Saturday, February 28, 2015

The Haiku of Finance for 02/28/15

World bodies working
Prosperous policy path
Inclusive approach

Listicle of Financial Inclusion Institutions

Financial inclusion is an emerging topic in both the traditional finance sector and the social capital arena.  Here's a rundown of the major institutions facilitating and tracking this phenomenon.

The Center for Financial Inclusion (CFI) has a target date of 2020 for full inclusion.  That's ambitious, so five years from now we can expect to see inclusive programs all over the developed world.  If the subject is ever going to catch fire, it must cover both the developed world and emerging markets.

The G20's Global Partnership for Financial Inclusion (GPFI) is a serious effort to integrate several multilateral initiatives.  It matters if it keeps the developed world's sub-ministerial task forces on track.  The risk is that the G20's recent endorsement of coordinated monetary stimulus will disrupt the capital account flows the developed world needs to meet inclusion targets.

The World Bank's Consultative Group to Assist the Poor (CGAP) develops a policy architecture for implementing inclusive plans.  That's a fancy way of saying the group has sample rules that any country can implement.  Check out their discussions of microcredit.  The World Bank also maintains GPFI's G20 Financial Inclusion Indicators, along with its own Financial Inclusion data and Global Findex.

The Alliance for Financial Inclusion (AFI) is probably the most inclusive policymaking body.  The difference with AFI is the participation of experts from the developing world to ensure the other coordinating bodies aren't making policy in a vacuum.

Billions of formerly marginalized people are crossing the chasm between the non-integrated gap and the functioning core.  Keeping up with the times means knowing how they will all grow wealthy.  Financial inclusiveness is the developed world's welcome mat laid out for the world economy's brand new members.

The Business Case For New Mentoring Tools

I recently visited with the enterprising minds behind MicroMentor, a derivative of Mercy Corps.  I don't participate in their program but they offer a good value proposition to anyone seeking mentoring via social media.  Entrepreneurs pressed for time now have another option besides SCORE.  They can also share knowledge with peers at Startgrid.  The good news for proteges seeking financial inclusiveness just keeps on coming.

The advent of microfinance and microenterprise means mentoring must adapt to changing times.  The Aspen Institute's FIELD program documents the latest data on how microbusiness sectors adapt.  Aspen has tons of other programs too numerous to name here that can help.  Mentors who need ROI trackers for their board service and volunteerism need look no further than True Impact.

A web search of topics covering mentoring reveals a ton of open-source research on personal mentoring for disadvantaged youth.  The research on mentoring within a business context is often behind the paywalls of academic journals or held in the private databases of consultancies.  The best open-source business cases for mentoring are in the Society for Human Resource Management's research and tools.  Searching SHRM's site for variations on the word "mentor" reveals everything a good manager needs to know.

The existing literature on mentoring has some gaps.  Mentoring disadvantaged youth makes sense from a humanitarian standpoint.  Finding a mentor at work has potential payoffs in the time-honored tradition of riding a superstar's coattails.  The HR coursework I recall from my business studies showed that formal mentoring programs often lead to mismatches.  There is room for disruption in mentoring.  Social media enablers like MicroMentor and Startgrid are natural evolutions in business relationships.

Friday, February 27, 2015

The Haiku of Finance for 02/27/15

Broker rule struggle
Wall Street greed for account fees
Need more strict control

Greek Crisis Drops Off Reality Radar Into Pretend Land

Hey children!  Let's all pretend that Greece can pay its bills, Germany loves giving away money, and Europe is one big happy family.  That would make a hilarious fairy tale suitable only for the dumbest of credulous kids.  Europe's leaders are living this fairy tale right now even though they know the grown-up math will never make it work.

Tuesday's approval of Greece's proposed austerity compliance plan was a farce beyond all belief.  European finance ministers somehow gave it their seal of approval with a straight face.  Whether they were complicit in drafting it before Greece pretended to own it is a moot point.  Every responsible adult at the European financial table is now engaging in mass self-deception, national deception, and continental deception.

Here's a trumpet blast of reality for any Europeans still asleep.  Greece has no intention of ever paying its debts or fulfilling its austerity promises.  Athens' capitulation to the troika's new bailout terms was a feint to stop Greek bank runs.  The Tsipras regime knows it will run out of money but needs another few weeks or months to turn disorderly starvation into something that does not lead to civil unrest.  Europe knows it will never see its banks made whole after a Greek default.  The ECB needs the next few weeks to figure out how to front-load as much quantitative easing as possible into Greek bonds.

Childish fairy tales are now okay for grown-ups.  European parliaments will sleep for the next four months telling themselves a bedtime story of prompt Greek payments, generous German taxpayers, and kindly central bankers.  The hard wake-up will be a surprise thunderstorm breaking in the middle of the night.

Thursday, February 26, 2015

The Haiku of Finance for 02/26/15

Python in finance
Calculate all risk metrics
No room for humans

The Choices Between Statistical Programming Languages

I recently attended a talk where an audience member posed a question to an experienced economist about which programming language is best for statistics.  The expert selected Python over MATLAB and Mathematica, and I think I heard the R language as one other choice (it wasn't clear).  Young professionals just entering the workforce with high-end skills take the choices between those languages very seriously.

MATLAB iterates the manual matrix programming most top MBA programs include in their decision science classes.  It interfaces with both modern languages like C++ and legacy languages like Fortran.  Some programmers, like our expert above, believe Python can replace MATLAB in transforming data into graphical displays.  Maybe it depends on the profession.  I have recently spoken with a hedge fund manager who swears by Python for its ease of use, comparable to MS Excel functions.  That's two anecdotal votes for Python in a week.

Mathematica's Wolfram language is almost as old as MATLAB, and just as heavily used in the sciences and engineering.  They both have open source competition.  R is a more recent innovation with open source origins.  I have heard R mentioned at tech conferences where hackathon alums discuss the techniques they used during competition.  Looking at snippets of R syntax I found on the web reminds me of the very basic DOS programming I did in an undergraduate business class in the early 1990s.  Comparing all of these to Python's supposed symbolic ease of use entices me to learn more about Python first.

Hedge fund quants know financial engineering, where high-level programming languages like Python are necessary.  I have long been skeptical of the value added by hedge funds.  Knowing their preferred lingo should make critiques of their approaches more credible.  I still expect a market cataclysm to shake out almost all hedge funds as redundant.  Any investment firms that survive will attract the best quant talent and programming will still be a valuable skill.  The key for those few quants who keep their jobs will be knowing the limits of financial engineering in marking risk/reward tradeoffs.  Economics are human-caused events, not natural phenomena governed by hard math.  Black Swans can still fly right through any Python script.

I am not yet at a decision point where I am ready to learn a computer programming language, but the changing demands of the finance sector may require such an adaptation.  Those of us in the middle of our careers need to seriously consider learning the basics of some of these languages.  None of the four languages I mentioned were in the curricula of my MBA courses but they are now recognized as de rigeur for enterprise data professionals.  The concept of coding as basic literacy is on many thought leaders' lips.  Young people who can do it are far ahead of middle-aged people in adapting to a high-value workplace.  Coding as literacy leads to a Big Data career.

Wednesday, February 25, 2015

The Haiku of Finance for 02/25/15

Global policy
"Thousand needle" stimulus
Everyone pushing

Scraping The Bottom Of The WTI Oil Price Barrel In 2015

Energy sector investors are waiting for a bottom in oil prices.  Industrial energy users are looking for a hard price to use as a benchmark for hedging their consumption.  A generation's worth of history allows us to make an educated guess about where the bottom price of the 2015 oil market glut may appear.

The last major bear market in crude oil was in the late 1980s, when a collapsing WTI price cut the legs out from under US independent drillers.  The collapse precipitated a crash in Texas real estate and triggered the infamous savings and loan crisis.  The US DOE's EIA maintains a database of historical WTI prices.  The absolute bottom in that 1980s bust was when the WTI spot price touched $10.83 on July 23 and July 25, 1986.  I had to eyeball the data series but I'm pretty sure I didn't see any lower price.  Someone with more time on their hands is welcome to search for a lower price at any other time in US history.

Let's find out what the equivalent of that price would be in today's inflation-adjusted dollars.  Using the Minneapolis Fed CPI calculator gives us $23.69 in 2015.  Using the BLS CPI calculator gives us $23.39 in 2014, the most recent year available.  Kudos to the Fed for getting the CPI adjustment even closer to the present day than the BLS.  Anyway, this gives us an idea as to how much farther the WTI price can fall before it touches a truly historic bottom.  The WTI Cushing spot price for February 23, 2015 (the EIA's most recent date) was $49.56, more than twice the inflation-adjusted 1986 bottom.

The price of oil does not have to fall that far before it recovers.  Alternatively, it could fall even farther and break all historical records if demand destruction continues in the developed world and US shale producers keep pumping rather shut down in an orderly manner.  The global supply glut of oil will not close to meet demand at a natural equilibrium until at least some time later in 2015.  Investors hunting for bargain prices among oil producing companies are not waiting that long to begin their search.

Tuesday, February 24, 2015

The Haiku of Finance for 02/24/15

Be nice to others
Politeness pays dividends
Remember kindness

Basic Politeness Matters In Business

Being polite may be going out of style.  It may be the zeitgeist.  Decades of poor parenting have elevated self-esteem over self-control.  The instant gratification of fast food, online shopping, streaming movies, and whatever else our smartphones can find for us has bred modern Americans to exhibit basic contempt for activities requiring patience.  Brutish behaviors have a cost measured in adult reputations tarnished and business opportunities missed.  Good manners should make for good business.  Just examine the costs of rudeness yourself and compare them to the payoffs for doing the right thing.

Politeness shows a respect for another person's worth.  I have attended private events where loudmouths continue to socialize even after a featured speaker has ascended the podium to say what everyone came to hear.  It is truly a head-scratching spectacle to watch an educated crowd ignore a feature event, even when some of them paid for the privilege.  Quiet down, folks.

Arriving on time shows respect for another person's time.  The worst supervisors in my career had a bad habit of making me wait for our appointed meetings while they socialized or wasted time in front of my face.  They sent me a clear message that whatever they asked me to bring to the table was not worth their time.  One superior never even showed up to a meeting she directed me to attend, even though I had to drive far out of my way.  Bad leaders enjoy wasting people's time.  Good subordinates run away from those superiors as soon as they witness sociopathic behavior.

Educated San Franciscans can change for the better.  The opening night galas of San Francisco's major performing arts companies typically start at least five minutes late because too many people take too long to get to their seats.  I wonder if the people arriving late really respect the arts so much by making the performers wait.  The VIPs in box seats can lead us by example even if they're not causing the problem.

Alfidi Capital has not always been kind to humans who misbehave.  Adults should know better but those who don't sometimes invite my wrath online.  My behavior in person is usually more amenable even though I no longer need to please anyone to have a career.  I do behave politely when I pay my bills and taxes on time, or when I attend social gatherings that require my silence.  Manners pay dividends.  It really is that simple.

Monday, February 23, 2015

The Haiku of Finance for 02/23/15

Timing a World's Fair
Capture zeitgeist of era
At crisis turning

San Francisco Needs A 21st-Century International Exposition

Tonight I attended a panel discussion at the Commonwealth Club commemorating the 100th year after the Panama-Pacific International Exposition.  All that I have read about that particular World's Fair makes me wish I had been alive in 1915 to attend it.  San Franciscans hunger for a recreation of their glorious past.  The obvious answer is to stage a new World's Fair that takes the PPIE spirit to a whole new level for the 21st Century.

The commemorations of this event began last Saturday with our Mayor and some historical reenactors at the Palace of Fine Arts.  I missed the fun and I'm pretty sure only a few thousand people could have attended.  Contrast that with the multitudes who came from around the United States to attend the PPIE in 1915.  The Commonwealth Club's panel of historians noted that the PPIE sponsors planned ahead to build hotels and railroad connections that facilitated the transit of tourists with money to spend.  The natural economic stimulus multiplied San Francisco's post-earthquake rebuilding effort.

One of the panel's final observations was to consider whether convening another fair like the PPIE would be feasible today.  The attraction of commercial conventions like CES in Las Vegas is obvious.  People today still like to travel to conclaves where they can personally witness technology exhibits, just as they did when the PPIE displayed that era's mechanical and electrical marvels.  The difference today is the prevalence of virtualization as a substitute for a physical presence.  Virtual reality interfaces like Oculus Rift promise to make the remote manipulation of physical objects an everyday activity.  Convening a future World's Fair here in the Bay Area must take this into account.

Here's my modest proposal for a Virtual San Francisco World's Fair.  The "virtual" part needs enough online activities to entice a Web audience to participate.  Publishing some addictive freemium games online, with instant machine language translation for non-English speakers, solves the problem of generating interest in developing countries whose people cannot come to a physical World's Fair.  Linking the virtual stuff to geolocated events in San Francisco closes the circle for tourists with the money and means to travel here.

The panelists mentioned that World's Fairs and other mass events tend to be tied to a local redevelopment effort.  The most obvious candidate neighborhood for redevelopment in San Francisco is the Hunter's Point Naval Shipyard.  It has plenty of space for the local component of a virtual World's Fair.  A few tens of millions to clean up some industrial waste is all it takes to make a pristine fairground.

World's Fairs continue today with little attention in mass media.  They lack attention because they have become sterile corporate blah-fests that do not capture the spirit of the times.  Notable World's Fairs like the PPIE, the 1939 New York World's Fair, and the 1939 Golden Gate International Exposition succeeded because they captured the zeitgeist of their respective eras.  The PPIE heralded the end of the Belle Epoque, the Victorian Era, and the Gilded Age.  World War One brought the modern era into being and the PPIE's organizers were wise not to postpone their fair as war clouds gathered.

When San Francisco decides to hold its next International Exposition, it must be timed to match the Fourth Turning general dynamics that drive history.  The Strauss-Howe generational saeculum has entered a crisis period in most of the Anglo-West.  The crisis will not be resolved without a world-shattering cataclysm, with Indian and Chinese demographic confrontations over the food-water-energy security nexus as the most likely trigger.  San Francisco should plan its Expo for a date when that future crisis has passed.  Hunter's Point will be derelict for years to come.  It will be vacant and ready for the world's technology exhibits in a post-crisis cultural high.  San Francisco will then reclaim its role as America's Pacific Rim gateway, and a postwar Pacific Rim will look to America for ways to rebuild.

Sunday, February 22, 2015

The Limerick of Finance for 02/22/15

Greece must make a new reform list
Troika reviews drafts to assist
The fine print will say
How much Europe will pay
An offer Greeks cannot resist

Friday, February 20, 2015

The Haiku of Finance for 02/20/15

Greece and Europe deal
Extend just to talk again
Celebrate nothing

Cancel Most US Federal Holidays To Save Money

I mentioned in one of my recent Financial Sarcasm Roundups that canceling Presidents' Day would be great.  I totally need to take this concept all the way.  The US federal government can save a ton of money and get more work done by canceling several official holidays.

Uncle Sam is nice enough to list the official holiday lineup.  The government also lists a bunch of stupid days like Groundhog Day, Valentine's Day, and Halloween, but those don't grant days off.  My focus is on some other stupid days that do cause people to skip work for no good reason.  The US Senate published an official Congressional Research Service paper from 1999 describing the origin of the eleven official holidays.  Note one very important point from the paper's abstract:  The holidays only legally apply to federal employees and the District of Columbia.  Your local laundromat or shoe repair shop that claims one of these holidays as an excuse to close is therefore just being lazy.

The eleven holidays in Uncle Sam's list are free days off for government workers, but alas nothing in this world is free.  The taxpayer pays through the nose for all of those cubicle dwellers to do nothing for almost one "working" day each month.  The Washington Times noted that one paid holiday in 2008 cost an estimated $450M.  Paying this out ten times a year, plus part of it once every fourth year for Inauguration Day, adds up to some serious cheddar cheese.  The opportunity cost of lost economic activity spills over into the private sector when service-oriented businesses decide they need to voluntarily shut down for a federal holiday.

Here's my modest proposal to restore sanity to America's out-of-control holiday calendar.  Let's eliminate every holiday that does not specifically relate to the nation's founding or its defense.  Conflict shapes our national character more than any other phenomenon.  Reducing the holiday count to this bare minimum leaves us with Memorial Day, Veterans Day, and Independence Day.  That should be enough for federal workers who also get accrued vacation days.  I question the rationale for giving federal workers Inauguration Day off because common sense should require the federal government be somewhat fully staffed while its head of state changes heads.  The other holidays are totally superfluous.

New Year's Day and Christmas Day are private functions for most people.  How we celebrate them should not be the government's concern.  The secularization of America is progress.  Elevating one religious holiday to a federal day off means granting other religions' special days the same status.  We either celebrate them all out of fairness, or celebrate none of them officially.  Take an accrued vacation day off if you must go visit your grandparents.

Thanksgiving Day can remain a semi-official holiday with no paid leave for federal employees.  Every civilization has some kind of harvest celebration and Thanksgiving fits the bill for America.  It also maintains the spirit of unity and magnanimity Abraham Lincoln had in mind when he first proclaimed it during the Civil War.  It therefore has something to do with building the nation's character and reminds us of our agrarian roots.

Labor Day makes no sense.  It is a vestigial reminder that the capitalist class once feared socialism enough to throw a bone to working stiffs with a special day.  We can declare victory in the class war by getting rid of Labor Day.

Celebrating Dr. King, our late but great Presidents, and Christopher Columbus likewise makes little sense.  Most Americans only paid minimal attention in school during history lessons.  Your average Joe or Jane Six-Pack probably wouldn't be able to pick those figures out of a lineup of cartoon characters or breakfast cereal mascots.  When those days occur, hardly any Americans stop and reflect on those holidays' notable namesakes.  Instead they go bowling or skiing, or whatever.

Federal holidays should serve a unifying purpose and remind us that we have a nation worth defending.  They should also take cost effectiveness into account.  Our modern federal holidays are too numerous and cost too much.  The private sector's imitation of government holidays costs the nation in lost productivity.  The nation got along just fine through the 1880s with barely half a dozen federal holidays.  Returning to the Republic's hard-working, thrifty roots is an excellent example for the government to set.

Nota bene:  Alfidi Capital is open 24 hours a day, seven days a week.  I have published blog articles during all major holidays.  This firm never takes a break, unlike the rest of this lazy, shiftless, good-for-nothing planet.  

Thursday, February 19, 2015

Monday, February 16, 2015

The Haiku of Finance for 02/16/15

Greece left the meeting
No deal at all for Europe
Almost no time left

Financial Sarcasm Roundup for 02/16/15

Stock markets march on despite Europe's woes, and Americans roll over on Presidents' Day.  Sarcasm has a role to play amid such madness.

Japan says its recession has ended.  I do not believe that for a New York minute, or a Tokyo minute if you prefer.  Japan's official economic statistics are about as reliable as the politically gamed stats from US agencies.  Revisions in the next quarter can invalidate Japan's claim to be out of the woods.  US statistical revisions do that all the time to our own country's economic numbers.

The European Union is finally moving towards a capital markets union.  They should have done this years ago when Greece and other weak economies gained admittance to the eurozone.  Now it's too late.  The zone's likely shrinkage means the benefits of a future capital markets union will be confined to the strong economies that remain in the euro after the weaklings are kicked out.  Germany and its northern friends can handle this by themselves.

Greek PM Tsipras promises his country will be completely different in six months.  LOL!  His citizens have no idea what's coming.  Recent polling shows they really believe they can both stay in the euro and get a better debt deal from Europe.  America no longer has the lock on low-information voters now that ordinary Greeks have weighed in.  Here's the hard slap of reality.  The Greek finance minister stunned today's Eurogroup meeting by flatly rejecting their negotiating position in record time.  Europe can now either take the Greek red lines seriously and open the ECB's quantitative easing floodgates, or give Greece the boot.  Greece will then be different, alright, and a lot sooner than six months from now.

I will make one more comment about today's national holiday.  Presidents' Day used to be two different holidays celebrating the birthdays of George Washington and Abraham Lincoln.  It went from two days to one day for some gawd-awful reason.  IMHO it should not be a national holiday because most Americans can't pick either of those two gentleman out of a lineup.  Americans have too many days off anyway.  National holidays just encourage laziness.  Get back to work.

Sunday, February 15, 2015

The Limerick of Finance for 02/15/15

Greek exit contingency plan
It pays to have one in the can
Athens won't agree
They want money free
Europe should have eased like Japan

Saturday, February 14, 2015

The Haiku of Finance for 02/14/15

BuzzFeed for health care
Share and click but do not think
How entertaining

Viral Marketing Lessons From The BuzzFeed Video For ACA 2015 Enrollment

The latest BuzzFeed video touting enrollment in ACA-compliant health insurance plans is a winner.  Plenty of social media addicts grokked its significance immediately, and plenty more people shared it enthusiastically.  Millions of people clicked on as expected.  I must admit I could not make hide nor hare of it when I first watched it.  There must be a generational divide at work.

Effective advertising normally requires some build-up to a call to action.  In this video, the call to action "sign up for health care" is buried in the middle at 0:50-1:00 with no context other than the star making funny faces.  The ad could have ended right there to make its point, but later wanders into the #thanks meme that diminishes the ad's message.  Mentioning the meme calls attention to's critics without addressing their criticisms.  That's why this doesn't work as a traditional ad.  Compare it to the most beloved Super Bowl ads of any year.  The typical blockbuster ad manages to be cool by associating cool images (people and/or animals having fun) with a call to action at the end: drink our beer, test drive our car.  The product is also displayed visually somehow (the car in motion) with the brand superimposed.  This is so even the most ADHD-afflicted viewers can't miss it.  Compare that very effective messaging to this BuzzFeed video, which depends on tech-savvy people who are already cued in to the message to explain it through social media shares.  Again, this would not be effective messaging in a passive medium like a TV commercial.

Viral sharing among Millennials turns traditional advertising inside out.  I shared this video via Facebook and saw the generation gap firsthand.  My slightly older friends at the high end of Generation X thought it was pointless.  My younger Millennial friends loved it for the main star and the disguised message.  They didn't even notice the non sequitur text explanation under the video of how a selfie stick somehow leads to a desire to sign up for health insurance.  The mere display of a link to something is enough of a call to action for Millennials.

The video is phenomenal for its innovative take on the #thanks meme.  The original #thanks propagators were critics of the health care mandate who saw their premiums increase or had serious problems logging on to enroll.  In a capitalist economy, any corporation that saw its brand name dragged through the mud by millions of customer complaints would immediately rectify the situation with some combo of lower prices, better service, and a marketing campaign to explain their progress.  The BuzzFeed video mocking the #thanks complainers turns that customer service philosophy on its head.  Complaints about health care services are meaningless when a mandate compels compliance.

It wouldn't have mattered if the star of this video were a notable human or Grumpy Cat.  Social media addicts only need to recognize two things:  a celebrity appears, and there's a link to be clicked.  YouTube has trained humans to click embedded links that appear in fun videos with the expectation that another fun spectacle awaits.  Facebook has trained humans to click the Like button after watching something funny.  Clicking ahead to a government compliance site is exactly what a trained audience is supposed to do.  No critical thinking is required.

America is not a monarchy, despite the pretensions of our hereditary elite.  Our leaders endear themselves to us by exhibiting self-deprecating humor.  President Nixon showed us how to have fun when he said "Sock it to me?" on Laugh-In.  America loves to be entertained.  Mandatory health insurance can be entertaining, mostly for those who watch the payments roll in.  A spoonful of sugar from a viral ad helps the medicine go down.

Friday, February 13, 2015

The Haiku of Finance for 02/13/15

Tech culture power
Attracting the finest minds
Move the world forward

Bay Area Reinvention And Risk For History's Next Long Boom

Peter Leyden from Reinventors spoke today at the Commonwealth Club about how the San Francisco Bay Area is the origin of the next wave of multifaceted rejuvenation that's about to sweep the planet.  It's a good sales pitch that makes me want to dive deeper into a lot of what drives this area's economic and cultural vigor.

It's easy to point to San Francisco's lifestyle diversity and the high valuations of our tech companies.  Those are always highly visible because people with lots of money continually promote those things.  It's harder to see what truly enables the area's innovative spirit.  Mr. Leyden is correct to identify the region's cultural diversity as an enabler for collaboration and sharing ideas.  I would also identify the region's strong research laboratories at Stanford and UC Berkeley, its record high density of advanced academic degrees per square mile, and history of strong government funding for technology development.  Money flows to places where it gets the most work done.

We should also ask why the Silicon Valley ecosystem is replicated in other parts of the US like Boston-Cambridge and Raleigh-Durham-Chapel Hill, but not in other countries.  The key is the strength of the rule of law in the US.  We lose some of that strength with every forced automobile bailout and mandatory health insurance plan.

Mr. Leyden liked to note several bonanza periods in American history as precursors for the next "long boom" the Bay Area is supposed to lead.  Okay, but let's remember that world history always moves in cycles and sometimes major socioeconomic disruptions force progress off its tracks.  Nothing in history moves in a linear fashion.  Wars, pandemics, and forced migrations often appear when long economic booms run out of steam.

Acknowledging generational differences was one notable part of Mr. Leyden's talk that I found encouraging.  I don't know whether he's read Strauss and Howe's The Fourth Turning but some of his discussion covered intergenerational psychology.  I had to leave his talk early due to a schedule conflict, so perhaps he has elaborated on generational cycles elsewhere in his body of work.  Analysts who are serious about generational interaction acknowledge the recurrence of crisis periods that destroy progress and force drastic social changes.

I would not go down the path of trumpeting Bay Area tech leadership based on the valuations of a select group of publicly traded tech companies.  The insane valuations of Twitter, Facebook, and Tesla Motors are probably fleeting.  They have more to do with the Federal Reserve's monetary stimulus than any added value they offer.  The same goes for the putative valuations of Uber and Airbnb; their freelance contractors are in for a rude awakening once they start paying for the insurance they'll have to carry.  Building a valuation based on outsourcing all costs and liabilities is a free lunch that eventually turns into a banquet of consequences.

I also would not go down the path of touting Moore's Law as a predictor of unlimited capacity growth in everything forever.  The most serious minds in the enterprise computing sector have been debating the potential end of Moore's Law for years.  Any advance in quantum computing that will put power laws back on track for unlimited growth has still not jumped from laboratories to real products.  Waiting for another Moore's Law in other sectors very dependent on material science, such as electric battery storage capacity, requires a similar quantum advance.  Bring on those quantum dots and nanoscale manufacturers, because we need them to manifest ASAP.

I like hearing tech evangelists go on cheerleading benders for the Bay Area.  I do it myself once in a while.  Nobody does it better than the Global Business Network (GBN).  They just need to acknowledge severe risks given humanity's penchant for messing things up.  The difference between me and other local gurus is that I study a lot more of the downside than anyone else.  I drink from a half-empty glass, fed by San Francisco's tasty Hetch Hetchy water system.

Thursday, February 12, 2015

Wednesday, February 11, 2015

The Haiku of Finance for 02/11/15

Europe looking hard
Greek position does not move
Make a weak hand strong

Body Language Hints Greece Is Not For Turning After G-20 Meeting

Tonight's NPR Marketplace broadcast repeated a Margaret Thatcher quote relevant to Greece's negotiating position:  "The lady's not for turning."  It is a very pithy assessment of the Greek approach to the eurogroup.  The two sides met today and all public reports indicate that they have not agreed to resolve Greece's pending debt crisis.  Body language can tell the story.

I have not located any real-time photos or videos of Jeroen Dijsselbloem, the Dutch finance minister who chaired the talks, after he held the post-meeting press conference.  The talks achieved little of substance.  I am certain that hedge funds on both sides of the Atlantic are frantically analyzing the facial expressions and body language of the eurogroup participants as they emerged from the meeting.  Confident posture would indicate a strong negotiating position, while slouching and slinking away from the cameras indicates the euro folks fear Greek demands.  Greek finance minister Yanis Varoufakis appears remarkably confident in his most recent public appearances, perhaps even flippant.

The NPR broadcast I referenced above offered comments from  economist James Galbraith, a former colleague of Mr. Varoufakis and the son of famed economist John Kenneth Galbraith.  His comments emphasized Mr. Varoufakis' rationality and knowledge of game theory.  I described the two parties' likely game theory boundaries in a previous article.  The Greeks are playing a weak hand the only way they can . . . with an immovable negotiating position that will force Europe's hand.

Europe thus has two choices if Greece will not tolerate any form of debt restructuring that requires another political upheaval in Athens.  I now consider an ECB-driven quantitative easing bailout to be slightly more likely than a Greek exit from the eurozone.  The reason for my shift is the changing atmosphere among the developed world's finance leaders.  A consensus emerged at the latest G-20 finance ministerial meeting favoring concurrent monetary stimulus and tolerating multiple currency devaluations.  Group photos of that meeting speak volumes.  The expressions on the faces of Christine Lagarde and Janet Yellen were priceless.  Mme. Lagarde of the IMF looked she was having the time of her life, entertaining several finance ministers as if she were fending off romantic suitors.  Ms. Yellen, on the other hand, looked like someone had just handed her a multi-trillion dollar bill for a party she knows the Federal Reserve cannot afford.

Portfolio managers should study financial statements, but when data is unavailable they must seek anecdotal indicators of human intentions.  They need financial analysts who can detect anomalies in human psychology.  Anomalies manifest in speech, facial expression, posture, and gait.  The US intelligence community produces trained human intelligence (HUMINT) analysts who notice these details.  These highly motivated people need something to do when they leave the military.  They might as well move to Wall Street and work in business intelligence.  Figuring out how hard the Greeks are riding Europe is right up their alley.

Tuesday, February 10, 2015

Monday, February 09, 2015

The Haiku of Finance for 02/09/15

Hedge fund bet on Greece
Whole country about to crash
Incredibly dumb

Financial Sarcasm Roundup for 02/09/15

History's infrequent inflection points bring the breakdown of ancien regimes.  They also bring sarcasm.

Greek PM Tsipras once again threw an anti-austerity brick at the EU.  He even upped the ante by demanding WWII reparations from Germany.  The conventional wisdom is that a eurozone breakup is impossible.  It's obvious to me that the new Greek government is buying time to put a post-euro contingency into place if they can't extort another bailout from Brussels.  Angela Merkel must be getting tired of this charade.  Credit ratings agencies are already sick of it, with Standard and Poor's downgrading Greece.

Japan's weakening current account surplus is bad news for Abenomics.  They'll have to sell a lot more sushi and Kobe beef to make up for these numbers.  Trashing the yen with monetary stimulus was supposed to boost exports, not reduce them.  Japan's two-decade experiment with economic retardation shows no sign of ending.  Economic stagnation is a gift to long-dormant militarists who are now beginning their push to re-arm Japan.  I expect them to hire one of the more frightening Pokemon characters as a cheap scare tactic until they can afford serious weaponry upgrades.

Gallup told the truth about how the USDOL miscounts unemployment statistics.  At least one CEO in America is willing to speak out; too bad he backtracked later on TV.  Labor statisticians know the real numbers but their political appointee bosses won't allow them to speak out.  Ordinary Americans suspect the numbers are false but don't mind as long as they can collect unemployment benefits.  Lying goes a long way in this country for liars who can throw money around.

The three narratives above reflect ancien regimes that subscribe to "extend and pretend" debt rollover fantasies.  The crackups needed to bring them all back to reality will be harsh but necessary.  Bring on the great unwinding.

Sunday, February 08, 2015

The Limerick of Finance for 02/08/15

Currency hedging sees high demand
Damping dollar swings no one had planned
Greece and oil posed a shock
Traders sped up the clock
Europe's flames of uncertainty fanned

Saturday, February 07, 2015

The Haiku of Finance for 02/07/15

Refinery strike
Steelworkers claim unfairness
Back to the table

Greece Projects False Bravado

Greece continues to build a kindling pile for the euro's immolation.  The Greeks claim to have no problem funding their short-term needs.  The entire world knows that is false.  A few weeks of cash until bankruptcy counts as a major short-term problem.  The ECB already called the Greek bluff by refusing the country's bonds as collateral.

We already know the outline of Greece's comprehensive proposal for a debt swap.  The growth-linked bonds they want to issue will constitute a selective default in the eyes of credit rating agencies. Private sector portfolio managers will then be reluctant to add Greek credit risk to their European debt holdings.  Hedge fund managers who have already loaded up on Greek bonds will watch their valuations crater.  The ECB would ordinarily be buyer of last resort, if the troika cares more about systemic stability than it does about saving face.

The hushed conversations in recent days between Greek ministers and their European counterparts made for fascinating lip-reading.  European leaders admitted in unguarded public moments that they knew Greece was destroying the euro.  The Greeks just smirked.  Every statement coming out of Athens is the equivalent of a big smirk at the world.

Full disclosure:  Long put position against FXE.

Wednesday, February 04, 2015

The Haiku of Finance for 02/04/15

Kick Greece where it hurts
Decline bond collateral
Brussels draws a line

ECB Kicks Greek Central Bank Between Its Legs

The financial news out of Europe gets more enjoyable all the time.  The ECB is not accepting any more Greek IOUs.  I'm pretty sure Germany turned up the heat as an opening negotiating tactic.  The effect is to force the new Greek government to keep its austerity and reform pledges.  Athens' opening gambit of pledging to renege while "negotiating" has just backfired.

The Greek central bank is not the US Federal Reserve.  It cannot print its own currency to buy domestic bonds.  It may only offer euros to buy its own government's debt or the private debt of its domestic banks.  Greece cannot print euros, so as long as it is confined to the euro it must force bank depositors to accept cramdowns as part of any bank recapitalizations.  Forced buy-ins won't go over well with Greeks who remember what happened to depositors in Cyprus banks.

I recently predicted that either a Greek exit from the euro (aka Grexit) or an ECB-driven bailout were the two most likely options.  I still do not believe the Greek government will back down from its political pledge to end austerity.  Europe just kicked the Bank of Greece where it hurts.  The bank will have trouble walking for a few days, until it is forced to announce a bank recapitalization plan that starts a run on Greece's private banks all over again.

Full disclosure:  Bearish position on the euro; long put position against FXE.  

Tuesday, February 03, 2015

Monday, February 02, 2015

The Haiku of Finance for 02/02/15

Monetary dance
Central bank jiggle routine
Worse moves than "left shark"

Financial Sarcasm Roundup for 02/02/15

Anyone who thinks I will ever run out of sarcasm needs to think hard.  I mean, like, really hard.  Sarcasm is like cosmic background radiation . . . it is always there.

Uber just can't catch a break, and doesn't deserve one.  Google is developing a competing app.  Drivers who thought they were contractors are suing Uber because they're being treated like employees but have to pay operating costs themselves.  Uber's bro-jock culture is about to render its competitive advantages inoperative.  Jerk bosses usually stick it to employees, but Uber's arrogance takes it to a new level.  Nobody remembers Webvan from the '90s, which is why today's startups are repeating its operational errors.

Whole Foods is no longer the darling of the grocery sector.  It has long catered to upscale eaters who have more money then brains.  Regular grocers have figured out how to stock quinoa and kale.  I know a lot of people in San Francisco who swear by Whole Foods' offerings and they're all idiots.  Salmon in a can from a discount grocer is the same fish as the fresh salmon at Whole Foods.  Rich shoppers are impoverishing themselves by opting for sixteen flavors of granola at Whole Foods.

McDonald's is having a tough time at the other end of the quality scale in food retailing.  Trying to be all things to all eaters puts it in competition with upscale brands whose regular customers have more buying power, and thus more options.  McDonald's should focus on being the low-price leader in lame food for poor people who have few options.  Human taste buds evolved to favor crispy, salty, sugary things that signaled a high fat content.  The golden arches needs to engineer those factors into cheap foodstuffs that poor people will find addictive.  Downscale brands thrive when developed economies hit the skids.  Put a McDonald's next to every dollar discount store for a countercyclical trend.

I did not watch the Super Bowl yesterday but I can't avoid the news feeds mentioning the halftime show.  Katy Perry's "left shark" was an unenthusiastic dancer.  Maybe he was sad after a bad experience taking Uber, a huge grocery bill at Whole Foods, or a soggy burger at McDonald's.  I do like watching Katy Perry shake her hindquarters.  She's welcome to come over to my place anytime provided she leaves her sharks somewhere else.

Full disclosure:  I have no positions in the stocks of the lame, stupid companies mentioned in this article.  

Sunday, February 01, 2015

The Limerick of Finance for 02/01/15

Foreign profits don't need some new tax
Collections have not become lax
Amnesty will work well
It's an easier sell
US firms pay up now to the max

Foreign Profits Under Fire In US

Corporate cash looks like a big pile of potential energy to rational business leaders.  It also looks like a big prize to politicians.  The Obama Administration wants a special tax on the profits that American corporations hold in their foreign subsidiaries.  The opening gambit of Washington's latest joust over tax reform is a play for more complex administrative burdens on corporations.  The political appeal of reinvesting in America obscures the chaos awaiting in the details.

The smart way to bring foreign profits home is to apply any new tax to future earnings only.  Grandfathering all prior earnings means corporations can keep whatever capital spending commitments they have made based on sequestering non-US earnings.  The Administration does not seem inclined to move that way.  The tax proposal reads as a grab for earnings held up to today.

US corporations already pay foreign taxes on their earnings from foreign operations, and these payments are addressed in the tax codes of both the US and foreign jurisdictions.  Many US corporations also have transfer pricing agreements with foreign governments' revenue ministries.  A new tax will force them to revise these agreements.  The US would be in the unenviable position of taxing its most successful companies twice for the same operations if the Administration's opening proposal succeeds.

High-profile tax inversion mergers have become the bogeyman driving a political quest to do something superficially patriotic.  Someone needs to send a memo to the White House's economic advisers that tax inversions are rarely the sole or even primary criterion for international mergers and acquisitions.  Corporate development officers execute checklists numbering hundreds of deal criteria.  Tax considerations may be one or two questions on a pre-merger checklist.

Corporations sequester cash in their non-US affiliates to fund enterprise growth, hedge currency volatility, and pay local employees.  Unleashing a bull into a china shop leads to lots of broken crockery.  The Administration's intended tax bull will upset many carefully emplaced corporate plans.