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"Macro" Musings


giofranchi

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"Iceland president: Let banks go bankrupt"

 

Thank you for sharing! The only really interesting video I have seen from Davos so far.

 

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

 

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"Iceland president: Let banks go bankrupt"

 

Thank you for sharing! The only really interesting video I have seen from Davos so far.

 

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

 

Hot from the press

 

http://www.eftacourt.int/images/uploads/16_11_PR_EN.pdf

 

Thus, considering ESA’s self-limitation, the Court was bound to assess whether Iceland was under a specific obligation to ensure that payments were made to Icesave depositors in the Netherlands and the United Kingdom. However, since the Court had already held that the Directive, even read in light of Article 4 EEA, imposes no obligation on the defendant to ensure that payments are made in accordance with the requirements of the Directive to Icesave depositors in the Netherlands and the United Kingdom, it was found that such an obligation of result could only be deemed to exist if it followed directly from Article 4 EEA itself. The Court held that this is not required under the principle of non-discrimination. A specific obligation upon the defendant that would not even establish equal treatment between domestic depositors and those depositors in Landsbanki’s branches in other EEA States could not be derived from that principle. Consequently, the third plea, and the application as a whole was dismissed.

 

 

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Larry Summers. I guess he's not running for anything … and that deserved better questions.

http://new.livestream.com/accounts/1909571/events/1790721

 

Regarding macro musings, and specifically the UK vs Japan macro test: I try to apply a discipline to myself … what you could you see in the next several years that would lead you to think that you were importantly wrong and would cause you to think you should change your mind.

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Are we too bearish?

 

http://www.viewfromtheblueridge.com/category/broyhill-letter/

 

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

 

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Fisher Says Fed Constantly Reassessing Stimulus:

 

http://www.ritholtz.com/blog/2013/01/fisher-says-fed-constantly-reassessing-stimulus/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+TheBigPicture+%28The+Big+Picture%29

 

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

 

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War Games.

 

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

Jan_29_2013_TTMYGH.pdf

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Ineichen Research, 01 February 2013

 

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

RMR_2013_Feb_1.pdf

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The Liscio Report, Janaury 2013: A long-term decline in  start-ups: the culprit?

 

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

TLR_1_31_13.pdf

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"Towards Government Sponsored Bubbles" by Charles Gave

 

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

Daily+2.1.13.pdf

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New Gary Shilling Insight

 

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

insight-0213b.pdf

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Sprott Market Insights February 2013

 

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

SPPP-Market-Insights-February-2013.pdf

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Wells Fargo on student loans

 

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

StudentLoansCEC_02112013.pdf

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Ireland shows the way with its debt deal - FT.com

 

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

Ireland_shows_the_way_with_its_debt_deal_-_FT.com.pdf

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I guess the key question now is HyperInflation/Inflation. My model of macro focuses on debt. Not total debt because I don't think all forms of debt are equal. I divide the balance sheet into: corporate, financial, consumer and government. Each of these 4 actors can be heavily indebted and then there is the question of how they deleverage and what kind of crisis deleveraging can lead to. In my opinion the two worst cases are: hyperinflation which is usually caused by a sovereign debt problem and deflation which is almost always a corporate/financial balance sheet crisis.

 

Corporate + Financial debt crisis - Japanese lost decade and the United States during great depression. This is almost always heavily deflationary and can be made much much worse if there is not lender of last resort and deposit insurance because then you get runs on banks. Deflation occurs because corporations are simultaneously trying to raise cash at the same time. How do they do this - fire workers and blowout sales. This inevitably causes deflation.

 

Sovereign Debt Crisis - worst case here is hyperinflation but this almost never happens and almost always is the result of a political crisis and incredibly dysfunctional governments. Hyperinflation is an extremely rare outcome and is almost always the result of extreme political dysfunction.

 

Consumer Debt Crisis - Most benign. The reason is simple. You can't fire your children or your wife. Generally consumers will keep consuming and will only lower their consumption by the minimum possible amount so that they can keep consuming. The develeraging process here generally leads to low GDP growth for a very long period of time. Inflation is usually low and deflation does not occur. Equity markets move sideways.

 

I think the United States is experiencing a consumer debt crisis + financial debt crisis. The outcome will probably not be hyperinflation because US elites, institutions etc are simply not screwed up enough to ever allow that to happen. Deflation is unlikely because corporate balance sheets are in good shape so they don't have to engage in fire sales and don't have to fire people. My view is that equity markets are going to move sideways for a long long time. That means they will go up and come back down again but not gain significant ground.

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One person I like to read on Macro is Steve Keen. I especially like one idea that he has. Keen is a demand-sider not a supply sider. The driving force in the economy is not supply its effective demand. And a part of effective demand is driven by increases in debt. The way to think of this is that Johnny takes out a loan from the bank and uses it to buy stuff. His increases in debt increase the effective demand for stuff in the economy. Decreases in debt do the reverse. You can think of increases in debt as the rate of change or velocity of debt. In this case the acceleration of debt, the change in the rate of increase in debt is a component of GDP growth.

 

This idea is very interesting. It implies a few things. During the deleveraging process for consumer debt there will be a large change in the velocity of debt. It will go from positive to negative since consumers will go from increasing their debt level to decreasing them. During this time GDP growth may be negative. However once consumers stabilize on the lower level of debt velocity the acceleration of debt will be zero and so GDP growth need not be negative anymore. It can be positive even with consumers deleveraging. HOWEVER, as consumers deleverage a component of GDP growth will be gone. Namely the acceleration of debt component. This is generally what drives a huge economic boom. To summarize:

 

component of GDP = rate of change of debt

component of GDP growth = rate of rate of change of debt or acceleration of debt.

 

http://www.debtdeflation.com/blogs/2012/01/03/the-debtwatch-manifesto/

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The Keynesian Depression

 

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

The-Keynesian-Depression~Guggenheim~12_2012.pdf

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