Well That Ended Anticlimactically

Here I was thinking CCJ would go on an epic run, and instead it decided to reverse 4.6% on a lazy Friday afternoon.

On the plus side, it and my other main positions (BAS, AEC, HCLP) all seem to be resting just above the higher moving averages. I’m going to pretend like I care about TA for a minute and assume that means paved glory in my future, next week.

China sucks and I’m sitting around just praying PGJ gets assaulted. The BRIC thing is just really a load of garbage. They’ve been shoveling this shit to private retail money for twenty continuous years now; meanwhile, to this day, three of the above four letters in said acronym don’t even have primitive shareholder legal protections in place worth a damn.

Pathetic.

Putin is bringing down US drones and generally showing off now, as if the inability to feed and cloth his own people (or other such humiliating realities of that Russian Exceptionalism lifetstyle) were somehow forgettable next to the nostalgic grandeur of a grey haired, 62 year old man suffocating on his own bullshit.

Suffice to say, if Bush were still in office, Putin wouldn’t have the balls to be trying any of this. I know you Obama apologists will be leaping around like faggots now, whining at me for being “unfair”. What’s unfair is us living in this day and age and still needing to explain how incentives and behavior work to you stupid assholes. Choke on some humility coming off the trio of failures that are Obamacare, Foreign Policy, and the DOJ before you open your mouths in my comments section. Unless I’m mistaken, outcomes still matter more than pathetic excuses and “intent”.

The only one of the BRIC’s I would even look at is Brazil. Even there though, no need to get tangled up in the state owned populism. I’m content to just sit back, crack a beer, and watch Venezuela and Argentina burn to cinders.

I’m 25% cash, a little less cocky from this week, and certainly not up 14.5% anymore (though doing quite well).

Russia Threatens to Confiscate Foreign Owned Property

Well they went and did it now.

This is a bold move, and one that is sure to escalate things quickly. Think about how much has been put at stake trying to lift Russia out of the pit of communism, over the past two decades. Think of Goldman Sachs’ Blankfein making cross continental trips all through the ’90′s, setting up access for foreign investment into Russia’s economy.

The move is crazy, of course. If Russia started hard confiscation of assets, you’re looking at a basic replay of what happened when they defaulted on their bonds in ’98. Economic stagnation, a plunge back into hard poverty, and all. Worse, even.

The trouble is, the Russian’s are just crazy enough not to care. The ’98 default itself didn’t make any sense. It was a clear blunder – to everyone – that would only hurt Russia and those who were trying to help support the country.

And they did it anyway. And the whole time, Russia’s “leadership” looked on with straight backs and the visage of complete confidence.

Threatening to confiscate assets to get your way is a lot like threatening to shoot yourself in the face. Sure it splatters the audience in blood and inconveniences them…but you’re the one that’s dead, idiot. Yet, here we are, watching “new” Russia follow in the footsteps of “old” Russia – plus Argentina and Venezuela – and you can’t help but wonder, do the people clutching the capacity to throw this switch know something that we don’t?

Like that keeping Russia-at-large somewhere just between the stone age (fighting polar bears with empty vodka bottles) and Flint, MI is personally the best outcome for them?

There’s a small part of me that’s tempted to jump around and start hunting for deals; scouting around for people willing to take $0.50 on the dollar for their now very much imperiled Russian stakes. But that small part is quickly squelched by the much larger part of me that wants nothing to do with gangster thugs running a cross between a cult and a crime syndicate.

Exhausted, Personally. But Everything Else Is Fine

I spent last night running around Detroit, doing what-have-you. I rolled into bed around two after midnight, and have spent the day in a stupor, daydreaming longingly of dreaming today.

CCJ is easing off a bit, but look at the move it made. This isn’t a problem, it’s earned a small nap. Much like the one I want to be taking.

Markets look tranquil, and I’m just waiting for the blaze higher to resume. Foreign debt is calm; holy hell! Greed 10 years are back below 7%. How did this happen?

Who would have guessed going long Greek debt in 2012 would be the trade of the decade?

ZZZzzz

Late Night Thoughts

Asia’s markets are settled this evening, in response to Turkey jacking their interest rates to 12% in the dead of night, if such sources as Reuters are to be believed.

Central banks have had such a firm hand on everything for the past few years, it really would not surprise me if we just shrug this off and keep going. But I’m not going to rest my hat on that this time.

Ultimately, jacking interest rates to 12% is really bad for growth. Turkey is an importer, so maybe this helps the rest of the world to up that production a little bit. But my concern has always been that we’d hit the point where the rest of the world couldn’t stand the US’ cheap money policies. I thought we were there with the EU, but they passed the buck somehow.

Where did that buck end up, I wonder?

Monetary Policy Remains Overwhelmingly Accommodative (And Outlook)

The fed decision to test the waters with a taper while I was away did surprise me, somewhat. Yet it did not phase me much and so I elected to remain on vacation, silent on the issue.

I would state now in hindsight that a $5B per month taper (with as much as another $5-10B in the works) would still put the Federal Reserve on path to add another ~$800B to its balance sheet in 2014. This remains colossal and would have the Fed assets outstanding at just under $5 Trillion by 2015.

They may very well have tapered by $5B/month just because they were running out of things to buy…(laughter)

If I were to state things that concern me as potential impediments to the US economy and growth, they would list (1) consumer slowdown from budget impacts (pension, healthcare costs, rents/mortgage, increased retirement contributions, etc), (2) foreign existential shocks (EU breakup, Asian crisis, similar collapse that disrupts foreign trade) – where exactly did the EU government debt go and why is it now suddenly not an issue? Who is buying it (ECB, Fed, banking scheme, inter-government trade imbalances, etc)? And what stops non-payment concerns from popping up again in the future? and (3) the election of a Republican majority

But banking solvency just isn’t on that list right now. Neither is inflation, really, although long term prospects of an uncontrollable outbreak of inflation remains a viable possibility. With credit expansion in this country limited to growth of government balance sheets, deflationary pressure is set to commence…until it doesn’t. In the meantime, another ~$1 Trillion of free money to those closest to the trough will keep a major disruption of financial assets here at home as a low probability outcome. Of course, this bodes ill for the “wealth equality” lot, but they’re too dumb to call the system out on that, so we maintain the course.

Concerns aside, I am optimistic. Recessions don’t last forever, and my concerns are outweighed by hope in outlook. I am very long (no margin) and prepared to reap the rewards of economic growth. It’s been almost six years; the system has been on a hyperactive outlook for problems which greatly reduces the likelihood that a real “Black Swan” manages to crop up. It could still happen of course, but with hundreds of thousands of financial professionals calling bubbles as quickly as problems crop up, and a full time central banking staff armed with an unlimited supply of money attacking them at first sight, how exactly is a crisis supposed to materialize from all of this?

The only room for crisis in the US is rampant commodity/asset appreciation, which remains benign. That or an elsewise major shock to the consumer. Financial assets and liquidity issues are covered.

Now, that being said, historically we haven’t had a period longer than 10 years without a recession since at least 1789 (and probably not since long before that either – I just lack records to verify a more robust claim). I’d say the expectation of a correction since the Great Depression is 5-10 years with occasional 1-3 year shocks intermittently. We’re past the small shocks phase, which would put the expectation at right about where we’re at.

These times are unprecedented and the support the Fed is willing to lend the markets (unlike any time in recorded history) makes me think we blow through the averages. I want to say this ship will have the wind to sail to years seven, eight or nine, uninterrupted. We may even match the record holder of 10 or above.

However, it would be foolhardy to doubt another recession will most likely crop up before 2020. The ever growing levels of margin debt to buy equities may well be the first sign of the beginning of the final run before that. Of course it could be nothing.

My belief then is that a long commitment remains the way to go. I have been positively surprised by recent developments that have overridden prior comments on wanting to have a larger cash position by about this time (end of 2013) that I made late last year. However, as gains are taken, a portion should begun to be set aside, starting sometime mid 2014 to early 2015. This should create a reserve build-up of steadily marching intervals (10-20%, with a 1-2% increase every month topping out at around 40-50% of ones account value) sometime around late 2015 to early 2016.

At such time, a second hard look should be had. Earlier and exceptional strength should trigger a reassessment of these statements. Casual to quality growth does not necessarily change them. A major weakness (such as a shock of a GOP majority and fear of monetary policy interference) of course may necessitate a sudden course change.

My most hated places to invest are land/real estate (excluding multifamily or renting derived), oil companies (excluding natural gas predominated), and retail (excluding facilitation to the ultra-rich).

My favorite places center around natural gas production expansion, uranium, coal, multifamily REITs, and I remain interested in holding physical precious metals in a full position in the event an inflation shock from significant expansion in credit hits the economy.

I’m indifferent to the insurance market – especially health insurance. It could swing either way; they crawled into bed with the devil so it’s all political at this point. On the one hand, the entire market is shifting in wild and unpredictable ways. On the other, the feds are rigging the game in the insurance companies favor. Just stay away.

Japan vs China Feud Will Secure Nuclear

Long ago, when I first purchased CCJ, in the midst of a nuclear reactor melting down on a coastline in the Pacific, I told you that there was more to this than the panic being cultivated by professional fire-alarm pullers.

And there were two primary reasons at that time which I gave. The first, and most obvious, of course, was that one does not just restructure the load production of a country’s power grid over night. Watching Japan struggle with prices as they import the coal needed to replace that energy has been an exercise in this concept.

Across the planet, other nations that declared their intentions to wean off nuclear energy are also realizing how difficult this task will actually be.

But the other main reason I gave why Japan, specifically, would not be divesting itself of nuclear assets was not economical. It was military.

Japan’s hardship is that it is an island nation with weak natural resources. And Her ancestral rival is a massive half a continent, sporting more than one billion people and rich natural resources just a short ship ride away.

In a peace time environment, Japan may have taken her sweet time (and much wasted money and hardship) restarting the nuclear energy program. The Japanese are a notoriously conservative culture, and if you have ever worked with a Japanese company, you know just what I mean by that.

But even Japan, with her slow, careful processions, has limits of patience.

Japan’s greatest threat is a blockade of supply routes. A steady flow of resources into the country is necessary to maintain it. These supply routes, not unlike the UK’s in World War 2, would prove a great headache and cause of domestic problems in a military conflict.

It’s bad enough importing food, goods, raw materials, munitions, etcetera. And having your nations power grid at the mercy of getting boats past enemy naval fleets is just one extra pitfall that Japanese military leadership will not want to deal with.

This was one of the main reasons Japan decided on the nuclear path years ago to begin with. A nuclear reactor carries enough fuel both active and in storage to supply full power for around 3 years.

Compare that to a coal plant, which under full load can require a delivery of about 15,000 tons of fuel a day. This approach requires a constant flow of fuel and also very large holding sites, both of which become attractive and hard to defend targets in wartime.

I bring this up because just recently, Japan’s leadership has reaffirmed the country’s commitment to safe nuclear power. A recent report from Cameco management issued guidance of a sizable fraction of Japan’s total nuclear assets beginning to come back online. This same report detailed that Cameco has observed Japan to be net buyers of nuclear fuel at this point in time.

This should be seen as reducing the uncertainty surrounding Japan’s fuel assets. One of the many worries supplying downward pressure on nuclear spot price has been that Japanese utilities may begin selling off unused fuel. This does not seem to be the case.

In the same presentation, Cameco also reassured audience members that Cameco will not be entering into any long term fuel contracts at these prices, which Cameco considers unreasonable. They are waiting for the market to set rates higher, and have instead dedicated themselves to shoring up the balance sheet and controlling costs to bide the time.

For the moment, the uranium market remains cold. But Cameco is committed to outlasting the cold spell. I remain very excited in the prospects of CCJ, and it remains my largest position at this time.

Well That Ended Anticlimactically

Here I was thinking CCJ would go on an epic run, and instead it decided to reverse 4.6% on a lazy Friday afternoon.

On the plus side, it and my other main positions (BAS, AEC, HCLP) all seem to be resting just above the higher moving averages. I’m going to pretend like I care about TA for a minute and assume that means paved glory in my future, next week.

China sucks and I’m sitting around just praying PGJ gets assaulted. The BRIC thing is just really a load of garbage. They’ve been shoveling this shit to private retail money for twenty continuous years now; meanwhile, to this day, three of the above four letters in said acronym don’t even have primitive shareholder legal protections in place worth a damn.

Pathetic.

Putin is bringing down US drones and generally showing off now, as if the inability to feed and cloth his own people (or other such humiliating realities of that Russian Exceptionalism lifetstyle) were somehow forgettable next to the nostalgic grandeur of a grey haired, 62 year old man suffocating on his own bullshit.

Suffice to say, if Bush were still in office, Putin wouldn’t have the balls to be trying any of this. I know you Obama apologists will be leaping around like faggots now, whining at me for being “unfair”. What’s unfair is us living in this day and age and still needing to explain how incentives and behavior work to you stupid assholes. Choke on some humility coming off the trio of failures that are Obamacare, Foreign Policy, and the DOJ before you open your mouths in my comments section. Unless I’m mistaken, outcomes still matter more than pathetic excuses and “intent”.

The only one of the BRIC’s I would even look at is Brazil. Even there though, no need to get tangled up in the state owned populism. I’m content to just sit back, crack a beer, and watch Venezuela and Argentina burn to cinders.

I’m 25% cash, a little less cocky from this week, and certainly not up 14.5% anymore (though doing quite well).

Russia Threatens to Confiscate Foreign Owned Property

Well they went and did it now.

This is a bold move, and one that is sure to escalate things quickly. Think about how much has been put at stake trying to lift Russia out of the pit of communism, over the past two decades. Think of Goldman Sachs’ Blankfein making cross continental trips all through the ’90′s, setting up access for foreign investment into Russia’s economy.

The move is crazy, of course. If Russia started hard confiscation of assets, you’re looking at a basic replay of what happened when they defaulted on their bonds in ’98. Economic stagnation, a plunge back into hard poverty, and all. Worse, even.

The trouble is, the Russian’s are just crazy enough not to care. The ’98 default itself didn’t make any sense. It was a clear blunder – to everyone – that would only hurt Russia and those who were trying to help support the country.

And they did it anyway. And the whole time, Russia’s “leadership” looked on with straight backs and the visage of complete confidence.

Threatening to confiscate assets to get your way is a lot like threatening to shoot yourself in the face. Sure it splatters the audience in blood and inconveniences them…but you’re the one that’s dead, idiot. Yet, here we are, watching “new” Russia follow in the footsteps of “old” Russia – plus Argentina and Venezuela – and you can’t help but wonder, do the people clutching the capacity to throw this switch know something that we don’t?

Like that keeping Russia-at-large somewhere just between the stone age (fighting polar bears with empty vodka bottles) and Flint, MI is personally the best outcome for them?

There’s a small part of me that’s tempted to jump around and start hunting for deals; scouting around for people willing to take $0.50 on the dollar for their now very much imperiled Russian stakes. But that small part is quickly squelched by the much larger part of me that wants nothing to do with gangster thugs running a cross between a cult and a crime syndicate.

Exhausted, Personally. But Everything Else Is Fine

I spent last night running around Detroit, doing what-have-you. I rolled into bed around two after midnight, and have spent the day in a stupor, daydreaming longingly of dreaming today.

CCJ is easing off a bit, but look at the move it made. This isn’t a problem, it’s earned a small nap. Much like the one I want to be taking.

Markets look tranquil, and I’m just waiting for the blaze higher to resume. Foreign debt is calm; holy hell! Greed 10 years are back below 7%. How did this happen?

Who would have guessed going long Greek debt in 2012 would be the trade of the decade?

ZZZzzz

Late Night Thoughts

Asia’s markets are settled this evening, in response to Turkey jacking their interest rates to 12% in the dead of night, if such sources as Reuters are to be believed.

Central banks have had such a firm hand on everything for the past few years, it really would not surprise me if we just shrug this off and keep going. But I’m not going to rest my hat on that this time.

Ultimately, jacking interest rates to 12% is really bad for growth. Turkey is an importer, so maybe this helps the rest of the world to up that production a little bit. But my concern has always been that we’d hit the point where the rest of the world couldn’t stand the US’ cheap money policies. I thought we were there with the EU, but they passed the buck somehow.

Where did that buck end up, I wonder?

Monetary Policy Remains Overwhelmingly Accommodative (And Outlook)

The fed decision to test the waters with a taper while I was away did surprise me, somewhat. Yet it did not phase me much and so I elected to remain on vacation, silent on the issue.

I would state now in hindsight that a $5B per month taper (with as much as another $5-10B in the works) would still put the Federal Reserve on path to add another ~$800B to its balance sheet in 2014. This remains colossal and would have the Fed assets outstanding at just under $5 Trillion by 2015.

They may very well have tapered by $5B/month just because they were running out of things to buy…(laughter)

If I were to state things that concern me as potential impediments to the US economy and growth, they would list (1) consumer slowdown from budget impacts (pension, healthcare costs, rents/mortgage, increased retirement contributions, etc), (2) foreign existential shocks (EU breakup, Asian crisis, similar collapse that disrupts foreign trade) – where exactly did the EU government debt go and why is it now suddenly not an issue? Who is buying it (ECB, Fed, banking scheme, inter-government trade imbalances, etc)? And what stops non-payment concerns from popping up again in the future? and (3) the election of a Republican majority

But banking solvency just isn’t on that list right now. Neither is inflation, really, although long term prospects of an uncontrollable outbreak of inflation remains a viable possibility. With credit expansion in this country limited to growth of government balance sheets, deflationary pressure is set to commence…until it doesn’t. In the meantime, another ~$1 Trillion of free money to those closest to the trough will keep a major disruption of financial assets here at home as a low probability outcome. Of course, this bodes ill for the “wealth equality” lot, but they’re too dumb to call the system out on that, so we maintain the course.

Concerns aside, I am optimistic. Recessions don’t last forever, and my concerns are outweighed by hope in outlook. I am very long (no margin) and prepared to reap the rewards of economic growth. It’s been almost six years; the system has been on a hyperactive outlook for problems which greatly reduces the likelihood that a real “Black Swan” manages to crop up. It could still happen of course, but with hundreds of thousands of financial professionals calling bubbles as quickly as problems crop up, and a full time central banking staff armed with an unlimited supply of money attacking them at first sight, how exactly is a crisis supposed to materialize from all of this?

The only room for crisis in the US is rampant commodity/asset appreciation, which remains benign. That or an elsewise major shock to the consumer. Financial assets and liquidity issues are covered.

Now, that being said, historically we haven’t had a period longer than 10 years without a recession since at least 1789 (and probably not since long before that either – I just lack records to verify a more robust claim). I’d say the expectation of a correction since the Great Depression is 5-10 years with occasional 1-3 year shocks intermittently. We’re past the small shocks phase, which would put the expectation at right about where we’re at.

These times are unprecedented and the support the Fed is willing to lend the markets (unlike any time in recorded history) makes me think we blow through the averages. I want to say this ship will have the wind to sail to years seven, eight or nine, uninterrupted. We may even match the record holder of 10 or above.

However, it would be foolhardy to doubt another recession will most likely crop up before 2020. The ever growing levels of margin debt to buy equities may well be the first sign of the beginning of the final run before that. Of course it could be nothing.

My belief then is that a long commitment remains the way to go. I have been positively surprised by recent developments that have overridden prior comments on wanting to have a larger cash position by about this time (end of 2013) that I made late last year. However, as gains are taken, a portion should begun to be set aside, starting sometime mid 2014 to early 2015. This should create a reserve build-up of steadily marching intervals (10-20%, with a 1-2% increase every month topping out at around 40-50% of ones account value) sometime around late 2015 to early 2016.

At such time, a second hard look should be had. Earlier and exceptional strength should trigger a reassessment of these statements. Casual to quality growth does not necessarily change them. A major weakness (such as a shock of a GOP majority and fear of monetary policy interference) of course may necessitate a sudden course change.

My most hated places to invest are land/real estate (excluding multifamily or renting derived), oil companies (excluding natural gas predominated), and retail (excluding facilitation to the ultra-rich).

My favorite places center around natural gas production expansion, uranium, coal, multifamily REITs, and I remain interested in holding physical precious metals in a full position in the event an inflation shock from significant expansion in credit hits the economy.

I’m indifferent to the insurance market – especially health insurance. It could swing either way; they crawled into bed with the devil so it’s all political at this point. On the one hand, the entire market is shifting in wild and unpredictable ways. On the other, the feds are rigging the game in the insurance companies favor. Just stay away.

Japan vs China Feud Will Secure Nuclear

Long ago, when I first purchased CCJ, in the midst of a nuclear reactor melting down on a coastline in the Pacific, I told you that there was more to this than the panic being cultivated by professional fire-alarm pullers.

And there were two primary reasons at that time which I gave. The first, and most obvious, of course, was that one does not just restructure the load production of a country’s power grid over night. Watching Japan struggle with prices as they import the coal needed to replace that energy has been an exercise in this concept.

Across the planet, other nations that declared their intentions to wean off nuclear energy are also realizing how difficult this task will actually be.

But the other main reason I gave why Japan, specifically, would not be divesting itself of nuclear assets was not economical. It was military.

Japan’s hardship is that it is an island nation with weak natural resources. And Her ancestral rival is a massive half a continent, sporting more than one billion people and rich natural resources just a short ship ride away.

In a peace time environment, Japan may have taken her sweet time (and much wasted money and hardship) restarting the nuclear energy program. The Japanese are a notoriously conservative culture, and if you have ever worked with a Japanese company, you know just what I mean by that.

But even Japan, with her slow, careful processions, has limits of patience.

Japan’s greatest threat is a blockade of supply routes. A steady flow of resources into the country is necessary to maintain it. These supply routes, not unlike the UK’s in World War 2, would prove a great headache and cause of domestic problems in a military conflict.

It’s bad enough importing food, goods, raw materials, munitions, etcetera. And having your nations power grid at the mercy of getting boats past enemy naval fleets is just one extra pitfall that Japanese military leadership will not want to deal with.

This was one of the main reasons Japan decided on the nuclear path years ago to begin with. A nuclear reactor carries enough fuel both active and in storage to supply full power for around 3 years.

Compare that to a coal plant, which under full load can require a delivery of about 15,000 tons of fuel a day. This approach requires a constant flow of fuel and also very large holding sites, both of which become attractive and hard to defend targets in wartime.

I bring this up because just recently, Japan’s leadership has reaffirmed the country’s commitment to safe nuclear power. A recent report from Cameco management issued guidance of a sizable fraction of Japan’s total nuclear assets beginning to come back online. This same report detailed that Cameco has observed Japan to be net buyers of nuclear fuel at this point in time.

This should be seen as reducing the uncertainty surrounding Japan’s fuel assets. One of the many worries supplying downward pressure on nuclear spot price has been that Japanese utilities may begin selling off unused fuel. This does not seem to be the case.

In the same presentation, Cameco also reassured audience members that Cameco will not be entering into any long term fuel contracts at these prices, which Cameco considers unreasonable. They are waiting for the market to set rates higher, and have instead dedicated themselves to shoring up the balance sheet and controlling costs to bide the time.

For the moment, the uranium market remains cold. But Cameco is committed to outlasting the cold spell. I remain very excited in the prospects of CCJ, and it remains my largest position at this time.

Previous Posts by Mr. Cain Thaler