SharperDingaan

Yield curves have inverted, and suddenly the overnight rate goes to 10% on material volume? To 5.5x the long-term rate (or more, if the Fed were not intervening!) It wasn't a glitch, and nobody knows (not guess) the cause? At the basic level ... 50B+ of debt couldn't roll, because borrowers continually saw no-bid, even as they were continuosly raising their offers. That doesn't happen, unless you're in an extremely toxic environment. Maybe because those whose notes were maturing, deliberately chose not to buy new notes? and if so, why? SD

if the current business doesn't work, they can always diversify into weed to achieve their mission :D WeHigh? Dial A Bud - coming to a location near you! https://weedmaps.com/deliveries/dial-a-bud With soon to be added weed infused Vape Juice - as the healthy lungs alternative!! https://vapesinthehood.com/make-thc-vape-juice/ SD

This is the NORM, not the exception; and it exists to be used - not shut down. The vast majority of stock market participants are not 'investing' - they are gambling. Buy high, sell higher, and do whatever you can to keep the bubble going. The industry makes far more money via 'churn' (commissions, fees, underwriting, credit rating, analysts/social media, etc) - than could ever be made through 'buy and hold'. For the most part, HFT and proprietal trading is just zero-sum gaming. In any given quarter a firm could be up/down quite a bit, but over MANY, MANY quarters? it tends to wash out. The sales benefit is higher market volatilty, and conditional liquidity, promoting higher 'churn'. And all sales people will make a lot more money in a 'hot' market. Play the 'game', the way 'industry' does (gorilla in the room); and you will lose. But play the game differently, and it is industry that loses (Gladwell, 'David and Goliath'). Lots of opportunities. Bubble investors only 'look' wealthy. The reality of course is that if they can't reliably dump their sh1t onto a patsy at a higher price, they're bankrupt. To ensure that they can; they engage the industry to sell the bubble, and its handmaidens to sell the individual deals. Add enough 'Benjamins', and you can obscure most anything. Smart approach. However, all bubbles eventually burst .... Industry's loss becomes your gain, everybody is fire selling everything, and you've the one with the cash. 50c on the offer, for a quick all cash sale; take it or leave it. You only need 1-2 of these in a lifetime, and you're essentially set for life. SD

It would seem that if your name appears on the list ... you've failed. You've been leaving too many breadcrumbs on your trail, and become traceable! SD

Not to put ideas in peoples heads :) ...... The short-term money in WeWork/Uber/SoftBank can only be made if the WeWork IPO goes through. To short any of these you need a material event to sell into, and IDEALLY - option/share-lend/repo markets to offset the risks against. Give up a 1B+ on the WeWork IPO, and make back double+ on the risk offsets ..... SD

How do they cancel the shares? Telling the SEC stating that they won't be selling it to anyone? Share count is reduced, and there a note disclosure in the next financial statement Where do the outside get the info on the buyback (number of shares and the purchase price)? Is it in the audited quarterly report? You don't. The note disclosure in the next financial statement will just speak to the total quantity bought, the total $ paid, and the price range of the purchases. See the above in italics SD

The company does the buyback because it currently has no internal opportunities that could earn more. The buyback is to avoid paying a dividend. Avoid having to come up with the same amount every quarter, and creating expectations. The bought shares could be cancellled. Increases EPS by reducing the share count, and makes debt numbers worse by reducing equity. The shares could be held as treasury. Reduces/eliminates share dilution from share based compensation. Does not affect equity. Short-term investors prefer large buybacks and share cancellation. Puts a floor under prices (may even elevate them), raises EPS (higher prices) and ensures bids in size. Investors sell into the bids, and walk-away. Longer-term investors prefer smaller buybacks that are combined with debt repayment, and only net share cancellation (buyback shares-compensation shares) - ratio's remain undisturbed, BS strength improves, and EPS improves. Short and long-term interests are not the same. They are just another tool. SD.

Discouraging predatory lending is like trying to banish clap. We might suppress it for a while, but it is not going away - and over the long term, it adapts to whatever drug is being used. Ultimately it is how much is tolerable. Assume the views on this thread are representative of the population. Simply writing off the debt, or discharging it through a bankruptcy, is clearly not a socially or politically practical approach. There's little objection to a write-off; but it has to be earned in some way. Society paid for it, society should get something for it, and there is a lot of societal need. Hard to argue against. The US has been trying to reconcile civil rights ever since the 60's, and is still trying 60 years later. Students loans are not a lot different. Ultimately, change is limited to the pace at which the oldest generation dies out. Write-offs will eventually occur, but it is going to be a very long 'negotiation'. SD

A good part of this is the FX difference, and otherwise US bound talent staying in Canada instead. The same thing routinely happens in the film and media production house industries. A software engineer in Canada will often only get paid 2/3 to 3/4 of thier US eqjuivalent, and in CAD versus USD. Hence a US engineer costing 100K USD/year, will cost the equivalent of roughly 56K USD/year if he's sourced in Canada (100x.75x1/1.3300). Even if you throw in telecom and 3 face/face visits/year, it's still a lot cheaper. To some extent Canada is also a lot more immigrant friendly. If you're likely to have your kids while working in Canada, they will automatically be dual-national. SD

Anecdotally, we shut down our business office in June, we’re 21 years old and were in that office for about 14 years. Nobody was using the space, more and more of the staff have moved out of Toronto to places like Cambridge, Kitchener, even New Brunswick, Nova Scotia, etc. We’re an internet company, and we do everything online. We were already doing everything virtually, phones, email, video conferencing, project tracking. The savings were substantial and go directly to the bottom line. It was a no-brainer. It turns out we’re not alone and this is becoming more the norm within the industry. I’d be wary of commercial real estate (office rentals), even the temp/space on-demand unicorns like WeWork are fighting an uphill battle I think. In a few years we may buy our own building, but it’ll be a mixed use: office downstairs, with multi-tenant rentals on top. We’ll see. I have had a similar experience with a GTA start-up ... The traditional reason for partners buying the real-estate the office is in, is because it's the partners pension plan. The business continues to pay rent every month, but after 20 years the partners real-estate is owned outright. We also found that we were primarily an internet company that was essentially outsourcing everything. Generally, partners/staff were having a face/face meeting once/week at best, the rest of the time it was mostly Skype/Phone. When we did the numbers; continuing with the combined cost of telecom+temp space-on-demand+lunches - came in at well under the costs of a permanent 'office'. Lower break-evens, and tax deductability, were also material 'additional' considerations. Amongst our takeaways; was the realization that to rent space (DT Toronto/GTA hubs) efficiently - all the renters in that location, had to have a similar need (place to bring clients) - and be actually using the space for that purpose. As rent is a fixed cost, and 'usage' doesn't show up as a variance each month, there was no incentive to manage it. Make usage semi-variable, and the dynamics change quite a bit. If you're a large company, a permanent office space is pretty much expected; but if you're a small/medium company, space-on-demand is becoming increasingly the norm. A 'common-use' lounge, a room of your own, and a 'conference' room bookable as needed. It's also the office set-up 'of choice' for a growing number of junior staff. SD

Do not argue with a fool because he will drag you down to his level and then beat you with experience. Be careful of the man who stays calm and smiles in a crisis for he has already found someone to put the fault on ;) SD

Per the UK's 'Time Team' program; after having dug to a depth of 10 feet in the UK last year.... "British scientists found traces of copper wire dating back 200 years and came to the conclusion that their ancestors already had a telephone network more than 150 years ago." Not to be outdone by the Brits, in the weeks that followed, a team of American archaeologists dug to a depth of 20 feet in the US, and shortly after, a story was published in the New York bulletin: "American archaeologists, finding traces of 250-year-old copper wire, have concluded that their ancestors already had an advanced high-tech communications network 50 years earlier than the British". One week later, the Herald newspaper in Harare, Zimbabwe; reported the following ... "After digging as deep as 30 feet in his backyard, Manius Dube a self-taught archaeologist, reported that he found absolutely nothing. Manius has therefore concluded that more than 250 years ago - Africa had already gone wireless!" Reality is all in the eyes of the believer. SD

The reality is that the US is not an island, it has to deal with the rest of the world - whether it wants to or not. Every time China/US make something for trade, they use in part - the resources of other countries; components, oil, labour, etc. Reducing the volume of trade (via tariffs) between these two countries, also reduces the volumes for everyone else - tipping the globe into recession. Today we have SDR's, which are quite capable of settling capital flows between nations, and have long been touted as a solution. We now also have the technology to make these transactions both visible to all (within the private network), and tamper proof. Joint develpment, as a face saving escape for all warring parties, has to be on the table at some point. Agreed this is market disruption, it will outlive Trump, and it is going to be bruising. A very good thing in the long-run .... just not so much in the short, or medium term ('cause we could all end up dead!). In the meantime, all we can do is flow with the river .. and position ourselves accordingly. SD

"As for whether limiting capital inflows will drive up interest rates, that is easy to test. Just look at the relationship between US interest rates and the US current account deficit. If you believe reduced capital inflows should raise interest rates, then you would expect that higher current account deficits are always associated with lower interest rates." .... If you need to roll a 1B treasury issue at maturity, and you only have bids on the table for 600M - you have to raise the yield enough to attract another 400M; that's just the way auctions work. If you have net capital outflow, you just have to raise the yield even further; 'cause you're the 'ugly' at this ball (as per your net capital outflow) - and I need a lot more 'benjamins' to 'hide' your imperfections! Hence, its hard to see how rates do NOT go up. ... Every country also believes that reserve currency status (regional or global) lasts 'forever', until they find out it doesn't. More recent examples have been the UK pound, and the gold standard. Additionally, the penalty for reserve status is the 'Triffen Dilemma' which seems to have been conveniently forgotten. https://en.wikipedia.org/wiki/Reserve_currency We live in interesting times. SD

All credit to the Carnegie Institute, but where's the piece on the capital outflow? If I'm a foreign (China) capital contributor and getting taxed on new US investments, why can't I .... 1) Simply route my US investment through a 3rd country? (invest the capital in a UK/German company; that in turn, makes the US investment). A very old smugglers trick, that apparently wasn't considered by the Carnegie Institute. 2) Just let my US treasuries mature and move the capital to some 'Other' country (not China)? US rates rise, as the US now has to 'crowd ' the market to raise enough to roll my maturing bills, and the US/Other 'FX' rate distorts as I sell US and buy Other. 3) But if the 3rd country, and 'Other', are the same country .... there will be minimally affect on the US/Other FX rate (ie: not a trade manipulator), but US rates WILL increase. I can plausibly claim, and prove, that I'm not a currency manipulator - the US is ;D Of course I may very well be a currency manipulator, but I'm just better at it than the US is ! In todays age of crypto currency, there are a number of far better ways of handling capital transfers between nations. If the US is going to impose a tax on US capital inflows, there is little reason for a non-US oil exporter to price oil in USD, and pay tax on petrodollar recycling. The exporter simply prices in SDR's, Euro, or Yuan/Renminbi instead; and devalues USD by reducing demand for it. It would appear that the end-game is devaluation of USD .... Nothing wrong in that - but there are a lot smarter ways of doing it. SD

The reality of course is that the 2 largest economies need each other. China needs the US to buy their goods, and the US needs China to finance its deficit. However, just as in a bar fight, there comes a point when the smartest thing is to just let them slug it out - until only one is left standing. Most would think that per the pending election, if this continues, it will be the Republicans/Trump leaving the ring. In the meantime ... let the trading gifts continue. Per those 100 year bonds, we need the market YTM driven to zero. Cut that fed rate baby, cut! SD

You might find Gladwell's: "David and Goliath" an interesting short read; as about a quarter of the book covers the fact that the money versus effectiveness of education plots out as an inverted U-Curve. If you start with nothing (the illiterate) - throwing money at education (more schools, teachers, etc) will improve effectiveness. But it's a diminishing return ... continue to throw money at education, and the net benefit sinks to zero, and then becomes seriously toxic. https://www.amazon.com/David-Goliath-Underdogs-Misfits-Battling/dp/0316204374 It has long been recognized that throwing money at the best students in an impoverished neighborhood, via an extended 'full-ride' scholarship to an Oxford, is the most effective way of 'educating' - but sadly it's not scalable. There are only so many people in an impoverished neighborhood that will beat the odds; to qualify for a Rhodes/Beit Scholarship AND graduate - despite the 'pressure of expectation'. But those that do .... are the truly exceptional, that really do change the world. https://www.theglobeandmail.com/canada/article-oxford-bound-meet-four-of-canadas-latest-rhodes-scholars/ To many, the issue with education is that little Johnny/Suzie cannot seem to APPLY what they have learned. Johnny/Suzie come out as intelligent idiots - sure they've learnt something valuable, but no idea 'how to' build the algos applying what they know. It is a large part why trade or co-op or 'night-school' courses are often preferred - as 'application' is favored over theory. Sadly, it has now gone on for so long, that many now question the value of education at all; ignorance and exploitation is preferable. SD

Couple of add-on's .... The majority of educators teach at the Junior and High School level. For many its a vocation, and as in any industry - the best rise to the top. If they can, they vote with their feet, and they teach at the private schools - not the inner city, or suburban schools. Higher pay, different environment, different risks. Of course, not everyone can vote with their feet. Do you really think that most teachers in a school with gun and/or rape violence want to be there? Do you really think the students want to be there? Do you really think that anybody wants to put up with the abuse? Teachers and students do so because they have no other choice. Just as everybody thinks they can run a restuarant, everybody thinks they can teach. The spectacular 1st year failure rate in the restaurant industry says otherwise, as does most parents inability to have the 'money' &/or the 'sex' talk with their kids. Yet, everybody is SURE they can do better, therefore the educator should get paid less than they are (average wage in the community). Majority rules, and it gets what it deserves - the typical life of inner-city school. The reality of course is that for most people, at the time their kids are going to school - the educator has a higher social ranking than they do (as evidenced by pay), and that is what rankles. When the economy is doing well and everybody is taking home bonus cheques, it's not a problem - because everyone is earning more than the educator. When the economy is poor ..... we need somebody to blame. All industries have their issues - education is no different. But is anyone going to reform it? probably not. SD

Education is broadly comped on a 2x4 matrix of private vs public vs University, College, High School and Junior School. Within each cell there is also division by experience, qualification, years of service, function, etc. The higher the level you participate at, the more required of you, and the more you get paid; no different to working in any large corporation. Most often, the higher the level, the fewer educators there are, and the more they get paid. For most people; over a working lifetime in education, industry vs education total comp is largely comparable. Educators just receive less cash in their early years (earn over 8 months versus 12), and more in their later years (when pensions kick in). A great many people do their 20-25 in industry, and retire to part time college/university teaching in the subjects they’ve worked in. It’s a great gig, there’s no real retirement age limit, and everyone benefits. A great many others, also change careers into education part-way through their working lives; as obviously you are not the same person at 50, that you were at 25. Educators were also students once; so hardly surprising that the same issues come up. They’re just now seeing both sides of the coin. As in all things, some will game the system and others will not; power to them. Nothing prevents anyone from getting in/out of education, at any time. If someone thinks it’s a great gig, they are free to put their time in and go for it like everyone else. However, the grass may well NOT be greener, but rather just a different shade of green. SD

Under IFRS, intangibles have to be 'means tested' every year, with the difference in valuation written off as an immediate expense. Start from scratch businesses generate intangibles every time they capitalize something (IT projects, deferred sales commission, etc). In mutual fund holding companies , DSC's (commissions paid > client income received) may even be the largest ongoing asset. GAAP allows straight line depreciation, and is wide open to manipulation. Ultimately you're really trying to put a value on 'reputation', the asset that is NOT on the Balance Sheet. Intangibles are the proxy for it. Obviously not great, but better than nothing. SD

Welcome to the dark side! ;D SD

Go back to fundamentals. The more debt in a capital structure, the more the debt behaves like equity. A 100 year sovereign bond is all about maximizing the price change to a small change in YTM; it produces a bigger bang for the buck that equivalent equity does, AND gives you a CB guaranteed positive carry (interest vs dividend). MORE importantly, it makes it much more difficult for a CB to put through a subsequent rate increase ..... because if the DSIB/GSIB holding those bonds could be severely compromized, that rate increase is not going through. The result? ..... YTM's lower for longer, and higher stock markets. Pension plans have very limited discetion within their FI investment allocations. US/domestic sovereign (CB guaranteed) FI that behaves like equity is highly attractive - especially when it comes with both an implied CB 'put', and greater certainty as to the direction of future interest rates. There is also the additional benefit that bond trading profit maximizes when YTM is zero. Detering further declines into negative interest rates. You and I can do nothing about Algo's - but like water flowing down a river, we CAN position ourselves to benefit from them. Lots of rivers have hydro facilities that benefit from flow &/or height differences, nothing prevents us from doing something simllar. Ultimately, one has to be a truly evil bastard to issue/use 100 year bonds. It's really an act of desperation .... So what has occurred that requires such desperate measures ? We would humbly suggest that today, we are living through the modern-day equivalent of the 1929 depression. It would appear that while the lessons/solutions learned from 1929 may have made the depression last longer; they have also made it much more humane. Point is, expect depression era returns, NOT 'normal' returns. And is that not almost exactly what we are seeing? SD

Public/private is really just swings & roundabouts. For some states/nations there may well be a clear direction, whereas for others it may well be essentially a wash. There's lots of abuse in both approaches The principal thing is aimed at house buyers. If I only have 2K month for debt service, and student loans take up 500 (350 P, 150 I) of it, the remaining 1500 is not going to cover a mortgage; I need partners/renters to split the mortgage with. If I can pay interest only on that student loan, the remaining 350 can go to mortgage (bigger house &/or fewer partners/renters). Ultimately I can live rent-free (managing my 'slum'), sell out for a higher price; but this time buy something similar with more equity, and no renters. Still have a partner though ... just this time re-named 'significant other' ;D Our new graduate can just be an 'intelligent idiot', or he/she can actually do something useful. No help required ! SD

A few take-aways, as we have relatives involved in the business. We own 5% of modest guest houses in both Paris (France) and Serville (Spain). It's a lot of work, and your 'projections' are almost always over-optimistic. If you bought wisely, made truly value-additive improvements, and held on to the property for a decade - you may well be OK; but this ISN'T most people. You'll need cleaners, weekly maintainance, handy man/women, a marketer, maintenance capex, and the ability to tolerate extended periods of 'no rent'. The more you can 'spread the load/risk', the easier a time you will have. Be clear on your objective. To get the most out of the property, you need to be using it part of the time that it is empty, and that use is not 'free'. You're also there when it isn't a popular time to visit, so it also has to be a place you'd like to live in - not just visit. Paris in early January is wet and cold ... but if you like culture, and french cuisine .... it's not a disaster. Net-net you will most likely come out at a financial wash. Transaction fees, and cummulative minor capex will erase much of your potential capital gain. Additionally, most of your annual P&L share will be lost to the cost of traveling to/from, and your expenses while on-site. The primary benefit will be that while on-site, your costs were covered. In our case, we get to go to, and stay in both Paris and Serville for a few weeks every year, for an extended period, at essentially a net cost of zero; while protecting the purchasing power of our money. The aim is to enjoy what you have, not try to make more. Everyone is different, but it's not as easy as many would like to think. Best of luck to you! SD

+1 No bailout is necessary. Just the ability to discharge the loans in bankruptcy. This will force reasonable lending standards on the industry instead of making loans that can never be paid back. I don't want a bailout to borrowers because it was a choice, but less of a choice when considering all of the social pressures. We were all told to go to college to get a good job. No other alternative was offered. Now, you may fault kids for not doing the cost-benefit analysis, but ultimately this is what they were told to do by older people with more experience - and those same people are the ones who disparaged the lazy millennials who DIDN'T want to go to college. The borrowers need to accept responsibility for their decisions. Bankruptcy doesn't come easy, but would "let them off the hook" and it would also punish the lenders who made unreasonable loans. The real travesty here is that the govt took it over by arguing private lenders were being predatory and make unsustainable loans....and then continued the practice at a much larger scale! Sorry, but we don't get to 'game the system'. No going to Harvard to get your masters, racking up 200K to pay for it; walking away from the debt (via bankruptcy) ... while still keeping the earning power of that Harvard degree! The loans are secured against (the future taxes on) lifetime earnings, and lifetime means exactly that - lifetime. As already pointed out; all a student need do every month is just pay interest only. Never pay the loan back, and just bank the principal that you would have paid in either a mortgage principal repayment, or T-Bills. No defaults, no pressure to act, and every month you're a little further ahead. Student wins, government loses, and eventually you will probably get a community related write-off. All we need do is just not give the loan until the student evidences sufficient 'maturity'. Pick a set of relevant criteria, that the student either has or does not. SD