Archive - Mar 8, 2014 - Story

With 40% of the portfolio in cash and having returned $4 billion to clients at year-end, Seth Klarman's Baupost Group has "drawn the line in the sand" as they reflect on the diminished opportunities in the so-called "Truman Show" market we see today. In the face of mixed economic data and at a critical inflection point in Federal Reserve policy, Klarman notes, the stock market, heading into 2014, resembles a Rorschach test - "what investors see in the inkblots says considerably more about them than it does about the market." From "born bulls" to "worry genes" and from Bitcoin to flash-mob-speculation, "there is a growing gap between the financial markets and the real economy...and the overall picture is one of growing risk and inadequate potential return almost everywhere one looks... as every 'Truman' under Bernanke’s dome knows the environment is phony."

On Thursday a senior Indian official appeared to endorse Russia’s position in Ukraine in recent days, even as Delhi urged all parties involved to seek a peaceful resolution to the diplomatic crisis. When asked for India’s official assessment of the events in Ukraine, National Security Adviser Shivshankar Menon responded: “We hope that whatever internal issues there are within Ukraine are settled peacefully, and the broader issues of reconciling various interests involved, and there are legitimate Russian and other interests involved…. We hope those are discussed, negotiated and that there is a satisfactory resolution to them." Local Indian media noted that Menon’s statement about Russia’s legitimate interests in Ukraine made it the first major nation to publicly lean toward Russia. The larger question, of course, is why India decided to take such a relatively pro-Russian stance on the Ukraine issue? There are a number of possibilities...

Everyone agrees that the winter just now winding down (hopefully) has been brutal for most Americans. And while it's easy to conclude that the Polar Vortex has been responsible for an excess of school shutdowns and ice related traffic snarls, it's much harder to conclude that it's responsible for the economic vortex that appears to have swallowed the American economy over the past three months. But this hasn't stopped economists, Fed officials, and media analysts from making this unequivocal assertion. In reality the weather is not what's ailing us. It's just the latest straw being grasped at by those who believe that the phony recovery engineered by the Fed is real and lasting. The April thaw is not far off. Unfortunately the economy is likely to stay frozen for some time to come. 

Presented with little comment aside to note that when 'work is punished' the demise of 'opportunity' will continue...

If there is a new cold war with Russia, many observers believe the U.S. is losing it. First under President George W. Bush and now under President Obama, the U.S. and Vladimir Putin’s Russia have engaged in a series of foreign policy battles — and Putin has repeatedly got his way. The Russian president’s objective is clear. He wants to reassert Russia’s influence in Eastern Europe while preventing NATO’s further expansion toward Russia. Lawmakers and experts across the political sphere warn that if the Obama administration and its western allies are not effective in dealing with Putin this time, it could have serious consequences going forward. And the dangers go beyond Putin.

1-800-TaylorMade or 1-900-Vladimir? You decide...

For the past few weeks we have seen stock markets surge as macro-economic data has collapsed around the world. The 'excuse' given for this apparent dichotomy - weather. But now it seems "weather" is to blame for other problems in the world too. As Russia Today reports, in its latest Quadrennial Defense Review, the US Department of Defense (DoD), stressed threats to global stability and American hegemony posed by climate change warning that that an erratic climate will likely cause increased “terrorist activity,” among other impacts..."The pressures caused by climate change will influence resource competition while placing additional burdens on economies, societies, and governance institutions around the world...these effects are threat multipliers."

The promise that each generation will be better off than the last is a fundamental tenet of modern society. By and large, most advanced economies have fulfilled this promise, with living standards rising over recent generations, despite setbacks from wars and financial crises. So far, every prediction in the modern era that mankind's lot will worsen, from Thomas Malthus to Karl Marx, has turned out to be spectacularly wrong. Technological progress has trumped obstacles to economic growth. Periodic political rebalancing, sometimes peaceful, sometimes not, has ensured most people have benefited, albeit some far more than others. But past growth performance is no guarantee that a broadly similar trajectory can be maintained throughout this century.

Did somebody say de-escalation?

When one studies history, all events seem to revolve around the applications and degenerations of war. Great feats of human understanding, realization and enlightenment barely register in the mental footnotes of the average person. War is what we remember, idealize and aggrandize, which is why war is the tool most often exploited by oligarchy to distract the masses while it centralizes power. With the exception of a few revolutions, most wars are instigated and controlled by financial elites, manipulating governments on both sides of the game to produce a preconceived result. Every major international crisis for the past century or more has ended with an even greater consolidation of world power into the hands of the few, and this is no accident.

According to Goldman, the median company’s EV/sales ratio is now the highest in 35 years, surpassing even the dot com bubble.

The dismal news overnight that a Malaysian Airlines jet, carrying over 200 passengers and crew, had "gone missing" appears to have become considerably more troublesome. News this morning of pools of oil off the Vietnam coast - suggestive of a crash - are dreadful but, as NBC News reports, perhaps more crucially, U.S. officials told NBC News on Saturday they are investigating terrorism concerns after two people listed as passengers on the missing Malaysia Airlines jet turned out not to be on the plane and had reported their passports stolen (while in Thailand).

Perhaps it is time to finally admit that anyone who thought Putin's Tuesday press conference, which the market so jubilantly assumed was a case of "blinking" and de-escalating tensions with the west, was wrong. If there is still any confusion, following yesterday's news that Gazprom officially threatened Ukraine with cutting off its gas supplies, as well as the storming of a Ukraine base by Russian troops - luckily with no shots fired so far - then today's developments should any remaining doubts. Moments ago AP reported that as the latest, third in a row, group of OSCE inspectors tried to enter Ukraine, they were not only barred from doing so, but warnings shots were fired to emphasize the point by pro-Russian forces.