Europe is boiling over again with Greece, Italy, and Spain all having fits of one sort or another. Options expire Friday and I'll have yet another opportunity to either go long gold stocks or wait around for even cheaper share prices. This is the stuff dreams are made of, as the old movie line goes. Dreams are also made of sarcastic comments on business news.
The EU has another mendicant demanding attention. Cyprus needs a bailout or the whole house of cards comes down right now across the Continent. No bailouts for any of these troubled countries means they fail to meet the deficit spending limits of EU membership. Any investor who goes long the euro now gets what they deserve. On an unrelated note, I once knew a really hot girl from Cyprus. She never needed a bailout.
U.S.-domiciled multinational corporations have long known how to keep profits away from the IRS. They don't repatriate their profits from operations outside the U.S. This reduces their corporate Treasury options but that is irrelevant for those companies that find high NPV projects in other markets. The cost of doing business in the U.S. is becoming an increasingly high barrier to new investment, thanks to the Affordable Care Act. Assigning IP to foreign subsidiaries isn't the only trick to ensuring profits stay overseas. There's always internal transfer pricing for companies with complex supply chains.
The BIS thinks big banks have an advantage in trading currency because the size of order flow has some kind of predictive power. I'm calling BS on the BIS and their stinking report. Order flow size is just another source of noise in valuing currency. Hedge funds dumb enough to use this as a signal will be hurt when the signal strength degrades. I can easily illustrate how this indicator could collapse. A run on the dollar will be the largest order flow increase in the history of the currency markets, indicating something that every market participant will already know (the death of the dollar as a reserve) when it happens. Only economic fundamentals determine a currency's real value. It would be just as dumb to say that daily NYSE volume indicates the stock market's future value but some hedge fund idiots will believe that too.
That run on the dollar gets postponed every time the eurozone does something stupid. Mme. Lagarde's endorsement of more ECB rate cuts is just the thing to reduce the euro's attractiveness as a store of value. Europe wants to play beggar-thy-neighbor with Japan and the dollar will rise in the short term as long as they keep this up. The Fed beat all of the developed economies to the bottom by being first with ZIRP.
The Chinese economy is clearly headed for stagflation. I'm so glad I sold out of my China equity ETF in 2012. Curious readers can find more support for my opinion on China's coming malaise in this summary article describing last week's WorldAffairs 2013 conference in San Francisco.
I do act on my own sarcastic thinking, at times of my choosing. No one else on the planet can benefit from what I say but smart people may find my transparency entertaining. I'll bet even "Mickey" reads my genius language, but he's too dumb to understand it and doesn't have any money at all.
Monday, March 11, 2013
Saturday, March 09, 2013
Stress Test Fraud Marries Endless QE
The bank stress tests in the U.S. and Europe are total baloney. I've said it before and I'll say it again for the benefit of whoever is stumbling upon my wisdom for the first time. Comparing the safety of Citigroup and JPMorgan is like comparing whether a ton of bricks or a ton of lead is more useful as a flotation device. Citigroup had multiple TARP bailouts and JPMorgan let the London Whale gamble with its entire capital cushion. The whole notion of safety means little to investors who are outside the small circle of politicians and industry insiders who have made provisions for the next round of bailouts.
The stress tests have to be frauds because the stealth bailouts they mask have been underway for some time. The Fed cannot tighten its loose monetary policy because SIFIs need the Fed's purchases to take bad mortgage-backed securities off their balance sheets. I don't bother reading news commentary about whether job growth is sufficient to meet the Fed's criteria for ending QE. That is deliberate misdirection worthy of the most skilled illusionists in human history.
Real safety can be found in the balance sheets of financial institutions that never needed TARP money. That would include the large number of credit unions, discount brokerages, and smaller banks with very stringent home mortgage origination criteria. Let's throw in any institution that has zero exposure to student loans (good luck finding one).
Full disclosure: No position in C or JPM.
Friday, March 08, 2013
The Haiku of Finance for 03/08/13
Financial statement
Most investors won't read one
No due diligence
Most investors won't read one
No due diligence
Thursday, March 07, 2013
Wednesday, March 06, 2013
The Haiku of Finance for 03/06/13
Why use gas fracking?
Seems like waste of energy
Carbon frack instead
Seems like waste of energy
Carbon frack instead
Terrace Energy (TCRRF) and Oil in Texas
Terrace Energy (TCRRF / TZR.V) is a Canadian company with oil wells in South Texas. Yee-hah. Their President is a petroleum engineer, which is good news for a producer. I can't figure out why they've got a separate CEO who's not an engineer, or what all those directors do to add value.
I kind of admire this one for having initial operational success. They've got producing test wells, for crying out loud. They think they can drill another 72 wells at their Olmos project. They also see potential at their Eagle Ford project. Potential is nice but sustained production is better. Their operating cost per BOE looks dirt cheap but it's too bad they have to use "gas fracking," a method of injecting natural gas that I consider to be a waste of a potential energy source. Their cost is cheap as long as natural gas in North America is cheap.
Terrace Energy's October 2012 financial statement showed C$1.5M in cash on hand. They have started earning revenue so the question of a burn rate should be moot in 2013. Terrace is a young company so there isn't much for me to add at this point. Maybe I'll say something else about them in a few months.
Full disclosure: No position in Terrace Energy at this time.
I kind of admire this one for having initial operational success. They've got producing test wells, for crying out loud. They think they can drill another 72 wells at their Olmos project. They also see potential at their Eagle Ford project. Potential is nice but sustained production is better. Their operating cost per BOE looks dirt cheap but it's too bad they have to use "gas fracking," a method of injecting natural gas that I consider to be a waste of a potential energy source. Their cost is cheap as long as natural gas in North America is cheap.
Terrace Energy's October 2012 financial statement showed C$1.5M in cash on hand. They have started earning revenue so the question of a burn rate should be moot in 2013. Terrace is a young company so there isn't much for me to add at this point. Maybe I'll say something else about them in a few months.
Full disclosure: No position in Terrace Energy at this time.
Tuesday, March 05, 2013
Dropping In On SPTechCon 2013
I've been a power user of Microsoft SharePoint during my stints as a knowledge manager with large organizations, so I couldn't resist the chance to check out SPTechCon 2013 this week in San Francisco. I got the free Exhibit Hall pass because I only needed a quick view of the main events.
The keynoter today was the Microsoftie responsible for the SharePoint 2013 product rollout. His demo went smoothly with only a couple of faults that could have crashed his laptop. The basic structure of this version of SharePoint appears to be a hybrid cloud that enables mobile updates to documents stored in the enterprise version of SkyDrive. The "create new site" landing page replaces the old hollow function placeholders with tiles connecting to the most-used functions. Page admins can now drag/drop documents from the desktop into a SharePoint directory without first switching to the old icon/window view.
One big difference is that URL character strings are shorter! I was often frustrated with the old SharePoint's inability to read path strings longer than a couple of hundred characters. I wonder if the 2013 version will truncate special characters instead of rejecting them.
Clicking a document shows you who has access to it, and you can email them immediately to share updates. That's what collaboration is all about. A SharePoint site now has its own Outlook mailbox, so SharePoint documents and Outlook messages can now be rendered in each other's environment. This is good if it saves time ordinarily spent downloading a document to your desktop only to attach it to an email message. The risk I see is the chance users will edit a document in Outlook without passing the updated version to the SharePoint document repository. I'd like to know how Microsoft has dummy-proofed that outcome.
The mobile version of SkyDrive will cache downloads of documents you edit. This is how Microsoft's cloud service links files on a user's desktop in the workplace to their mobile synch platform. You can edit docs on your smartphone and upload them back to the cloud. Users can also follow updates to content in a newsfeed, with the option of following users, sites, or documents. I first noticed the trend towards Facebook-style newsfeeds in SharePoint add-ons at one of the Cloud Connect / Enterprise 2.0 conferences I attended in recent years. Microsoft's corporate development strategy noticed the trend and made appropriate acquisitions prior to this rollout. I would like to know whether this newsfeed looks the same across all mobile platforms. Many enterprises are adopting bring-your-own-device (BYOD) policies, so the interface between SharePoint and SkyDrive needs to look the same whether it runs on Android or the iPhone. The federal government is all aboard the BYOD movement and is one of Microsoft's biggest customers, so Microsoft needs to get this one right.
My biggest concern with previous SharePoint editions was the search function. It was okay for finding random documents on a general topic but it was never good for complex queries. I was never able to use it to find the URL of the parent organization responsible for a site's hierarchy. SharePoint 2013 goes a long way toward solving that by displaying the photo I.D. of users who author documents. Their photo I.D. reveals a link to their position in the organization's hierarchy, making department location possible. This is good news! It means a product engineer who searches for "marketing" can eventually locate a marketing manager who has published documents on that topic for the enterprise's marketing department.
The Microsoft guy took a picture of the audience with his smartphone and immediately posted it to his enterprise SharePoint newsfeed. That's a cool trick. I can see how engineers and geologists in the field could use that to send a site photo back to their office for collaborative analysis. His other cool tricks covered developer functions that could instantly build basic apps. SharePoint is maturing from a content management platform to a problem-solving tool.
The vendors in the exhibit hall had more problem-solving tools on display. Most of their apps related to business analytics and user identity management. My biggest problem was finding some snacks. One booth was smart enough to bring a popcorn machine but I was disappointed that other booths had very little candy. I was also disappointed that there were very few attractive women manning the booths. Hey vendors, if you want my attention you need to include hot gals in your roadshows.
I'm a big picture thinker, so I didn't need the workshops on programming, module construction, and system integration. I'll eventually take a closer look at business intelligence and GIS applications. SharePoint is going to be one of the main tools enterprises use to exploit the Big Data we generate with our credit card purchases and social media preferences.
Full disclosure: No position in MSFT at this time.
The keynoter today was the Microsoftie responsible for the SharePoint 2013 product rollout. His demo went smoothly with only a couple of faults that could have crashed his laptop. The basic structure of this version of SharePoint appears to be a hybrid cloud that enables mobile updates to documents stored in the enterprise version of SkyDrive. The "create new site" landing page replaces the old hollow function placeholders with tiles connecting to the most-used functions. Page admins can now drag/drop documents from the desktop into a SharePoint directory without first switching to the old icon/window view.
One big difference is that URL character strings are shorter! I was often frustrated with the old SharePoint's inability to read path strings longer than a couple of hundred characters. I wonder if the 2013 version will truncate special characters instead of rejecting them.
Clicking a document shows you who has access to it, and you can email them immediately to share updates. That's what collaboration is all about. A SharePoint site now has its own Outlook mailbox, so SharePoint documents and Outlook messages can now be rendered in each other's environment. This is good if it saves time ordinarily spent downloading a document to your desktop only to attach it to an email message. The risk I see is the chance users will edit a document in Outlook without passing the updated version to the SharePoint document repository. I'd like to know how Microsoft has dummy-proofed that outcome.
The mobile version of SkyDrive will cache downloads of documents you edit. This is how Microsoft's cloud service links files on a user's desktop in the workplace to their mobile synch platform. You can edit docs on your smartphone and upload them back to the cloud. Users can also follow updates to content in a newsfeed, with the option of following users, sites, or documents. I first noticed the trend towards Facebook-style newsfeeds in SharePoint add-ons at one of the Cloud Connect / Enterprise 2.0 conferences I attended in recent years. Microsoft's corporate development strategy noticed the trend and made appropriate acquisitions prior to this rollout. I would like to know whether this newsfeed looks the same across all mobile platforms. Many enterprises are adopting bring-your-own-device (BYOD) policies, so the interface between SharePoint and SkyDrive needs to look the same whether it runs on Android or the iPhone. The federal government is all aboard the BYOD movement and is one of Microsoft's biggest customers, so Microsoft needs to get this one right.
My biggest concern with previous SharePoint editions was the search function. It was okay for finding random documents on a general topic but it was never good for complex queries. I was never able to use it to find the URL of the parent organization responsible for a site's hierarchy. SharePoint 2013 goes a long way toward solving that by displaying the photo I.D. of users who author documents. Their photo I.D. reveals a link to their position in the organization's hierarchy, making department location possible. This is good news! It means a product engineer who searches for "marketing" can eventually locate a marketing manager who has published documents on that topic for the enterprise's marketing department.
The Microsoft guy took a picture of the audience with his smartphone and immediately posted it to his enterprise SharePoint newsfeed. That's a cool trick. I can see how engineers and geologists in the field could use that to send a site photo back to their office for collaborative analysis. His other cool tricks covered developer functions that could instantly build basic apps. SharePoint is maturing from a content management platform to a problem-solving tool.
The vendors in the exhibit hall had more problem-solving tools on display. Most of their apps related to business analytics and user identity management. My biggest problem was finding some snacks. One booth was smart enough to bring a popcorn machine but I was disappointed that other booths had very little candy. I was also disappointed that there were very few attractive women manning the booths. Hey vendors, if you want my attention you need to include hot gals in your roadshows.
I'm a big picture thinker, so I didn't need the workshops on programming, module construction, and system integration. I'll eventually take a closer look at business intelligence and GIS applications. SharePoint is going to be one of the main tools enterprises use to exploit the Big Data we generate with our credit card purchases and social media preferences.
Full disclosure: No position in MSFT at this time.
Monday, March 04, 2013
The Haiku of Finance for 03/04/13
Government worker
Go learn some new maker skills
Don't hope for a check
Go learn some new maker skills
Don't hope for a check
Financial Sarcasm Roundup for 03/04/13
I must state up front that the federal sequester has not impacted the operations of Alfidi Capital. This firm doesn't run on government largess. It runs on my limitless supply of genius.
The sequester happened because the consequences for the U.S. government's finances and the economy were minimal, despite lots of scary rhetoric. The potential shutdown of the government is more serious, and that's why the negotiations in Washington are more likely to get a deal. No one in D.C. wants to see the interest costs for new debt jacked up. The U.S.-based credit rating agencies are sufficiently deterred from cutting the nation's sovereign credit rating but the bond market won't be fooled for long.
Professional fund managers are losing their heads again. The slowing Chinese economy is spooking hedge fund managers into cutting their exposure to commodity derivatives. Okey-dokey, derivatives are one thing but hedge funds have no business fiddling with those anyway. IMHO only industrial end-users are knowledgeable enough about demand for stuff to use hedges. Commodity prices will indeed suffer as the global recession becomes obvious but the low-cost commodity producers left standing will trade at bargain valuations.
Corporate earnings are up while hiring stays down. Executive greed for more bonuses isn't the only reason. American workers are less productive and more expensive than workers in emerging economies. If you don't believe me, just look around your own office. Observe the room full of obese slobs goofing off on the Internet instead of making things happen. Oh yeah, let's not forget how Obamacare has made hiring one full time employee more expensive and troublesome than engaging a temp firm to bring in two or three part-time employees.
Portuguese demonstrators don't like living within their means. Gee, that's too bad. They won't like hyperinflation either but that's what they'll get after they're kicked out of the eurozone. The U.S. will see a lot of this self-pitying and indignation eventually. It will be fun for me to watch because I'll be able to buy things that stupid people can't afford anymore.
Here's some advice for U.S. government workers based on the headlines above. Don't feel sorry for yourselves because Uncle Sam is cutting your pay by 20%. Don't take to the streets like the Portuguese and complain about subsidies that will be permanently gone. Instead, go learn some marketable skills that have nothing to do with your present job pushing papers around. Real skill at making real things will come in handy once our society turns off many of the subsidies it can no longer sustain. Start by taking classes at General Assembly and then market your project work online. I know I'm talking to human beings here, so asking people to get off the stoop and take charge of their lives might be a waste of effort. Maybe one or two people out of a few million will get the message.
The sequester happened because the consequences for the U.S. government's finances and the economy were minimal, despite lots of scary rhetoric. The potential shutdown of the government is more serious, and that's why the negotiations in Washington are more likely to get a deal. No one in D.C. wants to see the interest costs for new debt jacked up. The U.S.-based credit rating agencies are sufficiently deterred from cutting the nation's sovereign credit rating but the bond market won't be fooled for long.
Professional fund managers are losing their heads again. The slowing Chinese economy is spooking hedge fund managers into cutting their exposure to commodity derivatives. Okey-dokey, derivatives are one thing but hedge funds have no business fiddling with those anyway. IMHO only industrial end-users are knowledgeable enough about demand for stuff to use hedges. Commodity prices will indeed suffer as the global recession becomes obvious but the low-cost commodity producers left standing will trade at bargain valuations.
Corporate earnings are up while hiring stays down. Executive greed for more bonuses isn't the only reason. American workers are less productive and more expensive than workers in emerging economies. If you don't believe me, just look around your own office. Observe the room full of obese slobs goofing off on the Internet instead of making things happen. Oh yeah, let's not forget how Obamacare has made hiring one full time employee more expensive and troublesome than engaging a temp firm to bring in two or three part-time employees.
Portuguese demonstrators don't like living within their means. Gee, that's too bad. They won't like hyperinflation either but that's what they'll get after they're kicked out of the eurozone. The U.S. will see a lot of this self-pitying and indignation eventually. It will be fun for me to watch because I'll be able to buy things that stupid people can't afford anymore.
Here's some advice for U.S. government workers based on the headlines above. Don't feel sorry for yourselves because Uncle Sam is cutting your pay by 20%. Don't take to the streets like the Portuguese and complain about subsidies that will be permanently gone. Instead, go learn some marketable skills that have nothing to do with your present job pushing papers around. Real skill at making real things will come in handy once our society turns off many of the subsidies it can no longer sustain. Start by taking classes at General Assembly and then market your project work online. I know I'm talking to human beings here, so asking people to get off the stoop and take charge of their lives might be a waste of effort. Maybe one or two people out of a few million will get the message.
Sunday, March 03, 2013
The Limerick of Finance for 03/03/13
Berkshire said it did disappoint
Returns were a bit out of joint
Metrics are the same
Lots of cash hunting "game"
Acquisitions the firm did anoint
Returns were a bit out of joint
Metrics are the same
Lots of cash hunting "game"
Acquisitions the firm did anoint
Saturday, March 02, 2013
Friday, March 01, 2013
Jump on the Frugal Innovation Bandwagon
Today's Commonwealth Club panel on "Frugal Innovation" was a call to action for American innovators stuck in cubicles and pondering their next move. General Electric is looking for small-scale innovators they can hire as engineers. CFSI wants small banks to create products for the underbanked market. Rock Health is developing cheap medical devices that graft onto existing technology. TechShop is launching maker-spaces and developing curricula for DIY inventors.
DARPA's iFAB program is helping launch this phase of the Industrial Revolution. I'm particularly intrigued by TechShop's partnership with DARPA and the VA to open maker-spaces to veterans. TechShop's CEO Mark Hatch was right on the money when he said existing educational institutions will never meet the training needs of the maker revolution. I could not agree more. My own MBA in finance won't be worth the ink used to print it when the maker revolution gets into full swing. Classes from TechShop and General Assembly will be much more useful to capitalists. Veterans need to check out the VA's Center for Innovation to get into TechShop's pipeline.
I asked the first audience question about how crowdfunding can support frugal innovation and got some good answers. Many projects launched from TechShop got crowdfunded and some portals can be good sources for early validation of market demand. My membership in the Commonwealth Club pays for itself with these events.
Here's one more frugal innovation worth a mention. The BIL Conference has started as a frugally innovative answer to the TED Conference. It's a play on the movie Bill and Ted's Excellent Adventure from the 1980s. The thinking behind BIL is that TED has become too high-concept and unapproachable, so BIL aims to be smaller for the DIY crowd.
These are the kinds of things creative people need to be doing instead of congregating around a water cooler and playing nice with stupid supervisors. I'll be watching my favorite crowdfunding portals to see whose DIY idea gets traction.
DARPA's iFAB program is helping launch this phase of the Industrial Revolution. I'm particularly intrigued by TechShop's partnership with DARPA and the VA to open maker-spaces to veterans. TechShop's CEO Mark Hatch was right on the money when he said existing educational institutions will never meet the training needs of the maker revolution. I could not agree more. My own MBA in finance won't be worth the ink used to print it when the maker revolution gets into full swing. Classes from TechShop and General Assembly will be much more useful to capitalists. Veterans need to check out the VA's Center for Innovation to get into TechShop's pipeline.
I asked the first audience question about how crowdfunding can support frugal innovation and got some good answers. Many projects launched from TechShop got crowdfunded and some portals can be good sources for early validation of market demand. My membership in the Commonwealth Club pays for itself with these events.
Here's one more frugal innovation worth a mention. The BIL Conference has started as a frugally innovative answer to the TED Conference. It's a play on the movie Bill and Ted's Excellent Adventure from the 1980s. The thinking behind BIL is that TED has become too high-concept and unapproachable, so BIL aims to be smaller for the DIY crowd.
These are the kinds of things creative people need to be doing instead of congregating around a water cooler and playing nice with stupid supervisors. I'll be watching my favorite crowdfunding portals to see whose DIY idea gets traction.
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