Archive - Dec 2015

"...the march towards secularism and freedom is not inevitable. In fact, it’s problematic because we have a situation where every year the West becomes more secular, open, tolerant and liberal while many parts of the Muslim world are going the other way. So it would seem that we might be moving towards a head-on collision of some sort... In most Muslim countries the majority of people are tolerant. They want to live in a more inclusive society and have a more liberal religious doctrine. The problem is that Islam seems to have been hijacked by a vocal minority of people who are prepared to use violence to advance their very intolerant and conservative version of Islam."

Europe's Patriot Act has finally taken shape: according to a proposed amendment, the French state-of-emergency police powers, such as to conduct warrantless searches and order house arrests, will be unconditionally shieleded from court challenges.

"Anyone who has studied microeconomics knows... that an income transfer, as opposed to a gift in-kind, gets you to a higher level of utility," but as WSJ reports, putting theory under the tree is another matter. After years of studying the economics of gift-giving, economists have found that some gifts are valued more highly than others, and that some gift-givers seem to be better than others...

U.S. Senator Rand Paul today released a special ‘Festivus: Airing of Grievances for 2015’ edition of ‘The Waste Report,’ - an ongoing project cataloguing egregious examples of waste within the U.S. government.

As SOE profits continue to deteriorate at the expense of maximizing jobs and employment (recall the biggest threat facing China is a working class insurrection, or simply said, "lower and middle-class revolution") debt at these same SOEs just hit a new record high: according to the same FinMin numbers, total SOE debt rose by CNY393 billion to CNY78.3 trillion, or over $12 trillion - well above 100% of total Chinese GDP.

America's equity markets are broken. Individuals and institutions make transactions in rigged markets favoring short-term players. The root cause of the problem is that stocks trade on numerous venues, including 11 traditional exchanges and dozens of so-called dark pools that allow buyers and sellers to work out of the public eye. This market fragmentation allows high-frequency traders and exchanges to profit at the expense of long-term investors. Mr. Lewis was right.

Happy Holidays...

"Oil and gas sector bankruptcies have reached quarterly levels last seen in the Great Recession. At least nine U.S. oil and gas companies, accounting for more than $2 billion in debt, have filed for bankruptcy so far in the fourth quarter."

Dear Santa Claus, I am an activist investor in your company who has been infuriated for many years by your wilfully eccentric approach to capital allocation, pricing, brand strategy and supply chain management. Life at St Nicholas is one long party. Free food for your elves, who receive generous compensation to make bespoke, non-standardised products. Presents offered to anyone who writes you a begging letter and has been “good” according to some vague metric. Jingle bells, rides in one-horse open sleighs, eggnog cocktails: Oh, what fun you have with my money.

Since initially reporting on California's Alison Canyon gas leak, more details have emerged on the scale (and potential for no solution) of the problem... "the enormity of the Aliso Canyon gas leak cannot be overstated. Gas is escaping through a ruptured pipe more than 8,000 feet underground, and it shows no signs of stopping." Methane - a greenhouse gas 72 times more impactful in the atmosphere than carbon dioxide - has been leaking with force equivalent “to a volcanic eruption” for about two months now.

It was just 10 months ago that Boston smashed its all time snowfall record, and the US was blanketed in freezing weather from west to east as the Polar Vortex unleashed cold air for the second year in a row. It was so cold, the GDP report for the winter period had to be double-seasonally adjusted as the sharp economic slowdown simply did not make sense otherwise. Fast forward to today when according to AccuWeather, the east coast is celebrating Christmas with the warmest weather on record.

"The apostate's life and organs don't have to be respected and may be taken with impunity. A group of Islamic scholars have permitted, if necessary, one to kill the apostate in order to eat his flesh."

In American politics the nation of Russia, especially as personified in its leader Vladimir Putin, becomes all things to all men. To American leftists, Russia is a neo-fascist, violently nationalist country that ruthlessly suppressed minority groups, especially homosexuals. To the American Right, Putin is the second coming of Stalin who is working to subvert good old-fashioned American values around the world.

"By now, it’s an all-too-familiar drill. After an extended period of extraordinary monetary accommodation, the US Federal Reserve has begun the long march back to normalization. A majority of financial market participants applaud this strategy. In fact, it is a dangerous mistake."

There’s only one investment we can think of that many people either love or hate reflexively, almost without regard to market performance: gold. And, to a lesser degree, silver. It’s strange that these two metals provoke such powerful psychological reactions - especially among people who dislike them. Nobody has an instinctive hatred of iron, copper, aluminum, or cobalt. The reason, of course, is that the main use of gold has always been as money. And people have strong feelings about money. From an economic viewpoint, however, money is just a medium of exchange and a store of value. Efforts to turn it into a political football invariably are signs of a hidden agenda, or perhaps a psychological aberration. So, let’s take some recent statements, assertions, and opinions that have been promulgated in the media and analyze them.