This Is Nothing

265 views

I was on a tropical island beach in the Gulf of Mexico during the first Greek crisis back in 2010. It was one of those tranquil weeks where you check in once during the morning and once at night, just to stay abreast of the world.

That morning I had skipped the internet check in altogether and just proceeded directly to the ocean to have morning breakfast with mimosa. After breakfast (if you count the next three hours of mimosa as part of breakfast) I proceeded inside.

I will never forget this short journey back to the residence where I was staying, as it was marked with a black omen. The backyard, you see, was guarded jealously by a spring loaded door hinge, which took its duties quite seriously. I had been careful to avoid its wrathful impertinence before now, but on this occasion could not evade the blow it dealt me. Bleeding copiously from the back of my heel, I left a trail of thick, ruby red blood towards the house.

After I was bandaged up, I realized that was the least amount of blood I would shed that day.

The losses from the original Greek crisis and the panic that followed were intense. The volatility cannot be understated, with the VIX ramping from the mid teens to over 40 in a matter of a few short weeks. The world “contagion” was being used by taxi drivers in day to day conversation.

This is nothing.

We have had 5 long years to prepare for this. If any institutions are holding Greek debt as leverage against other positions, they are the world’s biggest idiots. They would deserve to lose everything. In fact, given the zeal with which central banks have been policing finance lately, I’m not sure such a hypothetical institution could even exist in the first place.

Greek debt has been aggressively purchased and stored away in the vaults of the public, where it can be ignored for the next three decades.

I originally thought we were pretty screwed when the first European Debt Crisis hit the waves. Average maturities of European countries were something incomprehensibly stupid, like 2 years. There was no organization of the central banks. No mandate by the ECB to intervene. No control of the euro. I bet against them and then I lost.

If we were going to collapse from European incompetence, that was the time to do it.

My guess is, although Greece seems finally ready to go, this is more a blow to the reputations of the morons that started the EU project than it is to the financial system, at this point in time.

I Am Betting On The Status Quo

1,460 views

This has been a very difficult past 12 months for me. It’s not just the losses from the oil markets cratering like that. The other issue is that I am looking around, now 6 years since the end of the last recession, and I just cannot quite figure out what comes next.

I usually have a pretty good handle on which way the wind is blowing. Some sort of overarching theme about what the next 5 years have in store for them. That thesis was the emergence of an American oil powerhouse that shattered old regimes. And that has sort of played out, albeit not like I expected.

But what else is going on? European countries seem keen on not burning down EU administrative buildings, which is what it would take to really break up that bureaucracy, seeing how no party in Europe appears to have the balls to hold referendums. But you can’t necessarily bet on Europe either. In my 401K, I’ve been nibbling on European indices and mutual funds since at least 2011, but there’s nothing in particular I would invest in. Nothing worthy of iBankCoin.

And what else is happening? Technology continues to undergo a multi-decade of fast paced evolution. The thing about evolution; it’s a violent, messy process. Not conducive to buy and hold at all. The consumers get rich with wonderful goods while the investors get ground to bits by emerging players and turnover. There’s only a few walls in that village, and they have a high premium attached.

My biggest reservation is that I once mapped out frequencies of recession in America, and we are fast coming due for one.

So what are your thoughts? What will the second half of this decade bring?

Saudi Arabia Can Suck It

1,902 views

The Saudi’s are clinging to the past.

The days of them being the variable producer are coming to a close. They see that clearly and are completely freaked out by it. This is a desperate guy move.

The thing about desperate guy moves is…they’re desperate. Saudi Arabia is not putting this genie back in the bottle. American oil production is here to stay. Right now there’s a cost average race to the bottom going on, and a big game of chicken being played with cash reserves.

But US production isn’t going to just roll over and die. These people are fighting for their lives and have been largely successful about it.

I am absolutely positive that we will see some domestic US producers collapse. It would be silly to suggest otherwise. But what comes out the other side is a leaner, slimmer, more efficient US oil operation.

OPEC is dead, folks. The US endeavored to put a stake through the heart of that malediction for 40 years. In the last 5, we pulled it off. They are coming apart at the seams and the Saudi’s, as the ring leader for that little circus, are trying to hold it all together.

They’re not going to succeed.

I Can’t Tell Yet If This Is An Awful Move

1,157 views

I’ve decided more or less to cling to the oil stocks I had before last year’s implosion. BAS and HCLP remain in my portfolio, and into the decline I added VOC.

On the face of it, this is a bad move. The oil price decline was a classic collapse and these things have a way of being dead money for prolonged periods of time after the big drop off.

I can think of things like uranium prices or old school tech where the market tanked and people sat around, wasting their lives, waiting for a redemption that still hasn’t come. (On that note, I still own CCJ too, and am getting quite impatient with the Japanese).

But if there’s one market that breaks the mold, it has to be oil.

Oil has dumped spectacularly, twice in the past seven years, and it always returns right back to new highs. Not since before the ’90’s has oil been truly dead money.

The world is modernizing and despite all the hoopla about pretty battery packs you can adorn your house with, if humanity is to fully push into 21st century modernity, then it will need oil and lots of it.

This isn’t just about gasoline for cars. I mean it certainly is about gasoline, as a young society will need cheap options available to create a footing. But it’s also about raw material for industrials.

So I have decided, despite horrendous 30% losses last year, to more or less stay put. Everyone is so negative right now, but if recessions and corrections were so obvious and always about to happen, then they wouldn’t be so devastating or rare now would they?

The Bond Market Has Essentially Called BS On The Entire Greek Episode

1,360 views

The bond market sold off hard today, and yields are starting to look as if bond traders are calling out the negotiations supposedly causing problems in Europe.

Check out Bloomberg’s Global Benchmark Bond Indexes; for sovereigns, the only set of positions that ended higher last month was Greece – that was the only country who’s bonds were bid higher.

Last September was when Greek debt started to break down again, and the core European countries saw an already mature bond rally exaggerate long in the tooth. Within the last month, Greek debt has seen some sharp rally’s that tend to make me think of a topping process, and the other European countries are showing pivots which (especially given their already virtually free nature) could mark a bottom.

We have seen this play out so many times before that I don’t think any of us can really get into it again. Greece swears they’ll do something. Schaeuble swears Greece isn’t a country he’s ever heard of. Then a week later, there was a deal the whole time. It’s not worth getting worked up over.

The bond market called the question. Let’s see what happens.

Growth Is Sucking Wind

990 views

Happy Monday and welcome back to. The crisp morning air of a spring not quite ripe welcomed those of us in Michigan; our early treatment to hot weather broke abruptly on Friday night to yield cool weather over the weekend. That has held into the start of this week so far.

Growth reports have yielded steady disappointment. Each time we get hit with a lackluster outcome, since late last year, we shrug it off like high times are just on the horizon. What if they aren’t?

There is an old economic theory that maximum production is ultimately bounded above at any given point in time. A society overproducing for the benefit of one generation necessarily creates low demand for the next, ushering in economic hardships, under this treaty of thought. If we think of the 90’s and early 00’s as such a point in time of overproduction (<5% unemployment in the 90's?), then that could maybe explain the ever present weakness in the face of effervescent punditry which we have been subjected to.

This line of thought led to the infamous "smashing windows" comments that are so well known in Keynesianism. Maybe we just need to blow up some more Middle East pipelines…?

I cannot condone shorting assets though. It's just too stupid of a strategy. If this economic idea is behind our weakness, then it follows that the Central Banks are directly at fault (and also directly to be commended for preventing the collapse of civilization 5 years ago, all sort of murkily at the same time). But weak growth will also provide justification for more intervention on the part of the same, the gross irony there barely coming under scrutiny.

So yes the people who sort of set us up for this in the '90's and '00's will almost assuredly break things more, while blaring the catch phrase "WE'RE HELPING!". Which sort of sets us up for more QE and longer periods of lower interest rates and maybe other even more stupid policies we haven't even thought up yet.

This Is Nothing

265 views

I was on a tropical island beach in the Gulf of Mexico during the first Greek crisis back in 2010. It was one of those tranquil weeks where you check in once during the morning and once at night, just to stay abreast of the world.

That morning I had skipped the internet check in altogether and just proceeded directly to the ocean to have morning breakfast with mimosa. After breakfast (if you count the next three hours of mimosa as part of breakfast) I proceeded inside.

I will never forget this short journey back to the residence where I was staying, as it was marked with a black omen. The backyard, you see, was guarded jealously by a spring loaded door hinge, which took its duties quite seriously. I had been careful to avoid its wrathful impertinence before now, but on this occasion could not evade the blow it dealt me. Bleeding copiously from the back of my heel, I left a trail of thick, ruby red blood towards the house.

After I was bandaged up, I realized that was the least amount of blood I would shed that day.

The losses from the original Greek crisis and the panic that followed were intense. The volatility cannot be understated, with the VIX ramping from the mid teens to over 40 in a matter of a few short weeks. The world “contagion” was being used by taxi drivers in day to day conversation.

This is nothing.

We have had 5 long years to prepare for this. If any institutions are holding Greek debt as leverage against other positions, they are the world’s biggest idiots. They would deserve to lose everything. In fact, given the zeal with which central banks have been policing finance lately, I’m not sure such a hypothetical institution could even exist in the first place.

Greek debt has been aggressively purchased and stored away in the vaults of the public, where it can be ignored for the next three decades.

I originally thought we were pretty screwed when the first European Debt Crisis hit the waves. Average maturities of European countries were something incomprehensibly stupid, like 2 years. There was no organization of the central banks. No mandate by the ECB to intervene. No control of the euro. I bet against them and then I lost.

If we were going to collapse from European incompetence, that was the time to do it.

My guess is, although Greece seems finally ready to go, this is more a blow to the reputations of the morons that started the EU project than it is to the financial system, at this point in time.

I Am Betting On The Status Quo

1,460 views

This has been a very difficult past 12 months for me. It’s not just the losses from the oil markets cratering like that. The other issue is that I am looking around, now 6 years since the end of the last recession, and I just cannot quite figure out what comes next.

I usually have a pretty good handle on which way the wind is blowing. Some sort of overarching theme about what the next 5 years have in store for them. That thesis was the emergence of an American oil powerhouse that shattered old regimes. And that has sort of played out, albeit not like I expected.

But what else is going on? European countries seem keen on not burning down EU administrative buildings, which is what it would take to really break up that bureaucracy, seeing how no party in Europe appears to have the balls to hold referendums. But you can’t necessarily bet on Europe either. In my 401K, I’ve been nibbling on European indices and mutual funds since at least 2011, but there’s nothing in particular I would invest in. Nothing worthy of iBankCoin.

And what else is happening? Technology continues to undergo a multi-decade of fast paced evolution. The thing about evolution; it’s a violent, messy process. Not conducive to buy and hold at all. The consumers get rich with wonderful goods while the investors get ground to bits by emerging players and turnover. There’s only a few walls in that village, and they have a high premium attached.

My biggest reservation is that I once mapped out frequencies of recession in America, and we are fast coming due for one.

So what are your thoughts? What will the second half of this decade bring?

Saudi Arabia Can Suck It

1,902 views

The Saudi’s are clinging to the past.

The days of them being the variable producer are coming to a close. They see that clearly and are completely freaked out by it. This is a desperate guy move.

The thing about desperate guy moves is…they’re desperate. Saudi Arabia is not putting this genie back in the bottle. American oil production is here to stay. Right now there’s a cost average race to the bottom going on, and a big game of chicken being played with cash reserves.

But US production isn’t going to just roll over and die. These people are fighting for their lives and have been largely successful about it.

I am absolutely positive that we will see some domestic US producers collapse. It would be silly to suggest otherwise. But what comes out the other side is a leaner, slimmer, more efficient US oil operation.

OPEC is dead, folks. The US endeavored to put a stake through the heart of that malediction for 40 years. In the last 5, we pulled it off. They are coming apart at the seams and the Saudi’s, as the ring leader for that little circus, are trying to hold it all together.

They’re not going to succeed.

I Can’t Tell Yet If This Is An Awful Move

1,157 views

I’ve decided more or less to cling to the oil stocks I had before last year’s implosion. BAS and HCLP remain in my portfolio, and into the decline I added VOC.

On the face of it, this is a bad move. The oil price decline was a classic collapse and these things have a way of being dead money for prolonged periods of time after the big drop off.

I can think of things like uranium prices or old school tech where the market tanked and people sat around, wasting their lives, waiting for a redemption that still hasn’t come. (On that note, I still own CCJ too, and am getting quite impatient with the Japanese).

But if there’s one market that breaks the mold, it has to be oil.

Oil has dumped spectacularly, twice in the past seven years, and it always returns right back to new highs. Not since before the ’90’s has oil been truly dead money.

The world is modernizing and despite all the hoopla about pretty battery packs you can adorn your house with, if humanity is to fully push into 21st century modernity, then it will need oil and lots of it.

This isn’t just about gasoline for cars. I mean it certainly is about gasoline, as a young society will need cheap options available to create a footing. But it’s also about raw material for industrials.

So I have decided, despite horrendous 30% losses last year, to more or less stay put. Everyone is so negative right now, but if recessions and corrections were so obvious and always about to happen, then they wouldn’t be so devastating or rare now would they?

The Bond Market Has Essentially Called BS On The Entire Greek Episode

1,360 views

The bond market sold off hard today, and yields are starting to look as if bond traders are calling out the negotiations supposedly causing problems in Europe.

Check out Bloomberg’s Global Benchmark Bond Indexes; for sovereigns, the only set of positions that ended higher last month was Greece – that was the only country who’s bonds were bid higher.

Last September was when Greek debt started to break down again, and the core European countries saw an already mature bond rally exaggerate long in the tooth. Within the last month, Greek debt has seen some sharp rally’s that tend to make me think of a topping process, and the other European countries are showing pivots which (especially given their already virtually free nature) could mark a bottom.

We have seen this play out so many times before that I don’t think any of us can really get into it again. Greece swears they’ll do something. Schaeuble swears Greece isn’t a country he’s ever heard of. Then a week later, there was a deal the whole time. It’s not worth getting worked up over.

The bond market called the question. Let’s see what happens.

Growth Is Sucking Wind

990 views

Happy Monday and welcome back to. The crisp morning air of a spring not quite ripe welcomed those of us in Michigan; our early treatment to hot weather broke abruptly on Friday night to yield cool weather over the weekend. That has held into the start of this week so far.

Growth reports have yielded steady disappointment. Each time we get hit with a lackluster outcome, since late last year, we shrug it off like high times are just on the horizon. What if they aren’t?

There is an old economic theory that maximum production is ultimately bounded above at any given point in time. A society overproducing for the benefit of one generation necessarily creates low demand for the next, ushering in economic hardships, under this treaty of thought. If we think of the 90’s and early 00’s as such a point in time of overproduction (<5% unemployment in the 90's?), then that could maybe explain the ever present weakness in the face of effervescent punditry which we have been subjected to.

This line of thought led to the infamous "smashing windows" comments that are so well known in Keynesianism. Maybe we just need to blow up some more Middle East pipelines…?

I cannot condone shorting assets though. It's just too stupid of a strategy. If this economic idea is behind our weakness, then it follows that the Central Banks are directly at fault (and also directly to be commended for preventing the collapse of civilization 5 years ago, all sort of murkily at the same time). But weak growth will also provide justification for more intervention on the part of the same, the gross irony there barely coming under scrutiny.

So yes the people who sort of set us up for this in the '90's and '00's will almost assuredly break things more, while blaring the catch phrase "WE'RE HELPING!". Which sort of sets us up for more QE and longer periods of lower interest rates and maybe other even more stupid policies we haven't even thought up yet.

Previous Posts by Mr. Cain Thaler