scorpioncapital

Governments around the world are covert and sneaky. Inflation is the preferred method to paper over so many social ills like your neighbour paying full taxes ethically while your other neighbour is offshore and pays nothing. Markets must go up to compensate for such social ills. Also, governments eventually bail out everything, via the banks and via the tax payer. So sure, maybe nothing bad happens and things march ever higher. But they are marching higher because the currency is being debased. Who suffers most from inflation? Those without any assets. But even those with assets must earn a real return or they are still getting poorer. All this plays out over a long time sometimes. Real estate will be the same. It's always a transfer of wealth from someone to someone else.

"Does this not sound like a small market forecast to you guys?" Sure does. Some have speculated that despite the desire to raise rates, they will not be able to. Check out the book 'Dying of Money'. An inflation begins very very slowly with very low rates and good times and the party just keeps going, the consequences are seen much later, and boy are they bad. But you'd have to be crazy to miss a 10 bagger in the market before the eventual crash.

One can even argue it's low pollution licensing fee :) If you look at numbeo, you'd be hard pressed to find major countries/cities with moderately low pollution ratings as Canada and Europe.

No surprise, Buffett comes out today and says stocks are cheap unless rates rise - http://video.cnbc.com/gallery/?video=3000596522 Rates are like gravity. They have a huge impact on valuation. He also takes a swipe at market timers who think they can weave in and out of stocks based on valuation :)

There is a very strong correlation between risk free rates and valuations. If the risk free rate tomorrow jumps to 20%, you can be sure stocks are not going to be trading for an average market P/E of 20 (or 5%) yield. You can just buy the government bond and get 20% , why would you buy a stock yielding 5%? On the other hand, if rates are zero, 5% is looking somewhat better. It looks even better if earnings can grow better in a low-inflation environment than a high one. But I think you have a point that within a certain range, it doesn't matter so much. It's the outliers that are dramatic...like now. Less than 1% for a decade is pretty far out. So is 20%. I believe there was a study published that showed that as rates move up modestly to some neutral level, stocks actually do very well, rising quite a bit more along the way. Beyond this critical level, they start to encounter some turbulence. Where this is is hard to say. I think Buffett in a lecture to students a few months ago said it was 4% and that stocks were extremely cheap if rates don't go above that. So while we don't know what rates will do they have a very big effect on whether stocks will turn out to be very cheap today, or very expensive, or perhaps the most likely case, something in the middle. Btw, Ken Fischer (http://www.financialsense.com/art-hill-technicals-ken-fisher-2017-market-outlook), son of Philip Fischer , made a good observation about market forecasters. For 2017 he said because the consensus is more of the same, it could very well be + or - quite a bit either way.

I think Fisher described a behavioral problem with market timing, namely, once you bought this quality stock you always wanted, there is no certainty that your macro-call is correct, nobody really knows if the company is expensive - and he argues in his books, EVEN IF the stock is expensive, that is no reason to sell. Then, after many years of compounding, even if the stock drops 50% after you sell it, he says many people don't get back in or even if it does drop, it can still be higher than the selling price. Lots of moving variables. The big danger is leverage, but I'm not personally going to 100% cash especially since it's not entirely clear there is euphoria. 0.75% interest rates and 20x-25x P/E on quality stocks does not strike me as expensive. There have been times when blue chips were like 40 to 50x P/E at rates of 3-4%. If anything, at these low levels, even penciling in 3 more rate hikes to 1.5%, what is stopping stocks from reflecting these low rates and going to 50x P/E ?

Does anyone know if the $587 monthly payment for Clayton homeowners represents just the house or both the land+house? If not the land, do these home owners have to buy the land and pay for a land mortgage?

It's most certainly the land, those houses will be demolished and new ones built. All these folks posting a decrepit picture and showing a large price tag maybe don't understand the game. Having said that, I don't think Canada is a desirable place to live, but for those who think it is, it's the land they're paying for.

I see both tickers traded today - NASDAQ:LSXMA NASDAQ:LSXMK

Just looking at the share prices of some banks and IBM (although BAC are held as warrants), as well as profits in industrials, I have a feeling Q4 could be an incredibly big quarter. If mark to market gains flow through the income statement it could even be a $10 billion quarter.

There is always us and them. Don't you find it a bit strange that there are only a few Western countries that have this operating structure? Try being non-Chinese in China, or Indian in Russia. North America is young, but I don't think around the world multiculturalism is going to be accepted in any large degree. Some even question that it works at all. What happened when Americans allowed military ships to sail in international water near American borders? Not much.. What happened when American ships tried to sail in 'international waters' near other countries, like China? Well, they just said we don't understand this concept of international waters :) Same with trade, immigration. It's not exactly a 1:1 exchange in both directions. I think that's what Trump was trying to rectify but personally I think it's the language barrier. Only English speaking countries really have these dynamics.

Don't know how conventional this is, but recently I've been ordering investments according to internal investments and deals made. If no deal or major investment is made, I order the operating business according to pricing power and growth in volumes. Lots of companies are making deals, especially big ones, so you can track what is the return on a few years of investment. This should be a leading indicator of returns over the mid-term. If investment of some sort, tangible or intangible, drives growth, than the quality and details of this investment is a variable you can use to position size according to your tastes.

You may just be talking about the 'delight your customers' idea. Very true. Also delight the investor - you. If you get turned on by the business and the management is having fun, that's a team you want to play on. My little measure is to look at a small action or acquisition a company makes. Once in a while I'll see a deal that makes me say, 'wow that's creative'. Or that is something of high quality, quite unique. You have to see many deals to get a feel for what is above average. Managements that do creative, superior things may be what turns you on. That often translates into a good result too.

Sounds like an argument for large caps vs smaller companies. But why large caps? I think because large caps represent some measure of success and stability - a minimum threshold. Maybe you give up some upside but you certainly cover your ass..ets. Also it isn't entirely clear that smaller outperforms bigger, perhaps very,very big but the range is wide and my experience is that a well timed large cap investment is no slouch relative to a smaller company which you don't know - ahead of time - will be the next gold mine or the next dud...I also notice many successful startups are going public as large caps and still are doing well.

Everything is cheaper in America, that is a big part of the problem up North. Also you can do more things without an crazy regulation - although there are many in the US they are still tame compared to Canada.

Initiated a test position in HXL yesterday. http://bulletin.incas.ro/files/mrazova_m__v5_iss_3_full.pdf

" collective mind" - scary concept, like the Borg in Star Trek :)

By trying to regulate a fair market price, I'm skeptical any government will not end up producing a very unfair market price because in a free market prices can drop off a cliff in some industries as innovation and demand /supply dictate. For example, look at the attempt to regulate Uber and Airbnb to maintain a fair market price when the natural price would be much lower without the meddling.

Float is a bit like crowd-funding even before this concept existed. Many small inflows of cash for premium or future benefit that add up to an interest free loan. It's a very communal concept :)

If he thinks underwriting profits are approaching break-even and cost of float is approaching zero to slightly positive then borrowing for a few years at a few % points above zero is the same thing but without having to take on any underwriting risk or do any business at all.

My best idea for 2017 is to bite my fingers and make no trades for the first 60-90 days of the year ;)

What can one expect from Socialist Canada? The crtc is about to rule that Internet is an 'essential service'. Like oxygen and water I suppose. As a consequence, the government is redistributing $500 million of taxpayer's hard earned money to provide Internet to the few rural customers that probably are rural because they don't want blazing Internet that much anyway :) This is part of the infrastructure spending... they have to come up with projects to use all this money they collected or will collect in taxes. Big brother knows best.

In this investment letter, the author argues that Hoover and Nixon are better comparisons to Trump than Reagan - http://www.myrmikan.com/pub/Myrmikan_Research_2016_11_25.pdf Also wouldn't tax decreases imply an increase in another invisible tax: inflation? After all, numbers must balance to some degree. If lower taxes occur for everyone, then inflation goes up hence the possible about face of some of these market prognosticators.

I've seen some stocks pay a very tiny dividend, the conspiracy theorist in me feels this piddling amount might be used to technically allow interest deduction. Even Berkshire could pay like 1 cent per year but I'm not sure how many other countries besides Canada have this system of equating 'profits' with 'dividends' and having to interpret/guess if a company might in the future pay a dividend. We must feed the paper shufflers and accountants or they will starve :)

Governments have no social or financial engineering agendas, just keep moving on :) I don't think any place in the world is a free market. That ship has sailed along time ago if it ever existed. Probably they are trying to promote resident ownership versus foreign ownership, to compensate for the foreigner tax. Also the loan is interest free only for 5 years after which it goes to market rate. It's not a particularly large amount after which it sits like a 1st or 2nd mortgage on the property.