Investors' Insights:
Week Ended March 30, 2013
FIRST FINANCIAL INSIGHTS
"Investors' Insights"
You cannot even imagine how highly levered these Chinese banks and real estate developers are:think Japan 1980's, then double or triple your values. Japan didn't even build "ghost cities" to sustain their facade, but their multiple skyscraper- design proposals also got ridiculous rocketing for the moon. Similarities are apparent, although China is far from being comparable in terms of accounting, legal, audit and related regulatory standards. Risks are thus much greater.
The Chinese are also capitalist neophytes associating with all forms of thespians practising nepotism. Imagine.Terrible! And no doubt suffer from the same old bubble syndrome " this time it's different ". It isn't. Never is, as most market bubble economies have, sooner or later, paid dearly for their excesses.
So as they say, "the rest as is history." Or will be.
First Financial Insights
March 29, 2013
Wizards of Leveraged Bubbles
"Neophytes, Thespians and Nepotism - Could you Imagine?"
Yes, No or Maybe. While we would feel confident is saying that markets are pretty much stuck in a range because of real underlying downward pressures caused by both resource-population and mathematical interest rate constraints; anything can happen to push prices upwards for an extended period of time. Markets represent an aggregate collection of socio-pathic thinking and rarely conform to what might be called rational thought phenomena.
The drivers of greed and fear are emotions that do not have carved in stone algebraic equations that determine outcomes. Still, they somehow, in strange ways, connect to "perceived rational thought" or what otherwise might be defined as powerful persuasions built on contextual logic. However, when any "perceived key assumption" behind such contextual logic changes - then all hell breaks loose.
So remember, today's markets were driven by the comforting abstracts of a liquidity that was poured into to them by 24-hour fiat-currency printing; that many, seem to assume has no limits. It does. Some event, or series, or connected events, will trigger either interest rates to rise, or profits to fall dramatically. These are likely rational reasons; the irrational reasons behind the markets emotions and related changes are much more elusive.
The point being, while for the most part we agree with Marc; US markets could still rise another 30% from here, and stay there for some time, - not likely, but it is still a possibility we must keep in mind. Markets can be cruel mistresses.
First Financial Insights
March 28, 2013
Market Alchemy:
Aggregate Emotional Algebra mixed with Collective Socio-Pathology
Jim Rogers BLOG : Cyprus is a real threat to the U.S. Everyone was asleep at the switch, in fact; many had a hard time finding the switc...
No doubt that Cyprus is in a heap of trouble with the collapse of its international banking model, but it's the integrity of the EU where the bigger concern lies. How did they ever think these National Banks would survive, when assets totalled more than six times the national GDP - what nobody fears or understands the consequences of leverage? That leads to the next question - how many more skeletons lurk around the EU's closet?
What can be surmised is that capitalization ratios of 1:8 may not be sufficient to ensure liquidity when Euro bonds go - No Bid! The ECB should be tabling bail-out plans now, to preserve confidence when the proverbial crap hits the fan - which is a foregone certitude at some point. There is some big money to be made shorting these puppies. How long are you on Spain? Italy? Portugal? And their respective financial institutions - a little homework here has BIG profit potential.
Observe that the Cyprus contagion has also poured into Egypt as well. There are more coming as food and fuel shortages plague the world. Importantly, oil prices are not being depressed, which is a very bad sign, suggesting supply may be a bigger concern than demand. Hmm...Peak Oil? And gold, is just lingering, perhaps as Central Banks dump reserves to buy food and fuel; defraying political upheaval to a future date. There are known unknown reasons for these pricing events.
The big issues: Who and What is next when?
First Financial Insights
March 27, 2013
So, Who's on First?
I don't know...
Just so you know that we are not the only ones who logically link Cyprus to further troubles for the Euro zone, making their banks and securities a short-seller's paradise. More banking and government financing problems can be expected to ravage their economies. It is starting to make more sense to unravel this scheme, and let marginal countries devalue and print their own currencies so as to optimize their comparative advantages. This could revitalize their economies.
Iceland was able to recover somewhat through devaluation, because it was not locked into another currency.
Where's Don Meredith when you need him? "Turn out the lights..."
First Financial Insights
March 26, 2013
"...the party's over"
More of the same message, but it is amazing how quickly everyone forgets what the real issues are out there. It is always good to hear Marc spread the gospel, even though his focus comes from the neo-classical point of view. Moreover, he has a short to near term orientation, like many of today's investor/economists. By this, they rarely look at things beyond a ten-year time horizon. We do.
In fact, we believe going out 10, 25 or even a 100 years is essential and differentiates our thinking. Formulating such a long term look, gives us a bench mark that is proactive; allowing us to envisage the emerging patterns or templates quickly. For instance, Iceland, Ireland, Greece, Cyprus and others, support the template we see for many countries down the road, as they shift into a physical-economic resource destitution comparable to Nauru. And this is the global template that we envisage heading towards the longer term, as populations explode, while resources are completely exhausted.
So our investment conclusions, draw from the insights of the best short-term investors providing a more integrated view, when meshed with our far-off time-lines and emerging templates. And for that, we should all be the better..
First Financial Insights
March 25, 2013
In the long-term we are...
