Jimbo

THE ITALIAN JOB The Italian Government is not playing ball on the BUDGET So the ECB will just have to show them who is the real boss. The "Italian Job" coming to an Italian bond market/ Italian bank near you. Owning Italian bonds at this stage is a licence to LOSE money!!!!!!!!! Lessons can be very expensive things indeed. The Italian Job ETF anyone???? (It could have a picture of one of those minis racing through a narrow Italian street on the cover of the prospectus)

THE COYOTE CLIFF A lot of the big car makers GM, BMW, Daimler seem to be adding lots of debt to pay out their big dividends What happens when they cant add any more debt?????? Nothing good I think All will cut or eliminate their dividends. All candidates for the Coyote Cliff ETF

QUANTITATIVE TIGHTENING Steve Eisman has called QE monetary policy for rich people In that case QT must be monetary policy for poor people.

LEHMAN REDUX The Financial Review full of ten year articles on the Lehman collapse But all the articles seem to miss the real issue Lehman went under because it had excessive leverage of 30 to 1. If it had been levered 15 to 1 it would have survived Even with all the bad subprime it had on the balance sheet, I had calculated months before Lehman collapsed that it had negative equity of 15 Billion and posted such information on this Board. I also stated on this Board that it was going bankrupt several months before it actually did go kaput. Lehman only had 20 Billion in equity backing up 600 Billion in assets and liabilities, It was simply too little. It needed at least double this equity level to survive. Actually Deutche Bank currently has the same debt equity ratios as Lehman had when it went under!!!!!!!!!!!! Thats why I think the German Government will have to bail it out.

QUANTITATIVE WHATEVER So Quantitative Easing has created some rather unfortunate things: 1/ Non existent real wage growth in the USA (all those empty malls and retailers going broke) 2/ Added significantly to Pension fund deficits (no bond income for you, low dividends on stocks). 3/ Added significantly to Budget deficits 4/ Lots more consumer debt. 5/ Lots more corporate debt as leverage is used to pump up stock prices through buy backs. 6/ Over valued stocks, bonds and over lending to capital deficit countries. So now we have QT Which should reverse these effects What QT does is take value from the PONZI economy (The leverage/asset value growth economy) And gives it back to the real economy of real goods and services. Is it inflationary - well YES and NO It deflates the PONZI economy but inflates the real economy at the same time. And as CPI measures the real economy you could call it inflationary. But not significantly

QUANTITATIVE TIGHTENING AND TRADE DEFICITS So China's trade surplus with the USA hits a new all time high Why????? Well you can thank the FED for that. Quantitative tightening means capital flows back to the USA from the periphery Creating all the currency and credit collapses we have seen - Turkey, Argentina, Iran et al And also the depreciation of the Yuan against the Dollar. But its secondary effect is to increase American's purchasing power And where does this purchasing power flow to???? To the import of more foreign goods to satisfy the consumptionist monster which lies at the heart of the American economy. Right back to China and increases the trade deficit with China!!!!! The Tarrifs are really a consumption tax on the American consumer. So in a way they contribute to the "great rebalancing" between consumption and production that the American economy so badly needs. But of course this is currently being cancelled out by QT!!!!!!!!!!!!!!!!! The effects of the Presidents tarriff war against china are being cancelled out by the QT actions of the FED. Oh the complete and total irony!!!!!!!!!!!!!!!!!!!! Where is the Quantitative Tightening ETF when you need it??????????

THE GREAT BOND OXYMORON I've always thought that total return bond funds have little real reason to exist After all unlike stocks Bonds are a fairly undifferentiated product.....in that there price tend to move all together. And so are very amenable assets for index funds Interest rates are low and just about all bonds are a bad buy. The only real three way for unconstrained bond funds to outperform is........... 1/ Take on more leverage 2/ Take on more risk 3/ Short But in a rising interest rate environment these are a recipe (except for item 3) to underperform NOT outperform. i.e the total return bond fund boom was very much a creature of QE and without its hot monetary air will wither on the vine.

APPLE BY THE NUMBERS - PART 2 Way back in April 2013 I did a number analysis of Apple and said it was a compelling valuation. It was then selling at $60 and now sells for over $200 I will now repeat this exercise Is Apple a better business than it was 5 years ago - the answer is no. It makes $50b in profit which converts to $50B in free cash flow. Its P/E is now 20 compared to my calculated P/E back in 2013 of 6. It is no longer value for money and is a no growth business. It jumped the shark in 2015. It may be America's first Trillion dollar company but it is no longer a good investment.

RE THE TORQUEMADA ETF Looks like we have to add Glencore Probably Barclays as well

WARREN CLOSES OUT HIS EQUITY PROTECTION SERVICE With a cape of 33 for the S and P and the FED ending QE it looks like warren has decided the premiums are too low for his equity insurance scheme and has bought back his equity puts. He made $2.5 Billion so he came out ahead. But even he now thinks that long the S&P right now is a bad bet.

OVERVALUED STOCK OF THE DAY Brown Forman Valued at $23 Billion 46 Times free cash flow. Is the valuation a little bit stretched or not!!!!!

HOUSING JENGA ANYONE???? When you think about it housing prices in the USA are a giant game of JENGA Due to the lending standards (or should I say non existence of such lending standards) of Fannie and Freddie Each time they reduce their lending standards to keep the housing market juiced Its like removing a wooden block from the tower. Fannie and Freddie could be very profitable businesses if they maintained decent lending standards Say 20% deposit. But they dont - because they are being used as politically motivated pump primers for the housing industry. And so the US housing industry (particularly at the lower price levels) has been turned into one gigantic game of JENGA.

RE THE TORQUEMADA ETF Besides Wells Fargo we must add ZTE and EN+ to the ETF I would like to add Fannie and Freddie to the ETF but...... After 10 years in the FED pen I think these are probably lifers and will never be released.

THE LONG SLOW CAPITAL BURN Buy Swisis ten year bonds and give 5% of your capital away over the ten year period.. Just owning bonds is giving away your money!!!! Without higher rates????. Bonds are trading below the "Capital Neutrality " level. Prices need to fall further.

BERKSHIRE _HATHAWAY - REVERSION TO UNDER THE MEAN When Berkshire was founded way back when tis first ten years of average return was 19 Much greater that the S and P return of 2 per cent. Not bad.at all - great out perfromance Unfortunately its last ten years of returns have been 9. Which is less than the 10 per cent for the Sand P Thats right you would have been better of investing your money in an S and P index fund.