The Big Picture |
- France’s Nuclear Dependence
- Look Out Below (Japanese Nuclear Edition)
- Japan and Bahrain. Oh, My!
- Explaining “Moral Hazard” to Salespeople
- Japan’s International Investment Position
- Monday Readings
- Bruntwood Prize for Playwriting
- History of Microsoft
- Secular Bear Markets (inflation adjusted)
- No, Kudlow Did Not Mean That . . .
| Posted: 15 Mar 2011 03:14 AM PDT |
| Look Out Below (Japanese Nuclear Edition) Posted: 15 Mar 2011 02:45 AM PDT
> Tokyo Electric Power Co.'s earthquake stricken nuclear power plant was rocked by more explosions and fire. There have been reports of additional radiation leaks as plant workers struggled to avert meltdown. Japanese stocks got shellacked, closing down more than 10%, while European bourses fell 3-5%. More shortly . . . |
| Posted: 14 Mar 2011 08:30 PM PDT Japan and Bahrain. Oh, My! > Risk management means sell now and then hope you are wrong. This morning we took Japan to zero weight. This is a huge step in view of the fact that the weight of Japan in global indices is 21%. We rarely go to an extreme like this. As Bill Witherell wrote this morning, the Kobe quake high to low was about 25%. That was our guide. We totally disagree with those who said hold. (Sorry, Jim Cramer, we like you, but we are on opposite sides on this one.) It is a mistake to hold when there is an uncertain and developing negative risk. We have that in Japan. Note: measure risk by the size of the evacuation zones around the reactors. That is official feet moving not official mouths talking. We mourn for the many thousands there who are not safe and for the loss of those who are innocents. We are thankful that our adopted family is alive, notwithstanding their pain for their countrymen. Now to this other issue in a very complicated and fast-moving world. The Saudis have moved troops into Bahrain. They are hoping to suppress the latest chapter in the Shia-Sunni war. This is a contest between Tehran and Riyadh. Iran vs. Saudi Arabia. Shia vs. Sunni. It is nothing less. See it any other way and you miss the “big picture” (as Barry Ritholtz calls it). Risk management has you in cash and in conventional energy like oil and gas. Half your portfolio needs to be in defense. Ours are. The world is in terrible shape because the developed nations are debt-hamstrung and cannot easily respond to crisis. They can only talk (no fly); they cannot act. "Walk softly and carry a big stick" has morphed into speak loudly and be disbelieved. We mourn for our friends and their neighbors in Japan. We worry for our grandchildren in America. We believe that the Congress of the United States rivals scorpions in popularity. They gave us our national policy impotence. We also believe that the true freedom fighters in MENA are being slaughtered. 45 years in this business, and we cannot remember a mess like this. We are in our highest cash since Lehman-AIG and overweight energy and raising defensive positions in our US stock market accounts. Bill Gross may be wrong; Treasuries may rally a lot. They are the least worst in a crisis. The public statement of the Bahrain Ministry of Foreign Affairs in regards to the GCC forces arriving in the Kingdom of Bahrain is below. "The GCC Peninsula Shield coalition forces arrived in the Kingdom of Bahrain today following recent events, to help protect the safety of citizens, residents and critical infrastructure. The forces' involvement follows the principle of unity and the interdependence of the security of the GCC and the common responsibility of the GCC countries in maintaining security and stability. At their recent meeting, GCC foreign ministers confirmed the unity of purpose of the Gulf Cooperation Council in the face of any danger to any of its countries, and to consider the security and stability of the GCC countries as integral and inseparable. Joint defense agreements among the GCC stress the importance of security and stability to achieve the prosperity of the region and maintain achievements. These were established to deter anyone from violating the security and stability of GCC and or seek to raise discord among citizens. The Bahrain Defense Force General Command calls on all citizens and residents to cooperate fully and to welcome the GCC Peninsula Shield Force." You figure out the rest. I am going to try to get a few hours sleep. ~~~ David R. Kotok, Chairman and Chief Investment Officer |
| Explaining “Moral Hazard” to Salespeople Posted: 14 Mar 2011 06:00 PM PDT The Verizon letter arrived at home, exhorting us to “Renew now and save $100 on a new phone.” Mrs. Big Picture was in no hurry to upgrade. She had been dragging her feet replacing her purple Motorola Razor (really), which she actually liked. I, on the other hand, was hating my aging Blackberry. But during some errands Sunday, we ended up near a Verizon store. We each got the iPhone 4, which I am happy to report actually allows you to make telephone calls. I took the bigger data plan, and the insurance, covering “lost, broken, stolen, cracked, wet” damage to the glass beauty. Insurance is something I almost never buy, but the replacement price of the iPhone, combined with the number of cracked screens I have already seen made it imperative. The missus found a case the exact same shade as her purple Moto-Razor. I didn’t see anything I liked, and knew I would find something fun online. That is when one of the sales people told me I should really get a case “to protect the phone.” I tossed the phone up and caught it, then (half-jokingly) said: “I don’t need a case, I have insurance.” She was absolutely aghast. I smiled and said to her: “Now you understand Moral hazard.” I don’t think she got it . . . > PS: This is the case I ordered, which I fully expect will help me in the fast corners . . .
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| Japan’s International Investment Position Posted: 14 Mar 2011 03:00 PM PDT The following table is a detailed analysis of Japan's international investment position from the Ministry of Finance. Using the latest data is from 2009 and the year-end exchange rate the country held $5.96 trillion of international assets with a net position of $2.8 trillion. In a sharp contrast with its public sector finances, Japan has the strongest net international investment position of any country. This also compares to the negative U.S. net international investment position of $2.7 trillion at year-end 2009 and a major reason why a U.S. Japanese-type deflation scenario is totally flawed, in our opinion. It's highly unlikely the Dollar will experience an 80 percent secular appreciation in the aftermath of the bursting of the U.S. real estate bubble as the Yen has, in our opinion. On December 31, 1989, the peak of the Japanese real estate and stock bubble, the Yen closed at 143.80 and is now at 82. This has hurt the export-oriented economy and one reason why the NIKKEI is still down over 70 percent from its December 1989 peak. Japan's strong international investment position is why some believe the country could sell and repatriate some of the assets to finance reconstruction, which would put upward pressure on the Yen. It appears the policymakers have drawn a line in the sand at the 80 level, however, and will do whatever it takes to protect their exporters.
(click here if chart is not observable) |
| Posted: 14 Mar 2011 02:00 PM PDT Some really interesting reading today:
What’s interesting to you? |
| Bruntwood Prize for Playwriting Posted: 14 Mar 2011 01:09 PM PDT Someofmywork by Jim Campbell:
Bruntwood Prize for Playwriting from SomeofmyWork™ on Vimeo. Manchester/London, UK |
| Posted: 14 Mar 2011 12:00 PM PDT We interrupt our usual Apple fanboy ‘tude for this cool chart porn via social media graphic: > |
| Secular Bear Markets (inflation adjusted) Posted: 14 Mar 2011 09:30 AM PDT Fabulous set of charts looking at inflation adjusted S&P composite during major secular bear markets, via The Chart Store: > Secular Bear Markets
~~~ Here is the current crash and snapback: 2007-09 Bear Market
~~~ Prior bear markets (WWI, great Depression, 1970s) after the jump
1906 – 1921 Bear Market
~~~ 1929 – 1949 Bear Market
~~~ 1968 – 1982 Bear Market
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| No, Kudlow Did Not Mean That . . . Posted: 14 Mar 2011 07:30 AM PDT The intertubes are all abuzz about something Larry Kudlow said on TV last week:
Now, c’mon. This was obviously little more than a slip of the tongue. Its LIVE TV for crying out loud — the guy is on at least 2 hours a day. Everyone who does these live shows eventually trips over their own tongue. That doesn’t mean it was a major Freudian slip revealing his true thoughts. Understand that I disagree with Larry about pretty much EVERYTHING. I cannot ever recall being booked on the show where we didn’t have a significant debate about a major issue: We disagreed about nearly everything George W. Bush did, about the credit bubble in 2005, the housing boom in 2006, why you should not buy the banks in 2007, why the market was so dangerous in 2008, why the bailout of Bear Stearns was a terrible idea, and how all of these big banks committed suicide. But Kudlow did NOT mean what he actually said . . . ~~~ I’m scheduled to do Kudlow Thursday night,and I’ll ask about this . . . |
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