What is the problem with Emerging markets?

Wednesday, November 27, 2013 Francisco Carneiro 0 Comments

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I have come across this kind of graph many times


what is the obvious conclusion here? If EM have 80% of global population, land mass, etc... GDP is below average they will have more growth than Developed markets going forward. I can accept this. However if EM people want to buy I-Phones, Coke, BMW's  i don't think EM stock market's will do much better than DM?

 Eventually some local consumption plays will do well.

 As the people who follow my blog already know , BIG Get Bigger is the big trend in the world and the big companies are not in EM, yet. Stick with DM equities.


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Long Inovation

Wednesday, November 27, 2013 Francisco Carneiro 0 Comments

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Druckenmiller described Google Inc. as the most “innovative company on the planet,” citing the company’s web-enabled eyeglasses and self-driving cars. He said investors who want to bet on innovation should buy shares of Google and those who want to bet against innovation should buy IBM shares.

 http://www.bloomberg.com/news/2013-11-22/druckenmiller-shorting-ibm-in-bet-cloud-computing-to-win.html
This is a very interesting interview and besides the Nikkei theme (min 6.40) he clearly cites the case for the new monopolies. Amazon & Google. I have posted several times in the last year about 2 themes

 Here http://thoughtmeme.blogspot.pt/2013/11/brands-monopolies.html

 a)Big get Bigger
b)Monopolies 
Well there is no doubt that some companies are going to win big, because of economies of scale, because of brand & because of R&D & Marketing dollars/budget. On top of this a lot of people love to buy the number 1 player which is a low risk option. If the number 1 can even provide a better service......

These companies, Google, Facebook, Priceline, Amazon, are going to win but are already very expensive. What to do?

 The smart money always loses money shorting bubbles because they cannot comprehend that it could go as high as it does
- Jim Rogers






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Not me i don't want to be poor!

Tuesday, November 26, 2013 Francisco Carneiro 0 Comments

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I don't agree with the Pope about economics


In this context, some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting. To sustain a lifestyle which excludes others, or to sustain enthusiasm for that selfish ideal, a globalization of indifference has developed. Almost without being aware of it, we end up being incapable of feeling compassion at the outcry of the poor, weeping for other people’s pain, and feeling a need to help them, as though all this were someone else’s responsibility and not our own.



APOSTOLIC EXHORTATION
EVANGELII GAUDIUM


The Pope speaks about a world that is not real

1.It's not true that the market's are "Unfettered" (not restricted). Regulation and the hand of the Goverment/Regulators has never been greater. There are rules for everything. The economy is paralyzed.
2.It's not true that the poor are worse when living close to very rich people.
3.Growth and improvement for the poor has a cost, some people get insanely rich. It has always been like that.
4.All the people that tried to impose a world without differences has created a tyranny.
5.The poor live much better in countries where there is free markets, the ones that create very rich people. I am sorry Pope Francis but this is the true.

What Pope Francis proposes is poverty for everybody


He chose to be called "Francis" after the Italian saint of the same name famed for choosing a life of poverty.

Not me i don't want to be poor

 some posts about this subject http://thoughtmeme.blogspot.pt/2013/10/equal-but-hungry.html










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Soon Government will give money away ......

Monday, November 25, 2013 Francisco Carneiro 0 Comments

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The table below shows how only those with incomes over $500,000 a year have benefited from QE. And the rich don’t spend, they save. The policy of getting money directly into the hands of the people who need it and who will spend it would be immensely popular politically. In other words, a tax cut for low-and-middle income tax payers, which is financed by selling government debt directly to the central bank.

13D Research, Kiril Sokoloff







Well i have written about this often. The worker's are being squeezed by the automation/Robotization process. Low & middle classes when they have money they spend. The rich when they get more money they save. The world has a demand problem, there is plenty of supply of everything but no demand.  One day  politicians will print and distribute a monthly check to everybody. Unfortunately that day is coming. I don't agree with this because earth cannot stand so much production/consumption. The option has to be produce less & consume less. people will have to live with less stuff. It's going to be a shock when people figure out that they are not necessary in the production process.....


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Brands & Monopolies

Wednesday, November 20, 2013 Francisco Carneiro 0 Comments

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There is excess supply of almost everything in the world. The only thing that i remeber from my Economics degree is Supply & Demand, and when supply is bigger than demand prices fall.
 
we can see that inflation in the Euro zone ( It's similar almost everywhere) in approaching zero! Of course if average inflation is approaching zero there are some parts of Europe already in deflation and other parts with a bit of it.
 
Governments in the last 10 years everywhere are running big deficits to make up for this Supply/Demand imbalance. But this intervention has some limits, when accumulated Government debts to GDP approach some high levels sometimes lenders don't lend anymore (Greece, etc...)


Since Governments can not keep spending to make up for this Supply/Demand imbalance central banks ( The FED in United States, BCE in Europe, and BOJ in Japan) are trying their best to awake the animal spirits and improve the willingness to spend all over. They do this through buying some securities in the markets and hope people who sell securities to them to spend or lend the money they get.
 
What they achieved is a big rally in stocks everywhere. Who has bennefit from QE. I guess the people who own stocks the rich people of the world. The workers are in a desperate situation where what they do is becoming redundant because of excess supply & automation.
 
This graph can give you as idea of who is doing well. Luxury Brands vs Retail for the middle classes.

Source :JPM

This graph in my view shows that in a world with excess supply you can fight with a lower price (Macy's, Kohl's or JCPenny) or you can have a brand. 

In the world we live on to have a brand it's a big plus because people want to buy what you produce for what it represents. What you do is still scarce in a oversupply of everything.
 
If i have to bet on what is going to happen, my bet goes like this, weak economy, keep the stimulus on, markets keep going up.
 
In this environment who can prosper? I think the Brands and the Monopolies. 


 
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Get a Job, son!

Wednesday, November 20, 2013 Francisco Carneiro 0 Comments

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Youngsters have got to stop thinking about becoming the next Zuckerberg. It's a trillion-to-one chance. What they need is mater and pater to say, 'Get a job, son.'
Alan Sugar 

The idea to study until you are well into the 30's taking a degree and post Degree is not a good idea anymore in my view.

1.First you make almost no money until you are into the 30's
2.You might get into debt
3.When you try to get a job sometimes people don't like candidates that have done nothing but studying until this age
4.If you get a very good job it's possible that you go to the highest IRS bracket paying up to 50% or 60% (In Portugal that is the case) of your income while you are still paying your debts.
5.Sometimes you study to be able to land your first job. If you can get a job do it asap and study while you are working.
6.Do sports all your life. You meet new people and people who are busy can do more things. Nothing is worse for the productivity than to have spare time.
7.If you start working in your early 20's (I got my first part time job at 16 and i work in BPI since i am 21, 26 years ago!) you make more money because you earn less and pay less taxes.
8.If you start saving a bit of money in your early 20's instead of early 40's it makes a big difference. Saving USD 1,000 for 40 years until you are 60 makes 95,000 USd at 4%  IRR. Saving USD 2,000 for 20 years at 4% makes 59,000 when you get to  60. You save the same amount but the result is very different.
9.When you are not used for 35 years to take an order to have a boss and to fight for a position, you are going to struggle a bit in a job.
10.When you are full of diplomas you might get the idea that you should only get a job in your area of study/degree and  that narrows your job possibilities.
11.There is a big income polarization but i think it's between shareholders/owner's of companies vs workers in general. Worker's vs workers i think the dispersion is getting narrower, perhaps there is still a difference between software/automation workers vs all the rest. The dispersion Worker vs Worker is smaller because of igualization policies, tax the ones that are doing well.
12.When you are in the 20's you can bear anything and do anything.

All in all i think Alan Sugar is right, just get any kind of job, study while working and do sports. 

Don't study to land the perfect job, it's not worth it anymore.



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stayin’ home

Monday, November 18, 2013 Francisco Carneiro 0 Comments

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American kids are stayin’ home these days. We knew that from anecdotes but now we know it given the hard data from the Census Bureau.
Unable to find jobs commensurate with their educations,college graduates are becoming what some are now calling “Generation Wait” and are bunking down with parents, or are joining up with friends in small apartments and condominiums, but clearly they are not out forming new housing units on their own.
They are delaying careers; they are certainly delaying marriages and they are delaying having children. We know this because the census bureau has reported that a historically low 23.3% of those Americans between the ages of 25-29 moved in the twelve months ending in March of this year. That is down from 24.6% the year previous and it is the lowest level since ’63! Indeed, the trend has been down since ’65 when a record 36.7% of those between those ages then moved. Generation Wait… that is precisely what is happening; they are waiting… and waiting and waiting… and….

Dennis Gartman from TGL one of the besd daily newsletters

It's not the 2008 Financial crisis, it's not the Banks fault, it's not the lack of regulation, it's not China, it's not the politicians the true is that the world doesn't need everybody to produce everything. Automation, mechanization, etc... make a lot of people expendable/without normal jobs. 
A person operating a machine can produce for 10,000 people. We are inventing new necessities/needs that didn't exist some years ago but many are very tech intensive and low labor intensive. (New games & apps ).

What to do?

1.Participate in the automation movement, became a programmer of software engineer. Make good money
2.Do something manual that cannot be done by a machine. Barber, therapist, personal trainer,  chef, bike mechanic, etc....  make little money
3.Invest in the Robotization/Automation. Participate and profit from it. If you are going to be replaced by a machine be a shareholder of the machine company
4.Be nice. There will always be demand for the personal touch.
5.Travel a lot cheaply and observe/learn.
6.Read the classics, nothing changes.
7.Don't let other people serve you, it's too expensive. Serve & charge for it, let others pay.
8.Be a regulator or police officer, there is a bull market for Government everywhere. If you like it (Not me) do it.
9.Do sports & meet lot's people


What not to do

1.Get into debt to take a useless diploma
2.Tell your kids that if they are good students they made it. It's not enough. That is why kids are staying home with their parents.





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Small is Not Always Beautiful

Friday, November 15, 2013 Francisco Carneiro 0 Comments

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Apple & Samsung take massive 109% of mobile industry profits while competitors lose money


The mobile market continues to be a two-horse race for profitability between Apple and Samsung, with the two rivals commanding 109 percent of profits — a number made possible because its competitors are actually losing money in the smartphone space.



Bigger get bigger is the strongest trend in business these days. Of course in this space many times the leader (SONY, NOKIA) get's destroyed by a new product/trend. In other sectors the nº1 position is much more resilient. However the point is that all the money is made by the nº1 or nº2,  and that is almost a Universal rule. Better to be big than good. 




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Pay People for Being Alive

Friday, November 15, 2013 Francisco Carneiro 0 Comments

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This fall, a truck dumped eight million coins outside the Parliament building in Bern, one for every Swiss citizen. It was a publicity stunt for advocates of an audacious social policy that just might become reality in the tiny, rich country. Along with the coins, activists delivered 125,000 signatures — enough to trigger a Swiss public referendum, this time on providing a monthly income to every citizen, no strings attached. Every month, every STwiss person would receive a check from the government, no matter how rich or poor, how hardworking or lazy, how old or young. Poverty would disappear. Economists, needless to say, are sharply divided on what would reappear in its place — and whether such a basic-income scheme might have some appeal for other, less socialist countries too. 


Well the problem of the world is lack of demand is not lack of supply. That means there is overcapacity in almost everything. Deflation is the word. What to do? QE is a very clumsy tool because it helps the rich people (who own shares) to much vs the working class. This proposal would be considered foolish some years ago but today i think it's a possibility (My Colleague Rui Martins Santos has proposed in the past a monthly check to people above 60, no strings attached) 
However i don't think we should do it and the reason is the environment. If we give incentive to consume more stuff, people will build even more stuff and we will have to keep doing it. Mother earth can not stand so much resource depletion. I think the way for the world is to live with less, to throw less food away, to forbid private cars in the center of a city, to ride bicycles, etc.....We need to cause less impact on the planet and we can't subsidized even more consumption.


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Big blue will win most of the times

Wednesday, November 13, 2013 Francisco Carneiro 0 Comments

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Perhaps nowhere is this more visible than in the recent strategy of smoothie retailer Jamba Juice, which in order to battle a 4% drop in Q3 same store sales has decided to radically transform its entire retailing strategy by getting rid of labor, cheap, part-time or otherwise, altogether. Presenting the biggest threat to minimum-wage restaurant workers everywhere: the JambaGo self-serve machine that just made the vast majority of Jamba's employees obsolete. Coming soon to a fast-food retailer near you.



Well nothing new here. Almost everywhere slowly but surly we see automation & robotisation. Labor is a cost and if you want to survive you have to lower the costs. It's difficult to figure out a world where unemployment is not growing everywhere. In this kind of world taxes must be very high on the ones that have a job to sustain the ones that are at home doing nothing or studying things that are useless. Another solution was to tax automation and subsidizing hiring people but that has not been the trend.

Perhaps a good solution would be to lower the corporate tax with the number of people the corporation employs. Without an incentive Big Blue will almost always win vs man



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My Top 5 Picks from last month

Tuesday, November 12, 2013 Francisco Carneiro 0 Comments

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1.When making a decision of minor importance, I have always found it advantageous to consider all the pros and cons. In vital maters however…the decision should come from the unconscious, from somewhere within.
Sigmund Freud

2.There is no reality, only perception.
Dr Phil

3.Never tell your problems to anyone. 20% don't care, and the other 80% are glad you have them
Lou Holtz

4.When people are free to do as they please, they usually imitate each other.
 Eric Hoffer
(1902 - 1983) 

5.All the tools in the world are meaningless without an essential idea
George Lois, Mad Man

and one more..........................

6.You are either putting weight or loosing, it's impossible to stay stable.

Me, Francisco Magalhaes Carneiro




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Just execution = Unemployment

Tuesday, November 12, 2013 Francisco Carneiro 0 Comments

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Here’s the concept, as explained to me by Briggo CEO Kevin Nater: “There’s this unbelievably beautiful supply chain for coffee,” he says, from the way the beans are painstakingly cultivated and harvested in countries like Honduras to the way they’re packed and shipped and roasted to perfection—“and then, at the last step, when you’ve spent all this time and money trying to make the perfect product, there’s a person brewing the coffee. And that has the potential to really just kill the customer experience. So why not automate it?”................................................................

 The Briggo machine may never be able to replicate the full, sit-down, Central Perk experience, but then again that’s not what every Starbucks customer is looking for. Starbucks is so successful because it dominates the market for two types of customers: those who want a place to sit down and chat with friends or get some work done, and those who just want a quick, reliable caffeine jolt on their way to work. It’s the latter market that might ultimately be better-served by a Briggo, or something like it. And that’s a very, very big market.


Slowly but surely all the jobs that are just execution are going to be replaced with machines. If you are not nice, talk to your customer, etc... you can be replaced. Be nice, be very nice or unemployed.


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After a new high we probably will have another new high

Monday, November 11, 2013 Francisco Carneiro 0 Comments

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Companies are racing to issue stock and bonds because markets are high, offering great prices for sellers, said Michael Farr, president of Farr, Miller & Washington, which oversees more than $950 million in Washington, D.C.. Issuers are grabbing current terms before markets fade. That makes experienced investors ask themselves a classic question: If the smart money is selling, should we be buying?

 http://blogs.wsj.com/moneybeat/2013/11/10/flurry-of-stock-bond-issuance-is-a-danger-sign-for-markets/
This plus this graph from John P. Hussman, Ph.D. What to say? SELL ? No way i think after a new high we will probably will have another new high. Even if the next 10 years are not going to be great i think the next year could be very ok? Why? because when the markets are at new highs nobody is loosing money (Except the shorts & skeptics)  and the i see more pressure from people in the sidelines to buy than people that are in to exit. When is the ideal time to sell? after a big correction has started, you have to lose some 10% to 15 % and let some time pass before cutting. 



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Not pretty but effective

Monday, November 11, 2013 Francisco Carneiro 0 Comments

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Why, then, did weak teams play in a way that made it easy for good teams to do the very things that made them so good?

Read more: http://www.newyorker.com/reporting/2009/05/11/090511fa_fact_gladwell?printable=true&currentPage=all#ixzz2kKNXz1q9

This is a long article about how David can beat Goliath but with a caveat. David can not play the game by traditional/Goliath rules. If he does even with a top rate attitude usually he loses. What David can do is to play in a different way a way that put's David & Goliath at the same level.

How can that be? Well i don't have time to train properly for my bike (i can train up to 8 hours a week). So what i do is to focus on something i can do and it makes a big difference in Endurance sports.  Nutrition. I am a almost 100% Veggan and that has made a big difference. 

In another situation many years ago i was racing in a Canoe race in river Mondego representing BPI with Rui Nápoles my partner in the boat. We were in 3rd place with the finish line in view and the 2nd team some 10 meters ahead of us. The water was shallow (some 20 cm ) so i jumped out of the boat and pushed the back of the boat with my hands claiming the 2nd place in the race. Not pretty but effective.


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Just try to improve a bit..... and you will do well

Friday, November 08, 2013 Francisco Carneiro 2 Comments

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"The only person you should try to be better than is the person you were yesterday." - Anonymous

This is the same idea as in the Book Mindset from Carol Dweck. This is a book that really can change your life. The idea behind the book is that in the fixed mindset, people believe their basic qualities like intelligence are fixed and either you have them or not. They spend time proving that they have it and they don't like to lose because it implies that you are not so smart aftar all.

In the growth mindset, people believe that you can grow all your basic abilities through dedication and hard work. In this frame of mind people love to learn, to try new things and in result they really improve. Almost all the big winners in history are in the growing mindset campus.

In the bike my approach has been to improve a bit from what i did in the previous season, and that has served me well. Either on the nutritional front or in the cardio front i just have to a bit better than last season. And is not easy at all. But it's enough for me to do very well.

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Adapt or die

Friday, November 01, 2013 Francisco Carneiro 0 Comments

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Participate of course

Friday, November 01, 2013 Francisco Carneiro 1 Comments

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It looks like the US market is getting expensive

 What do do when you see a bubble forming? Participate of course


Someone said it's easier to make money buying something expensive and that something get's more expensive that something cheaper to upgrade....
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