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Redacted Version of the September 2013 FOMC Statement

Redacted Version of the September 2013 FOMC Statement

Posted on by David Merkel
July 2013 September 2013 Comments
Information received since the Federal Open Market Committee met in June suggests that economic activity expanded at a modest pace during the first half of the year. Information received since the Federal Open Market Committee met in July suggests that economic activity has been expanding at a moderate pace. Shades their view of GDP growth up.
Labor market conditions have shown further improvement in recent months, on balance, but the unemployment rate remains elevated. Some indicators of labor market conditions have shown further improvement in recent months, but the unemployment rate remains elevated. Adds weasel words because the participation rate is falling, and wages are stagnant.
Household spending and business fixed investment advanced, and the housing sector has been strengthening, but mortgage rates have risen somewhat and fiscal policy is restraining economic growth. Household spending and business fixed investment advanced, and the housing sector has been strengthening, but mortgage rates have risen further and fiscal policy is restraining economic growth. Shades their view of housing down.? The Fed hasn?t learned that they can?t control the long end of the yield curve
Partly reflecting transitory influences, inflation has been running below the Committee’s longer-run objective, but longer-term inflation expectations have remained stable. Apart from fluctuations due to changes in energy prices, inflation has been running below the Committee’s longer-run objective, but longer-term inflation expectations have remained stable. Little change.? TIPS are showing similar inflation expectations since the last meeting. 5y forward 5y inflation implied from TIPS is near 2.45%, down 0.05% from July.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. No change. Any time they mention the ?statutory mandate,? it is to excuse bad policy.
The Committee expects that, with appropriate policy accommodation, economic growth will pick up from its recent pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. The Committee expects that, with appropriate policy accommodation, economic growth will pick up from its recent pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. No change.Emphasizes that the FOMC will keep doing the same thing and expect a different result than before. Monetary policy is omnipotent on the asset side, right?
The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished since the fall. The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished, on net, since last fall, but the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market. Does not take credit that the tightening of financial conditions happened largely because of FOMC communications.
The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term. The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term. No change.? CPI is at 1.8% now, yoy.? It may be closer than they think.
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, Taking into account the extent of federal fiscal retrenchment, the Committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program a year ago as consistent with growing underlying strength in the broader economy. However, the Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases. The notable paragraph, saying that the ?taper? is not starting because fiscal policy is not as stimulative as the Fed wants.
the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Accordingly, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. No real change.Operation Twist continues.? Additional absorption of long Treasuries commences.? Fed will make the empty ?monetary base? move from $3 to 4 Trillion by the end of 2013.

 
Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee’s dual mandate.
The Committee will closely monitor incoming information on economic and financial developments in coming months. The Committee will closely monitor incoming information on economic and financial developments in coming months No change. Useless comment.
The Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. and will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. No real change.
The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes. In determining the size, pace, and composition of its asset purchases, the Committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives. In judging when to moderate the pace of asset purchases, the Committee will, at its coming meetings, assess whether incoming information continues to support the Committee’s expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective. Drops the concept that they might increase the pace of purchases.? Aside from that, this section says about the same thing as July.
Asset purchases are not on a preset course, and the Committee’s decisions about their pace will remain contingent on the Committee’s economic outlook as well as its assessment of the likely efficacy and costs of such purchases. New sentence, but it really doesn?t add much.? Didn?t we know that already?
To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. No change.Promises that they won?t change until the economy strengthens.? Good luck with that.
In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. Not a time limit but economic limits from inflation and employment.Just ran the calculation ? TIPS implied forward inflation one year forward for one year ? i.e., a rough forecast for 2014, is currently 2.39%, up 19 bp from July.? Here?s the graph.? The FOMC has only 0.11% of margin in their calculation.

 
In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. No change.
When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. No change.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Charles L. Evans; Jerome H. Powell; Sarah Bloom Raskin; Eric S. Rosengren; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen. Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Charles L. Evans; Jerome H. Powell; Eric S. Rosengren; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen. Two doves leave the FOMC
Voting against the action was Esther L. George, who was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations. Voting against the action was Esther L. George, who was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations. George continues to make her point that is the same as mine in my piece Easy In, Hard Out; that the Fed may have greater problems as a result of its abnormal policies, whatever they do in the future.

?

Comments

  • No taper yet.? Equities, long bonds, and gold rally.? The FOMC says that any change to policy is contingent on almost everything.
  • They shaded their views of housing down and GDP up.
  • Longer statement.? They think that if they use more words, they will be clearer.? Longer statements are harder to parse and understand.
  • Current proposed policy is an exercise in wishful thinking.? Monetary policy does not work in reducing unemployment, and I think we should end the charade.
  • In the past I have said, ?When [holding down longer-term rates on the highest-quality debt] doesn?t work, what will they do?? I have to imagine that they are wondering whether QE works at all, given the recent rise in long rates.? The Fed is playing with forces bigger than themselves, and it isn?t dawning on them yet.
  • The key variables on Fed Policy are capacity utilization, unemployment, inflation trends, and inflation expectations.? As a result, the FOMC ain?t moving rates up, absent increases in employment, or a US Dollar crisis. ?Labor employment is the key metric.
  • GDP growth is not improving much if at all, and much of the unemployment rate improvement comes more from discouraged workers, and part-time workers.
Redacted Version of the July 2013 FOMC Statement

Redacted Version of the July 2013 FOMC Statement

Posted on by David Merkel
June 2013 July 2013 Comments
Information received since the Federal Open Market Committee met in May suggests that economic activity has been expanding at a moderate pace. Information received since the Federal Open Market Committee met in June suggests that economic activity expanded at a modest pace during the first half of the year. Shades their view of past GDP down.
Labor market conditions have shown further improvement in recent months, on balance, but the unemployment rate remains elevated. Labor market conditions have shown further improvement in recent months, on balance, but the unemployment rate remains elevated. No change
Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy is restraining economic growth. Household spending and business fixed investment advanced, and the housing sector has been strengthening, but mortgage rates have risen somewhat and fiscal policy is restraining economic growth. Shades their view of housing down.? I?m sorry, but balanced budgets promote growth, because economic actors don?t fear their taxes rising in the future.? Also, in Keynesian terms, any deficit is stimulative.
Partly reflecting transitory influences, inflation has been running below the Committee’s longer-run objective, but longer-term inflation expectations have remained stable. Partly reflecting transitory influences, inflation has been running below the Committee’s longer-run objective, but longer-term inflation expectations have remained stable. No change, and not true.? TIPS are showing rising inflation expectations since the last meeting. 5y forward 5y inflation implied from TIPS is near 2.5%, up 0.25% from June.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. No change. Any time they mention the ?statutory mandate,? it is to excuse bad policy.
The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. The Committee expects that, with appropriate policy accommodation, economic growth will pick up from its recent pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. No change.

Emphasizes that the FOMC will keep doing the same thing and expect a different result than before. Monetary policy is omnipotent on the asset side, right?
The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished since the fall. The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished since the fall. No change.
The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective. The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term. CPI is at 1.8% now, yoy.? It may be closer than they think.
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. No change.

Does not mention how the twist will affect those that have to fund long-dated liabilities.

Wonder how long it will take them to saturate agency RMBS market?

Operation Twist continues.? Additional absorption of long Treasuries commences.? Fed will make the empty ?monetary base? move from $3 to 4 Trillion by the end of 2013.

 
Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative. No change.
The Committee will closely monitor incoming information on economic and financial developments in coming months. The Committee will closely monitor incoming information on economic and financial developments in coming months. No change. Useless comment.
The Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. The Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. No change.
The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes. The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes. No change. Vacuous.
In determining the size, pace, and composition of its asset purchases, the Committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives. In determining the size, pace, and composition of its asset purchases, the Committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives. No change
To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. No change.

Promises that they won?t change until the economy strengthens.? Good luck with that.
In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. Not a time limit but economic limits from inflation and employment.

Just ran the calculation ? TIPS implied forward inflation one year forward for one year ? i.e., a rough forecast for 2014, is currently 2.20%, unchanged from May.? Here?s the graph.? The FOMC has only 0.30% of margin in their calculation.

 
In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. No change.
When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. No change.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Jerome H. Powell; Sarah Bloom Raskin; Eric S. Rosengren; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen. Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Charles L. Evans; Jerome H. Powell; Sarah Bloom Raskin; Eric S. Rosengren; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen. No change
Voting against the action was James Bullard, who believed that the Committee should signal more strongly its willingness to defend its inflation goal in light of recent low inflation readings, and Esther L. George, who was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations. Voting against the action was Esther L. George, who was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations. Bullard made his point last month, and sits back with the majority.

George continues to make her point that is the same as mine in my piece Easy In, Hard Out; that the Fed may have greater problems as a result of its abnormal policies, whatever they do in the future.

?

Comments

  • This FOMC Statement was close to a nothing-burger.? They try to take the deflation boogeyman off of the table with words, and no proof.? All the same, they shaded down their views of housing and GDP.
  • Current proposed policy is an exercise in wishful thinking.? Monetary policy does not work in reducing unemployment, and I think we should end the charade.
  • In the past I have said, ?When [holding down longer-term rates on the highest-quality debt] doesn?t work, what will they do?? I have to imagine that they are wondering whether QE works at all, given the recent rise in long rates.? The Fed is playing with forces bigger than themselves, and it might just be dawning on them now.
  • The key variables on Fed Policy are capacity utilization, unemployment, inflation trends, and inflation expectations.? As a result, the FOMC ain?t moving rates up, absent increases in employment, or a US Dollar crisis.? Labor employment is the key metric.
  • GDP growth is not improving much if at all, and much of the unemployment rate improvement comes more from discouraged workers, and part-time workers.
Best of the Aleph Blog, Part 21

Best of the Aleph Blog, Part 21

Posted on by David Merkel

These articles appeared between February 2012 and April 2012:

We Eat Dollar Weighted Returns ? III

What did a buy-and-hold investor get owning SPY?? 7%/year.? What did the average holder get? 0%.? A warning against over-trading.

Against Risk Parity

Against Risk Parity, Redux

Expressing skepticism over a strategy using leverage to extract returns out of lower-yielding asset classes.? Why not but subordinated asset-backed securities instead, and how did they do in the crisis?

Individual Investing Can Be Tough

Individual Investing Can Be Tough, Redux

The investment game is competitive, and I give a few tips on how to avoid the risks.

Musings on the ?400% Man?

Understanding small asset managers, and why you might want to invest with them.

Thinking about the Insurance Industry

I take a tour through the insurance industry after the carnage of the credit crisis.

Notes on the 2011 Berkshire Hathaway Annual Report, Part 3 (On Acquisitions)

Lists all of the notable acquisitions of Berkshire Hathaway from 1977 to 2011.? Analyzes Buffett’s strategy, which has been remarkably consistent over 40 years.

Notes on the 2011 Berkshire Hathaway Annual Report, Part 4 (10K Issues)

Goes through the main risks of Berkshire Hathaway.

Replacing Defined Contributions

I propose a hybrid plan that would replace 401(k)s, and other participant-directed DC plans.

The Rules, Part XXXI

The offering of liquidity through limit orders is a real service to the market, and on average gets rewarded in lower overall execution costs.? In choppy markets, it can really add value.

Buy-and-Hold Can?t Die

Buy-and-Hold Can?t Die, Redux

Explains how every investor (even speculators) has the option of holding on? for a long time, and why that can be valuable.

The Anti-Consultancy Consultancy

Call me, and I will tell you to fire the consultant, and listen to your middle managers.

Easy in, Hard out

It is always easier to loosen monetary policy than to tighten it.? The next tightening cycle will be particularly rough, should the Fed ever choose to do it.

Gold does Nothing

This post got a lot of play over the internet.? I was really surprised at how much response it received.? Gold has few industrial uses, but is pretty; that’s why it is so interesting.

Misunderstanding the Tax Debate

Misunderstanding the Tax Debate (II)

The debate should be about what income is, and not about what the rates should be.? Wealthy people have clever advisers that minimize “income.”? Doesn’t matter what the tax rate is.? The debate should focus on income.

Simple Retirement Calculator

Gives a simple way of analyzing whether you have saved enough or not.? Quick answer: you haven’t saved enough, particularly for the wretched investment environment that we are in now.

 

 

 

At the Towson University Investment Group’s International Market Summit, Part 1

At the Towson University Investment Group’s International Market Summit, Part 1

Posted on by David Merkel

Hello. ?My busy time is over, and I am back to live blogging. ?On Tuesday evening, I was one of five speakers at the?Towson University Investment Group’s International Market Summit. ?It was a fun time. ?Before I came, there was a list of 29 questions we could be asked, in addition to Q&A. ?As it was we were asked 6 of the questions in the main period, and 2 more in the Q&A.

I told the students at Towson that I would post a bunch of links to my blog for the questions asked that I have already answered. ?I will probably do a second post for the questions I am competent to answer that did not get asked.

Anyway, here goes:

1??????? Give us a short summary of things that keep you up at night and worry you in today?s markets.

Too Many Par Claims versus Sub-Par Assets

2??????? How big of an impact do you see the unwinding of QE having on the US and global economy?? In the event of inflation, how will markets react?

Easy in, Hard out

3??????? Give us some insight on how you behaviorally reduce the impact that a volatile market has on your investing strategy?

The Portfolio Rules Work Together?Rules 7 & 8 are particularly important for knowing when to sell.

4??????? Provide some tips to young investors starting out looking for both career and investment advice.

How Do I Find a Job in Finance?

How Do I Find a Job in Finance? (Part 2)

5??????? Should the current monetary policy of increasing the money supply be continued?

No. We should take losses and let the system reset. ?Get the government out of the macroeconomics business.

http://alephblog.com/?s=Queasing

6??????? Do you believe that High Frequency trading helps add liquidity in the market or that it distorts the market.

23,401 Auctions

391 Auctions

Other useful stuff that we discussed:

Buffett?s Career in Less Than 1000 Words

How to Become Super-Rich?

Hit the ?Defer? Button, Thanks?

Winding Down the Eurozone

Aim for the Middle

That’s all for now. ?I will follow this up, answering most of the questions not asked at the?Towson University Investment Group’s International Market Summit.

More to come…

Sorted Weekly Tweets

Posted on by David Merkel

Picture Credit: David Merkel, with an assist from the YouImagine AI image generator || Twitter bird visits China

Banking

  • Saba Capital’s Boaz Weinstein talks bank CDS; Carvana exchange falters; Evergrande reveals restructuring plan https://t.co/SFUXCBASiZ  Thinks bank sub debt is overpriced in general… Mar 24, 2023
  • US authorities guarantee bank deposits as high as $250,000. That could soon change https://t.co/PHS0cpK0R0  Will solve some short-term problems, and create bigger long-term problems. Mar 24, 2023
  • The banking precedent that matters for where we are now isn’t 2008, but the empire-building a decade earlier https://t.co/wgPsiKSHFC  As I have said before, hand banking regulation back to the states. End interstate banking. I like JP Morgan so much, I want 50 of them Mar 24, 2023
  • Schwab CEO Walt Bettinger says the brokerage giant could continue to operate even if it lost most of its deposits over the next year https://t.co/kZog3PhNBs  “At the end of last year, it was the 10th-largest bank in the US” $SCHW Okay, here is a sizable problem. Negative TBV MTM Mar 23, 2023
  • The Federal Home Loan Bank System issued $304 billion in debt last week. That’s almost double the $165 billion that liquidity-hungry lenders tapped from the Fed https://t.co/LVsV7GAmWD  The FHLBs are the second to last resort lender; there must be demand for funds Mar 21, 2023
  • Treasury Secretary Janet Yellen will tell bankers that the US could intervene again to protect depositors if smaller lenders get into jeopardy https://t.co/U5OUtxgg9p  You can’t have it both ways. Insuring all deposits will lead to bankers taking more risk Mar 21, 2023
  • Silicon Valley Bank was warned by BlackRock that risk controls were weak https://t.co/g544mW9MUa  This article a prime example of what I mean when interest rate risk does not get measured well for banks. 1-2% parallel shift rate rises are not enough! Mar 21, 2023
  • JPMorgan Chase Chief Executive Jamie Dimon is leading discussions with the chief executives of other big banks about fresh efforts to stabilize troubled First Republic Bank https://t.co/IJgU7riYOm  Uninsured deposits have to live somewhere… Mar 20, 2023
  • Treasury Secretary Janet Yellen and Fed Chair Jerome Powell are seeking to reassure investors to halt a slide in financial stocks https://t.co/fAJXDXvTzX  Will it be able to keep uninsured depositors? If so, will they be able to earn money over the cost of their liabilities? $FRC Mar 20, 2023
  • A coalition of midsize US banks asked regulators to extend FDIC insurance to all deposits for the next two years https://t.co/HMueRWZjHk  You could quietly raise the rate you pay on deposits, but don’t seem panicked Mar 20, 2023

Odds & Ends

  • Crypto fugitive Do Kwon, creator of the failed TerraUSD stablecoin, has been arrested in Montenegro https://t.co/oWPI8PUoIt  Lose enough people enough money, and it is likely you will be caught and prosecuted. Mar 24, 2023
  • Excel Never Dies, by @packyM https://t.co/OFjdeIFwV5  It’s the Swiss Army Knife of software. Used carefully, it can do amazing things. Mar 24, 2023
  • Researchers did DNA testing on strands of Ludwig van Beethoven’s hair and found answers to questions about the composer’s health and family history https://t.co/lqEv106yVV  A temperamental genius who was a wreck as a man. Still, there are a lot of unproven aspects to DNA testing. Mar 22, 2023
  • Elon Musk’s global empire has made him extremely powerful — and a major headache for Washington https://t.co/Mj5kZM70X4  How Elon Musk gives many politicians distress in the US Government, while having fun at the same time Mar 21, 2023
  • Here’s a visual guide to how America uses freight trains https://t.co/3g2iB4jfmv  Interesting graphics. Seems that safety improvements reversed around 2010. Mar 21, 2023
  • JPMorgan owned the London Metal Exchange nickel contracts that turned out to be backed by bags of stones rather than metal https://t.co/EewStihuef  Hmm… this *did* lead LME to ask the warehouses to check all the nickel inventories. Mar 21, 2023
  • Forget simple shampoo and conditioner. More consumers are adding extra steps to their showers–enough for the process to last 60 minutes or more. https://t.co/VHfulhcl9v  I realize I am an old guy, but this seems overboard. Mar 21, 2023
  • Why have a drab lawn when you can paint it green? Grass-painting is a growing way to save money and water. Neighbors might be shocked. “One day it’ll be yellow and the next day it’s green.” https://t.co/Chz6qpqH70  I would rather live with my weedy yard, with its many problems. Mar 20, 2023
  • The problem with AirPods and other Bluetooth earbuds? Their tiny, irreplaceable batteries https://t.co/81Wo8v1dOz  You could buy wireless headphones. They are better for your ears as well. Mar 20, 2023

Commercial Real Estate

  • As funding markets seize up, malls are headed for one more shakeout and that may be just what the long-suffering sector needs https://t.co/L9Bsj38U8P  Class A retail should be okay, though there will still be stress Mar 24, 2023
  • Small bank struggles could hit the real estate market hard https://t.co/1JujTvSqwZ  16% of CRE is offices Mar 24, 2023
  • Smaller banks are likely to respond to the crisis of confidence in banks overall by tightening standards and slowing lending to raise capital ratios https://t.co/j7gTP9Kr9L  Especially commercial real estate lending Mar 24, 2023
  • Remote work is starting to hit office rents https://t.co/MDGnDAedFl  Effect is higher where commuting is hard Mar 24, 2023
  • A large number of office defaults could force banks to mark down value of these and other loans https://t.co/bxyTAzZTee  Most of the carnage should be confined to offices, and malls that are not Class A Mar 22, 2023
  • Transcript: Where Stress Is Brewing in the $20 Trillion Commercial Real Estate Market https://t.co/pbWdLkcuZw  @TheStalwart & @tracyalloway did a great interview w/Rich Hill of Cohen & Steers. Offices are in trouble, Malls less so. And, it’s still about location. Mar 20, 2023

Science

  • The Sun Is Stranger Than Astrophysicists Imagined https://t.co/joHsDfna1D  Far more gamma rays than expected, and a big block of spectrum missing. Mar 24, 2023
  • A space object baffled scientists as it zipped through our solar system in 2017. Theories ranged from an asteroid to an alien probe, but a new study offers another idea. https://t.co/HG0lsIqwWb  It’s only a comet Mar 22, 2023
  • Google opens early access to its ChatGPT rival Bard — here are our first impressions https://t.co/zIVLnaXPL5  Bard is coming soon to a screen near you. You can sign up for the waitlist. Mar 22, 2023
  • Space junk getting you down? Just get out of the way https://t.co/8aNEFoA80b  Send up less, decommission more (burn up on re-entry), and dodge junk is the least costly solution Mar 23, 2023
  • A test vehicle unveiled by Chinese carmaker JAC has the battery world buzzing about sodium-ion cells https://t.co/OLMA08ggtH  Has the potential to deliver power at half the cost of lithium ion batteries. Plus: no fire risk. Minus: added weight Mar 21, 2023
  • Here’s everything you need to know about deadly fungus Candida auris, which has spread to more than half of all US states https://t.co/WMS0ixGumM  This one is challenging, as it is resistant to present antifungals & has a death rate of 30-60%. Mar 21, 2023

Culture

  • TikTok’s content moderator backtracks on a promise to stop making employees review the web’s most extreme content https://t.co/e7mAmHs2PN  It would be a rare person who could deal with every type of disturbing content day after day, and stay sane. Mar 25, 2023
  • Lawsuits and legislation targeting sex trafficking are causing collateral damage: they are damaging the livelihoods of online sex workers https://t.co/2fxX1lmIES  Suing Visa $V did the trick. Do we really want payment networks to be ethics guardians? That’s the government’s job Mar 24, 2023
  • The Real Reason South Koreans Aren’t Having Babies https://t.co/vXCgz96mQR  Evangelicals are 20% of SK’s population. This article doesn’t go into this, but the #1 factor differentiating fertility is strong religious faith. Likely true in SK. Mar 23, 2023
  • Is it a bad idea to assign a sex to digital assistants and other robots? https://t.co/dBwInqoxnJ  No, in most fiction, robots are assigned a sex, as they mimic humans. Example: Yokohama Kaidashi Kikou, where almost all the robots are female https://t.co/Hfl0JuTgMZ  Mar 23, 2023
  • What happens when sexting chatbots dump their human lovers https://t.co/o6N012otk5  This reads like something Asimov wrote (not just “I, Robot) in some of his stories in the 1970s. Mar 22, 2023

Monetary Policy

  • Federal Reserve Bank of Atlanta President Raphael Bostic says the decision to raise interest rates by 25 basis points this week came after “a lot of debate” https://t.co/KpzSjt2iXo  Smart short-term moves that lead to bad long-term results. Mar 25, 2023
  • The crisis that claimed Credit Suisse and SVB heralds a new chapter for financial capitalism https://t.co/S7ZkUfxSXt  The errors of monetary policy compound, creating a debt-ridden unstable economy. The government will take it over. Then the system as a whole will fail. Mar 25, 2023
  • The Fed’s Self-Directed Tragedy https://t.co/rPjnfyvKxi  If the FOMC would avoid inverting the yield curve or making it ultra-steep, we could avoid lot of problems. Toss all the neoclassical economists out of the Fed. Mar 22, 2023
  • STEVE HANKE And MATT SEKERKE: Fed’s Monetary Blunders Put The Entire Banking System In A Bad Spot https://t.co/CShCuEQaOS  This is the cost of QE. Load the banking system w/long debt, & the costs come due when policy tightens Mar 22, 2023
  • The Fed Must Not Flinch https://t.co/cQW7Ynwol5  Total idiot. Inflation is less important than systemic stability. Mar 22, 2023

Companies

  • Apple plans to spend $1 billion a year to make films for theaters https://t.co/sWbCMqCyo6  There is too much money chasing entertainment. Crowded trade. $AAPL $NFLX $AMZN Mar 24, 2023
  • Diebold Nixdorf and some of its lenders remain in confidential talks as the automated teller machines maker works to head off a liquidity shortfall https://t.co/vDO4aqd2qQ  This stock took a while to die $DBD People don’t use cash much Mar 21, 2023
  • The world’s most indebted developer said it expects that a restructuring support agreement will be ready by the end of March, after it won preliminary support from a group of major creditors https://t.co/r1ZjnnvxTF  Playing for time, one last time. Mar 21, 2023
  • Joe Hinrichs had never worked for a railroad when he was named CEO of $CSX, but the company is counting on his outsider perspective https://t.co/yXWnPKybDU  Key question: how much incremental profit will come from treating workers better? Mar 21, 2023
  • Some job listings don’t give anyone a ghost of a chance. Why some companies are posting ads for positions they aren’t actually trying to fill https://t.co/jgSDzj3wHb  The labor market is not as strong as it seems Mar 20, 2023

Risk Management

  • The M-Score is warning that the chance of fraud at major companies is the highest in over 40 years, writes Numbers columnist @JoshZumbrun https://t.co/ijbzyL9VMA  Take note, financial flexibility is ebbing. Mar 24, 2023
  • It’s the Most Thankless Job in Banking. Silicon Valley Bank Didn’t Fill It for Months. https://t.co/ZeoxnnEFww  If the CEO, CFO, & Chairman do not fully buy in to limit risk, rather than optimize risk, it does no good to have a Chief Risk Officer. Mar 23, 2023
  • Most companies don’t take steps to keep their bank accounts safe. Here’s why and how they should. https://t.co/R1cpJR3Y23  These are clever ideas, but why not just keep a laddered account of T-bills for the cash above normal transactional needs? Mar 23, 2023
  • The collapse of two lenders has prompted a rethink of banking rules, but risk experts say the failures could be something else: risk overseers who can’t stand up to the bosses https://t.co/gbbY2x0vsj  Boards exist to excuse management. Interest rate risk management at banks stinks Mar 22, 2023
  • The Federal Reserve raised concerns about risk management at Silicon Valley Bank starting at least four years before its failure earlier this month https://t.co/El3a1mjYV9  Since no one will talk about it, we have no idea of what this was. Mar 20, 2023

Market Dynamics

  • Hedge funds that bet on big-picture market moves have been hit with steep losses as a spate of recent bank failures upends bets that interest rates would remain elevated https://t.co/5NH5HT7hqg  Macro hedge funds are not infallible. Same for CTAs. Mar 23, 2023
  • Steve Leuthold, a financial guru known for partying and potatoes, has died at age 85. https://t.co/wANYmLz0RC  For a few years, I enjoyed reading his research. I knew he was a character — I didn’t know he was *such* a character. Mar 22, 2023
  • Banks and investors are reviving a push for changes to securities accounting after the SVB collapse https://t.co/YVRuZGWbvX  As I said to IASB 20+ years ago, there should be book and fair value balance sheets and income statements. More info for stakeholders. Mar 22, 2023
  • Why your financial conditions index sucks https://t.co/lJn1Rh2Zgf  I like the yield on 2-year US Treasury minus the yield on 30-Day A2/P2 Nonfinancial Commercial Paper https://t.co/KWJ42jOwnE  Mar 21, 2023
  • Record debt levels around the world have spurred fears of a ‘Minsky moment.’ Here’s what that means https://t.co/ljaM2Dmtms  So long as keep increasing debt levels, we will always face instability due to misfinancing of assets Mar 21, 2023

Around the US

  • CNN Visits San Francisco https://t.co/ifaUGKWgoG  CNN reporters with added security get robbed in San Francisco. Progressivism at its finest. Mar 22, 2023
  • Should New York be able to force suburbs to approve housing? Gov. Kathy Hochul’s plan to do so faces pushback https://t.co/NWahNVpLyQ  Zoning imposes costs on poor people Mar 20, 2023
  • As NBA fans wring their hands over star players missing games, the league’s coaches, owners and commissioner agree on one thing: it seems to work. https://t.co/715oUeUpWS  You have to remember — it’s a business. Disappointing fans when you are on the road is bearable. Mar 20, 2023
  • California’s torrential rains have plunged tens of thousands of homes into darkness, but may end up keeping the lights on during its summer blackout season https://t.co/ZSMf0aGSqk  You wanted more rain & you got it. Why complain? Mar 20, 2023
  • Chicago’s mayoral frontrunner Paul Vallas is taking a leaf out of Rahm Emanuel’s book to try to lure businesses back https://t.co/fxVWL6jQjY  Consider the economic drag of Chicago and Illinois state pensions & the task is very hard. What budget area will you cut? Mar 20, 2023

Islamic World

  • Iranian activists want tech companies to ban the Ayatollah https://t.co/0P00BQ7T5y  Tough to do, even though leader in Iran can use Twitter, but its citizens can’t Mar 22, 2023
  • About 79% of Turkish citizens think home sales to foreign nationals should be banned, according to a survey https://t.co/GrI5YPKp60  But well-off Russians, Iranians & Iraqis need a place to flee to. Mar 21, 2023
  • Iran is the big winner in the agreement with Saudi Arabia. Having given Tehran the upper hand, Riyadh should expect to be slapped around. https://t.co/MDqXXGRFwo  Hard to say. The disagreements of over 1300 years are not easily overcome Mar 21, 2023
  • The Taliban’s supreme leader, who banned girls from attending secondary school a year ago, is discovering it is one thing to issue a fiat, and quite another to enforce it. https://t.co/P7uzKoYPZR  Similar to those who homeschool underground in many totalitarian nations Mar 21, 2023

China

  • Those fretting about the challenge a united China and Russia pose to the West should have another look at the history of their relationship https://t.co/dMm4qPn105  Article indirectly compares Russia to N. Korea. China supports both, but has little leverage over either. Mar 25, 2023
  • Xi Jinping used two days of talks in Moscow to firmly align with Russia against the US. But the Chinese leader held back from offering Vladimir Putin something he’s been looking for: A commitment to buy a lot more gas https://t.co/2oXmXmS1dT  A lot of gas Mar 23, 2023
  • Chinese lenders and small businesses are stuck in a doom loop https://t.co/5jujZE5Iyt  You can’t have strong small & medium sized firms without freedom Mar 22, 2023

Credit Suisse

  • Credit Suisse’s top shareholders and AT1 bondholders are among the big losers while $UBS is a winner https://t.co/lCx0y3KOY6  Well said… other winners include employees of CS that will have jobs, & liability-holders of CS that will get paid. Mar 21, 2023
  • Credit Suisse’s riskiest bonds will be wiped out as part of its deal with UBS Group, dealing a blow to investors who held the lender’s AT1 bonds https://t.co/ZVp64UFRcz  When buying innovative bonds, be sure to read the terms in the prospectus. I like my bonds simple. Mar 20, 2023
  • After the write-down of Credit Suisse’s riskiest bonds, the Bank of England sought to clarify its rules regarding the order in which shareholders and creditors should bear losses in the event of insolvency https://t.co/g7uHWvbrhP  Read the terms of the bonds. Hard to cancel common Mar 20, 2023

CFA Institute

  • The AV CFA Meme Competition: the winners https://t.co/nHMeURHkZp  I had never seen these. Pretty funny. Easy exams that keep getting easier. Mar 20, 2023
  • Good news: ChatGPT would probably fail a CFA exam https://t.co/P5GMfOArRT  Scored at the same level as random guessing. Mar 20, 2023

Sorted Weekly Tweets

Posted on by David Merkel

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

Sorted Weekly Tweets

Posted on by David Merkel

Picture Credit: David Merkel, with an assist from the YouImagine AI image generator || Twitter bird tweets, and tweets!

Portfolio Management and Finance

  • The buying binge that has propelled US equities almost without interruption for four months is nearing a point where past rebounds caved in https://t.co/VyThd4RAZ1  Valuations are in the 97th percentile. Nominal equity returns over the next 10 years are 2.44%/yr #bondsarebetter Feb 11, 2023
  • Global investment banks including JPMorgan and UBS are renewing efforts to gauge investor interest in Chinese developer bond sales, in hopes of revitalizing a key business following a yearlong deal drought https://t.co/1stAioiz51  Policy unreliable, aggregate debt levels too high Feb 10, 2023
  • Tough to catch lightning in a bottle twice. https://t.co/zFlb6LUyk4  via @Jack_Raines This is like my saying, “Whom God would destroy, He first gives him an easy win.” Feb 09, 2023
  • A lawyer reminded lenders of the human cost should $BBBY crater before all capital-raising options were exhausted https://t.co/DJlWeG350d  “If I was running a meme stock I would be an idiot not to try to capitalize on the madness of crowds.” –Matthew Tuttle of Tuttle Capital Mgmt Feb 09, 2023
  • The surge in technology stocks has been pronounced in the riskiest corners of the market, suggesting potential for a reversal https://t.co/pBEaeFIerO  & Stocks have rallied despite weaker earnings and economic expectations, producing “massive disconnects,” https://t.co/MEGXwrTynD  Feb 08, 2023
  • Robinhood is mounting a counterattack at the SEC’s proposals, saying they would turn back the clock to the days before zero-commission trading https://t.co/dWi1l28A6c  Just require one central order book for each security Feb 08, 2023
  • How Much Portfolio Insurance Do You Need? https://t.co/SQZL9yKuzc  If you can write something like this without mentioning war, plague, famine, expropriation, etc., you don’t understand the concept of “unknown unknowns.” Feb 08, 2023
  • Some U.S. companies face reduced cash flows and higher tax bills as they are hit by a double whammy of interest-rate hikes and a tax-law change https://t.co/dLRalMLHSa  Fascinating headwinds for corporate earnings. Tax laws now encourage firms to de-lever Feb 07, 2023
  • Expect more defaults in the $4 trillion municipal-bond market this year, Bank of America strategists said https://t.co/KGswnLzzmY  With muni debt of “unrated securities in the not-for-profit, nursing home and hospital industries” you have to focus on economic necessity. Feb 07, 2023
  • What Are Stock Buybacks and How Did They Rise Above $1 Trillion? https://t.co/TrZ9SOsaVa  Deficient article. Stock buybacks already get taxed from the capital gains of the seller. Misses a major reason for buybacks: makes a company less of a takeover target #buybacksaregood Feb 07, 2023
  • Newbie investors got burned in 2022. Some are backing away in 2023. https://t.co/2ERk1bPyJZ  In general, you don’t make money when you trade; you make money while you wait. Feb 06, 2023
  • The stock market is broken https://t.co/Zhe9B3KTGI  Advocates replacing continuous trading with auctions. My take on that (11 years ago): https://t.co/t9AR42RWoO  Feb 06, 2023
  • An Early Sign That the Market for Green Bonds Is Stalling (Political risk comes for us all.) https://t.co/3vH8OgYzj2  Investors are not willing to pay much extra for them, so why go through the complexity of issuing them? Feb 06, 2023
  • The world’s largest publicly-traded hedge fund is bracing for a selloff in emerging markets, a view that pits it against bulls at some of Wall Street’s biggest investment banks https://t.co/zZqzqXC5T3  It’s rare when you find a skeptic on the whole sector that he manages Feb 06, 2023
  • He made a fortune on one big trade during the Great Recession. Now he’s eyeing a new market https://t.co/inhJYR5yXs  Daniel Ivascyn is looking to time the corporate credit cycle Feb 06, 2023
  • Despite appearing unsustainable, financial bubbles can last a surprisingly long time https://t.co/XjD8XsktiC  True, but when they break it is a doozy, and difficult to reflate. Beware assets that require investment to maintain their current value Feb 06, 2023

Crypto

  • A trove of documents shows who controls Tether, which runs the dominant stablecoin, and the company’s weaknesses. Tether is at the center of the crypto economy. https://t.co/Wjpyee2wsd  Tether, the rogue money market fund that doesn’t publish an NAV. Feb 11, 2023
  • One of the earliest peer-to-peer platforms for trading Bitcoin is shutting down, a casualty of the prolonged crypto downturn https://t.co/U0AX9h2lLo  Money laundering does in another crypto exchange Feb 10, 2023
  • SEC Chair Gary Gensler says the settlement with crypto exchange Kraken over staking “should put everyone on notice in this marketplace” https://t.co/EsIkDixbin  Similar to repo, margining, or securities lending. Feb 10, 2023
  • ‘Sam? Are you there?!’ The bizarre and brutal final hours of FTX https://t.co/H90Ieiuhbu  Insane ramblings of SBF as everything fell apart due to his neglect of normal safety protocols. Feb 10, 2023
  • Tether Holdings says more than $700 million in “net profit” was added in the fourth quarter to the reserve that backs the digital asset https://t.co/cQ1x9MmwZ0  Which means they will be hosed in the next bear market. Feb 10, 2023
  • The squabble between crypto billionaires Cameron and Tyler Winklevoss and veteran Barry Silbert appears to be over, paving the way for a resolution of one of the industry’s biggest bankruptcies https://t.co/Dpc5Jt9aVW  Compared to other crypto BKs this was resolved easily… Feb 07, 2023
  • Three months after crypto exchange FTX collapsed, Argentina’s government is weighing creating oversight requirements on crypto companies, sources say https://t.co/sxqT8TXgIn  Funny to see Argentina focusing on the solvency of crypto. What of their own solvency? Feb 07, 2023
  • The curious case of FTX VIPs https://t.co/9Y5lfxKHlR  The tangled web of relationships for lawyer David Boies Feb 06, 2023
  • There’s a wild theory that the price of Bitcoin is being propped up—and the academic who proved manipulation in 2017 suspects it may be happening again https://t.co/8v7D9Fusky  Simpler theory: Tether is using Bitcoin to back its currency Feb 06, 2023

Odds & Ends

  • Tech holdouts are making life hell for their colleagues https://t.co/33MuTLJtxU  But are management teams willing to hold classes for those who are not so good with technology, including top executives? Feb 10, 2023
  • A DNA technology that can screen for a wide range of disease-causing microbes in a single test could be a game-changer in diagnosing all kinds of infections. https://t.co/MHxW6gASyI  From a medical standpoint, this is the most promising thing I read this week. Feb 10, 2023
  • 11 Important Things I’m Thinking About In 2023 https://t.co/mjiE4oZ0WE  Stoicism, the crutch some people lean on because it is much easier than loving God and your neighbor more than yourself Feb 09, 2023
  • The Anxious Style of American Parenting https://t.co/9k4VfViTbY  There used to be more of a consensus on parenting prior to 1980, so there is little good guidance. Also, many people are quick to criticize. Feb 09, 2023
  • Why Did the Beatles Get So Many Bad Reviews?, by @tedgioia https://t.co/lued7s54w4  Perhaps all music critics are sourpusses because it sounds more intelligent, and they generally aren’t talented musicians Feb 08, 2023
  • Max Martin knows how to create a number-one hit https://t.co/J4157Ro0PB  Get to good stuff fast for an impatient generation Feb 08, 2023
  • The discovery of a ring around Quaoar, a small, sun-orbiting world beyond Pluto, is challenging astronomers’ ideas about how such rings form and persist https://t.co/K4Vi2nPAzo  Another example of how we know so little about the cosmos Feb 09, 2023
  • An ex-professor has made a fortune making scanners to fix teeth https://t.co/F4fzumb7Jy  Well done, you have solved a significant problem inexpensively! Feb 07, 2023

Companies

  • Micron Technology Board Committee Approves Cuts to Executives’ Salaries https://t.co/kQK4gtCF3g  It’s nice to see things like this. FD: + $MU Feb 10, 2023
  • Clif Bar CEO, Other Executives To Exit In Wake Of Its Nearly $3 Billion Sale To Mondelez https://t.co/sNGgDRBOZJ  When I read this, I think $MDLZ is losing out because of all of the leaders not staying with what they have acquired. Feb 10, 2023
  • BYD is exploring setting up its own factory in Europe. The Chinese carmaking giant is more likely to establish its own plant than take over one from Ford in Germany https://t.co/vi1DVtN3FX  For adoption of EV cars to really begin, they have to cheaper than hydrocarbon cars Feb 07, 2023
  • Fossil-Fuel Addiction Is Getting Harder for Oil Giants to Kick https://t.co/lWJUPCEq9w  Hydrocarbons will be needed for a long time. Alternatives are far too expensive for poorer people to afford. Feb 07, 2023
  • Lab-grown meat has a bigger problem than the lab https://t.co/pyHn1QQboG  You missed the biggest problem: it will be more expensive than meat via animal husbandry. Feb 07, 2023
  • Meet the man who wants to turn empty New York office space into luxury apartments https://t.co/lbk2KRjyco  This needs to be done more. Cities need fewer offices, and more multifamily. Feb 07, 2023
  • Bed Bath & Beyond announces offering of convertible preferred stock https://t.co/82mQ7dvXmC  Yes, the financing methods of last resort. Get the next one ready! $BBBY See also: https://t.co/YFm0OHgvak   Feb 06, 2023
  • Bernard Arnault has a succession plan to cement his family’s control over his luxury goods empire LVMH — and prevent the infighting that has plagued billionaire clans like the Murdochs & Ambanis https://t.co/SRbovCnUo0  Complicated succession plans create conditions for stagnation Feb 06, 2023

Personal Finance

  • Work gives a bit of meaning to life. Better if you know that the core meaning is serving Jesus. I have no compulsion to work. I could retire now. I like working. Retirement is a bogus post-WWII concept https://t.co/x9fpStkXLs  https://t.co/C2LxlUQx6k  Feb 11, 2023
  • Have we outgrown a single retirement age? The ability to stay at work boils down to privilege, leaving governments under pressure to address it https://t.co/7yJVJ1Vqlf  Exorbitant promises meets the challenge of bad demographics. We lost a reason to have children via entitlements Feb 11, 2023
  • Criminals use Telegram to recruit ‘walkers’ as America’s big banks see an 84% increase in check fraud https://t.co/xzhkrW6oKR  I’ve gotten cheated on this as well. Hint: check your bank account weekly, show bogus transactions to them quickly, and the bank will eat the loss. Feb 10, 2023
  • Jim Cramer versus the world https://t.co/98cG6IOAWL  I wrote for Realmoney.com for 4+ years. Some readers called me the anti-Cramer. I am grateful to Jim, who invited me to write. I wrote one article (without naming Jim) to warn viewers about him: https://t.co/ZIw7qaa663  Feb 10, 2023
  • Risk-free Annual Returns of 50% https://t.co/Lcil2SnWi4  No one invites you to earn a high return with no risk, except to cheat you. Feb 08, 2023
  • Where Do Millionaires Keep Their Money? [It’s Not Where You Think] https://t.co/Fz61jVYz6t  I’m not sure this is right. I’m pretty certain wealthy people have more in their own businesses, and less in alternatives (unless that means real estate) Feb 08, 2023
  • A decline in mortgage rates has kick-started people’s interest in buying homes https://t.co/qcehMofDxf  Small uptick, a lot depends on when the recession comes. Feb 06, 2023

Non-US

  • As Iran marks the 44th anniversary of the Islamic Revolution, the younger generation is digging up the regime’s brutal past https://t.co/kJ37dVAJfj  Revolution in 1979 kept only one promise: Islam. It produced an economically & politically unequal society dominated by the mullahs Feb 11, 2023
  • Biden and Lula Put On Pro-Democracy Show Under Bolsonaro’s Shadow https://t.co/pPcHGPJdvl  Why not trade dropping Cuba and Venezuela sanctions for free and fair elections in both places? Lula, you in? Feb 11, 2023
  • When I was 20, one of my friends was the son of the US Ambassador to Afghanistan. He had a crude poster on his wall saying “Afghanistan — the Russian word for graveyard!” There was a picture of an Afghani stabbing a Russian. Well, today we spell Afghanistan this way -> UKRAINE Feb 11, 2023
  • Moldova’s pro-Western government resigned amid the worsening economic fallout from the war in neighboring Ukraine https://t.co/cXCODSFFuq  It’s a challenge living next to Russia. Feb 11, 2023
  • Marina Ovsyannikova said the French group Reporters Without Borders helped exfiltrate her from Russia using different vehicles https://t.co/Z7hw6vGM87  Congratulations on surviving, escaping, and the bravery you displayed on Russian TV. Feb 10, 2023
  • South African President Cyril Ramaphosa declared a state of disaster to enable the government to accelerate its response to an ongoing energy crisis https://t.co/llFoCIBLS2  Unless you can root out the corruption at Eskom, this will not succeed. Feb 10, 2023

Adani Group

  • India has struggled to attract private capital to infrastructure projects. In Adani Group, New Delhi found an ally ready to promise billions to build a shinier India. https://t.co/TMjeY0Fugw  Corruption has its costs. How much truly goes to build a better India? Feb 10, 2023
  • Adani Group plans to prepay a $500 million loan due next month to a group of banks as the Indian conglomerate looks to bolster its finances following a short seller attack https://t.co/1UDde6kuMB  Wonder if they are running short of liquidity, but making a brave face of it for now Feb 08, 2023
  • Hedge funds and distressed debt specialists have scooped up bonds related to billionaire Gautam Adani’s business empire as they look to capitalize on falling prices https://t.co/zf7dEQI4CR  Encouraging for Adani Group… the buyers do their homework Feb 08, 2023
  • Gautam Adani’s ports business to repay $600mn in race to cut debt https://t.co/RfI7PvW0ED  If he can genuinely pay down the debt of one of his main subsidiaries, Adani Group will likely survive. Feb 08, 2023

Artificial Intelligence

  • Misinformation and bad data are the biggest risks to AI bots like ChatGPT https://t.co/OdnNWXxxV8  Use an area where you are an expert, and chat with a chatbot about it. You will be disappointed by the low quality. Feb 10, 2023
  • Chinese search giant Baidu plans to integrate an AI-powered chatbot into its main search engine in March, people familiar with the matter said https://t.co/m6IezSGREd  Wait for it to criticize the Communist Party Feb 09, 2023
  • Google has detailed new search features powered by artificial intelligence https://t.co/uual0i2tHP  Give the chatbot enough “ethical” principles and it might not be able to say much… from the the company that gave the bland rule “Don’t be evil.” Feb 09, 2023
  • Bing-O! @JoannaStern checks out a new version of Microsoft’s search engine with impressive ChatGPT-style artificial intelligence. https://t.co/tDUh1b1U74  As for me, Bing got my first question wrong and Google & You.com got it right. Feb 09, 2023
  • Traders See AI Tech Shaping Their Future, JPMorgan Finds https://t.co/tfxzMHdvI7  This is unlikely. Feb 06, 2023

Automobiles

  • Auto Credit Availability Tightened Again in January https://t.co/4GTGDuKvzL  Unless you are a cash buyer, this is not a good time to buy a car. Feb 11, 2023
  • Auto lenders, dealers draw more scrutiny after pandemic-era boom https://t.co/WSie3ZTABP  Given the way that lending agreements are drafted in a complex way, lenders possess most of the rights, so they take advantage of those who are unsophisticated. Feb 07, 2023
  • Even after you think you bought a car, dealerships can ‘yo-yo’ you and take it back https://t.co/VmivEQuNIF  Yes, it should be illegal to sell the trade-in vehicle before the sale is final. Feb 06, 2023
  • Auto loan delinquencies rise. What to do if you struggle with payments https://t.co/Xm82fLahZi  Their suggestion: “The sooner your bank or credit union is made aware, the easier it is to come up with possible solutions.” Feb 06, 2023

Politics

  • The first major criminal charges that Donald Trump could face for interfering in the 2020 election might come from Atlanta — but won’t stay there https://t.co/Yp5ikYs5Et  Nice to see Trump getting some pushback for his wrongdoings Feb 08, 2023
  • Crime Is the Only Issue in Chicago Mayor’s Race by Joseph Epstein https://t.co/HYh74TlnbV  It takes some doing but Chicago makes Baltimore look good by comparison Feb 07, 2023
  • Florida lawmakers are proposing to give Ron DeSantis full control over the board overseeing Disney’s special district, as the Republican governor escalates his fight with Disney https://t.co/W5pzQKyjfI  W/the legislature, he would appoint a new board not controlled by $DIS Feb 07, 2023
  • The White House slammed a proposal by House Republican committee and caucus chairs to set up a panel examining Social Security and Medicare solvency as part of debt-limit negotiations https://t.co/Vg5td3459l  Someone tell the GOP that a SS payment will get skipped in 2032. Feb 07, 2023

Economics

  • Fed’s Williams says there is still more work to do to bringing down inflation. https://t.co/7nWl8htdaL  For diversity, equity and inclusion, the FOMC has imposed maximum IQ limits on its members. Feb 09, 2023
  • Some workers are thrilled about being laid off https://t.co/EEKwSOQ2Cs  Remember, it is unusual to like being laid off Feb 08, 2023
  • Nearly 10% of US workers report having a main job plus at least one other side gig, a survey shows https://t.co/yYIJwyWSe1  The data here is interesting. More people work 2+ jobs. Few are in the office every day. Feb 07, 2023

Commodities

  • How metals keep going missing in an industry that has a history of risk and fraud https://t.co/vZyck422lM  Perhaps you should take delivery. Wait, you can’t take delivery? The problem of warehouse receipts Feb 10, 2023
  • Commodity trader Trafigura Group faces some $577 million in losses after discovering metal cargoes it bought didn’t contain the nickel they were supposed to https://t.co/48uoyHJtTa  One metal looks like another, right? Feb 10, 2023

Sorted Weekly Tweets

Posted on by David Merkel

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

Sorted Weekly Tweets

Posted on by David Merkel

Picture Credit: David Merkel, with an assist from the YouImagine AI image generator || Running at the beach

Non-US

  • New Zealand Prime Minister Jacinda Ardern’s resignation highlights the complexity of post-Covid economic challenges https://t.co/wYjiYV0MLi  People got tired of an overly interventionist leader who did not listen. Jan 20, 2023
  • Argentina’s plan to repurchase $1 billion of its deeply distressed dollar bonds has emerging-market investors scratching their heads https://t.co/hlu9qSfIrI  If you are going to do this, don’t announce it in advance. Just do it quietly. Jan 19, 2023
  • Entrepreneurs Flee China’s Heavy Hand: ‘You Don’t Have to Stay There’ https://t.co/Ijh5EWbg9A  China faces a talent and capital drain. Once you experience freedom, no level of economic incentives will get you to return to Communist China. Jan 19, 2023
  • India may have already surpassed China as the world’s most-populous nation https://t.co/pJiou6pys7  India’s culture would have to change a lot for it to have a fast-growing economy. Cultural change is difficult, so it is not likely Jan 19, 2023
  • How Rich Are Gulf Countries? Region’s Wealth Funds Have $3 Trillion to Spend https://t.co/KNNvnYr0BT  Finding new ways to lose money Jan 18, 2023
  • China’s population started shrinking in 2022 for the first time in six decades https://t.co/W3S9zvd3Aw  This is not news. Anyone paying attention knew this was coming 15 years ago. Jan 18, 2023
  • The UK is poised to threaten social media bosses with prison if they break new safety rules. That’s sensible, says @parmy https://t.co/uMKTmduBFs  Not sensible. We don’t jail corporate leaders for tortious corporate actions. Instead, we fine the companies severely. Jan 18, 2023
  • Russians became the top foreign buyers of real estate in Turkey last year, helping sustain the world’s hottest housing market by tripling purchases https://t.co/JHIAXw2uHe  Also happening in Georgia. Many Russians escaping Russia, and becoming significant in nearby nations. Jan 18, 2023
  • Western banks struggle to exit Russia after Putin intervention https://t.co/C1tdCYaYzK  The wind-down strategy seems the most compelling Jan 17, 2023

Credit Issues

  • The rapid meltdown of Americanas has left Brazilians with the prospect of losing a ubiquitous company known for its iconic red-and-white logo and holiday sales https://t.co/do9eD4mroq  Things like this don’t happen by accident. Management may have corrupted their accountants. Jan 20, 2023
  • Property markets face a deepening debt crisis as the era of easy money ends, and the fallout is everybody’s problem https://t.co/fFKTSmtiqI  Stick to low leverage, quality and only “B” properties that are necessary… Jan 20, 2023
  • US watchdog cracks down on private equity securitization vehicles https://t.co/rjSGcuzh7i  NAIC: 1) always late 2) underfunded 3) lacks smarts 4) states don’t listen to them 5) tries to grab control of credit questions, botches it, & gives it back to the rating agencies Jan 18, 2023
  • Opinion: More rotting assets are lurking in the shadows of the financial system https://t.co/kn6eaxfGMq  Definitely opinion & biased. Many of the things stated here are wrong. That said, if defaults pile up from CLOs, let the entities funding them default, and don’t bail them out Jan 19, 2023
  • Big banks might need to be broken up if they become too big to manage & are unable to fix significant regulatory lapses, a top federal banking regulator said Tuesday https://t.co/ThWQ1ujBId  Regulators most willing to break up the big banks likely have the least ability to do it Jan 18, 2023  

Portfolio Management

  • Baillie Gifford admits ‘humbling year’ after $14bn loss on Tesla and Shopify https://t.co/2fA5cLEtwT  Evaluate using dollar-weighted returns, like the PE guys do. Jan 20, 2023
  • Corporate fraud is widespread – and largely undetected, study says https://t.co/GEyfWRziKA  Cash flow conquers all. If things were that bad, you would see a lot more insolvencies. There is bending GAAP, and breaking GAAP. The former is common, the latter is not. Jan 20, 2023
  • Questioning the Illiquidity Premium https://t.co/8Q7lbVMxij  Simply put, you shouldn’t buy an illiquid investment unless you will likely get a premium return versus similar illiquid investments. Realizing an illiquidity premium is never guaranteed Jan 17, 2023
  • Investing When Your Time Horizon Is Short https://t.co/lmLOsMtFwv  If your assets need to spent in 3 years or less on average, don’t own stocks. Jan 17, 2023

Science

  • Propulsion System Could Get Us From Earth to Neptune in 1 Year https://t.co/iIuEIL25yp  This isn’t likely. Transferring kinetic energy with extreme accuracy would be tough. Jan 20, 2023
  • Companies are turning to microbes to alleviate fertilizer’s negative impact on the environment https://t.co/UIqd68kEf2  Milorganite has existed for years, Yara. But other technologies here could be game-changers. Jan 20, 2023
  • A nuclear-powered copter on Saturn’s moon Titan. Blimps on Venus. Space engineers are planning innovative flying machines to explore far-away worlds. https://t.co/LWiEDPiztg  At least unmanned missions are cheap. Pity they won’t find any life out there aside from microbe stowaways Jan 19, 2023
  • New research finds that global temperatures would be about 0.1°F higher, had it not been for an increase in atmospheric dust https://t.co/LQmqIbtmVv  Think of volcanoes. This isn’t news. Jan 19, 2023

Auto Finance

  • Can You Use a Home Equity Loan to Buy a Car? https://t.co/hg91niTa5L  Could be a good idea if you pay it down quickly (<5 years), but not otherwise. Jan 19, 2023
  • The steep plunge in used car prices – what it means, and what’s ahead https://t.co/cslWrGFhbQ  In general, the fall in prices is far greater the older and cheaper the cars are. Once new cars are being bought and sold in volume, recent used car prices may decline more rapidly. Jan 18, 2023
  • Hangover Time for Used-Vehicle Dealers. For Buyers, Patience Will Pay Off | Wolf Street https://t.co/HP7R7jyREj  It’s likely that the prices of used autos will continue to fall. Jan 17, 2023
  • How Auto Lenders Can Help the Growing Ranks of Troubled Borrowers https://t.co/GA7XI7VDmy  The low end is experiencing greater credit stress Jan 17, 2023

Politics

  • It’s Time to Put a Brake on the Debt-Ceiling Charade https://t.co/XQ4RAnotdG  Switzerland has an expenditure cap that requires balanced budgets over time. It would be a lot better than what we have now. Jan 18, 2023
  • A looming, high-profile fight in New York speaks to a widened interest in state judicial appointments since the U.S. Supreme Court overturned Roe v. Wade https://t.co/uwNJeEeHxz  New York, where liberals fight liberals. Jan 18, 2023
  • Lawsuits across the U.S. are challenging policies aimed at getting homeless people off city streets https://t.co/mIFMoYyamI  I’ve known some homeless people over the years. The main common factor: lack of self-control, which is a skill that can be lost or developed. Jan 17, 2023

Private Equity

  • Private equity’s slowdown in 3 charts https://t.co/GTXKsF1wDD  The situation is extended and ugly. What can we say? Watch for writedowns. Jan 20, 2023
  • Inside The Secretive World Of Shark Tank Deals: Who The Real Winners Are https://t.co/tMyOhmeC4h  Interesting article. I’ve never been impressed with “Shark Tank”, because like all investing, acting quickly leads to ruin. This helps prove it. Jan 20, 2023

Crypto

  • Binance Is Bleeding Assets, $12 Billion Gone In Less Than 60 Days https://t.co/rgdl1GniHM  Bye, bye, Binance Jan 20, 2023
  • Genesis Global Capital is laying the groundwork for a bankruptcy filing as soon as this week https://t.co/0WuMU0SrE9  Which will likely lead to a Gemini bankruptcy… Twin bankruptcies, and it is only the beginning. Jan 18, 2023

Companies

  • Meme stock Mullen risks drowning its investors by issuing a ton of shares, argues @chrismbryant https://t.co/Vvt5SYVoqG  This is a rational response to meme stock investors: stuff them full of stock. Jan 19, 2023
  • Looming Twitter interest payment leaves Elon Musk with unpalatable options https://t.co/oJmCngeWjC  If Twitter is worth no more than $15B at best, then basically the banks will own it, unless Musk tries to fold it into $TSLA, or some recapitalization that spreads the pain Jan 17, 2023

Odds and Ends

  • California Has a Gas-Price Mystery: Too High, But Why? https://t.co/FlrG5NHpsB  Low refining capacity, low number of gas stations per driver — blame California regulations. Jan 20, 2023
  • Appliance makers are betting that internet-connected “smart” appliances will help transform their businesses and customer relationships—but not all consumers are plugging in https://t.co/z2p59IWD06  Better to buy simpler appliances, they break less, & fancy features are marginal Jan 20, 2023
  • A major Hollywood producer just pulled back the curtain on how hard it is to make movies—and how the streaming model killed the independent film https://t.co/LkO6HxoEj3  In general, this is good. Edgy content is usually bad content. Jan 20, 2023
  • Tech startup workers are grappling with what the market tumult means for their finances. https://t.co/gbBj7Y8ijd  It’s a big risk to give up a lot for the startup company you work for in order to have a chance at a big score. ~80% don’t succeed. Jan 19, 2023
  • The Financial Accounting Standards Board is moving to permit companies to apply a certain accounting method to more tax-credit investments https://t.co/Kfdvz15ydT  This is an interesting corner of investing. The accounting issues matter less than risk-based capital issues Jan 19, 2023
  • Fake meat companies promised to halt climate change, protect animals and make people healthier— while making billions. But they’ve turned out to be another food fad https://t.co/gYtcLlx7D8  It comes down to lower quality at a higher price Jan 19, 2023
  • Something has been killing American young people in sharply rising numbers, but it’s not vaccines, @foxjust says https://t.co/d0WWDl5z5S  Large increases due to accidents, homicides, suicides, & C19 Jan 19, 2023
  • Bob Prince, who helps manage the world’s largest hedge fund, says more people need to lose their jobs before inflation will be brought under control https://t.co/GH6YFITkMR  No, the Phillips curve does not exist in the presence of global trade. Don’t create a financial crisis Jan 18, 2023
  • Food waste is a major contributor to climate change. This startup wants to reroute your kitchen scraps from the landfill back to the farm https://t.co/svDMWmZAaH  But why make them pay to do this? This is your cause. You should pay for it. Jan 18, 2023
  • The Consumer Financial Protection Bureau is weighing new restrictions on fees companies charge to wire money abroad https://t.co/998tjpQ24v  It’s fine if compensation is disclosed or undisclosed, just not both. https://t.co/HWWVFqqmCr  Jan 17, 2023
  • Going electric is often prohibitively expensive for truck drivers operating at US ports. One California startup may have a solution https://t.co/sy5KNgEFql  All-in, a lot of the supposed environment advantages go away when applied to extremely heavy vehicles. Jan 17, 2023
  • CES, the consumer electronics convention held in Las Vegas this month, felt a lot like the flashy auto shows of yesteryear, with a techy twist https://t.co/mMJPoHDJWj  Just be for real; flashy niche ideas that are costly will not pay off. Jan 17, 2023

The Rules, Part LXXI

Posted on by David Merkel

Picture Credit: Ron Mader || Humility is underrated. Without it everything is a fight.

“Size expectations to resources and you will rarely be disappointed.”

I would think that this one would be “common sense,” but I have another saying, “Common sense isn’t.” Many people engage in magical thinking, overspending and assuming that things will work out in the end. Under most conditions, it does not work out in the end.

Living in reality is a key to happiness. Delay gratification, have a buffer, and invest for the future. What could be simpler?

You might or might not be surprised at how many let short-term pleasure dominate over long-term well-being. I think it is hard if one is single to have the gumption to think long-term. There is a temptation to play when there is no one else relying on you.

The lessons of the Great Depression have been lost. Be self-reliant, or family-reliant.

Patience and humility are underrated virtues. Perhaps it seems like those who are proud and impatient do better, but that’s just the unequal signal problem. What’s the unequal signal problem, you say? Those that publicly succeed get more notice than the many more that privately fail because they offend others with their pride and impatience.

I’m not saying don’t take moderate risks to improve your position in life. I am saying that trying to hit home runs begets a lot of strikeouts. If you are not capable of bearing the losses of strikeouts, don’t try to hit home runs. Instead, try to hit singles more reliably.

This is one reason why I say to diversify. Here’s something I haven’t said before, but when I was a kid, I used to read Value Line. They would talk about cash as a diversifier, and highlight stocks that were growth at a reasonable price, and had momentum of earnings and price. It’s good to keep short bonds (cash) on hand for the opportunity to invest at lower prices when they become available. Or, to use the cash in an emergency, because you can’t always be sure of future spending needs.

Investing in stocks requires patience. Holding cash (short bonds) requires humility. With patience and humility you can take on the markets and not worry much about the future. You know you can hold your positions. You know you can meet surprising cash needs. You are ready for anything, because you have enough slack in your asset allocation to hold onto your risk positions under almost all circumstances.

For me, humility meant paying off my mortgage debt early, even though my investing was going well. My investing went well because I didn’t have to worry in market downdrafts about how we would live. Really, I haven’t had a significant personal economic worry in 18 years.

Patience for me meant slowing down buying and selling stocks. Hold them longer. Think harder about the purchase decision. Business plans take time to develop. Owning stock is owning a business. Real success comes over time, not by day-trading.

And, find happiness where you are. Retirement can be fulfilling even if you don’t have a lot of assets. Find work that isn’t too taxing, and keeps you in touch with others. Having purpose in life aids happiness. Then use your assets carefully to aid your life over the long haul. Remember that longevity is a risk, so don’t overspend.

Does this sound hard? Yes, it does. And that is our lives. Humility helps at this point, realizing that growing old isn’t easy. But if you size your expectations to your resources, it will be easier, recognizing that you did your best, and that you are getting a reasonable living in your old age.

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