melting pot

Meeting with Sven de Causmaecker

2012-02-08T04:45:00.000-08:00

Meeting with Sven de Causmaecker in KL, Malaysia.
He is a graduate in Chemistry from Germany. We chatted about possible breakthrough technologies within the renewable energies world.

He talked about Daniel Nocera, a Massachusetts Institute of Technology professor whose recent research focuses on solar-powered fuels.

2 H2O >> 2H2 + O2

Hydrogen, used as a chemical fuel, has much higher storage capacity than the lithium batteries (there is not enough lithium for widespread transportation usage. H2 has also zero emissions; and the chemical reaction can be reversed with sun power at relatively high levels of efficiency.

There are several interesting videos of this technology in youtube. I would highlight his lecture in the Brookhaven Science Associates titled "Harnessing Energy from the Sun for Six Billion People -- One at a Time."

Oil is a very efficient form to store energy because its chemical union has little mass: Carbon - electron - Carbon, while for Lithium, the lightest metal, the density of energy that you can store is much lower. The nuclei are very light in atomic weight. But it is less common than 25 of the 32 chemical elements.

Uranium: 20 Terajoules/kg

Hidrogen condensed at 700 bar): 123 MJ/kg

Gasoline & Diesel: 47.2 & 45.4 MJ/kg

Fats / Carboydrates / Proteins: 37 / 17 / 16.8

Lithium air battery: 9

Lthium battery: 1.3

Lithium-ion battery: 720 kJ/kg.

Sven also mentioned cyano-biofuels, a small biotech firm based in Berlin, born from the university entrepreneurial lab of the German university of xxx, doing research on cyanobacteria and how to obtain cheap ethanol from algae and CO2.

We also talked about other technologies other than sun, which are clearly insufficient to meet the energy demands of the global population for the next decades.

[Current population: 7bn people. Energy consumption: 14TW.

Exp. population in 2050: 9bn people. Exp. energy demand in 2050: from 30 to 50TW]

Wind (farms) could yield up to 3TW of energy, which falls much short of demand growth. Onshore wind is the cheapest of the renewable energies. It is already pretty developed, with most of the best areas in many countries already exploited. Furthermore, aesthetic considerations will probably curb future development (as WT are growing bigger and taller, and therefore they can be seen from larger distances.

Fernan, working in SG for Gamesa pointed out that for strong winds it is better to have a high density net of smaller WT. While for milder winds it is better to have fewer but bigger WT.

Sven also said that offshore wind farms provoke vibrations that affect the bio-diversity of the area. Although few decision-makers will care about it.
Onshore WT also have collateral damage for the biologic fauna: they kill birds.

Offshore wind farms slightly lowers the load factor in the onshore wind farms. As you harvest the wind in the sea, the load factors inland will be reduced because the total quantity of wind energy generated by the sun is limited.

Peter Gleick is a PhD from UC Berkeley. His area of research is centered around freshwater.

2012-02-08T02:59:00.000-08:00

Participants in the 2012 All-Europe Research Team were asked to rate, on a scale of 1 to 10, the importance they attach to a dozen sell-side equity research attributes. Industry knowledge receives the highest rating, followed by integrity/professionalism; accessibility/responsiveness and local market knowledge/country knowledge tie for third. Earnings estimates is deemed the least important of the attributes.

2012's ranking:
DB 117, BAML 77, UBS 52, MS 49, JPM 54, Citi 30, CS 25, Barcap 17, Stanford C. Bernstein 32, Exane 15, Nomura 10, RBS 4, CA 10, SG 3, Kempen 4, GS 3, Redburn Partners 3, Goodbody 3, Handelsbanken CM 3, MainFirst Bank 3, Rabobank 4, Davy 4, Santander 4, SEB 4, Equita S.I.M. 3.

2011's ranking:
DB 74, UBS 77, BAML 56, CS 49, MS 47, JPM 58, Citi 17, CS 49, Barcap 20, Stanford C. Bernstein 37, Exane 11, Nomura 31, RBS 6, CA 6, SG 5, GS 4, Kempen 2.

Looking back at 2011

2012-01-01T15:38:00.000-08:00

12 month performance chart from the FT macromap:

Looking ahead to 2012 and 2013, I think that equities and equity-like products will benefit from a lower equity risk premium once the European debt crisis stabilizes. Damodaran calculates it on a monthly basis, and according to his calculations -for which I would give full credit- it finished the year at 6.04% (up from 5.2% at the beginning of the year, but down from a max of 7.64% during the market jitters of the summer).

The improvement in the (attractiviness of) valuations has been supported by a good year for corporate america. With earnings up 16% for the year, and cash flows to investors (dividends and buybacks) yielding 5.9% -significantly higher than the 10y UST yield at 1.87%, but also higher than the 10 year average at 4.72%.

Treasuries had indeed a very good year. With returns above 16% for 2011 there is not much more upside potential. Higher economic growth or higher inflation expectations would drag the prices lower, to yields that would be more aligned with historical measures (like those for the end of 2010, above 3%).

This analysis, in combination with the exploration of the supply and demand prospects in some specific markets that have called my attention recently translantes into some more specific trading ideas:

Longs: commodities, materials and (early) cyclical equities. Read previous posts.

I like the PGMs: physical (rather than miners) ownership via ETFs of Palladium, Platinum, Rhodium and Iridium.

I like Uranium miners, and especially juniors like Fission Ur-Energy (although building positions in them can be more expensive due to their low share prices). URA is the most popular ETF in the industry. Apparently it was the worse performer ETF in 2011.

Digging into the fundamentals of the companies, I like some metals and mining companies like BHP, automotive companies like Volkswagen, BMW and Hyundai motor; and Korean exporters like Samsung.

As said before, I would open shorts on AAA Sovereign bonds (US, UK, DE, JP). Yields are so low that they can only go high. And if they go lower ... what? At these levels there is not much room for higher bond prices and therefore losses are fairly limited. On the other hand, the downside potential (for the underlying prices, and therefore to make money) is much greater. Besides, since we are experiencing a collateral crunch, these assets are priced at a premium vs fundamentals. If I would have a bigger portfolio, not only I would not hold them, I would short them.

I am also quite bearish about the wind energy industry.

I think that there is still money to be made shorting Gamesa, Acciona, Vestas, EDPR (in this order).

Eq long/short spreads:

Long companies with no dividends, short companies with high dividends (since it seems that are priced at a premium up and above their supposed smaller risk exposure).

Long Hang Seng (from 2H2012), Strait Times, short Dow Jones

Long MXP, EUR, GBP, short JPY

I also like an assymetric bet in precious metals: short gold and silver and long palladium and platinum -physical rather than equities.

Commodities III - Chemicals

2011-12-31T10:32:00.000-08:00

Natural gas prices are set to remain low due to the boom in shale gas extraction and the subdued economic growth (US Gov should start to tighten 1+% of GDP p.a. of its deficit after the elections. That could have an impact of up to 2% of GDP p.a.

Chemicals set to benefit from these low Natural Gas prices. US chem' firms have become the world's second cheapest producers Nitrogen fertilizers.

Ethanol demand will not decrease despite reduced subsidies. But if gasoline consumption would go down, ethanol would follow suite and corn with it (since it is the largest use of corn in the US.

Favorite picks:

Monsanto - MON at 70 usd

Mosaic - MOS at 50.4

Potash - POT at 41.3

Intrepid Potash - IPI at

CF Industries - CF

Agrium - AGU

Du Pont - DD

Commodities II - URanium

2011-12-31T09:02:00.000-08:00

After Fukushima disaster on March 11, 2011, the nuclear sector has been battered by investors as increased regulatory risk and phase-out programmes from several countries (Germany, Switzerland, .... ) could pose a paradigm change in the generation mix of developed countries.

Emerging countries seem to be less concerned about tail-risks associated with nuclear plants (Hungary & Czech vs Austria & Germany).

The ETF for uranium miners, Global X Uranium, URA (closing 2011 at $ 8.1) has been among the worst performing ETFs in 2011. Nonetheless, 2012 and 2013 could be the years to see a come back of uranium, triggered by the destocking of the Russian military reserves and the c. 55 million lbs gap between supply and demand.

More info can be found in this article.

Uranium U3O8 has finished 2011 trading at $ 51.75 in the spot market (see graph). These levels are not much higher than the production costs and make the development of many projects unprofitable. Worldwide production is 130 m lbs, short of the ww demand of 180 / 190 m lbs required to fuel the 443 reactors currently in use; of which 104 are in the US; and 11 of will cease to operate as a consequence of political decisions taken in Germany and Japan sparked by the Fukushima accident.

If we combine these factors with the end of the Russian military stockpiles of HEU treatment carried out by Cameco, we can already envisage a much tighter uranium market in 2012 / 2013.

Furthermore, China, India, ... have .... reactors planned /

62 reactors are currently under construction.

The long-term demographic and economic (ie increased energy consumption) trends are supporters of high uranium demand in the future. And our expectation is that this demand will drive uranium prices significantly up, since the supply side is much more constrained.

Risks

... to the investment case could come from an increased momentum in the anti-nuclear policies, worse news-flow from Japan (e.g. EPA has closed down the US monitoring stations), and a long-term substitution trend towards Thorium -a byproduct in the processing of rare earth elements.

China, Japan and some other countries are increasing their efforts to develop nuclear energy using thorium because it is safer the mineral per se, and the reactors are also safer. Besides, it is x400 times more availability than Uranium.

... but even if there would a clear switch towards thorium, with 400+ operating plants the needs of uranium won't decrease, as reactors were made to last 40+ years, and some could be extended for as long as 100 years.

Gaining risk exposure

can be achieved via market-wide ETFs like Global X Uranium, URA ($8/sh) which owns established and mature producers like Cameco, Denison Mines but also junior producers like Fission (which has high grade -good quality- mines), Strathmore and / or Ur-Energy ($0.85/sh).

Most of these companies are based in the US or Canada, which reduces significantly the political / regulatory and economic risks.

Favorite picks:

Uranium Energy Corporation - UEC at $3.06/share; 231m; fwPE 15

Uranerz Energy - URZ at 1.82; 140m; fwPE 36

Ur-Energy - URG at 0.86; 89m

Uranium one - UUU, 3Q2011 webcast;

Cameco - CCJ at $18/share; 7.12bn; PE 15

known unkowns:

is the uranium market affected by the electricity prices?

... I am not an expert in this field, but I would assume that no, only in the very long run (ie 10+y).

My thesis is based on the lengthy construction process of a nuclear plant, and the no optionality in the degree of operations of a reactor (ie either they work at full capacity or they don't work). Therefore, I assume that the operations are not affected by the supply/demand of energy. ie, as long as they are in OK conditions, they will operate at full capacity, and therefore demand of uranium is very unelastic (at least in what concerns the energy prices).

Commodities I - PGMs

2011-12-29T06:03:00.000-08:00

Palladium price (dec 2011)

Platinum price: 1138.5 eur/troy ounce (dec 2011)

PGMs, especially palladium, seem to be an attractive asset to own in the medium to long term.

Platinum, palladium and rhodium are used primarily to coate the autocatalysts in order to reduce emissions. Technology improvements can increase the efficiency of the autcatalysts and reduce the loads of PGMs. On the other hand, more stringent regulation has compensated this factor.

The three precious metals are used to coat autocatalysts of gasoline engines, while only the former can be used for diesel engines.

The cheaper price of palladium may lure autocat manufacturers like Johnson Matthey and increase their loads of this metal at the expense of platinum. This strategy may narrow the price gap between the two metals and we could see palladium prices at 0.7 to 0.9 of those for platinum.

Rhodium is a byproduct of platinum. Used mostly for autocatalysts, catalysts, and glass manufacturing. DeNOX (gasoline engines). Mined in SA

IRidium is also a byproduct, it's price has sky-rocketed due to its usage in tech gadgets.

These are some insightful comments from SWC's CFO, Greg Wing, about their acquisition of a copper and gold property, and about their view on PGMs, which has been their core area so far.

Hard Assets Investor: Why has copper held its price so well while other industrial metals seem to have taken a hit?
Wing: Well, if you were talking to my boss [CEO] Frank McAllister, he would say that copper is the fifth precious metal. But let me set that aside and say that I think my understanding of it links to the dynamics of the world economy.
If you went back to around 1900 and you looked at the intensity of copper use in the United States, you would see that it was rising very steeply at that point. And that intensity of use, say, per unit of GDP or something like that, was indicative of the fact that the United States was industrializing at that point. Copper demand had grown and was growing very significantly. And, by the way, if you looked at the price of copper in 1910 compared to today in real dollars, it was up around $8 a pound, up substantially from where it is now [about $4 a pound].
In the 1930s, you not only saw the Great Depression, but you also saw the completion of that major industrialization phase in the U.S. The intensity of copper use dropped off in the U.S. It came back, to some extent, during World War II. Following the war, you saw similar spikes in intensity of copper use in Japan and in Germany. That was the rebuilding of those economies.
And then prices fell off somewhere around 1970 and languished from the early 1970s until the early 2000s, about 2003. And all of a sudden, you see another major economy starting to emerge at that point. And that obviously is China, and, to a lesser extent, some other countries. Underlying the strength in the copper price is the fact that China is still very actively industrializing. There is a lot of demand for copper coming out of there.
The demand for copper is exceeding the supply and is probably on trend to do that for a while, or at least is tight against supply. Copper is looking good for the next decade or 15 years, maybe.
HAI: Let’s talk about platinum. What’s driving demand in platinum right now?
Wing: If you look at platinum — and this is true of palladium as well — there aren't very many places in the world where you produce significant quantities of platinum. South Africa produces probably 70 percent. Russia, as a byproduct, produces 20 to 25 percent. And the balance sort of comes out of companies like us. That’s just about it. So, on the supply side, there aren't huge tracts waiting to be developed. The cost curve drives platinum. In South Africa, the marginal producers are right up against the cost curve. On top of that, you’ve got the South African political scene, where people are talking about nationalization. It’s just really tough to make those investment decisions. And then you’ve got limited electricity and limitations on water. In effect, you’ve got platinum pretty well locked against the cost curve.
Obviously, palladium is the principal metal in gasoline catalytic converters. There still is a lot of platinum used in diesel catalytic converters, and a little more than 50 percent of European production is diesel. So that market is there.
The other growing application is in big on-road and off-road diesel applications, both stationary source and construction equipment, over-the-road diesels. So there’s some growth in demand there. And again, platinum supply isn't growing.
HAI: What is the recycling percentage a year of supply?
Wing: It’s probably about 1 million to 1.5 million ounces a year, on top of about 6 million ounces of native production.
HAI: So less than 20 percent?
Wing: That’s right. Others said they can see that going up to 2 to 2.5 million ounces over the next, well, let’s say five to 10 years. Hard to tell, exactly.
HAI: What about palladium?
Wing: Palladium is kind of a parallel story. The big producer, 50 percent or so of the market on palladium production is Norilsk Nickel of Russia. They produce it as a byproduct of nickel. The South Africans produce it as a byproduct of platinum. And obviously we produce it, and North American Palladium produces it, and, to a limited extent, the nickel producers in Canada produce some of it as a byproduct. And again, that’s about it, other than recycling.
The Russian angle to palladium isn’t discussed much. When Norilsk Nickel started large-scale production, which would have been around 1940-41, they also produced palladium as a byproduct. But in those days, there wasn’t really any market for palladium. So they stockpiled it until the fall of the Soviet Union. And estimates, at that point, had about 30 million ounces of palladium sitting in that stockpile.
When the Soviet Union became the Russian Federation and opened up to a freer market structure, the government began gradually selling off that inventory. They never quite said publicly how much is in that inventory. But just kind of working backwards, we’ve estimated that it’s somewhere between 25 and 35 million ounces. Since those sales began, about 30 million ounces have come out. Not much has come out in the last 18 months to two years.
There have been statements by Norilsk and by Russian Finance Ministry officials without attribution that that resource is about gone. The Russian agency that’s responsible for those sales came out earlier this year and said, “We are going to be selling some in 2012 as well.” But they also commented that, to do that, they would be reprocessing to get it up to quality.
Also, China is becoming key to the palladium story. Obviously, at the end of 2008, you saw worldwide auto production fall off fairly steeply. It’s been gradually recovering. In 2010, it was — on a worldwide basis — at record levels: somewhere around 75 million vehicles produced. And the big growth is not in the U.S. or America and Western Europe, it’s China. China is now the largest-producing and the largest-consuming country of vehicles in the world.
HAI: Does China have the same requirements for catalytic converters as the U.S.?
Wing: The requirements are a little bit lighter. But all vehicles produced there have to have catalytic converters. The engines probably, on average, are a little bit smaller. The requirement for platinum and palladium is a little bit lower, and in particular, palladium, because they're mostly gasoline catalytic converters. But again, the projections are that by 2015, we could be producing 100 million vehicles in the world; a one-third increase over where it is today. And obviously, that dynamic suggests that, against limited supply, price is attractive over time. I would quickly add that we think those underlying long-term dynamics are significant. But that’s not to say there won't be cycles in the price superimposed on top of that supply/demand dynamic.
HAI: What do you think of this new catalytic converter that uses gold?
Wing: Well, to the extent that technology is available to study, we’ve looked at it. It looks like it primarily is displacing a certain amount of platinum. At today’s prices, with gold right sort of neck-and-neck with platinum, I'm not sure there’s a whole lot of economic advantage to it. It doesn’t do very much to palladium, at least as we understand it. It’s mostly the platinum that it affects. And the platinum in gasoline catalytic converters is a pretty small component. It would be less than 5 percent.

With the acquisition of the copper and gold property, SWC ceases to be a pure play on PGMs.

Needless to say, the move has not been received cheerfully by the investment community. Here their arguments:

Hard Assets Investor: Why did Stillwater buy Peregrine Metals?
Greg Wing: There are several reasons. We have been concerned about the fact that we are not particularly diversified; that is, we specialize in platinum and palladium. And those are wonderful products to specialize in, but they’re also somewhat cyclical. And if you look back over the last decade or so, there have been about three occasions where the price of palladium, in particular, has cratered.

Elsewhere, platinum production in South Africa is subsidised via lower energy prices (which are even below generation costs).

There are also several macro headwinds

Mr. Savouri mentions several here in his interview in reuters

Toscafund sees South Africa "blow-up" in 15 years

* Consequences more serious than Libya

* Cites emigration, government failure to tackle problems

* Higher commodity prices to benefit Russia, Australia

And here, 'South Africa's election battle vs. markets', by Sid Verma, FT Tilt

Here the 2011 bloomberg ranking of analysts.

Acciona - Sell

2011-10-17T11:55:00.000-07:00

Spain:

1. Highly exposed to changes in regulation

a. After elections, the elected government will have to tackle the eur 3bn/year deficit that already amounts to 20bn

2. Exposed to the (wholesale) energy prices

a. Most of its generation capacity is unhedged, ie, top-line exposed to the wholesale price fluctuations

b. Expected GDP contraction due to the economic slowdown and the additional austerity measures to be taken by the new government (defitic has to be reduced from 7ish% currently to under 3% to comply with the European mandate.

c. Expected lower energy consumption as the electricity bill continues to rise to close the tariff deficit (3bn/year, a burden to be shared between consumers and producers –and especially clean tech generators among the latter

3. Higher O&M costs going forward due to older wind farms and worse WT technology (acciona

4. Higher country risk premium yet to be fully incorporated in the discount rate. And getting worse

International

1. Lower world GDP growth to be felt in the infrastructure division

2. Regulatory overhang in the US. Little visibility over the extension of the cash grants and PTCs

3. Energy prices in a long-term downward trend, as fracking continues to expand and a higher percentage of the energy generation and consumption is switched towards natural gas.

Capital Structure

1. Despite high leverage (Net Debt/EBITDA over 5x), management initiated share buy-back programme during the last quarter (1.5mn shares at c.66 eur/share for 100mn)

… a price above our fair value / target price

The outlook on Spain and the US, in both regulation and energy prices is negative. In Spain, the PP has not yet disclosed what will be the Energy Policy going forward, but most likely it will take a less benign approach to the renewable energies sector than the incumbent socialist government.

The conservative party has always had a penchant towards lower costs of generation and lower energy bills rather than to subsidy and increased generation share of the clean energies. Several articles appeared in the Spanish press (eg.: expansion / libertad digital) in the latter months have called attention to the dramatic increase in the costs of generation caused by the subsidies to the renewable energies, and how they have destroyed c. 2.2x more jobs than created, due to the industrial sector sensitivity to higher energy costs.

Furthermore, J.M. Entrecanales, CEO and Chairman of Acciona is a close friend of the Prime Minister Rodriguez Zapatero. This does not auspicious a more lenient regulation framework if the government changes, given that Acciona is the biggest national wind farm developer, with a different tariff regime from that of other peers (like EDPR), operating in a market that currently has 3bn euro deficit p.a., already amounting to eur. 20bn.

All these factors call for prudence in relation to the future tariffs in Spain. Besides, the upside potential embedded in the current tariff structure won’t be triggered. As energy prices in Spain won’t reach the level at which pool prices (market price+premium) will become more attractive than the current tariff. The gap stands currently at 7? eur/MWh, and the required increase in demand to close the gap is simply not there.

Elsewhere, PPAs in the US will also remain depressed in price levels and duration for two factors. First, policy makers continue to favour a strategy of energy independence. Shale gas extraction (known as fracking) has been the method gaining more market share and is indeed lowering the prices of natural gas in America. As a consequence, an increasing proportion of the generation and consumption of energy in the US is switching towards natgas. Second, the subdued economic outlook is dragging down the energy prices and the inflation expectations of the US, the two factors that determine the pricing of the PPAs. The alternative to not signing PPAs is to sell the energy directly in the wholesale market, but this exposes them to the price fluctuations.

Acciona has been investing heavily in wind energy projects with low IRR-WACC margins during the early stages of the development cycle of this technology. So far, a reality check about the growth prospects for wind, in combination with the worsening of the macroeconomic variables have dragged this margin to negative territory, with a spread of c. 140bp. We expect that higher-than-expected O&M costs will increase this spread further.

Furthermore, the company has very poor disclosure within its Energy division. It has only mildly improved the disclosure on its non-generating Energy activities (which include the loss-making WT manufacturing facilities), but overall remains far from sufficient for valuation purposes.

Given the few opportunities to achieve a project specific-IRR above its cost of capital with a comfortable margin, we think that the management strategy going forward will be to increase FCF by reducing CapEx even further. On the other hand, management appears to be comfortable with the current gearing of the firm at xx D/E, for that reason we think that a flattish debt evolution and a gradually declining Debt/EBITDA is the most likely capital structure scenario.

The company could certainly dispose assets above book value realising capital gains, but most of the value that could have been rescued by disposals in the appropriate geographies (mostly Spain) has already been lost, as the market has re-priced the sovereign risk accumulated throughout the last economic and political period, and a government of the PP conservative party seems would be committed to improve the economic stability (which would reduce the cost of capital in the long-term).

In this sense, we also see the political environment in Chile as stable and favourable to investments (as in all the other geographical areas in which Acciona is invested: US, Canada, Mexico, Australia and Poland -infraestructure), and do not find much added value in the disposal programmes carried away in Chile.

Corporate Governance details

Does the company have a combined chair/CEO? Yes

Percent Independent Directors 58.30%

Does the company disclose its corporate governance policies or guidelines? Yes

Do all executive board members own shares after excluding options held? Yes

Is the company currently under investigation for accounting irregularities? No

Do all common or ordinary equity shares have one-share, one-vote, with no restrictions? Yes

Do shareholders have a right to convene an EGM with 10% or less of the shares requesting one? Yes

Do shareowners have a right to act in concert through written communication? No

Potential Dilution from Stock Options Outstanding + Not Yet Granted Under Old or New Plans 0.00%

Is there a single shareholder or shareholder group which controls a majority of the voting power of the company? Yes

Has the company adopted a shareholder rights plan ("poison pill")? No

Links to practice French

2011-10-17T04:02:00.000-07:00

http://w3.restena.lu/amifra/exos/index.htm

http://www.francaisfacile.com/exercices/

http://www.francaisfacile.com/exercices/index.php?go2=audio&gototal=6861&niveau=1 (avec audio)

http://platea.pntic.mec.es/~cvera/ressources/recurfr39.htm (activités audio)

http://platea.pntic.mec.es/~cvera/hotpot/exos/index.htm (exercices)

http://platea.pntic.mec.es/~cvera/ressources/recurfr37.htm (jeux)

http://www.lepointdufle.net/ressources_fle/exercices_de_prononciation.htm (exercices prononciation)

http://flenet.rediris.es/phonetique.html (audio)

What I Have Learned

2011-05-08T11:21:00.000-07:00

What I Have Learned: "

An investment program or a trading system must be specifically tailored to each and every individual. Risk tolerances, return targets and cash flow needs are critical in structuring a program of capital allocation for investors. All programs and systems are unique based upon our own biases and requirements.

I do believe, however, that there are broad-based investing maxims that can assist individuals in navigating the financial markets. These are the investment maxims I follow.

Human nature never changes.

My favourite investment quote is from Jesse Livermore who said

Wall Street never changes. The pockets change, the suckers change, the stocks change but Wall Street never changes because human nature never changes.

Knowing human behavior is a critical to successful investing. It does not matter if one is trading short-term or investing long-term, any trade or investment is an explicit or implicit bet on human behavior.

Understand history.

History is a guide. It is a road-map to the future. It does not predict what is going to happen exactly because structural shifts occur, but the forces of economic history shift slowly over time. I first read Reminiscences of a Stock Operator in 1998, and I was amazed at how accurately Livermore (through Edwin Lefevre) was describing our time. In the same way that officers are taught military history to understand the mistakes of past battles and the evolution of strategy, investors should understand financial history to understand the mistakes and context of financial markets. Mark Twain said history doesn’t repeat itself, but it rhymes. Karl Marx said history repeats itself, first as tragedy than as farce. Twain and Marx could have been talking about financial markets.

Hubris kills.

The words I cringe the most upon hearing are "can't" and "won't." When people say something "can't" or "won't" happen as it pertains to investments, I become very wary. In investing, anything can happen. Do not think in certainties. Think in probabilities. Banish the words "can't" and "won't happen" from your investing vocabulary. People with a high degree of certainty about the future are the ones most likely to get wiped out. Confidence is good. Hubris is not.

Most people cannot invest successfully. You are probably one of them.

You are hardwired to fail at investing. Literally. Your brain and neurological system are wired in such a way to separate you from your money. It is why your feel euphoric when your stocks are rising and why you feel revulsion when your stocks are falling. It is why you feel you have to buy something when it appears to be running away from you, and why you feel fearful when stocks are falling. Learning to deal with your natural instincts may be the single most important aspect to investing success. Fortunately, there have been significant advances in understanding behavioral finance and neuroeconomics over the past decade. I have listed books on the subject in my book log. Read those books ASAP.

This is not a part-time job.

It is difficult to do well investing and trading over the long-run without being dedicated to it. It is difficult to invest profitably by dedicating a half hour of study in the evening. Investing and trading is not a hobby. Investing is a profession, a craft, a systematic pursuit. If you are not willing to put the time and resources needed to be successful, you should not do this yourself. Pay someone else who does this for a living to invest for you. Or give the professional most of your money and invest in small amount yourself.

Protect your capital.

You cannot play the game if you have nothing to play with. For an investor, that means buying a stock with a significant margin of safety. For a trader, that means cutting your losses quickly. An investor can average down if they have purchased a stock with a significant margin of safety, a trader cannot. A trader must cut his losses. An investor must be certain there is a margin of safety in his investment. Otherwise, capital could become permanently impaired.

Be patient. You do not always have to be involved.

I am an impatient person. I do not like waiting for a minute. I get bored easily and want to do something. Plus, I am greedy and feel that if I am not doing something, I am not accomplishing anything. But this works against me. Patience is a virtue when investing. I have found that I have done really well being patient, and I do much less well being impatient. You do not always have to be involved. Sometimes it is best to just step aside and not buy or sell anything.

Do not invest or trade something you do not understand.

Is this not obvious? You do not need to know Microsoft’s code to invest in Microsoft, but you should know what Microsoft does. If you are trading symbols, know your process cold.

Have a process and keep an open mind.

All great investors and traders have a process. Some great investors are great visionaries with nerves of steel. Some great traders flit in and out of markets successfully. However, all have a process. Different processes are often a function of differing emotional temperament and intellectual curiosity. Everyone is different and different processes will appeal to different people. But the important thing is to have a process. Your process will evolve over time. You will not do things perfectly. Thus, keep an open mind on what works for you and what does not. If there is a weakness in your process, be willing to change it.

Process and strategy are a function of time.

Whether a trade or investment is right or wrong is often a function of time. I both trade and invest. When I trade, I look out a few months. When I invest, I look out a few years. How each strategy plays out is dependent upon time. In the short-term, what matters most is momentum. In the long-term, what matters most is economics. In the short-term, news flow, sentiment and emotion are all the matters. In the long-term, what you pay for a stock relative to the long-term prospects for a stock is all that matters. If you are an investor, the crowd is usually wrong in the long-run. If you are a trader, the crowd is usually right in the short-run.

Time frames matter.

Wall Street tells its retail clientele that stocks are for the long-run. This is true, over generations. If you start methodically and systemically investing in stocks when you are 20 or 25 years of age, you can weather the volatility of the market and buy at almost any valuation and end up with a nice nest egg when you retire. But this is not necessarily true for most people. Most people do not start saving significantly until their mid-40s or later. If someone starts a saving plan at 45 with the goal of retiring at 65, plowing money into the stock market expecting to earn the historical return to equities of 10%, the results can be devastating if stocks bought at the wrong valuation. A 10% annual return over 10 years equates to a 159% gain compounded. But the US stock market has declined since the beginning of 2000. For the 55 year-old who started investing in stocks a decade ago, this is a huge hole in his retirement account compared to what he expected.

Do not base your actions on the opinions of others.

There are a lot of smart people doing stupid things in the world. Simply because someone sounds smart does not mean they are necessarily correct. I can remember just starting out as a portfolio manager, reading an extensive industry analysis by a well-respected Wall Street analyst, thinking “That doesn’t make sense.” I liked the thesis but could not get around this aspect regarding inventory that kept nagging me which the analyst had brushed off. I thought “Well, he knows more than I do,” and invested despite my reservation because everything else sounded good. Turns out, I was dead right, and I lost money because I trusted someone else's argument rather than my own instincts.

Take more risk when you are younger. Take less risk as you get older.

When you are younger, you rely primarily on income from your job. When you are older, you rely primarily on income from savings. Thus, you can take more risk with your savings when you are younger and less risk when you are older. When you are older, a sustained dip in the value of your savings can significantly alter your lifestyle. Thus, your primary goal should be to avoid losses. Conversely, a mistake many young people make is not taking enough risk. The corollary in investing is that, over time, higher risk means higher returns. Since younger people have more time before needing to draw on retirement savings, they should take more risk, and vice-versa.

Risk is however you define it.

Risk is usually defined in two ways – volatility and loss of capital. Academics, quantitative investors and consultants tend to define risk solely as volatility. Investors, usually value investors, tend to define risk solely as the loss of capital, particularly the permanent loss of capital. In truth, the answer depends upon your own circumstances. Some people do not want to see their capital fall, ever. To them, they do not care if an investment they purchased is worth 60 cents on the dollar that falls to 30 cents on the dollar. They care that it fell, period. To someone living off savings, volatility can be devastating, given that a fall in savings means relatively more capital is drawn down when savings are being tapped. This same affect occurs with an endowment or a pension fund that is required to disburse funds at periodic intervals, whereby volatility in itself can result in the permanent loss of capital to the fund. However, if one does not need to draw on capital for an extended period of time, and one has the fortitude to withstand the ups and downs in the market, volatility is irrelevant, and the only thing that matters is the permanent loss of capital.

The only thing that matters is how much money you make. Or, the only thing that matters is how much risk you take.

We do not trade nor invest to test dogmatic philosophies. We trade and invest to make money. In the end, what matters is the size of your account. Having the most logical or most elegant system means nothing if you cannot make money from it. Making money, however, is a matter of taking risk. Over time, the more risk you take, the more money you will make. At times, you want to take lots of risk, at other times, you want to take no risk at all. Understanding your risk profile and managing risk is perhaps the most important aspect of all in money management.

The only (other) thing that matters is price.

You invest and trade to make money. You should not invest or trade for any other reason. For example, you do not invest or trade a stock because it is a great company. I do not know how many times I have heard an investor say that they were investing in a stock because it was a great company. Cisco was a great company in 2000 when it was trading at 118x earnings. It was a great company when it was trading at 7x earnings. Investors who bought at 118x earnings lost 90% of their money top to bottom. A great company can make you great losses if you buy at the wrong price. For traders, if the price is working against you, get out! Get out now! If the price action is poor, the market is telling you are wrong. In the short-term, arguing against the market is a losing proposition. Do not do it.

Focus on what is going to happen, not what has happened.

This may sound trite but investors are often focused on what has already happened, not what is going to happen. People want to focus on what has made them money in the past. Nobody cared about homebuilders before the housing bubble, but you still see a disproportionate amount of commentary on homebuilders today, even though they have been crushed. After the tech bubble collapsed, investors focused on tech stocks for years and ignored, at least initially, basic materials and industrial stocks. And when the bull market inevitably ends in commodities, investors will focus on commodities for years afterwards.

Do not ignore the macro environment.

One does not have to be a macro trader to understand that the macro environment matters. Self-avowed stock pickers often brush aside macro issues, stating that no one can forecast the economy so you should not pay attention to the macro economy but instead focus on valuation and quality of the company. However, if one looked at the banks in 2006, one would have seen many great companies with stocks that appeared reasonably valued. But the edifice upon which the banks had built their businesses was dependent upon housing prices. Having a view on the banks meant having a view on housing prices. If one was bearish on the banks, one was bearish on housing prices and the concurrent collapse of the financial system, which was a macro call. The KBW Bank Index (the BKX) fell 86% peak to trough, which was greater than the Nasdaq’s decline of 78% after the collapse of the Tech Bubble. High quality banks like Wells Fargo and US Bancorp fell 75% or more. Yes, they have recovered, due in large part to government largesse - a political call even more disconnected from individual company fundamentals - but the volatility has been enormous, and most bank stocks have returned nothing over the past seven years.

It is much easier to make money in a bull market than a bear market.

It should be obvious that it is much easier to make money in a market that goes up 200% over a decade than one that is flat during that same time. For example, you would have been much better investing in commodities over the past decade than stocks, just like you would have been much better investing in stocks rather than almost everything else over the prior two decades.

Things can go on for longer than seems reasonable.

I remember thinking that technology was getting nutty in 1996. I thought housing was getting stupid in 2003. Boy, was I wrong. Both were just beginning. Trends tend to last a long time. Do not underestimate the strength of a trend.

Eventually, all bull markets and all bear markets end.

It is difficult to know exactly when bull and bear markets begin and end. However, they eventually do. You might be late in making that determination but understand that the end is an eventual certainty. Structural bull markets tend to last 10 to 20 years, so you have time in determining whether or not a bull market has begun or ended.

on Portugal and Spain

2011-05-05T01:50:00.000-07:00

Earlier this week, we learnt about the Portugal bailout and the Finnish giving sufficient leeway.
I think that most of the people / parties with a good understanding of the issue argued that Portugal needed a hawkish IMF bailout, not a dovish EU bailout.

By proceeding with the latter, Portugal and the EU decision-makers are buying time and procrastinating on must-to-do measures that would be a win-win for the Portuguese and for all its euro-partners. Some of these measures would include the privatization of stated-owned companies, economic liberalization (winding down subsidies, cutting red tape), deregulation of the labour market, and many more measures aimed to improve Portugal's competitiveness under a no-depreciation monetary system like the euro.

Elsewhere, Spain gave a pretty bad piece of news regarding the employment / unemployment measures. Surprisingly, the former were worse than the latter. Let me explain myself: 7110 people were added to the unemployment list in April (cyclically adjusted) adding up to 4,746,552 unemployed people in Spain ... which is 'rumbo a los cinco millones'.

But to make things worse, the number of employed people by the public administration rose significantly.

Take a look at these figures:

+ Pasive population: 23,5m
- Under 16: 7,900,000

- Above 64: 7,800,000

- in between, not listed / not searching: 7,700,000

+ Active population: 23m

- Civil servants / funcionarios: 3,185,900 (12 months before they were 3,088,000)

- Unemployed: 4,746,552

- Self-employed: 2,830,000

- Employed by private corporations: 11,935,000 (12 months before: 12,165,000)

It is quite clear that the Spanish workered is being cornered, suffering the heavy toll of the worse-ever political class seen in this country. This load, and the anticipation of heavier future loads as the deficit is reduced draws a rather ugly painting both for employers and especially for employees.

In the meantime ... the EUR is soaring and Spain, despite its dozens/hundreds of international pro-trade offices around the world (ICEX for Spain, IVEX for Valencia ...), is still unable to export anything but sun.

How is this translated to the stock markets?

... keep shorting Spanish-based assets like real estate.

JPM gave a call earlier this week about some peripheral-countries companies.

The buy list included these companies:

Spanish: abengoa, bbva, campofrio, inditex, tecnicas reunidas, telefonica,

Portuguese: cementos de portugal, semapa

Elsewhere: BIOX GA, DCC ID, GLB ID, ICON ID.

The sell list included:

Spanish: ACCIONA, ALMIRALL, SABADELL, B. VALENCIA, B. POPULAR, BANKINTER, BME, Corp Fin Alba, FCC, Gas Natural, Prisa. Sol Melia.

Portuguese: BCP PL, GALP PL
Elsewhere: TPEIR GA, EUROB GA, OPAP GA, TT GA, GCC ID,

My favorite 'buys' are
1) Santander (san.mc) at around 8+eur/share. It has a very diversified business portfolio; a stable Tier 1 capital (9+%), and very attractive dividend yield (7 / 8%)
2) Grupo SOS (sos.mc). Now suffering selling pressure from the 'cajas', which became shareholders at 50cent/share in the last debt restructuring deal and seem to be selling their stakes. I want to believe (and have some info to back it up) that the price is depressed below its fair value, reflecting that supply/demand imbalance.

3) Telefonica, good dividend yield, international exposure (including LatAm, WE, ...

On the sell side, during the last year I was a keen short-seller of ...
1) Popular (pop.mc) based on the previous arguments regarding the spanish labour market, and its consequences over the purchase power of society overall, and of the real estate prices in particular. Now that euribor is higher I would keep short-selling at around 4.5eur/share; and the same for the rest of national banks (not international).
2) BME seems cornered: the electronic venues will probably prove to be quite harmful in the long run; no international or diversification opportunities ... so keep collecting dividends but I also see a sell when it's lurking / hovering around its previous peaks.

3)Prisa is in this list for 'meritos propios'. Imo, a firm candidate for the worse company in the spanish investment market.

Arbitrage M&A: Talecris & Grifols

2011-05-04T12:04:00.001-07:00

The M&A arbitrage arises as an opportunity to benefit from the spread between the bidding price, and the market price. The biggest risk associated with this strategy is that the bidding firm would withdraw its offer (which is not in the interest of the investment bank); and the biggest opportunity would be associated with a bidding war, in which third companies bid above the previous offer.

Research has shown higher stakes in the target firms on behalf of the investment banks advising both the bidder and the target firm (especially the former); but I do not remember how developed is the research about the profitability of the arbitrage opportunities.

One book covering the issue is Warren Buffett and the Art of Stock Arbitrage, from which this is an excerpt:

In professors Gerald Martin and John Puthenpurackal's study of Berkshire Hathaway's stock portfolio's performance from 1980 to 2003, they discovered that the portfolio's 261 individual investments had an average annualized rate of return of 39.3%. Even more amazing was that out of those 261 investments, 59 of them were identified as arbitrage deals. And those 59 arbitrage deals produced an average annualized rate of return of 81.28%! Warren's arbitrage performance not only beat his regular portfolio's performance, it also stomped the average annualized performance of every other investment option in America by a mile. No one - be it individual or firm - even came close...

... good to know.

Elsewhere, the M&A deals covering companies listed in different currencies will have attached a 'currency risk', for which investors should ask a compensation.

For all these reasons, I have become interested in the Grifols bid for Talecris.

Grifols is bidding $19/share and 0,6485 own shares/talecris share.
With the former trading at around 14 eur/share, the latter could be priced at around 32,5 usd/share (assuming the bid would be successful).

I think it is a good risk/return opportunity and I have bought today some shares,
TLCR (nasdaq) @ 27,5usd/share.
More info about this deal can be found in the web, e.g.: bloomberg.

... will see how it ends.

Here there are some raw-sources for arbitrage-driven trades: sinletter, mergerinvesting, theonlineinvestor and here the required due-diligence and storytelling: dealbook, reuters.

Two deficits, two austerities, and quantities matter

2011-04-30T12:28:00.000-07:00

Two deficits, two austerities, and quantities matter: "

The excellent Kindred Winecoff considers the troubled periphery of the Eurozone:

[A]usterity must occur. It’s only a matter of how it occurs. The alternative to an internal devaluation through wage cuts, tax increases, and reduction of social services is external devaluation (exit from euro) and default. Call it the Iceland Alternative (Iceland was never in the euro, but it did devalue/default, which is what we’re talking about). In that scenario, the new drachma and Irish pound will collapse in value and the government will be unable to borrow from international capital markets. This is austerity too. The government budget will have to be balanced almost immediately, and unless there’s a full default will likely need to run a primary surplus for many years.

Moreover, small open economies like Greece and Ireland are heavily reliant on imports to maintain standards of living. Ireland imported about 40% of its GDP in 2009; Greece about 1/3. For comparison, the U.S. imported about 14% of its GDP. If the post-euro currencies drop 50% in those countries (as Iceland’s did, and it was never attached to the euro), then those imports become 100% more expensive. That’s a big price increase. True, there will be some substitution into domestically-produced goods, but such a large adjustment will take time and cause pain. These are not large, diversified economies and there’s a reason domestic production wasn’t being consumed before; overall standards of living will have to drop if there’s a currency devaluation. And while exporting industries may benefit from a cheaper currency, boosting employment in those sectors, the importing industries will suffer, contracting employment in those sectors. Even if overall employment goes up, it will be at much lower relative wages. This is why Iceland is applying for EU membership, including adoption of the currency, despite the sacrifice of policymaking autonomy that entails.

In other words, there will be austerity. The only question is how it’s distributed.

Winecoff makes an important point, but I think he needs to cut his analysis a bit more finely. Economies run two very different kinds of deficits, a government fiscal deficit and an international current account deficit. Although the two deficits are related, there is no mechanical connection between the two. They do not reliably move together.

A country that defaults on its international debt will find its paper shunned international capital markets for a while. In countries that have grown accustomed to running current account deficits — that is, countries whose citizens have grown used to consuming more imports than they pay for with exports — a forced return to international balance will undoubtedly be perceived as a form of austerity.

But Winecoff is wrong to claim that “[t]he government budget will have to be balanced almost immediately, and unless there’s a full default will likely need to run a primary surplus for many years”. As long as the country, post-default, issues its own currency, and as long as the country’s citizenry is interested in accumulating domestic currency and debt, the government can run a budget deficit after the restructuring. The capacity of a country to run budget deficits post-crisis will depend largely on the citizenry’s confidence in domestic institutions after the fall. (Countries can also employ controls to prevent capital flight and support domestic currency. But in cosmopolitan, habitually integrated Europe, I suspect that won’t work unless people have some measure of confidence in the project. Wise governments would implement technocratically credible monetary institutions and simultaneously encourage patriotic enthusiasm for the country’s newly independent scrip.)

Winecoff’s example of Iceland is a great case in point. Following its collapse and quasi-default in 2008, the Iceland ran a budget deficit of 9.3% of GDP in 2009 (a primary deficit of 6.6%), and has continued to run deficits since, gently drifting towards balance. Iceland has also been able to sustain large current account deficits as well for a while after the crisis, which helps to cushion the adjustment. Iceland received loans from the IMF and several European countries, which partially financed its continuing international deficit. Also, private citizens of Iceland may have had foreign asset holdings which they could pledge or sell to finance imports while the economy shifted towards international balance.

Iceland’s circumstances were, perhaps, unusually benign. Other crises (Argentina in 2002, Russia in 1998) proceeded much as Winecoff describes, with sharp, simultaneous moves towards fiscal balance and current account surplus. But would crises in the Eurozone look more Argentina or like Iceland? I don’t know, but I can make a strong case for Iceland. Savers in the Eurozone periphery inhabit a world of open financial borders, and have already been diversifying out of home-country bank deposits. (Importantly, this forces governments and the ECB to cover financing gaps left by fleeing depositors.) Argentine savers perceived dedollarization as expropriation, which was corrosive to the legitimacy of domestic institutions. Citizens of the Eurozone periphery, on the other hand, might support their governments’ bid to escape impossible foreign debt. The drawn out, slow motion nature of the Euro crisis has made it easy for private citizens to prepare for Euro exit by sending funds abroad. This practice shifts the costs of default to governments, who in turn can shift costs to external creditors. If domestic publics support the move and believe Euro exit to be a one-off event rather than the start of recurrent devaluation cycles, governments may well be able to run deficits and use Keynesian fiscal policy to smooth the aftershocks of Euro exit.

There may be important differences of institutional credibility between Greece and, say, Ireland or Spain. An Irish exit might be more Icelandic, while a Greek exit might be more Argentine. (It’s worth pointing out that, a decade later, Argentina’s default seems to have worked out very well.) As in Iceland, the (growing) foreign savings of private citizens might cushion the shift from international deficit. (Euro drop-outs could not expect the post-crisis IMF support that Iceland enjoyed, though.) There is a hazard that the furious Eurozone core would try to hold the private wealth of citizens of the periphery as security against the defaulted debt of sovereigns. But that would be a stronger violation of current norms than sovereign default.

Suppose that it will be possible for a drop-out to run a fiscal deficit, but as Winecoff predicts, a sharp shift to international balance proves inescapable. Winecoff is absolutely right to point out that

small open economies… are heavily reliant on imports to maintain standards of living… If the post-euro currencies drop 50% in those countries (as Iceland’s did…), then those imports become 100% more expensive. That’s a big price increase… [S]uch a large adjustment will take time and cause pain. These are not large, diversified economies

Undoubtedly, ending an era of persistent current account deficits will prove painful to consumers accustomed to cheap imports. However, that is not ultimately an incremental cost of leaving the Euro. After all, the purpose of staying and suffering austerity would be to pay down indebtedness, which is more costly than a shift to balance. Contrite borrowers have to pay interest on past debt and run (primary) surpluses. Deadbeats just need to pay for what they buy now. Quantities matter. Staying within the Eurozone offers the palliative of stretching the pain out over time, but increases the ultimate burden of the adjustment. Exiting front-loads costs, but reduces their size, as much of the work is done by the act of default. Undoubtedly, jilted creditors would punish “Euro deadbeats”, and exact non-financial costs, so the benefits of debt write-offs would be counterbalanced, at least in part, by new costs. There’d have to be some cost-benefit analysis. But the options are not, as Winecoff suggests, a zero-sum shift in how countries take their lumps. Countries may find they have a lot fewer lumps to take if they repudiate their debt than if they don’t.

Losing the capacity to run a current account deficit and losing the capacity to run a fiscal deficit have very different implications. Shifting international accounts from deficit to balance harms citizens in their role of consumers, but serves them in their roles as workers and savers. If you view the current crisis as driven by the challenge of maintaining consumers’ standard of living measured in tradable goods, then losing the ability to run current account deficits seems harsh. But if you view the crisis as driven by frustration within countries over insufficient opportunity and employment, then shifting to international balance or even to surplus helps. Losing the capacity to run a fiscal deficit has the opposite effect. Where current account austerity increases labor demand, fiscal austerity reduces it. So if you think that underemployment is the pressing problem in the Europeriphery, current account austerity plus continued fiscal deficit is a golden combination.

Lots of countries, obviously emerging Asia but also Germany, seem to prefer the social goods that come with full employment and financial security to the consumer purchasing power gains that accompany current account deficits. The countries of the Eurozone periphery have so far “chosen” the path of excess consumption, but it’s not clear whether that represents a genuine preference or a historical accident. This isn’t to minimize the pain and disruption that would undoubtedly attend import scarcity. Changing human habits hurts. But, as Joni Mitchell might say, something’s lost but something’s gained. This would not be a novel sort of transition. It would be a reprise of the aftermath of the Asian financial crisis.

Leaving the Euro would not be all bows and flows of angel’s hair. But it would not necessarily be catastrophe, and there is no fixed quantity of austerity that Europeriphery countries have to face one way or some other. These countries have difficult choices before them, and should think carefully about the tradeoffs and just what sort of outcomes they hope to engineer.

Note: I have very mixed feelings about any break-up of the Eurozone. This piece was not intended as advocacy of that. I do think the European core is being foolish and shortsighted in its dealings with the periphery. In a better world, the core countries would equitize their claims against the periphery by, for example, adopting some variation of Warren Mosler’s frequent suggestion that the ECB issue per capita grants to all member states, that surplus nations would use as they see fit but debtor states would use to reduce indebtedness.

2011-04-30T12:27:00.000-07:00

on Greece

2011-04-22T04:19:00.000-07:00

Interesting comments from Alphaville (from Citi’s Greek banking team).

The decision of whether to haircut or not is a cost-benefit analysis. For Greece, we believe, the pros include: immediately lower interest payments; faster progression to positive fiscal balance; and less pressure on the government to press on with austerity measures. The cons for Greece could include: denied access to the capital markets; deterioration in relations with Euro Area and EU members (if the haircut is done “prematurely”); and a round of recapitalisation for the domestic Greek banking sector and some Government entities (such as the social security fund). In order to minimise the cons of haircutting, Greece will likely await a macro inflection point — where real GDP growth starts turning positive and the primary balance enters positive territory. This is important as it could potentially allow Greece easier re-entry into the capital markets. Such an inflection point, according to our and other market participants’ estimates, could be the year 2013.

on Bernanke and the US

2011-04-22T03:40:00.000-07:00

I think that Mr. Bernanke deserves a lot of credit for what he has accomplished:

The US is semi defaulting by dollar depreciation, which will indeed help the US to grow its way out of debt.

Elsewhere, the dollar depreciation will boost 'Corporate America' results, which in turn, will spur Americans to spend more, as they feel richer due to the 'wealth effect'. Needless to say, to avoid losing purchase power they have to put their dollars to work (which was an intended consequence from Ben as well), either in real assets / invested in equity, or convert them to other currencies (increases the supply of usd, the demand of the target currency, and therefore pushes the usd lower).

Given that the usd is already quite cheap by PPP and other more sophisticated valuation metrics, the first option is the most sensible: buy shares. They are still fairly priced.

It seems that the market has risen (from the lows) by more or less the same proportion as earnings have done; therefore the valuation multiples are still at around the market bottoms.

E.g.: (implied) ERP on April 1 =5.31%. Source: Prof. Damodaran

The dark side of this policy of boosting the economy by dollar depreciation is that social imbalances are growing at a faster peace than expected/desirable. The skilled professionals enjoy a labor market with little unemployment and high salaries. Especially bankers, who have received subsidies (from the taxpayer) to make their annual bonus. While the mid class is being skewed, and the low class is probably still suffering at levels that remind them of the crisis.

Ben S. Bernanke

Was the Howard Harrison and Gabrielle Snyder Beck Professor of Economics and Public Affairs at Princeton University, Ben Bernanke received his B.A. in economics from Harvard University -suma cum laude-capturing both the Allyn Young Prize for best Harvard undergraduate economics thesis and the John H. Williams prize for outstanding senior in the economics department. He holds a PhD. from the Massachusetts Institute of Technology.

A random walk down Wall Street

2011-03-12T05:29:00.000-08:00

... is probably one of the very best books about financial markets for non-professionals.

In combination with Security Analyis / Intelligent Investor, the 'novice' investor could already assemble a good understanding of the investment tradeoffs, and pick up some strategies to beat the markets.lol. Summarizing:

There is a premium for bearing risk in the financial markets: the return on holding risky assets has been higher than the risk-free rate of return.
E.g.: Good quality corporate bonds and equities have generally beaten the cash / T-Bond investor. We should take advantage of it: buy and hold a portfolio including bonds and equities.
Tip suggested: Do not spend much time researching the market. You'd rather buy the same amount of money at regular intervals of time regardless of the market conditions.
Buy value, i.e.: good quality stocks with stable cash flow. "Buy stock in a company that is so good that even an idiot can run it, because sooner or later one will... Warren Buffett. Hilarious, and quite applicable to the TBTF companies (50% due to idiots misalignment of incentives, 50% due to the complexity of the task).
Be diversified: spread your investments across different investment (sectors) or even asset classes. Including geographical diversification.
The big franchise firms recommended in the 'value school' pass both tests, as they are truly international E.g.: KO, PG, JNJ, KFT, GSK.
When a crisis comes due ... your value shares should cope better than the average market; your cash holdings even better than your 'value' investments; and your T-Bonds may even draw a smile on your face.

In my opinion, if you have been cautious during the greed-driven cycle with a conservative portfolio, you could and should take advantage of the soundness of it during panic moments: that's the opportunity to bear higher risk aiming significant returns rotating your portfolio towards riskier assets (such as, for example, stocks that are more sensitive to the business cycle (luxury, automotive, discretionary goods in grl.), and/or index investing across the world -e.g.: SP500, HK, Singapore, South Korea, India, Brazil- and maybe even better if they are denominated in their own emerging currencies.

In the 'flight to quality' movement, emerging markets assets will suffer a double slap on their face: capital losses (market prices drop), and currency depreciation.

note: the last bullet point is more about my investing philosophy than about malkiel/buffett/graham's ideas.

note II: if bonds and stocks are expensive (which should happen half of the time:), then do not buy so much in securities, and hold more cash (long volatility strategy:), which gives you the real option to benefit of the market jitters.

See chart below about the real return of cash, bonds and equities during the 70's.

Built to Last - book review

2010-12-06T08:15:00.000-08:00

Built to last is a nicely written (and read) book by Jim Collins and Jerry Porras that has greatly influenced the management and consulting thinking in the latter decades.

Personally I found it Storytelling at the level of 'time-telling', rather than 'clock-building'.

Because (IMO) the authors fail to address the special circumstances in which those significant events occured. The US economy has changed significantly in these decades, and 'any idea' could end in a great product/service ... which could lead to a great company (if indeed the owners/managers made use of the "best practices -which is the underlying story behind the book).

Nowadays (IMO), any entrepreneur really needs a big idea or good specific-knowledge of the field where he wants to break in, because otherwise the difference between his cost of capital and that of the competitors already established in the market is plainly too big.

Corolary: make use of the best practices. E.g.: align management and employees interests with that of the firm, ...

They recommend to 1) make Big Hairy Audacious Goals (BHAGs): long-term vision projects that are supposed to be so daring in its scope as to seem impossible for outsiders; 2) Evolutionary Progress: Try a lot of stuff and keep what works; and 3) Good-enough never is, driven self-Improvement.

Financial Mkts, where we are? and where we are going?

2010-12-05T17:05:00.000-08:00

... only Bernanke knows

In an environment of (high to) low interest rates, growth companies (valuations) rise.
In an environment of (low to) high interest rates, growth companies decline.

In the current market situation, I think Bonds are poised to a significant fall in the med / long term. Thus, I like value companies more than growth companies.

Favourites among them: big franchise companies who have maintained a good operating margin through time (are price settlers), and have little debt: KO, JNJ, PG, MCD, MRK ...

VALUATION MODELS (PE / EVtoEBITDA / RIM)
PE is the most popular ratio. It is a measure of the price paid for a share relative to the annual net income earned by the firm per share.
It depends on:
- Growth (expected EPS g)
- Risk (Ke)
- Payout ratio (assuming constant growth, therefore ROE)

10y PE used by R. Schiller
Normalized PE used by J. Grantham: Calculate normalized earnings by multiplying a normalized profit margin (avg is 5.5%) by current P/S of the share / index. Apply the PE multiple (from 1900 to 2005, arithmetic avg 14, geometric avg 16)

Normalized PE for the SP500:
Calculate normalized earnings by multiplying a normalized profit margin by sales per share, assume 6% profit growth for the next 20 years – which is the long-term growth rate for earnings – apply a multiple of 15x – which is the long-term average PE of the market – then discount this 20-year expected S&P 500 target back to the present to calculate the expected capital gain. Then add the current dividend yield to get my total expected return. Currently, this model is forecasting a total return to equities over the next 20 years of 6.7%, well below the long-term average of 10%.

Enterprise Multiple (EV/EBITDA) looks at the cash flows before interest expenses.
It is very used by professionals (e.g. LBOs, MBOs, PE), because they could buy the outstanding equity and debt to change the leverage of the firm, and extract more value if possible.
It also leads to lower multiples' values (which is good, looks more attractive to buyers lol:)

RIM ...
would be the perfect valuation measure. Very appealing intellectually.
Takes into consideration the opportunity cost for the shareholders and examines whether the company created value up and above the broad market risk/return trade-off.

Current Valuation by Forward PE:

Calculate normalized earnings by multiplying a normalized profit margin by sales per share (P/S)
Assume 6% profit growth for the next 20 years – which is the long-term growth rate for earnings
Apply a multiple of 15x – which is the long-term average PE of the market
Discount this 20-year expected S&P 500 target back to the present to calculate the expected capital gain.
Add the current dividend yield to get the total expected return.

... currently, this model is forecasting a total return to equities over the next 20 years of 6.xx%, well below the long-term average of 10%. For how long Bernanke may sustain the house of cards (wealth effect among US consumers) ??

Angela Merkel warned that Germany could abandon the euro

2010-12-05T03:39:00.000-08:00

"If this is the sort of club the euro is becoming, perhaps Germany should leave,"

Altough the Euro area would lose the corner stone, and the best example of how economic rigor leads to well-grounded and stable growth, I think it is one of the best ideas I have recently heard from any politician in Europe.

First of all, the current situation of Europe is unsustainable:

With the current spreads, the PIiGS can not bear such a cost of the debt indefinitely,
The longer it takes to change their current situation, the more they'll have dig in the whole, and
The greater the economic differences between some leading countries (DE, NE, ...) and the tail of the animal (GR, IRE, PT, and SP)

With this scenario, my favorite solution is the so called 'United States of Europe', which would imply to go beyond the monetary union, to achieve a fiscal union (which Spain really needs to get rid of half of its political class).

The second solution is to go thorough some kind of disintegration in the Euro Club.

Much has been said about the countries that should leave the euro and the costs embedded.

'PIG'-countries are all small , that greatly benefit from a common currency, and would find expensive the logistics to leave the Euro.

On the other hand, Germany has the size to bear its own currency much better, and there are fewer advantages for them to be in the euro than to smaller countries (e.g.: benelux)

One solution could read like this:

PIIGS remain in the Euro, so that their liabilities do not appreciate due to the change in currency.

And the list of healthy countries, create their own currency and kick the can.

The banks will suffer equally because their liabilities will be denominated in a 'foreign currency' that will lose value, but ... the ECB can open a window of opportunity for them to exit.

The results are similar in both arrangements: an array of countries much more similar to each other than the current mix in the Eur. Because the third solution, to do nothing, to leave the differences between the core and the periphery to increase, provoking mutual nettle when default events occur is (IMO) the worse one.

Trichet made a good step forward calling for a fiscal union in the Euro the last month, but he needs to be piercing: no politian will be willilng to give up its 'kingdom', and action is needed asap.

Regrets of the Dying

2010-11-20T08:19:00.000-08:00

Regrets of the Dying: "

Bronnie Ware works in pallitative care -- with patients near the end of their life. In this post, she writes powerfully about the the top regrets that have surfaced again and again from her patients on their death beds. I've pasted the list of five below.

1. I wish I'd had the courage to live a life true to myself, not the life others expected of me.

This was the most common regret of all. When people realise that their life is almost over and look back clearly on it, it is easy to see how many dreams have gone unfulfilled. Most people had not honoured even a half of their dreams and had to die knowing that it was due to choices they had made, or not made.

It is very important to try and honour at least some of your dreams along the way. From the moment that you lose your health, it is too late. Health brings a freedom very few realise, until they no longer have it.

2. I wish I didn't work so hard.

This came from every male patient that I nursed. They missed their children's youth and their partner's companionship. Women also spoke of this regret. But as most were from an older generation, many of the female patients had not been breadwinners. All of the men I nursed deeply regretted spending so much of their lives on the treadmill of a work existence.

By simplifying your lifestyle and making conscious choices along the way, it is possible to not need the income that you think you do. And by creating more space in your life, you become happier and more open to new opportunities, ones more suited to your new lifestyle.

3. I wish I'd had the courage to express my feelings.

Many people suppressed their feelings in order to keep peace with others. As a result, they settled for a mediocre existence and never became who they were truly capable of becoming. Many developed illnesses relating to the bitterness and resentment they carried as a result.

We cannot control the reactions of others. However, although people may initially react when you change the way you are by speaking honestly, in the end it raises the relationship to a whole new and healthier level. Either that or it releases the unhealthy relationship from your life. Either way, you win.

4. I wish I had stayed in touch with my friends.

Often they would not truly realise the full benefits of old friends until their dying weeks and it was not always possible to track them down. Many had become so caught up in their own lives that they had let golden friendships slip by over the years. There were many deep regrets about not giving friendships the time and effort that they deserved. Everyone misses their friends when they are dying.

It is common for anyone in a busy lifestyle to let friendships slip. But when you are faced with your approaching death, the physical details of life fall away. People do want to get their financial affairs in order if possible. But it is not money or status that holds the true importance for them. They want to get things in order more for the benefit of those they love. Usually though, they are too ill and weary to ever manage this task. It is all comes down to love and relationships in the end. That is all that remains in the final weeks, love and relationships.

5. I wish that I had let myself be happier.

This is a surprisingly common one. Many did not realise until the end that happiness is a choice. They had stayed stuck in old patterns and habits. The so-called 'comfort' of familiarity overflowed into their emotions, as well as their physical lives. Fear of change had them pretending to others, and to their selves, that they were content. When deep within, they longed to laugh properly and have silliness in their life again.

When you are on your deathbed, what others think of you is a long way from your mind. How wonderful to be able to let go and smile again, long before you are dying.

(hat tip @bfeld)

The story of Luis Caselles Perez

2010-11-19T16:30:00.000-08:00

Every year, thousands of finance students look forward to break into one of the most exciting businesses in the World: Investment Banking. Goldman Sachs, Morgan Stanley, JP Morgan,… there are several “big ass banks” to which most of the candidates would feel naturally attracted to, but competition is so intense that not everyone is able to start such a promising career.

Today, I would like to talk about a story that reached my inbox. Last week, Luis Caselles Perez’s personal website went viral. The website does not contain anything unusual…. Not even a blog, linkedin or twitter … it’s just a CV with a couple of sections in which Luis talks about his dreams, and inspiration to get what he has always wanted to get: to work for an investment bank.

As I have heard, the web-based CV was transmitted via e-mail within the investment banking world in London. It contained some pictures of him wearing a suit, but the website became so popular that he decided to take them out due to privacy concerns. Apparently, some people have made fun of all this, but I have to say that the approach is so innovative that I would be surprised if he fails to get the job! It is not an excessive video-resume (forbidden in finance!), but a delicate and stylish way to make people be aware of him. If you were wondering, his CV is actually very good… and he is only 21 years old!

Rumours on takeovers and scandals are quickly transmitted in financial markets; surely, a web-based CV is the least important thing to be seen in a trading floor or M&A desk. Nevertheless, a lot of people are now aware of Luis! It is an amazing case because we are not talking about a product or a YouTube video that has become viral… we are talking about a person that has become viral.

Luis, if you read this: Good luck with your job search; I know some people did not like the idea of a website, but I am pretty sure you will be a successful man.

Jeremy Grantham on Asset Management

2010-11-14T18:03:00.000-08:00

On the importance of Asset Allocation:

…That incredible discrepancy…says the main event in investing should be getting the big picture right. It’s nice to pick stocks, but how many good stocks do you have to pick in a whole portfolio to equal that incredible move between the biggest asset class in the world, US equities, and the third or fourth biggest asset class, emerging markets? It’s these movements between the big asset classes that make you money.

On his current view of blue chips as the best investing opportunity at the moment given the general over-valuation of bonds and equities.

Being (still) British, this is likely to be my nth opportunity to show a stiff upper lip. There is, though, one quite friendly influence lurking around that may help us lovers of quality stocks. They are getting so cheap relative to the market that a wider range of buyers is finally noticing them. In the third quarter, in a market up a significant 12%, quality stocks held the market. To say the least, this has not been the law of nature recently: for the past eight years, quality stocks usually won in down quarters and usually lost badly in extreme up quarters.

On his current view on emerging markets

Everyone and his dog are now overweight emerging equities, and most stated intentions are to go higher and higher. Emerging markets are admittedly fully priced, but they still sell at a decent discount to the 75% of the S&P 500 that are not quality stocks – a particularly strange quirk in a strange market. With their high commodity exposure, their strong finances, and their strong GDP growth especially, I believe that they will sell at a premium to the S&P, perhaps a big one.

Escenario Macro

2010-06-15T02:50:00.000-07:00

En abril la banca griega ha perdido depósitos por 5.7 bn. sumando ya un descenso de 15.6 bn. en el año, más de 10.5 bn. desde depósitos de familias. La asistencia en liquidez desde el ECB es básica para la banca griega en estos momentos, donde los mercados de financiación internacional están cerrados despues de que las agencias le hayan retirado el rating de "inversion" a Grecia.

Provocara la salida de capitales una crisis ? o el BCE cubrira el descubierto??

Choosing a broker

2010-05-23T05:21:00.000-07:00

... choosing one is not an easy task. It seems there is no good broker in this world.
After struggling to find rankings and reviews of brokers that met my requirements (which included good price-low comission fees & broad portfolio of products, leaving aside the a chart station) I came up with a final list of candidates, which are:

FXCM
MB Trading
TradeStation, and
Interactive Brokers.

These were the sources of information I found more valuable:

Global Finance at GFMAG.com - Awards: World’s Best Foreign Exchange Providers
Reviews at ForexPeaceArmy.com
ranking - Barrons
ranking - TickerPedia ?? ... I know, they are nobody, furthermore some of their scales are inverted some other not. I would't even bet they reverse those before getting the final score.

... and the winner is:

Interactive Brokers.

So I'll switch from my current Spanish discount broker (interdin) to IB during July 2010.
I'll post my trades here; which hopefully will reduce the number of stupid decision I'll make, and who knows... we may even make mone:y!

Other options evaluated were:

- FXall.com and 360 Trading Networks.

FXall

360T Trading Networks

Spain vs Euro

2010-04-28T13:48:00.001-07:00

... Zapatero: "ya se esta notando la recuperacion"

Standard & Poor's baja la calificacion de "AA+" a "AA"

la rebaja de la calificacion de la deuda estaba anunciada, pero lo que me parece que va a traer juego, es que la mayor parte de la deuda espanyola es a corto plazo. Desde un punto de vista empresario-gubernamental, tenian que haber aprovechado estos meses atras que el mercado estaba valiente para emitir deuda a LARGO PLAZO!

...y endosarla a unos niveles de riesgo que todavia eran aceptables.

Ahora cuando quieran hacer roll-over de la deuda que tienen, va a salir mucho mas caro. Lo cual es malo para las finanzas del gobierno (que somos todos).

Pero mirando un pasito mas alla... igual nos vendra bien que la barra libre se haya acabado. Esa mayor dificultad para el gobierno de endeudarse, es el toque de atencion de los mercados financieros que necesitamos los espanyoles para pararle el carro al gobierno inconsciente y derrochador que tenemos.

Con el euro tenemos juego para rato ... (lease las tensiones entre la competitividad de alemania y holanda vs PIGS al jugar todos con una misma moneda.

Yo creo que o se toman decisiones muy serias (y creo que la talla de los politicos no es tanta) o al final estamos condenados al fracaso. O bien deshacer el euro y volver a nacer con peseta, o sufrir un "periodo correctivo" de ... diez, veinte ... treinta? anyos. Hasta que tengamos un presi con lo que se tiene que tener, que baje la deuda a cero, y despues los impuestos a las empresas (y volver a empezar aqui tambien:)

saludos!

2010-04-28T13:48:00.000-07:00

... Zapatero: "ya se esta notando la recuperacion"

Standard & Poor's baja la calificacion de "AA+" a "AA"

...y endosarla a unos niveles de riesgo que todavia eran aceptables.

Ahora cuando quieran hacer roll-over de la deuda que tienen, va a salir mucho mas caro. Lo cual es malo para las finanzas del gobierno (que somos todos).

Con el euro tenemos juego para rato ... (lease las tensiones entre la competitividad de alemania y holanda vs PIGS al jugar todos con una misma moneda.

saludos!

IPOs - Winner’s curse effect in Valuations

2010-03-27T03:40:00.000-07:00

Winner’s curse is the effect of incomplete information on the investors when an auction takes place. The winner of the auction, blinded by that lack of information, generally overpays and is worse off in general terms.

When valuating a company before the IPO takes place, in benefit of the objectivity it is good to move the growth ratios of the company towards the sector mean.

Otherwise the valuation may be biased towards overpricing, as the managers choose their “best suit for the luncheon”.

Managers and insiders are good at timing the market, and in an IPO scenario, they will time both the financial markets (taking advantage of “hot issue markets”, i.e.: when people is more willing to invest in IPOs, -period characterized both by higher frequency of offerings and by higher IPOs initial undervaluation) and their own company’s economic situation (IPOs generally take place after a very good economic performance of the company, coming to market with higher P/E and price to book ratios than the average of the sector.

Individual investors suffer also from betting on trends, and are prone to extrapolate that performance into the future. Failing to recognize a reversion to the sector mean for the issuing company, which is the most probable scenario. That is the bias valuators should bear in mind when assessing the value of the company.

Money supply, banks and the economy

2010-03-20T15:21:00.000-07:00

The banking sector is configured to be very conservative: not only in its origins, where people left their gold for a receipt, and received nothing in exchange except the feeling that their gold was secure and well kept, but also currently by all the government regulation. In the very same moment the public institutions are setting limits to the elasticity of the money, they are pushing all the industry to that edge.

Otherwise we would expect a more diverse range of strategies by the banks in their natural competition, i.e.: some more risk averse and less profitable for its customers, and others less risk averse and capable of offering better conditions* in response to the riskier situation for its customers –those different strategies as normal ways for individuals to compete in a society that Darwin describes holds perfectly for companies in a market with competition.

In that Darwinian scenario, the interest rate would be the price at which supply and demand meet each other (much tighter than current conditions), thus, a deflationary trend would be the standard situation for the economy, (e.g.: Smith describes it so some hundred of years ago.

The current conditions are pretty different. Maybe we are more intelligent and can obtain more profits for society and the banking sector thanks to ... Maths 2.0 or thanks to the backing support of the governments, or maybe .... It is only that we have too much money around, too cheap to borrow, and too low banking requirements.

That would better explain the great benefits of the banks ... and the skyscraper in Dubai.

The problem though, is that with this configuration, the banks shrink at the same time as the economy does. They are not neutral, but pro-cyclical, digging deeper into the economic pain. So, what should be changed in order to avoid messy situations like the current? What to change so that the financial sector doesn’t make the problems worse?

The thing that I am not an economist may help make clear I am not going to solve it, but the fact that I don't understand the subterfuges of the government’s agencies, should help to understand that there is something wrong when the system is that complicated.

How is possible that the government can do it all: borrow money (government per se), and lend it to himself (through the SEC? From my point of view, the government should only be able to borrow money (and that is another topic, in politics, but... somehow it should be limited by an international agency: it is too cheap for any current "x" government to borrow money, win elections today, and even get some dark money extra), and leave the bill for the next government...

A first step (the libertarian step) should drive us to sounder money, therefore we would avoid expensive excesses of the system (dot com bubble, Real Estate bubble, Dubai, etc. That solution sounds good to “gold bugs” and “austrians”.

A second step (the keynesian’s) could intend to have the government helping the economy. Of course not spending what they don’t have as it’s common strategy for ex post crisis situations, but spending the money (when the aggregate demand shrinks or when the economy enters recession) they have previously saved.

That strategy would be twofold beneficially:
Saving in the good times and getting that money out of the stream, helps to cool down the peace of the economy. Even better, you can diversify and invest it abroad (as SWFs already do).

Then, when the economy is overheated and starts to fall (recessions are natural in economics, and they even have a good side too), that money that has been saved by the government can be invested better: getting it back to work in infrastructures, in IT projects and hardware to improve the technology of the public workers, etc.* -> Bearing in mind that it is a recession, and the government will face higher spending (e.g. unemployment subsidies) and lower incomes (e.g. less taxes from consumer spending, from companies profits, etc.

Regarding the financial regulation, William Wild has a good paper about the topic, advocating for a high-cost, low-return form of capital.link.
... that may get the banks out of the stock markets (a truly conservative banking strategy is not able to cope with the equity risk premium of the stock markets.

Pairs-Trading Strategies

2010-02-27T11:55:00.000-08:00

Stock market strategies based on pairs trading have lower volatility. Since we're shorting one stock/indice and buying another. This is my recipe-list for such kind of trades:

- Market Size
Bigger companies will probably react sooner to general market information / events than smaller ones. e.g.: Repsol and Cepsa plummeted at different stages of the '08 crisis. chart

Emerging markets are more prone to suffer booms than developed ones (bk they are smaller, and more vulnerable to ... investors' sentiment, money supply, ...

- Macro / Politicians :) Controversial issue
But in my opinion, libertarian / conservative parties will do better for the economy in the long term than socialist parties at government (provided that they fit to the "clasification given" and act and govern guided by such ideas. e.g.: Spain before and after the socialist party got the government at '04. Trade: long DAX, short IBEX, FTSE. chart

In the States the difference is not that big, as republicans may be more prone to run war's deficits (Bush), and democrats to do good at economics (Clinton's reduction of debt), and the FED can play an important role on the stockmarkets (thru interest rates, SEC thru buying stocks ... everything is possible)

- Board of Directors

As Mr. Damodaran asks, Do they work for the investor? or for the CEO? Take a look at the funny board of Disney in '97.

Corporate governance principles include: board independence and leadership, board and executive compensation, audit integrity, corporate responsability, shareowner rights, emerging market principles ...

There are some rankings out there: good information to trade (with care)

- CEOs' Empire building aspirations

Acquiring other companies that do not provide particular synergies, overpaying...

The market is generally wise in its reaction. But in my opinion, most of the time underreacts (those CEO's are not going to stop till they ruin the company. e.g.: Jean-Marie Messier as CEO of Vivendi since '96.

As a former investment banker ... he was capable of much more than running a simple water-utility company, wasn't he??

His hubris drove him to turn the company into a Media Giant
In 2001, losses of 13 billions of euro.

2002: losses of 23.6 billion. French loss record

... eventually the "giant" wasn't that big: he had to sell the Veolia, the water business, Vinci, and some other acquisitions (Universal Studio / NBC Universal, from Seagram Universal, where he paid a 20% premium. British Sky broadcasting: UK's largest pay TV provider. American Nerworks ($10 billion).

Another illustrative example in the Spanish energy sector:
Gas Natural took over Endesa (a much bigger company) for political motivations.

Prior to that, a bidding war had started between E.ON (Germany) and Enel (Italy) driving the bidding price above intrinsic value.
Iberdrola, EON and Enel have done much better than Gas Natural has. chart.

- Economic links between companies
Companies in one sector usually underreact to profit warnings of linked companies. Especially when the links are not obvious. In the article by L Cohen, A Frazzini - Journal of Finance, 2008, it is showed an example about two golf companies: Coastcast is a manufacturer of golf sticks, and Callaway Golf Corp. is its main client, a golf retailer. The latter announced a dramatic profit warning, dropped 30% in the market (efficiency OK), ... while the former kept trading around its price range (as if nothing had happened -efficiency KO-.

... eventually the gap was closed.

To bear in mind the risk of these strategies.
Although market exposition can be reduced, leveraged is frequently over?used in these strategies, and history brings valuable examples: LTCM (biggest hedge fund, which had to be rescued by the SEC), Orange County (the biggest municipal bankruptcy @US), etc.

The swine flu opportunity

2009-11-04T11:13:00.000-08:00

Let's recall the performance during the swine flu period of the spread between the pharmaceutical and the airlines' sectors.

The strategy would have been to buy pharmaceutical stocks during those early days, and sell short airlines stocks, as market underreacted to the news, as it already happened during the bird flu.

If missed the first opportunity, the second one is to wait until the gap is widened the most, until it is exhausted, and bet in the other direction (i.e.: long in airline sector and short on pharmaceutical).

--
"El primer caso detectado en 2009 se detectó el 28 de marzo, según la conferencia de prensa ofrecida el 23 de abril del 2009" translation: The first case was detected in March 28, according to the press conference given on April 23, 2009. spread Pfizer-United Airlines-American Airlines (April 23)

... the chart can not be uploaded properly. So feel free to use the dates given to check it out yourself!

Technology@Crisis

2009-10-19T14:41:00.000-07:00

Perrow's book Normal accidents (1984) summarizes that technology intensive industries are more prone to suffer those accidents, due to:

- Complexity (nonlinearities.

- Tight coupling (multiple stages of a process which depend intimately on prior stages executing correctly.

1xtra*: absence of negative feedback over an extended period of time.

It is hard-wired in human behavior that we underestimate risk if nothing has happened recently.

e.g.: nuclear power plants, chemical industries, space programs, ..
Since 1974, 18 national level Banking Crisis around the world ('77 Spain, '87 Norway, '91 Finland and Sweden, '92 Japan.

Rogoff & Reinhart find these among the causes of the current crisis:
- Rising housing and stock markets
- Capital inflowsLarge public debt/GDP
- Financial liberalization

Measures aiming Crisis Preparation and Crisis Prevention (gathered from specialists):

- Break up banks and broker/dealers that are too big to fail

- Create exchanges for CDSs and other large OTC contracts

Create financial N1SB for analyzing all blow ups

Require confidential disclosure regarding "network"exposures

- Implement counter-cyclical leverage constraints for bank-like entities

- Enforce "suitability"requirements for mortgage-broker advice

- Require certification for mgmt. and boards of complex financial institutions

Impose more mark to market accounting and risk controls

Impose capital adequacy requirements for all bank like entities

Create new discipline of risk accounting

Impose small derivatives tax to fund financial engineering programs

Revise laws to allow "pre-packaged"bankruptcies for finance companies

Change corporate governance structure (compensation, CRO role, etc.)

- Teach economics, finance and risk management in high school

About Behavioral Finance

2009-10-19T14:05:00.000-07:00

Behavioral Vulnerabilities:

About Prospect Theory: An Analysis of Decision under Risk

The theory distinguishes two phases in the choice process: an early phase of editing and a subsequent phase of evaluation; the editing phase consists of a preliminary analysis of the offered prospects, which often yields a simpler representation of theses prospects, whereas the edited prospects are evaluated in the second phase and the prospect of the highest value is chosen.

Outcomes which are obtained with certainty are overweighted relative to uncertain outcomes. Certainty increases the aversiveness of losses as well as the desirability of gains

In the positive domain, the certainty effect contributes to a risk averse preference for a sure gain over a larger gain that is merely probable; in the negative domain, the same effect leads to a risk seeking preference for a loss that is merely probable over a smaller loss that is certain (the overweighting of certainty favors risk aversion in the domain of gains and risk seeking in the domain of losses)

Value function: Reference point + Magnitude of the change. (vs final welfare states)

The value function is normally concave above the reference point and often convex below it, meaning, the marginal value of both gains and losses generally decreases with their magnitude.

Losses loom larger than gains; the aggravation that one experiences in losing a sum of money appears to be greater than the pleasure associated with gaining the same amount (i.e.: the value function for losses is steeper than the value function for gains).

Because people are limited in their ability to comprehend and evaluate extreme probabilities, highly unlikely events are either ignored or overweighted, and the difference between high probability and certainty is either neglected or exaggerated.

... which leads to perceive both insurance and lottery/gambling as atractive.

It is suggested that a person who has not made peace with his losses is likely to accept gambles that would be unacceptable to him otherwise (e.g.: Leeson at Barings Bank, Citron at Orange County)

Value Investing

2009-08-29T16:59:00.000-07:00

The three factor model to explain most of the differences in financial markets returns:

1. The premium return of the stock market when compared to riskless assets.Sharpe's Beta.
2. The premium return of small capitalization stocks over large cap stocks.Fama's size effect.
3. The premium return of value stocks over growth stocks.Fama's value effect.
... I don't think the momentum factor is at the same level.

The performance of the stock markets exceeded those of Bonds, T-Bills, Gold and Dollar.
(Siegel's "Stocks for the long run"). But we should also bear in mind certain factors:

1. Take the market's geometric return (not the arithmetic return.

2. Consider the survivorship bias: Siegel only considers the best market in the best century of the history. But Argentina was as wealthy as the US a century ago. Austrians lost all their money at the mid-century. Japan will have to wait some generations to see the 40,000 back, ...
So, to bear in mind: companies do fail (while S&P500 do not consider those), some currencies lose value, and markets / economies sometimes get exhausted for some generations.

Stock returns in developed countries - markets, have outperformed those in emerging countries, with an astonishing Sharpe ratio difference.

The average return of small (and medium) companies outgoes the average return of the big companies both in developed and emerging countries (Fama's size effect).

Relative price is often measured by a firm's book-to-market ratio (BtM). When stocks are ranked by relative price, high BtM (or "value") stocks tend to have higher average returns than low BtM (or "growth") stocks. This is known as the relative-price or value effect.

Active management is encouraged to rely on settled rules. My favorite guide is the 50 day Nasdaq moving average. On the other hand, passive management stands on solid theoretical grounds, has enormous empirical support, and works very well for investors.

Regarding the composition of the portfolio:
Between 5 and 15 different stocks provide enough diversification for a personal portfolio.
(although some behaviorist may call this "the rule of five", ... a rule of thumb that only leads to underperformance)

In that sense, a good long run strategy to apply could be:
% of our portfolio invested in the stock markets = 100 - our age.

A book that should be re read more frequently...
"The intelligent investor" by Graham,

From his best student, W. Buffet, we should learn that a continued and periodically buy, in the stock market, is not only more easy and relaxed than the timming and stock picking strategies, but it will generally provide better results (80% of the Funds fail to match market returns).

And regarding the company's management:
Natural, organic growth for a company is better than the M&A growth.
(stock markets reflect it very well, and the reason the second is so much practiced is mostly because the CEOs looking for perks (i.e. empire building).

Repurchase of its own shares on the market is a better way for the company to pay their shareholders than providing dividends (because by doing that, we are going to suffer double taxation: company's + shareholder's). I think most mutual funds do not suffer the double taxation though. Furthermore it is well documented that senior investors, who are already retired, do prefer not to sell capital (stocks) and perceive the dividends as a rent.

Carta Abierta a Doña Esperanza Aguirre

2009-08-17T11:49:00.001-07:00

topic, tags: radio BBC in Spain / English improvement.

Buenos días.

Quería proponer que en la Comunidad de Madrid se valorara la posibilidad de tener una emisora de radio publica.
La emisión que propongo es: BBC World Service

Por qué:
El ingles se debería potenciar más. En España el nivel es bajo con respecto a nuestros vecinos europeos y eso nos hace menos competitivos. (Y a los jóvenes españoles mas esclavos de la deriva del país a manos del gobierno socialista. --> Cuando podriamos disfrutar mucho mas del mercado único laboral europeo si tuvieramos mejor nivel de inglés)

Mas tiempo en embotellamientos, atascos = Más tiempo perdido. Más paro = más horas libres. Etc.
Con esta emisión se avanza en la democratización del inglés: en que no haga falta pagar una academia, viajes o clases para mejorarlo, sino el interés y esfuerzo personal. En las ganas de superacion personales, atributos de la derecha de los que tendriamos que hacer gala mas a menudo.

Por último quería apuntar también que ya hay una iniciativa similar en España.
En concreto se trata de Talk Radio Europe - link. Una emisora de expatriados jubilados ingleses donde las producciones propias (shows normales de radio) se alternan con horarios donde directamente conectan con la BBC (todas las noches desde las 11:30 pm hasta las 07:00 am; de lunes a viernes de 06:00 a 07:00 pm, etc.).
Es una maravilla que sea ingles británico, que no haya anuncios en la emisión, que el acceso sea libre ...

Les mando un cordial saludo, Atte.
RT

Pairs-Trading Strategies @ personal portoflio

2009-08-14T16:01:00.000-07:00

I have made some changes recently in my portfolio because I think we have to be prepared for uncertainty in the financial markets.

As a consequence of that, my strategy is almost market neutral.
These are my positions (for a 1700 eur power purchase) :

POP.MC - 600 @ 6.75 e
ACX.MC - 270 @ 14.11 e
MT + 123 @ 24.7 e
NOK + 400 @ 9.13 e

portfolio
--
I think Arcelor Mittal will outperform Acerinox. The last one have not dropped so much during the downturn in the financial markets, and that is just because it has fewer liquidity / # trades.

Secondly, Nokia makes good cellphones (Does Customer Satisfaction Translate to Excess Stock Returns?, the sector´s outlook is bright and the shares have underperformed the market and its sector recently. Certainly it is a risky proposition, since we do not know when the company will pick up again. But .... I like this moment to buy the stock, I think it may have been over-sold.

On the other hand, the Spanish bank, Popular will suffer from spain's PM.
Zapatero and his socialist ideas are not the best macro strategies to deal with the current recession. So the levered position of the bank in the spanish housing market has gloomy perspectives unless BIG! changes in public policy take place -diminishing the taxes, subsidies, government power, government cars, travels, # wages ... it is just not gonna happen.

Asset Allocation for personal portfolio

2009-06-19T09:18:00.000-07:00

What if we had $100K to invest today for our own account? ... empirical simulation

The first thing we should do, is to establish the risk adversity we want.
Tough that is a personal decision, there is a pretty simple guide to do that:

% RISKY ASSETS = 100 – AGE (years).
… Bonds, T-bills and gold are good low-risk assets.

Since I am a follower of the Austrian School of economics, I find gold quite appealing, furthermore in such market (and policitcal) conditions.
But I think that a 10% allocation is in the highest range of alternatives. More than that is not an option: gold doesn't produce anything.

So … If we were 40 years old, we’ll end up with this proportions:
Risky assets: $60 000
Bonds / T-bills: $ 30 000
Gold: $ 10 000 (preferably in spot, rather than in financial products. Otherwise... we never know whether we will have it when it is more needed)

- RISKY ASSETS [leveraged]:
- Currencies: $ 20 000
aud.usd - 0
cad.usd - 28 (buy, wait)
chf.usd - 27 (BUY)
eur.usd - 18 (buy, wait)
gbp.usd - (neutral)
jpy.usd - 25 (inverted) (SELL if it is around 1/103 - BUY if it is around 103)
... so as June 19th, we start a position: CHF/JPY (at around: 89)

- Stock markets: $ 40 000
Hedge strategies: $ 20 000 [$ 100 000] : mt.acx / acn.ibm? / gas.oil /
Moving averages crossovers: $ 5 000 [x]
New maximums - New minimums hedged system: $ 5 000 [x]
MACD R2: $ 5 000 [x]
Seasonal trading opportunities: $ 5 000 [x] (1st month) / Options / Volatility / Option wRiting strategies (risks) ...

Trading Volatility / Writing Options

2009-06-18T12:24:00.000-07:00

--> the title of the post is a link to a video of a fully developed strategy on option writing. video at fma.org <--

Suggested chart to work with options:
http://tiny.cc/kRlgP
(value of the options: time + volatility + spot _underlying asset)

Let's go to the point:

On a regular basis, we should rather write (sell) options, than to buy them.

The best moment to sell options is when the VIX is peaking / has already peaked.
That is, when it is coming down after a rally (moving averages crossing down).
Thus, the best Options to use are PUTs, never CALLs in such conditions.

On the other hand, the best moment to buy options is when the VIX is in its lowest levels. Consequently we'd rather buy PUTs than CALLs.
We can do it when the moving averages have crossed upward.
Sadly, with that strategy we can find a lot of different occasions when they have just crossed up for a short time of time, coming down afterwards. Such occasions will not provide good results, but among those... there will be the good ones!

Economic Outlook

2009-06-17T10:03:00.000-07:00

Be carefull with the green shoots. Economic data / analysis is not all pointing towards a rosy future.
On the one hand, bigger than expected earning forecasts during the last week were released, supporting the rally experienced in the stock markets since march (because actually the earnings' improvement was in fact bigger than the rise by the stock markets).

But on the other hand, it was just released yesterday the June GEAB N°36, with gloomy perspectives for the months to come. Forecasting payment defaults in the UK and the US

... and (spanish):
Estas son las olas principales:
1- La ola del paro masivo. -> Massive unemployment.
2- La ola de las quiebras en serie, empresas, bancos, inmobiliario, estados, regiones, ciudades.
-> Wave of city councils, states, banks and corporation defaults.
3- La ola de la crisis terminal de los bonos del tesoro de EEUU, del dólar y de la libra y la vuelta a la inflación.
-> US' bond crisis. USD and GBP currency crisis, and back to (super)inflation times

Hope these guys are wrong bk otherwise the green shoots are going to get burned during the summer

So, be prepared for worst economic performance, and get a neutral/bearish market portfolio!
--
GEAB 36: http://tiny.cc/Qu0Qj

Consultora Gubernamental

2009-05-25T03:41:00.001-07:00

Pop Up stores

2009-05-25T03:37:00.001-07:00

Diet > Carbohydrates > Glycemic Index

2009-05-11T02:53:00.000-07:00

Harvard's new guide to healthy eating:

Glycemic Index: a ranking of foods based on their immediate effect on blood glucose-or blood sugar levels.

Carbohydrate foods that break down quickly during digestion have the highest glycemic indexes. Their blood sugar response is fast and high.
Carbohydrates that break down slowly, releasing glucose gradually into the blood stream, have low glycemic index values.

WHY LOW CARB DIETS ARE BAD?

Your body needs to maintain a certain glucose level in the blood to serve the brain and central nervous system. To ensure that glucose is readily available, your body stores it in the muscles and liver. This storage is called glycogen. If you are not eating the right amount of carbohydrates your body will take these glycogen stores, break them down, and convert them to glucose. Once the glycogen is used up, then starts breaking down muscle protein to synthesize glucose for vital organs. This will make you feel irritable, headachy and sick, and it causes a loss of lean muscle, tissue and water, two things that your body needs. It WILL NOT help you lose weight in the long run because the bodies fat stores can not be converted to glucose. So it's all about eating more of the "good" (complex), low glycemic index carbs, rather than lower amounts of carbs that will keep the weight off for good!

RECOMMENDATIONS:

First, to stabilize blood sugar levels, eat smaller more frequent balanced meals. According to some diets, each carbohydrate in your meals must be combined with a quality protein source and some sort of vegetables.

Good quality proteins include: eggs, fish, white meat, whey (by-product of cheese production).

Second, you should not have a diet too low in fat. The whole craze over high fat, high protein diets are to decrease spikes in insulin and to lower the GI index of foods and meals.

Third, you should purposely use mainly high glycemic carbs after you train. A carb drink with a scoop or two of a low fat protein powder will work wonders right after you train.

Finally, I would combine supplements like creatine, 10 grams of glutamine, and a good anti-oxidant with the post-workout drink. This will give you a big jump-start to recovery and glycogen replenishment.

GIs. These are examples of some good quality carbs:

100% stone ground whole wheat bread (GI=51)

Multi-grain breads(GI=49)

Fruits* act as a simple carb when eaten alone, add a fat and protein for it to become complex.

Vegetables

Bulgar

Beans

Lentils

Legumes

All Bran, or other high fiber cereals

Oatmeal

Beans

baby lima 32

baked 43

black 30

brown 38

butter 31

chickpeas 33

kidney 27

lentil 30

navy 38

pinto 42

red lentils 27

split peas 32

soy 18

Breads

bagel 72

croissant 67

Kaiser roll 73

pita 57

pumpernickel 49

rye 64

rye, dark 76

rye, whole 50

white 72

whole wheat 72

waffles 76

Graham crackers 74

oatmeal 55

shortbread 64

Vanilla Wafers 77

Crackers

Kavli Norwegian 71

rice cakes 82

rye 63

saltine 72

stoned wheat thins 67

water crackers 78

Desserts

angel Food Cake 67

banana bread 47

blueberry muffin 59

bran muffin 60

Danish 59

fruit bread 47

pound cake 54

sponge cake 46

Grains

barley 22

brown rice 59

buckwheat 54

bulger 47

chickpeas 36

cornmeal 68

couscous 65

hominy 40

millet 75

rice, instant 91

rice, parboiled 47

rye 34

sweet corn 55

wheat, whole 41

white rice 88

wh. rice, high amylose 59

Juices

agave nector 11

apple 41

grapefruit 48

orange 55

pineapple 46

Cereals

All Bran 44

Bran Chex 58

Cheerios 74

Corn Bran 75

Corn Chex 83

Cornflakes 83

Cream of Wheat 66

Crispix 87

Frosted Flakes 55

Grapenuts 67

Grapenuts Flakes 80

Life 66

Muesli 60

NutriGrain 66

Oatmeal 49

Oatmeal 1 min 66

Puffed Wheat 74

Puffed Rice 90

Rice Bran 19

Rice Chex 89

Rice Krispies 82

Shredded Wheat 69

Special K 54

Swiss Muesli 60

Team 82

Total 76

Fruit

apple 38

apricot, canned 64

apricot, dried 30

apricot jam 55

banana 62

banana, unripe 30

canteloupe 65

cherries 22

dates, dried 103

fruit cocktail 55

grapefruit 25

grapes 43

kiwi 52

mango 55

orange 43

papaya 58

peach 42

pear 36

pineapple 66

plum 24

raisins 64

strawberries 32

strawberry jam 51

watermelon 72

Milk Products

chocolate milk 34

ice cream 50

milk 34

pudding43

soy milk 31

yogurt 38

Pasta

brown rice pasta 92

gnocchi 68

linguine, durum 50

macaroni 46

macaroni & cheese 64

spaghetti 40

spag. prot. enrich. 28

vermicelli 35

vermicelli, rice 58

Sweets

honey 58

jelly beans 80

Life Savers 70

M&M's Choc. Peanut 33

Skittles 70

Snickers 41

References-"The Glucose Revolution" Jennie Brand-Miller, PhD; Thomas M.S. Wolever, MD.,PhD; Stephen Colagiuri, MD., Kaye Foster-Powell, M. Nutr.&Diet.

"The Bottom Line", Harvard Publish Review.

http://www.hsph.harvard.edu/nutritionsource/what-should-you-eat/carbohydrates/

Hacia un nuevo modelo impositivo

2009-04-28T01:38:00.001-07:00

post en proceso.
--
otras lecturas:
articulos:
El colapso alimentario del planeta
Conscious - Capitalism
is there a market for conscious capitalism?
libros:
be te solution,
liberalismo paternal

eBooks

2009-04-21T03:09:00.000-07:00

El ebook es un invento genial.
Con grandes ventajas y comodidades para ávidos lectores y nuevas generaciones de estudiantes. How the E-Book will change the way we read and write - WSJ

Por ejemplo, una buena forma de mejorar el inglés de forma autodidacta es leer libros a la vez que escuchamos la lectura del correspondiente audiolibro. Aunque hay ediciones especiales para ello -nivel medio/bajo- en las obras que ya han perdido los derechos originales, va a ser mucho más fácil conseguir ambos formatos, y de manera gratuita -los derechos de copyright se pierden a los 50 años de la publicación.

Aquí algunas ideas:

sun tzu, el príncipe // darwin // adam smith, locke, john ruskin, stuart mill, david ricardo, max weber, keynes // (liberalismo) mises, hayek, friedman, bastiat, ...

shakespeare, moby dick, dracula, pride and prejudice, the phantom of the opera, importance of being earnest, strange case of dr jekyll, great expectations, ...

--
20 Best websites to download free ebooks
- scribd
- manybooks
- pdf search engine
- pdf geni
- datasheet
- dailylit
- gutenber proj
...

Motivos para sospechar de nuestros políticos.

2009-03-30T03:03:00.000-07:00

Vimos la semana pasada como después de que le pusieran limite a los planes de "impulso económico" a Gordon Brown, no contento con haber conseguido tamaño despropósito, hizo la maleta y se fue a pedir a sus vecinos europeos que hicieran lo mismo.
Y eso, no puede sino reafirmar nuestras sospechas sobre los políticos que nos gobiernan, y nuestras maltrechas economías mientras estén a su merced.

Ordeno por orden de eficiencia económica las diferentes opciones gubernamentales para afrontar la crisis:
No intervenir en la economía, que no lo hagan el resto de países.
No intervenir en la economía, que sí lo hagan el resto de países.
Intervenir en la economía, que no lo hagan el resto de países.
Intervenir en la economía, que sí lo hagan el resto de países.

Pues eso, G.B. no contento con mantener la segunda peor conducta económica, allí se fue a intentar convencer a sus colegas europeos de las bondades del gobierno para planificar la economía ¡!
Y es que si bien puede haber debate respecto de lo conveniente o no de reforzar las industrias nacionales a costa del bolsillo del contribuyente (keynesianos-liberales); de lo que no creo que hay tanta duda, es de que es mejor tener la menor competencia posible a la hora de colocar la deuda pública (1) y más importante, que el apoyo a las industrias que te dispones a impulsar se traduzca en una ventaja competitiva en los mercados internacionales (2): si todo el esfuerzo realizado finalmente no supone una ventaja frente a las empresas extranjeras porque ellas también se han beneficiado del dinero (subvenciones) gratis, flaco favor es el que les propicias a tus conciudadanos.

Respecto a diferentes puntos de vista, que vean en un mayor impulso económico europeo las alas para despegar de la economía inglesa (como espero que sea G.B.), cabe mencionar que Inglaterra no era precisamente una economía que viviera de la exportación de bienes (como sí lo es la alemana) y por tanto el beneficio económico quedaría muy diluido. Por otra parte, el efecto es equivalente al que se produciría con una mayor devaluación de la libra, sin tener que comprometer el bolsillo del contribuyente.

Cada empleado paga 4500 euros por los funcionarios

2008-10-31T03:42:00.000-07:00

Desde que comenzó la crisis, tan sólo los gobiernos autonómicos de Murcia, Madrid y Galicia han recortado el número de altos cargos y departamentos. Y, mientras la economía destruía empleo, la contratación total de efectivos públicos repuntó un 4% en 2008.

Sin embargo, la productividad humana tiene un tope alrededor del 3% (y por ello, en los países desarrollados, es harto difícil conseguir continuidad en el crecimiento del PIB por encima de estos niveles).

Cada vez es mayor la presión impositiva del gobierno sobre la actividad económica de la sociedad. Además, la proporción entre inversión/gasto corriente -nóminas, coches, dietas ... - es cada vez menor. El gasto en coches, reformas, comilonas y asesores es lo que manda.

La crisis puede ser culpa de los Estados Unidos, de los neocon, y de Bush y Aznar, no Z? Pero a España le hace falta un partido que crea sinceramente en la austeridad del ente público. Y es que con otras políticas, va a ser difícil relanzar la economía.

--

Y con perlas del presidente como <<ningún trabajador quedará abandonado a su suerte>>
Los sindicatos pidiendo más empleo, inversión pública y protección social -día del trabajo.
Y reportajes de TVE sobre Marinaleda, el pueblo donde los vecinos votan sus decisiones -para darnos ideas- este país, en manos de quien está, deriva hacia el comunismo. Me dan miedo.

Overview of the Blog

2008-10-31T03:35:00.000-07:00

About Me

First and foremost hello and thank you for visiting my blog.

My name is Rafa Tudela. I am from Spain, in my twenties.

My areas of interest lie within the wonderful, fast paced world of finance, financial markets and the economy.

My blog will cover topics on-

National development and economic strategies
Economic policy & Macroeconomy
International financial markets & currencies
Asset pricing & valuation
Some personal topics

My objective with this blog is to cover the above topics summarizing its most important findings and implications for practicioners.

If there are topics you wish to hear my opinion on or perhaps you are looking for advice please do get in touch. I am also here to learn from you, your contribution is appreciated.

Thank you so much and I hope you enjoy my writing.