Tuesday, April 15, 2014

The Haiku of Finance for 04/15/14

Income tax deadline
File on time to get refund
Many forms to send

Monday, April 14, 2014

The Haiku of Finance for 04/14/14

Forecasting guesswork
Try building scenarios
At least one may fit

Financial Sarcasm Roundup for 04/14/14

I am seriously pressed for time this week.  Someday you'll find out why but I don't care to disclose it today.  Suffice it to say that I'm doing something very important in the short term.  I can still make a minimally sarcastic effort.

Japan hints that Europe should follow its example in fighting deflation.  I say Japan is nuts for saying this and Europe is nuts for taking it seriously.  Deflation isn't so bad if it forces indebted businesses into bankruptcy so more efficient businesses can take charge.  The generation that comes of age in a hyperinflationary Japan or Europe will never forgive the modern leaders who destroyed their national currencies.

American shareholders are demanding that their companies acquire for growth.  They do this because they are stupid.  They should instead ask for huge special dividends to get that cash back.  The few hundred corporate CFOs in the country who sit on trillions of dollars of uncommitted cash know how insanely high any NPV would have to be in these pumped markets to justify any acquisitions.

I've read a bunch of brief news items lately about what nouveau riche twentysomethings want from a financial adviser.  It's all really impressionistic and contradictory stuff, but the general sense is that today's young rich enjoy throwing money away and want advisers to praise them for throwing even more away.  The cleverest and most dishonest advisers will step up and take as much as they can in fees while praising these young idiots for their nonexistent brilliance.  I will enjoy watching these preppies and their advisers starve in the gutter.

The most sarcastic thing I can say today is that people in Japan, Europe, and America are all getting a lot dumber about money.  I am living on the wrong planet, or the wrong time period on the right planet.  

Sunday, April 13, 2014

The Limerick of Finance for 04/13/14

Singapore is exposed to the Fed
Higher rates are the one thing to dread
City-state stays a course
No reason for remorse
Staying balanced can keep it ahead

Saturday, April 12, 2014

The Haiku of Finance for 04/12/14

Finding cash online
Connecting every net node
Cyber-everything

Friday, April 11, 2014

Pure Internet Gold From The Minds Of Reddit Bitcoiners

I check out Reddit once in a while for random inspiration.  It's a jungle out there and I like cutting through it with the brute force digital machete that is Alfidi Capital.  I never know whether I'll find pearls of wisdom or juvenile ramblings.  It's usually more of the latter but that's okay.  Arrested development adolescents need to let their primal screams out somewhere.  Better that they spew to Reddit threads than deface a bathroom stall.

The Reddit community on Bitcoin must be oodles of fun for people with no lives.  It is the only corner of the financial world where overgrown infants, naive dreamers, and other cutting-edge crybabies can congratulate themselves for knowing nothing about money.  They find a worshipful audience on Reddit.  I've selected some of the best recent comments from the Bitcoin subreddit below in italics.  Errors in spelling, capitalization, and other fundamentals of intelligible communication remain as their authors intended.  I will not identify the perps because they may want to grow up someday.  My own comments always follow.

So i should recommend to my 70 year old grandma to put all her savings into bitcoin (what's the easiest way to teach her bitcoin? took me years to teach her email/skype... think she might be dead before she's able to transfer funds on her own)? How will this stop the government from taking her tax refunds which are not in bitcoin? What happens if the price drops under the current 400$? I love bitcoin and what it stands for but you needa stop drinking the Kool-aid.

Stop right there, dude.  The apple didn't fall too far from the tree if grandma's tech learning curve is indicative of this Bitcoiner's abilities.  Oh BTW, the government can and will assess the value of your Bitcoin for tax purposes since the blockchain is publicly available.  I think the easiest way to learn Bitcoin is to watch a video of 1990s teens playing with "Magic:  The Gathering" cards.  That's kind of how the Mt. Gox Bitcoin exchange got started anyway.  Kids using cards to pretend to be wizards is just like grown adults playing with digits and pretending to be bankers.  See, it's really easy for granny and her quilting bee.  

I bought about $1,000 worth just for the sake of holding on to it long term. It's a decent chunk of change for me but it's also an amount I'm comfortable losing.  But this is exactly why I'm not discouraged over "losing" almost half of my $1k investment. There will be another spike at some point and I will either hang on until that happens or until I lose it all.

What was your cost basis for tax purposes?  Can you prove it?  The IRS will want to know and federal tax returns are due in four days.  Oh, wait, I'm talking about a bunch of people who think they don't have to pay taxes.  Never mind, idiots.  Just hang on until you lose it all.  It's funny that this person conflates "long term" with some point where they may "lose it all."  This person is definitely not Warren Buffett.  

Long term speculators don't create as much instability.  

Say what?  What exactly is a "long term speculator" anyway?  That might be a conventional investor like me who performs a valuation analysis before committing to an investment, but to Bitcoiners I'm just another gambler.  Moral equivalency is great when you don't have to account for cognitive deficiencies.  

Bitcoin is way more influential than Dogecoin is. Marketing does matter, or else our dog-based coin wouldn't have gotten this far. DOGE is honestly a lot more style over substance but obviously style is important to people. I hope that Dogecoin will teach Bitcoin about style in the same way that I hope that our community looks towards Bitcoin for substance.

Dogecoin teaching style . . . means Bitcoin will need an animal mascot.  Somebody already picked the honey badger.  Bitcoin teaching substance . . . means Dogecoin will be based on nothing.  Oh, that already happened.  Maybe these Reddit people aren't as cutting-edge as I had assumed.

This sort of thing is baffling to me on the altcoins. A new business shows up and because it has an address, and an office there is immediate trust in them. We have seen large scale operations fail time and time again.  We need businesses involved in the currency but we also need healthy skepticism when it comes to verification. 

The above comment might be the all-time winner for far-out fantasy.  It deserves a prize of some sort but Alfidi Capital has no prizes to give.  Follow this one down the rabbit hole.  A business with a known physical office and identifiable employees is somehow less trustworthy than a bunch of random hashes floating through cyberspace that hackers can steal and duplicate.  Yeah, ooookaaaayyyy.  This implies that the only thing more trustworthy than Bitcoin would be something completely unverifiable, like a fantasy land of fairies and unicorns.  Wait a minute . . . that takes us right back to "Magic:  The Gathering" again!  Brilliant.  

I just can't believe people would run scams as public figures, when it's so easy to do it in the Bitcoin crowd as anonymous figures. People around here are very trusting of anonymous figures.

OMG!  OMG!  Just when I thought there was an all-time winner, another gem falls out of the sky!  Here's a Bitcoin fan admitting the ease of scamming the rest of the community.  Anonymity is some kind of holy grail on Reddit.  It allows emotional cripples and shut-ins to pretend to be knowledgeable.  Anglo-Saxon cultures have long recognized anonymous communication as a form of free speech because it can shield unpopular authors from abuse.  The downside is that the rest of us have to wade through Bitcoin garbage to find comedy.  

In the bitcoin world embezzlement is indistinguishable from a hacker attack.

Exactly.  They both come with criminal penalties in the real world.  In the Bitcoin underworld, these things confer street cred.  I expect the next crypto-coin fork to allow graffiti artist tags.  

I still believe that bitcoin is the most regulated currency in the world. Criminals are way too vulnerable when using bitcoin.

This is awesome.  Precisely one IRS decision covers Bitcoin, and that was all anyone needed to move Bitcoin into the "asset" column of a balance sheet.  Calling it the "most regulated currency" ignores the wire transfer protocols, bullion holdings, transfer pricing agreements, and other facts that govern real currencies.  Calling criminals "vulnerable" in Bitcoin insults the abilities of the thieves who busted Mt. Gox out of millions.  They still haven't been caught.  I know, Bitcoiners, facts are hard to understand.  It's so much more fun just to make things up.

The bottom line on all of these Reddit commenters is that they are dumber than dumb.  There may be some pseudo-intellectuals in there to give the Bitcoin community a natural ruling elite but they function much like wooden decoys on a duck hunt.  They make it easier to identify the fowl that respond to hunting calls.  Reddit brings out the worst in people who are too immature to be trusted with adult responsibility.  Bitcoin will never be a currency but its advocates' stupidity is pure Internet gold.  

Thursday, April 10, 2014

The Haiku of Finance for 04/10/14

Make payment on time
Customer should not delay
Keep high credit score

Wednesday, April 09, 2014

The Haiku of Finance for 04/09/14

Top line revenue
Account for all expenses
Bottom line earnings

Tuesday, April 08, 2014

The Haiku of Finance for 04/08/14

Ultimate cash flow
Dividends plus covered calls
Reinvest it all

Monday, April 07, 2014

Financial Sarcasm Roundup for 04/07/14

I may have once seen a scientific study where nine of out of ten doctors recommended a daily dose of sarcasm.  Okay, I didn't really see that, but making it up sounded cute.  I needed an intro for this week's dose of sarcasm.

Multiple law enforcement agencies are investigating high-frequency trading (HFT).  The bureaucratic imperative to "do something" is in high gear even though I'm certain it will lead to nothing.  Entrepreneurs have already solved the HFT's exploitative anomaly by creating a new trading system that slows orders down so algorithms can't exploit time differences in routing.  Investigating "HFT" as a phenomenon makes perfect sense if the political objective is to avoid indicting Wall Street campaign donors while giving the public the appearance of action.  It's a lot like declaring war on "terrorism" rather than some specific state or organization.

Research shows that G20 meetings don't move financial markets.  That's a big slap in the face to big-shots from the developed world who like to see their names in headlines.  Why are all these organizations having "summits" anyway?  World leaders lose at least a day in travel to attend meetings where sub-ministerial functionaries have already solved everything substantive.  They should cancel the G20 and other consultative bodies that do little besides provide photo-ops.

China voices its concern about capital flows.  The intended audience for this message is the Federal Reserve, not big financial institutions.  The big Western banks already know that they are limited to buying and selling the renminbi within limited bands inside the Shanghai FTZ.  China is making it clear that it is willing to defend the yuan's value if the Fed's curtailment of ZIRP roils emerging markets again.  There's a difference between willingness and ability.  The PBOC may find its ability to intervene severely limited by blowups in the shadow banking system.

There's nothing scientific about sarcasm.  I just make it happen.  

Sunday, April 06, 2014

The Limerick of Finance for 04/06/14

Lending firms in a quest for high yield
Loan to Europe and spots far afield
Borrow dollars so cheap
Mighty profits to reap
Term sheet covenants set legal shield

US Lenders Seek Interest Rate Arbitrage With Europe SMEs

This WSJ article on US lending to European small and medium-size enterprises (SMEs) caught my eye today.  US funds are exporting the business development company (BDC) model of asset-based lending to the continentals.  These funds are combining a carry trade with interest rate arbitrage.  Hedge funds do that instantaneously but these private funds are lending with much longer durations.

The carry trade is easy money right about now while US interest rates are still at historic lows.  Borrowing in US dollars from US institutions and lending to European businesses that are hungry for capital is a lender's dream.  The euro is lower right now than it's been since late February, so US lenders who need to buy it just to loan it out are getting a decent deal.

It's no mystery why European banks can't fill the lending gap themselves.  Their balance sheets are overstretched with bad debt from the PIIGS and whoever else couldn't figure out how to run a healthy national economy.  European banks applying Basel capital tests have discovered to their chagrin that they can't afford to make more high-risk loans.  Those banks haven't figured out the US trick of moving bad assets into off-balance sheet entities and securitizing their cash flows.

I'm not interested in the details of these trans-Atlantic BDC clones.  They do not appear to be publicly traded (except KKR) so I can't evaluate them.  The news item is noteworthy as a bellwether for the US financial sector.  Funds that chase returns by making loans to European SMEs at double-digit annual interest rates are pretty desperate for yield.  Their investors may be running out of high-yield alternatives here in the US.  I still recall the headlines I read back in 2007 about how a collapse in the US high-yield debt market preceded the collapse of US equities by several months.  I watched it all from the sidelines, in cash.  

Saturday, April 05, 2014

The Haiku of Finance for 04/05/14

Ethical career
Hard to tell truth in big firm
People like to lie

Ethical Half-Lives In Finance

The few conversations I've had with people younger than me who aspired to finance careers always covered personal integrity.  I could not ignore this subject because it is the ultimate litmus test of whether someone belongs in a large corporation.  I use the term "belong" in a somewhat pejorative sense, as you'll see below.

I worked for three very large financial sector firms at various points in my career.  They all publicly held themselves out as putting the client's interests ahead of their own.  I observed their employees honoring this commitment more as an exception to general practices behind the corporate veil.  It is possible to make a decent living by genuinely caring for a client, meeting their expectations, and charging them reasonable fees.  Managers in large corporations often discount that objective by pushing their revenue producers (brokers, advisors, traders, loan officers, etc.) to make their department's growth numbers look good.  That's how managers get promoted.

The competition for promotions in finance is fierce and unforgiving.  A fast and loose approach to ethics is an easy ticket to the big time.  It is very difficult to have a long career in a large organization without resorting to unethical behavior.  The outsized rewards in finance tempt normal people to stray over to the dark side.  The ones who cross over often enough will never look back, and never realize where they went wrong.  Those rare people who climb ladders ethically and build business honestly deserve respect.  The rest of these people are clawing, grasping, vicious vipers who masquerade as humans to deceive clients.  They "belong" in a large corporation in the same sense that criminals belong in prison.  Society must keep its sociopathic predators under positive control.

I care more about my personal integrity than my career.  I performed very poorly when I worked in large financial institutions because I told the truth, followed rules, and executed my duties correctly.  My supervisors marked me for elimination after observing my behavior.  I wasn't fit for employment in their eyes because I would not lie or manipulate people.  I stand out as an oddball and I couldn't care less.  I dislike unethical people as much as they dislike me.

The half-lives of financial careers may be longest in corporate finance because incidences of temptation occur least frequently there.  It's always possible to falsify payment invoices but internal auditors can catch those instantly, especially if they're tied to the enterprise's supply chain.  There may very well be plenty of honest CFOs and treasurers around, and maybe this is why so many of them are sitting on piles of corporate cash rather than investing in overpriced assets.

Career half-lives are probably shortest in the financial sector's customer-facing roles.  I specifically envision retail brokerage, institutional sales, and investment banking rainmakers as the career paths that winnow out honest people very quickly.  The pressures to meet performance goals and earn bonuses are largest in those fields.  Opportunities to deceive investors appear daily.  The biggest liars and laziest trust fund babies win the retail production games.

Anyone who considers a career in finance should think very hard about the choice they will face soon after they begin work.  Personal integrity and career success in a large enterprise become mutually exclusive at some point during upward career progression.  Employees will choose one path over another.  Choosing personal integrity usually leads to unemployment.  Choosing career success usually means making ethical compromises.  Those compromises come with severe legal risks that cannot stay buried forever in an era of pervasive surveillance.  Having both integrity and success is possible with self-employment.  I have extended my career's half-life by working for myself.  

Friday, April 04, 2014

The Haiku of Finance for 04/04/14

Cost effectiveness
Measure outcome improvement
Divide by expense