November 2009
41 posts
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Who Is Betting On The Yen?
Betting on the currency of a country on the verge of bankruptcy is an interesting play. But traders are betting on the yen as we speak. It sure could work on a short term basis, but I still think that Japan will face the wrath of the bond market in the next 18-24 months.
But I am not a trader …
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Is That Deleverage That I See?
Fed balance sheet might have exploded, but banks sure are not lending out. Welcome to a deleveraging world.
Source: St. Louis Fed
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The Value Of Simplicity
Private equity firm TPG got a heavy tax bill from Australian government.
MELBOURNE, Nov 25 (Reuters) - Australia’s tax office has hit U.S. private equity group TPG [TPG.UL] with a $628 million bill for tax and penalties, in a dispute that threatens to deter further foreign investment in the country.
TPG last month sold its stake in top Australian department store chain Myer (MYR.AX) in...
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FDIC Funds Go Negative
With 552 banks still on the “problem list” and a negative balance in insurance funds, guess who’s the next candidate for a federal bail-out.
Banks earned $2.8 billion in the third quarter, but loan balances plummeted and the fund that insures their deposits had a negative balance of $8.2 billion.
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Hard Times For EU Grasshoppers
Ambrose Evans-Pritchard talks about Greece coming sovereign debt crisis, but could as well be talking about Italy:
Euro membership blocks every plausible way out of the crisis, other than EU beggary. This is what happens when a facile political elite signs up to a currency union for reasons of prestige or to snatch windfall gains without understanding the terms of its Faustian contract.
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Peg Me Baby
Check out this Google Finance Graph of USD / CNY exchange ratio vs USD / EUR
The last 18 months peg might actually be not far away from market price …
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“Short-term US interest rates turned negative on Thursday as banks frantically...”
– FT.com / Markets - Short-term US interest rates turn negative
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More Statistical Recovery From Japan
David Rosenberg says that, actually, Japan GDP was more or less flat nominally while deflation boosted real GDP 4.8% …
Speaking of Japan, while many pundits waxed over the “real” GDP expansion of 4.8% at an annual rate in Q3, the entire increase was due to the negative deflator. In fact, the economy continues to deflate at such an extent that GDP in nominal terms contracted at a 0.3%...
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Riding Giants
At an HBS event tonight in Milan, the managing director of McKinsey Mediterrenean Complex Vittorio Terzi said that drivers for growth are 65% momentum (or riding the right wave), 5% excellence (or being better at executing than your competitors) and 30% M&A.
How good you are impacts the final outcome only at 5%! So you’d better pick the right wave to ride …
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“My advisers have told me that between the fourth quarter of 2007 and the second...”
– FT.com / Columnists / Martin Wolf - Grim truths Obama should have told Hu
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“My view is that markets are still in denial about the structural wreckage of the...”
– China has now become the biggest risk to the world economy - Telegraph
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A Wall Of Debt Coming Due, And Equity Too
The effects of the booming years of the credit bubble 2003-2007 will take a long time to work through the system. Issuance of leveraged loans and commercial real estate mortages increased 2x and 4x respectively during the bubble, and are now coming due.
From the Financial Times Wall of US maturing debt threatens to extend crunch article on November 12:
About $2,700bn of commercial mortgages...
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“7 years in, Wal-Mart had 2 stores. 13 years in Starbucks had 5 stores. 8 years...”
– Jim Collins at Inc 500
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Building Things
Chris Dixon adds more thoughts to the idea vs execution debate:
The reality is ideas don’t matter that much. First of all, in almost all startups, the idea changes – often dramatically – over time. Secondly, ideas are relatively abundant. For every decent idea there are very likely other people who’ve also thought of it, and, surprisingly often, are also actively pitching investors. At an early...
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China vs USA In A Picture
Less then 200 years ago, the United States represented 1.8% of world economy. It peaked above 30% in the eighties and is now below 25%. China was above 30% in 1820, went back down below 5% and is now catching up quickly.
Courtesy of Financial Times
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World Bank Numbers Via Google
Google made World Bank data easily accessible, I love it.
Here’s the Gross National Income in PPP dollars of United States, China, Germany and Italy:
And below is the gross national income per capita in PPP dollars of United Sates, Japan, Italy, Spain, Brazil, China and Russia:
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“You can become wealthy by creating wealth or by appropriating wealth created by...”
– Very insightful article on rent seeking vs wealth creation by John Kay: FT.com / Columnists / John Kay - Powerful interests are trying to control the market
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BOE Inflation Report →
Interesting statistics on the UK economy via ZeroHedge.
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The Wisdom Of AdMob’s Founder Omar Hamoui -... →
Interesting links to Omar Hamoui’s interviews and thoughts
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Over $5 Trillion Of Government Bonds Issuance In...
and that excludes emerging markets …
$2,000 billion in the US
€1,000 ($1,500) billion in the Eurozone (up from €600B in 2008 and €900B in 2009)
Y149,204 ($1,658) billion in Japan (up from $1,535 billion in 2009)
Source: FT.com / Capital Markets - Threat from large budget deficits looms
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Spending And Income Actually Increased In...
Casey Mulligan pulls a shocker:
So a year later, in September 2009, after living through a year of “disaster,” how did real consumption expenditure (one economists’ favorite measures of living standards) compare to what it was in September 2008?
What about real disposable personal incomes: the amount of income households have on hand to spend?
Both of these are HIGHER in...
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Leverage And Internet Businesses
Scalability and leverage offered to internet businesses are unprecedented. Network effects create a system with exponential paths for growth. Small differences (in the “exponent”) drive big differences in the outcome, with the appearance of power law concentrations and “winner takes all” effects.
Naval Ravikant says it best in his post “The returns to...
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Sometimes Markets Can Disappear
Like the encyclopedia market. Josh Kopelman reminds us of the creative destruction process:
Today Microsoft announced that they will be closing Encarta — an apparent victim of Wikipedia.
The product that disrupted the encyclopedia market in the nineties (Microsoft Encarta), was disrupted itself by a rush to the bottom.
Will this happen again? Old media comes to mind …
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Google Acquires AdMob For $750 million
Now that is a big, quick exit!
Founded in January 2006, nice exit in 4 years for founders and guess who … Sequoia Capital … that sold yet another portfolio company to Google.
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The Value Of Money
Through my fabulous finance/economics news finder, I found this interesting piece on the value of money and the balance sheet of a central bank:
A Ponzi scheme is a financial institution with liabilities and no assets backing those liabilities. Paper money can operate just like a Ponzi scheme, but with one important difference. Mr Ponzi promised his clients high rates of interest and/or capital...
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“Lee argues that the carry trade has two prerequisites; interference in the...”
– Carry trades | Buttonwood’s notebook | Economist.com
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Deleverage: The Supply Side And The Demand Side...
Deleveraging is not only driven by credit crunch (supply side of credit, or banks) but also from an effort by companies to save, pay down debt, hoard cash to improve their resilience in uncertain times.
The Huffington Post has an interesting round-up: Citigroup, Bank Of America Among Companies Hoarding Cash
Supply side: banks are restricting credit and hoarding cash.
The four largest U.S....
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Oh Japan!
The Telegraph has a nice summary of the recent discussion on Japan public debt situation:
It is Japan we should be worrying about, not America
Here are my previous blog posts on Japan.
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Flight To Quality In Venture Capital Commitments
Flight to quality continues, as VC firm Greylock Partners raises its 13th fund of $575 million in 4 weeks and attracts Reid Hoffman as investing partner:
Reid Hoffman, the founder and chairman of popular professional networking site LinkedIn, is joining venture firm Greylock Partners as an investing partner. The firm also announced today that it has raised a $575 million fund, its thirteenth.
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Population Peak Theory
Sometime between 2020 and 2050 the world’s fertility rate will fall below the global replacement rate.
Think about it for a moment. We will actually witness the peak of world population.
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“So the combined effect of the Fed policy of a zero Fed funds rate, quantitative...”
– Nouriel Roubini: Mother of all carry trades faces an inevitable bust
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“I then asked my friend, “so why would they ever use the Google (non open source)...”
– Google Redefines Disruption: The “Less Than Free” Business Model « abovethecrowd.com
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Thoughts On Demand For Treasuries
The Fed completed its $300 billion Treasuries purchase program.
Fed purchases have helped buttress demand as the U.S. sells record amounts of debt to finance a budget deficit that exceeds $1 trillion for the first time. Total sales of Treasuries will increase to $2.38 trillion in the fiscal year that began Oct. 1, from $1.81 trillion in the prior 12 months, primary dealer Goldman Sachs Group...
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“The Japan-US comparison is not generally compelling, particularly as Japan ran a...”
– Baseline Scenario, October 30, 2009 « The Baseline Scenario
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