txitxo

None of them popped up in my radar. Short term gains are taxed at the personal income rate, which goes up to 52%, long term gains at a rate from 23% to 27%.

Well today Repsol came up at the top of my screen. Statistical investing does not work that well with megacaps (the markets are more efficient for them) so I will not probably buy it. But in the last few months I've bought and still hold Adveo, Prim and Duro Felguera, bought and sold Vueling for a nice short term profit and also some Portuguese stocks: Corticeira Amorim and Sonaecom. No Banco Santader? Nope. I think they are the safest bank in Spain, but I just don't fish in those ponds.

All drinks in Granada bars come with free tapas...that's why Granada is one of the top destinations of the European Erasmus college exchange program...having lunch or dinner just involves going our for some beers...

Well today Repsol came up at the top of my screen. Statistical investing does not work that well with megacaps (the markets are more efficient for them) so I will not probably buy it. But in the last few months I've bought and still hold Adveo, Prim and Duro Felguera, bought and sold Vueling for a nice short term profit and also some Portuguese stocks: Corticeira Amorim and Sonaecom.

The unemployment numbers from Spain are completely unsustainable... Hunger is growing in Greece as well. People are hungry and we know what that means. Either it explodes or austerity is stopped. Imagine how the markets will react if tomorrow it is officially announced austerity failed and they are changing a direction... Hotels are still a little pricey though (Idon't think the depression in US had hotels at such lofty prices). I checked Madrid about a week ago and it is comparable to other major European cities http://www.theatlantic.com/business/archive/2013/04/spain-is-beyond-doomed-the-2-scariest-unemployment-charts-ever/275324/ "Five years after its housing boom turned to bust, Spanish unemployment hit a record high of 27.2 percent in the first quarter of 2013. It's almost too horrible to comprehend, but 19.5 percent of the total workforce has not had a job in the past six months; 15.3 percent have not in the past year; and 9.2 percent have not in the past two years. You can see this 1930s-style catastrophe in the chart below from the National Statistics Institute." Well, real life case in Granada, which officially is close to a 40% unemployment rate. Interviewing about two dozen people for a maid position, about half of them say "No thanks, I am not interested" when they know that the job involves a formal contract, because they are receiving unemployment or health benefits. Many, many people, specially in Southern Spain are working in the black economy. That's why things don't blow up. This is the worst crisis since Franco died, no doubt about that. There is huge human suffering, specially because people bought houses at totally absurd prices and Spain's mortgage are not non-recourse, so you get evicted and still get a big chunk of your salary seizen by the bank until you pay off all your debt. You have upper middle class families which had lived comfortably for decades suddenly being thrown into the low class. But there is no hunger (thanks to the dedication of NGOs) and amazingly little crime. Last thursday there was a national call to surround the Parliament to protest against the situation. The government was very scared, because it received lots of publicity, and they sent 1400 policemen there to fight the demonstrators. Do you know how many people showed up, in the country with 60% youth unemployment? Around 1000. And many of them had white hair. I live near quite a expensive mall which was opened last year. Go there on a weekend. It is impossible to find a seat in the terrazas. Have a look at the bars and restaurants in downtown Granada. Yes, business is not as good as usual, prices have gone down. But the people drinking nice Rioja and Ribera and eating tapas don't look like a picture out of "The grapes of Wrath". I've been a huge pessimist regarding Spain since 2004. We sold our apartment, have been renting ever since. I got totally out of Spanish stocks in 2006. Two years ago I braced myself for an euro break up. They've cut my scientist salary by 20% in the last 3 years and it is getting nearly impossible to get a research grant, no matter how good you are. My research institute is losing all the young people, no idea when we will be able to hire them back. I am pretty sure than unemployment will increase for at least another year and the economy will contract this year or probably the next. Things look ugly as hell. But whatever little intuition I have as a value investor tells me we are starting to see some light at the end of the tunnel, and it doesn't look like another train coming at us ..:) So after 7 years, when my screens produce Spanish stocks, I buy them...

Gio, most of the things you describe happen in Spain too. An established company, which is paying "old" high salaries and cannot change anything will have lots of trouble ahead. So quite a few companies are firing everybody (hence the very high unemployment figures), moving to a better new location with 1/2 the previous rent and reopening again. Right now you can create a new company from scratch with much lower costs because office rent is extremely cheap and salaries for highly qualified personnel are much lower. And yes, the unions are so out of touch with reality that you have to pay a secretary significantly more now than 5 years ago. But that's going to change after some of the measures in last year's labor reform kick in. And young, highly qualified engineers, programmers, etc. which are not so bound by union rules are asking 1/2 of what they used to. You have lots of construction companies setting up a front office in Brazil because it is much cheaper to do engineering work here than there. The internal market is dead, and it will be dead for years, but if you are exporting, this is the best moment to create or expand your company in the last few decades. El Corte Inglés, Spain's retail behemoth, is having lots of trouble whereas dynamic companies like Mercadona (which is soon opening stores in Northern Italy and other European countries) are growing at a fast pace. My point is that this "new" economy will grow and eat the "old" one, based on the pre-crisis rules and which is basically impossible to reform. It has to. Because of the pressure from Europe, and the fear of leaving the euro, governments will keep reforming, however reluctantly, until there is economic growth.

Don't get me wrong, right now the euro makes no sense whatsoever. We are like the countries stuck with the gold standard in the 30's. But making the euro work (i.e. forcing everybody to harmonize their economic policies as if they were a single country through reform and fiscal discipline) is much cheaper than breaking everything up. That's why it will eventually happen.

I know, the same thing happened in Spain. Prices are still pretty high in some areas. Electricity, water has gone through the roof. But other things are way cheaper. 6 years ago, if you were looking for a reliable electrician, plumber or landscaper, it took weeks to get them to come home. Nowadays is like ordering pizza. You call and they show up 10 minutes later. And fees are significantly lower. Actual house prices (not official ones) are 50-60% lower. Commercial rents are easily half of what they were in 2007. At some point people are going to realize that you can buy a hotel for a song, staff it with new hires at rock bottom salaries, offer rooms at 30% the price of the competition, and still make good money. Few people are still doing it because of the uncertainty. But the potential for lots of economic growth is accumulating fast. Just to give you a example, you can hire young top graduates, people who would do very well on a Ivy League school, for ~20k/year, including all the employer expenses. They used to get twice that or even three times after a few years on the job. Hiring a top-notch engineer in Spain will soon be cheaper than in China. In facts exports are increasing very fast in Spain, so obviously companies are already taking advantage of this. So it is not realistic to assume that the existing companies and business with self-devaluate 28%. What's going to happen is that some companies will use the new opportunities to lower prices, and they will beat out of existence those who don't. It is going to be a protracted process, extending for many years. So that's why you need Eurobonds to provide support (and pressure) for this to happen.

Gio, of course it is difficult. Nothing worthwhile is easy. But it does necessarily have to be much more complicated than the current workings of the UE. E la nave va. As a physicist I try to figure out some safe assumption and then build from there. It seems clear to me that a disordered euro break up is, by far, the most costly option for all the decision makers involved. First, it is disastrously expensive for Germany (they get to compete with countries with massively devaluated currencies + Big economic depression on their main customers + Lehman Brothers financial turmoil x10 + enduring hatred from the rest of Europe). So Germany can huff and puff, and they can chastise small countries like Cyprus, but they will not take any steps which make Italy or Spain leave. Keeping the current stalemate while they can, spending as little as possible, or even leaving the euro by themselves (which would probably bring any chancellor big political kudos) is less onerous. Now look at the things from the point of view of Spain or Italy. In Spain political parties are huge patronage organisations, with hundreds of thousands of dependants, which require their party to hold political power so that they can get jobs, contracts, etc. Any political party which takes Spain out of the euro, and perhaps out of the UE, reversing all the progress achieved since Franco died in 1975, will be destroyed forever. It is not a question of losing one general election. They will just cease to exist as a political entity, like the PSI or the Democrazia Cristiana in the 90's. It would be almost impossible to any Spanish Prime Minister to make such a move, he'd be deposed internally well before that. So if you assume that euro break up is too expensive to happen, then something else will, no matter how unpalatable or politically difficult it seems now. And the cheapest option for everybody involved is partial debt mutualisation, some form of QE where needed, and further economical integration. You don't need a political White House to do that. You just need to have a centralised Treasury which holds the strings to each country's purse. And the key to do that is controlling cheap debt issuance. Since that's the lowest "energy" end state, it is the most likely. So which particular trajectory do we take to get there? No idea. You can try figure out how things end, but the actual path is absolutely unpredictable.

Speaking about Mr. Soros, I must admit that most probably I am the one who doesn’t get it… ;D Still, I think Eurobonds could be the third way to solve our problems… which won’t work! Eurobonds mean that the Germans must accept to share all the liabilities, without retaining control over the assets… would you ever accept something like that? It would be like starting a business with a partner of yours: you put up all the capital, and he controls all operations?! Would you ever do that? Even if you trust him very much? I wouldn’t. Because it doesn’t make any economic sense. Again, either you we a “White House” in Berlin, or every nation will get back to its currency. Nothing else makes economic sense to me. But… I am no George Soros, so I must be surely missing something here! :( giofranchi Gio, have a look at this link: http://en.wikipedia.org/wiki/Eurobonds What you mention is option 1) in "Three approaches to Eurobonds", i.e. "Full eurobonds with joint liability". I don't think anybody is seriously suggesting that, it would be totally crazy. What Soros talks about is some variant of the blue/red bonds proposal of von Weizsäcker and Delpla. It reduces the deficits immediately in the countries with problems, gives the EU a powerful tool to censor individual country budgets and it can even be fine-tuned to avoid free riding.

txitxo, that’s exactly why they cannot afford the Euro. They would be much more competitive with a currency that truly makes economic sense for Spain. The same applies to Italy and others. Keynes was right, and again we won’t solve our problems until either we get to a United States of Europe, with a political, banking, and fiscal union, instead of only a monetary union, or Italy, Spain, and others get back to their currencies. I don’t see a third way to solve our problems. In Italy I keep hearing politicians talk about many things, yet no one speaks about the real problem: Italy has been losing in competitiveness on Germany and northern Europe in general for 12 years now, the gap is getting wider and wider, and prices in Italy are still way too high. And yet, no one even tries to tackle this most crucial issue! giofranchi Of course, Gio. In hindsight, we would had been much better off with an independent currency. Borrowing costs for the private sector would have been much higher, and the housing bubble would not have inflated so much. But there is no going back. I think the recent Soros article explains very well the situation. The main point is that if Spain and Italy leave the euro, it would be financial Armageddon for everybody. The costs, both economical and political would be enormous, equivalent to those of losing a war, the EU would break up and individual countries, including Germany, would become internationally irrelevant. So Germany has to choose between going back to the DM (which would be costly but feasible) or eventually accepting Eurobonds and an easing of austerity, to quench social rebellion in Southern Europe and avoid spontaneous euro exits. The Germans can stall, kick and scream, but the logic of Soros is unimpeachable. They have no other way out. They've beaten everybody in their path so far, but now they are stuck in front of Moscow and winter is coming. So we may have to endure the current absurd situation a bit longer, certainly until the German elections, but eventually we will have Eurobonds, and the ECB will print as much money as required to get to a not-so-ugly deleveraging. If German public opinion cannot take it, they will have to leave the Euro. Although I don't think that will happen. The new DM would shoot up like a rocket, and German industrialists must still have nightmares about Northern Italians with a cheap currency... ;).

What moves prices is not reality, but changes in the perception of reality. One year ago Spain was going to leave the euro and become a new Argentina. But now it seems that we just have a few years of near Depression ahead of us. Wonderful news! Between the Rogoff & Reinhardt fallout and the Japanese buying up all the bonds they can find, I am even starting to feel a little optimism about Spain's economic prospects for the first time in 8 years. And in any case, total market cap /GDP is 66%, near all time lows of 63%, and now that includes companies like Santander, BBVA, Telefónica, etc. which make most of their money outside Spain.

Thanks. I think this is one of the best analysis I've read about the crisis. However, although the solutions are smart, they are not realistic. Eurobonds, even in the guise proposed by Soros, will be almost impossible to implement in practice. And Germany's big companies will put lots of pressure to keep it in the euro. Apart from the fact that Germany, going alone, will just become an oversized Switzerland, geopolitically speaking. So the most likely course will be Germany trying to keep the euro together, but using the current local optimization approach, which not only will end up being much more costly for them, but it is also disastrous for the countries suffering austerity, and risks catastrophic failure at every turn.

Well, I am still reading it, but I have yet to find a theological debate. So far it is just very complicated physics explained in plain English with extreme clarity! I have understood that a “flat” universe, which is expanding at an ever increasing speed, instead of slowing down, like it was previously thought, requires energy far superior to the one that can be contained in its observable mass, and therefore circa 70% of that energy should be contained in empty space - the so-called “dark energy” our friend txitxo is a renowned expert about - yet I still have a lot of trouble trying to grasp what “dark energy” exactly is supposed to be… Maybe, as I go on reading, it will become clearer! :) giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes Hi Gio. Lawrence Krauss is a very competent scientist and a world class science communicator. This hypothesis about the Universe being created out of nothing (where you have to qualify what nothing is) sounds pretty interesting, although of course it will be difficult to verify. I had a quick look at the book and the first part seems like a very interesting introduction into modern Cosmology. Between you and me, when our physical theories do not agree with observations, we invent a "dark"-something to fill the gap and keep asking for money to do more research about it... ;) But do not tell the science funding agencies. More seriously, I think that we are on the verge of a revolution in our understanding of the Universe. General Relativity is a very well verified and reliable theory, which explains almost everything we see at small scales/large accelerations, from the behaviour of satellites and planets in our Solar System to a pair of neutron stars rotating around each other at devilish speeds. However, when we test GR at large scales (around galaxies and galaxy clusters) we have to introduce some putative particles which we call dark matter to fit the observations. And when we test it at still larger scales (the Universe), we see an excess of acceleration which we explain through "Dark Energy" (which is a catch-all name to cover several types of physical explanations). My personal (and rather contrarian) guess is that in the next 10 or 20 years we are going to see General Relativity substituted by a new physical theory which explains what we call now DM and DE. But to get there, we need to obtain very high quality data, we need to describe accurately how the expansion of the Universe changed with time (which is what I am currently trying to do) so that we are able to differentiate between various Dark Energy hypothesis. Or perhaps I am wrong, because the current market consensus is that the current paradigm is right, most of the problems in Cosmology are already solved, and it is just a question of adding more decimal places to the measurements...

That's right, the US has the highest gross rental yields of any developed country in the world: http://www.numbeo.com/property-investment/rankings_by_country.jsp Germany seems fair valued...

Underwater: The Netherlands Falls Prey to Economic Crisis http://www.spiegel.de/international/europe/economic-crisis-hits-the-netherlands-a-891919.html

I think it is much worse than: "Brussels considers itself a master of game theory". You have guys in charge like the Eurogroup chief Dijsselbloem, better known as Dieselbomb, who needed 6 years to get a BA degree in Agricultural Economy in some small Dutch University, has no MSc or PhD and has been the typical European political hack for most of his career. But he became Finance Minister in November of last year, and although obviously doesn't know squat about anything, is pontificating in the press about how to solve Europe's problems by confiscating money from depositors over the 100k limit and retracting his statements one day later, as we say in Spanish, "dónde dije digo, digo Diego". With idiots like that running the show even SuperMario may not be able to keep the euro together. I am trying to figure out what happened to people who were holding stocks in Laiki and Bank of Cyprus. If they were not affected by the bail-in, then there is going to be a massive bull market in Europe as everybody over the 100k limit who is not able or does not want to transfer their cash abroad puts as much of their money as they can into stocks. Many risk averse people will think that it is much better to put up with the fluctuations of owning BRK or FFH than to get shorn like the poor cypriots.

I loved this! I fully agree with the practical advice, as Graham said: "buy a list of diversified, statistically cheap stocks". You will not blow up, and you will end up making quite a bit of money. But the physics analogy is not right. Of course at that time very few people had heard about Chaos Theory, which I think is the best physical explanation for what goes on in the stock market. In QM the uncertainty is intrinsic, in the sense that you cannot measure the state of things with high precision due to physical limitations, that's what Heisenberg's principle tells you. But on the other hand, if you know the structure of a system well, you can calculate probabilities with astonishing accuracy, up to many decimal places and perfectly predict its statistical behavior. Chaos theory tells you that for certain systems, no matter how well you measure all the parameters involved, you will not be able to make precise predictions. See this video: (but turn off the sound because the music is atrocious). Three points which are very close at the beginning quickly diverge, even in a system as simple as the Lorentz's attractor, which is governed by a set of deterministic equations, with no random noise introduced anywhere. You can see the same effect with a real water wheel: So you can thoroughly study a company, visit all the factories, count all the nuts and bolts in the inventory, learn by heart the CVs of all the managers, etc. and still you will not be able to forecast earnings or sales with reliability. Because of that, you are much safer if you assume your ignorance, realize that you will not be able to predict performance accurately, no matter how smart you are or how hard you try, and deal with the system by empirically studying its pattern of long term behaviour. Of course, all your cognitive biases will fight this concept...because you know that company A is going up, and you know that company B is going down, etc...

;D ;D ;D ;D giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes Not quite, but it is definitely an Angelaphile. :) (Actually, it reminds me of the infamous Naked ice borer discovered by Aprile Pazzo) :) Google: Aprile Pazzo Naked ice borer Discover Magazine :)

it reminds me of Merkel...

...winter is coming...

Rent the house you own and pay the rent downtown with the money you get from it.

Spain has quite a few large companies which should not be too affected by the situation here, which is getting worse fast. http://www.economist.com/news/business/21573153-rubble-signs-hope-foreign-gain-domestic-pain Some companies I own are Duro Felguera and Prim, in Spain, and Corticeira Amorim in Portugal.

Look for companies with Piotroski's F-score <=3, P/S>1 and 1yr. asset growth > 10% (the so called Montier Shorts). http://www.safehaven.com/article/10348/joining-the-dark-side-pirates-spies-and-short-sellers Right now, by market cap order, good "statistical" short candidates are Apple, Baidu, United Technologies, Eaton Corporation, Apache, salesforce, Broadcom, and many, many more in the US. In the EU zone, only Caixabank, BME.MC, GSW Immobilien and few more. That shows that there is a lot of optimism in the US, very little in the Eurozone. The Shiller P/E is also around 40% lower in Europe than in the US. By the way, according to these criteria, Tesla is clearly a short candidate.

Inflation is coming, independently of the actual path which takes us there. Rogoff and Reinhardt showed it convincingly in "This time is different". The best endorsement of the book I've read is what the WSJ said of it: "...they offer frustratingly little economic theory to accompany their findings...". I am skeptical about models, but good data can always be relied upon, in Economics or in Cosmology. With the current levels of debt in the developed world, the only realistic way out is a "soft" default by inflation. Developed countries will not default outright, and prolonged austerity is impossible to maintain in a democracy. Here in Spain public opinion has shifted more in the last two years than in the previous 30. A few more years like this, and we will have a Spanish Beppe Grillo on the government, taking the country by action or omission out of the Eurozone. The powers that be in the Eurozone are very well aware of this. They also know that in a world with rising countries like India, China, Brazil or Russia a divided Eurozone will be irrelevant. 10 years from now no EU country will probably be within the top 6 economies of the World. So they will not allow the Eurozone to break up, under any circumstances, not because of economic considerations, but of geostrategic ones, and the way to avoid this has already been implemented in the Anglo-Irish debt deal. Debt will be restructured so that it has to be paid 30-40 years from now, that will avoid legal challenges (no formal monetization) and make it bearable for the indebted countries. What they are doing right now is just trying to squeeze as much public spending cuts as they can from the European South before that happens. So there will be inflation across the developed world. But as Hugh Hendry says, before there is inflation, there will very likely be a big deflation scare, to make inflation palatable. Japan is showing the way. My personal bet is that we will have a big crisis first, due to some exogenous shock, perhaps provoked (and there is no lack of candidates) and then central banks and governments will save the day by shifting into inflation mode. The related crash or crashes should bring the US Shiller multiples to a secular bottom and kickstart the next bull market a few years from now. My timing indicator shows that a US stock market crash may come any time now, so I don't think we will have to wait a long time for the final adjustment process to start.