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

Picture Credit: Harper Collins, Simon & Schuster, with an assist from Pinetools.com || As is common with ChatGPT: explain this to me in a way that a five year old would understand.

I have five grandchildren living near me. The oldest one is three, the second oldest is two. The two oldest ones are boys, and they love me. Grandpa is a lot of fun. I read to them, and play with them. I am slightly unpredictable to them, enough so that it makes them test me as they play with me. I never do anything their parents would not like, but the parents appreciate the way I take care of them. I even change diapers!

But from my grandchildren, and remembering my children, I appreciate the simplicity of books for young children. So, tonight I want to comment on We’re Going on a Bear Hunt, and the short story inside Frog and Toad Together, entitled “Dragons and Giants.”

We’re Going on a Bear Hunt displays a family who think going on a bear hunt is easy, and so they don’t prepare properly for it. They proclaim many times, “We are not afraid.” After many going through many obstacles to find a bear, once they find a bear they run away back to their home as the bear chases them. They lock the door and hide under the covers in the master bedroom. As I said to my three-year old grandchild, “Were they afraid?” He thought for a moment and said “Yes.” Smart kid.

In the story “Dragons and Giants,” Frog and Toad admire the bravery of those they have read about fighting dragons and giants. They muse as to how brave they are, and conclude that they are pretty brave. They go on a hike outside to prove their bravery, are nearly eaten by two creatures and almost crushed in a landslide while proclaiming that they are not afraid. Then they run home, go to the bedroom, and tell each other how grateful they are to have such a brave friend, while they hide safely at home.

Now, what does this have to do with the FOMC [Federal Open Markets Committee]? They want the honor accorded to Paul Volcker for his extraordinary efforts for extinguishing inflation in the late ’70s / early ’80s. Regarding inflation, things are nowhere near as bad as in 1981, but they want to sound stern about inflation, even if it isn’t a big threat. They want to look good and courageous. Thus they proclaim loudly their fight against inflation.

Sadly, because of too much debt, deflation is the greater threat, and once it is too late because monetary policy has been too tight for too long, the FOMC will panic and loosen rates more than they should when the recession hits, setting the stage for the next mistakes of the FOMC. (Can Saturday Night Live parody the FOMC? It deserves parody.)

The FOMC runs from panic to panic, never willing to admit that they made mistakes that helped create the panics. It’s a foolish system. A gold standard would be better. I offer my own standard for those who like fiat money.

Replace the FOMC with a computer. The key variable is the difference between 10-year and 2-year Treasury yields. When the difference is greater than 1.5%, raise short rates until the difference is less than 1.5%. When the difference is less than 0.25%, lower short rates until the difference is more than 0.25%, unless it would make the policy rate negative.

This would be much more stable than what we have at present. Rather than proclaiming bravery and running away when they are wrong, it would be far better for the FOMC to be quiet, and not take aggressive policy actions.

Oh, and for those that want to know what the FOMC should do, I tell you they should loosen 1%! What will they do? Fools that they are, they will tighten.

Companies

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

Market Structure Issues

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

India

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

Portfolio Management

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

Fraud

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

Energy

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

CMBS / CRE

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

Non-US

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

Personal Finance

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

US Economy

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

US Politics

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

Odds & Ends

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

Picture Credit: 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

Picture Credit: David Merkel, with an assist from the YouImagine AI image generator || Boldly flying in front of a stained glass window

Portfolio Management

• Sick of the ups and downs of the markets? Assets that don’t trade at all might sound tempting, but @jasonzweigwsj says beware of the pitfalls of private offerings https://t.co/AO2RWVMdVq  Don’t let the volatility of publicly traded assets scare you into buying opaque investments Jan 13, 2023
• Why investing will grow more difficult in 2023 https://t.co/nq173pzVFO  The VIX, and option volatility generally is over-followed, and there are options speculators than before, particularly with calls. 2023 is merely a sequel to 2022, already anticipating the FOMC stopping Jan 13, 2023
• Experts Spent Years ‘Angst-ing’ Over Value. In the End, the Answer Was in the Textbook. https://t.co/7gEByaPayA  Abundant liquidity from the Fed emboldened growth investors to bid prices to unsustainable valuations. Jan 11, 2023
• Barbarians Are at Grayscale’s Gates. Can They Take Over $GBTC? https://t.co/pKLMtrt4go  This situation may be hopeless, so learn from the broader principle: be careful before investing in anything where it is extra difficult to vote out management. Jan 10, 2023
• 3 Ways to Measure Management Integrity https://t.co/ft2IfzGblW  Integrity is important because if a management team is unethical toward stakeholders, in a tough situation, they will cheat shareholders as well Jan 10, 2023
• How often do you need to rebalance your portfolio? The answer may surprise you https://t.co/Q21GMn5zLj  Rewards for rebalancing have declined because risky asset classes have become more correlated over time, as diversification has become more broad Jan 10, 2023
• Brokers that offer traders the chance to buy less than a full share of a stock are set to face more scrutiny from a key industry watchdog https://t.co/NvfIUAnFyE  These are worthy of scrutiny, but the amounts involved are small potatoes, for the most part. Jan 10, 2023
• The California Public Employees’ Retirement System is making a $1Bn wager that small private equity firms can boost the pension giant’s returns and clout https://t.co/NGKkU6tnmD  CALPERS has a knack for being late… adding money to two small private equity shops now? #pe_glut Jan 10, 2023
• Monte Carlo Failures Aren’t Plane Crashes https://t.co/AenaX40s1k  Attempts to distinguish between meeting needs and wants. Does not take into account, as far as I can see: quasi-MC, return assumptions, variances, correlation, mean-reversion, momentum, extreme events, etc. Jan 09, 2023
• Estimating Future Stock Returns, September 2022 Update https://t.co/EwIuzWnCDL  My but future returns are limited. 3.2%/year over the next 10 years. Does that sound attractive? Jan 08, 2023
• A look back at the wildest financial predictions from the everything bubble https://t.co/oOIPcQ7Se4  Impossible to have an “everything bubble.” That said, stocks, housing, and crypto are still overvalued. Jan 08, 2023

Culture

• US birth rates are at record lows – even though the number of kids most Americans say they want has held steady https://t.co/Nz026ECbUX  There is no mystery here. If you don’t have children while young, odds decrease that you will have children, and a higher number of them. Jan 14, 2023
• The Half-Madness of Prince Harry by @peggynoonannyc https://t.co/l34TqzQmK9  Seems like a PR “scorched earth policy.” Why should we care about the English monarchy, including Harry? Is he trying to destroy something because he cannot have it himself? #envy Jan 13, 2023
• The new conservative Israeli government means Jewish activists have more support for praying at the Temple Mount. https://t.co/Cbxx8xqrNq  Playing with dynamite Jan 12, 2023
• Why Italians have become the most common foreign nationality in London https://t.co/SCsAskWoS2  Culture matters. There is more opportunity in London than much of Italy Jan 10, 2023
• Xi Jinping’s plan to reset China’s economy and win back friends https://t.co/ezTQgj9u62  It’s rare to see someone have severe opinions “spin on a dime.” These efforts are meant to end the protests and regain some Western support. Xi will revert when he finds it advantageous Jan 10, 2023
• The Engineers Are Bloggers Now https://t.co/j9DU5Ot69p  Anytime you can get good writers in STEM fields to break down the complexity, it is a treat. Management appreciates those who can take a tough subject and explain it to them. Jan 10, 2023
• CFP? CSLP? There is an alphabet soup of financial-adviser credentials https://t.co/reycid43Lm  Credentialing is overdone. The only ones who directly benefit are those who create the credentials. This will eventually fade, aside from credentials that are genuinely hard to obtain Jan 09, 2023
• Is it time to kill calculus? https://t.co/7vmGjNozdI  Maybe, and it might be good to replace geometry with analytic geometry, but adding data science and probability will leave most STEM majors underprepared for college math. Jan 08, 2023
• Also, the article is wrong when it states that current math pedagogy favors boys over girls. It is the opposite, except in the top decile. This proposal would not make things better; it would create new problems. Math pedagogy peaked in the 1950s and has gone down since https://t.co/qxQl3tnt2z  Jan 08, 2023

Companies

• Bed Bath & Beyond continued to surge on Thursday after the company’s bankruptcy warning reignited interest from retail traders https://t.co/EeW4tHeUdT  Time for a secondary offering of $BBBY stock, or quietly do a PIPE. Or a rights offering w/some warrants, or a junior convertible Jan 12, 2023
• With $200 billion already squandered and Tesla in sharp decline, it’s possible Elon Musk will never be the world’s richest person again https://t.co/VPqvOEMAOk  Could Elon Musk lose all of his $TSLA stock? Dubious, but losing almost all of it is quite possible. Jan 11, 2023
• A swing and a miss https://t.co/Iva3XAYNIT  A commercial real estate pro comments on Univ. CA’s recent transaction In BREIT. His conclusion: even with the discount, they would have gotten a better deal in the public REIT markets Jan 10, 2023
• Pizza Robot Company Stellar Draws Engineers From SpaceX https://t.co/ZcxP4vAI08  If it can get the cost of a pizza down with reasonable quality, this could be interesting on a mass market basis. Jan 10, 2023
• Ukrainians accounted for 45% of all the new foreign companies that set up shop in Poland last year, according to a report https://t.co/lhFlsqYkJn  Will be interesting to see how Polish/Ukrainian relations evolve. Jan 10, 2023
• Warren Buffett’s excellent Japanese adventure will probably keep pumping out profits even as oil and gas prices slip from their highs, writes @JavierBlas https://t.co/wZrceogkZY  Another small win for Buffett Jan 09, 2023
• The US Supreme Court turned away four appeals by Fannie Mae and Freddie Mac shareholders who wanted compensation after the Treasury collected more than $100Bn in profit from the GSEs https://t.co/Uud0coWGJO  The common stock should have been canceled after the bailout Jan 09, 2023

Central Banking

• Transcript: Why Banks Are Suddenly Borrowing From the Fed’s Discount Window https://t.co/3YUSj4Jnhv  Long, but valuable if you want to learn how the Fed’s discount windows, and other liquidity facilities work Jan 13, 2023
• Peru extended its biggest-ever phase of monetary tightening Thursday to curb a spike in inflation that is aggravated by anti-government protests https://t.co/gwJ82CTznj  When no foreigners have to buy your debt, in order to aid exporters, inflation can get out of control quickly Jan 13, 2023
• The Bank of Korea raised its benchmark interest rate on Friday in what could be the final act of its 18-month tightening cycle https://t.co/5K5LrbIsK1  Yield curve inverted, seemingly stopping. Jan 13, 2023
• More investors are putting greater focus on services inflation and labor-market data as they try to grasp a more complex inflation picture https://t.co/6UsJ8f4SY6  Leaving out anything skews the inflation picture. But ignore the Phillips curve. Wages have low impact on prices Jan 11, 2023
• Jerome Powell said the FOMC is strongly committed to lowering inflation even though interest-rate increases could fuel political blowback https://t.co/BaPhhEtJM7  FOMC drives through the rearview mirror. Should use forward looking indicators even if at odds w/present conditions Jan 10, 2023
• The Fed is not a ‘climate-policy maker,’ Powell says https://t.co/fHymyqQHI0  Well said, stick to your statutory mandates — if you can actually achieve them (Tsst… the Phillips Curve was a post-WWII statutory anomaly. It does not exist when there is global trade) Jan 10, 2023

Auto Lending

• Used-vehicle volume hits lowest mark in nearly a decade https://t.co/Jwi4SzmNaq  Delinquencies are rising, & as there are more new cars, there will be more trade-ins. Used car prices should continue to fall. Then expectations effect as dealers pay less for trade-ins as lots fill Jan 14, 2023
• Inventory crisis dragged auto sales to a decade low in 2022 https://t.co/Kq8MJthZNm  Oversupply of used cars coming as many trade in for new cars Jan 13, 2023
• Growing new car supplies means used car prices are starting to drop https://t.co/6VEB0oOfkF  And the prices will likely fall further, as interest rates are higher, and credit is tighter. Jan 12, 2023
• Used car prices post biggest drop ever as new luxury car sales boom https://t.co/STXfvk1Emx  Conspicuous consumption among the wealthy Jan 11, 2023
• It’s Not Just a Car-Loan Crisis https://t.co/t6W4ZDo923  The author is partially right, in that many mortgages and car loans are now inverted as asset prices fall, as the FOMC has raised rates. But car loans are shorter, which makes inversion more severe. Defaults will be greater Jan 11, 2023
• Why worries over subprime auto bonds might be only getting started https://t.co/foKwjdA7Og  More reasons why overprovision of credit in auto finance will either led to 1) more defaults, or, 2) reduction in loan options if $CACC has to pull back –> falling used car prices Jan 08, 2023

Crypto

• Sam Bankman-Fried should be treated as innocent until proven guilty, Ackman says https://t.co/ASTbvVsyy7  A worthy thought. Spitzer won when he got people to compromise. Remember that the grand majority of cases that went to trial were won by the defendants vs Spitzer in the 2000s Jan 13, 2023
• Samsung Asset Management indicated the firm could consider starting a spot Bitcoin ETF in Hong Kong if the city allows such products https://t.co/xaiqRnevBB  Enabling people to lose more money while leveraged, and perhaps unleveraged. Jan 13, 2023
• Mike Novogratz sounds off on Sam Bankman-Fried and Barry Silbert: “The toxic masculine side of me would like to punch them both in the jaw.” https://t.co/z21VhMAhBj  A crazy dreamer — all crypto is a Ponzi at some level. Jan 12, 2023
• FTX advisers have found more than $5 billion in cash or crypto assets that it may be able to sell to help repay creditors, a lawyer for the company said https://t.co/M5UiEHUhnn  Like Madoff, claimants won’t get nothing, but they won’t get paid in full. Jan 11, 2023
• Coinbase Crypto Exchange to Cut Nearly 1,000 Jobs https://t.co/uFKd747eM0  If you are laying off people, you are likely not a growth company. With $COIN estimate cash burn rate vs cash available to the holding company Jan 10, 2023

Credit Issues

• A deal frenzy that included Elon Musk’s Twitter takeover has left Wall Street banks struggling to revive the lucrative business of backing big mergers https://t.co/X9QhKAolI8  Take your losses & be done. The bear phase of the credit cycle lasts well into the FOMC’s loosening cycle Jan 13, 2023
• To many young consumers, zero-interest layaway plans such as Afterpay mean free money, and the idea of paying down daily indulgences doesn’t faze them. A report on the problem with Gen Z’s love of “buy now, pay later” programs https://t.co/JLg75QPM3q  Credit losses emerging Jan 12, 2023
• Japanese Internet Firm Rakuten Selling $200 Million Bond https://t.co/VjsYLTR3Cz  Interesting that some junk credits are also bringing deals. Jan 10, 2023
• Europe’s Bond Sales Top $130 Billion in Record Time https://t.co/aYljLxYqkr  Interesting to see this level of borrowing… also the $20B Saudi Arabia deal. Many Non-US entities borrowing long in USD Jan 10, 2023

Rain in California

• Beach towns such as Capitola, where a wharf was torn in half, have borne much of the brunt from California’s recent series of torrential rainstorms https://t.co/ejqXBkHZbA  If you build on the coast of the ocean, or next to a large river, you are asking for trouble. Jan 13, 2023
• EXPLAINER: Storms put California levees to the test https://t.co/fjndwqBvbI  I used to live in Davis, CA. The levee systems of California are crucial for avoiding flooding. But responsibility for the levee is dispersed in public and private hands. Complex and underfunded Jan 10, 2023
• California faces more drenching rain, as concerns about drought have been replaced by fears of flooding that’s killed at least 14 people https://t.co/A2ZqSxJlBg  Excellent news for farmers and skiers. No drought in 2023. Can we get this for the Mississippi river basin? Jan 10, 2023

Science

• Why Not Mars https://t.co/cYPeEfG5Ta  I don’t favor going to Mars, unless it is done with private money. And if we go there we should ignore the international treaty requiring that we don’t contaminate Mars with Earth organisms. Impossible to avoid. Jan 14, 2023
• A climate startup removes carbon from open air in a first for the industry, potentially launching an industry to address climate change https://t.co/NDpLZUTJIv  Looks like a promising technology, if CO2 is indeed a pollutant. Jan 13, 2023
• Why ChatGPT may be the most human form of A.I. yet: It produces informed BS https://t.co/wyzVlZoSrz  I’ve been playing around with the chat utility at https://t.co/ATiFIuhEjl.  It’s not always right, but if you point it to the right resources, it learns. Jan 13, 2023

Food

• Alchemist: Is this the world’s most creative restaurant? https://t.co/suamcigX9z  Odd, not creative, I will pass on this even if one like it is nearby. Jan 14, 2023
• This new, eco-friendly ‘sugar’ has half the calories of cane sugar: ‘A world-changing ingredient’ https://t.co/DYZgg5PiVe With so many people skeptical about additives, drugs, vaccines, why is there quick adoption of new ‘sugars?’ Jan 14, 2023
• A US government agency will move to regulate gas stoves as new research links them to childhood asthma. “This is a hidden hazard,” said an official https://t.co/limmfmgZSj  If this were true, we would have known it long before. Gas offers much better control in cooking. Jan 09, 2023

Energy

• The Edge of Productivity https://t.co/VZE0RrV3nz  Interesting article on energy use trends, but way too bullish on the impact of AI for productivity. Jan 14, 2023
• The US is backing a Nevada lithium project in an effort to create its own supply chain of the metal. https://t.co/p1w4J57hdT  If it’s that good of an idea, why do you need public financing? National security? Jan 13, 2023

Odds & Ends

• A case before the Supreme Court challenging the liability shield protecting websites such as YouTube and Facebook could “upend the internet,” Google said in a court filing https://t.co/xyLPZIveIL  The internet would survive, but profitability of social media would decline. Jan 13, 2023
• “It would be great if the companies would switch away from email and start using other services,” one executive said, “but people don’t change.” https://t.co/w0q4gGOsuU  Don’t trust email. Skepticism is warranted w/those you don’t know, & those you do know when it looks weird Jan 13, 2023
• The West Coast, for the past decade a leader in the housing boom, is stumbling, while eastern and southern cities are holding up better https://t.co/CHQluSWy2F  Places where the boom was no so large, or where there have been many migrating to the area. Jan 13, 2023
• Private jet business booms despite commercial airline revival https://t.co/HG8PosSnZ4  ‘“Inflation never affected the 1 per cent,” said Kevin Singh, president of Icarus Jet, a private jet broker.’ Convenience, flexibility, and not having to go through security are the keys. Jan 10, 2023
• President Biden asked Treasury Secretary Janet Yellen to stay in her post, and she agreed, a White House official said https://t.co/GnR4FrlRAl  This should not be news Jan 10, 2023
• Unmarried Women No Longer Pay a Financial Penalty in Retirement https://t.co/caAhCPHrN8  Accurate title would be: Middle Income Women Do Badly in Retirement, Married or Not Jan 10, 2023
• Brazilian police clashed with supporters of former President Jair Bolsonaro in the capital of Brasilia on Sunday https://t.co/zLbWuoW9IP  There was no possibility that they could overthrow Lula. Jan 09, 2023

Picture Credit: Aleph Blog || I know this is late, but still, here it is…

At September 30th, 2022, the S&P 500 was priced to return 4.14%/year over the next ten years. Given the rally since then, that return has shrunk to 3.20%/year. Does that sound attractive? It is lower than the yield on the 10-year T-note, and lower than current inflation (which is falling like a stone, don’t tell the geniuses at the FOMC).

And you could be adventurous, as I was when I was a corporate bond manager (2001-2003) buying long single-A and BBB/Baa bonds. Even at 10 year maturities, you can get well over 5% for sound credits.

The stock market needs to fall around 20% to be at parity with lower-rated investment grade bonds. This is not pleasant news, but given the media drumbeat of:

Stocks always beat bonds! Stocks always beat bonds! Stocks always beat bonds! Stocks always beat bonds! Stocks always beat bonds!

It needs to be said that it is not always true. It wasn’t true in the 2000s decade. It wasn’t true in the Great Depression.

I’m keeping this short this evening. The US corporate bond market is still more attractive than the US stock market. If the S&P 500 drops below 3100, with no changes in interest rates, then the stock market will be a better buy.

So be ready for the stock market to fall further after the Fed stops tightening, when the recession ensues, and buy stocks amid the panic.

PS — when the tech giants are firing people, that is a sign that they are no longer growth stocks.

Picture Credit: David Merkel, with an assist from the YouImagine AI image generator || Even logos need a vacation every now and then

Investing

• Hedge funds gave Discord, Stripe, SpaceX and other startups billions. A Bloomberg News analysis shows what they may be worth https://t.co/vBOZSoqyIJ  Far better to write them down, so as to keep an air of honesty. Jan 07, 2023
• Berkshire Hathaway Could Face a Big Tax Hit if the Bull Market Resumes https://t.co/TIZsdztH9T  This is a proposal that I support: tax the change in unrealized capital gains. In the first year, tax unrealized capital gains. For private equity, an EBITDA tax Jan 07, 2023
• ARK’s Cathie Wood Isn’t Backing Down. She Explains Exactly Why. https://t.co/7hsvVaV8Ea  An amateur who got lucky for a while, who throws money at companies that generally can’t produce positive free cash flow to reward shareholders. Jan 07, 2023
• How private markets became an escape from reality https://t.co/ouOZMxC7JT  ‘Investor Cliff Asness wrote recently of the “mind blowing” possibility that investors now knowingly accept lower returns “for the privilege of not being told the prices”.’ Jan 07, 2023
• Silicon Valley staff rush to offload start-up shares as valuations plummet https://t.co/T6hxfFBzJt  Watch for more deals where a big investor buys in at the last round price, but with additional goodies atached. Jan 07, 2023
• The Fed needs to jack rates up by 10% right now https://t.co/DbWnztkWNw  “But we’re sure that the good folk at Andreessen Horowitz, Sequoia and Founders Fund have done exhaustive due diligence and been disciplined in their capital allocation.” Jan 07, 2023
• A tried-and-true investing strategy just turned in one of its worst years ever. But is the strategy dead? Not even close, says @jasonzweigwsj. https://t.co/jWP36ra4DM  80/20 is best for the long haul. 60/40 does about as well as 100/0 but with less volatility Jan 06, 2023
• If you receive a windfall, should you pay down debt or save for the future? https://t.co/X82JnL6Wp8  It may be a good idea if you have a long time horizon. Valuations are *still* not cheap yet. There is more downside likely after the FOMC stops raising rates. Jan 05, 2023

Politics

• Kevin McCarthy’s torturous bid for House speaker exemplifies the dysfunctional state of the Republican Party heading into the 2024 presidential race https://t.co/X3BIIk5cRq  Be bold. Want centrist politics? Ban political parties and primaries. Jan 07, 2023
• South Carolina’s congressional maps will be redrawn after a federal court ruled that the House district lines intentionally split Black neighborhoods https://t.co/iePGQNglOT  District boundaries should be chosen to minimize the length of internal boundaries Jan 06, 2023
• Why can’t Kevin McCarthy get the votes he needs, and what happens until the standoff is resolved? Here are answers https://t.co/eExsSCCvpZ  Well, who knows? Maybe nothing gets done by Congress, and the government shuts down. The Russians invade Alaska, & the Chinese take Taiwan Jan 05, 2023
• Representatives Matt Gaetz and Andy Harris, and even a freshman GOP House member, stand to gain from their votes for Kevin McCarthy for speaker https://t.co/QXtkZIUXJD  Somewhat piggish here, problem of a small majority… perhaps the “Freedom Caucus” could do a deal with the Dems Jan 04, 2023
• Directors who often have little financial expertise are looking after the retirement funds of US public servants. They’re proving to be no match for a system that’s exploded in size and complexity https://t.co/vXZiUcPc33  We do our best to keep investment expertise off the boards. Jan 04, 2023
• I applied to serve on the Maryland & Howard County Pension Boards as a citizen representative. I am more than a generalist investor; I am an investment actuary. I understand it all. Of course they didn’t choose me. Politics. https://t.co/9FP9JeS9vp  Jan 04, 2023

Science

• The phenomenon behind California’s double-whammy drought and storms has a name: “hydroclimate whiplash” https://t.co/Z8yUafaHwu  Climate change is getting stretched pretty thin to explain every unusual bit of weather. Jan 08, 2023
• US Army’s Flow Battery Could Change Military Power https://t.co/malEss9iyc  If this actually works, it would be significant for intermittent power sources Jan 07, 2023
• Improved Solid-State Batteries for Electric Vehicles Are On The Way https://t.co/gkKCcEKDIt  Still has to be developed to scale, but this could be promising Jan 07, 2023
• San Francisco is in the path of one of the worst rainstorms yet in a season that has likely left behind $1 billion in damages and losses across California https://t.co/GSDxXdfpTe  At least this will good for the farmers Jan 07, 2023
• Meet Tree Energy Solutions, a green-hydrogen startup looking to provide low-emission fuels to European companies amid the energy crisis https://t.co/8JCKHUqBe3  This does not make sense. Most projects in this vein are trying to turn NG into hydrogen. Jan 04, 2023
• Is my study useless? Why researchers need methodological review boards https://t.co/nDKAEgFS2s  It would also help if they reviewed the data & statistical analysis in advance, so that it will be “set in stone” and not arbitrarily modified to get a “significant” result Jan 03, 2023

Companies

• How Amazon grew an awkward side project into AWS, a behemoth that’s now 4 times bigger than its original shopping business https://t.co/eAg7FtrYkh  Long read, worth it. How an internal project to standardize $AMZN programming became a business for others needing computer services Jan 07, 2023
• Why Banks Are Losing the War Against Fintechs https://t.co/6NUII7cwNH  This article is really about cultural differences between bankers and programmers. It would pay the banks to teach programmers about banking, then listen to their suggestions once they have learned Jan 05, 2023
• Southwest’s Biggest Mistake Was Forgetting Its Own Culture https://t.co/6yHLAXawM6  This was coming for a while. On a $LUV flight over a year ago, the crew was openly complaining about the long hours and unpredictability of scheduling. Jan 04, 2023
• About that $4bn BREIT deal https://t.co/KoBvPE6FCj  You have an opportunity to exit the troubled BREIT. Take the exit, and feed the losses to $BX, the University of CA, and those who are too slow to act. Jan 04, 2023
• Bank regulators say holding cryptocurrencies is likely inconsistent with safe banking practices https://t.co/lt7wvzuZwv  “Regulators say holding cryptocurrencies is likely inconsistent with safe banking practices.” Keep the two systems separate. Same way we don’t allow FX mismatch Jan 04, 2023

Economics

• What makes the least sense in Chinese economic policy is trying to maintain residential real estate prices at such high levels, virtually requiring huge amounts of debt to support the prices. Housing is important, but it can’t truly be 70% of the assets of the nation. #3redlines Jan 07, 2023
• The Fed needs to stop raising rates https://t.co/eFgO1Oc1ti  I used to accuse Bill Gross of “talking his book” when he was at PIMCO, but in this case, I think he hit the nail on the head. Jan 04, 2023
• Japan’s new benchmark 10-year note brings a fresh headache for the nation’s central bank in its battle against bond bears https://t.co/GtnWVv45eF  Japan risks a situation where something may break. Better to let the 10-yr float. Jan 06, 2023

Financing

• Wall Street wants capital rules eased to unblock $22tn Treasury market https://t.co/VyNaOGhrr7  This could make sense. Treasuries and cash reserves hit the supplemental leverage ratios disproportionate to their actual riskiness Jan 07, 2023
• The deal was unusual because of its timing and purpose. Most banks and borrowers were holding off on bringing new deals after a rocky year https://t.co/lYIn3LYbPU  Dividend deals are usually bad investments. Do they think the credit bear cycle is over? Jan 06, 2023
• “There’s a durable arbitrage built into AAA CLOs. There’s a regulatory arbitrage,” said Sycamore Tree’s Okada. “You’re floating rate, you’re AAA. I’m pounding the table on that trade.” https://t.co/Bpp20OM083  And that will work until it doesn’t Jan 06, 2023

Odds & Ends

• If you’re looking to earn some extra income, these are the most profitable side hustles https://t.co/A3VDHLIjVu  Useful article Jan 07, 2023
• Extra pharmacy certification requirements put an unnecessary stigma on abortion medication https://t.co/hPZ4FkO6Tx  Yes, “safe” medicine that kills an unborn child Jan 06, 2023
• Walgreens plans to seek certification to dispense pills that can induce an abortion, part of a new program through the US FDA to broaden access to the medication https://t.co/VnIunu2BfK  I will be selling my CVS shares. FD: + $CVS Jan 06, 2023
• The Patriarch Behind Vladimir Putin by @tunkuv https://t.co/hltSakx8fR  This is believable, given the long-term fractious relationship between the Russian and Ukrainian Orthodox Churches. But both are empty ritualism. Jan 04, 2023
• Pope Francis has been the leader of the Catholic Church for almost 10 years, but he has only been the sole pope in the Vatican since Saturday https://t.co/TxW06Raa9c  Bergoglio is a relativist, similar to a liberal protestant with few absolutes Jan 04, 2023
• The moves partly stem from a growing consensus among many who work in education that disruptive behavior often reflects underlying mental-health issues such as anxiety, depression and trauma https://t.co/KRbLENCvxW  In-school suspension is effective. So is expulsion. Jan 04, 2023
• Sam Bankman-Fried has said Alameda prospered until it was tripped up in a crypto crash. Its troubles were much deeper than that. https://t.co/7JrH5fxqnH  Hindsight is 20-20, even for things with a lot of red flags. Jan 04, 2023

Picture Credit: David Merkel, with an assist from the YouImagine AI image generator || I’m giving this another try

Dear Readers,

I know I don’t write as much as I used to. I typically write when I motivated by a given topic, and that’s just not coming as much to me now. But I still tweet on Twitter. I did sorted weekly tweets from 2012 to 2014, then I stopped tweeting as much for a while, and so discontinued them.

I can think of three good reasons to try this again:

1. Readers can see the most interesting articles that I have been reading, and can see some of my thoughts about them.
2. It may give me an idea for a blog post when I see them categorized.
3. In the past, some people have asked me to try this again

So, here is the first episode of this go-round of “Sorted Weekly Tweets.”

Credit Trends

• The worst year for equity bulls since 2008 will also be remembered as one when the predominant investment strategies veered from one another by the most in 21 years https://t.co/BWG0OaRZok  2022 key: “immunize yourself from interest-rate sensitivity.” 2023 key: reduce credit risk Dec 31, 2022
• Despite performance, corporate issues OneMain Financial to raise $460.5 million https://t.co/wszreQ7DXr  Though terms of the securitization offer more structural protection than prior, underlying asset quality looks poor. Credit deterioration on the low end. Dec 31, 2022
• Predictions for 2023: Car Prices Fall as Dealers Suffer https://t.co/glne5aK761  There are a lot of good charts and analysis here. Should be good deals on used cars around mid-year 2023, if you have cash… Dec 31, 2022
• Consumer ABS experts: Keep an eye on employment amid rate policy, inflation https://t.co/cCv1vsPkPP  Early signs of weakness on the low end of credit Dec 31, 2022
• Multiple stress points are emerging in credit markets after years of excess. With cheap money becoming a thing of the past, this may just be the start https://t.co/SqGbFUu5wR  Recently issued loans, with weak covenants, became the financing of choice for many weak companies Dec 28, 2022
• Still one place to get a good deal on an auto loan: Credit unions, which have been offering some of the lowest rates around, undercutting banks and other lenders https://t.co/kDiPkbSfPy  They don’t pay taxes; gives more flexibility. Can cut deposit interest if defaults spike Dec 28, 2022

Politics

• Trump’s tax returns released, launching fresh scrutiny of his finances https://t.co/q9B3s71DTG  If it becomes a question of fraud for assets Trump wrote down in the past to generate losses, his tax returns prior to the seven-year limit could be audited also, particularly 2009. Dec 30, 2022
• Brazil President-elect Luiz Inacio Lula da Silva has selected a senator and former Petrobras official to lead the country’s state-controlled oil giant https://t.co/Bc9PRFoPDi  Sounds like a disaster that will come back to bite Lula. Another unforced error, like Europe & China Dec 30, 2022
• Weeks before the government approved a wind farm off Rhode Island, US scientists warned it could jeopardize the area’s iconic cod https://t.co/Ent7FU1qFK  Environmentalists arguing with environmentalists Dec 30, 2022
• 10 Ways Secure 2.0, Part of Spending Bill, Changes Retirement Planning https://t.co/45p2tW2xzT  Marginal ideas at best Dec 27, 2022
• Going Boldly: The Retirement Savings for Americans Act 2022 https://t.co/HkIDtzSrlq  This will do less good than most imagine. Many poor people need the money to live now. They will not use this. Dec 27, 2022
• Inside TurboTax’s 20-Year Fight to Stop Americans From Filing Their Taxes for Free https://t.co/Fa0tWhAzNA  & Intuit spends millions lobbying amid accusations of deceptive TurboTax advertising https://t.co/UZ378WSCa7  $INTU is annoying, especially paying annually for Quicken Dec 24, 2022
• Intuit collects as much as $1.6Bn in annual income from its TurboTax products, and ProPublica & OpenSecrets find that $INTU has spent >$10Mn lobbying Congress to keep the IRS from simplifying taxes (which would undercut the need to purchase TurboTax). https://t.co/iLHl9qJqk3  Dec 24, 2022
• The Sordid Saga of Hunter Biden’s Laptop https://t.co/VeY2ynEWSW  “The most invasive data breach imaginable is a political scandal Democrats can’t just wish away.” Very long, and sadly, we will likely hear a lot more about this. Dec 24, 2022
• The Surreal Case of a C.I.A. Hacker’s Revenge https://t.co/g6Z8kIovAN  This is indeed surreal, and quite long. Who watches over the watchers? Dec 24, 2022
• I golfed a full course of congressional districts in 84 strokes – 11 strokes over par! Tee off in @washingtonpost’s Gerrymander Invitational: https://t.co/pbmw1nZSvv  I live in MD’s 3rd district, likely the most gerrymandered in the country. It is hole 9, par 26 on this course Dec 24, 2022
• “Isn’t administrative complexity a problem for the government to solve, not a bunch of unelected do-gooders?” @AnnieLowrey writes: https://t.co/N8T8Q6OUIy  Cool idea. I am concerned that in dealing with the government, poor people are disadvantaged by legal & regulatory complexity Dec 24, 2022

Cryptocurrencies

• Opportunities Around GBTC – Valkyrie https://t.co/fkPmSuOPzR  Why should Grayscale voluntarily give up its profits? Dec 30, 2022
• Has Sam Bankman-Fried finally managed to make accounting class sexy? https://t.co/miOiI5y865  No, but he has shown its necessity. Also, the “run on the bank” at FTX would have happened even if CZ hadn’t taken action. That said, when will Binance have its run? Dec 30, 2022
• MicroStrategy shares hit the lowest since 2020 after the enterprise-software firm, the largest corporate buyer of Bitcoin, disclosed its first ever sale of the token https://t.co/XVVczgL629  $MSTR is just levered Bitcoin. Goes broke in 2025 as 2028 secured notes accelerate. Dec 30, 2022
• Criminal charges against a trader who swiped $100M from a DeFi platform show that even as crypto remains largely unregulated, it offers no shield against prosecution over alleged fraud https://t.co/gUtpv4I4fF  I think the plaintiffs have the better argument. Dec 30, 2022

Markets

• Cash holdings at U.S. state government pension funds dropped to the lowest level since the financial crisis https://t.co/xBk8rGpJhh  Many of these funds are desperate: looking for higher returns to bail out the underfunding, taking on risks they don’t grasp including illiquidity Dec 30, 2022
• Tech-heavy hedge funds had a banner year in 2020, but that was the last of the good times https://t.co/zXBkkzK66a  In general long-only management is less risky than hedge funds, and over a full market cycle provide better returns Dec 30, 2022
• After the worst year for global stocks in more than a decade, & a rout in bonds that’s unmatched this century, some investors aren’t going to take anything for granted in 2023 https://t.co/4i6ExvYesP  In the past, few took account of war, contagion, expropriation, sovereign crises Dec 28, 2022
• Home prices fell 0.5% in October compared with the previous month, as higher mortgage interest rates continue to weigh on home-buying demand https://t.co/cUEtw52Ppd  Leading indicator on inflation and growth Dec 28, 2022

Stocks

• Wall Street’s best and brightest got inflation all wrong this year, leaving them & their clients exposed to the full brunt of an epic market collapse. Now, they have to adjust to a new era https://t.co/7Y4AcgaLWd  Stock valuations are still top decile by the equity share model Dec 30, 2022
• US automobile industry; Final Sales of 2022 and Trends for 2023 https://t.co/p2THEFWRXZ  Of the top 10 new car sellers: 1) 9 had their stock price fall. Exception: Subaru. 2) 8 sold fewer cars than 2021. Exceptions: Tesla and GM. In general, I prefer owning auto part makers. Dec 30, 2022
• @MikePTraffic @retheauditors As a value investor, I could not see how Border’s would survive vs $AMZN. It was weakly capitalized, and had to carry a lot of inventory. I agree with your point about management loving their business, and understanding the economics thereof. There is no generic business. Dec 30, 2022
• Used Tesla prices are plummeting four times faster than other cars https://t.co/GEKnx91fIg  Calling Elon Musk! Time to focus on your main business! Dec 30, 2022
• VanEck is the latest asset manager to liquidate Russia ETFs nearly a year into Vladimir Putin’s invasion of Ukraine https://t.co/44trdYkzRf  Isn’t it: 1) Convert ADRs to local Russian shares 2) Deposit Russian shares with a Russian broker 3) Sell them on a Russian exchange? Dec 29, 2022
• 4) Convert rubles to dollars. 5) Wire dollars to the custodial account in the US. 6) Distribute pro-rata to shareholders https://t.co/De3NJTMy2y  Dec 30, 2022
• Silicon Valley staff rush to offload start-up shares as valuations plummet https://t.co/T6hxfFB1TV  Too much money chased too little profit in the past. Now liquidity is needed. Who will provide it, and at what price? Dec 29, 2022

Economics

• After a turbulent year, signs are emerging that wage inequality may be starting to reverse https://t.co/lTdjd4aOVi  Unlikely. Technology aids those who are intelligent, and doesn’t help those who aren’t. Dec 30, 2022
• David A. Shaywitz reviews “Escape From Model Land” by Erica Thompson https://t.co/522DtNmOMl  Send a copy to the Fed Dec 29, 2022
• We Aren’t Ready for a Financial Crisis https://t.co/u5to9iTDqY  We grew faster when we had less debt, public and private, and ran balanced budgets. Dec 24, 2022

Central Banking

• The central bank horror story https://t.co/HBpCjxDEWJ  May not be so bad. Swaps in aggregate net to zero, but there are winners & losers. If the losers run out of money while margining, the winners may lose as well. Dec 30, 2022
• The Bank of Japan announced a third day of unscheduled bond purchases as it fights back against speculation it’s moving toward ending its super-accommodative monetary policy https://t.co/TFZ322s70j  Rippling across global bond markets, creating lots of Yen deposit liabilities Dec 30, 2022
• The long Australian boom shielded the central bank. That’s changing, for the better https://t.co/IG9Yba411h  Just set up a currency board, and end your misery. Dec 30, 2022
• Global debt markets extended an end-of year selloff Wednesday, prompting additional bond purchases from the Bank of Japan https://t.co/9TEV4yBfWO  Say goodbye to negative yields. Hope we never go there again. Dec 29, 2022

China

• Rural residents worry for elderly as COVID rips across China https://t.co/m38cO0ORAO It would have been better if the CCP had given two months warning so people could get vaccinated prior to dropping the COVID zero policy. But the CCP couldn’t be thoughtful Dec 30, 2022
• China’s unprecedented assault on its housing market has left would-be home buyers asking if it was all worth it https://t.co/BJyH7vsZvf  The real estate situation in China is even worse than Japan’s in 1989. Crackup, or three lost decades? Dec 29, 2022
• A growing number of affluent Chinese are coming to Japan to live, in an indication of social and political tensions back home https://t.co/MHst0tbhLe  I find this fascinating given the past antipathy between Chinese & Japanese. Dec 28, 2022

Global

• Billionaire Adani Says India Will Add $1 Trillion to GDP Every 12-18 Months https://t.co/FAbMGwkyV5  Not likely. When this overindebted conglomerateur flames out it will be stunning. Dec 29, 2022
• Putin Wants Fealty, and He’s Found It in Africa https://t.co/rdCmko1vD7  The Central African Republic has always been among the most corrupt nations in the world. Should this be surprising? Dec 28, 2022
• In Record Numbers, Venezuelans Risk a Deadly Trek to the U.S. Border https://t.co/bgoGTQNV9a  This is dated, but I had not heard about this. You have to be pretty desperate to take on a trip like this. Thanks a lot, Chavez & Maduro, for ruining Venezuela. Dec 24, 2022

Science

• Unlike Covid shots, vaccines for cancer need to be customized for each individual, writes @lisamjarvis https://t.co/rDIed7BhJn Looks promising, but there is a long way to go. $MRK $MRNA FD: + $MRK for clients and me Dec 31, 2022
• Our investigation traces plastic recycling from US households to a city in India where the items are burnt for energy https://t.co/jdtBUxjxbr  I’m surprised that you would not expect this. People have to live. Global warming is just a theory. We need 100 years to make it a fact. Dec 28, 2022
• The deep freeze that blanketed most of the US temporarily plunged millions into darkness, and laid bare just how vulnerable the electric grid has become to a full-on catastrophe https://t.co/VYidNKPC8Q  I would not assume this won’t revert. Weather often has decadal streaks Dec 28, 2022
• These Prenatal Tests Are Usually Wrong When Warning of Rare Disorders https://t.co/kSGzVgjj8R  This is a practical example of how the misuse of statistics by scientists (ignoring false positives) harms patients. Aside from common diseases, it is better not to get your baby tested Dec 24, 2022

Odds & Ends

• Explaining the baby formula shortage. Mapping abortion access after the end of Roe v. Wade. Breaking down the FTX collapse. Here’s how we used data and graphics to tell 2022’s most important stories https://t.co/8I4bdgJzdB  Beautiful graphics on an artistic page that is clunky Dec 29, 2022
• As travel springs back and even China dismantles the last remaining Covid curbs, one stark truth is beginning to emerge — the world is running desperately short of planes https://t.co/rhJjRDk6Xx  I missed this. Thought the planes in the desert could be easily restarted, but no Dec 28, 2022
• You can fix most of your tech problems with these simple troubleshooting tricks from @nicnguyen https://t.co/nBpr4Cv02I  I knew about these, but it is very good and simple advice. Off and on. Disconnect and reconnect. Uninstall and reinstall. Clear Cache. Delete Cookies. Dec 28, 2022
• @TasteAtlas The last battle in the manga “Food Wars” was to make a dish that no one has ever seen before using elements of the five great cuisines of our world. What was their list of five? Chinese, Indian, French, Italian, and Turkish. A reasonable list. Dec 28, 2022
• Twitterati are looking for their next destination. https://t.co/MmUw4w4J9F  Then again, there may be some out from Twitter, but Twitter stays large enough to remain dominant over things that are trying to be like Twitter. Elon may bail on the investment, but Twitter will survive Dec 28, 2022
• How Telegram Became the Anti-Facebook https://t.co/6l5kFll3GO  Utterly long, but fascinating. There will always be demand for unfiltered social networks, and governments will fight that. Dec 24, 2022
• These three brothers scammed their investors out of $233Mn. Then they lived like kings https://t.co/W7J0nv3hmj  There is never anything easy about investing, especially if aiming for high returns. Safety can be controlled, mostly. Avoid people who advertise easy high returns Dec 24, 2022
• The Precarious Future of Sanibel Island https://t.co/XFmkZrwWWk  I went to beautiful Sanibel as a boy. Time & chance happen to all men and places. “Old Town” Ellicott City has been badly flooded twice in the last decade. Twice rebuilt, but the cost was high, & higher for Sanibel Dec 24, 2022
• @VIXandMore I get it. Hope you are doing well, Bill. I write less than I used to, but I am still writing. Dec 24, 2022

Photo Credit: Inhabitat || What is wealth, but concentrated efforts from the past organized by a man?

I’ve written on this topic many times, and I summarized my thoughts in this piece, Understanding Investment Consensus. Journalists and investors are often cavalier regarding how the market is positioned versus a given issue. Just because journalists and bloggers talk about something that is a possible crisis, that does not mean that investors have acted on those opinions.

Think of our last two major crises, the Great Financial Crisis (2008) and the Dot-Com Bubble (2000). Were there many people warning about those events in advance? Yes, there were many who did so. Did institutional investors react to these correct predictions? No, they didn’t. Why?

First, institutional investors have been trained not to time the market. Thus they tune out what they view as noise. Second, indexing and pseudo-indexing dominate the markets. Pseudo-indexing is the asset managers who are benchmarked against the market as a whole. All of them hug the indexes on average. There are generally few asset managers that are willing to be unique.

Most of the market is passive investing when aggregated, which leaves more opportunity for those that are willing to take chances on a portfolio that is not index-like in the slightest.

There is a real advantage at present to managers who are willing to run value portfolios that are distinct — not like the indexes, and willing to tolerate a lot of deviation versus the indexes.

Picture credit: Kevin Trotman || In general, it is probably best to put off retirement as long as you can…

I’ve seen a number of articles suggesting that it is a bad time to retire at present, because the market value of portfolios has declined. I’m here to tell you that the opposite is true.

Why did I pick these three dates to show you the US Treasury Yield Curve? On 1/3/2022, the stock market hit its high point. On 11/7/2022, pessimism about FOMC policy hit its high point. 12/13/2022 is now, leaving aside the rally in long Treasuries after the FOMC announcement on 12/14/2022.

Yes, asset values on a mark-to-market basis have declined by around 15%. But the yield you can obtain from those asset has doubled! You are not in a worse position to retire. You have a greater expectation of income now if you converted your assets to a bond ladder.

And I can tell you that the yield that you can get from a bond ladder has more than doubled since the beginning of 2022. So even if your assets have declined by 15% or so, the income you can receive now from bonds is far greater then before. You can even throw in some TIPS for inflation protection, and still have more income.

What’s that, you say? Why not stocks that pay growing dividends? Why the focus on default free bonds?

I start with Treasury securities because they are the backbone of the fixed income market. Everything else prices off of them.

Most dividend-paying common stocks yield less than Treasury securities now. That said, one way to compare a stock with growing dividends is to look at its current yield, and add to it half of your estimate of how fast stockholders’ equity per share is growing. If you were perfectly accurate, you would not cut it in half, you would add in the whole percentage growth in equity. This would assume that management is reinvesting the equity at high returns on equity, or planning on paying it out to shareholders at a more rapid rate.

Income opportunities are much higher now than in the yield-starved 2010s. Do you want income in retirement? It is on offer now.