Picture Credit: David Merkel, with an assist from the YouImagine AI image generator || Twitter bird flies off into the sunset

Companies

• Missed signals: behind Trafigura’s $577mn loss on non-existent nickel https://t.co/fJNQSmKbgl  Fascinating that they never did physical checks of what was delivered. Also that they didn’t do a background check on TMT. Feb 16, 2023
• Podcast Companies, Once Walking on Air, Feel the Strain of Gravity https://t.co/RaNTop40uS  My kids ask me to do a podcast. I tell them it’s too much work for too little gain. I would rather read than listen, unless I am driving or cutting the yard. Feb 15, 2023
• One of the world’s richest families was thrust into the spotlight by a surprising share sale from one of its own members https://t.co/Gk6Xzr2OcU  You need a liquidity plan, akin to what a private real estate fund does. You can’t assume that no family member needs liquidity Feb 15, 2023
• How Ben & Jerry’s ended up at war with itself https://t.co/x2W5knUvR7  The revolution eats it own children, even as they eat ice cream Feb 15, 2023
• As tech companies shed thousands of jobs, more employees want a say in their severance https://t.co/WHDVvdwRCO  Hiring a lawyer at your severance can be valuable. Feb 15, 2023
• On the latest episode of the Zero podcast, @AkshatRathi speaks to the founder of Imprint Energy, which developed a printable battery for internet-connected devices. https://t.co/uIdNoxfPlz  Looks promising Feb 15, 2023
• FICO scores are flawed. These lenders say they’ve found a better way to judge your credit https://t.co/jklyVW53r3  Sowing the seeds of new consumer bankruptcies on the low end of the income scale. Avoid debt for consumption purposes. Feb 14, 2023
• A $4B accounting shortfall typically raises alarm bells for an auditor. Somehow a PwC affiliate missed it at Americanas https://t.co/Vr72rqV6c7  PwC may have cultural problems. If you can miss something that large & not be culpable, it calls into question the value of audits Feb 14, 2023
• As tech giants look to slim down, middle managers are feeling the pressure https://t.co/4I5JhO6ez8  Not sure if this is good or bad Feb 13, 2023

Odds & Ends

• New Car Prices Are So High Only Rich Americans Can Afford Them https://t.co/yrGEmDSIVS  This will eventually have political impacts, as regulations affect poor people more than the rich Feb 18, 2023
• Wanting to go big with AI in search, Microsoft could end up causing the kinds of harm it will come to regret, writes @parmy https://t.co/e9g3Mlom6D  They are not sentient. They are easily tricked. They are code. Feb 18, 2023
• The buildout of so-called dark warehouses has begun, but the high-tech facilities are far from common due to their high price tags and the limitations of robotic technology https://t.co/i1xgwi8BKY  Not quite ready for prime time Feb 17, 2023
• A ‘Crucial Bridge’ to History, the Codex Sassoon Could Fetch $50 Million https://t.co/z9xQGClGoF  Really, you can’t put a price on this. I bet there are Hebrew scholars worried about who will buy this, & future access. Feb 16, 2023
• 3 amateur codebreakers set out to decrypt old letters. They uncovered royal history https://t.co/kNGYZx6YT7  But nothing significant, really… Feb 16, 2023
• This Company Uses Machine Learning to Track Your Antibodies https://t.co/c0r5Bk1Tn4  Promising technology Feb 15, 2023
• Two of the most-talked-about Super Bowl ads on Sunday focused on an unlikely topic: Jesus https://t.co/lDOsgH3cjM  The gospels were written for a Roman audience as eyewitness accounts of who Jesus was & what he did. Read them & ask, was Jesus a legend, liar, lunatic or Lord? Feb 13, 2023
• @codywillard Wow, Cody. Glad you’re alive. The Lord had mercy on you and your family. Feb 12, 2023

Culture

• Yes, Single People Can Be Happy and Healthy https://t.co/6mrXtdv6ai  It is better to be single & wish you were married, than to be married & wish you were single. That said, this article is wrong, at least for men. Married men live longer & are happier than single men, on average Feb 18, 2023
• The adults celebrating child-free lives https://t.co/hkiZK3zrpn  Those not having or adopting children should be excluded from government pensions and healthcare benefits Feb 18, 2023
• Some school districts are doing away with honors classes, which has made some parents unhappy https://t.co/rPHDXEx68L  All teaching only reaches a fraction of IQs. This is why there needs to be many levels of teaching: high, middle, low, if you want to have all children improve. Feb 17, 2023
• Education should not be a social experiment. It needs to be based off of what works, not wishful theories. What gets taught to prospective teachers in college is positively harmful to pedagogy. We need to end that. https://t.co/uHyxOznUxl  Feb 17, 2023
• Miriam Adelson, along with her late-husband, poured tens of millions of dollars into former President Trump’s reelection campaign. Now she’s leading a push to legalize gambling in Texas https://t.co/jMmlxpVWq7  Legal gambling leaves society as a whole worse off Feb 16, 2023
• As the country emerges from a pandemic that left children zoning out over Zoom, parents are turning to the turbocharged “Russian math” method to give their kids an academic edge. https://t.co/zsdtgrNnel  The examples given are not impressive Feb 16, 2023
• Disney has tightly controlled Winnie-the-Pooh’s image. With the copyright expired, ‘Winnie-the-Pooh: Blood and Honey’ breaks the wholesome mold https://t.co/2H3IxjRtOc  This is not good, but it is notable. Perhaps $DIS will find a way to sue. Feb 15, 2023

Real Estate

• America’s Priciest Neighborhoods Are Changing as the Ultra-Rich Move to Florida https://t.co/GOIJ61QsPD  The wealthy seek lower taxes and warmer places. There should be no surprise here. Feb 15, 2023
• Turning offices into condos: New York after the pandemic https://t.co/z8zoyRUTyy  Popular concept. Tough but not impossible to execute Feb 15, 2023
• Brookfield Defaults on Two Los Angeles Office Towers. The properties include the Gas Company Tower and the 777 Tower https://t.co/KmTLc9r9OZ  Losses go to Brookfield DTLA Fund holders, & their lenders Feb 15, 2023
• When It’s Easy to Be a Landlord, No One Wants to Sell https://t.co/brqym7aoJS  With help from firms like Mynd that do property managment, you can keep your home w/a low rate mortgage, and rent it out Feb 13, 2023
• Why mortgage rates spiked from 6% to 6.5% early-February 2023 & what’s next https://t.co/y6sKncYEBs  Complex way of saying “We don’t know.” Hint: the long end of the curve does not move much in response to short-term inflation. FOMC, take note Feb 13, 2023
• The high costs of housing are influencing romantic decisions https://t.co/opJ5P2Abjw  Moving in reveals who each of you really are. Selfishness, laziness, bad communicating, substance abuse, lying… break relationships Feb 13, 2023

Adani Group

• Adani Group tells investors that they will address deadlines to repay debt with options including private placement notes and cash from operations https://t.co/FUEWh43C3I  But will they be profitable after refinancing near-term debt at higher rates? What covenants will they make? Feb 17, 2023
• Adani halts $847mn acquisition of coal-fired power plant in India https://t.co/hJQDR61XfB  Financing is less available. Not a good sign. Feb 16, 2023
• That would functionally subordinate some of their public debts, making them even less valuable. I remember looking at the final private placement Enron issued. Complexity was over the top; we did not participate. I would love to see the PP memorandum leaked. https://t.co/sDRoh7P6qc  Feb 16, 2023
• Indian conglomerate Adani Group is in talks with potential investors as it considers offering privately placed bonds for at least three of its group companies, people familiar with the matter say https://t.co/YF98mIE4Vb  Maybe they do secured debt, or add protective covenants Feb 16, 2023
• Adani Group sees no material refinancing risk for its listed companies and has no significant near-term liquidity requirements https://t.co/frK2aP7nZq  Complex holding company structures make liquidity management difficult. I’ve lost money on a few of those. Feb 15, 2023
• Adani Group sees no material refinancing risk for its listed companies and has no significant near-term liquidity requirements https://t.co/frK2aP7nZq  If so, keep paying down your debts, and feed losses to the shorts. Feb 15, 2023

The Markets

• The rise of short-dated options is creating event risk on the scale of the stock market’s early-2018 volatility implosion, JPMorgan’s Marko Kolanovic says https://t.co/IRIg7SYOb8  Possibility of self-reinforcing move if 0DTE options go into the money, forcing option deals to hedge Feb 16, 2023
• A once arcane corner of Wall Street is now in demand as borrowing costs soar and $6 trillion of bond maturities loom https://t.co/XZsM1nDN43  The corporate bond market is not arcane, & though there will be bankruptcies, this is not a crisis. Feb 16, 2023
• The shares have surged so much that it’s creating a dilemma for investment giant Nuveen — and posing a little-known risk to its investors https://t.co/jmcR1WpDbH  Why not do an “in kind” distribution as a dividend, or a discounted buyback, or just “ride the ask” $ENGH Feb 16, 2023
• Credit Suisse is offering investors a hefty incentive to buy its new euro bonds just days after announcing a bigger-than-expected quarterly loss https://t.co/OeuM8J31NO  Seems desperate Feb 15, 2023
• The mood is starting to shift in global credit markets after a three-month rally https://t.co/VRjlamNJ0W  Credit rally overdone & difficult to get away from LIBOR #liborwasbetter Feb 13, 2023

Non-US

• Nigeria is trying to gain more control over its vast cash economy by compelling citizens to swap their old money for newly designed naira bills. But the plan is running into serious trouble https://t.co/63mjaLLbBQ  Difficult to outlaw cash when financial systems are underdeveloped Feb 16, 2023
• It’s undermining Beijing’s attempt to engineer an economic recovery tied to consumption https://t.co/GrjowTdfdT  Efforts to get Chinese to consume more creates financial speculation via low rates on personal loans. Feb 15, 2023
• More than 200 construction bosses face arrest in Gaziantep and cities across Turkey’s earthquake zone. https://t.co/sCgMpMdLup  Corruption leading to deaths Feb 15, 2023
• Japan is quietly experiencing its biggest outbreak of the pandemic https://t.co/rbwea15TwH  Elderly population is more likely to die. Medical resources are stretched. Feb 15, 2023
• Moldova’s pro-European president accused Russia of trying to overthrow its democratic system and open a fresh front in Moscow’s war on Ukraine https://t.co/2koKvf0DbJ  Putin wants the USSR back. Feb 13, 2023

Central Banking

• Richmond Fed President Tom Barkin says he supported the central bank’s plans to continue raising interest rates in quarter-point increments https://t.co/R9w8bhtw3l  Driving through the rear-view mirror. My three questions he didn’t answer at the 3/22 @CFASBaltimore all came true Feb 17, 2023
• President Christine Lagarde reiterates that the European Central Bank intends to raise borrowing costs by another half-point next month https://t.co/zGOtVri6ka  Unless you want to discover hidden weaknesses in EU financial systems, you shouldn’t invert the yield curve further Feb 15, 2023
• Liquidity, leverage and interconnectedness? https://t.co/abqrRH6lsZ  Good interview w/@fmnatalucci. He understands financial risk and liquidity. A lot of what he said sounds like me. Where I see risk is not open-end high yield funds, but EU banks & pseudo-banks. Feb 15, 2023
• The White House is considering nominating Austan Goolsbee, who became president of the Chicago Fed last month, to serve as vice chair of the Federal Reserve’s board of governors https://t.co/QwxJJD5Gph  We could do worse, but why not Lacy Hunt? Feb 15, 2023
• The end of distressingly high inflation is coming into view, but the cost of goods, housing and other services is complicating path for easing consumer prices https://t.co/laCY0cZDdn  Focus on median inflation than all of the measures that drop out whole spending categories Feb 13, 2023

Economic Policy

• How three major bills could change the American economy. https://t.co/ufiiuufFTw  Nothing useful, lots of additional debt Feb 17, 2023
• The US Supreme Court could rewrite the rules of the internet with a challenge to the liability shield cherished by online companies https://t.co/sQfeDhzmJO  I lean in favor of allowing lawsuits against social media companies for inadequate moderation, but limiting damage claims Feb 17, 2023
• Odd Lots Transcript: This Is What Happens If the US Actually Hits the Debt Ceiling –What if it doesn’t get lifted? https://t.co/AkPZE6hxoy  No one knows. Maybe the 14th amendment section 4 can be invoked to invalidate the debt ceiling Feb 16, 2023
• New York City is pausing a small business loan program less than a month after it launched after an unanticipated influx of over 10,000 applications https://t.co/i9uRS9Ml2o  Why governments should not subsidize: they are either too generous or cheapskates Feb 15, 2023

China

• China’s sweeping policy support for the property sector has been no quick fix for developers’ liquidity struggles, leaving some investors waiting until the last minute for cash https://t.co/EB7wDHkaJH  The Chinese Communist Party learns reflating a bubble is surprisingly difficult Feb 17, 2023
• Heard on the Street: China’s fiscal position—and ability to fund other priorities—will increasingly be threatened by threatened by rising healthcare costs https://t.co/0sX2iyoBoE  Social welfare systems only work well when populations are young. Feb 17, 2023
• Investors are buying Chinese stock funds, betting that the reopening of China’s economy will help push markets higher  https://t.co/hISEKrfwbN  ‘“There’s opportunity, to be sure, but I think those are trades, not investments,” said Nancy Tengler.’ Feb 15, 2023
• In China, single mothers are facing fewer hurdles as Beijing tries to boost its fertility rate https://t.co/BNIeVRlIs2  Reduces abortion Feb 15, 2023

Crypto

• Binance is considering ending relationships with US business partners as regulators turn up the heat on crypto https://t.co/8f7dIWson0  Pushing crypto out of the US is good policy Feb 17, 2023
• Crypto platforms could soon face a new set of hurdles to hold digital assets owned by clients of hedge funds and private equity firms in the US https://t.co/m9bZLCxokL  Makes sense if you want custodial accounts. Feb 15, 2023
• Sam Bankman-Fried was blocked from using virtual private networks while on bail, with the judge overseeing his fraud case expressing concern that VPNs present similar risks as encrypted messaging apps https://t.co/7zpiWHoMjE  From crypto-king to peasant disallowed encryption Feb 15, 2023
• US regulatory crackdown on crypto aids Tether’s USDT, a stablecoin that’s located offshore, even as the transparency of its reserves faces scrutiny https://t.co/didoPeEO6t  US holders of Tether will appreciate the foreign domicile when Tether fails & recovering value is hard Feb 15, 2023

War

• Hundreds of fuel vessels are taking steps to hide where they’re going https://t.co/wK67gNEjV2  Evading sanctions — there is a profit to be made, and Russia needs money for the war Feb 18, 2023
• Many countries are reassessing their military might — and it’s not just limited to Ukraine’s neighbors https://t.co/C0QpA7rXOj  War takes resources, & budgets are stretched… what will be given up? Feb 18, 2023
• The world’s war machine is running low on ammunition https://t.co/VAMcJLwxbp  Together with stretched government budgets and relatively tight money globally — is this why the long end is selling off? Feb 16, 2023

Pensions

• Time Bomb of Public Pension Funding Ticks Louder https://t.co/QO6mS07lwI  One way the article could have been improved would be to add in the effects of falling interest rates, not just the long stock rally Feb 13, 2023
• The aggregate funding level for state and local pension plans is below 50%, inviting a disaster that would outstrip the occasional municipal bankruptcy https://t.co/QO6mS07lwI  Well written. Will it take the failure of a US State to get serious about this? Feb 13, 2023

Picture Credit: David Merkel, with an assist from the YouImagine AI image generator || Chibi Gautam Adani surrounded by Twitter birds

Adani Group

• “Foreign investors are clearly watching.” Billionaire Gautam Adani is battling the worst crisis of his corporate life and that’s raising big questions about India’s credibility as a destination for global investors https://t.co/zkvzRS87R6  Indian cronyism affects foreign investors Feb 04, 2023
• S&P Global slashes the outlooks on Adani Group’s credit scores to negative as investors grow concerned about potential governance risks and funding challenges https://t.co/Z2FSJfUxyB  Not so big, just neg outlook, not neg watch Feb 03, 2023
• In six trading days, Gautam Adani has lost more than Sam Bankman-Fried and had his wealth wiped out almost as fast as Elon Musk https://t.co/WXJ7aMZhPC  Easy come, easy go. Wealth does not grow that fast, unless there’s too much leverage employed. Feb 02, 2023
• Gautam Adani recently had a $147B fortune. Now, he’s facing billions of dollars in losses, a short seller’s accusations of fraud and a canceled $2.5 billion stock sale. https://t.co/7VxW1TRVgV  He never had a $147B fortune. The float is small, and the debts are high. Price<>Value Feb 02, 2023
• Adani says his ports-to-power conglomerate would examine its capital market strategy after pulling his flagship firm’s $2.5B stock offering following fraud allegations made by Hindenburg https://t.co/uUIaQfzKnm  If you think you can grow without free cash flow you are nuts Feb 02, 2023
• The flagship company of beleaguered Indian tycoon Gautam Adani pulls a record $2.4 billion share sale https://t.co/iJMW4nnV4F  Time for the financing methods of last resort https://t.co/3rqY8GgZ6e  Feb 01, 2023
• The crisis plaguing Gautam Adani takes a sudden turn for the worse, with a record 28% plunge in his flagship company’s stock raising questions over the collateral he needs to cover loans https://t.co/4b2HYe4IDc  When the is no free cash flow, you can’t fight back against shorts Feb 01, 2023
• Adani Group put up $300 million worth of its shares on Friday to maintain its collateral cover on a $1 billion loan, sources say https://t.co/au2vrOHbt7  This looks risky, or at least dilutive. Why not borrow directly? Jan 31, 2023
• Abu Dhabi-based IHC says it will invest $400 million in the $2.5 billion follow-on share sale floated by Indian billionaire Gautam Adani’s flagship https://t.co/oyEscsd9yy  They are as shady as Adani Group, and are using many of their techniques. Jan 31, 2023
• A plunge in dollar bonds of Adani Group companies quickened on Monday after a rebuttal by the Indian conglomerate failed to ease concerns following a scathing report by short seller Hindenburg https://t.co/RjJU0HJcSO  If I were speculating on the bonds, I average in slowly Jan 30, 2023
• RT @AlephBlog: Billionaire Adani Says India Will Add $1 Trillion to GDP Every 12-18 Months https://t.co/FAbMGwkyV5  Not likely. When this ov… Jan 30, 2023
• Adani Group fired back at an American short seller, but the group’s 413-page response didn’t stop a slide in the shares and bonds of its companies https://t.co/72zaxIzoDE  Maybe some margin calls? Also IHC of Abu Dhabi has similar issues. Debt, complexity, fast stock price rise… Jan 30, 2023
• These are the guys who bought $400 million of stock in an Adani Group subsidiary. Birds of a feather flock together. https://t.co/HOgpd9E0sX  Jan 30, 2023
• For more on International Holding Company, look here: https://t.co/QUAfU9B2PR  https://t.co/fz6Y0WzVMv  Jan 30, 2023
• Adani says Hindenburg’s conduct “is nothing short of a calculated securities fraud” https://t.co/OskrHOfmQj  As we say near DC, “Never believe anything until it is officially denied.” Also, saying, “Same as above” many times does not answer the question. Same as *what* above? Jan 30, 2023
• Also, cheaters often label accusers they way they themselves should be labeled. Calling Hindenburg “Madoff” increases the likelihood that Adani is engaged in fraudulent activity. https://t.co/weWJnxUD9w  Jan 30, 2023
• Adani responds to Hindenburg report, but stocks continue descent https://t.co/HhxMJ4RJGn  Fascinating that Adani Group for all of its size, needs to get a measly $2B secondary IPO done. They don’t want to give up control, but they probably need liquidity https://t.co/IIDr73q2hH  Jan 30, 2023

Portfolio Management

• Cathie Wood is having a scorching start to the year and she wants investors to know it https://t.co/unUdiVze8B  Humility is not her strong suit. Feb 03, 2023
• How many stocks should a portfolio hold? https://t.co/AsYvvxPmoo  Usually, I think 20-35, but it depends on what types of stocks, and what other assets you own, and your time horizon. Feb 03, 2023
• Legendary ‘Big Short’ investor Michael Burry issues an ominous warning after the latest stock market rally: ‘Sell.’ https://t.co/fY3XdLg8IX  We are in the 97th percentile of valuations as the equity share model goes. But I don’t see weakness in financials. Analogy 2000-2002? Feb 03, 2023
• Michael Platt built an $11 billion fortune by turning his back on outsiders’ money to focus on tending his own — with some perilous losses along the way https://t.co/UQZnbki7tO  Odds of flaming-out are nonzero. Feb 02, 2023
• After the Darkest Hour Comes the Dawn https://t.co/RbSkvVGTo3  European Value looks promising Jan 31, 2023
• European de-equitisation comes of age https://t.co/d8KHqn7eR9  Interesting, probably positive for European stocks. Jan 31, 2023
• The Forgotten Lessons of 2008: Seth Klarman https://t.co/BwtgKTbq21  Worth reviewing. Valuations are still stretched, and debt levels are high, though not at the banks. Jan 31, 2023
• Heard on the Street: After an epic 15-year run, hedge fund Universa’s Mark Spitznagel says the financial system is poised for a crisis—eventually https://t.co/YobK8GMFHH  Has anyone gotten a look at what Spitznagel uses for hedging? I assume credit default swaps, but am I right? Jan 31, 2023
• How Do Active Managers Invest Their Own Money? @ritholtz https://t.co/OrOH6x4j1F  Many active managers invest passively. I invest over 90% of my liquid assets in my active strategies. It would be dishonest for me not to have significant skin in the game as an active value manager. Jan 31, 2023
• Pension-fund investment in private-market loans reached an eight-year high in 2022, even as banks pulled back on lending and default rates inched upward https://t.co/Ke7N42SMx9  If CALPERS has shown up, the bull cycle is near its peak. Jan 30, 2023

Companies

• British companies are starting to pay a premium for staff who work five days a week in the office, according to recruitment giant Reed https://t.co/S1TAegZiZC  This shouldn’t be a surprise. Being able to interact more freely is valuable. Feb 02, 2023
• A startup that sells $555,000 flying motorbikes will soon start trading on Nasdaq, making it the rare Japanese company to trade on the American bourse https://t.co/X7hU6RFRYk  Not useful in its present form, but with improvements who knows what this could bring? Feb 02, 2023
• Industrial companies like Caterpillar, UPS and Dover appear to be moving full steam ahead on investments amid chatter about a downturn https://t.co/icbGmSukui  I would be skeptical for this to persist Feb 01, 2023
• Blackstone’s $69 billion real estate trust hit a monthly redemption limit in January, ramping up the pressure on the massive vehicle for wealthy individuals https://t.co/UINfs7x4Le  Get out if you can. Feb 01, 2023
• AIG Terminates Interim Finance Chief Mark Lyons https://t.co/j5r5pNwWhy  Odd. $AIG Jan 31, 2023
• Why Does It Feel Like Amazon Is Making Itself Worse? https://t.co/18JZI92WOm  Interesting thought. As a facilitator of third party sellers, $AMZN works less well than as a first party seller. But maybe they just want to be a middleman. Jan 31, 2023
• Lawler: D.R. Horton (DHI) Net Order Price Declined “Roughly” 10% from Peak https://t.co/AofAP4Hh8C  Housing prices continue to sag Jan 30, 2023

Non-US

• Ghana plans to convert an estimated $3.3 billion of loans owed to its central bank into bonds, making it the single biggest holder of domestic government securities and exposing it to an ongoing debt restructuring, sources say https://t.co/eHkTOgg9bB  No free lunch Feb 03, 2023
• Maybe sending tanks and escalating in Ukraine is the only way to end the war. But Western leaders haven’t earned the benefit of the doubt https://t.co/3YG0EfLg4M  This does need to be talked about more as the EU & the US are depleting stockpiles of armaments… is this worth it? Jan 30, 2023
• Parts of Johannesburg are being subjected to renewed water-supply cuts as ongoing electricity shortages disrupt pumping operations https://t.co/HpuzaIrv3j  Theivery & corruption plague Eskom. When will S. Africa’s leaders focus on the good of the nation and clean up Eskom? Jan 30, 2023
• Will accusations of dirty governance tactics in India spur global investors to change course? @shuli_ren https://t.co/HqEmEeOSFX  Given the complex holding company structure, how much debt might not be disclosed because of joint ventures, etc? Jan 30, 2023
• For Russian gas to reach India, it will have to build pipelines through Afghanistan and Pakistan, writes @JLeeEnergy. Good luck with that. https://t.co/ZQuFDe6PN6  Putin does not care for his own people. He has semi-permanently damaged his own economy. Jan 30, 2023

Central Banking

• Understanding the FOMC through the eyes of a child https://t.co/yV3G6wDvV8  Avoiding bravery and panic — be humble. https://t.co/OrNU6vBsyS  Feb 01, 2023
• ‘Colossal’ central bank buying drives gold demand to decade high https://t.co/enUPd28Dad  Gold is a nice neutral asset to hold, particularly during wars and trade wars Jan 31, 2023
• Banks tighten lending standards in an uncertain economy https://t.co/qF6FEzgBQ6  Credit deteriorating on the low end Jan 31, 2023
• The Goose That Stopped Laying Golden Eggs https://t.co/8P3aOUZE4g  Central Banks should keep their assets short, and not play around with the yield curve. Jan 31, 2023
• The Fed Is Asleep At The Wheel And Americans Are Feeling The Consequences https://t.co/qRWqSx032A  Falling M2 and ODL, inverted yield curve, weakness in housing and autos. Time to cut rates. Drive through the windshield, not the rearview mirror Jan 31, 2023

Legal

• A former Allianz fund manager says the lawyers who were engaged to represent him in a fraud investigation switched sides to become government informants https://t.co/YA8HSihKdn  Maybe we are getting to the point where employees need to purchase their own E&O policies. Feb 03, 2023
• A derivative lawsuit in Delaware seeks to hold McDonald’s directors and officers liable for failing to sufficiently intervene in a sexual-harassment scandal. https://t.co/9vAJDklSRo  If appealed, it will likely be reversed. In other news: D&O insurance premiums rise again. Feb 03, 2023
• A court ruled that Johnson & Johnson can’t use the bankruptcy system to administer tens of thousands of talc claims because the fund the company created to pay claimants had too much money. https://t.co/ZLQ19Ldgrh  To me it seems like a form of fraudulent conveyance of a liability Feb 03, 2023
• Johnson & Johnson will probably face years of litigation in courts around the US before it can resolve baby-powder lawsuits https://t.co/utpZ8D5wyq  Until now, it has been difficult to deny a bankruptcy petition, even from solvent entities Feb 03, 2023

Crypto

• New York Digital Investment Group, one of the largest crypto lenders, is repossessing 27,403 mining machines from bankrupt miner Core Scientific https://t.co/J44Dyp7kW8  If selling the machine isn’t profitable, why should running them be profitable? Feb 03, 2023
• A trader faces criminal charges for allegedly manipulating the decentralized exchange Mango Markets and draining more than $110 million of cryptocurrency https://t.co/Lv4MUKJAoE  Some may think “code is law,” but there are more general laws that exist outside computer code Feb 03, 2023
• When a one-time TV and film producer’s company bought Farmington State Bank, it got a name change and a new shareholder: Sam Bankman-Fried’s Alameda Research https://t.co/3iqIKi0PVl  Could be wrong, but crypto can’t be a reserve asset at a bank. Maybe it could be held as surplus Feb 03, 2023
• Crypto’s Tax Shelter Problem https://t.co/V6X2S0G0Mo  Secrecy on the part of tax havens compounds the difficulty of getting money back Feb 01, 2023

Financial Plumbing

• The glitch at the New York Stock Exchange has become a pawn in the ongoing battle over a rewrite of stock-trading rules proposed by US regulators https://t.co/JsCnvxwy2x  One central order book would be nice Feb 02, 2023
• “We are at the beginning of a reckoning.” Scott Peng, one of the first people to call out Libor, is now sounding the alarm over its successor https://t.co/3ot0DVxfzm  “Corporate borrowers… can’t enter into paid term SOFR swaps, given the ARRC’s recommendations” #liborwasbetter Feb 01, 2023
• Smart money is betting on insurance money to fund fast growth https://t.co/zJyogt1VbS  The bad old days for life insurers returns. Insurers/reinsurers are taking too much asset risk. Some regulators should disallow reserve credits for insuring asset performance by weak reinsurers Jan 31, 2023
• if I wanted to talk to an institutional expert on deep out-of-the-money put options, who should I talk to? Feb 01, 2023

Politics

• Biden administration proposed an end to an exemption allowing health plans to exclude coverage of no-cost birth control on moral grounds, part of work to protect access to contraception since Roe v. Wade was overturned https://t.co/yPPi43RP3n  Supreme Court already ruled on this Feb 03, 2023
• How Biden Officials Bungled a Better Vaccine https://t.co/xgUujkehiy  Argues that C19 isn’t merely seasonal, & that the J&J vaccine offers more durable immunity FD: + $JNJ Jan 30, 2023
• Missouri Camping Ban Squeezes Rural Homeless Population https://t.co/ENuahUJzJX  This fits my ruralization of poverty theme, and now rural areas fight back. Jan 30, 2023

Personal Finance

• Most Americans stayed the course with their retirement savings in 2022, even as the stock market fell and inflation rose https://t.co/1kmr4sqigB  Retail investor driving through the rear-view mirror, which is temporarily self-reinforcing Feb 03, 2023
• Penalties on early 401(k) withdrawals stop some workers from putting money away because they fear they won’t be able to access it https://t.co/wpMqKLcr68  This is the price of getting tax deferral. Sorry, this is fair. Feb 02, 2023
• In the event of an emergency, you can crack your nest egg, but financial advisers say it should be a last resort. https://t.co/keHuFmuUWF  Think hard before doing this. It might be better to do a home equity loan, or borrow from the 401(k). But sometimes the present trumps future Feb 02, 2023

Energy

• Models of collapsing oil demand look increasingly at odds with short-term trends https://t.co/YDN6mmjV4c  If the end of 2022 didn’t teach us that the transition will be slow, what will? Feb 02, 2023
• Diesel prices have receded from record highs, but pressures on supply signal that gains at the pump may have run out. https://t.co/IoGwx0s6yD  Diesel supplies are tight, especially on the east coast, which spills into jet fuel pricing https://t.co/n7X7Me2SGi  Feb 02, 2023

Credit

• Another company could be pulling a J. Crew https://t.co/IGsDlbtsYa  What you get for lending without significant protection from covenants Jan 30, 2023
• Worries loom for used-car market https://t.co/rK8o23mFYT  More downward pressure on prices Jan 30, 2023

Odds & Ends

• 17 Most Dangerous Toys of All Time – Banned Kids Toys https://t.co/l1tbGC3HCP  I remember catching a Jart in my hand after an errant throw had it flying at my face. That hurt a lot, but healed well. That said, it was a fun game, and played it many times without accident. Feb 03, 2023
• The 31 Most Hard-to-Pronounce Words https://t.co/NozETlULPg  Aside from 2 ridiculous words that I never heard of, I think most well-educated people pronounce these correctly Feb 03, 2023
• 26 Ridiculously Hard Jeopardy! Questions to Stump Your Brain https://t.co/Evqk8kqQ28  I got 5 right, 3 wrong, and 18 I had no idea Feb 03, 2023
• This ‘airliner of the future’ has a radical new wing design https://t.co/L3NZBQvFrs  Looks flimsy. Feb 03, 2023
• “The more you put in the store, the more bandwidth it requires,” said Ahold Delhaize USA CIO Rom Kosla https://t.co/dYXVUeYEgs  Tech equipment is inexpensive for what it can do & there are many alternatives for how to do it. This shouldn’t be so tough. Feb 02, 2023
• U.S. home prices declined in November from the prior month as higher mortgage-interest rates made home purchases less affordable for home buyers https://t.co/Kaufh1fxEW  Absent economic weakness, mortgage rates are at their lowest level in 5 months. Price declines should slow Feb 02, 2023
• “Miracle Mineral Solution,” or MMS, is easy to find on Amazon despite FDA warnings on how toxic and dangerous the potion can be https://t.co/R3khPhWkz2  Astounding that people would drink bleach. Feb 01, 2023
• It’s the new chicken-and-egg question: Should I just buy some birds? Some shoppers thought that was the answer to record egg prices. It’s often not so simple. https://t.co/ILUzbLmmSk  There are simpler ways to save money. Jan 31, 2023
• Medical Schools Bail on Academic Merit and Intellectual Rigor https://t.co/Lzp8C3xNMU  This is a place where you should value competence over ideology. Jan 30, 2023

Companies

• Intel shares slid in late trading after the chipmaker gave a dire forecast for the current quarter https://t.co/hClfp9Y1C9  $INTC lost its way in the 2000s, and did not respond effectively to changes in new chip designs & uses. Most of my computers don’t have Intel chips. Jan 27, 2023
• The rate of returns at U.S. retailers more than doubled last year from 2019. What are the best ways for companies to deal with this flood? https://t.co/nTbNIGFKam  Well-written article. Makes perfect sense. Jan 27, 2023
• The legacy of Jack Welch lives on as forced rankings endure despite controversy https://t.co/KDR5e2EYxM  It’s true that putting constraints on surveys makes them more accurate on average, but the effect on culture is bad because it harms teamwork. Jan 27, 2023
• Elon Musk is upending the way that Twitter works. Ella Irwin is in charge of making his impulses a reality. https://t.co/9B2KrhbjNv  This will eventually result in lawsuits and laws limiting Twitter. Self-regulation is the best defense against external regulation Jan 27, 2023
• When you can’t speak to the manager — or anyone https://t.co/B23satO6kM  In the short-run it saves money not having a call center. In the long run you lose customer loyalty, and don’t get feedback on how to improve. Jan 26, 2023
• It takes an enormous amount of processing power to keep ChatGPT running https://t.co/tCtpfQ3aLh  So OpenAI stays near $MSFT — it minimizes their costs Jan 26, 2023
• Giving four months’ notice or paying to quit has workers at a health-care company feeling trapped https://t.co/mfYdvI5P8s  If training is specific to the company, it benefits the company, so the laborer does not benefit, and should repay. Opposite for general skills Jan 26, 2023
• Heard on the Street: Johnson & Johnson’s consumer business was the only division to deliver growth in the fourth quarter https://t.co/AjchC9YOkO  Surely they could have come up with a better name than Kenvue? Jan 25, 2023
• Crypto companies seeking to go public over the past year have faced increased scrutiny from the Securities and Exchange Commission https://t.co/e5Bod8Y4jp  Highly speculative companies get more scrutiny. Jan 24, 2023
• Twitter is being sued for allegedly not paying the rent on its headquarters, adding to the legal battles between the social-media company and vendors since Elon Musk took over https://t.co/uAtdtLWBzT  Elon likes to see what he can get away with. You can’t cut your way to greatness Jan 24, 2023
• Allstate plans to tap the pool of recently fired tech workers to help the insurer overhaul its business https://t.co/Jtc6c76qx6  Most IT developers would find most insurers to be pretty stifling. In all the insurance firms I worked, only one division of one company got IT right. Jan 23, 2023

Market Structure Issues

• Meet the 11 ordinary twenty-somethings with $250 billion riding on their lives https://t.co/l69SlZqLwC  This is bizarre. Sometime between 2070 and 2110, this will have to be restructured $SPY Jan 27, 2023
• Heading into Tuesday, a NYSE employee failed to properly shut down a disaster-recovery system — leading to a disaster https://t.co/ZUFpA84Eag  If you always trade with limit orders, this wouldn’t be a big deal. Market orders are risky. Jan 26, 2023
• About 9% of outstanding US leveraged loans tied to Libor have no successor listed, but businesses may use extensions past the June 30 phaseout deadline https://t.co/Qr9PdTxJQp  Five months left on the grand experiment. Will SOFR be able to absorb the stress and hedging? Jan 26, 2023
• Wall Street firms that help issue ABS wouldn’t be able to bet against those products under a Securities and Exchange Commission plan https://t.co/kfi4j40i6Y  Sometimes dealers sell bonds to clients via shorting as a service to clients that wanted more. Is that disallowed? Jan 26, 2023
• Private companies desperate for cash as economic conditions sour are cutting confidential deals to avoid a dreaded down round https://t.co/cPbAL1K7GK  Kicking the can down the road, or, living to play for another day? Jan 25, 2023
• Josh Kushner is richer than Donald Trump after billionaires back his investment firm. https://t.co/38CuybHp7I  be careful of measuring wealth off of small financing rounds, or stocks with small floats. Jan 25, 2023
• Question of using term SOFR for ABS remains unresolved in 2023 https://t.co/hU1QhKLfVC  Lenders want predictability, even if there is some amount of basis risk — thus the desire for term rather than floating. This should get ironed out through futures markets. #LIBORwasbetter Jan 25, 2023
• A Depression-era backstop that Wall Street banks use for short-term funding is the latest corner of traditional finance to be ensnared by upheaval in the crypto industry https://t.co/IEnVkbTpoq  The Federal gov’t has too many entities that lend money, guarantee, etc. Jan 25, 2023
• A chaotic open for some stocks listed on the New York Stock Exchange sent chills across Wall Street, leaving some investors frustrated and others clamoring for an explanation https://t.co/81wbDOjyrV  I had two stocks halted. No big deal. Wait a little, and markets were normal. Jan 24, 2023
• The last time hedge funds and asset managers were this split on the future for benchmark Treasuries was when the Fed’s tightening cycle was about to peak in late 2018 https://t.co/0R3k0DViL7  Usually the guys that are levered up lose Jan 23, 2023

India

• India’s integration into the global economy means the next big scandal may well be London or Singapore, rather than Mumbai, @andymukherjee70 writes https://t.co/iuLYhx1a8m  Much as the SEC has its weaknesses, isn’t the Securities and Exchange Board of India considerably worse? Jan 27, 2023
• Talk of cronyism misses the point. If Adani didn’t exist, the Indian government would have had to invent him in order to fulfill its development ambitions https://t.co/rxffQ1B6uW  Relying on “big men” to run businesses is dangerous to any economy. It’s one reason India stays poor Jan 27, 2023
• India’s Adani slammed by $48 bln stock rout, putting share sale at risk https://t.co/OvQLXRe2sz  Complex holding company structures with lots of debt are inherently fragile, dependent on liquidity being easily available. Jan 27, 2023
• “Largest Con in Corporate History?” Nate Anderson’s Hindenburg is betting on it as the firm targets Asia’s richest person Gautam Adani https://t.co/ss3SZwlpVC  Any complex company that compounds at too high of a rate for its industries is suspicious. Think of Enron. Jan 26, 2023
• India’s Adani Group explores legal action against US investor Hindenburg Research after its report accused firms owned by billionaire Gautam Adani of “brazen” market manipulation and accounting fraud https://t.co/FtdOdF9GhZ  Fighting short-sellers is often a sign of weakness Jan 26, 2023
• Adani Group’s shares fall after Hindenburg Research issued a report and said it had taken a short position in the company https://t.co/qT29MJsgZf  Conglomerate, price rise too rapid, lots of debt –> too much risk. Jan 26, 2023
• “India is on the cusp of huge change.” How soon can a country once synonymous with red tape become a $10 trillion economy? https://t.co/PlD05lJ2S9  This isn’t likely. India has deep cultural problems that hinder them from developing. India is an empire more than a nation. Jan 23, 2023
• From soap to paint, optimism for a harvest-led revival is laced with nervousness about urban spending https://t.co/0r1WHEABFN  Among other problems, “India’s software-exports industry — a large employer in metropolises — has become wary of hiring because of slowing global growth.” Jan 23, 2023

Portfolio Management

• Happy 30th birthday to the ETF* https://t.co/m1hGrVswFV  Nathan Most, the man who changed the structure of fund investing by creating $SPY. Jan 27, 2023
• The Buck Stops Here https://t.co/ukhvcQG0nt  Worth considering. The US has outperformed for a long time, and the US Dollar is weakening as the Fed decelerates Jan 26, 2023
• Vanguard’s 10-Year Equity Outlook https://t.co/SjTITqtoqg  All the non-US equity estimates are at least 3%/yr too high, commodities & non-US could be accurate. Jan 26, 2023
• ChatGPT was asked to create a market-beating ETF. Turns out AI has a long way to go https://t.co/kMJB59xPJc  ChatGPT is remarkably humble. Jan 26, 2023
• Adding to that, bond ladders are the all-weather strategy for handling all aspects of interest rate risk. https://t.co/7ggbuMnL0q  Jan 25, 2023
• Beware: even cash and bonds can land you in a fix https://t.co/tjEGYtnD1Z  A good introduction to the concept of reinvestment risk. In this environment, you get a higher yield by investing short, but when the bond matures, will you get a good yield to reinvest at? Jan 25, 2023
• This Changes Everything for Hedge Fund Managers https://t.co/Uj4vuyEKcl  ‘“The higher the cost of money, the lower the competition,” says Avenue Capital’s Marc Lasry on the risk-free rate.’ You have to be more selective as to who can afford the high interest rate Jan 25, 2023
• Why Invest in Stocks When Bond Yields Are Higher? by @awealthofcs https://t.co/DxUb55SwmD  Probably the only ones buying long bonds at the rates peak in 1981 were those that had to defease/hedge long liabilities. Everyone else was too scared. So life insurers, DB pensions… Jan 25, 2023
• The Bank of England warned that life insurers are taking an “optimistic” view of how easily they could ditch assets in tough times https://t.co/Wk4gHZp8Mr  Depends on how big the positions are relative to the market, & sadly, the article does not give that stat. Jan 23, 2023

Fraud

• $4 Billion Accounting Scandal Exposes Supplier Finance Risks https://t.co/TpXAL3MToM  Caldor returns! Jan 27, 2023
• Crypto Speculators Are Betting On Ethereum’s Shanghai Upgrade Risks https://t.co/LM0ndJEhyJ  Ask where the yield comes from. These strategies blew up in 2022, and will do so again in 2023-4. Jan 27, 2023
• What the poet, playboy and prophet of bubbles can still teach us https://t.co/qQu5XrPyGH  How Charles Mackay, author of “Extraordinary ­Popular Delusions and the Madness of Crowds” described bubbles, but couldn’t see the biggest one of his time: railroad securities. Jan 26, 2023
• The Getty Family’s Trust Issues https://t.co/KkeXoSFnnn  Very long. I knew half of this, and it reinforces two of my beliefs: tax all income types equally, and abolish all tax deferral. Jan 25, 2023
• Digital-asset wallet linked to one of crypto’s biggest hacks has moved over $150 million of stolen funds to tap a trade involving a derivative of Ether https://t.co/2F69VAZahc  From crypto news today, remember that security is always weakest at endpoints, where transfers are made Jan 24, 2023
• Spyware that can turn even the most secure of phones into surveillance devices has become affordable enough that lawmakers are starting to do something about it https://t.co/yEy28x3oon  Is there really no way to scan for these zero click hacks? Jan 24, 2023
• Thinking of buying crypto on the dip? @LionelRALaurent suggests you take note of authorities’ accelerating crackdown https://t.co/2dX3L3FbB3  No social value to crypto, aside from ransoming yourself from authoritarian regimes Jan 23, 2023

Energy

• Scientists Are Turning Abandoned Mines Into Gravity Batteries https://t.co/PoAugP2e3Z  Physical batteries have a lot of advantages Jan 27, 2023
• Man-made graphite isn’t very green, so battery makers want the mined, natural mineral. The problem is there isn’t enough. https://t.co/7yQesrsNHf  “It’s the largest raw material in the battery.” Though not the most expensive… it can be synthesized if mines can’t produce enough Jan 25, 2023
• This giant underground battery is a $1-billion clean energy solution https://t.co/6Wg88Q7SqW  Compressed air drives a turbine when power is needed. Clean, right? No one would argue against this? Wrong. Jan 25, 2023
• Construction of wind and solar installations has slowed to a crawl in the US, despite billions of dollars in federal tax credits and investor enthusiasm for clean-energy projects https://t.co/yxrYY84yWR  When many want to do the same thing, bottlenecks appear & delay ensues Jan 24, 2023
• Nuclear reactors are being pushed to operate for more than double their intended lifespans. It’s a risky experiment with global consequences https://t.co/JtYhXZEWbB  Choices, choices — do the maintenance well. Schedule downtime. Jan 24, 2023
• An increasing number of wind turbine malfunctions are indicative of green power’s growing pains https://t.co/RJLwfqIW20  There is probably a limit to how large you can make turbines without smallish flaws cascading into large failures. Jan 23, 2023

CMBS / CRE

• Office Dominates New Transfers as CMBS Special Servicing Declines in December https://t.co/DyFCFkzQGO  One year ago, I bet the owners did not think rates would get this high. Jan 25, 2023
• Refinancing Tough as CMBS Maturities Pile Up in New York City https://t.co/EJrmmDrDEA  Facing the end, of extend, and pretend. Jan 25, 2023
• CMBS Realized Losses Increased in December https://t.co/ToWWYtZkPt  Interesting. Many of the losses took 5+ years to work out. The biggest loss took over 10 years, with 100% severity. Jan 25, 2023
• Expiring Interest Rate Caps to Fuel Distressed Property Sales https://t.co/jZyDmEP7Jx  Will your rents cover higher financing costs? Jan 25, 2023
• $9B plunge in NYC commercial real estate sets up brutal political fight over shrinking tax pie https://t.co/x27iLbUJqc  Not so many office buildings are needed as before Jan 25, 2023
• Surge In ODCE Fund Withdrawals Is Another Worrying Sign for Commercial Real Estate – https://t.co/VlYRaEtnvP  You will get money… just not as much as you would like, nor as quickly. Jan 25, 2023

Non-US

• Brazil and Argentina’s presidents have launched discussions on a common currency, but their plans are nothing like the euro, which replaced national currencies like the lira, franc and deutsche mark entirely https://t.co/O2LZY7UWXb  Much ado about nothing. Jan 26, 2023
• Countries with established auto industries have been blindsided by China, which is poised to become the world’s No. 2 car exporter https://t.co/HpomO1RNmH  China does not lack for labor. Odd to promote a capital-intensive industry Jan 26, 2023
• Zimbabwe’s leader seeks investment for a new capital just down the road from an impoverished and overcrowded Harare https://t.co/aGxTgu773Y  Better to focus on improving agriculture & infrastructure for public well-being. The Saudis may have money for folderol, Zimbabwe doesn’t Jan 26, 2023
• The UK faces a brutal reality: either taxes are raised, free NHS services are cut, other government departments are effectively scrapped — or the health service breaks https://t.co/k2vS4P6TK9  If you think healthcare is expensive now, wait until it is free Jan 24, 2023
• The on-off talks are back on again: Brazil and Argentina Are Discussing Whether to Combine Currencies https://t.co/XEDcxjHXGN  Would likely fail. Argentina can’t peg to anything given its lousy economic policies. A euro-like currency fails if much of the zone runs large deficits Jan 23, 2023

Personal Finance

• Only one in three Americans can comfortably cover a $400 emergency expense, according to new survey data https://t.co/EWpFVnxe4q  Make good choices when you are young, apply yourself to school and work, and don’t overspend. Jan 24, 2023
• Couples often grow more alike over time in their approach to spending, saving and risk, researchers say https://t.co/ag4MfeMC3b  Opposites can work if communication is good, or if one party lets the other do it. Otherwise it can be a disaster. Jan 24, 2023
• The trouble with ‘buy now, pay later’ https://t.co/ZnEhIhILnD  People forget the 1920s, where BNPL was common and it led many into bankruptcy. Those who ignore history are fated to repeat it. Jan 23, 2023
• Used car prices drop 12pc but bargains a long way off https://t.co/q0s8tZ9w6C  Yes, used car prices have fallen, but they are not cheap yet. Jan 23, 2023

US Economy

• Seven Signs That Economic Growth Is Starting to Falter https://t.co/UkiMH7p2Eo  Mostly employment, retail, and low-end consumer credit Jan 25, 2023
• Employers are shedding temporary workers at a fast rate, a sign that broader job losses could be on the horizon https://t.co/oBZIbci9tj  Labor markets may be weakening. Jan 24, 2023
• The pride of central bankers has taken a battering as inflation has soared. But they need to prioritize growth over restoring their dented credibility https://t.co/3pfEivyJTQ  The inverted yield curve is the markets telling the FOMC “your forecasts of inflation are wrong.” Jan 24, 2023

US Politics

• U.S. weapons industry isn’t prepared for a China conflict, a report says https://t.co/7no7A9cZqE  Will defense spending be a priority or not? What allies are you willing to give up on? Jan 25, 2023
• Democratic congressman Khanna says Biden administration might have to take unilateral action to head off US debt default https://t.co/MBz3DDAvWz  Gimmicks might affect acctg, but never the real economy. We need to stop running primary deficits & then all deficits to avoid crisis Jan 24, 2023
• The Biden administration’s analysis of the tax code by race is in. It shows White Americans disproportionately gaining from lower rates on capital gains and dividends https://t.co/wf5qjfddGr  This isn’t about race, but class. That said, tax all income equally. Jan 23, 2023

Odds & Ends

• The Duck Brigade Behind a Farmer’s Plentiful Rice Harvest @atlasobscura https://t.co/yV9IupsDg3  The ducks eat the weeds. At the end of the season, people eat rice and ducks. Jan 27, 2023
• “We are not out of drought in California, but this certainly makes a significant dent,” said Karla Nemeth, director of the California Department of Water Resources https://t.co/hWv12RqjE6  That there are far fewer farmers than before also makes a dent in water demand. Jan 27, 2023
• Transcript: What the Heck Is Going on With Egg Prices “Let’s crack open the story.” https://t.co/32vZBDCrQc  From the avian flu to feed costs to holiday demand Jan 25, 2023
• Getting a divorce in Japan is relatively simple. But it can sometimes result in single-parent custody, leaving one parent largely excluded from a child’s life https://t.co/p0efdka5eN  If you want to get sad, read this. Jan 24, 2023
• New Paper Says Crypto Is Just A Hot Ball of Momentum-Chasing Money https://t.co/1kD0RxVDH8  So are Ponzi schemes Jan 24, 2023
• Earth’s inner core may have reversed its rotation, potentially shortening the length of the day by a fraction of a millisecond over the course of a year https://t.co/UwtynNMmgk  Uncertain hypotheses Jan 24, 2023
• Steelmaking is a major source of planet-warming emissions. A group of British scientists have come up with a way to avoid them. https://t.co/fkR7F76rr2  Cheaper, too — could be interesting. How prevalent is perovskite? Jan 24, 2023

Picture Credit: Marco Verch Professional Photographer || Being a financial analyst is being a competent generalist in business

Let me tell you why I am writing this, roughly three years later than I said I would. It started with a post I entitled Limits. The post itself is not why I am writing this, but in the the comments there was great criticism of the CFA Institute. They asked me what I thought of the criticisms and I said I would write about it.

I suspect no one will like this post. I will mention that I served on the board of the Baltimore CFA Society for 12 years, serving nine years as its Secretary, and two years as its programs chair. I am grateful that I earned my CFA credential in 1996, which enabled me to transition from being a life actuary, to being an investment actuary, to being a a financial analyst with actuarial skills.

Four weeks ago, I gave a talk at the Baltimore CFA Society’s Charter Award Dinner. The title of the talk was “The Value of Ethics –The Value of a CFA Charter.” The main point of my talk was that the uniqueness of the CFA Charter did not stem from the “Body of Knowledge” imparted in the exams, but rather from the emphasis on ethics. The men who created the “National Federation of Financial Analysts Societies” in 1947 wanted financial analysts to be competent and ethical. After all, the Great Depression soured many people on investing, considering all of the unsavory tactics that many speculators used.

So what made me decide to write this tonight? My friend Tom Brakke made the following post at LinkedIn. He laments the decline in the teaching of the “Body of Knowledge” at the CFA Institute. I agree with him. The leadership of the CFA Institute seems weak to me, and gives in to political and cultural trends. Two examples: first, adding cryptocurrency to the “body of knowledge,” when it has no intrinsic value. Second, adding ESG to the body of knowledge, when it is ill-defined, useless, and not in the interests of those served by fiduciaries.

What should the CFA Institute do with respect to the “Body of Knowledge?” Investment knowledge is not a monopoly of the CFA Institute. You can get the same knowledge through many different sources. For me, I learned 90%+ of my investment knowledge before I took my first CFA exam. That’s why they were so easy for me. Many CFA Charterholders don’t like me saying the exams are easy, but I will say, “Have you taken an actuarial exam? There is no comparison.” Even the penultimate president of the CFA Institute said to me, “They have an amazing qualification process.” (Something like that…)

What should the CFA Institute do to create its “Body of Knowledge?” Choose the most compact and important knowledge that an intelligent investor needs to know, and then pursue it in a written exam format, not using computers. Why written? Because investing requires the ability to be able to write. The Society of Actuaries made a similar mistake when it eliminated their English exam, which turned their candidates into math nerds who often could not understand qualitative features in insurance. Actuaries once were CEOs of insurance companies, and that is rare now.

Does the CFA Institute’s Body of Knowledge need reform? Definitely. Clear out the crud, and make more room for the basics. Also, emphasize ethics, because that is what differentiates CFA Charterholders from other investment workers.

But Back to the Original Reason for Writing this

So what of people who pass the CFA exams, get a job, stop paying their CFA dues, and say that they passed the CFA exams, but not explicitly calling themselves CFA Charterholders? Are they cheating the system?

Yes, they are cheating the system, and if the CFA Institute had an ounce of courage, they would take them to court, saying that they agreed to the CFA Institute’s standards when they took the exams and received the Charter. If they are not doing so now, they can’t say they passed the exams. It might be true, but it is an obfuscation to have some benefit of a CFA Charter while not continuing to hold to its code of ethics. If you are not subject to the CFA Code of Ethics, you should not be allowed to mention that you were once a CFA.

The same is true for me. I never say that I am a Fellow in the Society of Actuaries, though I passed all of the exams and was inducted. I haven’t paid dues for over a decade, nor have I done their continuing education (that was the bigger issue). Do I still know their body of knowledge? I was a leader in asset-liability management inside life insurers, and I would still be a leader there.

To close this article, I would simply say to those who have dropped their CFA charters, but still try to benefit from them: pay the money and observe the code of ethics. Be a real CFA Charterholder. We are the ones that are supposed to be cleaning up the financial industry. This is our ethical obligation that you agreed to when you received your CFA Charter. Don’t be a cheapskate, and don’t be unethical by avoiding the duties that you accepted when you took the CFA exams.

Photo Credit: House Photography || I always read a lot when I was young

This a is follow-up to When I was a Boy… which I wrote ~5 1/2 years ago. It is also a response to an article posted by Jason Zweig, who I have talked with once or twice, and emailed a little more than that. In that article, he asks the question:

How did you learn how to invest? Did you take a class, play a stock-market game in school, have a friend or family member as a mentor?

How Should Kids Learn to Invest?

If you read the original article, you would know that my original start was from two gifts of stock that male relatives in my extended family gave me in the 1960s. They picked two high-fliers — Litton Industries and Magnavox. Bought and held, by the mid-1970s both generated >80% losses when they were bought by another company.

Did I ever play the stock market game in school? Yes, once when I was in seventh grade (early 1973). Our school decided to play around and do an intersession between the two semesters. It was a two week course called “Bulls and Bears. How this Little Piggy Went to Market.” My favorite science teacher was teaching it. I realized that the game was utterly short-term and so I put all of my play money into AT&T warrants, knowing that if AT&T stock rose, the warrants would zoom up. Was I a smart kid, or what?

What. Well, AT&T when nowhere for those two weeks, and the same for the warrants. They were at the same price at the contest end, thus losing the commissions on both sides, and this was when commissions were high, prior to deregulation.

The three main things that taught me about investing were watching Wall Street Week with my Mom, borrowing books on investing at the Brookfield library, and reading the Value Line subscription that she purchased.

I probably read 10 books on investing before I was 18. Louis Rukeyser was an affable guide to the markets, including the elves, the guests, etc. (As an aside, Frank A. Cappiello, Jr. was a founding member of the Baltimore Security Analysts Society, and a frequent guest on his show. After all, where is Owings Mills, Maryland?)

With Value Line, I began to understand how corporations worked. The one-page descriptions of companies were just big enough to give me a good idea of what was going on, while not over-taxing a kid 12-21 years old.

I remember as a student at Johns Hopkins earning 16% on my money market fund in my freshman year.  I was only at Hopkins for three years 1979-1982, but those were tough years, particularly in the Midwest “Rust Belt.”  My father’s business earned little, but my Mom’s investing paid off.  Though not “working” she was making more off the family portfolio than my Dad was earning off his business.  As it was, to help my family then, I paid the last semester of tuition.  (My Mom later paid me back for that.)  I came back home in 1982 with $5 in my pocket.  Then I learned that I overdrew my bank account, costing me $10.

Oh, one more thing the clever and distinguished Carl Christ, who signed my Master’s Thesis at Hopkins, taught a class on investing in my junior year. I learned a lot, but the main thing I remember was writing a research report on a firm that made specialty paper — James River. My mother had owned it for a long time, but had sold her stake at an opportune time. When I wrote the report, she did not own it, and the stock had fallen from where she sold it. Dr. Christ had never heard of James River, an was fascinated at what was at that time a midcap firm in a underfollowed industry. I got an “A.” When I showed the report to my Mom, she bought it again, and made money of it.

Also, in my senior year, I wrote my thesis on stock splits. As I said there:

This brings me to my conclusion: stock splits are a momentum effect, but it is larger when companies are still have a cheap valuation. Perhaps splits have no effect on stock performance — it is all momentum and valuation. To me, that is the most likely conclusion, and my thesis anticipated quantitative money management by 10+ years.

On Stock Splits

In the summer of 1982, I remember sitting down with Value Line in my family’s living room (quiet place, no TV) and selecting a paper portfolio of 40-50 stocks. I went through all 1700 stocks. I recorded the prices in the Milwaukee Journal, and then went to Grad School at UC-Davis. Over the next year the stocks in my “portfolio” appreciated at double the rate of the market. At that time, I was a TA for a Corporate Financial Management class. I showed it to the professor, and he said, “Oh, you have a beta of two.” I said, “No, this portfolio has stocks that are not as risky as the market. This is alpha, not beta.”

Several years later, I participated in the Value Line Investing Contest. I placed in the top 1%, but not good enough to win.

When my dissertation committee dissolved, I was forced to abandon my Ph. D. I took three actuarial exams on the fly in early 1986 and passed. I had an informational interview at Pacific Standard Life which sponsored the exams, and they hired me on the spot. (My boss’ secretary told me that the boss said, “No one can pass the first three exams on the first try.” Then a fellow employee told me later, “You didn’t negotiate hard enough. They would have hired you regardless.”)

When I worked for Pacific Standard Life, and later AIG, I got investment-related projects, because I was the one actuary that understood investing. During this time, I was managing my own portfolio, sometimes better, sometimes worse. I bought stocks, and mutual funds investing outside the US. I had a CTA in my portfolio. I tried investing in spectrum with the FCC, but that was a bomb. I settled on small cap value investing in the mid-1990s, which was a bad era for small cap value. Still, I managed to keep pace with the S&P 500.

In 2000, I had an email exchange with Kenneth Fisher (yes, the big guy of Fisher Investments). This led to he creation of my eight rules. As I wrote on portfolio rule three:

Let me give you a little history of how the eight rules came to be. In 2000, I had an e-mail discussion with Kenneth Fisher. I explained to him what I had been doing with small-cap value, and how I had done well with it in the 90s. He told me to forget everything that I’ve learned, especially the CFA syllabus, and look for the things that I can do better than anyone else. We exchanged about five or so e-mails; I appreciate the time he spent on me.

So I sat back and thought about what investments had worked best for me in the past. I noticed that when I got the call right on cyclical industries, the results were spectacular. I also noticed that I lost most when investing in companies that didn’t have good balance sheets, no matter how “cheap” they were in terms of valuation.

I came to the conclusion that size and value/growth were not the major determinants of my investing success. Instead, industry selection played a large role in what went right and wrong with my investment decisions. So, I decided to formalize that. I would rotate industries with a value bias. But that would have other impacts on how I invested. One of those impacts is rule number three.

Over the next ten years, I tore up the pavement, and would have been in the top percentile of mutual fund managers. And so I opened my own shop in 2010, to find for the next eleven years that value investing was overrated.

My life is bigger than my little company. I am a happy man. I know Jesus Christ; I have eternal life. Have there been disappointments? Of course. The one main positive I can say about my investing is that I rarely have big losses on any security. This is not due to stop losses; I pay attention to balance sheets and the cyclicality of markets.

Even at the age of 61, I am still learning. I am not a boy, obviously, but I am still absorbing new ideas. To all who read me, be life-long learners. I am closer to the end to my life than my beginning, but invest! Take your opportunities to learn and capitalize on them!

And remember, Judgement Day is coming. Are you ready? Investments will help you for now, but will be useless in the hereafter.

Picture Credit: Jackie || Though the idea for the lights bringing back the twin towers is beautiful, for me, someone who travelled to the PATH station beneath them many times, I miss the twin towers.

For those that don’t know my blog well, I described what happened to me during 9/11 in two places:

• My 9/11 Experience
• The Education of a Corporate Bond Manager, Part I (and a little bit in part VI, but that’s mostly on bond management)

There’s one small thing I left out. I was planning to go to a conference at the World Trade Center on 9/12, if things were in good enough order at my work. I had to leave it flexible, because I did not know what would come of my client meeting planned for 9/11 — the client was rarely reasonable, and I might have to jump on a bunch of projects, and not go to NYC. As it was, I never had to make that choice. The events that unfolded made it for me.

One of the things that surprised me at the time was all the people who said, “Why did they attack us? What did we ever do to them?” in the US. I remember an email that came to me saying that, and I came up with seven reasons why they would do it. Now, I don’t have that email, so I am guessing at what I said, and I may not be able to come up with all seven, but I will try to do it here.

1. The US supports Israel.
2. Our entertainment dominates the globe, and poisons their culture, as many in Islamic countries like the entertainment, and become lukewarm to serious Islam.
3. We support “moderate” Islamic governments, which keeps serious Islamists out of power.
4. We kept bases in Saudi Arabia, desecrating their Holy Land.
5. The Saudi Monarchy talks a good game with respect to Islam, but they oppose radicalism, and the US supports them.
6. They hate the US because it is so morally degenerate, and yet so rich, which gnaws at them because the more consistent a nation is with Islam (excluding the accident of crude oil), the poorer they tend to be.
7. The US invaded Iraq for less than significant reasons in Gulf War I. The US & Israel make military and pseudo-military actions with impunity in the Middle East. Think of Reagan bombing Ghaddafi.

Okay, I got to seven, and I suspect at least six of these were in my original email. My statement to those I ran across in 2001 was that the attack was not irrational. They had genuine reasons to hate the US government.

I think we didn’t learn anything from 9/11. Or, we didn’t care that we offended them. We essentially doubled down.

1. We fought Gulf War II.
2. We invaded Afghanistan, a nation that is not a nation, and tried to change it, blowing a lot of money on a hopeless cause. Cultural change is almost impossible to achieve, and certainly will not happen when pushed by outsiders.
3. The O-bomber used drone strikes with impunity to eliminate enemies, and occasionally innocent people by mistake. Now Biden follows in his footsteps.
4. Seal team six eliminated Osama Bin Laden in Pakistan. (Do we really want a world where those who are technologically powerful can assassinate with impunity? How should we feel about Salvador Allende of Chile?)

I believe that war is legitimate if there are legitimate reasons. I believe in Just War Theory. Aside from that, I tend to be a pacifist. One of the few things I liked about Trump was that he was probably the least hawkish President that we had in a long time. I don’t think the US has had a legitimate war over the last 70 years. It is our job to defend our nation, not the world as a whole.

I think we have created more problems in the Middle East over the last 20 years, and to the degree we feel we have to continue to interfere there, those problems will increase still more. If you think of George Washington warning about “entangling alliances,” I think we have fallen into the dangers that he described. And if you think of Eisenhower warning us about the “military-industrial complex,” that has come to dominate us as well.

We may have beaten back serious Islam for a time, but it will come back. We have offended them too much. The US has to understand that the hatred that exists in the Middle East can’t be solved. Let them fight, and let us stay out of it. Protect our nation? Yes. Protect the world? No. Offensive wars are almost never just.

Part of being a strong nation is controlling that strength, and only using it in the most severe situations that affect us directly. If you waste that strength on lesser matters, you weaken you own nation, and your reputation abroad.

So no, I don’t think we did the right things as a nation post-9/11, and I haven’t even touched on the loss of freedom here. The US needs to be more humble, and not impose its will on the rest of the world.

Photo Credit: Bartleby || Remember the 2020 toilet paper, paper towel, and cleaning supplies shortage. That got worked out after a reasonable period. Now if we could only find corrugated cardboard.

After I wrote last night’s piece, I thought of another area that is investable. It is unfashionable today to be vertically integrated. There’s a good reason for that. When you are vertically integrated your immune from the pricing signals between divisions that could instruct you to do things differently. (i.e., sell your intermediate goods to other companies, or buy intermediate goods from other companies.  Low price wins.)  As such, because of activist investors, companies have been broken up into simpler component units because management teams are sharper when they are managing just one thing.

But the benefits of vertical integration mean that when there is a supply crisis, they can keep running their business on affected. I’ll give you an example: a favorite company of mine called Industrias Bachoco [IBA]. They’re one of the biggest meat producers in North America; mostly they grow chickens, and they produce most of the feed that they use. Did you know that there is a feed shortage? I don’t think it’s affecting Industrias Bachoco. Anyway, it has cheap valuation, no debt, and in this case, an advantage from being vertically integrated.

I want to talk about another aspect of what I discussed last night. I read an article today which said that the most scarce resource in the United States for building homes is not lumber, but land that is already approved to be built on. Zoning is perhaps well-meaning, but that doesn’t help younger people who are looking to buy homes.

So this is in this environment there are bidding wars, and 20% of the buyer base is investors looking to buy at least the house out. In the old days, and this may not be true anymore, but I doubt it, we used to say a market was overheating when it had more than 10% investors.

And this article indicates that housing prices in the United States are as high as they were at the peak of the housing bubble back 2007-2008. Does that mean we’re in a bubble now?

Well, we might be in a bubble for stocks. You can only be in the 99^th percentile of valuations for a couple years at most.� But housing is different in this environment because the terms of the loans being done are better than back during the bubble. However, bit by bit we are seeing leverage rise on home purchases. A bubble might be forming, but we’re not there yet. (Hey, thanks Fed.� You never admit to being wrong.)

And Now for Something Marginally Related Completely Different

Before I close this evening, I want to talk about a somewhat different topic. I think one of the weaknesses of academic economics, and those who use it within the government and the central bank, is that they think that they can eliminate the boom bust cycle. When I read about the startup, shutdown, and switching costs that many capital intensive industries have to go through in order to increase or decrease capacity, or change capacity to a different form, I think economists don’t realize that it is impossible to eliminate the boom bust cycle.

It takes a long time and a big opportunity to make capital intensive firms expand capacity. It takes a long time and a dearth of opportunities to make a capital intensive firm go through shutdown of some capacity. And getting them to shift from one type of production to another takes a long time. They must be convinced that the shift will be profitable for many years.

Economics is a lot more complex than it seems for academics sitting in their chairs with their toy models. It would be far better to get some of them out working in some industrial, financial, and utility firms so that they can understand how difficult it is to work amid volatility.

And as I said, not quite in the same way last night, the virtue of capitalism is that it can deal with volatility more effectively than any other economic system. Supply and demand imbalances will get addressed, and the price mechanism will be the incentive to do so.

The supply imbalances will end, likely in the next two years. It will be replaced by other imbalances. That’s normal. We need to stop treating every problem as a crisis. We especially need to stop asking the government to intervene. In most cases they will do more harm than good, and sometimes they will even prolong the crisis.

And if I didn’t say it last night, be sure to own companies that have strong balance sheets. You want them to be able to survive times of imbalance. As we have seen over the last 15 months, there are often unexpected troubles in an interconnected world.

Full disclosure: Long IBA for clients and me

Picture Credit: AJC1 ||We are dealing with many different types of bottlenecks, with many second-order effects happening due limits in the system. Neoclassical economics in its simple form doesn’t deal with issues like these, and even what I got in Grad School was pretty limited.

According to some of my friends who work at T. Rowe Price, the founder, Thomas Rowe Price, Jr. said something like, “The hardest time to invest is today.” There are also those who say, “It’s different this time,” to which the pithy response is, “It’s always different this time.”

Uncertainty is normal in life as well as investing. It is not a bug. It is a feature of the system. It keeps away people who otherwise might profit if they were willing to take moderate risks. That makes the returns higher for those that do participate.

Leaving aside Covid-19, and all of its side effects we have many fascinating things going on partially as a result of trying to overstimulate the economy. The economy is meant to have small amounts of stimulative government influence, not large amounts. When the stimulative government influence gets too large, elements of the system begin to get hyperactive. Because interest rates are so low, mortgage rates are low. Because mortgage rates are low, many people are buying new houses who otherwise would not. Because many people are buying new houses, lumber is in short supply. And not only lumber, but many industrial metals, parts, and skilled labor are also in short supply.

Typically it takes time to develop skilled labor, and to ramp up supply of parts, commodities, transport, etc. If you try to get these done things done too quickly, you get supply shortfalls which are bottlenecks on the economy.

It doesn’t help that we had “just in time” manufacturing, lean manufacturing, and businesses hoarding commodities and goods that are used in early stage production. When firms realize that there are supply shortages, they take action, accentuating the shortages.

Of course, there is the well known shortage of semiconductors that are slowing down the production of various technological hardware, and particularly automobiles. But what company had the sense to always maintain a stockpile that would be adequate to survive a 6-month crisis? Of course no one does that. They would be told by their management that that much investment in inventory would kill the return on equity.

We can add in the supply problem stemming from the Ever Given and it’s blockage of the Suez canal, and the delays induced in much global shipping while the ships waited for the canal to clear. We can also bring up how Los Angeles ports are hopelessly clogged. And how intermodal lacks enough trucks and drivers to cart the stuff away.

For another example consider the trouble stemming from Colonial Pipelines getting hacked. The gasoline shortage resulting from that came mostly from hoarding, but showed us how much we rely on a single enterprise to provide energy to the South and Northeast.

There’s not enough slack in the system. We need more redundancy. And that won’t happen because firms are looking to maximize the return on equity, and as such they tend not to keep too much excess supply of ability to produce or transport. Most government regulation does not help here, but it would be interesting to see what would happen if the government mandated that firms maintain sufficient slack capacity for production or transport. That would be an ugly regulation, but if it affected everyone maybe it wouldn’t be so bad. How to enforce that would be an absolute headache and so it will never happen.

And at Aleph Blog, in the past I would talk about plague, pestilence, war and other things that people typically don’t anticipate. Not that I thought that any particular one was going to happen at any particular time, but just to make you think about what could happen. Well, now we have experienced plague. Let me try out another idea on you: how many people are expecting a war right now? Yeah, not many people. Can you imagine how badly a war might snarl global trade, particularly since the division of labor is global? Who is prepared for this? Probably no one.

This is one reason among many that I try to emphasize caution in investing. We are running an economic system that has no slack. We are overstimulating by a monetary policy and creating asset bubbles. The government is borrowing far beyond its means which means that someday it will not be able to pay it all back, and at that point in time what will the dollar be worth? When the government has to borrow the money in order to pay the interest, something is so wrong that eventually foreign creditors will not lend any longer.

No, if I can get off that bleak topic of macroeconomics for a moment, let me talk about what probably would not work in investing now. In general, these shortages will be transitory. The capitalist system will overcome these things, despite the best efforts of the government to thwart that. So, I don’t think it’s time to invest in semiconductor equipment or semiconductor stocks. I don’t think it’s a time to invest in trucking. We invest on the basis of the long haul, not on the basis of temporary disruptions.

I would rather invest in the companies that will do well once the supply shortages or bottlenecks are eliminated. In other words who uses the products or services that are currently less available? That is where to invest.� Look for the areas that have continuing usefulness and are still down considerably since 2019. That’s where I’ll be digging; I’m not sure I have the answers yet, but I think that’s where to look. In the meantime, hold enough slack assets in short-dated bonds to give additional buying power, and average in as prices of stocks fall.

Postscript

• Using Sentieo I did massive searches through their databases to see when the shortage talk began — it started four months ago, peaked in March/April, and is still quite high now.
• There’s a neat transcript of Tracy Alloway and Joe Weisenthal talking to an executive of a logistics company about current transportation issues. It’s long but good.
• Another article from Bloomberg on the same topic.
• We know about US housing issues, but they are even more severe in Canada.
• A CEO friend of mine who runs a small manufacturing firm says he has more orders than he can fill. He just can’t get the parts, and the same is true for his industry globally.