Notes for Tuesday:
0.“If cash flows and expected growth have not changed over the month, the
price of equity risk has jumped from 5.38% at the start of the month to the
5.89% on October 26, putting it at the high end of equity risk premiums in the
last decade.
Damodaran
1.From Bloomberg:
Angela Merkel’s announcement yesterday
marks the last chapter of her long domination of German politics. She is
stepping down as the head of Germany’s Christian Democratic Union and says she
won’t run for re-election. What’s less certain is whether she will see out her
full term as chancellor, which might run until 2021, and whether the country’s
political center can survive without her.
Nothing new
here Schroeder left the party in 2004 and stayed as chancellor.
2. The polls are showing that the Republicans
will lose the House. That definitely has capital scared. The Democrats are just
hostile right now and it does not matter if something is good or bad - they are
simply out for revenge. That is what has capital really upset.
3.From Clifwater Weekly
(Brazilian Macro Manager #1) Long, then Short BRL: Far-right populist
Jair Bolsonaro is widely expected to defeat his left-wing opponent Fernando
Haddad in the nation’s final presidential vote on Sunday. Bolsonaro’s win
will lead to a nice bounce, and which will be nice entry point to short
BRL. Bolsonaro’s honeymoon period won’t last long – he’s political
unsavvy, congress remains very fragmented, and Brazil faces considerable fiscal
headwinds. This will ultimately lead to downward pressure on the BRL and
Brazilian equities
4.Price of Power in Europe
My country Portugal despite being one of the poorest have one of the highest prices of Power in Europe, 0,22 per kwh above the European average 0,2!
in 1987 the year i started working in the stock exchange doing research stock's (S&P) were 19% above the 200 day moving average, a bit too much. after the crash they were 28% below the average.
After than the Bull market continued until 2000 with a big scare in 1998.
what is happening now?
I don’t see a recession
anytime soon so I see this market correction as a “correction” and not a Bear
market. We were 7% above the 200 day moving average at the end of September and
now we are 5% below the 200 day moving average on the S&P. Is the correction done? i don't know but some steam was liberated from the stock market. we are ready for the next leg up.
my vision. chop until the elections and then we resume the Bull Market.
The eurusd just gave a
bullish sign for the EUR. 1,1792, normally when the USD is weak everything goes
up. The American stock market is doing well with the Doillar strong if it gets
weaker it could be better.
From Gary Savage service
We are in a Bull market soon we will have good surprises everywhere. how to play the Bull market. There are several ways to play one of them is to buy the strongest sectors and just have patience
Poverty is not
socialism. To be rich is glorious.
Deng Xiaoping
I came across this in The Economist this month
Abraaj, a private-equity firm, files for provisional liquidation
The firm dipped into investor funds for its own corporate purposes........................A review from Deloitte, an auditor, concluded that it had covered its own expenses expenses with investors money from the health care fund and another.The money was replaced in the helth care fund but the other fund was left short of $95 million.
Abraaj Capital was the biggest private equity firm in the Middle East. They visited me in 2006 introduced by a European Investment Bank. I remember this meeting and kept the book (picture below) they gave me because the picture of the new fund was from Lisbon!
I asked them about the picture and they said its probably some bridge in the middle east. Not a big mistake but this bridge looks like the Vasco da Gama bridge in Lisbon. Even the painting blue & white is exactly the same. I didn't invest but i thought they were a bit careless.
To dip your hand in the investor funds is not careless it's criminal....
This is the title of a great GaveKal piece by Louis Gave
DB is down again today
why banks are underperforming big time? i guess the most lucrative parts of the business, trading , market making were shut down by the regulators. On top of that the costs of regulation compliance etc... just keep rising.
On top of that when the interest banks charge companies is much higher that the GDP growth rate there is going to be trouble ahead. In Europe many countries the costs of financing debt are higher than GDP growth Italy, Greece, etc.....
“How To Build A Company Where The Best Ideas Win”, Ray Dalio
only the objective make this company ahead of almost everybody. Most companies do things just because it's the way they do things. No one knows why!
in my view the way to do well is to use data/information and as Isaac Asimov explains in his Foundation series.
The premise is that with the use of statistics you can gather up all prior history and use it to predict the future.
Bridgewater is not a quant shop but they definitely use data extensively.
when you use data to figure out what to do how does it work in practice?
a)you find people who were successful and see what they have done. if there is a pattern do it.... If the sample is short don't use but if you find thousands of people in history who have done something perhaps ......it works
b)you find some sign that usually precedes x if you find that sign you know x is probably coming soon again the sample is key
c)you find something that has a probability of 60% should you do it? depends if it's only one bet i wouldn't do, but if you can do thousands of small bets with a 60% probability i would win for sure. i would not play russian roulette because despite having very good odds.....
most companies just do what they do without knowing why, just try to implement the system where the best ideas win how do Bridgewater do it
one very interesting feature of his company is the weight each person opinion has.
if you have been right recentely your opinion is worth more than the next guy
One system that can work is to put a very smart guy as a CEO and he listens to lot's of people and just decides at the end trying to figure out what is the best idea. It doesn't make you the best company but you could survive
