Always bet against the central banks and with the real world
truly down trodden people do not rise, but hell hath no fury like suppressed peoples whose expectations have been aroused
people don’t change their ways until their are forced to
while it is easy to figure out an investment is cheap, the real work is figuring out if a change is about to occur in the near future. It is important to study markets and their history
when seeing a big change coming (the opening of the trans Siberian railway), consider the economic, political and social shift
Why buy a new sofa when it could be put to work in the markets
Only invest in what I can sell quickly
do nothing until you can see the money to be picked up around the corner
key areas of study
Company assessment criteria
Price to book value
sound balance sheet
Price to earnings ratios
start with largest soundest enterprises
On assessing countries
Watch out for statism – governments getting in the way of an organic market
democracy does not equal prosperity
US government piling more and more regulations
SnL crisis of the 1980s
Artificially suppressed prices
1970s gold in America
2019 prices of pork in China
Foreign aids (IMF, UN and Peace Corps) just props up a system that does not work and delays the actual rebuilding process. Have faith in the locals to rebuild themselves in a configuration that works for them as opposed to a system suited to foreigners liking (hubris)
On ethnic strife and separatism
Some geographical boundaries don’t make sense.
no borders remain stable for long
economic hardship will bring to surface these fault lines as they get used as a vehicles to get more
Wait till wars are fought and border issues sorted out. It might then become a great investment opportunity to enter at the bottom
Rise of Islam and Christianity in Siberia prior to Soviet collapse
Hong Kong riots
Barcelona declaration of independence
black markets as signals: difference between black markets rates and official exchange rates provide an indicator of how much the central bank has propped up the exchange rate. Minimal to no differences are signs of a strong economy
major red flags:
currency controls, import taxes, export restrictions. Makes it hard to pull funds out
is country trying to devalue its way out of its internal problems instead of doing a proper fix?
frantic purchase of gold in local jewelry store
Is the country trying to get foreign hard currency by making things other people want to buy – quality goods
Is the country learning to compete and out innovate its competition
an educated population
On centrally planned economies
the market feedback mechanism is missing
resources get ruined due to misuse
it would have thrive if it was a sound economic theory
while Russia abused their resources, China having nowhere to go were more deliberate and took better care of their resources
success had a lot to do with economic and political organization
took bees to blooming flowers to work them 5-7 times harder than their foreign counterparts
Hong Kong, Guangzhou and Shanghai being captured by the capitalist spirit generally ignores capital’s policies
Note worthy collations
China (labor) / Siberia (natural resources)
Australia (natural resources) / Japan (capital)
US (capital) / Canada (natural resources) / Mexico (labor)
most local markets will eventually get assimilated into the global market
diamonds have artificially propped up prices that will be hard to maintain in the long run. DeBeers will eventually run out of cash buying up supplies from the black market and it will lead to sudden price collapse. Opt for gem and rubies instead
when gold gets too cheap companies will figure out ways to use it thereby depleting its supply driving up price. Same could be said of oil
underlying structural issues within a country can stay hidden for long during times of a commodity boom
The key to success
out of every 1000 people who wants to be rich only 6 can master the discipline to do so
stay focus on a single goal for five, ten, twenty years
Core inflation at 1.8% continues to run below target 2%.
Federal reserve decides upon another 0.25% cut in interest rates, targeting range of 1.5% to 1.75%.
Action is taken to provide meaningful support to the economy in response to global economic slowdown and the increasing disinflationary pressure felt from around the world. The special characteristics of this particular slow down is a lack of any large imbalances in the economy.
Dual mandate of the federal reserve
2% symmetrical inflation target
Low unemployment rates
Consumer confidence remains strong
Unemployment rate is at historic low
Business fixed investments has slowed
Global exports has slowed
Manufacturing compared to a year ago is down
macro environment risk
protracted US/China trade risk is down
No deal Brexit risk is down
economic health monitor
Leverage in financial system: low
Funding risk in banks and non-banks: low
Asset prices: no major bubble, high in some
Leverage in non-financial sector
households: gone down
businesses + corporate debts: historic high
Concerns in Overnight Repo markets persist.
Banks have liquidity in excess of required reserves level but choose not to participate in the markets.
Federal reserve will seek to inject short term liquidity into the system
build up short term treasury reserves
buying into short term treasury bills thereby boosting treasury reserves
opposed to the standard QE mechanism which entails buying up of assets and securities with longer maturity periods
The polarization between democratic systems and authoritarian systems is becoming more apparent as China leverages its growing middle class to project it’s influence on the world stage a strategy that US has been utilizing for the past decades.
Facebook is a vehicle for projecting American values overseas.
The African continent remains a land grab for the two different regime types. Thus far, China has won out on the physical infrastructure and government level while FaceBook has won out on the community grassroots levels.
For the C Suite especially CMOs to execute their jobs well they need to be focused on what’s happening out there in the world as opposed to what’s happening within their own functional organization. It’s the VP of marketing’s job to handle what is within their own marketing organization.
Its a time when US companies will need to navigate the international markets while managing the challenges to their American values.
The Chinese government has done a better execution on that front with their One Belt Road initiative by clearing the path at the government level to facilitate the unhindered expansion at the commercial level by its enterprises.
Western media is working at full Rev to control the narrative frames that drives public opinions.
Mark Zuckerberg has masterfully leverage recent trends to reframe Libra as a champion of democratic ideals as opposed to a disintermediation force on central banks around the world.