What would have happened without GM?

The story goes that the defense budget was cut by 20% at the end of the 1950s. A lot of engineers and radio technicians saw themselves without jobs or without great prospects, and this was the foundation of Silicon Valley.

What would have happened if we hadn't saved General Motors? We would have had all this manufcturing open for contracts. What would have happened if as a consequence, Tesla was able to buy three automovile plants at rock bottom prices? It might have been a great story for the US automovile industry.

Philip Auerswald
Economist

An older Perspective

A long time ago, the Gold Standard ruled. It has been praised again as the answer for current issues.

But once upon a time, England left the Gold standard, and bankers rushed to reinstate the precendent in the land of Money.

The story goes that bankers feared that if interest rates were not tied to Gold, they would be manage by politicians:
"Sober finance might be held hostage to political expediency, giving a bias towards inflation and paper money"

"Keynes...is flirting with strange gods and proposing to abandon the gold standard forever and to substitute a 'managed' currency...it is better to have some standard than to turn our affairs over to the wisdom of the economists for management."
- J. P. Morgan was warned.

Trying to bring England back to the Gold standard, bankers in the US kept interest rates extremely low. This might accelerated the bubble that ended in the crash of 1929. So similar. So close to recent events.

And the story went. Trying to push British currency up to match the previous honored place of an overvalued currency, it destroyed the British industry which needed cheap currency to be competitive in foreign markets.

1926 was a tumultuous year in England's history. The old bankers had no choice than to "returned to their natural habitat: the shadows. Playing duets at their pianos while strikers and police clashed in the streets" of London.

Micron, ARM, and the cycle GiG

I was writing this a while back trying to bring some sense to Intel's prospects at this point, and Otellini announced his retirement later that week.

There is not much to add. There is always tomorrow, and it is all we have to wait for.

---------

It probably still has the edge of the pure science for the next wave of computing chips.

Sony Chocolates

It was a long time ago that Sony sued a chocolate maker for its name. It was a landmark case driven by the concept of brand dilution. The fact that nobody could find Sony in any dictionary, gave Sony the rights to its name across the planet way before global was a business adjective. Back then, Sony was a mere transnational.

Sony was the first Japanese company to sell stock in a US market. It conquered the Americas and later boasted of their disciplined character when raising debt.

Fast forward at least 30 years, and a Sony debt offering causes the stock to plunge. The markets have reacted as if a wet cat just jumped on the table.

It is convertible offering for common stock at a premium price in 5 years. The problem is not a subtle matter of the right capital-debt ratio that might not serve their wise investors well. It is one of those rare offering where every possible outcome is bad. Without anywhere to look, investors headed for the exit of the house of mirrors.

If Sony gets in serious trouble, getting common stock for debt is like loosing the whole investment. Debt gets serviced first.

If Sony reaches a premium in 5 years, and the debt is converted, it would be an additional 15% dilution for the stock. So the stock plunges.

If Sony does revamps its facilities and comes out ahead with "taking names" products, it might be better to keep the debt given the high yield it will carry instead of an unpredictable and diluted stock price.

A good place to start might be to get a good read on the market for their offering before sitting at the gambling table of the consumer electronic tournament trying to take back their old global spot.

Geo

Geo-politics is inserting itself in the Thanksgiving Turkey.

Among the most cunning observations is the melting of the Artic cap. Preventable, human made, or precognized in tabular scriptures, the Artic cap is breaking.

The opening ceremony occurred a few years back at the height of Russian growth. Seen as a transcient nationalistic act by most, it was explained by a few as the begining of a race to a new world. It was a simple event: a Russian submarine placed the Russian flag on Artic underwater soil which was accessible for first time in thousands of years.

The most relevant prediction is the raise of Canada from Backyard neighbor to Artic power with new direct commerce routes to very developed markets. It is like the discovery of a new route to the Indies except this time the walkway might be private.

------

I think the new edition of Smithonian copied from this posting; they just added a page to each sentence.
March 25th, 2013.

Open Sesame

Alibaba will have more transactions this year than Amazon and Ebay combined.

Yahoo looking to make the quarterly numbers sold its stake in Alibaba loosing firm footing on a future nobody can yet imagine.

Billion trickle down

Like an analyst explained in the middle of the Facebook IPO debacle before being silenced by the crowd: With so many users they -Facebook- are bound to find a way to profit. With a billion people registered, if they find a way to monetize just 10%, it becomes a 100 million revenue. And this is what they did. From nothing, Facebook now has 150 million in revenue from mobile advertisement.

It is not just Facebook. It is also the amazing alliances Facebook is able to forge now that they have so many investors and users locked in.

In the earnings call, they explained the vision: Mobile advertisement will resemble more TV advertisement with more videos and interactions than in the desktop. The last earning calls were about trying to figure out the new mobile advertisement. Probably, they were looking at the same channels as their desktop counterpart. Their Vision Quest has delivered answers, and it has trickled down from the Dream world for everyone to follow.

KaGooG

GOOGLE qualified for the diving Olympics today. Kaboom. Biiiig Kaboom like the Supreme Being says in the Fifth Element.

Mobile has cheapen the value of the derivative click; then, there is the other already known cause: MOTO ROLA. Google's VPs had to rephrase their original stand of listing Motorola separately. They realized there is no way around it. At least they behaved better than Groupon following their existential conundrum after being surprised with the fact that their opinion might not be real in the real world.

Don't look where there is none

Don't look for a breakthrough where there is no breakthrough; don't look for a cliff where there is no cliff.

This is the new good mantra from Cramer especially when referring to the Tech sector.

"Stay with consumers" - he says. China's exports to the US increased last month, and even though Amazon hired a staggering number for temp workers for the holiday season, we will have to wait and see.

In the other side of the coin, there is Google looking for the next breakthrough. This is a a major change for recent history since Intel created its venture capital arm. Risk management is being done at the top of the major corporations while they look to seed new ventures. This makes them hope to become a solid investment in one hand, but it challenges the traditional investment analysis. The question is - Can they do better than the market on their quest? History says no.

-------

The De of Decision Making

A study suggests good managers are right 65% of the time. In risk management, this is catastrophic.

The ultimate quest for leadership leads corporations to failure and stagnation by default. Strong selling is the only way to mask this.

An average Hedge Fund manager has to be right 90% of the time. To beat the average, he or she has to be right 95% of the time.

Leadership has shifted from the Art of delegation and of getting the right things done the right way.

TIPy TIPy Toe

The TIPs are still negative with a lot less demand. Regulation is circling around automated trading. That is the beauty of a system built to correct itself. It is also the subtle but structural legal difference between Europe and the US. Europe requires a stated and intended outcome. The US relies on the fall off of unintended consequences to correct itself. This creates a stark contrast on the life of the individual on each system.

Meanwhile, a new recession has been declared for 2013. China's slowdown is starting to be felt on the market leaders like FedEx.

Chanos is embodying Carl Marx in his successful pessimism. One has to wonder how an analyst like Chanos grew up to be a short seller. It is not a profession you choose from a class curriculum.
How are your calls bounded by the downside?
Can a fund mission statement change the wiring in your brain?
Did Enron typecast his character?
Do the structural contradictions continue to lead him on the same trail with a killer instinct?
Has it become just too easy for him at this point?
I think his $40 million tower condo on the TIP of South Beach allows him to witness the Light bending phenomena caused by the Earth's mass. It also lets him count the number of cranes before they show up in the books.
Why find the trail when you can touch the Source?





*Aren't we allowed to talk about Higgs already?

The Less Paperwork Favor Bites Back

The issue of allowing less requirements for smaller companies already took its toll. It was clear that this was going to become a problem. It was better to allow private companies to sell shares than to eliminate requirements based on size. Networking and the elevator pitch have replaced decision making in the last ten years.

For first time there was a compassionate calling to allow smaller companies to do less paperwork. This decision undermined the purpose of the practices without providing a way to meet the requirement.

The main purpose of the paperwork is not for the company to do; it is for the investors to have. They eliminated procedures without satisfying the need that created them.

A successful small company crashed in less than a year of going public without any transparency.

The market is becoming secondary when automated traders have priority, insider lockout periods are flexible, and public companies don't need to report as much leaving investors on their own. Again, it seems the system is forgetting why it was built.

This makes Gross's overreaching statement that equities are dead a lot more credible.



Hologram IPO Holds Lesson for Investors http://on.wsj.com/OjERIQ

The imprint of TheFacebook.com

In the history books of positivism, American mysticism, and their consequences in actual implementation, there is a new great solemn event: the 2012 California budget.

In their forecasted budget, California accounted for the taxes that a successful Facebook IPO would have brought to the state.

The forecast accounted for an extra 2.5 billion over five years. The interesting fact about this type of decision making is that the consequences tend to double the effects in the negative direction. It is one of those interesting proportion rules in nature.

They just didn't loose the 2.5 billion tax revenue they predicted leaving them at zero. Now they are probably an extra 2.5 billion in the red.

The ramifications of simple decisions like the Facebook IPO ripple throughout society just to amaze us. It makes it so easy to visualize the collapse of a system. Probably only another mystic positive outlook forecast could fix the situation this time.

The Americas

Still holds the shores where fleeing capital runs to. The Hong Kongian Vix jumped 40%.

It seems that the US economy might not have any other way to go but up. Direct investment is declining across the globe. And here is the US economy once more, standing again at the shore watching capital swim its way looking for dry land.

Muni Money Mani Mo

More than a handful of analyses have been ditched out like out of a toaster about how Muni defaults are really not a risk.

The Meredith got it all wrong.

Meanwhile, Buffet just recalled all his defaults swaps on all muni debt. This is usually an expensive move having to recall the insurance at a premium. If someone can afford it, he can, and he did.

If he had the capital to recall it early; then he doesn't need the capital to invest it somewhere else. So why do it.

I think the FED calls this move Quantitative Ease. They also act like this with very old bills and with counterfeit. They just take them all out and disappear them.

It is a pretty terminal decision for The Long Term Value Investor.

The July Yield

It seems naive to read warnings to the buyers of corporate bonds that they will loose money. The basic assumption is that both sides of the transaction are aware of the basics, they should just have different expectations.

The explanation given is that buyers are looking for quality investment. Under what calculation, a sure drop in price becomes a positive return?

There could be a sharp pencil expecting still lower yields in contrast to an uncertain world where US Corporations might continue making a deeper dent.

In the other hand, in a global market, the expected depreciation of other currencies might easily cover the devaluation of the principal. Then, it comes the reinvestment at higher yields if the warnings are correct. But this already makes it an unsafe strategy compared to what the original assumption was when trying to explain why so many buyers are snatching very expensive bonds.

Follow the money and the end of the month data, and answers might reveal themselves.

------/////


The numbers show that a lot of the flight to bonds are 401k owners.

Hayek

I am not sure. It could have been his idiosyncrasies. When Paulson went on Charlie Rose after he had left office, it seemed his relation with Goldman Had become a soft spot.

With no doubt, at the moment of crisis, his closeness became the only venue he could see for a solution.

There have been interesting questions raised about what could have been done when it all happened.

Way before they even acknowledged the crisis, the wise men spread the rumor of allowing Hayek run free. It was a clear solution before the too big to fail was pitched the same way Chrysler became one of three.

It would have been painful, but the proponents showed the vision. The business lost should have been satisfied by competitors. Instead, it dragged not only loosing the business but also loosing the demand.

The New Rising Global NFL league

The NFL is a league of stats. It seems the purity of the game is born from its unmatched transparency.

After all the turnmoil, there is the possibility that everything was just the prolog of what is to come.

If the Libor investigation bears undeniable proof, all the major banks have just become a target of compensatory lawsuits from the rest of the world that feels they have suffered from a strict and placist system with a rigged rule book.

The Best

As suspected, The Best Buy is looking for private equity to take Best Buy private. Now they can be free to do more while lifting the work and the risk associated with the expected steady and surely decline of store sales.

The New System

The new "state" of the Union has been named by others. There are many people who have given it a shot. From idiological concepts to quick protest slogans, there is a line of analysts trying to describe the current state of affairs.

"Collusive Capitalism" is the best description yet. FASB doesn't have rules against it. Automation has overridden the classic notion of controls. We are left with a new system requiring new solutions.

Fedex vs. UPS

While most predictions have been pessimistic, there are a few industry leaders whose forecast does not depend on localized market conditions. And a few positive notes are starting to be heard.

Fedex predicts the US to grow faster than expected. UPS expects slower growth.

UPS is mostly business to business and retail which might be suffering the impact of the digital transformation. Every CD, Video, file, and mistake is easily downloadable and resolved nowadays with a digital connection.

Caterpillar is the tie breaker. The US's economy is growing. PIMCO sees the US as the most solid and stable market. There is less uncertainty in the US market than in the rest of the world even if the growth is minimal.

At the end, the fight for regulation and accepted accounting practices continues to prove it is absolutely necessary specially when nobody knows whose numbers to believe.

The TIPs and the iceberg

TIPs go negative. The big boys are paying the US government to keep their money. Companies are being overvalued by selling small stakes at commanding prices. Only a stake could ask such a premium because more of it, and it starts to resemble the real world. This make company stakes behave like trenches (or is it tranches). A piece of the trench is acceptable; all the CDOs and it is a flip of the coin. There is abundance of capital, but deflation is peeking outside the cave while prices only increase where risks have been contained. It is the new world, the place where markets collide, and where the consistent split between the best and the next to best takes place. It is in this market like the following of the Great Depression where only the good shine. It is in this place where numbers stop meaning as much because the terrain is on the move and where the emotional connection to a discovery occurs. It is here where Truth is formed. It is in this place where Seabiscuit and the Soggy Bottom Boys flourished.

IMF predictions

Waking up from its long sleep, the IMF is predicting that China will surpasse the US as the largest economy in four years.

You would think that doesn't make sense. Traditional GDP calculations convert GDP output to dollars. The IMF's calculation is based on purchasing power (without currency adjustment).

By this non-American standard, the US's GDP is 15 trillion while China's adds up 11 trillion with high reserves and ... "purchasing power". Still doesn't make much sense.

---------/

Another

Together with Michael Burry, and Paulson's statistician, she saw and educated everyone around about their mortgage business.

Without much refinement, she is known for speaking her mind. People could not believe she insisted in teaching powerful career bankers about their business. She was a history major after all.

She has suffered the political and Wall Street mob for her new prediction of municipalities in bankruptcy.

With San Bernardino declaring bankruptcy, and Buffet suggesting more are to come, Meredith Whitney has proven she is not a statistical aberration. But what is interesting is the fact that she could have come out ahead of everyone if she had just profited from her findings as it is her role instead of warning the market years in advance.

The Birth of Federalism

Even though game theory scenarios suggested the final showdown for the European Union is to take place between Italy and Germany, the are developments taking shape for a possible European government.

Italy's burden is too great for Germany to take on unless it benefits Germany at the same time. By breaking from the EU, Italy would gain a cheaper currency promoting growth. This might be the more probable showdown according to economists.

At the same time, the EU taking control of Spanish banks establishes the European government as the legitimate power overriding local governments.

This is just so similar to the history of the American Federal government that it makes it a possible precedent for an established European government for the good and bad.

Morph

News keep getting extended. The news of yesterday ripples riding the days, the weeks, the months, and keep extending into the years.

Nothing is new, but everything is rarely more than 4 years old.

It has been almost 5 years since the financial meltdown, and the SEC is rushing to avoid the statute of limitation. Even the firms that survived are still imploding.

FASB is not just regulatory compliance; it is also the basis for sound investment and management. They are not made by democratic vote; they are made by experts targeting weaknesses in the system. If you don't follow the rules, at least you need to know the potholes, or you will end up discovering them.

The Libor, the banking crisis, the slowdown, the constant swapping of CEOs, the Arab world, patent wars, the EU, and the South China Sea.

An overlooked opinion had a catchy phrase: The world cannot afford endless litigation against banks.

The Best

Best Buy owns Five Star which is an emerging China superstore with 200 locations so far. Five Star plans to open up to 500 stores based on the positive reinforcement of its sales.

Maybe it is time for Best Buy to become the Nike of the electronic Retail business. Design retail like restaurant chains, buy up - up coming players, and take them to The Level.

This is something that someone who raised through the ranks can't really draw on a map. It requires someone with acquisition talent.

Spain, Ah, Espan~a

It seems the 120 billion Spain requested from the Euro zone (meaning Germany), will probably be handed.

Given the strange configuration of the Euro zone, the money that is meant to bail out Spanish banks goes to the Spanish government first. There seems to be no legal binding for the Spanish government to use the money requested as prescribed by the doctor.

This is probably the real test for the post Cold War Europe. Either way, it will set a dramatic precedent for the next few decades.

Espana, ah, Espana! Are you still the back country of Lorca or the winner of the World Cup?

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Government Yard Sale

The US government is selling its stake in banks semi-nationalized during the financial crisis.

The number of banks is never clear until is time to sell. The stakes are parked in no less than 343 banks.

Geithner was nicknamed eHarmony during the turmoil due to his relentless matching and pairing of banks. It seems there was a lot more matching and nationalizing than was first disclosed.

On the Week Before the Race

On the week before the Derby, APPL reports earnings.

And like music rehearsed over and over, negative reports come up exactly a week before as usual.

Carriers will be cutting subsidies from IPhones. There are insightful doubts on APPL's success given the market for smart phones is really in its infancy.
Godzilla is headed for Tokyo. RIMM is coming back opening stores in Indonesia.

We just have to wait and see whether the young Bodemister beats Dullahan, and whether the white silk of Hansen was just playing slow.

--------------

In the tradition of behavior tied to a market bubble, there is no need to confirm the facts. There is no need to corroborate the announcement with the financial statements.

AAPL's profit increases 94%. 9 - nine -4 - four. In other words, ninety four percent. Did I spell that right? I am surprise there is space on this blog for that number.

Sovereign Perspective

The head of China's sovereign fund spoke of the risk of Europe's breakup as a real possibility.

He has the opposite perspective from Chanos. Lou Jiwei, like most, concentrates on international companies with a foot on China's growth.

Zero

The zero coupon is back on the block. With yields being pushed towards zero, it is the closest thing to a saving account without the risk of depositing it in a bank.

The reason is simple: there is no place to invest. Even the dollar which was challenged, remains the denomination of choice because there are no other safe assets.

Newspapers have died because the hussle of the web is always connecting people through failed business models.

There are reports of companies eliminating the word innovation from their vocabulary because in reality most people don't know what it is. As soon as an innovating idea comes up anywhere is already a threat to the already established law of diminishing returns.

Spain is next, France is a rumor, and Germany is hesitant to serve anymore on the silver platter.

The country who was always the rescuer of last resort is unable to rescue other countries nor engage in any side of the world anymore.

China's slowdown is hitting the BRIC especially the B, the C, and Australia.

Now they call the future:
- The next 11
- The MIST
- The CIVEST

The M is Mexico. The I stands for Indonesia. The S is South Africa or South Korea. T is Turkey. What is different is that the R has dropped from everywhere which was usually reserved for Mother Russia. And many other predictions.

There is a theory that describes how the ups and down in history have an amazing correlation with 50 years intervals of innovation. This Kondratiev wave theory was correlated by others that matched it with technological revolutions.

The 50 years of innovation fueled unseen growth followed by 50 years of slow down or contraction. The slow growth phase was characterized by the implementation of the innovation from the previous 50-year cycle cannibalizing industries and squeezing margins from slow growth industries.

I came across this graph in the 1990s, and it placed history at that moment towards the end of the 50 year innovating cycle.

It has been the most accurate predictor of current times while everyone spoke of a self regulating financial industry that crashed, the promise of the web, and the rise of a global economy.

TheFacebook.com

So many stories of legend come to mind when an IPO goes off the cliff. It brings back the old pools of pumping news and assurances while the Charleston plays and Prohibition offers the greatest of times.

But from 23 deals made since 2011, only 4 have seen a drop in price. In the other side of the counter, Citi, UBS, and e-Trade counting their missing beans offers beyond reasonable doubt, the idea that the technology glitch was a major dreams popper.

It is probable that the underwriters bought into the hype treating the market as an unexpected and unpredictable beast without realizing that in such a large offering, they are the voice of reason and the market maker. An 800 hundred pound gorilla has its name because it is singular in a plural world.

The warnings to major partners carried the same content that everyone already knew. It might not be a sign of asymmetrical information. I think it is a sign of asymmetrical perception of our own roles when failing to realize this is just not one more offering; this is The Offering.

This is one of those times when it would be so nice if the SEC could say after reminding the underwriters of their fiduciary duty to the offering and the public:
OK. Now, let's try that again: what is the price supposed to be?

Masters of the one level below the ultimate know-how

In a recent fund raising event where the main speakers were major hedge fund managers, certain prediction were made.

Listening to any of these people is like listening to Copernicus rearranging the Solar System. Understanding their frame of reference or lack of is challenging and eye opening.

People paid large sums of money to have the privilege of listening to what could be next. But the predictions were all dire. They ranged from France defaulting to deflation, Europe splitting back to individual struggling nations, and no sign of growth in the US.

Even the established notion of personal banking was challenged like back in the 1930s. There is not worse advise to people who just dropped large sums of money to find out the good angles: "Take three boxes of cheerios. Empty them, and fill them with 100 bills."

IMF projections

When asked why was she optimistic, the head of the IMF says:

There was a discussion between Rousseau and Voltaire who didn't get along.

Rousseau says:
- Life is hard.

Voltaire replies:
- Compared to what?

Everyone and the Other

For centuries business evolved looking to standardize itself. From the creation of currency trading in Northern Europe to Holland's stock markets in the 1600s to the birth of farm future contracts in Chicago.

Non-standard contracts make news when they are profitable like selling mortgages to the Amish or micro-finance.

And nowadays, the powerful machine of marketing and branding seems to override general accepted Truths built over centuries.

Customized contracts that have left clients and whole municipalities bankrupt have been the norm. The word liquidity was deleted as consideration when packaging the sale for special clients who deserved one on one undivided attention but end up buying sure losses.

It is like a plague of unlearning has hit the world in the last 10 years. All the sudden automated trading has been a middle man in the transactions even on the trading platforms that advertised it differently.

And now, even traders are blindsided because every party believes they are the other. They believe they are outside the system. This is a belief that has been built on the moment of sale. A believe that every buyer or seller is part of the inner circle; therefore, standardization doesn't apply to them.

And...the system is believing their own pitch by allowing this sense of insider grouping. Regulation can't rewire the system.

We are again on a cycle propelled by the networks. And no government or agency can track these "specialties."

The one-hour walk out of traders in Chicago is a sign that the system is contradictory. A customized large trade bypassed the trading floor without even posting prices. Either traders and real capitalism are a sign of the past, or the system is completely forgetting why it was built.

Quick Stat on the Lavish Life of the Black Gold

Saudi Arabia now consumes more oil than Germany which has three times the Saudi population. It is consuming a quarter of its own production. By 2040s, the Saudis will be a net importer...

Gorvachev held his ground on this point while discussing with the Iron Lady back in the 1980s: The world cannot consume at the same growth rate as developed countries; there are not enough resources. But Soviet inefficiency was as bad of a calamity as his opponents' capitalist consumption goals.

Alternative energy just stopped being "Green". It is It.

The $1,000 Mark

Newspapers are all over it. Can apple get to $1,000 a share? Even when trying to bite its tail two weeks ago, it was an already expensive $540. A lesson learned is that when a stock is taking off, do not buy limit orders, just buy it. Today's price: 628 and holding in that range. With a P/E of 17.50, it is not overly expensive.

Without even looking at financials, there are the risks of backlash from labor conditions, higher costs, dividends taking capital out, investments in negative return projects like TVs, the risk of becoming another cash hoarder, shrinking margins, and there is also the kindle fire with other competitors.

On the other hand, 30 millions iPads might be small compared to 5 billion people worldwide.

AAPL has become by itself a measure of technology in the world. It has become a predictor of supply chains, innovations, and global consumer confidence. Just with this, it is a must have in any portfolio.

Can AAPL break the 1,000 share "prize"?

AAPL will still capitalize on the residual business from its still fresh successful footprint. It has enough products to ride that wind. AAPL's consumers are happy to pay $200 for a replacement battery or phone that went bad. It is an unmatched sense of value following on the Toyota tradition where the notion of haggling is unthinkable.

What some analyst miss sometimes is that we live in a very small world. It is not so much how good a company is, but how good is it relative to the rest of the market. This will continue to attract positions from an international investor base. Without suffering a fluke or a competitor in shining armor, there is more than enough for the next couple years as it still becomes more mainstream.

The inexpensive road

Biotech stocks are loaded with high PE and the gamble of a big win.

Then there is the new phenomenon of finding new uses for already approved drugs.

With less capital requirements, they can do less testing with lower liability. Inspired by previous amazing findings from the blue pill to hair restoration, it seemed promising. But a small company hoping to find that rare accident is more of a gamble than a full FDA cycle with a known purpose.

But they are a niche for speculation having valuations swinging widely on short successes. Their almost random uptick makes them the perfect partner for a portfolio looking for short term not correlated assets in a correlated world.

Libor and the Circle

The manipulation of the Libor interest exchange rate, rings of "non-insider" insider trading, rings of cell phone hacking, an established Quattrone syndrome in the Valley of Silicone, gentlemen agreements in engineering circles overriding quality controls, and just out, puerto rican tax refunds going through an organized interception on the week of the NFL draft. Poor Griffin the Third, it is hard to go against those odds.

It was noise and incoherent appearances until now, but it is a noise that is starting to become a whistle. Once unknown to the many, it is becoming a symphony with each passing year: the voice of the wisdom of the crowds in an interconnected world.

Meanwhile corporations look desperately for innovation. Motor companies are opening labs in Silicon Valley hoping to harness creativity. Dell wakes up in the middle of the night with cold sweats. Japanese companies are slowly vanishing. Sony is seeing its previous aura in Apple while institutional investors want to cash out from Apple to avoid re-investments they never intended. Panasonic refocus its business to dishwashers. The circle in the financial industry ends up overriding the core businesses and the banker's reputation.

There are no tools to categorize and easily reference* the power of the circles. It seems the only defense businesses have is the esoteric solution of corporate culture and values. It is esoteric at the present time, but it becomes very palpable with every passing year. In this new world, only the ones who managed to keep the old ways, private, and established cultures might have a true chance to last.

The other true solution is accommodating global minds. Higher management is more and more: more international. The inherent value that can bring global minds together is the business, not the circle. A person Art is the hot sale. With the new wave of people who abstained from online interactions, I wonder if the new Art has to be conceived in an old fashion, archaic, unconnected brick and mortar mind.


*Delightful X Files Reference

Cash in the bank: 98 billion

OAAPL to pay dividend and to do a buyback. 100% return on the investment in the last 52 weeks is just not enough. The 52 week low was 300. Today's trading price: 600.

Microsoft found itself in the same junction back in 2004. With 50 billion in cash in the bank but a stale stock price, investors were screaming for some sort of return. Microsoft paid a one time dividend of 32 billion. This was probably the beginning of the split between Bill Gates and Microsoft. Bill Gates donated all his dividend to charity, and it probably led him to discover the impact he could have with charity instead of with Microsoft products.

AAPL has already been singled out as a tremendous anomaly requiring fund manager to exclude the stock from market analysis. With a growing stock price, a large dividend, increasing sales, and a buyback, it is hard to tell where it is going.

It is always the question of whether its product pipeline can continue propelling the momentum. The newest iPad seems to suffer from overheating. And even though the WSJ reports 55% of iPad users look to buy a second one to avoid sharing it within the family, it might be too soon for most users to replace their older model.

Then there are the other revenue streams which are too long to list. There is even 238 million from the profit sharing (18%) in the AppStore. 

On the other hand, a curious fact surfaced this week. Sharp was delayed in the delivery of components bringing light to the fact that Apple is forced to rely solely on Samsung which is a direct competitor. While Apple rearranges the marketplace, there is a stream of suppliers and competitors who are not standing still and are reshaping themselves at the same speed.

When we add all this, we get 98 billions in cash, and a string of future market changers to follow.

Buy Miami sell Beijing

Undo the big short and take risk on mortgage bonds.

Bet on emergent currencies, and wait for a weaker euro just to accommodate smaller euro economies.

Bankruptcy is the best place for investments because the increased transparency. AA, MF Global, etc.

Soros, still the greatest macro guy in modern times.

Watch for a real slow down in China to track the ramifications.

What was the journey of the mortgage industry was our journey

Best put together list of the possible reasons of why the system failed to respond and react. Why in the world Economists and Finance gurus removed from the front line of trading failed to warn.


Traditional institutions failed.
IMF
From the center of the international monetary system, the IMF was sent to a peripheral position. Third world countries accumulated more reserves than the IMF budget. Commodities raised, so what need was there for the infamous IMF. They are trying to come back - the trillion dollar lady.

Traditional measures of market volatility should have registered some uptick as the aberrations began multiplying.

There was a reduction of volatility. Given the belief of the great moderation which a belief that the world's economies had entered a period of reduced fluctuations in economic and financial indicators.

VIX is wall street fear index, now covered daily by Melissa Lee's Fast Money - I wondered if it happened after this book was published-. It is the Chicago board options exchange volatility index. Measure of implied volatility based on the weighted average of prices for various options on a diversified basket of stocks.

Sustained moves in the vix carries important information about the extend of the uncertainty in the markets. A decline in vix would be accompanied by an increase in many investors willingness to assume risk.

VIX kept declining in an impressive fashion until the summer 2007. In other words, investors preferred to take more risks at a time of growing and simultaneous inconsistencies in the marketplace.

The same occurred for volatility in the fixed income and foreign exchange markets.

There another more general sign:
A notable increase in correlations among different asset classes in different geographies and different fundamental drivers.

And others.

Inspired by scribbles and notes from:
When markets collide

Even if Greenspan called it a statistical aberration, It had to take an Asperger's person in Michael Burry and a removed statistician working for Paulson to look beyond the indicators followed by the crowd.

Nothing a Carnegie Mellon process wouldn't catch.

Neuf Règles générales du marché

China owns 45% of the world supply of polysilicon used in the solar industry.

With prices for end products falling rapidly, a raise on demand, consolidation , or a technological breakthrough would bring some stability to the sector.

But that was the world of yesterday. The Chicago free market dogma woud have dictate a foreseen equilibrium, but it is today.

China largest producer will withhold production until prices raise 60%. The market forces are just indicators.

The old fashion banker is still priceless in today's world

There is no more clear sign that shows the old banker prestige hasn't been forgotten. Their nod is not like any other nod. Trained in the art of valuation and risk for generations, their nod is still the ACCURATE factoring of information in one instance.

And the markets haven't forgotten their role no matter how powerful conglomerates are.

Investors May Rethink Plan to Oust Rothschild at Bumi http://on.wsj.com/znLjiV #WSJ #iPhone

The days of risk

Call it the passing of time. Usual headlines on mega chips didnt seem attractive. The big short was always the play. Charlie Rose holding the iPad was just an hour long infomercial.

New tides have reached the desert sands. Coincidentally, the Maddoff proposition of low risk with low consistent returns is the new grail, and the infomercial is then another attempt to curve fit the news of tomorrow.

Google lost a bit of steam, and a buy was suggested

Fears from the Motorola acquisition and a small disappointment in earnings for pricing and non-operating income made Goog catch a cold.

However, there is consensus on a buy. In the money: strike price of 540 is 28.49 with high volatility. With one month still out, it is a taker.

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Opening market next day: 27% gain plus or minus when you actually moved in or out of the position. Price strike of 540: +7.84 from 28.49.

Chinese solar panel producers to suffer passing of evolution

From the 330 chinese manufacturers of solar panels, only 15 are expected to survive the next few years.

Meanwhile, the major players continue to post huge gains on a daily basis. There seems to be a correlation between good economic news and these stocks. They did hold while the markets hesitated to post gains.

On the other hand, Germany one of the largest markets, is planning to cut subsidies on its domestic solar panel market. This is probably helping the rebound expecting more supply from chinese manufacturers.

Without much new information, it is time to decide whether to get out on the next station or hold hoping that the spike in the volume traded with an increase in prices continues.

Google bought Motorola. Ooops?

Google strategic decision to control the supply chain in the mobile market will backfire when it realizes it needs to behave like everyone else unless it pulls it off brilliantly.

Having Motorola's slow growth in their statements will make Google's numbers look less attractive. It seems they didn't consider this when announcing the buyout.

They said they will report Motorola separately. Isn't that a choice everyone would like to have?

Even when staying optimistic and positive, what is going to happen to the transactions out of the synergy? Even assuming there is no precendent on this, what happens when Motorola requires assistance that Google investors were not expecting?

On the other hand, what better way to go head to head with Apple by getting their hands into hardware. Sometimes when you are left with the hot potato, you just have to find a way to cool it.

Spread

When a company changes its symbol, should it be a positive or a negative sign of the randomness Gods? The ask is for 56% more than the bid. Is it lack of knowledge of the market or just a hussle. Meanwhile, the volume traded is almost zero. Someone is hoarding and waiting like one of those big fishes that camouflage themselves at the bottom of the sea with their jaws open.

Market Data

Reuters is a great data provider with great API:
https://customers.reuters.com/Home/RMDS.aspx

There are also niche players focused on these type of testing. Technical Analysis Magazine lists and rates some of them.

Apple expecting to grow

More promises from AAPL. More sales of the iPad and now they seem to be able to run Microsoft Office. Bye bye mouse, keyboard, monitor, speakers, web-cam, and surge protector. Competition for leadership from the OS executive might have a longer lasting effect if chosen.

What about Now? By 5 o'clock, I am a dinosaur! Call Option expiring this week for a strike price of 435 (only 6 above today's closing is just $0.65.

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For a reason, there was consensus the stock was going to dip. It was priced right.

After deep decline, solar has seen a rebound

CSUND, the Chinese manufacturer and assembler of solar panels seems to have been chosen and completed an installation in India. Rose 13% in one day following a positive streak of positive momentum. Hoping it is not just someone unloading and cutting losses. 68% decline in shares sold short. Is the demand just to return the shares?

Meanwhile, it seems Germany is absorbing contracts from the leaders in the segment helping on a rebound. Either way, their hands are tied. Inventory is decreasing value as we speak. Materials are more expensive relative to the final product. There is a mini-deflation effect on the segment. Dollar per watt has emerged as the metric of choice instead of the complete deliverying of a product to the market. Rat race like the old Mhz per clock cycle. A breakthrough or a stable demand is needed.

The inevitable and steep learning curve of the rails

China's bullet fast train crashed in a head on collision. The blame falls on official corruption, low quality (Chinese) signal equipment, and political pressure to meet deadlines.

Even though the promise was great, historically it was expected. There is nothing worse than the American fatal rail history. The US lived through such a bubble and disasters in railroad construction that hordes of railroad companies defaulted on their bonds. The US solution to the problem? The bankers became more involved in railroad operations to assure returns to foreign investors creating the Trust as the logical solution.

But it seems the biggest lesson for China is that their amazing economic minds are ignoring a basic principle of macro-economics:  relative advantage. If they insist on building everything themselves, they will just have to take a number in the back of the line behind Latinoamerican countries after they fell in love with the notion of imports substitution.