Buying puts before 10 am tomorrow?

[Spekulatius]

Ah yes, RVs.  Not sure how I forgot about those.  They are supposedly one of the best recession predictors out there.

 

Consumer spending is a key variable to monitor, as that is what seems to be holding the US economy up at the moment.  I have the suspicion that it got a temporary boost over the last few quarters because those who were paying close attention to what Trump was up to (including me) front loaded their spending.  If I'm right about this we are going to see a sharp drop in consumer spending over the next few quarters, with negative consequences.

 

RV’s are supposedly a good measure because strong RV sales indicate a lot of consumer confidence (since it is large outlay for those who tend to buy them and it’s totally discretionary ) as well as easy to obtain credit (most are bought on credit).

 

I think boats are similar and their sales also have weakened recently.

[TwoCitiesCapital]

Ah yes, RVs.  Not sure how I forgot about those.  They are supposedly one of the best recession predictors out there.

 

Consumer spending is a key variable to monitor, as that is what seems to be holding the US economy up at the moment.  I have the suspicion that it got a temporary boost over the last few quarters because those who were paying close attention to what Trump was up to (including me) front loaded their spending.  If I'm right about this we are going to see a sharp drop in consumer spending over the next few quarters, with negative consequences.

 

RV’s are supposedly a good measure because strong RV sales indicate a lot of consumer confidence (since it is large outlay for those who tend to buy them and it’s totally discretionary ) as well as easy to obtain credit (most are bought on credit).

 

I think boats are similar and their sales also have weakened recently.

 

It's ok. He ignores all of the indicators to pick on the one that seems.most dubious on the surface...and yet, still agrees with the overall narrative

[SHDL]

Ah yes, RVs.  Not sure how I forgot about those.  They are supposedly one of the best recession predictors out there.

 

Consumer spending is a key variable to monitor, as that is what seems to be holding the US economy up at the moment.  I have the suspicion that it got a temporary boost over the last few quarters because those who were paying close attention to what Trump was up to (including me) front loaded their spending.  If I'm right about this we are going to see a sharp drop in consumer spending over the next few quarters, with negative consequences.

 

RV’s are supposedly a good measure because strong RV sales indicate a lot of consumer confidence (since it is large outlay for those who tend to buy them and it’s totally discretionary ) as well as easy to obtain credit (most are bought on credit).

 

I think boats are similar and their sales also have weakened recently.

 

It's ok. He ignores all of the indicators to pick on the one that seems.most dubious on the surface...and yet, still agrees with the overall narrative

 

To be clear I wasn’t picking on you.  I apologize if I came across that way.

 

I’m fully aware of the supporting data.  I just find it funny for whatever reason.  :)

[RuleNumberOne]

I don't watch or read anything on politics, but i presume some demagogues must have done some attacking to get ahead in their careers. Drug companies are at historically low valuations. Same goes for banks and oil companies. That can only mean the Dem primaries are going on.

 

This adds to the negative wealth effect.

[Gregmal]

I always come back to the same things, kind of touched on above. Much of the market is already pricing in scenarios much more severe than just a run of the mill recession. Its not like autos, housing, energy, banking, etc, etc are trading at 52 week highs and 25x PEs...I mean look at what we just saw with some housing stocks. I recall about 9-12 months ago chatting here with some about companies like NVR, and LGIH...how they were priced for death and if death didn't occur it was impossible not to see massive rallies here. And NVR is up like 70% and LGIH basically doubled and guess what? They're still trading at pretty modest valuations...Nothing says the same isn't possible for many in the above mentioned sectors. Is it really all the farfetched to see BAC at $40+ or WFC at $65 next year?

 

But further contradictory, if indeed all believe the slowdown is here, why does nearly everyone on this board own BRK which has a massive composition of cyclical businesses? What cuz Warrens got $120B of cash? At 90 some odd years old, you're essentially making a bet that a recession and massive plunge will occur in such rapid order that a guy statistically on his deathbed not only has the time to deploy all that capital, but to see the investments through... I don't know about that. I think all would be well suited to step back off the ledge.

[Ahab]

Well said Gregmal. You can get large cap US banks at a sub-10 PE with 15% projected returns of capital over the next year. You can get automakers such as General Motors and Fiat-Chrysler at sub 6 PE's. The former has a world class autonomous driving unit. The latter is quietly pursing merger opportunities. Sure the aforementioned stocks could go down much further in a recession. However, if investors are spooking themselves right now, valuations are cheap in many of these out of favor sectors. The contrarian in me says we don't have a recession with everyone screaming about a recession and pretending like they understand the yield curve..

 

[SHDL]

I think you’re right that a lot of cyclical things are trading at depressed multiples now, which is an indication that at least some recession risk is already priced in.  But at the same time the major indexes are trading at high-ish multiples on earnings that appear quite elevated relative to things like GDP.  So it’s a curious situation.  If I were to guess, the active investors are making certain things cheaper than others while at the same time passive investors are preventing the index itself from meaningfully selling off. 

 

My personal strategy at the moment is to deal with the recession risk by reducing my total equity exposure and buying some long dated puts, and then not worry too much about cycles when picking my longs.  That may or may not be optimal but I think it’s reasonably close.  BRK makes sense to me as a long now because it’s cheap, the assets are solid (even though some are certainly cyclical), the capital structure is great, and I have basic confidence in the management. 

[Gregmal]

Cheap money and lack of quality assets is a recipe for....significantly greater appreciation and duration of "cycles" than anyone can predict. Look at the Canadian housing market, specifically in areas like BC where Asians with unlimited wealth keep on rocking and rolling. Even Buffett has said something along the lines of, if the rate on the 30 year remains 2%, stocks are very undervalued. Its supply and demand. There really arent THAT many quality asset options out there and money printing has just allowed the people with assets to need to place more of it somewhere.

 

Another thing I'd point out that is truly amazing to me is the unemployment rate. We're at 4% and considered full employment, EVEN WITH Amazon destroying retail, 90% of mom and pop businesses 6 feet under, outsourcing abundant, and automation gearing up as well. I would have expected things to be much worse.

 

[SHDL]

There really arent THAT many quality asset options out there and money printing has just allowed the people with assets to need to place more of it somewhere.

 

This is actually something I wonder a bit about.  My current thinking is that this is more likely to be a temporary situation than not, the reason being that normally when you have a shortage of something but a lot of demand for it, yes its price can go up like crazy at first but then over time the high price attracts new supply and that brings the price back down to earth.  I don’t see why something similar cannot happen to things like, say, quality businesses via increased/improved entrepreneurship over time.  That being said, it may take quite a long time for this type of “cycle” to fully play out.

[Cigarbutt]

Ah yes, RVs.  Not sure how I forgot about those.  They are supposedly one of the best recession predictors out there.

 

Consumer spending is a key variable to monitor, as that is what seems to be holding the US economy up at the moment.  I have the suspicion that it got a temporary boost over the last few quarters because those who were paying close attention to what Trump was up to (including me) front loaded their spending.  If I'm right about this we are going to see a sharp drop in consumer spending over the next few quarters, with negative consequences.

 

RV’s are supposedly a good measure because strong RV sales indicate a lot of consumer confidence (since it is large outlay for those who tend to buy them and it’s totally discretionary ) as well as easy to obtain credit (most are bought on credit).

 

I think boats are similar and their sales also have weakened recently.

 

It's ok. He ignores all of the indicators to pick on the one that seems.most dubious on the surface...and yet, still agrees with the overall narrative

I wonder if people are looking at the same thing but using a different lens.

Simply looking at one idiosyncratic indicator and concluding that a recession is coming is unlikely to be a valid or useful conclusion. Also, even if one 'sees' slowing conditions, it probably has very little to do with economic conditions down the road.

However, within the evaluation of a specific company, I would say that there are many 'indicators' that may have some usefulness in order to understand industry dynamics and the cyclicality aspect of the industry as well as helping form an opinion about potential outcomes and downside risks.

We met a couple a few weeks ago and the description revolving around their RV acquisition was extremely instructive in terms of defining our present investing environment.

Since our investing environment has been largely defined by the Federal Reserve, one may want to use a tool that M. Alan Greenspan promoted as a maestro: the male underwear index. Anecdotally, online sales of male underwear has been relatively disappointing in 2019, so watch out.

[meiroy]

https://www.bloomberg.com/opinion/articles/2019-09-01/fed-rate-cut-won-t-give-trump-an-edge-in-trade-war-with-china?srnd=opinion&utm_source=twitter&utm_medium=social&cmpid%3D=socialflow-twitter-view&utm_content=view&utm_campaign=socialflow-organic

 

How Trump Can Win the Trade War

[SHDL]

There really arent THAT many quality asset options out there and money printing has just allowed the people with assets to need to place more of it somewhere.

 

This is actually something I wonder a bit about.  My current thinking is that this is more likely to be a temporary situation than not, the reason being that normally when you have a shortage of something but a lot of demand for it, yes its price can go up like crazy at first but then over time the high price attracts new supply and that brings the price back down to earth.  I don’t see why something similar cannot happen to things like, say, quality businesses via increased/improved entrepreneurship over time.  That being said, it may take quite a long time for this type of “cycle” to fully play out.

 

Today’s Bloomberg Odd Lots podcast was pretty interesting:

 

https://www.bloomberg.com/news/articles/2019-09-02/why-one-of-the-oldest-investing-strategies-has-been-doing-terribly?srnd=premium

 

The guest (Chris Meredith, Co-CIO of O'Shaughnessy Asset Management) talks about some similarities he sees in the business/investment environment today and the 1920s.  In each era, he notes, seemingly expensive growth stocks hugely outperformed other stocks, and not because there was a stupid bubble but because the growth companies (GM, Sears, etc in the 1920s; FANGs and co. today) actually lived up to the market’s lofty expectations.  He then notes that value investing started to make a comeback sometime around 1940-50 as other businesses gradually caught up with those industry leaders in terms of technology, and that we may be heading in that direction today.

 

I think this somewhat relates to what was discussed above re: how the lofty valuations of great companies — even if they are fully justified — can gradually deflate over time as the supply of such companies increases through things like imitation, technology diffusion, and the invention of better alternatives by new entrants.

[DooDiligence]

https://www.bloomberg.com/opinion/articles/2019-09-01/fed-rate-cut-won-t-give-trump-an-edge-in-trade-war-with-china?srnd=opinion&utm_source=twitter&utm_medium=social&cmpid%3D=socialflow-twitter-view&utm_content=view&utm_campaign=socialflow-organic

 

How Trump Can Win the Trade War

 

Agree 1000% but the Cheeto in chief is too stupid to see something as elegant as this.

 

It also wouldn't be anything his base would understand, thus it wouldn't give him any buttons to push with them.

 

He's a button pusher.

[Gregmal]

There really arent THAT many quality asset options out there and money printing has just allowed the people with assets to need to place more of it somewhere.

 

This is actually something I wonder a bit about.  My current thinking is that this is more likely to be a temporary situation than not, the reason being that normally when you have a shortage of something but a lot of demand for it, yes its price can go up like crazy at first but then over time the high price attracts new supply and that brings the price back down to earth.  I don’t see why something similar cannot happen to things like, say, quality businesses via increased/improved entrepreneurship over time.  That being said, it may take quite a long time for this type of “cycle” to fully play out.

 

Today’s Bloomberg Odd Lots podcast was pretty interesting:

 

https://www.bloomberg.com/news/articles/2019-09-02/why-one-of-the-oldest-investing-strategies-has-been-doing-terribly?srnd=premium

 

The guest (Chris Meredith, Co-CIO of O'Shaughnessy Asset Management) talks about some similarities he sees in the business/investment environment today and the 1920s.  In each era, he notes, seemingly expensive growth stocks hugely outperformed other stocks, and not because there was a stupid bubble but because the growth companies (GM, Sears, etc in the 1920s; FANGs and co. today) actually lived up to the market’s lofty expectations.  He then notes that value investing started to make a comeback sometime around 1940-50 as other businesses gradually caught up with those industry leaders in terms of technology, and that we may be heading in that direction today.

 

I think this somewhat relates to what was discussed above re: how the lofty valuations of great companies — even if they are fully justified — can gradually deflate over time as the supply of such companies increases through things like imitation, technology diffusion, and the invention of better alternatives by new entrants.

 

Yea, I kind of see some parallels and I think regulation could ultimately be what causes the valuations to readjust. But on the other side, GOOG, AAPL, FB, etc I don't see as outrageously expensive. The Saas stuff is ridiculous. Much of biotech is hugely at odds with what is implied by big Pharma valuations. There s a lot of stuff all around that doesn't make a ton of sense in relation to other stuff.

 

But one area where I think it is harder to overcome this is because of the massive increase in wealth inequality(in other words, control of the resources) it's harder for ... "normally when you have a shortage of something but a lot of demand for it, yes its price can go up like crazy at first but then over time the high price attracts new supply and that brings the price back down to earth"... to occur. Yes the roaring 20's saw similar wealth gaps, but todays environment I think makes it difficult for competition beyond a certain level. To the extent we have some of the big tech monopolies, that at the same time have tentacles stretching into many other business areas, I see that stifling the success of new entrants. Unless you're a Silicon Valley type which most of us are not.

 

That said, I have and continue to see plenty of areas to make money for the normal investor. I am hardly a macro guy, and frankly wouldn't consider myself smart enough to justify spending time in that arena either. Ive seen so many people who clearly are intelligent enough to play there, still be so friggin hilariously wrong with their macro reads and predictions, that it makes me question why anyone bothers when they can just spend time studying the over 10,000 publicly available individual companies and make easy money that way. And by easy money I dont mean get rich quick, but kind of just being a singles and doubles hitter with a .400 OBP vs being Kyle Bass or John Paulson and hitting .150 with a few grand slams...

[SHDL]

Yes I mostly agree.  There are a few people like Buffett and Shiller who I think have been rather successful at reading macro trends, but it is interesting how their behavior contrasts with a lot of the big macro trader types you see on TV and elsewhere.  Buffett has been quite emphatic about how the really big money is made by nailing the business prospects of individual companies rather than predicting macro events, and Shiller is on record saying that the problem with macro forecasting is that it is hard to make a career out of it because there are normally only a handful of opportunities to do it well in your entire life.  I think both are on point.

[Gregmal]

I also think being a macro guy is poisonous because your beliefs at the top trickle down and influence your ability to analyze at the bottom. If Im a guy looking bottom up, I do my analysis and have the various scenario skews and then assess probability and risk/reward. But Ive noticed that most macro guys can't do the same. Instead, they'll take their macro views, and then taint the fundamental analysis of individual companies, with those macro conclusions. The danger is, when you're wrong on macro, then that will likely translate to you being wrong on everything else. Again, look at Paulson, Einhorn, Bass, etc. These guys arent just wrong, they can't even hit the broad side of a barn and their returns arent just bad, they're f**** terrible. Whereas with individual investment companies, I can get the company analysis right and not even care about macro, and still make money.

[Ahab]

Well said. I think a cardinal myopia of institutional investors is thinking that their intelligence translates to success in predicting the behavior of complex systems.

Predicting the fate of individual companies is hard, but at least you can handicap the "pitch". Predicting the future of the global economy and correctly analyzing the resulting impact on securities prices requires you to be an utter savant with a Midas touch. Even Keynes was a bad macro investor.

[SHDL]

Yeah, top-down approaches tend not to work very well from what I’ve observed.  I get the strong impression that a lot of big pension funds operate with that kind of mindset too, with dismal results.  It is also interesting that Druckenmiller, who is probably the most successful macro trader of all time, doesn’t go around broadcasting his trades all the time and sounds like he actually changes his mind about things quite frequently.

[Cigarbutt]

https://www.bloomberg.com/opinion/articles/2019-09-01/fed-rate-cut-won-t-give-trump-an-edge-in-trade-war-with-china?srnd=opinion&utm_source=twitter&utm_medium=social&cmpid%3D=socialflow-twitter-view&utm_content=view&utm_campaign=socialflow-organic

 

How Trump Can Win the Trade War

Maybe that stuff is irrelevant for stock picking but it's entertaining and the article is refreshing when compared to the intellectual consensus (entrenchment?) coming out of Jackson Hole last August: The World needs a lower USD and lower US-based risk-free rates.

Mr. Mark Carney's speech was interesting.

https://www.bankofengland.co.uk/-/media/boe/files/speech/2019/the-growing-challenges-for-monetary-policy-speech-by-mark-carney.pdf?la=en&hash=01A18270247C456901D4043F59D4B79F09B6BFBC

He basically questioned the consequences of the disproportionate dominance of the USD in global markets and is suggesting (not a tax) an alternative based on fiat currencies. It seems like these guys have realized that the Bretton-Woods framework has lived and will take the next steps in stride.

 

Applying the content of the article would likely result in a rapid reconciliation of the achieved-future-consumption-brought-to-the-present imbalance but i wonder if the author did a good job describing possible ramifications. Maybe those will be covered in a follow-up note.

"Taxing incoming Chinese (and other foreign) investment. U.S. Senators Tammy Baldwin and Josh Hawley in late July submitted a bill that would allow the Fed to impose a flexible tax on capital inflows. This measure would make it less attractive to park money in U.S. assets, thereby shrinking the capital account imbalance, and by extension, the trade deficit."

I've been looking to buy a spot in the southern US. I guess i will have to look for alternatives.

Mr. Josh Hawley (interesting protectionist name) seems to intermittently exhibit distorted logic. He is pushing for radical protectionist policies on the trade front but seems to be unusually globalist when he simultaneously pushes for 1-importation of public price control policies used elsewhere to cap drug pricing and 2-drug reference pricing policies based on prices of medications in foreign countries.

This is turning into a swampy post and perhaps the US should tax all inputs originating outside its borders.

[Spekulatius]

I also think being a macro guy is poisonous because your beliefs at the top trickle down and influence your ability to analyze at the bottom. If Im a guy looking bottom up, I do my analysis and have the various scenario skews and then assess probability and risk/reward. But Ive noticed that most macro guys can't do the same. Instead, they'll take their macro views, and then taint the fundamental analysis of individual companies, with those macro conclusions. The danger is, when you're wrong on macro, then that will likely translate to you being wrong on everything else. Again, look at Paulson, Einhorn, Bass, etc. These guys arent just wrong, they can't even hit the broad side of a barn and their returns arent just bad, they're f**** terrible. Whereas with individual investment companies, I can get the company analysis right and not even care about macro, and still make money.

 

Referring to your earlier post, have you ever seen a recession that was priced in?

 

I agree that top down doesn’t work. Analysis of individual companies prospects is where the  money is made, but at the same time, the prospects are dependent on the macro environment to some extend. Or one can take the Howard Mark point of view and just try to assess broadly where we are in the macro cycle and go from here. Most would agree that we are more likely late in the cycle rather than early.

 

My own thinking is that there are a lot of political risk too, our current administration, as well as the election in 2020 represent a risk of a substantial paradigm shift with unclear, but most likely adverse impact on the market. Then we have Iran, Brexit and a host of other things like trade wars and crummy start ups to worry about. It isn’t clear to me they any of this is priced in the market they is just 3% of its high and at a historical high valuation.

 

Average valuation is a skewed number as there are certainly quite a few of stocks with low valuations around. but then again, if the broad indices are selling off, it seems to me that this means that at least for mid and large caps, pretty much everything will sell of, perhaps simply because Indic selling is indiscriminate. So my point is that this is a time to be more opportunistic than bullish and simply wait until Mr Market gets one of its fits again and presents great opportunities like in late 2018. I am inclined to believe, that those opportunities I’ll very likely represent themselves, perhaps in the near term future.

[Gregmal]

Priced in? It depends, like I said, housing a year ago was definitely priced in, and then it didn't happen and some things utterly exploded. But then there's the issue of "what if there actually is a recession?" and I think that comes down to valuation, and where things are in the cycle. There are two cycles. The economic one, and then the market cycle for any individual or group of equities. We may be in inning 7 or 8, sure. I agree if we are talking about economic expansion. But some equities have been well ahead of that or even permanently penalized because of past events. So I think there are a lot of companies, BAC, WFC, GM, etc's of the world, that arent terribly far off in terms of valuation, from where their cyclical bottom may be.

 

Im probably in the camp of Marks philosophically. Where are we generally speaking is quite easy to assess rather then "when exactly" it will all start/end.

 

Political risk though I 100% agree with. Donny losing his mind a little more could be bad, Certain Lefties getting in next year could be catastrophic, so one needs to stay nimble. But if things don't go haywire, and we just get a regular old run of the mil recession, I dont see much to be scared of investing in certain names. Are 20-30% pullbacks possible? Sure. Is that a big deal if your are ready for it? Not in my book. The part that is really exciting? If lets say BAC has 30% downside until the next bottom, and Im there with bags of cash to throw at it, how big a position can I get, and how much upside then do I have going forward if now we're talking about being in the 1st or 2nd inning of a new cycle and these once hated companies are now proven, durable, and market leaders?

[John Hjorth]

... But further contradictory, if indeed all believe the slowdown is here, why does nearly everyone on this board own BRK which has a massive composition of cyclical businesses? What cuz Warrens got $120B of cash? At 90 some odd years old, you're essentially making a bet that a recession and massive plunge will occur in such rapid order that a guy statistically on his deathbed not only has the time to deploy all that capital, but to see the investments through... I don't know about that. I think all would be well suited to step back off the ledge.

 

Greg,

 

To me, you've got this wrong. Why do you think that Mr. Jain & Mr. Abel are paid by Berkshire USD 18 M each annually [as far as we know, so far]? I mean : USD 18 M each for "delegation, bordering to abdication" [ref. Mr. Munger]? To me, it simply does not work that way anymore at Berkshire [and hasn't for a long time]. Yes, cyclicals are cyclicals, but then cyclicals aren't really all alike. I mean, there are stand-one-cyclicals, and then there are cyclicals-under-an-umbrella [, perhaps under the Berkshire-umbrella], and their operating conditions with regard to access to capital during a full cycle aren't nowhere near similar.

[Gregmal]

... But further contradictory, if indeed all believe the slowdown is here, why does nearly everyone on this board own BRK which has a massive composition of cyclical businesses? What cuz Warrens got $120B of cash? At 90 some odd years old, you're essentially making a bet that a recession and massive plunge will occur in such rapid order that a guy statistically on his deathbed not only has the time to deploy all that capital, but to see the investments through... I don't know about that. I think all would be well suited to step back off the ledge.

 

Greg,

 

To me, you've got this wrong. Why do you think that Mr. Jain & Mr. Abel are paid by Berkshire USD 18 M each annually [as far as we know, so far]? I mean : USD 18 M each for "delegation, bordering to abdication" [ref. Mr. Munger]? To me, it simply does not work that way anymore at Berkshire [and hasn't for a long time]. Yes, cyclicals are cyclicals, but then cyclicals aren't really all alike. I mean, there are stand-one-cyclicals, and then there are cyclicals-under-an-umbrella [, perhaps under the Berkshire-umbrella], and their operating conditions with regard to access to capital during a full cycle aren't nowhere near similar.

 

Indeed I'll admit there is some hyperbole there to make my point. Everyone is terrified but they still find it OK to buy BRK...why? I think because they(hopefully) understand the business well enough to be comfortable owning it in a drawdown, and have seen how that story plays out before. BRK isn't the only security that's ownable, and I think a lot of the dilemma for most is a combination of fear and just not knowing enough to own a business without certainty.

 

I remember when I first started out, reading a book, I think it may have been Minding Mr. Market or something like that, where the example Im shooting for came up. Essentially stating that investors often leave much by the way of returns, on the table because they rather be sure before doing anything. And that there is a very inverse relationship between certain types of certainty, and the types of returns one achieves. Another example of this is Cornwall Capitals play of Capital One during the subprime crisis in (I think) 2003 or so. Todays scenario is no where near as uncertain, but I constantly run into people who act that way which baffles me.

 

Ive definitely seen reason to get more cautious the past year or so, and definitely want to be weary over the next 18 months. But "global growth" and "recession" fears to me have been for a long time, and continue to be poor reasons to earn 0-2% annually on your money...

 

But yes John, in regards to your specific point, I think Berkshire is A-OK with Jain and Abel and if anything, am of the personal opinion that they will do better AFTER Mr. Buffett passes the torch.

[Cigarbutt]

Cheap money and lack of quality assets is a recipe for....significantly greater appreciation and duration of "cycles" than anyone can predict. Look at the Canadian housing market, specifically in areas like BC where Asians with unlimited wealth keep on rocking and rolling. Even Buffett has said something along the lines of, if the rate on the 30 year remains 2%, stocks are very undervalued. Its supply and demand. There really arent THAT many quality asset options out there and money printing has just allowed the people with assets to need to place more of it somewhere.

Underlying assumptions need to be questioned here. It is assumed that reversion to the mean will be inconsequential going forward, which is a possibility. Even under a steady state scenario (demand-supply of 'safe' assets and money chasing those assets), it's hard to see "significantly greater appreciation". The statement, as stated, would imply increasing 'money printing' going forward.

 

I've been looking at public pensions' asset-liability growing mismatch and, so far, haven't been able to spot an area to make money. An interesting feature in the last 20 years is that pension fund investment managers have increased the allocation to 'safe assets' and, despite adjustments in contributions and expected benefits, the funding ratios have been deteriorating. The math doesn't seem to be working anymore.

[DooDiligence]

https://www.bloomberg.com/opinion/articles/2019-09-01/fed-rate-cut-won-t-give-trump-an-edge-in-trade-war-with-china?srnd=opinion&utm_source=twitter&utm_medium=social&cmpid%3D=socialflow-twitter-view&utm_content=view&utm_campaign=socialflow-organic

 

How Trump Can Win the Trade War

Maybe that stuff is irrelevant for stock picking but it's entertaining and the article is refreshing when compared to the intellectual consensus (entrenchment?) coming out of Jackson Hole last August: The World needs a lower USD and lower US-based risk-free rates.

Mr. Mark Carney's speech was interesting.

https://www.bankofengland.co.uk/-/media/boe/files/speech/2019/the-growing-challenges-for-monetary-policy-speech-by-mark-carney.pdf?la=en&hash=01A18270247C456901D4043F59D4B79F09B6BFBC

He basically questioned the consequences of the disproportionate dominance of the USD in global markets and is suggesting (not a tax) an alternative based on fiat currencies. It seems like these guys have realized that the Bretton-Woods framework has lived and will take the next steps in stride.

 

Applying the content of the article would likely result in a rapid reconciliation of the achieved-future-consumption-brought-to-the-present imbalance but i wonder if the author did a good job describing possible ramifications. Maybe those will be covered in a follow-up note.

"Taxing incoming Chinese (and other foreign) investment. U.S. Senators Tammy Baldwin and Josh Hawley in late July submitted a bill that would allow the Fed to impose a flexible tax on capital inflows. This measure would make it less attractive to park money in U.S. assets, thereby shrinking the capital account imbalance, and by extension, the trade deficit."

I've been looking to buy a spot in the southern US. I guess i will have to look for alternatives.

Mr. Josh Hawley (interesting protectionist name) seems to intermittently exhibit distorted logic. He is pushing for radical protectionist policies on the trade front but seems to be unusually globalist when he simultaneously pushes for 1-importation of public price control policies used elsewhere to cap drug pricing and 2-drug reference pricing policies based on prices of medications in foreign countries.

This is turning into a swampy post and perhaps the US should tax all inputs originating outside its borders.

 

Maybe they'll make an exception for our good natured northern brothers?

 

;)

 

----

 

Not really related but while looking to see if Trumpty had ever threatened a

wall between us, I found this from the BS Journal ( a little bit Onion'y  ;D )

 

https://www.burrardstreetjournal.com/trump-demands-canadian-border-wall-after-learning-mexico-not-only-country-adjacent-to-u-s/