Thought Bubbles from the Deep

[sinner]

It's great to see you actively posting again.

Thanks. Not sure how long I'll continue though.

This will track nominal GDP if corporate profit share is a constant proportion of nominal GDP and the share which is listed is roughly unchanged (one reason why Buffett probably regards market cap to GDP as a valuation indicator, I think).

Yes Hussman has been explaining this a lot recently in his WMCs. Basically, valuation measures like CAPE are good, they have a correlation approaching 70-80% to 10y nominal total returns.

But if you account for variations in profit margin, the correlation is much much higher.

Turns out that "accounting for the profit margin" essentially gives you Price/Revenue (which I think is Price/Sales with a different name?) ratio.

Also turns out that Market Cap / GDP is essentially an almost perfect proxy for "total market Price/Sales". The other one he mentioned recently in this vein was Market Cap / Gross Value Added which supposedly has the highest correlation to future nominal total returns without any tweaking required.

(from http://hussmanfunds.com/wmc/wmc150601.htm)

 

[DeepState]

The hope (2009):




The present reality (recent CNN Poll):

 

[DeepState]

Nugget of the day from Howard Marks:

 

[DeepState]

An acronym I've not heard of but will now embed in my head:

FOMO risk: Fear of Missing Out risk.

I doubt there is a risk premium associated with it. Or, maybe, it's what causes momentum effects. Not sure.

Credit to: Howard Marks

 

[DeepState]

On the importance and value of financial independence, risk-taking, geo-politics, collateral, taking profits, cutting losses, property, trading prop money, avoidance of excessive debt and life wisdom. So directly and succinctly explained. Best I've ever come across. Should be required viewing for all budding speculators.

In my mind, when I was working, there was always a number....and when that number was reached...."f*#k you"

Warning: Explicit language

 

[Trembling Hand]

In my mind, when I was working, there was always a number....and when that number was reached...."f*#k you"

Trouble is that if there is a formula representing the value of fu as the period reduces towards said fu event the fu amount increases,



Like chasing the right side of the train track while being stuck on the left side.

 

[DeepState]

Trouble is that if there is a formula representing the value of fu as the period reduces towards said fu event the fu amount increases,

View attachment 63181

Like chasing the right side of the train track while being stuck on the left side.

That would be the well-worn fate for someone who doesn't know enough about the probability of ruin and the toxic mix it has with the decrease in utility arising from further wealth...possibly because greed makes them think otherwise until reality dawns that chasing that little bit extra was picking up pennies in front of steam rollers (or trains, if you prefer) in actual life terms. It is the classic toxicity that arises from living relatively as opposed to in absolute terms. Such people generally get hit by locomotives eventually whilst trying to jump from one side of the track to another...because the train rides on both rails.

At least for me, the fu-point meant an adjustment to preservation. Some others who passed that point long ago and kept pushing are doing really well. All power to them. But they have their fu-point fortressed. A train wreck will still allow them to live the fu-life.

 

[sinner]

Trouble is that if there is a formula representing the value of fu as the period reduces towards said fu event the fu amount increases,

View attachment 63181

Like chasing the right side of the train track while being stuck on the left side.

So what you're saying is buy stocks and avoid synthetic longs?

http://www.theoptionsguide.com/synthetic-long-stock.aspx

 

[skc]

The market is already pricing a moderately busted franchise in zombie mode. Seems a little extreme. It wasn't so long ago that this stock was pricing in things like the take-over the fashion world. That seemed a little extreme too. I think Mr Market has been skipping a few tablets.

Position initiated with more in the tank should further weakness develop from the winter season.

Another Kiwi retailer to the rescue... no details on the takeover price yet, but Briscoes paid up to NZ $1.80 for aa 19.95% stake.

DS, when you posted the share price was ranging $1.30-1.40. It went as low as $1.10. I hope you followed your plan and acquired a meaningful stake.

 

[VSntchr]

Another Kiwi retailer to the rescue... no details on the takeover price yet, but Briscoes paid up to NZ $1.80 for aa 19.95% stake.

DS, when you posted the share price was ranging $1.30-1.40. It went as low as $1.10. I hope you followed your plan and acquired a meaningful stake.

Maybe DS is actually Rod Duke, and that meaningful stake is 19.9% :
Jokes aside, should be a nice premium offered to your entry DS - at least based upon what price Briscoe has been paying insto's for their stake.

EDIT - KMD.NZ currently down 1.4%...hmmm?!

 

[DeepState]

KMD-AU

Sometimes, even the sun shines on a dog's ahrse...

Did not re-load as the trigger for that was announcement of FY15 figures where I could update anything I was thinking and step in if the market was particularly punishing or otherwise not recognising that things were more ok than what was priced. Still, a nice outcome relative to any alternative. Set in at $1.34 cum div.

Overall, this bid looks a bit opportunistic. Have to see how KMD reacts. Maybe a bump yet to come.

The nicer outcome would be to turn up as CEO, loaded full of price related incentives, and receive a take-out on day #2 when you were still getting to know your secretary's name. Xavier Simonet would have sunburn....

 

[DeepState]

Greece:

Why bother holding a referendum and campaign for the Oxi vote to resist pension reform and further fiscal measures, win...and then come back to the table a few days later offering more of them then you had? What the..? This whole process has been very weird. Clearly making it up on the fly.

 

[avion]

Greece:

Why bother holding a referendum and campaign for the Oxi vote to resist pension reform and further fiscal measures, win...and then come back to the table a few days later offering more of them then you had? What the..? This whole process has been very weird. Clearly making it up on the fly.

Yeah, standard issue pollie, backflip it seems is 'new normal' these days...

This world is starved for a true leader. Such a rare species...extinct really.

 

[DeepState]

Greece: Didn't think it would get so close to the wire, but a deal is done. Hopefully the debt relief and refi elements actually make sense.

Interesting that there was nearly biffo in the Finance Ministers' meeting into the matter:

 

[luutzu]

Greece: Didn't think it would get so close to the wire, but a deal is done. Hopefully the debt relief and refi elements actually make sense.

Interesting that there was nearly biffo in the Finance Ministers' meeting into the matter:

View attachment 63393

A few are calling it a coup.

In hindsight, what were the Greeks thinking. Owing money and thinking they can just declare bankrupt and not pay? Have no idea who they're dealing with.

 

[McLovin]

Is this a real solution or another can kicking exercise? Apparently debt relief will follow, I hope so! My thinking from the outset was that Greece needed to get out of the EZ to improve have a meaningful improvement.

But I'm just some booner in Sydney.

 

[luutzu]

Is this a real solution or another can kicking exercise? Apparently debt relief will follow, I hope so! My thinking from the outset was that Greece needed to get out of the EZ to improve have a meaningful improvement.

But I'm just some booner in Sydney.

It's kicking the can down the road and collecting a few ports and island and gas exploration rights and other assets on your way there.

It's a cool and profitable game when you can play it. Unless you're the European taxpayers who will have to fork out the cash now and may not see it when time's up again in 3 years.

 

[DeepState]

Is this a real solution or another can kicking exercise? Apparently debt relief will follow, I hope so! My thinking from the outset was that Greece needed to get out of the EZ to improve have a meaningful improvement.

But I'm just some booner in Sydney.

Although the institutions have come a long way in fro the economy-breaking requirements of the last bailout, Greece has also moved in and can be regarded as the party which blinked. Had they not blinked, I think they would have been in a very bad way for many years. Who knows what might have happened with the Russian as financiers, the Turks as aggressors and the historically volatile Balkans to the north.

The deal is done without clear commitments from the institutions in terms of debt relief and restructuring. I think there is a desire not to be in this same position again in 2 years. Further, it is clear to the IMF that wholesale restructuring is required for Greece to be viable. Who knows, but the idea from here would be to sort this crap out properly. The EZ is no-where near as unstable as it was when the last two deals were slammed together. Then, another swing factor is whether legislation which is created can even be implemented and enforced.

Who knows? At each step, all sorts of twists took place that require liberal translation of the legal structure. Drop dead dates became less critical along the way....it's been entertaining.

 

[McLovin]

The EZ is no-where near as unstable as it was when the last two deals were slammed together. Then, another swing factor is whether legislation which is created can even be implemented and enforced.

Yer. Although the Greeks have admitted there was no plan B, which is farcical really. On Bloomberg I saw that two people close into the talks independently described Tsipras as a "beaten dog". It also turns out he never wanted to win the referendum. Again farcical. America had hinted that they were not happy with cutting Greece loose but beyond that they hadn't done or said much, so I'm not really sure just how important geo-politically Greece actual was.

One thing for certain is that when the initial bailout was cobbled together it was more about saving the EZ, this time around much of the periphery is in far better shape and I don't think the Greeks realised that their hand wasn't as strong.

 

[Klogg]

Yer. Although the Greeks have admitted there was no plan B, which is farcical really.

That's really scary actually (for the Greek people). I do remember an FT article talking about issuing government IOUs in lieu of another currency, but that's all I heard of it.
Surely you'd be readying another currency incase all these deals go south.

One thing for certain is that when the initial bailout was cobbled together it was more about saving the EZ, this time around much of the periphery is in far better shape and I don't think the Greeks realised that their hand wasn't as strong.

Given the ECB and IMF own a lot more of the Greek bonds than last time, and the banks need an immediate top-up from the ELA, I don't see how Greece thought they had the upper hand at all...