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| Total Unique Visitors: 151441 |
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| Meredith Whitney CNBC interview. |
| 2009-09-15 04:38:35 |
Sorry for the extended hiatus. Always tough catching up after a long Labor Day vacation. Came across this excellent Meredith Whitney interview on CNBC. If she’s right on real estate, 2010 could be a tough year for the markets. Listen to this one very carefully!
Whitney : Home prices going down.
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| Giant squids, black swans, and the financial sector. |
| 2009-08-28 03:12:00 |
One of the most popular passages from the book Black Swan by Nassim Taleb has a chart illustrating the growth of a turkey. (I presume it’s popular because Taleb often talks about this). However, the image of a turkey has been much abused in relation to a Black Swan. Hence I’m going to replace the turkey instead with a giant squid reared in a fish farm.
Imagine you’re the squid. Each day, you get fed more than the last day, and your weight goes up, you feel healthier and happier, and life is good. Humans are the most wonderful creatures on this planet. Such a happy state exists right until harvesting, when the fat happy squid gets butchered. A chart of squid’s growth looks something like this:
This event was entirely unpredictable to the squid right until the day it happened. This illustrates the concept of the black swan, the impact of the highly improbable.
Well I was browsing through a report called “Small lessons from a big crisis”, issued by the excelle...
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| Friday edition: Role of inflation and interest rates in market valuation. |
| 2009-08-28 02:59:12 |
I’ve been thinking of doing or highlighting a thoughtful piece every Friday. So here’s a start!
Vitaliy Katsenelson recently came out with a postscript to his excellent book, Active Value Investing in Range-Bound / Sideways Markets. I’ve read parts of it, and thoroughly enjoyed it. I admire Vitaliy as one of the few people who have the uncanny ability to think “outside the fog”. (You can check out his blog to know exactly what I mean.)
Vitaliy makes some great points and I particularly wanted to highlight this one regarding the role of interest rates and inflation in determining market valuations.
Let’s take a look at the role interest rates and inflation play in market cycles… My thoughts on the role of interest rates and inflation have changed since the book came out.
Let’s divide the interest/inflation chart into three zones: 1, 2, and 3. Zone 2 is the zone of peace. When interest rates and inflation are in this zone or thereabouts, they have little posit...
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| Bob Janjuah : Exit short positions if market crosses 1022 4 days in a row. |
| 2009-08-25 02:02:11 |
Note: Market here refers to S&P 500.
Came across this David Tice interview, courtesy Pragcap.
While the interview was standard David Tice fare, there was this quote from Bob Janjuah which caught my ears. (I’ve referred to his crash warnings earlier here. For an even better compendium, check out this FT Alphaville post.).
IF market closes above 1022 for 4 days in a row, it is time to hit the exits.Note: Here "exit" refers to exiting from his short positions via stop loss. Basically, he's looking for a momentary spike to 1025-1050. If we can sustain above 1022 for 4 days, then it's time to exit short positions as another asset bubble is coming our way...
Hmm..I guess we’ll find out soon enough! (Tuesday was the second day the markets did exactly that).
Check out the interview below:
PS: As I type this, the Asian markets are selling off. If the sell off should extend to the US markets and S&P 500 closes below 1022, then this count shall be reset to zero...
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| Reading links 8/24/2009: The market direction edition. |
| 2009-08-25 01:05:28 |
It’s been a while since I posted on market predictions from the financial gurus. This might be a critical time, with a few commentators warning that markets could be topping out in August.
Well, this linkfest specifically focuses on market prognostications!
VALUE LINE HASN’T BEEN THIS BEARISH SINCE 2000 : Value Line reduced its recommended equity allocation to the range of 60% to 70%.This reflects a cautious to outright bearish posture on Value Line’s part, since the firm has never lowered its recommended allocation to below 50%. The last time it was lower than it is now was October 2000.?
Value Line’s rationale for lowering its recommended equity allocation was not that the economic and financial news is about to take a big turn for the worse, however. Instead, the firm’s concern is that the stock market has rallied so far, so fast, that it has gotten too far ahead of itself.
Marc Faber: Expect a correction over the next 2 months.(CNBC)
B...
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| Emerging markets: “new era” bubble talk is back. |
| 2009-08-24 13:44:46 |
In the final phases of a bubble’s blowoff, the talk of new paradigms and global tectonic shifts comes into vogue. One hallmark of the emerging markets mania back in 2007 was the bubble talk that went with it(See my post here). China and India seemed like failsafe can’t miss destinations.
Well, looks like some of it is back. Look at this article for instance. Here’s an interesting chart from the same.
Let’s consider the data from 2003 to 2008 (A very short span of 5.5 years):
Share of World GDP:
Chinese GDP went from 4.4% of global GDP to 7.3 %, or a rise of 66%.
Indian GDP went from 1.5% of global GDP to 2 %, or a rise of 33%.
Share of World market capitalization:
Chinese market capitalization as a share of world market capitalization went from 1.1% to 7.1% , an increase of ~545%!!!
India's share went up from 0.9% to 2.8%, a rise of 211%
The stock markets in India and China have gone up almost 8-9 TIMES their rise in the share of world GDP! The author complete...
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| CFA and the financial blogosphere. |
| 2009-08-22 04:22:32 |
Just wanted to share with my readers that I cleared my CFA Level 3 exam this week. It took me 18 months to clear all 3 levels… The blogosphere certainly made this look easy.I’ve been an avid reader of the financial blogosphere for almost 5 years now, and a lot of credit goes to the insightful posts and ideas I’ve learned, assimilated, and hopefully mastered.So a BIG BIG Thank You.Here’s hoping I can pay back some of what I’ve learned these past few years.Sincerely,PS: Unfortunately, I cannot call myself a CFA yet as I do not have the requisite financial industry experience. Hopefully though that should be an easier hurdle to cross than the exams!
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| A look at health care expenses and consumer spending. |
| 2009-08-20 03:27:00 |
Last week I posted a link to CNBC interviews by Tobias Levkovich. He alluded to the fact that over the last 30 years, all growth in consumer expenditure as a percentage of GDP had come from health care.Well, came across this interesting post from Calculated Risk which discusses consumer spending as a percentage of GDP with and without health-care expenditures. It basically drives home the above point.I’ll let the graph do the talking:The inference is quite amazing. The consumers did NOT go on a spending binge as is widely believed. The actual increase was barely in line with GDP growth rates. The increase in consumer spending as a percentage of GDP was simply due to the rise in health care costs (!)Ex-health, the ratio has stagnated. CR has these ominous lines:But the more important poin...
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| Reading Links 8/17/2009 |
| 2009-08-18 04:03:21 |
A brief summary of what I've been reading this past week :The Confidence Game by Kenneth Rogof : Asia may be willing to sponsor the west for now, but not in perpetuity. Eventually Asia will find alternatives in part by deepening its own debt markets. Within a few years, western governments will have to sharply raise taxes, inflate, partially default, or some combination of all three. As painful as it may seem, it would be far better to start bringing fundamentals in line now. Restoring confidence has been helpful and important. But ultimately we need a system of global financial regulation and governance that merits our faith. (Project Syndicate)Doug Kass: A Summary of My Bearishness. (TheStreet.com)RBS uber-bear issues fresh alert on global stock markets : Three-month slide could hit reco...
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| Interesting interviews with Tobias Levkovich. |
| 2009-08-14 04:02:24 |
As far as investment bank strategists go, I actually enjoy listening to Tobias Levkovich. I had written about him more than a year back here, where he argued for a W-shaped downturn, a collapse in commodity prices, emerging market declines, higher taxes and other interesting stuff.Perfect for a hopefully slow Friday, here are some of his interviews on CNBC these past 2 months. I've posted my notes as well. Enjoy!Interview 1. Notes:Production will climb in H2 and into 2010.Increase in production rates drive earnings growth. Could provide bump to GDP data. Cost control merely provides operating leverage to the upside.In last 30 years, all growth in consumer expenditure as a percentage of GDP has come from health care expenditures.Our debts went up, but so did our wealth. When the d...
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