Saturday, May 10th, 2014

Market Dynamics


  • Yellen Comments Boost Demand for Treasury Bonds Carry trade rescued, grows larger 4a later day of reckoning $$ $TLT May 10, 2014
  • One of the Best Retirement Deals 9 of 10 People Ignore Contribute 2a Roth 401(k) & save big on future taxes $$ $TROW May 10, 2014
  • NYSE to Curtail Order Types Amid Debate Over Their Fairness Will b interesting 2c what they curtail $$ Affects my biz May 10, 2014
  • What Baby Boomers’ Retirement Means For the US Economy Cheer up, the US is in better shape than rest of the world $$ May 10, 2014
  • I’m worried about a crisis bigger than 2008: Faber “For the next six months, maybe cash is the most attractive.” $$ May 10, 2014
  • When Stocks and Bonds Disagree @reformedbroker points out anomaly. Bond mkt bigger than stock mkt, should b right $$ May 07, 2014
  • research puzzle pix by tom brakke Bloat, which I would measure by number of days to trade away the portfolio $$ $SPY May 07, 2014
  • Ten Surefire Trading Rules To Make You Rich @reformedbroker tongue-in-cheek way of telling you what not to do $$ $SPY May 06, 2014
  • Early Tap of 401(k) Replaces Homes as American Piggy Bank If you don’t have an “out” door 4 $$, less will go “in” May 06, 2014
  • The bond market is giving the stock market angst 2 many long bond shorts, economic weakness, low govt-measured inf $$ May 06, 2014
  • Free Life-Insurance Offer Scrutinized Nothing is free; this will come out of the life insurer dumb enough 2sell it $$ May 06, 2014
  • Bond Returns Post Global Records as Warnings Go Unheeded Long bond buyers need to fund long liabilities & momentum $$ May 06, 2014
  • Borrowing Cash to Buy Complex Assets Is In Vogue Again Borrowed $$ is mostly being used 2buy AAA CLOs; 10x lev ~ 8%yd May 06, 2014
  • Can’t Find Enough 30-Year Treasuries to Buy? Here’s Why Fed buying, also pensions, life insurers & speculators $$ May 05, 2014




  • Covered Bond Talks Intensify as Bank Liquidity Rules in Play Denmark needs bank capital concessions 4covered bonds $$ May 10, 2014
  • Bitcoin Breakthroughs Studied by Banks the Currency Is Out to Replace May not be a currency, but a payment system $$ May 10, 2014
  • JPMorgan Joins Wells Fargo in Rolling Out Jumbo Offerings High end of residential housing market is hot $$ $JPM $WFC May 10, 2014
  • Fed 2 Bank Giants: Don’t Get Bigger Via Mergers Have >10% of total financial system liabs can’t merge $$ $BAC $C $JPM May 10, 2014
  • The Real Reason Big Banks Stay Big The larger the bank, the larger the management pay packets $$ $C $BAC $WFC $JPM May 06, 2014


Rest of the World


  • Russian Aggression Prompts Finnish-Swedish Military Pact It’s not an expansion of NATO yet, but reaction 2 Russia $$ May 10, 2014
  • China Property Slump Adds Danger to Local Finances Local govts rely on selling property 4 revenue; now what to do? $$ May 10, 2014
  • Ukraine’s Arms Industry Is Both Prize and Problem for Putin Has many arms joint ventures w/ Ukraine $$ #irony $MACRO May 10, 2014
  • Panama Can School US on Immigration “Panama is the kind of country the US once was: quick to embrace workers.” $$ May 10, 2014
  • Draghi’s Euro Angst Rising as Rally to $1.40 Pummels What will he do? Sell Euros & buy Dollars? Has 2 many $$ now. May 10, 2014
  • Accident Leads to Scrutiny of Oil Sand Production Little damage, but made regulators think of other bad scenarios $$ May 06, 2014
  • British Coins Pass Test in 800-Year-Old Ritual Trial of the Pyx, 1 of Britain’s oldest&strangest legal procedures $$ May 06, 2014


Global Economy


  • US Ready to Join 6-Nation Tax Alliance Members Will Share Information 2Fight Multinational Corporate Tax Avoidance $$ May 10, 2014
  • Ron Wyden: We Must Stop Driving Businesses Out of the Country Cutting corporate taxes to 24% would be a start $$ $SPY May 10, 2014
  • Corporate Tax Planners Vexed by New International Tax Guidelines If elites agree, can limit tax leakages 2 havens $$ May 10, 2014
  • Decoding Dollar Turns Into Wall Street’s Parlor Game Bad speculation on strengthening $$ fails, trade gets reversed May 10, 2014
  • World Economy Stabilizes in Great Moderation 2.0 Really seems 2 early 2b trotting out an idea like this $$ $SPY $TLT May 10, 2014
  • How Russia Inc. Moves Billions Offshore & a Handful of Tax Havens May Hold Key to Sanctions Expropriation risk $$ May 05, 2014
  • Tax Break ‘Blarney’: U.S. Companies Beat the System With Irish Addresses Maybe a “Value Added Tax” could fix this $$ May 05, 2014


Companies & Industries


  • Fat-Destroying Machine Doubted by Stock Traders $ELOS uses ultrasound 2 heat up & destroy fat cells. Does it work? $$ May 10, 2014
  • Son Makes $58B on Alibaba With Buffett-Type Return Masayoshi Son had insight into Alibaba when invested $20M $$ May 10, 2014
  • US Shale Boom Keeps Global Oil Prices From Soaring Oil Majors have 2 invest more 2 get less $$ May 10, 2014
  • Lenovo Targets Mobile as Tech Empire Grows on Castoff Businesses Squeezing good $$ out of mature tech businesses May 10, 2014
  • Pitney Bowes changing stripes: Cramer Talks about their partnership w/ $EBAY to seamlessly estimate shipping $$ $PBI May 10, 2014
  • 5 quality stocks that are missing out on the bull run Quality often misses out when credit spreads r tight $$ 2005-7? May 10, 2014
  • Alibaba Partners Keep Control After Shunning Hong Kong for US A partnership will govern, limiting takeover efforts $$ May 10, 2014
  • Wal-Mart Notches Web Win Against Rival Amazon Still $AMZN is 6x larger than $WMT in online sales, long way to go $$ May 06, 2014
  • IBM’s Watson supercomputer can help settle your debates Ask Watson a question, will give top 3 args for & against $$ May 06, 2014
  • Symantec Develops New Attack on Cyberhacking Declaring Antivirus Dead, Firm Turns2Minimizing Damage From Breaches $$ May 06, 2014
  • Buffett Phase Two Means Seeking Deals More Enduring Than Stocks Trying to build the best long-term conglomerate $$ May 05, 2014


US Politics & Policies


  • Benghazi Isn’t Iran-Contra But the comparison reflects poorly on the Obama administration $$ May 10, 2014
  • SEC Finds Illegal or Bogus Fees Majority of Buyout Firms Who pays what expenses? How r fees & returns calculated? $$ May 10, 2014
  • What Timothy Geithner Really Thinks Just don’t blame him, didn’t want the job & wanted 2 leave it sooner, Really? $$ May 10, 2014
  • Railroad: Federal order won’t affect oil shipments BNSF carries most of the oil coming from Bakken FD: + $BRK.B $$ May 10, 2014
  • Why Nonbank SIFI Designations Put the Cart Before the Horse FSOC & Fed don’t get systemic risk & designating SIFIs $$ May 10, 2014
  • Massachusetts Scraps Its Health Insurance Exchange Fascinating how many states had to scrap their healthcare sites $$ May 06, 2014
  • Why Weather Could Determine Who Wins a Race To Measure Inflation Billion Prices Project inflation measure 1%>CPI $$ May 06, 2014
  • The End of the Permissionless Web Regulators want 2 become the gatekeepers for Internet innovation. It ain’t broke $$ May 06, 2014
  • Toilet Bowl Kills Fan in Violence at World Cup Host Brazil Soccer hooliganism hits a new low, death by toilet $$ $EWZ May 05, 2014





  • Woman With Printer Shows the Digital Ease of Bogus Cash Fascinating 2c how easy it is to convert $5s into $100s $$ May 10, 2014
  • Career Advice for Managers: Learn to Execute Strategy Strategy should come b4 reaction to the problems of the day $$ May 10, 2014
  • Growing Number of Hispanics in US Leave Catholic Church Most of those leaving go evangelical protestant $$ #readbible May 10, 2014
  • Economics students call for shakeup of the way their subject is taught Right diagnosis, wrong cure, need Austrian $$ May 07, 2014
  • Rethink The Word ‘Cancer,’ Panel Says Cancer comes in many different forms; with some, early treatment is needed $$ May 06, 2014
  • Virtual reality preps 4 impact in healthcare, manufacturing, finance Retirement planning, worker safety, training $$ May 06, 2014
  • MLB: The Year That No One Got Caught Stealing Catchers now spend more time practicing hitting than throwing $$ $SPY May 06, 2014
  • Elite Colleges Don’t Buy Happiness for Graduates Happiness stems more from personal attitudes than college type $$ May 06, 2014


US Economy


  • Cancer Doctors Join Insurers in US Drug-Cost Revolt Drug costs reflect price 4 successes but paying 4 failures $$ May 10, 2014
  • Later Easter Drives Retail Sales in April Never thought Easter was that big of an economic factor $$ May 10, 2014
  • Record Meat Costs Mean Pricey Barbecues Herds r smaller, as ranchers shake off past water & feed problems $$ $TSN May 10, 2014




  • Wrong: Happy Hedge Fund Managers Earn Money for Nothing Wrong benchmark S&P 500 4 hedgie comparison s/b t-bills $$ May 10, 2014
  • Wrong: Blackstone’s Schwarzman Says Individuals Need More Alternatives He’s just trolling 4 dumb $$ folks. Ignore him May 10, 2014



Comments, Replies & Retweets


  • If the treatment is cheap enough, & has no harmful side-effects, investors will benefit from fat returns ;) $$ $ELOS May 07, 2014
  • “He might be comparing IRRs on PE to total returns on stocks. Trouble with that one is that capital…” — D. Merkel $$ May 07, 2014


Book Review: The Death of Money

Sunday, April 20th, 2014

103729This is a hard book to review. I have respect for the author, and most of his opinions.  But extraordinary claims require extraordinary proof.  There is evidence here, but not extraordinary proof.  I agree that we are in a bad spot, and that there is reason to be cautious.  To claim that the current international monetary system will disappear by 2020 or so requires more than the book delivers.

Let me begin by saying the book is worth buying.  It will make you think.  Thinking is a valuable exercise in which few engage.  Most of us imitate, which is far easier to do than thinking, and usually saves time on common issues.

The author focuses on the weaknesses of US economic policy, but is less critical of bad economic policies being pursued around the world, with the poster children being Japan, China, and the EU.  The US has its problems, but also its unique strengths.  Though I am a critic of US economic policy, we are better off than most other large nations.

One criticism of the book is that it is not focused.  Make your case, and don’t go down many “rabbit trails.”  That said, the rabbit trails are interesting, and you will learn a lot from them, though they don’t support the central thesis of the book.  I think the book needed a better editor, because a tighter book would have made the case better.

Here’s the main difficulty: Okay, so the US Dollar is not a great store of value.  Imagine another nation who wants a better store of value, who lets their currency rise, and their politically powerful exporters scream.  Who will likely win?  The exporters.  At least, that has been the way it has worked for the last 30 years.

In order for a gold-backed currency to be introduced, there will be sacrifices, and under most conditions, it will produce some deflation.  It is not at all certain that the nation(s) that might do this will take the short-term punishment.  Our world is geared toward short-termism, and it harms us all.


The book is far too kind to the IMF, an incompetent institution, and far too kind to China, which faces a collapse in its financial system far more quickly then the US will see.

The book is also too kind to the EU, which continues the experiment of monetary union without political union, which has never worked  before on a large scale.

Who would benefit from this book: Anyone could benefit from this great book.  If you want to, you can buy it here:The Death of Money: The Coming Collapse of the International Monetary System.

Full disclosure: I asked the PR people for a copy of the  book, and they sent it.

If you enter Amazon through my site, and you buy anything, I get a small commission.  This is my main source of blog revenue.  I prefer this to a “tip jar” because I want you to get something you want, rather than merely giving me a tip.  Book reviews take time, particularly with the reading, which most book reviewers don’t do in full, and I typically do. (When I don’t, I mention that I scanned the book.  Also, I never use the data that the PR flacks send out.)

Most people buying at Amazon do not enter via a referring website.  Thus Amazon builds an extra 1-3% into the prices to all buyers to compensate for the commissions given to the minority that come through referring sites.  Whether you buy at Amazon directly or enter via my site, your prices don’t change.

Sorted Weekly Tweets

Saturday, March 1st, 2014



  • Mt Gox: The brief reign of bitcoin’s top exchange What happens when u neglect basic acctg & programming controls Mar 01, 2014
  • Bitcoin Exchange Mt. Gox Files for Bankruptcy Protection B wary of opaque transaction systems, clever may steal $$ Mar 01, 2014
  • Where Did the Bitcoins Go? The Mt. Gox Shutdown, Explained Currencies can’t exist apart from legal systems $$ $BTCUSD Feb 26, 2014
  • The Bitcoin Collective Delusion Inevitable that gov’ts get involved in currencies & trade 4 punishment of fraud $$ Feb 26, 2014


Companies & Industries


  • Wall Street Hates JPMorgan Fee 4 $1T Junk Loans It is a private market; if the distortions r bad enuf, biz will leave Mar 01, 2014
  • Line Builds $15B Value With Teddy Bears, Wicked Witches Freemium model applied to Asian messaging, watch 4 IPO Mar 01, 2014
  • Old Mutual Plans IPO of US Unit After Profit Increases The final reconciliation of a decade-plus of mis-investment $$ Feb 28, 2014
  • Oil Giants Sell Pipelines as Shale Strength Drives Deals They expect oil prices 2rise as they c cheap oil scarcity $$ Feb 28, 2014
  • Dream of US Oil Independence Slams Against Shale Costs If debt funds a large part of drilling, time 2b nervous $$ Feb 28, 2014
  • $MSFT ‘s Culture Is Like ‘ $IBM Circa 1990,’ New Chairman Says Use MSFT Office/Windows Cash Cow 2build new biz $$ Feb 27, 2014
  • What is ‘Forbes’ worth? The Internet chgs everything; formerly important publications get digitally hollowed out $$ Feb 26, 2014
  • Rolls-Royce Drone Ships Challenge $375B Industry Problems here r considerable- control in bad weather, piracy, etc $$ Feb 26, 2014
  • US Issues Emergency Testing Order To Crude Oil Rail Shippers Reasonable precautions 4 general safety $$ $UNP $CSX Feb 26, 2014
  • Japan Post Prepares for IPO Lotsa assets, but the Q is what can be done w/them. Fuzzy situation w/no hurry $$ $EWJ Feb 26, 2014
  • Zuckerberg Dines With Phone Frenemies Fretting Over Profits Monet 2b made in solving mobile payments problem $$ $FB Feb 26, 2014
  • Rising Premiums May Hit Small Firms The lies told by the administration regarding cost control r astounding $$ Feb 26, 2014
  • Saudi’s Allure Undimmed for Bechtel to DaVita Amid Fallout Someone has 2 buy from the US; $DTA helps w/diabetes $$ Feb 26, 2014
  • $BAC Reaches Deal With Buffett on Preferred Stake Buffett gets better call protection, divs can b waived in crisis $$ Feb 26, 2014
  • Woes of Megacity Driving Signal Dawn of ‘Peak Car’ Era It may take ~10 yrs, this will right itself, w/fewer cars $$ Feb 26, 2014
  • Google Buses Fuel Inequality Debate as Boom Inflates Rents I f you can’t afford living in San Francisco, move out $$ Feb 26, 2014
  • How ARM Holdings Dominates the Chip World $ARMH vs $INTC – 2 clever approaches that r utterly different. Who wins? $$ Feb 26, 2014
  • Health Law Already Has Impact on Bottom Lines Fitting that health insurers r getting hosed 4 cooperating w/Obama $$ Feb 26, 2014
  • Repsol Agrees to $5B Deal W/Argentina on $YPF $REP decides half a loaf is better than none, nondefaultable bonds $$ Feb 26, 2014

Rest of the World


  • China’s Yuan Slides Against US Dollar The Yuan is still a rigged market, we need 2c it float to ascertain value $$ Mar 01, 2014
  • Bulgaria’s Currency Board versus Ukraine’s Chaos A currency that is anchored leads 2 better results in many ways $$ Feb 28, 2014
  • China’s Central Bank Engineered Yuan’s Decline It remains 2b seen where the yuan will trade when it freely floats $$ Feb 28, 2014
  • War Crimes Evident in South Sudan, Human Rights Watch Says Easiest way 2 call off dogs of war is not 2 loose them $$ Feb 27, 2014
  • Abe’s Southeast Asia Push Adds to US Ties Amid China Rift Example of entangling alliances: Will US defend Asia? $$ Feb 26, 2014
  • Ortega’s Zara Fashions Tax Avoidance by Shifting Profits to Alps Govts have an interest in unifying tax policy $$ Feb 26, 2014
  • Crisis Gauge Rises to Record High as Swaps Avoided Chinese corp spreads widening, same for their TED spread $$ $FXI Feb 26, 2014
  • Investors Mount Attack on Norway in $20B Oil, Gas Row Norway becomes less predictable, may chase developers away $$ Feb 26, 2014
  • Ukraine Pledges to Protect Deposits as Kiev Rally Called Must ring hollow in Cyprus as EU moves 2 support Ukraine $$ Feb 26, 2014


US Politics & Policy


  • How ADA, a Chemical Used in Rubber, Got Into 500 Food Products Just because it’s not natural doesn’t mean it’s bad $$ Mar 01, 2014
  • Federal audit calls new school lunch rules a failure Missing middle ground where kids get yummy nutritious food $$ Mar 01, 2014
  • Study Finds SEC Staff Sold Shares B4 Cases Made Public SEC staffers don’t know what 2 buy, they know what 2 sell $$ Feb 28, 2014
  • GOP Targets Hillary Clinton With Obamacare Attacks It is fair to ask her what she would do differently than Obama $$ Feb 27, 2014
  • Here’s How Much People Are Actually Paying for Health Insurance Interesting, not sure what to make of it $$ Feb 27, 2014
  • Busted State Obamacare Websites Haven’t Caught Up to Healthcare gov OR, MA & OR r worse than Fed’l website 4 PPACA $$ Feb 27, 2014
  • What Does Eric Schneiderman Know That the Rest of Us Don’t? Oversteps his bounds, but gets sellside firms 2 stop $$ Feb 27, 2014
  • Dave Camp: How to Fix Our Appalling Tax Code Complex tax codes allow the wealthy 2 eliminate taxes that poor can’t $$ Feb 26, 2014
  • When the Minimum Wage Goes Up, the Menu Price Also Rises The pain has 2go somewhere, including reducing employment $$ Feb 26, 2014
  • America’s 10-Year Experiment in Broadband Investment Has Failed We need to free up competition in the “last mile” $$ Feb 26, 2014
  • How Dodd-Frank Might Kill the CLO Market & we won’t miss it, b/c securitized credit is not accounted 4 properly $$ Feb 26, 2014
  • High-Priced Hydrogen Cars to Challenge Electrics Hydrogen is not the solution, it is just fossil fuels in disguise $$ Feb 26, 2014
  • Truth About Hydrogen Power Old article, explains y hydrogen is no panacea b/c it takes fossil energy 2 produce it $$ Feb 26, 2014
  • The same is true of fusion power. The costs of creating Tritium at a scale needed to power a city would be astounding. $$ Feb 26, 2014
  • A Surprise Guest at the SEC’s Annual Gathering @mcuban shows what a measured & classy guy he can b @ SEC meeting $$ Feb 22, 2014


US Economics & Monetary Policy


  • Foreclosures Climaxing in New York-New Jersey Market: Mortgages Judicial foreclosure states catching up rest of US $$ Feb 26, 2014
  • Home Prices in 2013 Notch Biggest Annual Gain Since 2005 Demand from investors pads purchases, rates higher now $$ Feb 26, 2014
  • America’s Hottest Housing Market Has Suddenly Cooled Down Phoenix RE rises out of ashes on speculative demand $$ $Z Feb 26, 2014
  • March 4 Hearing for Three Fed Nominees One bullet & 2 blanks in the gun. Stanley Fischer will bring some wisdom $$ Feb 26, 2014
  • Fed Crisis Transcripts Highlight Futility of FSOC Crystal Balls Bureaucrats can’t/won’t predict disaster coming $$ Feb 26, 2014
  • The Fed knows less than average & & 2008 Transcripts show clueless $$ Feb 26, 2014
  • How to Profit from the Yellen Fed Yellen is core 2 the M.O. of the Fed, it’s like jazz, they make it up as they go $$ Feb 26, 2014



Market Impact


  • Banks Averting Bond Losses With Accounting Twist Switching bonds from available 4 sale 2 held 2 maturity $$ Feb 26, 2014
  • The switch limits flexibility b/c u can’t change back w/o poss changing all back; also doesn’t change economics, moves losses 2 future $$ Feb 26, 2014
  • Greed Turning Losers to Leaders in Russell 1000 Index Could this b a harbinger of a change in the markets? $$ $SPY Feb 26, 2014
  • Outcome or process — what investment focus succeeds over time? @Ritholtz tells us to focus on process not results $$ Feb 26, 2014
  • Social psychology: Market madness This is y the 1st priority of investment is risk control; can’t sleep @ night $$ Feb 26, 2014
  • 10 Value Investing Blogs You’d Be Crazy Not To Follow Happy 2b featured among this great group of blogs $$ Thanks! Feb 26, 2014


Other Business


  • Harvard Brainpower Joins MIT Fueling Boston Sports Teams’

Titles Bright guys using math2analyze sports in Beantown $$ Feb 28, 2014

  • Big Data Comes to the Farm, Sowing Mistrust Farmers worry that data used to help them will b used against them too $$ Feb 28, 2014
  • Corporate Economists Are Hot Again An alternative would b actuaries, they r usually better at practical models $$ Feb 27, 2014
  • Dwindling Midwest High School Grads Spur College Hunt Demographics now fight against colleges, many weak will die $$ Feb 26, 2014
  • The Joy and Freedom of Working Until Death Find something that u enjoy doing that supports u & yours well forever $$ Feb 26, 2014




  • Dad May Join Two Moms for Disease-Free Designer Babies Designer babies:many embryos die in order 2 produce 1 child $$ Feb 26, 2014
  • Your Heart May Be Older Than You Are Cute way 2 get people to take care of themselves; may have false negatives $$ Feb 26, 2014
  • Mystery Medical Symptoms Hit a Surprising Number of Patients Stress can trigger pains; this teaches stress control $$ Feb 26, 2014


Pimco & Bill Gross

  • Pimco’s Gross: ‘U don’t always produce productive family by sweet talking&always being inclusive’ Allianz happy w/him Mar 01, 2014
  • Counterpoint: It’s time for Bill Gross 2 retire Everybody Should Get Off Bill Gross’s Back $$ Feb 26, 2014
  • Inside the Showdown Atop Pimco, the World’s Biggest Bond Firm Gross developed the theories guide Pimco & he stays $$ Feb 26, 2014



  • Wrong: Templeton Braving China’s Housing Bubble China looks like Japan in 1989, or the developed world in 2007 #avoid Mar 01, 2014
  • Wrong: NASA Scientists Discover 715 New Planets Life is finely tuned on Earth +/- 10% in size of Earth -> no life $$ Feb 27, 2014
  • Wrong: Fed s Tarullo Eyes New Tools to Limit Interest Rate Risk Dreams 2 undo effects of bad policy w/o undoing it $$ Feb 26, 2014
  • Wrong: It Takes How Much Water to Grow an Almond?! Misses the idea that water does get reused many times: rain $$ Feb 26, 2014
  • Wrong: Can Amazon Dominate in Insurance, Too? Except 4 simple products, Insurance is too complex 4 people to pull $$ Feb 24, 2014


Comments, Replies & Retweets

  • @jasonzweigwsj @AlexRubalcava I wrote an article on the problems w/zero cost investing recently “sand in the gears” Mar 01, 2014
  • RT @AlexRubalcava: Zero commission stock trading sounds like a product tailor made to amplify investors’ behavioral finance mistakes. Mar 01, 2014
  • “Currencies & trade cannot exist in a vacuum apart from legal systems, because fraud is a crime…” — David_Merkel $$ Feb 26, 2014
  • ‘ @GSElevator Tattletale Exposed (He Was Not in the Goldman Elevator) I don’t get out much, 1st I’ve heard of this $$ Feb 26, 2014
  • “Regarding First Data, many might think it quite desirable to step out of the spotlight @ $JPM &…” — David_Merkel $$ Feb 26, 2014
  • . @dpinsen The ancient retirement tripod of course unless the modern one works. $$ Feb 26, 2014
  • @dpinsen That was icky, and more… gotta go wash my brain out… brrr. Feb 22, 2014

Book Review: Rule Based Investing

Friday, January 3rd, 2014

Everyone would like a “money machine.”  Follow simple rules, and “Wow, this makes money.”  This is that kind of book but it has better foundations than most in its class.

The book examines three types of investing, most of which are foreign to average investors.  Most investors don’t invest in equity by shorting it, and most investors are not currency traders.

But that is what the book encourages.  I’m going to digress here, because I have to explain some salient matters, and say what I think, so that my later critique makes sense.

Volatility and credit are cousins.  After all when markets go nuts, and everything is in disarray, those that have been trying to borrow at low interest in one currency, and invest at higher interest in another currency get hosed.  Why?  Because in volatile times, the riskier currencies face capital flight versus safer currencies that have the confidence of the markets.

All of the methods mentioned in this book as a result are making bets on volatility/credit, and try to control the bet by monitoring implied volatility, credit spreads, and momentum.  They limit when they are in the market and when they are out.

I don’t have a problem with the theory here, but with the ability of average people to carry it out.  This book would be good for quantitative hedge fund managers; I am less certain about individuals here.

As an aside, what the book describes is how PIMCO has done so well at bond investing over its history — shorting volatility to pick up yield.

But the main criticism is this: the author optimized the book to fit her full data set.  When you read the last chapter, and see that you could have earned 30%+/year for 13 years, if you were as clever as the author, you should think, “Yes, if I had 20/20 foresight.”  The methods will not do as well in prospect as in retrospect.


There is little that I disagree with in the book on a theoretical basis.  Where I differ comes in two areas: individual investors will not have the fortitude to carry out what is a complex method of investment.  Secondly, when enough hedge fund money adopts these strategies, the pricing in the market will shift, and the hedge funds will no longer have easy money.

Who would benefit from this book: If you are willing to do the work of a volatility-selling hedge fund manager, this is the book for you.  If you want to, you can buy it here: Rule Based Investing.

Full disclosure: The publisher sent me the book after he offered me a review copy.

If you enter Amazon through my site, and you buy anything, I get a small commission.  This is my main source of blog revenue.  I prefer this to a “tip jar” because I want you to get something you want, rather than merely giving me a tip.  Book reviews take time, particularly with the reading, which most book reviewers don’t do in full, and I typically do. (When I don’t, I mention that I scanned the book.  Also, I never use the data that the PR flacks send out.)

Most people buying at Amazon do not enter via a referring website.  Thus Amazon builds an extra 1-3% into the prices to all buyers to compensate for the commissions given to the minority that come through referring sites.  Whether you buy at Amazon directly or enter via my site, your prices don’t change.


Book Review: Currencies after the Crash

Tuesday, November 5th, 2013

Sara Eisen is smart.  How smart is Sara Eisen?  She can write twelve pages on currencies, invite some clever and opinionated people to write articles for her, and serve as editor of the book, and thus get top billing for a moderate amount of work.

There are other reasons why I think she is smart — she is an able interviewer, and maybe there is not a lot of difference between choosing people to write articles for you, and knowing what to ask someone that you choose to interview.  Both require understanding the views of the person in question.

Be that as it may, the ten writing the represent different points of view.  Let me briefly describe each one:

1) Gary Shilling — The US Dollar has its weaknesses, but is stronger than all of the alternatives, because the US possesses a lot of strengths not found in the rest of the world.

2) Stephen L. Jen — The Chinese Yuan will become a reserve currency, but it is highly unlikely that it will significantly replace the US Dollar in the intermediate term.

3) Jorg Asmussen — The Euro can be an alternative to the US Dollar if it overcomes integration issues, and continues to deepen economic integration.

4) John Taylor — Assuming the Euro survives its imbalances, a shrinking population and sclerotic economic policies will make the Eurozone less important by 2050.

5) Megan Greene — The Eurozone will be better off if weaker nations leave.

6) Anoop Singh & Papa N’Diaye — Even though rebalancing to internal growth through increased domestic consumption will slow down Chinese growth, in the long run it will lead to a better, healthier Chinese economy and currency.

7) James Rickards — Competitive devaluation is leading to currency wars, but embracing deflation and austerity as the Euro has is the right path.  We can do the same thing globally through the IMF with their SDRs.

8 ) Peter Boockvar — We need to tie the hands of the Central Bankers, because they overshoot and make economic volatility worse.  One way to do so is through a gold or other commodity standard.

9) Robert Johnson — Much like the authors in Chapter six, except more pessimistic about whether it will happen.

Do You Want a Conclusion or Not?

This  book offers no unified point of view or conclusion, and that is a strength, because it mirrors the debate that exists in the world today.  If you are not confused, you don’t get it.  That said, the book could have been much stronger if the ten authors were allowed to respond to the other authors briefly, with a brief rebuttal from the original author.  The weakness of the book is that there is no interaction, no attempt to see how the views fight or agree with each other.  This could have been a better book, but I recommend it as it is.


Already expressed.

Who would benefit from this book: If you want to learn nine different views on currencies and global macroeconomics, this could be the book for you.  If you want to, you can buy it here: Currencies After the Crash: The Uncertain Future of the Global Paper-Based Currency System.

Full disclosure: The publisher sent me the book after asking me if I wanted it.

If you enter Amazon through my site, and you buy anything, I get a small commission.  This is my main source of blog revenue.  I prefer this to a “tip jar” because I want you to get something you want, rather than merely giving me a tip.  Book reviews take time, particularly with the reading, which most book reviewers don’t do in full, and I typically do. (When I don’t, I mention that I scanned the book.  Also, I never use the data that the PR flacks send out.)

Most people buying at Amazon do not enter via a referring website.  Thus Amazon builds an extra 1-3% into the prices to all buyers to compensate for the commissions given to the minority that come through referring sites.  Whether you buy at Amazon directly or enter via my site, your prices don’t change.

Sorted Weekly Tweets

Saturday, May 25th, 2013


  • Delta Sees S&P 500 in Reach as Credit Ratings Rise  I would b cautious here, airlines have destroyed a lot of capital $$
  • Berkshire’s Weschler Holds Almost $150 Million of DaVita  FD: + $BRK.B | The slow takeover of Davita continues $$
  • The real Apple tax scandal  Scrap the corporate income tax & raise taxes on realized capital gains & dividends $$
  • Berkshire Hathaway Seeks Release of ResCap, Ally Financial Report  Wants 2c if there was any fraudulent conveyance $$
  • Oil Revolt Generates $35 Billion as Icahn-Singer Agitate  Many activist investors trawling in energy stocks $$
  • Inside Google’s Secret Lab  “Since its creation in 2010, Google has kept X largely hidden from view.” Long but good $$
  • Explaining Apple’s Irish Tax Dodge  A good transfer pricing accountant is worth his weight in gold $$
  • Deal of the Week: Penney Holds Real Value  $JCP needs to turn around its retailing much more than managing property $$
  • After all, that’s how BK conservation is done in the insurance industry, taxpayer never gets on the hook (please ignore $AIG) $$
  • Customer Service Is Next Job for IBM’s Watson  Could Watson replace the grunts that take care of customer service? $$
  • “…insurance giants such as ACE Ltd and Endurance Specialty Holdings Ltd”  $ACE is a giant @ $31B , $ENH not @ $2B $$
  • $VOD to Keep $VZ Payout Amid Europe Struggles  Not surprising they stalemated on VZW, & no special div | FD: + $VOD $$
  • Regulators Scrutinize Firms’ Ties to Insurers  How much unsafe assets are held by life companies of $APO $HRG $GS ? $$


Market Dynamics

  • Murray International’s Stout Says Stocks Too Expensive  This means invest in cash, long Tsys or gold if correct $$
  • Bargain-Hunting Buoys Treasurys [sic]  Strength Returns as Bargain-Hunters Appear, but Prices Still Fall 4 the Week $$
  • EVERGREEN VIRTUAL ADVISOR  A very good publication this week. If u beg, u can get on the distribution list. $$
  • Richard Band notes that the S&P 500’s prices-to-sales ratio is 1.5 to 1, almost 60% above its average since 1955  $$
  • Paul Tudor Jones: Macro trading, babies r a ‘killer’ 2a woman’s focus  Any significant outside activity harms focus $$
  • Is This the Best Time for Investors? Don’t Bet On It  Long term valuation measures r flashing red, play defense $$
  • 3 articles on gold  &  &  New hedging, record shorting, paper gold $$ $GLD
  • Follow the Leader @mktanthropology  Global economy feeling deflationary; stock markets poised to follow down $$
  • Goldman raises S&P 500 targets through 2015  Not impossible historically, but not likely, profit margins would b2hi $$
  • James Surowiecki: Is There a Stock-Market Bubble?  Argues profit margins sustainable: lower taxes, globalization $$
  • Looking for Investments With Higher Yields in a Low Interest-Rate World  Grab hi yields now= walk tightrope; no net $$
  • Gold in Yen and SP500 and Bitcoin : Back to the Future  Gold almost back to peak in yen terms & much more $$
  • Gold Bear Bets Reach Record as Soros Cuts Holdings  Market delivers pain to the gold longs: bears now overextended? $$
  • Gold Rebounded After Moody’s Says U.S. May Face Downgrade  People want certainty somewhere, whether in Govt or gold $$
  • Junk Stocks Spur Broadest Equity Advance Since 1995  Highly indebted firms take the lead in the equity market $$

US Politics & Economic Policy

  • Obama Bully Pulpit Bullied With Congress Probes Obscuring Agenda  Maybe we should limit Presidents to one 4-yr term $$
  • Fannie Mae Profiting as Market Middleman Angers Lenders  If we really want 2wind down F&F, we should end purchases $$
  • Goldman Sachs Research Disputes TBTF Subsidy  In quiet times, advantage difficult to detect, easy during crisis $$
  • Unaccountable Executive  If President doesn’t run government, who does? Can delegate authority, not responsibility $$
  • The Prisoner’s Dilemma of Central Banks [pdf]  Everyone has an incentive 2 inflate, which leaves everyone worse off $$
  • The Fed Is Squeezing the Shadow-Banking System  As they should: repo market was a big part of the financial crisis $$
  • The FED & F-35: Still no Rules of Engagement  The Fed doesn’t know what they are doing; making it up, smiling a lot $$
  • Sheila Bair: Dodd-Frank really did end taxpayer bailouts  Will follow BK pecking order, after that charge industry $$
  • Naming Names in the Dodd Frank Mess  Mark Wetjen manages to stymie Dodd-Frank reforms; some of it is good, some bad $$
  • What Strong Dollar? US Boom Provides Oil Hedge  W/more energy produced in the US, $$ has less impact on oil prices
  • White House urges Senate to cut crop insurance in farm bill  Difficult to beat the Ag lobby on crop insurance $$
  • Health Law Costs: Employers Eye Bare-Bones Plans  Obamacare messes up the health system; avg person less well-off $$
  • Puerto Rico Statehood Bid Gets New Push  Sensing future bankruptcy, Puerto Rico reconsiders a permanent liege-lord $$
  • Does Rand Paul’s Rise Signal A Broader Libertarian Moment?  Somehow I think this one will end in disappointment too $$
  • US Immigration Plan Encounters Business-Labor Rift  Fascinating how seeming certainty of immigration bill has gone $$
  • The end of QE?  @izakaminska tells us why more QE won’t help, & why the process will have to end soon. $$ #becareful

Rest of the World

  • Turkey Moves 2Curb Alcohol Sales  This will b an interesting test of govt power; vodka is delivered quietly in Iran $$
  • Foreign Fighters Enter Syria to Defend Shiites and Al-Assad Regime  “Islam is a religion of peace” “Islam is a…” $$
  • The Great Chinese Property Bubble: a Wall of Worry?  2 much 2 occupy; prices 2 high; enough debt 2b troublesome $$
  • BRICS risk ‘sudden stop’ as dollar rally builds  EM blowups often preceded by rise in $$ | Good 4 EM exporters though
  • Wrong:Avoid These 3 Stocks on Japan, Says Expert  An expert that doesn’t understand insurance trashes $AFL | FD:+ $AFL
  • Asia Goes on a Debt Binge as Much of World Sobers Up  Over-indebted economies don’t grow rapidly; complexity chokes $$
  • 2 articles on Japan  &  Rising bond yields & trade deficit, monetary policy drives both $$
  • Two articles on the Tokyo market rout  &  Abenomics is stretching the limits of the possible $$
  • Nobel Laureate Phelps Warns Against EU as Iceland Abandons Talks  Iceland gets smart, doesn’t join the Eurozone $$
  • Death in Parched Farm Field Reveals Growing India Water Tragedy  Water shortages r big factor 4 India’s development $$
  • The Abenomics Experiment: Major Risks for Banks  If interest rates rise 2much, banks in Japan go to neg net worth $$
  • Experts call for urgent measures to tackle debt  One advantage of US over China; we resolve troubled debts better $$
  • Stockholm Riots Continue for Third Night  If this can happen in Stockholm, it can happen in a lot of other places 2 $$
  • Hollande Bonds Without AAA Shine Brighter Than Gold  Similar things worked 4 Japan 4a while, but now may b shifting $$
  • World’s Biggest Volatility Jump Spurs Fund Outflow  Investors invest outside Japan 2 escape perpetually falling yen $$
  • China April housing inflation quickens to two year high  Chinese inflation is the endgame for many globally $$ #theend



  • Soldiers Turn Entrepreneurs as One Million Exit Military  Military training has similarities w/entrepreneurship $$
  • The Exercise Equivalent of a Cheeseburger?  Exercise is good; too much exercise is worse than little exercise $$
  • How Rail is Reshaping America’s Energy System  Summary piece on how tank cars r taking cheap fuel to the coasts $$
  • Wined, Dined, Canned  Inside the insiders game that is the Cannes film festival $$ Movie about the business of movies
  •  Teen’s invention could charge cellphone in 20 seconds  Wonder how stable supercapacitor will b? Might b an issue $$
  •  “I’m going to be setting the world on fire,” she said.  Having seen overpowered capacitors burn, could b literal $$
  • The Tech Innovator Who Almost Killed Saddam Hussein  Long interesting article; Sabra becomes rich computer maven $$
  • Getting Along With the Original Other Woman—Your Mother-in-Law  Husbands, support your wives. Mothers, bow out $$
  • New Rival Emerging for Bloomberg Chat  Bloomberg may learn the hard way: messaging security can’t be compromised $$

Comments, Replies, & Retweets

  • @Sir_Strangelove Had not caught that, thanks for correcting me
  • “There is one thing you neglected: Baa bond yields are 3% lower than in 1999. That roughly comports…” — D_Merkel  $$
  • @joshuademasi It’s like long-tail reinsurers in the mid-’80s, most were technically insolvent, but book capital was +; losses eaten slowly
  • “Jeff Matthews is correct; Dealbook, though usually good, is wrong.” — David_Merkel  $$
  • “This is a failure of the regulators, that they let this happen at all. They have the power to top it” — D_Merkel 
  • @danielckoontz I know that dividend swaps exist, can imagine the possibility of leverage, don’t think it’s done much though, I hope
  • @danielckoontz So long as there isn’t any leverage on the person holding the dividend paying stocks, generally it should self-limit


  • My week on twitter: 35 retweets received, 1 new listings, 66 new followers, 30 mentions. Via: 

The Gold Medal Gold Model, Tarnished?

Saturday, April 27th, 2013

From one of my longtime readers:

I just wanted to toss this suggestion your way and the motivation is partly selfish, but given the decline in gold the last 3-4 days (I actually exited all my long positions around 1500-1505 last Friday based on the breach of the technical support level at 1525-1535 and am now short in my trading account from that same level) I’d be interested to get your qualitative thoughts and maybe an update on your refined quantitative model with negative real interest rates and where it says gold should be trading.

If it turns out substantially above the current price of 1360, I’d be curious if you think that model isn’t valid or if gold is a bargain here.  This article here got my wheels turning that bases on a gold price model on ratio to CPI:

But to come up with an estimate of gold’s fair value, they calculate a ratio of gold to inflation going back as far as they were able to obtain data. They report that this ratio, when expressed in terms of the U.S. Consumer Price Index, has averaged about 3.2-to-1. Even at $1,400 an ounce, this ratio stands at 6.03-to-1, or nearly double this average. 

From a qualitative standpoint, the negative interest rate model made the most sense to me simply from a critical thinking standpoint.  The relationship to CPI seems less reasonable to me if one starts with premise that gold is an alternative currency.

Anyways, thanks for any response or addressing this on your blog.

Links: The Gold Medal Gold Model, Gold does Nothing.

I updated my gold model.  This is what it looks like without re-estimating the parameters:

Eddy's Gold Model_16809_image001

And this is what it looks like after re-estimating the parameters:

Eddy's Gold Model_11787_image001

The real cost of carry in holding gold is negative, and it has been consistently negative for the last five years. and mostly so for the last ten years.  Thus the run-up in the price of gold over the last 10 years.

Now models are just that, models.  I can make three seemingly contradictory statements about this model:

  • The old models did not predict the path of the gold prices well.
  • The re-estimated models fit the data better than the old models.
  • If the model is accurate, there is economic pressure to make the price of gold rise.

My hypothesis at this point in time is that easily tradable products based on gold encouraged speculative pressure, leading the price of gold to overshoot, and now it is correcting.  That said, when the real cost of carry is so negative, gold should appreciate.

Alternatively, we could try to develop a supply-driven model of gold, where we estimate the marginal costs of mining an additional ounce of gold.  Ore depletion is significant, but the effect is relatively constant compared to demand for gold.  It also helps to explain why the stocks of most gold miners have not done well, even with a rising gold price.

We often like to think that if a commodity price is rising, the stock of the producer must do even better.  Not always true, if the prices of extraction/production rise faster than the commodity price, as it has been with gold producers, the stocks will be a bad investment.

My final opinion is this: if you have a 5-year time horizon, I think you will do well with physical gold, where you take delivery, and store it yourself.  With easily tradable paper versions of gold, it is less clear, because you would need to analyze the actual assets.  There might be some credit risk involved.

I don’t think the currency devaluation competition is going away anytime soon, so gold will likely do well against paper.  The real question is when will some major country decide to give up and raise taxes dramatically, inflate, or default.  Aside from the raising taxes scenario, gold should do pretty well.  I might get less optimistic if the gold miners began making significant money,producing much more gold, but producing gold remains a hard business.

Sorted Weekly Tweets

Friday, April 19th, 2013

Market Dynamics


  • Gold Volatility Beats US Stocks and May Last: Chart of the Day Bodes ill 4 gold in short-run, good in the long-run $$ Apr 19, 2013
  • S&P500, & their friends: Market Fatigue? Confirmation Signs? Momentum failing in small cap stocks, not a good sign $$ Apr 18, 2013
  • Some (more) crushing news for goldbugs Depletion is the bane of gold producers, pushing up the cost of ore $$ Apr 18, 2013
  • Just Before the Crash Institutions create their own crises by herding into risky asset classes & fleeing en masse $$ Apr 18, 2013
  • End of the supercycle looms: commodities, stocks sell off Calling end of cycle is gutsy when resource demands r up $$ Apr 17, 2013
  • Commodities Crushing Stocks One day does not make a market; that said, increased volatility is a negative $$ Apr 17, 2013
  • Gold’s fair value is $800 an ounce Way too low, unless inflation will remain negative 4 some time $$ Apr 17, 2013
  • 4 Signs That The Housing Recovery Is Stalling Interesting set of charts; feels like a dead cat bounce in Res RE $$ Apr 16, 2013
  • Busting Sell in May and Go Away Myth Buy&Hold best in LR, then buy November, sell April $$ C: Apr 16, 2013


Companies & Industries


  • Caterpillar and Federal Express: Two Global Bellweathers, Two Worries Where did all the ppl go talking of growth $$ Apr 19, 2013
  • Chevron Defies California On Carbon Emissions California’s policies r2 strict, another reason y CA state is failing $$ Apr 19, 2013
  • $VZ Says Tax Hurdle 2 $VOD Wireless Buyout Fixable $VZ should buy $VOD, spin off what it doesn’t want | FD: + $VOD $$ Apr 19, 2013
  • More Cracks Undermine the Citadel of TV Profits How 2 keep information bundles together, good subsidizing mediocre $$ Apr 16, 2013


United States


  • Boston Bombings Bring Americans Closer to Living on Edge Free societies have to live w/risk or we destroy freedom $$ Apr 18, 2013
  • Clinging to Guns—and Abortion Hadn’t heard story about Kermit Gosnell; really surprised it isn’t a bigger story $$ Apr 18, 2013
  • Route Change Forces Keystone Foes to Shift Focus Environmentalism is intellectually bankrupt, a prime example here $$ Apr 18, 2013
  • Is making US banks foresee trouble more trouble than it’s worth? Done fairly, no. If abused, yes. Analysts needed $$ Apr 17, 2013
  • Retirement Account Cap With Obama Budget Buoys Insurance A positive for life insurance among the most wealthy $$ Apr 17, 2013




  • Chinese Go Nuts After a Bumper Crop knew Chinese liked peanuts so much; thought their favorite nut was cashews $$ Apr 19, 2013
  • China’s Potential growth may slow later in decade: Older population shrinks labor force Pop growth -> Econ growth $$ Apr 19, 2013
  • Study Finds Massive Europe Investment by Chinese State Companies Does China get how difficult it will b2 get out $$ Apr 18, 2013
  • China Local Authority Debt ‘Out of Control’ Yet another sign of debt disarray in China; Govt will take losses $$ Apr 18, 2013
  • Has China’s Economy Hit a ‘Dead End’? You bet. it is similar to Japan in 1989, and the USSR in 1965: Stagnation $$ Apr 18, 2013
  • Slower China Growth Signals Days of Miracles Are Waning Capital productivity declining in China; hard landing $$ Apr 16, 2013


Rest of the World


  • Risky Economic Plan for Japan Inspires Hope and Fear Gambler Abe presumes that inflation can help Japan $$ #FTL Apr 19, 2013
  • Chavez Heir to Be Sworn in as Vote Dispute Roils Investors Somehow this doesn’t feel stable. Electronic vote audit? $$ Apr 19, 2013
  • Spanish Squatters Invoking Robin Hood Deter Investment What is not paid 4 is not valued, Spain is dying slowly $$ Apr 18, 2013
  • Spanish Pension Reserve Fund:All In For Spanish Debt! Not all that different from Social Security; backed by taxes $$ Apr 18, 2013
  • The ECB Fragmented Monetary Policy DIfficult 4 the EZ 2b anything other than a 2-tier capital mkt: feast & famine $$ Apr 16, 2013
  • The riddle of Europe’s single currency with many values A euro isn’t equal everywhere in EZ, time 2 end the euro $$ Apr 16, 2013




  • 10 things Coke, Pepsi and soda industry won’t say Avoid sweetened fizzy drinks; they aren’t good 4u $$ #simple Apr 17, 2013
  • The spreadsheet error in Reinhart and Rogoff’s famous paper on debt sustainability Oops, even professors goof $$ Apr 16, 2013
  • Inside Bloomberg’s Twitter A-List (Well, At Least a Fraction of It) Brings best tweets of the moment to BB users $$ Apr 16, 2013


Wrong or Late


  • Wrong: To Boost Retirement Savings, Stop Giving Tax Breaks on 401(k)s “Nudges” eventually fail, tax breaks don’t $$ Apr 19, 2013
  • Late: Efforts to Revive the Economy Lead 2 Worries of a Bubble Bubble will b revealed when Fed 1st hints 2 tighten $$ Apr 18, 2013
  • Wrong: Economic Data Galore, but No Certainty 1 thing is certain, the ability of economists 2 forecast is abysmal $$ Apr 17, 2013


Replies, Retweets & Comments

  • W/all the white flower petals falling off trees, it looked like a blizzard 4a while. I said 2 my youngest, “Look, Snow.” She just smiled $$ Apr 19, 2013
  • @Tubulus In the short-run, no. In the long-run, yes. Those who need more spending $$ will eventually undo the enrollment & move 2 cash Apr 19, 2013
  • @finemrespice No, not sure, but to me slowly is a number of years, which we are well into. Cyprus was fast. Apr 18, 2013
  • “You didn’t ask him about the purchase of Scottish Re, which lost a lot of $$ . Y the free pass?” — David_Merkel Apr 18, 2013
  • “Sadly, neither really succeeded. The debt started growing uncontrollably in their terms, leading…” — David_Merkel Apr 18, 2013
  • ‘ @StockGravity It is not certain that money will b printed, though I believe that will happen. I do think gold is cheap here. $$ Apr 17, 2013
  • RT @LauricellaTom: Pimco’s El-Erian: Easy money policies mean stocks, bonds “trading at very artificial levels” @MoneyBeat @Pimco #WSJ … Apr 16, 2013
  • @edwindearborn How do you define viral? I get that level almost every day when you add in everything… and I am not that big. Apr 16, 2013
  • @portfolio14 @Greenbackd I said no in my piece, but here is the advice for market bottoms: $$ Apr 16, 2013


  • My week on twitter: 42 retweets received, 2 new listings, 53 new followers, 25 mentions. Via: Apr 18, 2013


At the Towson University Investment Group’s International Market Summit, Part 2

Thursday, April 18th, 2013

Here are some questions submitted in writing that did not get asked.  Here are some questions & answers:

1        What do you make of the move towards energy independence in America and what are some benefits that accommodate it?

Any innovation that lowers costs is a good thing.  Energy independence is a a shibboleth that many bow to but is meaningless, absent embargoes or war.

The important thing is to deregulate exports of energy from the US, so that it can be done freely, allowing energy companies the ability to send crude oil and LNG to the places that value it the most.  We also need to permit pipelines, and ignore the shortsighted environmentalists who don’t realize that pipelines minimize pollution relative to rail.

There will be some benefit to other US industries, which will get cheap energy because they don’t have high energy transport costs.

2        You can argue that we are in the midst of a bond bubble.  What are the implications on markets in the event this bubble bursts?

We aren’t in a bond bubble, at least not yet.  Bubbles are typically asset-liability mismatches, where long assets are financed short.  For a bond bubble to pop, you need the short financing rate to rise above the yield of the long bonds being financed.  In more plebeian terms, you need the yield curve to invert.  Bubbles pop when investors have to feed the asset in order to hold the position, and that never lasts long.

3        What are some risks of the global stimulus taking place?

We are involved in a colossal “race to the bottom.”  Those with low exchange rates can temporarily stimulate their own economy, until another major country devalues their currency.  The main risk is stagflation.  Little growth, and depreciation of purchasing power.  Personally, I would have preferred a deeper recession that eliminated bad debts.

4        How big of a risk is the European Union and Euro instability given the unprecedented circumstances in Cyprus where depositor monies are at risk?

The risk is big.  Why should anyone hold money in a non-core Eurozone bank?  Better to put it under your mattress where it can’t be confiscated.

Cyprus demonstrated that a Euro is not a Euro; value depends on where the Euro is.  Far better to have many predictable currencies than a single unpredictable currency.

The Cyprus experience teaches two main lessons to those in stressed nations:

a) The deposit guarantees mean nothing.

b) Your money has a safer home buried in your yard.

You don’t want that to be the case.  Runs on banks in weak nations compound all the other problems.  Why help create the conditions of the Great Depression?

5        What do you make of the transparency (or lack thereof) in China? How big of a threat does this pose to investors and companies that do business in China?

Regardless of how cheap an asset is, you never trade away transparency.  If you don’t understand an asset, you will never be able to trade it properly.  It is a huge threat; avoid situations like this.

As an aside, China does not have the “rule of law.”  They have “rule by law.”  The distinction is significant, because under “rule of law” the government is subject to the law.  Under “rule by law” the government controls the legal process.  You are only as safe as your government connections are strong, and that is not very reliable as a foreigner.

6        With the suggestions from the president to increase the minimum wage, what are some of the effects that it might have on unemployment, foreign and business investment, and the market in general?

7        Should state minimum wages be tied the federal minimum wage and will the change in minimum wage at the federal level have any effect on states since they are not tied to federal minimum wage law?

You can’t get something for nothing.  Any government intervention changing a price will have less impact than commonly believed.  The free market should regulate wages, not the government.

But away from that, many corporations are penny wise, pound foolish.  There are virtues in paying your employees an above-market wage where you:

  1. Train them
  2. Instill loyalty
  3. Make them part of the decision-making process
  4. Give them a sense of ownership, and offer profit-based bonuses.

If you pay your employees the minimum, expect minimum or worse efforts.  Pilferage often comes from employees who realize their efforts are not appreciated.

I suspect this will go 2-3 more pieces.  I hope you enjoy them.

Sorted Weekly Tweets

Friday, March 15th, 2013

US Politics & Economic Policy


  • Employers Blast Fees From New Health Law Phases in the added costs of covering sick people previously uninsured $$ Mar 15, 2013
  • Conservative Groups Warn GOP Lawmakers About Deals With Obama If this were a 2-player game, would have been solved $$ Mar 15, 2013
  • Gundlach: Investors are asking the Wrong Question ht: @ReformedBroker QE as a permanent affair w/which we have 2 live Mar 15, 2013
  • New Group Pushes Corporate-Tax Overhaul Trying 2 End Double Taxation of foreign profits. Hasn’t worked so far $$ Mar 14, 2013
  • The Almighty Dollar Is Back Skeptical. Waiting for the Fed to announce increase of QE to send the $$ back down Mar 14, 2013
  • GIs Fighting Nazis Last Time Factory Workers Toiled Longer This is optimistic for new hiring $$ Mar 14, 2013
  • Grand Bargain Taxes, Entitlements Cuts Await Deal Makers My sense is that we r heading 4 another deadlock $$ Mar 14, 2013
  • Refusal to Expand Medicaid May Cost Employers $1 Billion Pressure is going to grow to eliminate PPACA & Medicaid $$ Mar 14, 2013
  • US Growth = Inventories Much of the presumed growth in the US is just rebuilding of inventories to a peak level $$ Mar 12, 2013
  • GOP Budget Establishes Contrast With Democrats No chance of it being passed, but gives an idea of where 2 sides r $$ Mar 12, 2013
  • SEC Charges Illinois Over Pension Funding This is how it should be. No one gets punished in the slightest. $$ Mar 12, 2013
  • Note from last tweet: a lot of ppl want to punish bankers, what about state officials who lie – they r much bigger, where is the outcry? $$ Mar 12, 2013
  • Fed mulls putting a ‘not for sale’ sign on its assets A sign of weakness from the Fed; they know they r trapped $$ Mar 10, 2013


Roman Catholic Church


  • Jesuits Had Past Struggles With Popes In the RC church, they have top liberation theologians &their top opposition $$ Mar 14, 2013
  • Ten things you probably didn’t know about the Jesuits If the Church have defined anything to be black… amazing $$ Mar 14, 2013
  • The sins of the Argentine church New Pope may have been complicit w/Military Dictators killing their enemies. $$ Mar 14, 2013
  • The Changing Church Interesting 2c change in locations of Cardinals. Size of RC church overstated, many not active $$ Mar 14, 2013
  • How Is the Pope Elected? A little late, but I thought this was an interesting infographic on papal elections $$ Mar 14, 2013
  • African Catholics Look to Black Pope to Safeguard Tradition US Media does not get how traditional most Catholics r $$ Mar 13, 2013
  • Black Smoke Signals No New Pope More & less unity in RCC than commonly thought. More: Europe, Less: elsewhere $$ Mar 12, 2013


Financial Markets


  • To all of the fixed income followers out there: someone asked me today to recommend good bond blogs. What would you recommend? Mar 15, 2013
  • Highest Bond Yield at Auction in a Year Could Be Sign of Things to Come Or it could be a buying opportunity $$ Mar 15, 2013
  • $OAK Founder Knows How to Get an Edge in Investing “Experience is what u get when u didn’t get what u wanted.” $$ Mar 14, 2013
  • Smallcap Stock Volatility Index Hits All-Time Low Complacency is the rule of the the day among small cap stocks $$ Mar 14, 2013
  • 5 ways Warren Buffett invests that you don’t Good job describing what parts of Buffett’s strategies can b mimicked $$ Mar 14, 2013
  • Team Alpha Retirement Portfolio: Dividend Investing Vs. Annuity Purchasing Example of y I don’t read Seeking Alpha $$ Mar 14, 2013
  • New Carlyle Group Fund Lowers Bar for Investors As @reformedbroker aptly put it, “Muppet Bait” Avoid. Avoid. $$ Mar 14, 2013
  • Fidelity to Expand ETF Relationship With BlackRock Fidelity says “Me 2,” by partnering with $BLK . No value added $$ Mar 14, 2013
  • moving down-market @researchpuzzler has it right, inviting small accounts in means opportunities r getting worse $$ Mar 14, 2013
  • Historical S&P 500 Price to Sales (P/S) Chart Useful little chart – around avg now, but profit margins r a record $$ Mar 13, 2013
  • SP500 Bull and Bear Factors – Not so Fun Damentals! Bull factors: QE, Buybacks, Yen. Bear: Econ data, Earnings mo $$ Mar 13, 2013
  • Gold Sales From Soros Reveal 12-Yr Bull Run Decay Makes me want 2 do a piece on $$ weighted vs time weighted on $GLD Mar 13, 2013
  • Why (Most) People Hate Good Financial News Regret is a strong force in psyche of amateur investors: missing out $$ Mar 12, 2013
  • How Much Of The Stock Market’s Growth Is Caused By Its Shrinking? I would be skeptical here; capital changes weak $$ Mar 12, 2013
  • Securities Lending: Worth The ‘Risk’ When done right, sec lending is almost free money, the risks r low. $$ Mar 12, 2013
  • New ETF Underway for Distressed Debt Bad idea. Creating indexes for distressed bonds will be hard, Won’t attract $$ Mar 12, 2013
  • Firms Send Record Cash Back to Investors A sign of economic weakness; there are few places to invest for growth $$ Mar 10, 2013




  • Wrong: Amazon Preparing Bid For Barnes And Noble? Combination would not be allowed by the FTC $$ Mar 13, 2013
  • Wrong: Why Insurers May Be Unprepared for the Next Big Storm Most P&C insurers have more than adequate reserves $$ Mar 13, 2013
  • Wrong: The US can’t afford a Chinese economic collapse We can afford it; China won’t affect much in the US $$ Mar 12, 2013


Rest of the World


  • China s Next Potential Bubble: Hello, Anybody Home? Trapped. Potential sellers need prices 2 stay high, buyers low $$ Mar 15, 2013
  • Embrace consumption, IMF’s Zhu urges China Easier said than done. Party not ready to give people more freedom. $$ Mar 15, 2013
  • Nordic Testicular Cancer Mystery Prompts Chemicals Probe Interesting, might be a combo of genetics & environment $$ Mar 15, 2013
  • Jeffrey ♥’s Japan Stocks♥s-japan-stocks/? Weak yen drives Japan stocks up $$ Mar 15, 2013
  • Recent cyberattacks could be part of a Chinese military strategy started nearly 20 years ago Explains what is up now Mar 14, 2013
  • Brazil’s Richest Family Forging $13 Billion Niobium Dream Stronger flexible steel from a Brazilian tech company $$ Mar 14, 2013
  • Even Berlusconi Can’t Slow Bulls Boosting Euro View Great 4 core Eurozone, bad news 4 the fringe Eurozone $$ Mar 13, 2013
  • Chinese inflation hits 10-month high The end of the cycle comes when Chinese inflation gets out of control $$ Mar 13, 2013
  • Snow Causes European Travel Chaos That’s one thing about weather & climate, constantly changing & always will $$ Mar 13, 2013
  • Should You Bond With Azerbaijan? by @jasonzweigwsj | Emerging market govts are better run than developed govts $$ Mar 12, 2013
  • Norway Fund Flees Currencies Tainted by Stimulus Addiction Rational response2 depreciating currencies: hail Norway $$ Mar 12, 2013




  • JP Morgan’s Jamie Dimon showed too much hubris and too little humility @moorehn highlights cultural problem @ $JPM $$ Mar 15, 2013
  • Bubble Exchange: Technology vs Financials Suggests that financials, not tech, will do better in the future $$ Mar 15, 2013
  • EU Said to Plan Concession on Tax Credits as Bank Capital Deferred Tax Assets should not be allowed as capital $$ Mar 15, 2013
  • Deferred Tax Assets r only valuable if a company makes $$ in the future, which for a bank in distress is less likely; should not b capital Mar 15, 2013
  • Beware of a New Banking Bubble Three recent deals involved premiums of 32% to 83% above tangible book value $$ #fire Mar 14, 2013
  • Fisher and Rosenblum: How to Shrink the TBTF Banks Could work, roll back safety net, keep pieces small, holdcos fail Mar 14, 2013
  • 5 Big Questions for the Future of Retail Banking Branches buy/sell, online/mobile, layoffs, interest margins down $$ Mar 14, 2013


Companies & Industries


  • Lawmakers Examine Ethanol Credits’ Affect on Gas Prices Wasteful program doesn’t aid conservation adds 2 pollution $$ Mar 15, 2013
  • 5 beloved tech products that were sentenced to death Impending death of Google Reader makes writer wax nostalgic $$ Mar 15, 2013
  • Google and Bing Say the Future of Search Is Conversational Software improves ability 2 understand contextual data $$ Mar 15, 2013
  • Herbalife short-seller sues banks, Icahn over alleged fraud Losing investor throws good $$ after bad, will not win Mar 14, 2013
  • Evolv, Making Hourly Workers More Profitable, Lands $15 Million Improves retention of the employees u want 2 keep $$ Mar 14, 2013
  • Lincoln’s Cooper Shuns Shoot-For-Moon Funds After Goldman This does not make me feel better about $LNC. Avoid. $$ Mar 14, 2013
  • How Benjamin Franklin Invented the Mail-Order Business A look at the precursors to mail-order retail. Interesting $$ Mar 14, 2013
  • Lego Builds New Billionaires as Toymaker Topples Mattel Family controls 75% of the operation through Kirkbi A/S $$ Mar 14, 2013
  • 8 Megatrends Defining the Oil & Gas Industry Nationalization, Ending subsidies, Green, New frontiers, LNG, M&A $$ &c Mar 14, 2013
  • Blackstone Said to Get $2.1 Billion Loan for Home Purchases I’m skeptical, don’t think renting homes is scalable $$ Mar 14, 2013
  • Many hospitals, doctors offer cash discount for medical bills ht: @dpinsen | Sometimes ucan pay less w/o insurance $$ Mar 13, 2013
  • Gas Rigs Drop to Fewest Since 1999 as Drilling Declines Almost like the old days when they would flare off natgas $$ Mar 13, 2013
  • Starr Proceeds With Fight Over $AIG Rescue I don’t think he will win, but Greenberg will get his day in court $$ Mar 13, 2013
  • Beating The Downturn By Degrees Good summary article on the for-profit educators $$ Mar 13, 2013
  • Liberal-Arts Colleges Dangle Deals to Woo Students Pay for 4 years & never have 2 pay again; u *can* finish 4 free $$ Mar 13, 2013
  • InTrade Online Betting Site Shuts Down Abruptly A long shot from the start, current bettors may b stuck w/the loss $$ Mar 12, 2013
  • Green Cars Have a Dirty Little Secret Producing and charging electric cars means heavy carbon-dioxide emissions. $$ Mar 12, 2013
  • Uninsured Americans Get Hit With Biggest Hospital Bills First value of insurance is buying power lowering prices $$ Mar 12, 2013




  • Jim Gaffigan Is the King of (Clean) Comedy Heartening 2c clean humor getting attention; certainly harder 2 do $$ Mar 15, 2013
  • The Bearded Man I’m no trendsetter. If you’re out of fashion long enough, eventually u accidentally get in fashion $$ Mar 15, 2013
  • Does money taint the sharing economy? If you want an organization to last, there must be a profit margin $$ Mar 15, 2013
  • Scientists find how deadly new virus infects human cells Disease is similar to SARS. Infected 15, killed 9 $$ Mar 14, 2013
  • Former Ravens May Outnumber Ravens Noticed in Baltimore; curse of the Joe Flacco contract; less $$ for rest of team Mar 14, 2013


Retweets & Replies

  • ‘ @tradewins @moorehn The problems are concealing data from the regulators, & Dimon perhaps concealing what he truly knew at the time $$ Mar 16, 2013
  • @TWealthMgmt Yeah, they are good, & I mentioned them. Seems many bond blogs have folded; they had a finite maturity ;) Mar 15, 2013
  • @nelson3748 Railroads r scarce; impossible to replicate; has a big moat w/pricing power; trucking has no moat; scale is needed Mar 14, 2013
  • I just left a comment in “5 ways Warren Buffett invests that you don’t – Jonathan Burton’s Life Savings – MarketWat…” Mar 14, 2013
  • Yes, but the nice thing about Pi day is that it has been a round RT @EddyElfenbein: Celebrating Pi Day seems so irrational. Mar 14, 2013
  • @EliHoffmann Don’t get me wrong I *like* dividends & have for a long time. They r more frail than the new advocates assume Mar 14, 2013
  • @EliHoffmann There r other things he got wrong re insurance, but the faith in dividends is naive. They get cut in bad periods like the ’70s Mar 14, 2013
  • @EliHoffmann Annuities r guaranteed by state guarantee funds Mar 14, 2013
  • @DavidSchawel Thanks, but r u bullish on it or neutral? Mar 14, 2013
  • @DavidSchawel How successful? Mar 14, 2013
  • No RT @pdacosta: VZ president says Chavez, now close to Christ, had a hand in choice of South American pope Mar 14, 2013
  • “Pretty cool. Billy Joel took a chance on the student, and it was beautiful. Kid had moxie.” — David_Merkel $$ Mar 14, 2013
  • UCan say that again RT @ReformedBroker:Muppet Bait MT @researchpuzzler:Don’t miss your chance 2 play w/big boys of PE Mar 14, 2013
  • Listening to broadcasters in Rome, it reminds me of the Super Bowl when the power went out; gotta say something, but not much to say… $$ Mar 13, 2013
  • . @scott_matagrano Also, $AIG’s domestic life companies were BK until rescued b/c of sec lending… long story: $$ Mar 13, 2013
  • @scott_matagrano Not *quite* riskless. There were some bond trades I could not execute b/c we could not get the shares back. Mar 13, 2013
  • @merrillmatter I don’t but some of my clients do. Mar 13, 2013
  • @ReformedBroker Hey Josh, where is that indicator now? Mar 12, 2013
  • @weelifeworkplay Saw that, but property tends not to vary in value as much as currencies do. Owning land tends to preserve value, mostly $$ Mar 12, 2013
  • @prchovanec In a word, overvalued. P/E measurements of value fluctuate too much b/c earnings varies more than sales or book $$ Mar 12, 2013
  • @exMBB I avoid life companies that primarily write variable business; the accounting quality is poor. No opinion on $PNX $$ Mar 12, 2013
  • @SagittaCapital I’m afraid that one is a ‘No.” I don’t have a lot to say there. Mar 12, 2013
  • @60Minutes @sherylsandberg That’s dumb. It could just be rudeness, or ego, and the same applies to boys. Will to power <> leadership $$ Mar 11, 2013
  • @prchovanec P/E is more significant in the short-run. CAPE10 & Q-ratio more significant in the long run. $$ Mar 10, 2013




  • My week on twitter: 48 retweets received, 11 new listings, 51 new followers, 55 mentions. Via: Mar 14, 2013



David Merkel is an investment professional, and like every investment professional, he makes mistakes. David encourages you to do your own independent "due diligence" on any idea that he talks about, because he could be wrong. Nothing written here, at RealMoney, Wall Street All-Stars, or anywhere else David may write is an invitation to buy or sell any particular security; at most, David is handing out educated guesses as to what the markets may do. David is fond of saying, "The markets always find a new way to make a fool out of you," and so he encourages caution in investing. Risk control wins the game in the long run, not bold moves. Even the best strategies of the past fail, sometimes spectacularly, when you least expect it. David is not immune to that, so please understand that any past success of his will be probably be followed by failures.

Also, though David runs Aleph Investments, LLC, this blog is not a part of that business. This blog exists to educate investors, and give something back. It is not intended as advertisement for Aleph Investments; David is not soliciting business through it. When David, or a client of David's has an interest in a security mentioned, full disclosure will be given, as has been past practice for all that David does on the web. Disclosure is the breakfast of champions.

Additionally, David may occasionally write about accounting, actuarial, insurance, and tax topics, but nothing written here, at RealMoney, or anywhere else is meant to be formal "advice" in those areas. Consult a reputable professional in those areas to get personal, tailored advice that meets the specialized needs that David can have no knowledge of.

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