Archive - Dec 14, 2013

it's not Spago, nor Per Se. It isn't located on Rodeo Drive or in Columbus Circle. The restaurant with the longest waiting list, five-years to be precise, is a small, nondescript, 12-table basement located in Earlton, N.Y., named simply enough Damon Baehrel after its owner and chef. Its guests come from 48 countries and include such celebrities as Jerry Seinfeld, Martha Stewart and Barack Obama himself. However what makes Baehrel's restaurant the most exclusive restaurant in the world is not the decor, nor the patrons, some who fly overnight from Manhattan to pay $255 for dinner (before wine and tip), nor the hype (although all the advertising is through word-of-mouth), but the food, which is all cultivated, grown, prepared, cooked and served from and on the property, and where Baehrel is literally the only employee. "I’m the chef, the waiter, the grower, the forager, the gardener, the cheesemaker, the cured-meat maker, and, as I will explain, everything comes from this 12-acre property."

Two years ago, the CME announced USD/CNH futures trading enabling speculation (and hedging or risk transfer) of offshore Chinese Renminbi and the writing on the wall of the dollar's demise grew clearer. On the other side of the world this week, a couple of gentlemen that few people have ever heard of signed an agreement that has massive consequences for the global financial system. It was a Memorandum of Understanding signed by representatives of the Singapore Exchange and Hong Kong Exchange. Their aim – to combine their forces in rolling out more financial products denominated in Chinese renminbi. This is huge...

In 2008, the aftermath of the Subprime Mortgage Crisis created the perfect storm for the emergence of Bitcoin. Here is the definitive history of the famous crypto-currency. From the pseudonymous "Satoshi Nakamoto"'s founding to the innovation of block chains to the "genesis block", buying pizzas, Sandiches, Teslas, and now houses... Bitcoin has come a long way (and where it goes is anyone's guess)...

One would think that value investors from outside the industry would be all over this vacuum.

China’s economy is straining to keep up a semblance of its former growth rate. The surest sign is the way a shadow market in bank paper has evolved to substitute the commodity that China is increasingly running short of: cash. Bankers are passing around their own ersatz currency, stimulating trade with what, in effect, are off-the-books loans. As in the wildcat currency era of the United States, the antebellum period before America had a national currency, this paper trades at a discount from province to province. It is increasingly used for speculative purposes, is potentially inflationary, and is hard to regulate. The People’s Bank of China (PBOC) has been unable or unwilling to crack down, lest it provoke a serious slowdown. But when the world’s second largest economy must resort to passing around IOUs, the financial community should take note.

Two phrases sum up the 'new normal' farce that is the world's equity markets in 2013... "Don't fight the Fed (or BoJ, or PBoC, or BoE)" and "Climbing the wall of worry"... one wonders, of course, what happens to 'climber' once the central bank's 'belay' is taken away (but that's just silly talk because it's all priced in, right?)...

Healthcare.gov may or may not be fixed, depending on who one listens to (and if one reads the WSJ's, "Errors Continue to Plague Government Health Site" this morning, there is much more fixing left despite the administration's most sincere promises), but a greater issue is already looming: payment. "We have a bigger number of applicants than people who have paid," Aetna Chief Financial Officer Shawn Guertin said in an interview today in New York. "That’s a situation that I am a little bit worried about, that people will think they have completed the process but haven’t paid the premium yet." Whether Americans didn't realize there would be an actual payment involved in America's socialized healthcare system, or simply there is too much confusion over how the process is run, is irrelevant - the bottom line is that for whatever reason people are simply not paying their premiums.

The key level on the $VIX to watch is at 14.64.

There are multiple signs of a top forming. And even stock bulls are sitting on cash. What's next?

• BAD TRADE #1 For 2014: Ignoring Mean Reversion
• BAD TRADE #2 For 2014: Which-flation?
• BAD TRADE #3 For 2014: Forgetting Late Cycle Dynamics
• BAD TRADE #4 For 2014: Blind Faith In Policy
• BAD TRADE #5 For 2014: Reaching for Yield During Late Cycle

Come fry with us...

One of the singular best investment strategies is to buy assets/asset classes which are most reviled by investors. Right now, junior gold miners fit the bill.

Hours ago, China's lunar probe Chang'e-3, carrying the nation's first moon rover onboard, successfully landed on the moon, making it the first time China has sent a spacecraft to soft land on the surface of an extraterrestrial body, joining only the US and the former Soviet Union in accomplishing such a feat. Chang'e-3 is the world's first soft-landing of a probe on the moon in nearly four decades. The last such soft-landing was carried out by the Soviet Union in 1976. As Reuters reports, the Chang'e 3, a probe named after a lunar goddess in traditional Chinese mythology, is carrying the solar-powered Yutu, or Jade Rabbit buggy, which will dig and conduct geological surveys. China has been increasingly ambitious in developing its space programs, for military, commercial and scientific purposes. This is a teaser to China's next space ambition - building its own space station. In its most recent manned space mission in June, three astronauts spent 15 days in orbit and docked with an experimental space laboratory, part of Beijing's quest to build a working space station by 2020.

2013 was a year when Europe tried to reallign its primary source of natgas energy, from Gazpromia to Qatar, and failed. More importantly, it was a year in which Russia's Vladimir Putin undisputedly won every foreign relations conflict that involved Russian national interests, to the sheer humiliation of both John Kerry and Francois Hollande. However, it seems the former KGB spy had a Plan B in case things escalated out of control, one that fits with what we wrote a few days ago when we reported that "Russia casually announces it will use nukes if attacked." Namely, as Bloomberg reports citing Bild, Russia quietly stationed a double-digit number of SS-26 Stone, aka Iskander, tactical, nuclear-capable short-range missiles near the Polish border in a dramatic escalation to merely verbal threats issued as recently as a year ago.

All things considered it has been quite a nice year for Nick Saban with two salary raises in one calendar year without even winning the SEC.