Showing posts with label ECONOMICS. Show all posts

One lesson from David F Swansen



Many years ago in 2004 BPI invited the great David Swansen from Yale Endowment to speak to our clients. one of the messages that he left was this

ILliquidity accompanies several characteristics prized by serius investors. Less information tends to be available on illiquid securities, creating an opportunity to be rewarded for uncovering nuggets of data relevant to valuation.

David Swansen, page 91 of Pioneering Portfolio management

Apparently in the Hedge Fund area the less liquid funds perform better. why? because they can do things that the liquid ones can't do

what 

buy less liquid an obscure investments




The warren Buffett strategy


low vol stocks + leverage = Beat the market


Image result for low volatility anomaly graph



From Wikipedia

The low-volatility anomaly[Note 1] is the observation that portfolios of low-volatility stocks have higher risk-adjusted returns than portfolios with high-volatility stocks in most markets studied. The capital asset pricing model made some predictions of return versus beta. First, return should be a linear function of beta, and nothing else. Also, the return of a stock with average beta should be the average return of stocks (this is easy to show given the first assumption). Second, the intercept should be equal to the risk-free rate. Then the slope can be computed from these two points. Almost immediately these predictions were challenged on the grounds that they are empirically not true. Studies find that the correct slope is either less than predicted, not significantly different from zero, or even negative. Also, additional factors are predictive of return independent of beta.[1]
Black proposed a theory where there is a zero-beta return which is different from the risk-free return. This fits the data better since the zero-beta return is different from the risk-free return. It still presumes, on principle, that there is higher return for higher beta.
The low-volatility anomaly has now been found in the United States over an 85-year period and in global markets for at least the past 20 years.[when?][2][3][4]
Research challenging CAPM's underlying assumptions about risk has been mounting for decades.[5] One challenge was in 1972, when Jensen, Black and Scholes published a study showing what CAPM would look like if one could not borrow at a risk-free rate. Their results indicated that the relationship between beta and realized return was flatter than predicted by CAPM.[6][Note 2]
Shortly after, Robert Haugen and A. James Heins produced a working paper titled “On the Evidence Supporting the Existence of Risk Premiums in the Capital Market”.[Note 3] Studying the period from 1926 to 1971, they concluded that "over the long run stock portfolios with lesser variance in monthly returns have experienced greater average returns than their ‘riskier’ counterparts".[
Image result for low volatility anomaly AQR


Are we entering a new bull market?

Value line is an index where all the companies have the same weight. It touched 500 points in 1997, 2007 and 2014 and recently is trading at 554! Are we entering a new bull market after 20 years consolidating ? i hope so i want to live a easy period to make money.

what can make everything jump? Technology & Productivity 

Live in Portugal if you are not a local........





In Portugal the Government as a dual system if you are Portuguese you pay 50% marginal tax above 80,000 euros /year plus 11% Social Security  plus 24% VAT plus ......If you are a new resident in Portugal you pay 0% for 10 years or 20% if you get income locally.

This has make real estate skyrocket and make life difficult for Portuguese who live in Portugal. Big taxes and high real estate prices.

Don't tell me what to buy, tell me when to buy

healthy market

When the advance decline line is making new highs usually the market follows to new highs soon. In 2000 and 2007 the market was making new highs and the advance decline line was going down. Not the case today.



Why salaries don't grow

Very good paper from Barclays with an introduction from CEO Jes Staley. in a nutshell this is the explanation why salaries will keep going down. Jobs are not replaced by Robots, parts of the jobs are simplified and automated. So anyone can do it. Almost anyone can be a UBER driver. the taxi driver is not necessary anymore.



According to citi not yet time to throw the towel !


According to citi not yet time to throw the towel !

Despite the recent volatility, a checklist of stock market indicators is flashing few sell signals indicating the current correction should be bought, according to Citigroup Inc.

my take is the following, i was going to buy if today we open gap down, it looks that is not going to happen . I am writing this monday early morning.

however if the market closes below February lows all bets are off i don't care about Citi i will trow the towel.



2 Ideas for Today


Commit to being great, not just average. Any industry can be a painful profession for average and bottom performers, but massively rewarding for those that are great. Those that live, breathe and eat their profession, those that are obsessed, become great.

Grant Cardone



Bad Career Advice: Do What You Love and You'll Never Work a Day
Oh man, this one kills me. It’s so frequently repeated that hardly anyone questions its truth anymore. And the sad fact is this: If you do what you love for a living, you’ll probably end up loving it a little bit less.

Chrissy Scivicque, FORBES


I agree with this two thoughts my view is to be of service, do something that the world wants and needs and you will be fine. Do what you love just ruins what you love. I love to ride my bike but if i had to Chaperone groups of tourists at a sub par pace i would probably hate it.
a job it's a job and if you invest a bit one day you would love it (the other way around)


the view from my window this morning

enjoy a great day



I think there are fatal crashes with men driving vehicles!

From Fortune

Police Say Uber Is Likely Not at Fault for Its Self-Driving Car Fatality in Arizona

Chief of Police Sylvia Moir told the San Francisco Chronicle on Monday that video footage taken from cameras equipped to the autonomous Volvo SUV potentially shift the blame to the victim herself, 49-year-old Elaine Herzberg, rather than the vehicle.
“It’s very clear it would have been difficult to avoid this collision in any kind of mode [autonomous or human-driven] based on how she came from the shadows right into the roadway,” Moir told the paper, adding that the incident occurred roughly 100 yards from a crosswalk. “It is dangerous to cross roadways in the evening hour when well-illuminated managed crosswalks are available,” she said.


I know one thing, in 10 years all car's will be self driven. When this is the case you can live a bit farther from the center because you can sleep or read inside your car while commuting.



If you don't want your life exposed don't go into facebook! period

Media is ridiculous why should people have the right to have their info protected if they sign into Facebook and expose their life and probably accept sharing their data ???

If you don't want your life exposed don't go into facebook! period

Does anyone is forced into Facebook?


NEW YORK -- Facebook's leadership needs explain its use of data to lawmakers in the wake of the Cambridge Analytica scandal, Jennifer Grygiel, a social media expert and assistant professor of communications at Syracuse University, told CBSN on Sunday. Cambridge Analytica was hired by the Trump campaign in 2016 and has come under fire after reportedly harvesting more than 50 million Facebook profiles without users' permission via a third-party app.
"I hope that people in Congress are taking a look at this very carefully and that they step up and start to hold these companies accountable," she added. "I think we need to hear from Mark Zuckerberg and the heads of the platform. I think they need to testify and disclose exactly what's happening with the data."
"We need them to testify and tell us exactly what's going on here," she said. Sens. Mark Warner and Amy Klobuchar have already called for senior figures from Facebook to appear personally in front of the Senate. 

Why outsource something to Portugal?

Java Developers
Natixis is a French investment banking company, part of Groupe BPCE (the second largest financial group in France). In 2016, Natixis based its technology competency center in Oporto and currently counts on more than 200 IT professionals (out of 600 predicted to hire until 2019). 



Dividing the cake more fairly..........UMMMMMM


Who has not yet recovered to pre crisis levels

I can't just speak for Portugal why did this happened? Because the Government increased taxes to 50% plus 24% Vat social security solidarity tax etc.... The Government spends the money of the people not the people.


No one plays the lottery if there are no winners 


One side of the debate suggests that development should focus on 'dividing the cake more fairly,' while the other says development should be focused on 'baking a bigger cake'

In Portugal we are specialist in dividing .



Resultado de imagem para weak recovery fuel discord FT big read



when you grow you get more money, when you don't grow your pay does not grow......


Resultado de imagem para labour productivity growth



















If i had to pick i would also take the butcher !


Looking the Part
Say you had the choice between two surgeons of similar rank in the same department in some hospital. The first is highly refined in appearance; he wears silver-rimmed glasses, has a thin built, delicate hands, a measured speech, and elegant gestures. His hair is silver and well combed. He is the person you would put in a movie if you needed to impersonate a surgeon. His office prominently boasts an Ivy League diploma, both for his undergraduate and medical schools.
The second one looks like a butcher; he is overweight, with large hands, uncouth speech and an unkempt appearance. His shirt is dangling from the back. No known tailor in the East Coast of the U.S. is capable of making his shirt button at the neck. He speaks unapologetically with a strong New Yawk accent, as if he wasn’t aware of it. He even has a gold tooth showing when he opens his mouth. The absence of diploma on the wall hints at the lack of pride in his education: he perhaps went to some local college. In a movie, you would expect him to impersonate a retired bodyguard for a junior congressman, or a third-generation cook in a New Jersey cafeteria.
Now if I had to pick, I would overcome my suckerproneness and take the butcher any minute. Even more: I would seek the butcher as a third option if my choice was between two doctors who looked like doctors. Why? Simply the one who doesn’t look the part, conditional of having made a (sort of) successful career in his profession, had to have much to overcome in terms of perception. And if we are lucky enough to have people who do not look the part, it is thanks to the presence of some skin in the game, the contact with reality that filters out incompetence, as reality is blind to looks
Nassim Taleb, Skin in the Game


Note: I don’t care about what people say, I care a lot about how many times you have been doing something. My wife had a Sky accident last year and damaged her Cruciate Ligament, total rupture. When we went to the dr. Pedro Granate in Lisbon I just asked how many times he had done this procedure. I remember he said something I will do 12 in the same week. I said ok.

I don’t care about the looks I care a lot about experience. Time removes the fragile and keeps the robust. Beware of the old barber and the young doctor.


On the Big scheme we are just starting!

Resultado de imagem para ciovacco market 1934-2017


i guess after some difficult years 2000 to 2015 we could have easy markets going forward

Resultado de imagem para ciovacco market 1934-2017


i took this graphs from Chris Ciovacco tumblr.

The market could turn up today!

My best scenario today is a gap down open and a turnaround and finish strong

why?

short term sentiment is excess pessimism
we are in a bull market

the worst scenario is a gap up and finish weak. If this happens we might have a different animal.





Do you see inflation picking up?


Core US CPI excluding Shelter



I think 2018 surprise could be less growth and less inflation.

Everything bubble ?

As the people who have followed my blog i don't care if it's a bubble or not. 

I think like George Soros but have a bit less money....

When I see a bubble forming I rush in to buy, adding fuel to the fire
George Soros




I took this excerpt below in Italic from the report of Quest Partners a very good Quant fund from NYC that i follow since 2004. 


Equities: The S&P 500:
·        Had a 'perfect year' - the first time in its history that it was up every single month of the year.
·        Had the longest ever stretch without a 3% correction (279 business days and counting).
·        Had the longest ever stretch without a 5% correction (373 business days and counting).

Equity Volatility:
·        The VIX index fell to its lowest level in history at 9.1%.
·        Realized volatility (1-year monthly) on the S&P 500 fell to its lowest level in history at 3.9%.
·        18 of the 20 lowest ever readings of the VIX index were registered in 2017.
·        The XIV 'Short VIX' ETF returned 187.6% for the year, its best return ever.
·        The Sharpe ratio of short VIX and short EURVIX exceeded 5.0 and 10.0 respectively on a rolling 12-month, monthly compounding basis.

Fixed Income: The Merrill Lynch ‘MOVE’ Interest Rate Volatility Index fell to its lowest level in history.

Credit:
·        The European High Yield credit spreads fell to their lowest levels in history (below 2%!!).
·        The US Investment Grade credit spreads fell to the lowest level since 2007.

Foreign Exchange: Implied and Realized volatilities in foreign exchange fell close to their lowest levels reached in 2014 and 2007.

Commodities:
·        Implied and realized volatility on Gold fell to its lowest level in history.
·        Implied and Realized volatility on Crude Oil fell close to their lowest levels reached in 2014.

Crypto-currencies, Art, Watches etc.: As traditional asset classes were not perceived to deliver enough risk, investor attention turned to alternative investment vehicles:
·        The size of the crypto-currency market ballooned to over $600 billion, an increase of over 10x during the year.
·        Bitcoin returned 1,403.2%; Ethereum returned 8,761.6%; and Litecoin returned 5492.3%. Some other crypto-currencies did even better.
·        Not to be left behind, hedge funds rushed into this new, fun asset class. More than 120 "cryptofunds" launched during the year for a total of at least 175 such funds managing over $3 billion, according to financial research firm, Autonomous Next.
·        Leonardo Da Vinci's "Salvatore Mundi" painting sold for $450 million, the highest ever price for a painting. The same painting sold for $10,000 in 2005.
·        Paul Neuman's 1968 Rolex Daytona sold for $17.75 million the highest ever price for a watch. The watch originally cost $200.

This is an extraordinary time in global financial markets. Nearly a decade of liquidity injections by Central Banks totaling over $11 trillion has created a surreal, risk-less environment where everything only goes up and every dip is an opportunity to buy more. Confidence in this regime continuing has never been greater. 

In many things there is no premium to being fast

Similarly, when Strategy researchers Sucheta Nadkarni and Pol Herrmann studied nearly two hundred companies in India, the firms with the highest financial returns were the ones whose CEOs rated themselves the lowest on efficiency and promptness.
In both cases, the most successful organizations were run by executives who
admitted that they often wasted time before settling down to work and
sometimes failed to pace themselves to get things done on time.


Adam Grant, Originals 


This reminds me the joke where some guys are moving some furniture in a tall building and the leader of the group asks one guy to check how many more floors to the top?
After checking he comes back down and announces he has good and bad news. The leader says, just give me the good news!
We only have 3 more floors till the top.....
They get back to work
when they reached the top the leader asks What were the bad news?
This is the wrong tower !


It's better to ponder and think before rushing and executing something that should never been executed


There is nothing so useless as doing efficiently that which should not be done at all. 

Peter Drucker

Sorry no Inflation in the horizon

From Bloomberg Mliv, Mark Cudmore



Formerly known as Dow Jones-UBS Agriculture Subindex Total Return (DJUBAGTR), the index is a commodity group subindex of the Bloomberg CITR. The index is composed of futures contracts on
coffee, corn, cotton, soybeans, soybean oil, soybean meal,sugar and wheat. It reflects the return on
fully collateralized futures positions and is quoted in USD.


Ever-cheaper food may wreak havoc for markets next year. It's clear from the Markets Live macro assets survey on WHIS that the consensus is for higher benchmark yields in 2018. That suggests a belief inflation will pick-up.

But food prices are a key input to CPI globally and they continue to fall. Technology and science are making agriculture increasingly efficient and there are plenty of gains still to be made globally. The Bloomberg Agriculture Subindex closed at the lowest level since records began in 1991. And it's unlikely to see relief soon given that the weakness has caught speculators offside. Friday's CFTC data showed that the combined net-long positions for agricultural products increased more than 10-fold in the week ending Dec. 5.

And it really matters. Falling food prices were cited as the core reason why China's weekend CPI release came in below expectations. On the other side of the world, Brazil's latest CPI print came in below all economists' forecasts. This year has seen the measure drop below the target range for the first time since 1999 after the 7th-straight decline for food prices.