Wednesday, July 02, 2008

Investment challenges in a bear market

If you don't believe me, believe a sophisticated investor like Karl Denninger:
One thing to remember folks - the test of your prowess as an investor does not come in a bull market. It's easy to make money in a bull market - you just buy the index.

No, the test is whether you keep your money in a Bear market. Note that I didn't say "make money". I said keep your money.

If you have the same amount of money now in your investment accounts as you did at SPX 1576 in October, you are doing better than 90% of all institutional money managers and 95% of all individual investors. This puts you in the top 5% - and that's just by going to cash in October and sitting on your hands.

If you've actually made money since then, you're in the top 1%.

Tuesday, July 01, 2008

The potential for Near Eastern industrialisation

Why shouldn't the eastern seaboard of the Mediterranean bcome a manufacturing centre to rival any in the world?

  • There is still a vast amount of oil in Arabia, but water, too - e.g. under the Judean desert, plus three aquifers under the Sahara.
  • The dry atmospheric conditions are conducive to the long-term storage of stocks of new cars, planes etc.
  • The sunny region would be very suitable for "green" energy systems, too, such as solar updraft towers.
  • The Arab leaders have enormous reserves of capital.
  • There are many people in those countries who would benefit enormously from the work and wealth if their countries industrialised.
  • There is land a-plenty for development.
  • The eastern Med is beautifully located for producers to get their goods by sea to Western European and North African markets, and the Red Sea for the Middle and Far East.
I don't see why it couldn't happen, once political peace and good governance are established - and what incentives to do so!

Monday, June 30, 2008

Marc Faber update: take refuge in gold

Dr Faber has become a gold bug again, but is expecting a correction in other commodities. In a climate of low interest rates and high inflation, Adrian Ash seconds the call for gold.

And here's an extract from Faber's monthly "Market Comment" three years ago (July 5, 2005):

... Lastly, think about the following situation. The US manufacturing sector becomes very weak. The housing market falls and consumption declines. But oil goes through the roof because the empire of eternally rising home prices has just bombed Iran (very likely, in my opinion). Now the Fed cuts interest rates and eases massively. Just think what the stock, bond, foreign exchange, and gold market will do? The initial reaction might be a flight to safety – into government bonds and gold, and out of stocks. But, thereafter, a massive sell-off in bonds could occur as inflationary pressures build from sky high energy prices and massive money printing.

I have to confess, that I am not so sure exactly how this situation would play itself out, but it is worth thinking about it.

Worth the US$ 200 annual subscription, you may think. Especially since some of it goes towards the education of poor children in northern Thailand.

Janszen says next bubble will be in energy

A "bubble cycle" instead of a business cycle... house prices to revert to trend and fall 38% from peak... a $12 trillion gap to plug with fresh securities in a different sector as the current bubble collapses... government legislation to clear the way for the speculative rush... $12 tn + an extra $8 tn = $20 tn... it's going to be... ALTERNATIVE ENERGY.

Read iTulip founder Eric Janszen's Harpers article.

"Caloriefornia or bust!" Any views from energy investment specialists (e.g. Nick Drew)?

A defence of blogging

In early times, learning was only to be had by digging and mining; it is now the circulating medium. Men may become learned in many ways besides the means of erudite courses of instruction: that is learning which enables a writer to inform his readers of matters applicable to the purposes of either profit or pleasure, of which they were not previously aware. In this sense, many are learned who do not suspect themselves in possession of this envied distinction. A prejudice lingers, however, in favour of that description of learning gained by hard study over tall books, and under the dim light of the lamp. But this is only the theory: in practice, men appreciate the living learning only which cheers the evening of leisure, or guides the daily labour - enlightens the professions, or instructs the statesman.

From "The Spectator" magazine, inaugural issue, July 5, 1828.

Yet how swiftly do some other publications forget their humble origins, which have subsequently attained eminent status. "Private Eye" lampoons the "online community" in its column "From The Message Boards"; but in 1961, there were its founders Christopher Booker and Willie Rushton, using typewriter, Letraset, hand-drawn cartoons, scissors and glue (in Willie's mother's flat, I seem to remember) to compose their witty and scurrilous magazine; and the new technology of photo-litho offset to print it. How is this different from the homeworkers of the blogosphere, and the use of the new capabilities of the Internet? Was not Private Eye the original blogpaper?

Liberty Marr'd by its Champions


A gentleman writes, that Mr Andrew Marr, the news-reporter and erstwhile foe of judge-made privacy law, now desires to be kept privy not only certain information concerning himself, but also the knowledge that he has secured an injunction to that effect from the court.

If any correspondent should care to illuminate this dark matter, he shall find us all ears; though we grant, that ears cannot see.

Might it be item 35 here? As revealed by Guido in January?

UPDATE: Another gentleman writes in defence of Mr Marr's right to privacy

*** 2009 UPDATE: Alastair Campbell implies exposure of Andrew Marr

Sunday, June 29, 2008

Making money out of distressed financials

Michael Panzner has come across a real estate blogpost that includes this idea:

Several of the deal guys said that banks they contacted three months ago about buying assets are all of a sudden calling back. Three months ago they said everything was fine. The idea du jour is to buy the bank to get the bank’s real estate. Sounds screwy to me but I’ll write some more about this one tomorrow.

This reminds me of something I read many years ago in "Adam Smith" (George Goodman) and wrote about here almost exactly a year ago - buying bankrupt (or nearly so) stock that includes the rights to tangible assets.

I don't have the cash or sophistication for this one, but maybe one of you out there knows how to work out whether a bank's shares are selling at a discount to the value of its underlying assets.

There's always an angle, isn't there?