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Will Crimea saddle Russia for years? – A different investment persepective

March 26, 2014
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Crimea

 

 

  • The near-term focus has been on the short-term impact of Crimea annexation.
  • Longer-term, Russia is likely to be saddled with burdens.
  • After an inevitable economic collapse, longer-term, Ukraine may be more united, will better attract western capital, and may be better off.

A great contrarian take from Foreign Affairs:

http://www.foreignaffairs.com/articles/141020/alexander-j-motyl/is-losing-crimea-a-loss

 

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Bankia’s Needs & Spanish Banking Crisis

May 30, 2012
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  • Amount of capital needed continues to grow
  • Pressure mounts of Germany/Spain bond spreads
  • Uncertainty with other European financials grows
  • Euro continues to sell-off now sub 1.25 to the USD.

 

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Cambodian Stock Market Opens with Phnom Penh Water Surging on First Day

April 23, 2012
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Cambodia is a country with 14 million people nestled between Vietnam, Thailand and Laos. Cambodia’s history has been difficult with the brutal Khmer Rouge dictatorship through the 1970′s. It has been estimated that over 3 million Cambodians were killed. Cambodia has been quietly emerging and is now considered a frontier market for investing. The economy has been growing and gaining share of global manufacturing and corporations have been building a presence. On April 18th, the Cambodian stock market opened with Phnom Penh Water Supply (PWSA KH) surging 48% on the first day of trading. The company raised $21M from investors through its IPO. Frontier markets have the ability to decouple from global macro as there are a number of idiosyncratic changes taking place in markets like Vietnam, Cambodia, Laos, Mongolia and Bangladesh. Worth keeping an eye on.

 

 

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Warren Buffett Interviewed by Charlie Rose and Lara Logan

March 31, 2012
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Warren is out in the media more and more these days.

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An Oldie But Goodie – The Europe Collapse Video

February 28, 2012
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Caesars (CZR) IPO at $9 – Company Returns to the Public Markets

February 8, 2012
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Caesars will launch their IPO under the ticker CZR. The company is offering 1,811,313 shares to the public priced at $9. Credit Suisse and Citigroup are the joint-book runners. Caesars operates under the Caesars, Harrah’s, and Horseshoe brand names. Caesars also owns the World Series of Poker and London Clubs. When the stock commences trading at $9 the market cap will be $1.1 billion and the enterprise value will be $22 billion as the company will still have a heavy debt load. Caesars valuation is down sharply from peak valuations in 2007. John Paulson has been one of the private investors.

Caesars comes public in a period of low interest costs where Vegas is starting to slowly recover. There is an old adage among Las Vegas gamblers: “don’t game where they don’t own the house”. It will be interesting to see if Caesars will maintain their levels of customer service in a period where expenses will be more scrutinized in the light of the public markets.

Casino Market Capitalizations:

Las Vegas Sands:              $42B
Wynn Resorts:                 $14B
MGM Resorts:                 $7B
Caesars:                         $1.1B

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Lego Man Launched in Space

January 28, 2012
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That’s one small step for lego man, one giant leap for lego mankind. Technically speaking, the lego man made it high into the upper atmosphere, until the weather balloon propelling it popped. Lego man made it 24 kilometers above sea level, but you can clearly make out the curvature of the earth in the background. Technically speaking, space begins at 100 kilometers above sea level which is called the Karman line.

This is simply one of the coolest and most wondrous stories in a long time. Fantastic job by these two Canadian students who spent $400 and successfully launched a lego man into near-space, recorded it, and parachuted him safely back to earth. This video is simply stunning.

 

 

 

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Mario Draghi – ECB Monetary Policy Webcast

January 12, 2012
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Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference. Let me wish you all a Happy New Year. We will now report on the outcome of today’s meeting of the Governing Council.

Based on its regular economic and monetary analyses, the Governing Council decided today to keep the key ECB interest rates unchanged, following the 25 basis point decreases on 3 November and 8 December 2011. The information that has become available since early December broadly confirms our previous assessment. Inflation is likely to stay above 2% for several months to come, before declining to below 2%. At the same time, the underlying pace of monetary expansion remains moderate. As expected, ongoing financial market tensions continue to dampen economic activity in the euro area, while, according to some recent survey indicators, there are tentative signs of a stabilisation in activity at low levels. The economic outlook remains subject to high uncertainty and substantial downside risks. In such an environment, cost, wage and price pressures in the euro area should remain modest and inflation rates should develop in line with price stability over the policy-relevant horizon. Overall, it is essential for monetary policy to maintain price stability over the medium term, thereby ensuring a firm anchoring of inflation expectations in the euro area in line with our aim of maintaining inflation rates below, but close to, 2% over the medium term. Such anchoring is a prerequisite for monetary policy to make its contribution towards supporting economic growth and job creation in the euro area. A very thorough analysis of all incoming data and developments over the period ahead is warranted.

The provision of liquidity and the allotment modes for refinancing operations will continue to support euro area banks, and thus the financing of the real economy. The extensive recourse to the first three-year refinancing operation indicates that our non-standard policy measures are providing a substantial contribution to improving the funding situation of banks, thereby supporting financing conditions and confidence. In addition, we are actively working towards the implementation of all the measures announced at our December meeting, which should provide additional support to the economy. As stated on previous occasions, all the non-standard monetary policy measures are temporary in nature.

Let me now explain our assessment in greater detail, starting with the economic analysis. Real GDP in the euro area grew by 0.1% quarter on quarter in the third quarter of 2011. At present, a number of factors seem to be dampening the underlying growth momentum in the euro area. They include moderate global demand growth and weak business and consumer confidence in the euro area. Domestic demand is likely to be dampened by the ongoing tensions in euro area sovereign debt markets, as well as the process of balance sheet adjustment in the financial and non-financial sectors. At the same time, we continue to expect euro area economic activity to recover, albeit very gradually, in the course of 2012, supported by developments in global demand, very low short-term interest rates and all the measures taken to support the functioning of the financial sector.

In the Governing Council’s assessment, substantial downside risks to the economic outlook for the euro area continue to exist in an environment of high uncertainty. They notably relate to a further intensification of the tensions in euro area debt markets and their potential spillover to the euro area real economy. Downside risks also relate to the global economy, protectionist pressures and the possibility of a disorderly correction of global imbalances. With regard to price developments, euro area annual HICP inflation was 2.8% in December 2011, according to Eurostat’s flash estimate, after 3.0% in the preceding three months. This decline was expected and reflects a downward base effect stemming from energy prices. Inflation rates have been at elevated levels since the end of 2010, mainly driven by higher energy and other commodity prices. Looking ahead, they are likely to stay above 2% for several months to come, before declining to below 2%. This pattern reflects the expectation that, in an environment of weaker growth in the euro area and globally, underlying cost, wage and price pressures in the euro area should remain modest.

The Governing Council continues to view the risks to the medium-term outlook for price developments as broadly balanced. On the upside, the main risks relate to further increases in indirect taxes and administered prices, owing to the need for fiscal consolidation in the coming years, and possible increases in commodity prices. The main downside risks relate to the impact of weaker than expected growth in the euro area and globally.

Click here for the full transcript

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Hostess Brands Files for Chapter 11 – Again

January 11, 2012
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I grew up within 5 minutes of a Hostess/Wonder Bread factory and one of my enduring childhood memories was going to the factory store with mom on the discount day (I think it used to be Wednesday) when the snack cakes were all on sale. The excitement was unbearable as we approached the factory and the wonderful smells of the bakery overwhelmed once you were within a quarter mile of the factory store parking lot.

Hostess Brands has filed for Chapter 11 again, after previously filing for bankruptcy just three years ago. Courtney Donohoe, from Bloomberg news, points out, with her very cute lisp, that the combination of a weak economy, unionized workforce, heavy pension obligations and competition has done Hostess in. The brands were owned by private equity firm Ripplewood Capital Partners. Reportedly, Hostess Brands will continue to operate in Chapter 11, with $75M in financing commitments from Silverpoint Capital.

While very unhealthy, the iconic brand portfolio of Twinkies, HoHos, Suzy Q’s, Donettes, Fruit Pie, Ding Dongs, SnoBalls, and Zingers surely have tremendous brand equity. I wouldn’t be at all surprised to see a bid from Kraft (KFT), PepsiCo (PEP), or Berkshire Hathaway (BRK/B).

Good luck to Hostess! If there are going to be tremendously unhealthy snack foods around that we indulged in as kids, the world is a better place if Hostess is one of them.

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German IFO Business Climate Index – Unexpected Improvement

December 20, 2011
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  • The German IFO Business Climate Survey improved unexpectedly today
  • Germany has been able to shrug off the sovereign debt crisis better than any of the other large economies in the EU-17
  • Germany’s unemployment rate has trended lower throughout 2011 to a new low of 5.5% in October. This is clearly helping German sentiment.
  • In a world short on confidence, Germany is doing ok.
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Jim Rogers on Bloomberg News

December 15, 2011
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  • Always entertaining whether you believe with Jim’s investment views or not.
  • Jim likes commodities (as always) with sugar being a good place to start (down 60% from the highs)
  • He didn’t mention cotton, which is down about the same amount.
  • Highlight:
    “What was your worst year?”

    Jim:
    “The year I met my first wife.”

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    McDonald’s Sales Continue to Exhibit Strong Momentum

    December 8, 2011
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    • McDonald’s reported global company SSS of +7.4% well ahead of consensus estimates.
    • US comp sales were +6.0%
    • European comp sales were +6.5%
    • Asia/African comp sales were +8.1%

    McDonald’s (MCD) continues to display tremendous momentum from remodeling restaurants, improving food quality, adding new menu items, and expanding store hours. While many companies are slowing sharply in Europe, McDonald’s showed acceleration from October trends to November. The world isn’t so bad, despite Europe’s crisis, that business anywhere and everywhere is falling off a cliff. It isn’t as bad in Europe as it was in the US during Q4 2008.

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    Zumiez Zoooooooooms (ZUMZ) – High Short Interest Helps Fuel Rally

    December 2, 2011
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    • Zumiez reported earnings yesterday which beat the first call consensus estimates of $0.45 vs. $0.42 expected
    • Gross margins were up and drove most of the earnings beat
    • Sales trends were also solid with Q3 same store sales of +6% and November same store sales of  +8.4%.
    • While ZUMZ results were solid, and ahead of expectations, a key factor in the surge is the high short interest.
    • Short interest as a % of the float is 25%, amounting to 14 days to cover.
    • The outsized tail risks to short positions are just as large as they are to long positions in this year’s manic markets.

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    Economic Surprise Index – Has Been Improving Since June

    November 30, 2011
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    The economic surprise index represents how macroeconomic indicators are reported relative to Wall Street economist consensus estimates. There was a big move down in April and May as estimates on the economic outlook were too high. Just the reverse has taken place since the summer. Economic forecasters have been too gloomy on the economy from August – November. Economic indicators are continuing to beat at present.

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    Thailand Industrial Production Drops Most in 10 Years on Flooding

    November 28, 2011
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    • Thailand’s October industrial production index was released last night and fell 35.8% from a year earlier.
    • Consensus estimates were for a 15% drop.
    • The Office of Industrial Economics, in Thailand, said that the drop was the largest since at least 2000.
    • The Bank of Thailand has signaled additional rate cuts but interest rates will only help so much with normalizing the economic environment.
    • GDP growth for Thailand has been cut meaningfully.
    • It will be very important to watch the supply chain impact on the Japanese auto industry, disk drive production, and overall technology.
    • The flooding in Thailand is a humanitarian disaster and will also have a material impact on production for firms which manufacture in the flooded regions. Hopefully the crisis will abate quickly but some estimates are emerging that the impact could be as large as the Japanese tsunami and nuclear disaster’s impact.

     

     

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    Risk Off – Europe Fears Grow!

    November 23, 2011
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    • US markets close bang on the lows
    • DOW down 236
    • S&P 500 down 2.2%
    • Russell down 3.2%
    • S&P Financials down 2.9%
    • Homebuilders down 4.2%
    • VIX up 6% to 34
    • Brazil ETF down 4%

    Happy Thanksgiving!!

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    E-Trade Baby has a Rough Day in the Market

    November 18, 2011
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    Richemont Business Booms in Asia – Cartier and Piaget Growing in China

    November 11, 2011
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    • Richemont SA (CFR VX) is the second largest maker of luxury goods in the world.
    • The company owns a number of luxury brands including; Cartier, Piaget, IWC, Alfred Dunhill, Van Cleef, Montblanc, Chloe, and many others
    • Richemont reported that first half net income hit plan and boosted sales assumptions for the second half of the year.
    • First half sales growth was up 29% and in the month of October, sales are up 28% – so essentially no slowdown.
    • The Asia-Pacific region was up 48% and distribution expansion related to China is driving growth
    • Cartier and Piaget have been particularly strong brands (from a growth rate standpoint)
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