Facebook lockup ends
Insiders now free to sell
Push share price downward
Wednesday, October 31, 2012
Panoro Minerals Explores Peru
There's minerals, and then there's Panoro Minerals (TSXV: PML). Okay, maybe I should be more sanguine about junior miners but I needed an opener.
Right now their 43-101 shows only inferred resources of 0.23g/t gold and 2.84 g/t silver at their Cotabambas project. Those are relatively low grades for precious metals compared to many junior peers, so maybe an updated 43-101 with 2P estimates will show more promise. The CEO isn't a geologist but has long experience in mining.
I always check a startup's burn rate. Their Q3 2012 financial statement from June 30, 2012 shows CAN$17.9M in cash on hand thanks to a successful private placement this past March. The same statement shows a quarterly loss of over $630K, so their cash horde should last until October 2014 given present spending. They will of course have to prepare for production at some point, which will accelerate their burn rate.
They have yet to decide on what style of development is feasible for each project; for example, their Antilla project has small amounts of bauxite that would make heap leaching feasible. It's good that all of their projects are within the reach of unpaved local roads, but not so good that their most active projects are 30km away from power lines. Figure step-down transformers and line extensions into that capex budget for the feasibility study.
The belt they're exploring is known mainly for copper. I await further notice of their feasibility estimates, along with news of just what they plan to do with their gold properties.
Full disclosure: No position in Panoro Minerals at this time.
Right now their 43-101 shows only inferred resources of 0.23g/t gold and 2.84 g/t silver at their Cotabambas project. Those are relatively low grades for precious metals compared to many junior peers, so maybe an updated 43-101 with 2P estimates will show more promise. The CEO isn't a geologist but has long experience in mining.
I always check a startup's burn rate. Their Q3 2012 financial statement from June 30, 2012 shows CAN$17.9M in cash on hand thanks to a successful private placement this past March. The same statement shows a quarterly loss of over $630K, so their cash horde should last until October 2014 given present spending. They will of course have to prepare for production at some point, which will accelerate their burn rate.
They have yet to decide on what style of development is feasible for each project; for example, their Antilla project has small amounts of bauxite that would make heap leaching feasible. It's good that all of their projects are within the reach of unpaved local roads, but not so good that their most active projects are 30km away from power lines. Figure step-down transformers and line extensions into that capex budget for the feasibility study.
The belt they're exploring is known mainly for copper. I await further notice of their feasibility estimates, along with news of just what they plan to do with their gold properties.
Full disclosure: No position in Panoro Minerals at this time.
Tuesday, October 30, 2012
Monday, October 29, 2012
Financial Sarcasm Update for 10/29/12
This is an exciting week thanks to an unpredictable presidential election and a big 'ole storm headed for the Eastern Seaboard. I'm going to make it even more exciting with some financial sarcasm.
U.S. markets are closed for extremely bad weather. This is more than a puncture wound to the self-made myth of Wall Streeters as indestructible masters of the universe. It's a sign of how vulnerable equity markets are to the physical isolation of a single city block. There is no substitute market if the NYSE were forced to shut indefinitely after a physical catastrophe. The dark pools of liquidity sponsored by major asset managers are not sufficiently transparent to substitute immediately for an open market. The internal crossing networks of major asset managers are pretty robust but firms like BlackRock and State Street would be reluctant to immediately open them without strong-arming from the SEC. This country is in serious trouble without a decentralized equity trading market, but unfortunately that's just the way our mandarin class wants to treat us.
US and UK regulators are ready to sweep the Libor scandal under the rug with a few slaps on the wrists at money-center banks. Business as usual! The fraud and rigging will continue so insiders can keep getting rich at the expense of outsiders. Read my blog articles from some months ago. I predicted this outcome.
If the above items haven't got you depressed, the next phase of Great Depression 2.0 will do the trick. The fiscal cliff's negative impact on the economy will be exacerbated by reduced consumer spending. Call it the flip side of the marginal propensity to consume; poor folks spend proportionately more of their income and will have less of it to spend once layoffs really get rolling in first quarter 2013.
We've finally hit the peak of the junk bond curve. Companies with deteriorating credit quality can issue more high yield debt than ever and investors just eat it all up. How stupid can hedge funds be? They're the ones driving this nonsense because their market-lagging returns push them farther into losing territory. They'll reach for extra yield even if it means reaching for junk bonds that should default. Most hedge funds should just close up shop rather than chase each other over a cliff, but I'll enjoy watching them hit the wall. Maybe the biggest intellects really do gravitate to private equity, since they're driving this junk bond issuance to extract the last drop of dividend juice from their portfolios before the big collapse.
Wild pursuit of dividends for their own sake can make any investor dumb. Money managers are actually considering special dividend payouts as a type of special situation investment. That's really dumb. Experienced investors should know that exchanges reduce the price of a stock on the dividend payout date by the dividend's amount, with no guarantee that the share price will recover in subsequent trading. These portfolio managers will have to explain to their clients why they went for the amateur's trick of "trading dividends" (a tactic I outgrew years ago, thank you, after a run of good luck). The fiscal cliff will do a lot more than force temporary changes in corporate dividend policies. It will hammer the prices of stocks that investors bought on the cusp of a recession.
I can't let myself feel sad about all of this pending misfortune. Professional investors have access to all of the information I have and then some, and they still buy the wrong investments at the wrong times for the wrong reasons. I am very happy that hard times will flush these people out of finance and put their assets on sale just for me.
U.S. markets are closed for extremely bad weather. This is more than a puncture wound to the self-made myth of Wall Streeters as indestructible masters of the universe. It's a sign of how vulnerable equity markets are to the physical isolation of a single city block. There is no substitute market if the NYSE were forced to shut indefinitely after a physical catastrophe. The dark pools of liquidity sponsored by major asset managers are not sufficiently transparent to substitute immediately for an open market. The internal crossing networks of major asset managers are pretty robust but firms like BlackRock and State Street would be reluctant to immediately open them without strong-arming from the SEC. This country is in serious trouble without a decentralized equity trading market, but unfortunately that's just the way our mandarin class wants to treat us.
US and UK regulators are ready to sweep the Libor scandal under the rug with a few slaps on the wrists at money-center banks. Business as usual! The fraud and rigging will continue so insiders can keep getting rich at the expense of outsiders. Read my blog articles from some months ago. I predicted this outcome.
If the above items haven't got you depressed, the next phase of Great Depression 2.0 will do the trick. The fiscal cliff's negative impact on the economy will be exacerbated by reduced consumer spending. Call it the flip side of the marginal propensity to consume; poor folks spend proportionately more of their income and will have less of it to spend once layoffs really get rolling in first quarter 2013.
We've finally hit the peak of the junk bond curve. Companies with deteriorating credit quality can issue more high yield debt than ever and investors just eat it all up. How stupid can hedge funds be? They're the ones driving this nonsense because their market-lagging returns push them farther into losing territory. They'll reach for extra yield even if it means reaching for junk bonds that should default. Most hedge funds should just close up shop rather than chase each other over a cliff, but I'll enjoy watching them hit the wall. Maybe the biggest intellects really do gravitate to private equity, since they're driving this junk bond issuance to extract the last drop of dividend juice from their portfolios before the big collapse.
Wild pursuit of dividends for their own sake can make any investor dumb. Money managers are actually considering special dividend payouts as a type of special situation investment. That's really dumb. Experienced investors should know that exchanges reduce the price of a stock on the dividend payout date by the dividend's amount, with no guarantee that the share price will recover in subsequent trading. These portfolio managers will have to explain to their clients why they went for the amateur's trick of "trading dividends" (a tactic I outgrew years ago, thank you, after a run of good luck). The fiscal cliff will do a lot more than force temporary changes in corporate dividend policies. It will hammer the prices of stocks that investors bought on the cusp of a recession.
I can't let myself feel sad about all of this pending misfortune. Professional investors have access to all of the information I have and then some, and they still buy the wrong investments at the wrong times for the wrong reasons. I am very happy that hard times will flush these people out of finance and put their assets on sale just for me.
Sunday, October 28, 2012
The Limerick of Finance for 10/28/12
The U.S. stock market will close
Hurricane may deal powerful blows
Traders all ran away
No one wants to stay
They're not as bold as they suppose
Hurricane may deal powerful blows
Traders all ran away
No one wants to stay
They're not as bold as they suppose
Maxwell Resources (MAXE) Maxes Out Its Glossy Marketing Brochure
Never count out stock promoters. There's always another glossy mailer in my mailbox, tempting me with breathless promises of sky-high returns. The latest pumper to hit my radar is something called Wall Street Revelator from Andrew Carpenter. Don't ask me what a "revelator" does; maybe be it's an elevator that does revelations. The Revelator is pumping Maxwell Resources (MAXE), a company that purports to be the owner of mineral and energy rights to a land tract in New Mexico.
The CEO is not a geologist. Their brief corporate history doesn't give investors a lot to go on. There's more to developing a mining property than just acquiring mineral rights, so I don't know why the founders need a publicly traded entity. I would have just contacted a bunch of corporate development officers at mining companies to gauge their interest in exploration, but that's just me.
I wonder if the company even knows what it wants to do. In August 2012 it changed its name from Mericol to Maxwell Resources, reduced the par value of its Series A Preferred stock to $0.001/share, and changed its business model from 3D printing to, well, whatever it plans to do now. Mericol's results from its previous business line were pretty pathetic.
Please, pumpers, go away. You're insulting my intelligence by claiming this radical reinvention of a shell company is the greatest thing since sliced bread.
Full disclosure: No position in MAXE, ever.
The CEO is not a geologist. Their brief corporate history doesn't give investors a lot to go on. There's more to developing a mining property than just acquiring mineral rights, so I don't know why the founders need a publicly traded entity. I would have just contacted a bunch of corporate development officers at mining companies to gauge their interest in exploration, but that's just me.
I wonder if the company even knows what it wants to do. In August 2012 it changed its name from Mericol to Maxwell Resources, reduced the par value of its Series A Preferred stock to $0.001/share, and changed its business model from 3D printing to, well, whatever it plans to do now. Mericol's results from its previous business line were pretty pathetic.
Please, pumpers, go away. You're insulting my intelligence by claiming this radical reinvention of a shell company is the greatest thing since sliced bread.
Full disclosure: No position in MAXE, ever.
Saturday, October 27, 2012
Friday, October 26, 2012
Thursday, October 25, 2012
Wednesday, October 24, 2012
North Country Gold Really Is Way Up North
North Country Gold (NCG in Toronto, or NCGDF on the Pink Sheets) is exploring for gold on a property with some exploration history way up in the far north of Canada. Their main property is in a cold, remote area so I sure don't plan on heading up there any time soon for a look around. I much prefer the warmer climes of the San Francisco Bay Area where women walk around in revealing attire. There's none of that on display up in the frozen tundra. Let's talk about NCG anyway despite the uninviting location.
First of all, their CEO is a geologist. You know I've complained in many past blog articles about exploration companies run by non-geologists, so finally here's one run by someone professionally qualified to do so. I am curious how a geologist can found ten separate companies over 17 years in mining and find time to make them all successful. That's hard to do if you only spend about a year and a half with each one, or juggle three or four of them over a period of several years, or whatever. I can't figure that schedule out and I have enough trouble juggling my own schedule.
Check out their most recent financial statements from May 31, 2012. They have $3.3M in cash on hand and burn about $200K/month from operations, so that cushion will last a little over 16 months before they have to raise more money. Please note that I'm ignoring the flow-through share premium described in note 8 of their consolidated statements; that is an accounting treatment with no bearing on operations. They'll need to demonstrate some progress by the time they'll need to raise more capital, specifically towards an updated 43-101 report that includes proven and probable reserves.
The property is in a part of Canada that is frozen in for much of the year, with no permanent road access to ports or the national highway system. Assuming they can grade iced roads during the winter months for a couple of million dollars per year, the capital they'll have to raise to fund ice roads will dilute existing shareholders. The photographs from the investor relations slideshows they have on their website do not show any access to the national power grid, so they'll have to truck in fuel from ports that are iced over in winter or from nearby rural communities.
They seem to have thought through the logistics of operating during warmer months, with an airstrip visible to fly in supplies and fly out gold dore bars processed on site to reduce bulk. It would be useful to know whether the cost of regular flights is factored into their estimate of the cash cost of production, because that will be variable during warmer months given the unique logistics of operating that far north.
This one's not for me. There's a lot of risk in their Three Bluffs gold project and not enough confirmation of high metal grades to get me interested.
Full disclosure: No position in NCG / NCGDF at this time.
First of all, their CEO is a geologist. You know I've complained in many past blog articles about exploration companies run by non-geologists, so finally here's one run by someone professionally qualified to do so. I am curious how a geologist can found ten separate companies over 17 years in mining and find time to make them all successful. That's hard to do if you only spend about a year and a half with each one, or juggle three or four of them over a period of several years, or whatever. I can't figure that schedule out and I have enough trouble juggling my own schedule.
Check out their most recent financial statements from May 31, 2012. They have $3.3M in cash on hand and burn about $200K/month from operations, so that cushion will last a little over 16 months before they have to raise more money. Please note that I'm ignoring the flow-through share premium described in note 8 of their consolidated statements; that is an accounting treatment with no bearing on operations. They'll need to demonstrate some progress by the time they'll need to raise more capital, specifically towards an updated 43-101 report that includes proven and probable reserves.
The property is in a part of Canada that is frozen in for much of the year, with no permanent road access to ports or the national highway system. Assuming they can grade iced roads during the winter months for a couple of million dollars per year, the capital they'll have to raise to fund ice roads will dilute existing shareholders. The photographs from the investor relations slideshows they have on their website do not show any access to the national power grid, so they'll have to truck in fuel from ports that are iced over in winter or from nearby rural communities.
They seem to have thought through the logistics of operating during warmer months, with an airstrip visible to fly in supplies and fly out gold dore bars processed on site to reduce bulk. It would be useful to know whether the cost of regular flights is factored into their estimate of the cash cost of production, because that will be variable during warmer months given the unique logistics of operating that far north.
This one's not for me. There's a lot of risk in their Three Bluffs gold project and not enough confirmation of high metal grades to get me interested.
Full disclosure: No position in NCG / NCGDF at this time.
Tuesday, October 23, 2012
Alpha-D Update for 10/23/12
Today I finally pulled the trigger on an equity ETF position, although the underlying holding in the ETF is really a cash position. I went long FXF, the Swiss franc ETF. One more well-managed currency in a solid country is a hedge against the Fed's plan to devalue the U.S. dollar.
I have not changed my other ETF positions. I am still long GDX, FXA, and FXC. I did not write any option positions against those two currency ETFs this month because I'd rather not see volatility sell them away or add to my stake. I did not add to or subtract from my GDX stake.
The covered calls I wrote last month on GDX expired unexercised, as did the cash-covered puts I wrote under FXF. My expiring puts under FXF aren't in need of renewal as I now own a stake in FXF itself that is sufficient to give me more currency diversification. I don't need any more or less of FXF for right now.
I wrote some covered calls on my new FXF position and on my GDX. Writing calls on GDX has forced me to sell in the past but buying it back has been no big deal; the incidence of buying and selling has pretty much evened out price-wise and the cash flow from writing the options is nice to have. I also wrote some cash-covered puts under GDX even though its price keeps falling. If that triggers a purchase then so be it, because a larger gold position at a lower price will come in handy during the initial phases of the high inflation I expect to hit the U.S. economy.
This is a very simple strategy for complex market conditions that are on the verge of breaking into utter chaos. Too many complacent portfolio managers are still actively managing equity mutual funds with an all-in approach, in the face of earnings disappointments, the U.S. fiscal cliff, and continuing bad news from Europe. I will let them fail at this game. My cash is ready to buy what they will be forced to disgorge in panic selling.
I have not changed my other ETF positions. I am still long GDX, FXA, and FXC. I did not write any option positions against those two currency ETFs this month because I'd rather not see volatility sell them away or add to my stake. I did not add to or subtract from my GDX stake.
The covered calls I wrote last month on GDX expired unexercised, as did the cash-covered puts I wrote under FXF. My expiring puts under FXF aren't in need of renewal as I now own a stake in FXF itself that is sufficient to give me more currency diversification. I don't need any more or less of FXF for right now.
I wrote some covered calls on my new FXF position and on my GDX. Writing calls on GDX has forced me to sell in the past but buying it back has been no big deal; the incidence of buying and selling has pretty much evened out price-wise and the cash flow from writing the options is nice to have. I also wrote some cash-covered puts under GDX even though its price keeps falling. If that triggers a purchase then so be it, because a larger gold position at a lower price will come in handy during the initial phases of the high inflation I expect to hit the U.S. economy.
This is a very simple strategy for complex market conditions that are on the verge of breaking into utter chaos. Too many complacent portfolio managers are still actively managing equity mutual funds with an all-in approach, in the face of earnings disappointments, the U.S. fiscal cliff, and continuing bad news from Europe. I will let them fail at this game. My cash is ready to buy what they will be forced to disgorge in panic selling.
Monday, October 22, 2012
The Haiku of Finance for 10/22/12
Junk bond cycle peak
High risk debt demand dries up
Not good sign for stocks
High risk debt demand dries up
Not good sign for stocks
Financial Sarcasm Roundup for 10/22/12
I should have refreshed my investment portfolio today but was busy with a series of meetings that occupied all of my daylight hours. Interacting with human beings can be a waste of time but sometimes it a necessary inconvenience. I won't get sarcastic about the political debate from earlier this evening. There are other matters to discuss.
Hey look, jobless claims are up again! Did you miss that while you were buying socks again, like some newscaster said you should? Getting past the noise on intermodal railcar loads brings us the revelation that shipments of metal and coal are way down. Reduced demand for raw inputs is not a sign of a growing economy.
Japan's exports are down, and IMHO the country faces another credit rating downgrade whether it goes for QE or austerity. Maybe they should rename the place Land of the Sinking Sun.
Stories on a probable market top in high-yield bonds remind me of similar stories I saw in early 2007 that wondered what was powering the high-yield market to seemingly impossible highs. I had the foresight to exit U.S. equities in mid-2007 just as the stock market peaked. Most people never saw it coming, nor do they see anything notable coming now.
Asia is now far advanced in its stealth run on the dollar. China's trading partners have slowly replaced dollar holdings with yuan holdings. Helicopter Ben has no idea what he started with his taunt to Asian central banks that they can just decouple. His overconfidence that the Fed can now take the place of foreign bond buyers in the market for Treasuries will be the undoing of the dollar's domestic value.
Stay tuned for my portfolio update tomorrow. I'm going to pull the trigger on a change I've hinted at making for some time now.
Hey look, jobless claims are up again! Did you miss that while you were buying socks again, like some newscaster said you should? Getting past the noise on intermodal railcar loads brings us the revelation that shipments of metal and coal are way down. Reduced demand for raw inputs is not a sign of a growing economy.
Japan's exports are down, and IMHO the country faces another credit rating downgrade whether it goes for QE or austerity. Maybe they should rename the place Land of the Sinking Sun.
Stories on a probable market top in high-yield bonds remind me of similar stories I saw in early 2007 that wondered what was powering the high-yield market to seemingly impossible highs. I had the foresight to exit U.S. equities in mid-2007 just as the stock market peaked. Most people never saw it coming, nor do they see anything notable coming now.
Asia is now far advanced in its stealth run on the dollar. China's trading partners have slowly replaced dollar holdings with yuan holdings. Helicopter Ben has no idea what he started with his taunt to Asian central banks that they can just decouple. His overconfidence that the Fed can now take the place of foreign bond buyers in the market for Treasuries will be the undoing of the dollar's domestic value.
Stay tuned for my portfolio update tomorrow. I'm going to pull the trigger on a change I've hinted at making for some time now.
Sunday, October 21, 2012
The Limerick of Finance for 10/21/12
Japan's exports have hit a new slump
Bonds rose when stocks went to the dump
This really looks bad
Making investors sad
Going long is a trade for a chump
Bonds rose when stocks went to the dump
This really looks bad
Making investors sad
Going long is a trade for a chump
Saturday, October 20, 2012
Revenues Lead The Way . . . Down
The verdicts coming in on the economy's health are not good, at least from the perspective of corporate financial results. A string of S+P 500 revenue misses can't all be chalked up to poor execution. UNP is having a banner time but I suspect railroads are riding the peak of a bow wave of imports, driven by retailers accumulating inventory for the Christmas season. That will collapse when consumer spending is exhausted.
Earnings misses are next but we won't see them until corporations are done trimming expenses. That means more layoffs are coming. Forget about the falsified employment numbers from BLS. The line out the door of your city's unemployment office is a better indicator.
Oh yeah, here's an unrelated tidbit. The home price recovery is driven by the lack of supply of existing homes, and banks are still withholding foreclosures from the market. Mortgage rates are at all-time lows and won't stay there forever. The accelerants are lighting this fire without any kindling to sustain it, and it will be gone in a puff of smoke.
Wall Street's sell-side preppies and wealth management flim-flam salespeople love people who buy into this market. So do realtors desperate for the commissions of five years ago. Forget it.
Earnings misses are next but we won't see them until corporations are done trimming expenses. That means more layoffs are coming. Forget about the falsified employment numbers from BLS. The line out the door of your city's unemployment office is a better indicator.
Oh yeah, here's an unrelated tidbit. The home price recovery is driven by the lack of supply of existing homes, and banks are still withholding foreclosures from the market. Mortgage rates are at all-time lows and won't stay there forever. The accelerants are lighting this fire without any kindling to sustain it, and it will be gone in a puff of smoke.
Wall Street's sell-side preppies and wealth management flim-flam salespeople love people who buy into this market. So do realtors desperate for the commissions of five years ago. Forget it.
Friday, October 19, 2012
Thursday, October 18, 2012
Wednesday, October 17, 2012
The Haiku of Finance for 10/17/12
Show me currency
Low-debt and high-growth country
Useful dollar hedge
Low-debt and high-growth country
Useful dollar hedge
Synopsis of FX Invest West Coast 2012
FX Week held its second annual FX Invest West Coast Conference on September 11, 2012 in San Francisco. I attended this investment conference on currency last month. I've had a lot of work to catch up on since then and this report is one of those things I stuck on the back burner. Well, better late than never. I publish according to my schedule, no one else's. The month since then has given me plenty of time to absorb the conference material and figure how much of it applies to my own portfolio.
I missed the first couple of speakers due to a breakfast meeting with some visiting executives, so when I arrived late I wasn't able to secure a seat next to some of the hot chicks in attendance. There weren't that many chicks anyway so pickings were slim. I slid into a vacant seat near the front after listening to one hot chick, Lida Preyma of the G20 Research Group, give her rundown of the European debt crisis. She thinks Greece won't be allowed to leave the euro due to the chaos that would ensue, and even Germany's objections would not be sufficient to forestall ESM implementation. She's correct so far but 2012 isn't over yet. I had the chance to talk to her afterwards and she's even hotter when viewed up close.
A panel of managing directors from institutional investors like State Street and Mellon Capital held forth on whether the US dollar still was the healthiest currency on tap. I could have told them it wasn't but they didn't ask me; those firms never responded to me when I sent them my resume years ago. Anyway, they said the Canadian dollar looks good because the central bank up there in the Great White North is unlikely to do QE. That 's good news for people long FXC (like me). They correctly predicted QE3 here in the US, which in hindsight was a no-brainer (I saw it coming too, if you read my previous blog posts). The panelists said something really dumb by claiming the US dollar would lose its bull case if the US Treasury issued bonds denominated in euros. Come on, why would they do something so pointless?! Even Robert Rubin's proteges at Treasury aren't that dumb. There is no point in issuing US treasuries in euros in the face of that currency's likely self-destruction just because it's a more widely held currency than Canadian, Australian, or New Zealand dollars! If the US was to issue securities in foreign currencies, those would be the more likely candidates IMHO. The panel was somewhat prescient on other things despite this one stupid comment, noting that governments' stimulus has had no success channeling money into real economies due to low demand for funding and tight credit requirements. I say just wait until the US government starts forcing banks to lend. One very revealing observation was that European governments have no real plan to either forestall or manage a eurozone breakup, and their actions to date hint at hidden panic among policymakers. I figured that out earlier this summer, after watching US Treasury Secretary Timothy Geithner's shuttle diplomacy force Germany's Angela Merkel to take a more pro-euro public stance. Despite all of this blather about the euro, the panel never really addressed the health of the US dollar in detail aside from stating that QE3's impact would be limited and the Fed would be out of ammo (hey, they've been correct so far). When I'm on one of these panels at next year's FX Invest West Coast Conference, I'll tell them all about how serious inflation is just raring to go in the US.
You know something, I'm still quite fond of my concept of a "Holy Roman Euro." I mentioned it to Lida Preyma while I was flirting with her during a break and she seemed intrigued. Of course, attractive women can't help but be intrigued by the extraordinary greatness that is Yours Truly, Anthony J. Alfidi. I believe France, Germany, and the Benelux region were meant to be permanently linked financially due to their cultural and physical connections. They have more in common with each other than they do with Southern Europe. The Holy Roman Euro will fulfill the original mission of the European Coal and Steel Community - preventing war in Western Europe.
Legendary currency quant analyst Jessica James was up next to talk about FX options and equity as drivers of FX moves. Currency options intrigue me as an indirect way to borrow in low-interest currencies and go long in high-interest currencies. Dr. James discovered that FX option payouts vary significantly from premia paid, implying great opportunity for investors. Systematically writing straddles since 1986 would have been a very successful trading strategy. Her discussion of implied volatility and the implied rates of currency pairs brought back memories of my MBA global financial instruments elective, and thankfully I still have my notes and can apply the hedging strategies I learned. Note to self: Long-dated options have higher premia with a sweet spot for value at the one-year point (thanks, Dr. James). She noted that customers' equity positions tracked by the World Federation of Exchanges have increased recently. Her discovery implies that a good trading strategy is to buy the short-term forward contract of an FX pair after buying equity, but I wonder . . . equity domiciled in which country? Denominated in which currency? In other words, would you pair the Hong Kong Dollar with Chinese equity? Her brilliant research shows how equity investment flows drive FX moves, which makes intuitive sense once you realize that FDI has to be exchanged for local currency at some point in the transaction. Money managers can develop hard-core hedging strategies with Dr. James' research.
Now we come to another panel before lunch. This group talked up the latest developments in electronic trading for the buy-side community. I found this discussion of platforms to be extremely boring and not at all germane to my portfolio. My impression of the sector is that customers who need currency constantly exchanged (import/export firms, ocean carriers) would prefer platforms emphasizing speed of execution. Customers who focus on long-term hedges (manufacturers buying capital goods) would prefer platforms offering best price. Anyhow, the panelists kept boring me to death but I picked up some nuggets of info despite my eyes glazing over. Banks make up 99% of the currency market's liquidity providers and market makers, so FX platforms are banks' liquidity enablers. Unbundling services cuts premiums and adds value for buy-side clients (hey, that makes me think of cable/satellite TV providers unbundling their channel packages, of all things). These folks claim that unbundling increases transparency but I'm not convinced. IMHO only seeing a counterparty's posted collateral can do that. No wonder I have a hard time taking platform technology seriously, as it is not at all a panacea for counterparty risk.
Lunch was served. I was impressed with the spread at the Hilton San Francisco Union Square, with great risotto and plenty of meat offerings. The Hilton's "vine spritzer" drink was some kind of sparkling grape juice concoction. Some e-platform sales jerk with an Australian accent grabbed my napkin to wipe his fingers. I restrained my impulse to slug him even after he had the nerve to start pre-qualifying me as a prospect. I don't get angry at investment conferences because I want to be invited back. My extremely stern facial expression must have told him that I was not in the mood to be trifled with given his rudeness. He walked away and I grabbed his dessert, some really nice chocolate truffles. I'm all about justice. I grabbed even more dessert later on because the pickings were so good but my waistline doesn't suffer because I work out more than most finance slobs.
A manager from CalPERS gave the afternoon keynote on standards for calculating currency returns. Why hasn't this been done yet? Well, maybe because money managers compare returns in a single currency (like the dollar) and not in a universal standard like the information ratio. I don't buy his argument for a "risk budget" because IMHO there is no truly riskless approach in currency. I also can't buy his advocacy of using Libor as a credit component because it's been totally discredited by this year's bank manipulation scandals. I'd rather use the long-term interest rate of the nation underlying the short component of the currency pair in question (i.e., the ten-year Treasury for the US dollar). I also noticed that levered portfolios don't seem to add much alpha. My bottom-line takeaway from this one is that if currency positions are identical as a percentage of a portfolio, then choosing your base asset (Libor vs. T-bill) will change the interest rate you use as a metric of a manger's skill. That in itself heavily influences a currency portfolio's ROI, perhaps even more so than the currency's beta.
The next panel talked about winning investment strategies. One of the panelists earned my permanent enmity when I met him at the first FX West Coast in 2011, when he insulted my intelligence. I didn't rip his head off then and that's why I got invited back this year. The panel spewed a bunch of nonsense that told me they learned nothing about benchmarks and risk budgets from the previous speaker. One telling comment did slip out: "Good times make us all carry traders, bad times make us all hedge traders." There has never been a more complete indictment of the futility of a currency-only investment strategy than that revelation right there. Listening to these pedigreed fools convinced me more than ever that currency holdings should hedge the cash portion of a domestic portfolio and should not be pursued for the sake of their own ROI.
The next speaker on risk management said that institutional investors, especially plan sponsors, need to match assets to their liability streams, and currencies are no exception since they are assets that produce long-term non-zero returns. Alpha is possible if two funds with different risk profiles engage in currency swaps. The more I think about that, the dumber I think that would be but fund managers can be pretty dumb. Here we go again with pursuit of currency ROI for its own sake, rather than putting currency investing in its proper context of hedging cash holdings or FDI transactions! This insanity is going to come to a screeching halt when central banks pull the leverage rug out from under money-center banks, or if hyperinflation forces the repeal of legal tender laws. Yeah, currency geniuses, try that on for size. I did agree with the guy that said the currency of a high-inflation country should fall in value; I mean, come on, that's obvious. He noted that currency bid/ask spreads exploded after the Lehman Brothers collapse in 2008. I noted that a lot of these pros use "GFC" as shorthand for the Global Financial Crisis but they seem to think it's over. Fat chance. His final comment that euro-sovereign risk is baked into every market right now was yet another Captain Obvious moment.
The next speaker was a currency advisor from Credit Suisse with a very informative presentation on volatility regime classification. It's the kind of thing that would bore most people to death but there's a chance it would add value as an approach for a global asset manager who needed a currency overlay to manage exposures in multiple countries. His conclusion was that conditioning your trade strategy selection on the type of "regime" you're in will improve risk-adjusted returns. The regime itself has two dimensions: a vertical axis for volatility (low to high) and a horizontal axis for term structure (flat to steep). The only problem I have with this kind of thinking is that these regimes do not persist over time, and the discontinuity that occurs when one regime suddenly changes into another (i.e., the term structure of interest rates suddenly steepens when a central bank buys the short end of a yield curve) will probably invalidate a manager's strategy. Making this work as a money management strategy means staying very liquid if regimes change quickly in a day. Violent transitions will make you lose money and get you fired. In other words, this kind of thinking is the financial equivalent of a Rube Goldberg mechanism for selecting currency investment strategies. IMHO, the best currency strategy is the simplest, one that hedges cash exposure.
Another speaker heralded the end of "beta trading" baskets of Asian currencies. The yuan's appreciation and the likelihood of a persistent structural deficit in China's capital account spell the end of an era. His claim that Asia will be a currency safe haven is too simplistic for me to take seriously. Come on, dude, your thesis only considers capital and current account flows. You're completely ignoring debt/GDP as a solvency metric, interest rates, and the propensity of central banks to favor inflation! What a stupid FX strategy! I can't believe people give this guy money to invest. BTW, I also noticed quite a few people at this conference spending perfectly good money on Starbucks coffee from the lobby even though the hotel provided us all with endless free coffee (I'll say it again, FREE OF CHARGE java) with our meal and snack breaks. The behavioral finance implications of my discovery fascinate me to no end. The people attending FX West by and large are accustomed to throwing away money, and it appears their clients are equally willing to throw away money by letting these people manage it with Rube Goldberg currency strategies. There are so many suckers for me to have as counterparties in the investing world. It boggles my mind that these people can dress themselves in the morning.
One thing I need to mention before I touch on the final panel is the word of the day: leptokurtic, or a distribution with a higher peak around the mean than a normal distribution. Speakers used it to describe the distribution of currency returns. I'll use it to describe the distribution of intellectual ability among currency portfolio managers, i.e., there are a lot more average Joes doing this work than you'd expect and far fewer superstars.
The final panel talked about the global outlook for currency investing. I couldn't take my eyes off this one hot chick on the panel, Natalia Gurushina of Roubini Global Economics. She was one hot blonde Russian with knee-high boots that unfortunately hid her legs from view. Anyway, they said that "frontier currencies" represented an uncorrelated asset class in theory; I say it's because political instability makes it hard for a frontier economy to ever cross the threshold into the emerging market realm. One panelist opined that quants like them are reluctant to call this low-growth era the "new normal" because it will invalidate all financial models based on recent history. Well, no duh! That admission made me realize that these people are all hard-core quants who find Buffett-style fundamental analysis incomprehensible. I find their collective professional existence to be one of the greatest misallocations of intellectual effort in human history. These people have no idea how badly they need me as a speaker next year.
The conference closed up and cocktails were served next door. I made sure to eat enough cheese and crackers to suffice for dinner. I couldn't resist the chance to ask one of the attendees about his history with one of the backers of the Blueseed idiocy, which you'll recognize as a completely unworkable concept if you read my articles on it from many months ago. This guy pretty much confirmed my thesis that it was a stalking horse for a hidden agenda, one that is more focused on collecting business plans than launching a high-seas adventure. Folks, I can figure all of this stuff out myself.
I enjoyed this conference to no end. It made me feel okay that none of the big firms here had ever considered hiring me, because I would have had to swallow a lot of overcomplicated nonsense just to hang onto my job. I couldn't do that at firms that did hire me and they showed me the door. Now doors open to me because I can write persuasively about stuff these people miss. I'll return to FX Invest West Coast next year and I'll find some more hot finance chicks to bring along.
I missed the first couple of speakers due to a breakfast meeting with some visiting executives, so when I arrived late I wasn't able to secure a seat next to some of the hot chicks in attendance. There weren't that many chicks anyway so pickings were slim. I slid into a vacant seat near the front after listening to one hot chick, Lida Preyma of the G20 Research Group, give her rundown of the European debt crisis. She thinks Greece won't be allowed to leave the euro due to the chaos that would ensue, and even Germany's objections would not be sufficient to forestall ESM implementation. She's correct so far but 2012 isn't over yet. I had the chance to talk to her afterwards and she's even hotter when viewed up close.
A panel of managing directors from institutional investors like State Street and Mellon Capital held forth on whether the US dollar still was the healthiest currency on tap. I could have told them it wasn't but they didn't ask me; those firms never responded to me when I sent them my resume years ago. Anyway, they said the Canadian dollar looks good because the central bank up there in the Great White North is unlikely to do QE. That 's good news for people long FXC (like me). They correctly predicted QE3 here in the US, which in hindsight was a no-brainer (I saw it coming too, if you read my previous blog posts). The panelists said something really dumb by claiming the US dollar would lose its bull case if the US Treasury issued bonds denominated in euros. Come on, why would they do something so pointless?! Even Robert Rubin's proteges at Treasury aren't that dumb. There is no point in issuing US treasuries in euros in the face of that currency's likely self-destruction just because it's a more widely held currency than Canadian, Australian, or New Zealand dollars! If the US was to issue securities in foreign currencies, those would be the more likely candidates IMHO. The panel was somewhat prescient on other things despite this one stupid comment, noting that governments' stimulus has had no success channeling money into real economies due to low demand for funding and tight credit requirements. I say just wait until the US government starts forcing banks to lend. One very revealing observation was that European governments have no real plan to either forestall or manage a eurozone breakup, and their actions to date hint at hidden panic among policymakers. I figured that out earlier this summer, after watching US Treasury Secretary Timothy Geithner's shuttle diplomacy force Germany's Angela Merkel to take a more pro-euro public stance. Despite all of this blather about the euro, the panel never really addressed the health of the US dollar in detail aside from stating that QE3's impact would be limited and the Fed would be out of ammo (hey, they've been correct so far). When I'm on one of these panels at next year's FX Invest West Coast Conference, I'll tell them all about how serious inflation is just raring to go in the US.
You know something, I'm still quite fond of my concept of a "Holy Roman Euro." I mentioned it to Lida Preyma while I was flirting with her during a break and she seemed intrigued. Of course, attractive women can't help but be intrigued by the extraordinary greatness that is Yours Truly, Anthony J. Alfidi. I believe France, Germany, and the Benelux region were meant to be permanently linked financially due to their cultural and physical connections. They have more in common with each other than they do with Southern Europe. The Holy Roman Euro will fulfill the original mission of the European Coal and Steel Community - preventing war in Western Europe.
Legendary currency quant analyst Jessica James was up next to talk about FX options and equity as drivers of FX moves. Currency options intrigue me as an indirect way to borrow in low-interest currencies and go long in high-interest currencies. Dr. James discovered that FX option payouts vary significantly from premia paid, implying great opportunity for investors. Systematically writing straddles since 1986 would have been a very successful trading strategy. Her discussion of implied volatility and the implied rates of currency pairs brought back memories of my MBA global financial instruments elective, and thankfully I still have my notes and can apply the hedging strategies I learned. Note to self: Long-dated options have higher premia with a sweet spot for value at the one-year point (thanks, Dr. James). She noted that customers' equity positions tracked by the World Federation of Exchanges have increased recently. Her discovery implies that a good trading strategy is to buy the short-term forward contract of an FX pair after buying equity, but I wonder . . . equity domiciled in which country? Denominated in which currency? In other words, would you pair the Hong Kong Dollar with Chinese equity? Her brilliant research shows how equity investment flows drive FX moves, which makes intuitive sense once you realize that FDI has to be exchanged for local currency at some point in the transaction. Money managers can develop hard-core hedging strategies with Dr. James' research.
Now we come to another panel before lunch. This group talked up the latest developments in electronic trading for the buy-side community. I found this discussion of platforms to be extremely boring and not at all germane to my portfolio. My impression of the sector is that customers who need currency constantly exchanged (import/export firms, ocean carriers) would prefer platforms emphasizing speed of execution. Customers who focus on long-term hedges (manufacturers buying capital goods) would prefer platforms offering best price. Anyhow, the panelists kept boring me to death but I picked up some nuggets of info despite my eyes glazing over. Banks make up 99% of the currency market's liquidity providers and market makers, so FX platforms are banks' liquidity enablers. Unbundling services cuts premiums and adds value for buy-side clients (hey, that makes me think of cable/satellite TV providers unbundling their channel packages, of all things). These folks claim that unbundling increases transparency but I'm not convinced. IMHO only seeing a counterparty's posted collateral can do that. No wonder I have a hard time taking platform technology seriously, as it is not at all a panacea for counterparty risk.
Lunch was served. I was impressed with the spread at the Hilton San Francisco Union Square, with great risotto and plenty of meat offerings. The Hilton's "vine spritzer" drink was some kind of sparkling grape juice concoction. Some e-platform sales jerk with an Australian accent grabbed my napkin to wipe his fingers. I restrained my impulse to slug him even after he had the nerve to start pre-qualifying me as a prospect. I don't get angry at investment conferences because I want to be invited back. My extremely stern facial expression must have told him that I was not in the mood to be trifled with given his rudeness. He walked away and I grabbed his dessert, some really nice chocolate truffles. I'm all about justice. I grabbed even more dessert later on because the pickings were so good but my waistline doesn't suffer because I work out more than most finance slobs.
A manager from CalPERS gave the afternoon keynote on standards for calculating currency returns. Why hasn't this been done yet? Well, maybe because money managers compare returns in a single currency (like the dollar) and not in a universal standard like the information ratio. I don't buy his argument for a "risk budget" because IMHO there is no truly riskless approach in currency. I also can't buy his advocacy of using Libor as a credit component because it's been totally discredited by this year's bank manipulation scandals. I'd rather use the long-term interest rate of the nation underlying the short component of the currency pair in question (i.e., the ten-year Treasury for the US dollar). I also noticed that levered portfolios don't seem to add much alpha. My bottom-line takeaway from this one is that if currency positions are identical as a percentage of a portfolio, then choosing your base asset (Libor vs. T-bill) will change the interest rate you use as a metric of a manger's skill. That in itself heavily influences a currency portfolio's ROI, perhaps even more so than the currency's beta.
The next panel talked about winning investment strategies. One of the panelists earned my permanent enmity when I met him at the first FX West Coast in 2011, when he insulted my intelligence. I didn't rip his head off then and that's why I got invited back this year. The panel spewed a bunch of nonsense that told me they learned nothing about benchmarks and risk budgets from the previous speaker. One telling comment did slip out: "Good times make us all carry traders, bad times make us all hedge traders." There has never been a more complete indictment of the futility of a currency-only investment strategy than that revelation right there. Listening to these pedigreed fools convinced me more than ever that currency holdings should hedge the cash portion of a domestic portfolio and should not be pursued for the sake of their own ROI.
The next speaker on risk management said that institutional investors, especially plan sponsors, need to match assets to their liability streams, and currencies are no exception since they are assets that produce long-term non-zero returns. Alpha is possible if two funds with different risk profiles engage in currency swaps. The more I think about that, the dumber I think that would be but fund managers can be pretty dumb. Here we go again with pursuit of currency ROI for its own sake, rather than putting currency investing in its proper context of hedging cash holdings or FDI transactions! This insanity is going to come to a screeching halt when central banks pull the leverage rug out from under money-center banks, or if hyperinflation forces the repeal of legal tender laws. Yeah, currency geniuses, try that on for size. I did agree with the guy that said the currency of a high-inflation country should fall in value; I mean, come on, that's obvious. He noted that currency bid/ask spreads exploded after the Lehman Brothers collapse in 2008. I noted that a lot of these pros use "GFC" as shorthand for the Global Financial Crisis but they seem to think it's over. Fat chance. His final comment that euro-sovereign risk is baked into every market right now was yet another Captain Obvious moment.
The next speaker was a currency advisor from Credit Suisse with a very informative presentation on volatility regime classification. It's the kind of thing that would bore most people to death but there's a chance it would add value as an approach for a global asset manager who needed a currency overlay to manage exposures in multiple countries. His conclusion was that conditioning your trade strategy selection on the type of "regime" you're in will improve risk-adjusted returns. The regime itself has two dimensions: a vertical axis for volatility (low to high) and a horizontal axis for term structure (flat to steep). The only problem I have with this kind of thinking is that these regimes do not persist over time, and the discontinuity that occurs when one regime suddenly changes into another (i.e., the term structure of interest rates suddenly steepens when a central bank buys the short end of a yield curve) will probably invalidate a manager's strategy. Making this work as a money management strategy means staying very liquid if regimes change quickly in a day. Violent transitions will make you lose money and get you fired. In other words, this kind of thinking is the financial equivalent of a Rube Goldberg mechanism for selecting currency investment strategies. IMHO, the best currency strategy is the simplest, one that hedges cash exposure.
Another speaker heralded the end of "beta trading" baskets of Asian currencies. The yuan's appreciation and the likelihood of a persistent structural deficit in China's capital account spell the end of an era. His claim that Asia will be a currency safe haven is too simplistic for me to take seriously. Come on, dude, your thesis only considers capital and current account flows. You're completely ignoring debt/GDP as a solvency metric, interest rates, and the propensity of central banks to favor inflation! What a stupid FX strategy! I can't believe people give this guy money to invest. BTW, I also noticed quite a few people at this conference spending perfectly good money on Starbucks coffee from the lobby even though the hotel provided us all with endless free coffee (I'll say it again, FREE OF CHARGE java) with our meal and snack breaks. The behavioral finance implications of my discovery fascinate me to no end. The people attending FX West by and large are accustomed to throwing away money, and it appears their clients are equally willing to throw away money by letting these people manage it with Rube Goldberg currency strategies. There are so many suckers for me to have as counterparties in the investing world. It boggles my mind that these people can dress themselves in the morning.
One thing I need to mention before I touch on the final panel is the word of the day: leptokurtic, or a distribution with a higher peak around the mean than a normal distribution. Speakers used it to describe the distribution of currency returns. I'll use it to describe the distribution of intellectual ability among currency portfolio managers, i.e., there are a lot more average Joes doing this work than you'd expect and far fewer superstars.
The final panel talked about the global outlook for currency investing. I couldn't take my eyes off this one hot chick on the panel, Natalia Gurushina of Roubini Global Economics. She was one hot blonde Russian with knee-high boots that unfortunately hid her legs from view. Anyway, they said that "frontier currencies" represented an uncorrelated asset class in theory; I say it's because political instability makes it hard for a frontier economy to ever cross the threshold into the emerging market realm. One panelist opined that quants like them are reluctant to call this low-growth era the "new normal" because it will invalidate all financial models based on recent history. Well, no duh! That admission made me realize that these people are all hard-core quants who find Buffett-style fundamental analysis incomprehensible. I find their collective professional existence to be one of the greatest misallocations of intellectual effort in human history. These people have no idea how badly they need me as a speaker next year.
The conference closed up and cocktails were served next door. I made sure to eat enough cheese and crackers to suffice for dinner. I couldn't resist the chance to ask one of the attendees about his history with one of the backers of the Blueseed idiocy, which you'll recognize as a completely unworkable concept if you read my articles on it from many months ago. This guy pretty much confirmed my thesis that it was a stalking horse for a hidden agenda, one that is more focused on collecting business plans than launching a high-seas adventure. Folks, I can figure all of this stuff out myself.
I enjoyed this conference to no end. It made me feel okay that none of the big firms here had ever considered hiring me, because I would have had to swallow a lot of overcomplicated nonsense just to hang onto my job. I couldn't do that at firms that did hire me and they showed me the door. Now doors open to me because I can write persuasively about stuff these people miss. I'll return to FX Invest West Coast next year and I'll find some more hot finance chicks to bring along.
Tuesday, October 16, 2012
The Haiku of Finance for 10/16/12
Drill for oil and gas
Wildcatters crowdfunding wells
More penny stock fraud
Wildcatters crowdfunding wells
More penny stock fraud
Alternative Energy Not Getting Any Second Wind
Another alternative energy company is giving up the ghost. A123 has concluded that it can't profitably make lithium-ion batteries and is going into Chapter 11. DOE should never have tried to pick winners but the temptation to look "green" is too strong to resist. So where's all the green tech going to come from that's going to generate green jobs? I guess it will have to come from green companies that don't need government help.
Some green sectors are addicted to government help. Wind energy companies are scaling back in advance of the expiration of tax breaks for their sector. Renewable energy seems to come and go in fads, and investors fall out of love with the sector when they realize how difficult it is to compete with hydrocarbons on cost.
Tonight's second presidential debate paid scant attention to renewable energy. The rhetorical action centered on domestic production of oil, gas, and coal. Both contenders had something to say about permits for drilling on federal land but little to say on what entrepreneurs needed to do to obtain permits. One thing energy entrepreneurs can do is use the JOBS Act to raise capital. Wildcatters who are serious about drilling can now crowdfund an equity raise for a project.
The energy story for America in the next few years will have little to do with the scant promise of green tech. That train left the station and went off the tracks before it could build up a full head of steam. The promise of renewable sources has always been very selective. Entrepreneurs can bid for the right to commercialize green tech developed in DOE labs. The Southwest is full of acreage ripe for concentrated solar PV development. Green approaches work when they're focused.
Some green sectors are addicted to government help. Wind energy companies are scaling back in advance of the expiration of tax breaks for their sector. Renewable energy seems to come and go in fads, and investors fall out of love with the sector when they realize how difficult it is to compete with hydrocarbons on cost.
Tonight's second presidential debate paid scant attention to renewable energy. The rhetorical action centered on domestic production of oil, gas, and coal. Both contenders had something to say about permits for drilling on federal land but little to say on what entrepreneurs needed to do to obtain permits. One thing energy entrepreneurs can do is use the JOBS Act to raise capital. Wildcatters who are serious about drilling can now crowdfund an equity raise for a project.
The energy story for America in the next few years will have little to do with the scant promise of green tech. That train left the station and went off the tracks before it could build up a full head of steam. The promise of renewable sources has always been very selective. Entrepreneurs can bid for the right to commercialize green tech developed in DOE labs. The Southwest is full of acreage ripe for concentrated solar PV development. Green approaches work when they're focused.
Monday, October 15, 2012
Financial Sarcasm Roundup for 10/15/12
Clueless consumers are more divorced from reality than ever as their optimism rises to a five-year high. Maybe that's the 47% of the voting populace that is steeped in victimhood and needs an endless stream of government handouts to sustain their household spending. I don't see how a macroeconomic report on sentiment can help an incumbent, since it only reaches high-information voters who have already made up their minds. Low-information voters won't understand the content.
The IMF is now mouthing support for "growth" out of fear. The demonstrations in Spain and Greece now have Eurocrats fearing for their lives. Do the math and you'll find that European debtor nations can't grow their way out of their debts. The IMF knows this and is putting new memes into play, partly to avoid blame when the demonstrations hit Berlin and Brussels. This position is intended for headline play and public consumption. Now the other shoe drops. The IMF warns debtor nations to "grow" by delaying sudden fiscal balance for as long as possible. Following the urge to "act decisively" means forcing balanced budgets that will destroy growth in the short term. The cognitive dissonance inside IMF headquarters must be deafening. Words are all they have left, until the Fed launches its swap lines with the ECB.
Actually, I take that back. Rhetoric isn't the only tool policymakers have left in Europe. They also have fraudulent accounting. The EU may delay Basel rules on bank capital adequacy for a year. That's great news for bank executives running scams.
China has new lies to tell the world about its export growth. Someone in the Politburo freaked out when they realized the word was getting out about the country's unrealistic growth estimates, so they've doubled down and told bigger lies than ever. There must be some kind of uneasy symbiosis between the Wall Street pumpers who keep pushing the discredited China growth story and Chinese Communist Party hacks who want the foreign investment to keep coming. I got off that merry-go-round. China also lies about its inflation rate decelerating.
If all of this lying, fraud, and wishful thinking makes you sick then you're my kind of person. If you're also an attractive woman then you should contact me immediately for some fun times.
The IMF is now mouthing support for "growth" out of fear. The demonstrations in Spain and Greece now have Eurocrats fearing for their lives. Do the math and you'll find that European debtor nations can't grow their way out of their debts. The IMF knows this and is putting new memes into play, partly to avoid blame when the demonstrations hit Berlin and Brussels. This position is intended for headline play and public consumption. Now the other shoe drops. The IMF warns debtor nations to "grow" by delaying sudden fiscal balance for as long as possible. Following the urge to "act decisively" means forcing balanced budgets that will destroy growth in the short term. The cognitive dissonance inside IMF headquarters must be deafening. Words are all they have left, until the Fed launches its swap lines with the ECB.
Actually, I take that back. Rhetoric isn't the only tool policymakers have left in Europe. They also have fraudulent accounting. The EU may delay Basel rules on bank capital adequacy for a year. That's great news for bank executives running scams.
China has new lies to tell the world about its export growth. Someone in the Politburo freaked out when they realized the word was getting out about the country's unrealistic growth estimates, so they've doubled down and told bigger lies than ever. There must be some kind of uneasy symbiosis between the Wall Street pumpers who keep pushing the discredited China growth story and Chinese Communist Party hacks who want the foreign investment to keep coming. I got off that merry-go-round. China also lies about its inflation rate decelerating.
If all of this lying, fraud, and wishful thinking makes you sick then you're my kind of person. If you're also an attractive woman then you should contact me immediately for some fun times.
Sunday, October 14, 2012
The Limerick of Finance for 10/14/12
Ben denies the Fed hurts currencies
He vows to continue to ease
The dollar gets weak
Food shortages peak
Raising prices in many countries
He vows to continue to ease
The dollar gets weak
Food shortages peak
Raising prices in many countries
Saturday, October 13, 2012
The Haiku of Finance for 10/13/12
Fiscal cliff answer
Throw too-big banks over edge
Fill up debt canyon
Throw too-big banks over edge
Fill up debt canyon
Friday, October 12, 2012
The Haiku of Finance for 10/12/12
Fed QE helps banks
Low-cost loans raise bank profits
Not for rate relief
Low-cost loans raise bank profits
Not for rate relief
Chinese Banker Admits China Is Ponzi
The supposedly inscrutable Orient just pulled the mask away to reveal a panicked visage. Some top Chinese banking dude voiced a public warning that his country's shadow banking system was breeding Ponzi schemes. I fear for this man's safety but he may be sufficiently ensconced in the Party apparatus to have a protection network.
Compare this guy's candor to the lack of candor from American bankers. The CEOs of all the U.S. Ponzi banks that collapsed in 2008 insisted right up until the end that they were healthy. We hear the same thing today from American bankers and only a few big-mouthed people (like me) outside the system are willing to point out that the emperor doesn't have a stitch.
The Chinese folks who bought into wealth management Ponzi products are going to see their dreams dashed. At least they tried to invest for their futures. Most Americans haven't saved jack squat for retirement and have no intention of doing so. Americans would rather place their faith in the one big Ponzi scheme called Social Security than take personal responsibility for themselves.
This news makes me even more glad that I sold out the last of my long China equity position.
Compare this guy's candor to the lack of candor from American bankers. The CEOs of all the U.S. Ponzi banks that collapsed in 2008 insisted right up until the end that they were healthy. We hear the same thing today from American bankers and only a few big-mouthed people (like me) outside the system are willing to point out that the emperor doesn't have a stitch.
The Chinese folks who bought into wealth management Ponzi products are going to see their dreams dashed. At least they tried to invest for their futures. Most Americans haven't saved jack squat for retirement and have no intention of doing so. Americans would rather place their faith in the one big Ponzi scheme called Social Security than take personal responsibility for themselves.
This news makes me even more glad that I sold out the last of my long China equity position.
Thursday, October 11, 2012
Wednesday, October 10, 2012
Maturing Thoughts on Borrowing for Non-Productive Purchases
I have been a lifelong opponent of assuming personal debts. I have never maxed out a credit card or applied for a loan. The handful of times I've been late on a bill payment in my life are some of my gravest mistakes, and the tiny finance charges I paid each time for my oversights are a source of shame. I hate debt. That was the mature attitude to have during normal, boom-bust business cycles marked by productivity-driven growth and inventory-derived recessions.
Times have changed. The historically normal boom-bust model is giving way to its once-in-a-lifetime deformed cousin, the hyperinflationary depression crisis. An overindulgence in government, business, and household debt is driving the Fed to quantitatively ease away the dollar's value. This will destroy dollar-based fixed income assets. That's bad for savers, bondholders, banks, and hedge funds holding fixed-rate notes. That's good for debtors owing fixed-rate loans, as the devaluing dollar enables them to pay off old debts with dollars of lesser value.
My point is that now is the time for previously debt-averse people like me to seriously consider taking on debt as a time-based arbitrage strategy for a self-destructing currency. I scoffed for years at consumers who took out automobile loans. Owing money on a consumer good that immediately loses half of its book value upon purchase ought to be financial suicide. Buying a vehicle with debt is good if said vehicle is used as an income-producing asset, i.e., a taxi cab, delivery van, ice cream truck, or urban safari tour bus for the hills of San Francisco. I thought that way until very recently. Now I think a loan of any kind, even for something as unproductive as a new car, is a useful way to acquire a hard asset with an increasingly worthless liquid asset.
I've been window shopping for a new car for some time. My 2003 Ford Mustang still hums but at 80K+ miles it's getting long in the tooth. When I turn the ignition key on a brand new sports car of some sort (another Ford Mustang or a Porsche are my leading contenders), it will be with the help of a fixed-rate loan that I will be happy to owe. Watching the loan lose its value in the years ahead as hyperinflation enables me to pay it off in today's equivalent of pennies will be great for my net worth and my stellar credit rating. Why, I may just pay that five-year loan off a month early as a show of generosity just to ensure I'm not the final nail that drives Ford Credit or its hedge fund syndicate into bankruptcy.
Nah, just kidding on that last count. I'd never accelerate my payment schedule or do anything else to give a brain-dead counterparty some temporary advantage. They'd probably assess me a prepayment penalty just to reach for my wallet one last time from beyond the bankruptcy grave. Don't think a creditor wouldn't resort to that if a post-hyperinflation political regime allows it in one final act of financial repression.
I'll be checking with my local auto dealers soon to see what kind of financing terms they offer on new, flashy sports cars. I'll also be checking with my bank's loan desk to see if they'll let me max out some one-year consumer loans just before this hyperinflation show gets rolling. The Godfather of Soul, James Brown, once sang "Papa's Got a Brand New Bag." Well, Tony here needs a brand new car, paid for by creditors dumb enough to loan me money as the dollar goes down the drain.
Times have changed. The historically normal boom-bust model is giving way to its once-in-a-lifetime deformed cousin, the hyperinflationary depression crisis. An overindulgence in government, business, and household debt is driving the Fed to quantitatively ease away the dollar's value. This will destroy dollar-based fixed income assets. That's bad for savers, bondholders, banks, and hedge funds holding fixed-rate notes. That's good for debtors owing fixed-rate loans, as the devaluing dollar enables them to pay off old debts with dollars of lesser value.
My point is that now is the time for previously debt-averse people like me to seriously consider taking on debt as a time-based arbitrage strategy for a self-destructing currency. I scoffed for years at consumers who took out automobile loans. Owing money on a consumer good that immediately loses half of its book value upon purchase ought to be financial suicide. Buying a vehicle with debt is good if said vehicle is used as an income-producing asset, i.e., a taxi cab, delivery van, ice cream truck, or urban safari tour bus for the hills of San Francisco. I thought that way until very recently. Now I think a loan of any kind, even for something as unproductive as a new car, is a useful way to acquire a hard asset with an increasingly worthless liquid asset.
I've been window shopping for a new car for some time. My 2003 Ford Mustang still hums but at 80K+ miles it's getting long in the tooth. When I turn the ignition key on a brand new sports car of some sort (another Ford Mustang or a Porsche are my leading contenders), it will be with the help of a fixed-rate loan that I will be happy to owe. Watching the loan lose its value in the years ahead as hyperinflation enables me to pay it off in today's equivalent of pennies will be great for my net worth and my stellar credit rating. Why, I may just pay that five-year loan off a month early as a show of generosity just to ensure I'm not the final nail that drives Ford Credit or its hedge fund syndicate into bankruptcy.
Nah, just kidding on that last count. I'd never accelerate my payment schedule or do anything else to give a brain-dead counterparty some temporary advantage. They'd probably assess me a prepayment penalty just to reach for my wallet one last time from beyond the bankruptcy grave. Don't think a creditor wouldn't resort to that if a post-hyperinflation political regime allows it in one final act of financial repression.
I'll be checking with my local auto dealers soon to see what kind of financing terms they offer on new, flashy sports cars. I'll also be checking with my bank's loan desk to see if they'll let me max out some one-year consumer loans just before this hyperinflation show gets rolling. The Godfather of Soul, James Brown, once sang "Papa's Got a Brand New Bag." Well, Tony here needs a brand new car, paid for by creditors dumb enough to loan me money as the dollar goes down the drain.
Tuesday, October 09, 2012
Observing the Global Market Minefield
There are too many mines in the water to count. The best course for a boat in these waters is to stand still and let some other imprudent captain detonate them. Let's consider the mines in plain sight.
Some specialized analysts, as good as they can be with a given sector sometimes, still miss the big picture. Wondering whether port capacity can keep up with growth in container traffic may be a moot point very soon. The IMF keeps flashing the warning signal about a renewed global recession. Ocean carriers won't need so many container ships after all and port officials can quit thinking about expansion for the rest of this decade.
Greece is all-in on a financial transactions tax and other European countries are cheering them on. I've voiced my support for such a tax here in the U.S. because it will make hedge funds' HFT business lines painfully expensive. This long-term social good comes with a short-term cost. HFTs now generate so much of the volume on exchanges that destroying them will shatter market confidence and probably send indexes reeling. That's fine with me, because I need some bargains to buy.
In the dust-up over whether the BLS's latest unemployment report was realistic, you may have missed the Census report on factory orders declining by 5.2% in August. Ouch.
Sanctions on Iran are destroying its currency and economy. Tehran is countering with tighter controls on currency trading. The flexibility of that "exchange center" goes beyond currency and could easily adapt itself to a domestic rationing regime for basic commodities. Iran may very well earn enough in net exports to muddle through tighter sanctions next year. Never underestimate an authoritarian regime's ability to survive by transferring hardship to its people. This contest with the mullahs would be terrific bloodsport if the world economy were healthy, but the Iranian wild card is to shut the the Strait of Hormuz and spike world oil prices. There's your trigger for depression, if you wish to take notice.
BTW, the continued ability of World Bank and IMF officials to talk out of both sides of their mouths is unintentionally humorous. The preferred solution to "fiscal cliffs" offered by globalist bankers is more kick-the-can delays in austerity that will eventually turn hard landings into smoking craters. They know full well that heavily indebted economies cannot grow their way to prosperity. The gods of the growth cargo cult must be appeased until the island is inundated by a hyperinflationary tsunami.
Why do I even bother connecting the dots? Well, for one thing I just like to mouth off. I also want a publicly available record that I did not throw my portfolio into a black hole along with every other dummy on Wall Street. Let them strike the sea mines first. I'll note the clear path marked by derelict hulks (i.e. asset classes to avoid) and tow them for salvage (buy the dummies' assets out of bankruptcy).
Some specialized analysts, as good as they can be with a given sector sometimes, still miss the big picture. Wondering whether port capacity can keep up with growth in container traffic may be a moot point very soon. The IMF keeps flashing the warning signal about a renewed global recession. Ocean carriers won't need so many container ships after all and port officials can quit thinking about expansion for the rest of this decade.
Greece is all-in on a financial transactions tax and other European countries are cheering them on. I've voiced my support for such a tax here in the U.S. because it will make hedge funds' HFT business lines painfully expensive. This long-term social good comes with a short-term cost. HFTs now generate so much of the volume on exchanges that destroying them will shatter market confidence and probably send indexes reeling. That's fine with me, because I need some bargains to buy.
In the dust-up over whether the BLS's latest unemployment report was realistic, you may have missed the Census report on factory orders declining by 5.2% in August. Ouch.
Sanctions on Iran are destroying its currency and economy. Tehran is countering with tighter controls on currency trading. The flexibility of that "exchange center" goes beyond currency and could easily adapt itself to a domestic rationing regime for basic commodities. Iran may very well earn enough in net exports to muddle through tighter sanctions next year. Never underestimate an authoritarian regime's ability to survive by transferring hardship to its people. This contest with the mullahs would be terrific bloodsport if the world economy were healthy, but the Iranian wild card is to shut the the Strait of Hormuz and spike world oil prices. There's your trigger for depression, if you wish to take notice.
BTW, the continued ability of World Bank and IMF officials to talk out of both sides of their mouths is unintentionally humorous. The preferred solution to "fiscal cliffs" offered by globalist bankers is more kick-the-can delays in austerity that will eventually turn hard landings into smoking craters. They know full well that heavily indebted economies cannot grow their way to prosperity. The gods of the growth cargo cult must be appeased until the island is inundated by a hyperinflationary tsunami.
Why do I even bother connecting the dots? Well, for one thing I just like to mouth off. I also want a publicly available record that I did not throw my portfolio into a black hole along with every other dummy on Wall Street. Let them strike the sea mines first. I'll note the clear path marked by derelict hulks (i.e. asset classes to avoid) and tow them for salvage (buy the dummies' assets out of bankruptcy).
Monday, October 08, 2012
Financial Sarcasm Roundup for 10/08/12
My Internet connection gives me a front-row seat to the end of the ancien regime, the post-Cold War era of U.S. dollar hegemony. The unpredictable vagaries of history will determine whether the American ruling elite gets thrown out with the currency they are about to throw away. Alright, let's get on with the sarcasm.
Lehman Brothers' diehard hedge fund creditors have reached some kind of legal milestone in their quest for $38B worth of assets. Yeah right. Legal judgments mean nothing if the money is long gone. Just ask MF Global's creditors. Most of the unsecured claims against rump Lehman will probably go nowhere and the smart creditors have already started throwing those claims away.
Dodd-Frank is being nickel-and-dimed to death by the financial predators who don't like being bound by laws. Tough luck for the little investor who hoped reform would have teeth. Our leaders like to mouth off about Dodd-Frank because low-information voters mistakenly think it matters.
The World Bank is throwing more cold water on the East Asia growth story. One factor they're missing is the tendency for authoritarian regimes to conquer their neighbors in search of new markets, cheap resources, and forced labor. China could just walk over its neighbors after a sufficiently robust military buildup masks its inability to generate GDP growth. That's another decade away but I didn't want to keep China exposure in my portfolio long enough to see that happen.
The latest U.S. unemployment report is complete baloney. I'm not sure whether it's driven by political factors. The simplest explanation is that a generation of mathematicians and economists are no longer able to recognize ground truth in statistics. Making seasonal adjustments, then throwing them out for new adjustments, then adjusting the adjustments based on prior adjustments that were never made can have that cumulative effect. John Williams easily deconstructs the silliness behind the adjustments that render these statistics meaningless.
I'm getting over the remnants of a headache I've had since last week and spewing this sarcasm really helps. I've got a pretty full plate of business meetings to attend this week, plus a stack of notes on previous meetings that I still haven't blogged. I'll get around to all of that as soon as people quit wasting my time.
Lehman Brothers' diehard hedge fund creditors have reached some kind of legal milestone in their quest for $38B worth of assets. Yeah right. Legal judgments mean nothing if the money is long gone. Just ask MF Global's creditors. Most of the unsecured claims against rump Lehman will probably go nowhere and the smart creditors have already started throwing those claims away.
Dodd-Frank is being nickel-and-dimed to death by the financial predators who don't like being bound by laws. Tough luck for the little investor who hoped reform would have teeth. Our leaders like to mouth off about Dodd-Frank because low-information voters mistakenly think it matters.
The World Bank is throwing more cold water on the East Asia growth story. One factor they're missing is the tendency for authoritarian regimes to conquer their neighbors in search of new markets, cheap resources, and forced labor. China could just walk over its neighbors after a sufficiently robust military buildup masks its inability to generate GDP growth. That's another decade away but I didn't want to keep China exposure in my portfolio long enough to see that happen.
The latest U.S. unemployment report is complete baloney. I'm not sure whether it's driven by political factors. The simplest explanation is that a generation of mathematicians and economists are no longer able to recognize ground truth in statistics. Making seasonal adjustments, then throwing them out for new adjustments, then adjusting the adjustments based on prior adjustments that were never made can have that cumulative effect. John Williams easily deconstructs the silliness behind the adjustments that render these statistics meaningless.
I'm getting over the remnants of a headache I've had since last week and spewing this sarcasm really helps. I've got a pretty full plate of business meetings to attend this week, plus a stack of notes on previous meetings that I still haven't blogged. I'll get around to all of that as soon as people quit wasting my time.
Sunday, October 07, 2012
The Limerick of Finance for 10/07/12
California gas prices are high
Governor needs to ask the Fed why
QE3 keeps it up
You'll pay to fill up
Ration laws will limit what you buy
Governor needs to ask the Fed why
QE3 keeps it up
You'll pay to fill up
Ration laws will limit what you buy
Friday, October 05, 2012
Thursday, October 04, 2012
Debating Shale Oil And Transport
There's plenty of room for disagreement over the widely divergent economic sources the two Presidential candidates cited in their debate last night. What isn't debatable is something they both found agreeable: U.S. shale oil production is strong and is reducing this country's dependence on imported oil. The shale boom blessing may drive an unanticipated effect on the fortunes of some ocean carriers. Demand for oil tankers to service U.S. imports will probably suffer. The entire shipping industry has been on a newbuild frenzy since the Great Recession went into hiatus in 2009 but that affection for new hulls has been most visible in the containerized shipping sector. Petroleum carriers will soon find out just how much an overcommitment to new hulls will cost them.
I've been tracking a couple of oil carriers off and on for about three years but I never went long their stocks. If the whole sector suffers, the carriers with the least debt and fewest newbuild commitments may merit my investment. If the renewed global recession (yes, it's here already) crashes crude oil prices, the weakest ocean carriers may look for acquirers.
Full disclosure: No positions in the shipping sector at this time.
I've been tracking a couple of oil carriers off and on for about three years but I never went long their stocks. If the whole sector suffers, the carriers with the least debt and fewest newbuild commitments may merit my investment. If the renewed global recession (yes, it's here already) crashes crude oil prices, the weakest ocean carriers may look for acquirers.
Full disclosure: No positions in the shipping sector at this time.
Wednesday, October 03, 2012
Dude, Where's My Inflation?
You want inflation? I got your inflation right here. The OECD is tracking monthly inflation in the developed countries, and it's higher by 0.1% in August. That may not seem like much of a jump but think of it as the first of many camel noses under the tent. The U.S. and Germany are leading the way but both countries under-report their official statistics.
Private reporting of Australia's inflation rate puts it higher than the OECD developed countries' rate. That does not deter me from investing in Australian currency, since their government's debt is smaller relative to GDP than that of many other developed countries. The Reserve Bank of Australia is not encumbered with some academic who demands quantitative easing, as we are here in the U.S.
BTW, the question in my title is a reference to an idiotic movie from a few years ago, and the meme it spawned more recently wondering whether a recession was in progress. Answering it today is easy. Dude, inflation is everywhere, but some countries' central bankers have a much higher pain threshold.
Full disclosure: Long FXA.
Private reporting of Australia's inflation rate puts it higher than the OECD developed countries' rate. That does not deter me from investing in Australian currency, since their government's debt is smaller relative to GDP than that of many other developed countries. The Reserve Bank of Australia is not encumbered with some academic who demands quantitative easing, as we are here in the U.S.
BTW, the question in my title is a reference to an idiotic movie from a few years ago, and the meme it spawned more recently wondering whether a recession was in progress. Answering it today is easy. Dude, inflation is everywhere, but some countries' central bankers have a much higher pain threshold.
Full disclosure: Long FXA.
Tuesday, October 02, 2012
Monday, October 01, 2012
The Haiku of Finance for 10/01/12
No dollar crash yet
Euro crisis still plays out
Give it some more time
Euro crisis still plays out
Give it some more time
Financial Sarcasm Roundup for 10/01/12
September flew by with no market crash, no default from Greece (or Spain, or Italy), no eurozone breakup, and no U.S. hyperinflation. I'm disappointed. I'll have to find more things to get sarcastic about.
The head of the SF Fed defends QE3 in his own words. I get the argument for a natural unemployment rate of 6% but it needs to be defined as primarily for those in transition from one job to another. I don't get the claim that real unemployment is only 8.1%. The Fed folks are glad U-6 isn't published anymore because they know it would embarrass them with a high double-digit unemployment rate. This guy also trots out the deliberate underestimation of inflation at under 2%. *Sigh.* He needs to do more of his own grocery shopping so he can see the price of canned tuna is over $1.00 a can. I remember when it was $0.45 per can a decade ago when I was in graduate school. Nowhere in the speech does he specify just how monetary stimulus will reduce unemployment. That sleight-of-hand trick won't fool markets for much longer.
Bank of America is paying off the last of the irate shareholders who didn't like getting saddled with Merrill Lynch's problems. The $2.4B bill will cause a $1.6B charge against earnings, and BAC had net income of just over $2.4B last quarter. That leaves very little cushion for any other bad news coming out of this bank. Maybe I should take out a loan from BofA just for kicks in case they can't survive. Nah, I'm not that mean and BofA isn't in that much trouble (yet). Full disclosure: No position in BAC.
China's exports are rapidly collapsing. A less intense contraction is still a contraction. I'm glad I sold the last of my China position to herald the end of the China bull story. Note that this survey of purchasing managers by a private bank is more pessimistic than the Chinese government's official survey of purchasing managers. China can no longer avoid getting caught lying about its economy. The plan to turn China into a nation of middle-class consumers hasn't come fast enough and probably never will given that country's demographics. Staying away from Chinese investments is probably the patriotic American thing to do anyway, given Beijing's increasingly bellicose attitude towards its neighbors. I expect nothing but trouble from that country for the next couple of decades.
The Financial Planning Association is in denial about the chances it can reach middle class investors. I remember the rounds of interviews I went through as an aspiring financial adviser in 2005 with branch managers who were convinced that 401(k) rollovers into IRAs would be the industry's growth story. Fast forward to today, with the average retiree having less than $30K in assets. Great job, FPA. Keep wasting time touting the middle class's nonexistent wealth so you can send people like me on wild goose chases. That's how rich people (and their financial advisers) amuse themselves.
The head of the SF Fed defends QE3 in his own words. I get the argument for a natural unemployment rate of 6% but it needs to be defined as primarily for those in transition from one job to another. I don't get the claim that real unemployment is only 8.1%. The Fed folks are glad U-6 isn't published anymore because they know it would embarrass them with a high double-digit unemployment rate. This guy also trots out the deliberate underestimation of inflation at under 2%. *Sigh.* He needs to do more of his own grocery shopping so he can see the price of canned tuna is over $1.00 a can. I remember when it was $0.45 per can a decade ago when I was in graduate school. Nowhere in the speech does he specify just how monetary stimulus will reduce unemployment. That sleight-of-hand trick won't fool markets for much longer.
Bank of America is paying off the last of the irate shareholders who didn't like getting saddled with Merrill Lynch's problems. The $2.4B bill will cause a $1.6B charge against earnings, and BAC had net income of just over $2.4B last quarter. That leaves very little cushion for any other bad news coming out of this bank. Maybe I should take out a loan from BofA just for kicks in case they can't survive. Nah, I'm not that mean and BofA isn't in that much trouble (yet). Full disclosure: No position in BAC.
China's exports are rapidly collapsing. A less intense contraction is still a contraction. I'm glad I sold the last of my China position to herald the end of the China bull story. Note that this survey of purchasing managers by a private bank is more pessimistic than the Chinese government's official survey of purchasing managers. China can no longer avoid getting caught lying about its economy. The plan to turn China into a nation of middle-class consumers hasn't come fast enough and probably never will given that country's demographics. Staying away from Chinese investments is probably the patriotic American thing to do anyway, given Beijing's increasingly bellicose attitude towards its neighbors. I expect nothing but trouble from that country for the next couple of decades.
The Financial Planning Association is in denial about the chances it can reach middle class investors. I remember the rounds of interviews I went through as an aspiring financial adviser in 2005 with branch managers who were convinced that 401(k) rollovers into IRAs would be the industry's growth story. Fast forward to today, with the average retiree having less than $30K in assets. Great job, FPA. Keep wasting time touting the middle class's nonexistent wealth so you can send people like me on wild goose chases. That's how rich people (and their financial advisers) amuse themselves.
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