Jimbo

THE PRINTING GODS WILL RISE When you are this close to the event horizon of actual default the only way to save your self is: By turning on the print engine and blasting away from the black hole of formal default. The FED has turned on this engine many times in the past. Usually in the last years of or immediately after a war so that the economy can escape the debt gravity and actually grow. Remember the FED currently prints at 2% per annum so it is already using the print engine to default on its debts. The ten year bond, even at 3%, after inflation and tax still provides no real return. They are a terrible "investment".

WARREN BITES AN APPLE WITH A WORM IN IT, So Warren takes a bite of the Apple But there is a bit of a worm in it, Worm, thy name is valuation, The time to buy Apple was when it was trading at five times earnings back in early 2013. WHY WAS IT SUCH A GREAT BARGIAN THEN???? 1/ Because the hedge funds were dumping it like there was no tomorrow. Because they wanted to lock in their performance fees before the end of the financial year and they thought if they continued to hold Apple their big fat juicy performance fees would disappear. Thats what happens when you calculate fund manager performance fees on an annual basis. 2/ Apple had a pristine balance sheet with lots of cash and no debt. But come 30 June 2013 the stock did a 180 degree turn and has never looked back!!!!!! (with the new financial year came a positive pshycological "Frame" for the stock) Until now. When it trades for 20 times earnings and it has jumped the shark from a performance point of view. The stock has simply run out of runway (it was a long runway but then Apple is a big stock).

THE RELIEF RALLY Breaks out as I predicted. Ho Hum Trump adding plenty of synthetic QE before the elections to juice stocks. Ho Hum

I said way back in February that 2018 would not be good year for US stocks Took its time to be proved right However just remember there is always a relief rally around the corner somewhere When things get a bit too relentless on the down side.

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!!!!!