This Dilbert cartoon was too good to pass up, in light of the fact that the book club covered The Halo Effect at the end of June, for its 21nd book — since the book argues that this is in fact how “serious” business authors write their books.
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(Originally written June 14. Posted, with modest supplemental info, June 17.)
For those who follow my investing adventures (or “monetary misadventures”, depending on how the year’s going 
) gold made it onto the front page of the New York Times this past weekend. An example of the “magazine cover indicator“, this strongly suggests that it’s due for a plummetting pummelling.
I’d expect this for gold priced in Euros — its slope was nearing positive infinity with the various crises (see the blue line in the image below). And in market arrangements, things which rise sharply in price — whether the Nikkei index circa 1990, Nasdaq circa 2000, or Shanghai circa 2008 — tend to fall back sharply when the upward momentum stops. Gold in Euros (blue) dropped sharply after seeing soaring gains in ‘06 and ‘09 — and fell sharply after rising sharply against the US dollar in ‘06 and ‘08 (red).
With the magazine cover, it seems highly probable gold will be cheaper in a couple months’ time, regardless of what might happens in the next couple weeks, as the investing classes find other amuse-portfeuilles for their wallets. (On account of other self-fulfilling indicators, summarized finely by the pseudonymous Jesse here, I figure its price is due for a modest surge in the very near term.)
Euro-wise, the news has been so bad out of Europe for so long, that the Euro seems likely to strengthen for the next little bit: everyone who wanted to sell, has already sold. As such, the trading algorithms of government-moneyed investment-bank speculators (whose predecessors Adam Smith characterized as an “idle class”) are likely trading dollars for Euros using some of those very same complex instruments which necessitated their bailouts. Ah, few things match the hypnotic stupor of a flatlined learning curve — as long-suffering Leafs (and Canucks) fans will surely attest!
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(Originally written June 14. Posted June 17.)
I was grudgingly happy for the Blackhawks’ recent Stanley Cup win — seeing as the Flyers made it into the playoffs on a shootout in the last game of the regular season (!) it wouldn’t've seemed fair for them to win. Their loss means that the unbroken streak of Cinderella Cup Finalists losing, continues; karma remains strong, among the hockey gods. 
That, and it’s a shade less frustrating when it’s the Cup winners who eliminate your perennially underperforming team…
On the topic of perennially underperforming, the Chicago Blackhawks’ recent Stanley Cup win — their first in 49 years — means the mantle of “longest Cupless drought” now moves to the Toronto Maple Leafs. Here are a few factoids about the last time they won, back in 1967:
Yes, that’s right, Toronto hasn’t won a Cup since its goalies started wearing masks. Correlation doesn’t imply causation, but if in a few years you hear the Maple Leafs ownership floating the idea of making goalie masks optional, you’ll know where they’re coming from.
The Blackhawks’ win also means that Marian Hossa managed to avoid becoming the probably-first player to lose three consecutive Stanley Cup Finals for three different teams. (He played for the Penguins in ‘08, when they got beat by Detroit. Looking to win, he then signed with Detroit, only to lose in game seven to… the Penguins.) Claude “Turtle” Lemieux notably won with New Jersey and Colorado in consecutive years, back in ‘95 and ‘96. And the first year, he was even the Conn Smythe Trophy winner!
Below: a photo of Maple Leafs’ maskless, Cup-winning duo of Johnny Bower and Terry Sawchuk.
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Through a link on the usually-relevant, often-irreverent FlowingData website, I also found a brilliant little visualization of Stanley Cup finalists in the past eight decades, which puts Leafs’ fans misery in perspective.
On the other hand, since the Canucks have been around since 1970-1971, it’s not exactly as if we’re doing much better here on the Left Coast…! The Vancouver Millionaires did win back in 1915 (probably before goalies wore jockstraps) though fortunately we’re not the worst-off in that regard. The Winnipeg Victorias won in 1902, and so hockey-inclined Winterpeggers have waited even longer than Cubs fans for another championship. Mind you, Winnipeg didn’t have an NHL team for most of the ensuing eleven decades, so they aren’t quite as overdue as Cubbies’ fans are.
(Originally written May 10; posted May 17)
If you’ve had the (mis)fortune to work with me in recent months, you’ll know that I’m on a bit of a warpath against poorly-labelled graphs. And that I think label-challenged chartists should be consigned to one of Dante’s famous nine circles of Hell — or at a minimum, one of his obscure, seven terraces of Purgatory.
After getting home Friday, refreshed from a good week’s work, I saw the following on Flowing Data, which makes the case better than any 1022 words of my own raging rhetoric, ever could.
Saw this on Barry Ritholtz’ blog (originally from ThisIsIndexed). Now it’s appeared on Mish’s blog. Which means this bit of visual poetry is spreading online as fast as economic instability through Europe and beyond…
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We recently covered Jim Collins’ book Good to Great, in our business book club.
The tome is responsible for popularizing the hedgehog metaphor, namely that a company should stick to what it’s best at, and not diversify into other sectors where it has no competitive advantage. (I’ve heard of this kind of diversification being jeered as “deworsification” by irritated investors. )
I’d heard that the fox / hedgehog contrast originated from Aesop’s fables… but when I double-checked, it turns out that Aesop’s fox/hedgehog story was a parable about how when the proletariat overthrow the bourgeoisie, it just leaves a power vacuum for a new and even-more-rapacious aristocracy to move in. Or at least, that’s how Marxists would put it.
Turns out the fox-and-hedgehog comparison comes from an even more obscure Greek guy, Archilochus, who said: “the fox knows many things, but the hedgehog knows one big thing”. That’s about the only thing of his that’s survived. Who knows — but for selective scribes, equally pithy aphorisms about, say, the hippo and the oxpecker, or the cat and the giraffe, might have inspired future business books! (Hippos and oxpeckers are symbiotic species, while I chose cats and giraffes arbitrarily.)
Now, the real test as to whether the fox-and-hedgehog parable holds true, is whether there are more foxes in the world, or hedgehogs. Sadly, I couldn’t find any population numbers in a quick online scan. Though given how dumb hedgehogs are reputed to be, I’d sort of imagine foxes would be more genetically successful… which would contradict the saying.
(Mind you, foxes are near-top-of-food-pyramid predators, and there are generally far fewer such predators than any prey species.)
As an unabashed fan of Sprott Asset Management, and (hilariously small-time) unitholder in their mutual funds, I keep tabs on the writings coming from that gold-hoarding golden horde.
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Here’s the latest from Sprott’s chief gold nut, John Embry. I agree with the thesis that gold will hit an all-time high (in US dollars) — and probably within the next few months. It’s been making all-time highs in Euros already. But once that move starts making it to the front pages of newspapers (or The Economist) then it’s likely to take a year or two to consolidate its gains before eventually moving higher still. At least, based on “history doesn’t repeat but it rhymes” theory. The summer months tend to be fairly humdrum.
Gold does well in periods when stocks don’t, and vice versa. So for gold to continue its decade or so of overperformance, one would expect general stocks not to do so well. And in the US, that appears very likely. In the past century, when stocks have been this richly valued, the S&P 500 index has returned a paltry 2% per year, over the subsequent decade. So this data is consistent with the “gold-is-going-up” thesis. Of course, there’s some selection bias on my part, in focusing on this supporting data.
More selection bias comes from the link in this article (the link is titled “Japan - past the point of no return”) which elaborates the troublesome state of Japanese state finances: they took in more money last year from issuing bonds than they collected in taxes; the working-age population is falling even faster than the general population; and only Zimbabwe has a higher gov’t debt-to-GDP ratio.
To be fair, it’s not all bad news: after the catastrophic misery that drastic cutbacks and higher taxes will cause, the resulting drop in the yen’s value should be of benefit for exporters. Mind you, that’s about as ridiculous an attempt to be even-handed, as a historian who says “while the Chinese invented paper, in so doing, they invented paper cuts”.
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There was a story in the Globe & Mail the other day about how Sprott has actually *lost* assets under management, as some clients have been unhappy with his portfolio’s underperformance since the recovery in March of last year. My guess is that successes in most stocks have been overwhelmed by the catastrophic losses in Timminco, a company which was trying to upgrade metallurgical silicon to solar grade. In the past 2 years it went from from $30 to 82 cents. [at time of original writing] At one point Sprott owned 17% of the company, so that 97% loss most definitely weighed on shareholder returns.
From a contrarian perspective, this is interesting, and would be interpreted as meaning he’s due for some outperformance. Media outlets generally cover streakiness — so a superstar who’s had a good run and gets glowing coverage (e.g. Eric Sprott circa 2008) is likely to have some bad years. And a fallen titan who gets sympathetic coverage (e.g. Eric Sprott circa 2010) is due for a rebound. Not that this should be interpreted as investment advice.
Incidentally, he tried to buy some of the 191 tonnes of gold the IMF recently said it would put up for sale… but was rebuffed. (Admittedly, he may not have been wearing a shirt or shoes…) There’s a healthy minority who think the IMF only owns gold derivatives, and that Sprott was turned down because he would’ve asked for the bars to be moved to a vault in Toronto. Maybe he wanted to swim in them, like Scrooge McDuck.
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In you-can’t-make-this-stuff-up news, a whistleblower who’d sent emails to the US Commodities Futures Trading Commission, claiming JP Morgan Chase and others were manipulating commodities prices for fun and profit, was a victim of a hit-and-run a few days after his name surfaced in testimony. (Fortunately he was also in a car at the time, and so was uninjured.) I doubt the financial firms had anything to do with it, but this isn’t doing much for those institutions’ credibility in what I shall euphemistically call the “gold enthusiast” sector.
It’s an odd decision, but I guess it’ll satisfy traditionalists…
LEED-Monument Rollout (click to… yeah, you know the drill)
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(Originally written March 15. Posted March 28)
We’re back from the Diamond Capital of North America(tm), with tales of our quartz-priced travels and gypsum-level accomodations.
On the flight over, I was struck by the vast expanse of the north — most of the landscape was as empty as the mind of a Zen adept. It was astonishing, thrilling in a way, to see an entire landscape under the horizon, unoverrun by civilization and unblemished by the mark of man.
On the other end of the spectrum, I was hoping to catch a glimpse of the oil sands from 35000 feet, but sadly Fort MacMurray and its environs were crowded over. So much for seeing one of the “7 eyesores of the industrial world” with my own eyes.*
The first thing I noticed when stepping off the plane and into the frosty frontier, was that the airport was very small. You walk off a ramp onto the tarmac and into the terminal building. Mind you, Yellowknife does have a third small baggage conveyor, to Whitehorse’s two. And it’s got bilingual ads at the airport — English and Japanese! Playing to the tourist base, the audio tour of the legislative assembly building is also available in Japanese, as well as the expected English, French, and nine other official languages of the territory. While there seemed to be more Japanese folks in Yellowknife than Aussies at Whistler, it’s apparently a big draw for German tourists too. Which means *both* sides of my family tree predisposed me to visit. In a sense, it may have been my genetic destiny! (That and invading Russia… hmm, maybe it’s an Arctic wanderlust thing.)
Back to the igloo-esque legislature building: it’s open on weekends, staffed by a volunteer and a security guard. Built in 1993, it’s the first permanent legislative building for the Territories. Prior legislatures met in the ballrooms of Yellowknife hotels, with occasional “road trips” hither and yon; maybe an attempt to neutralize the Yellowknifers’ home field advantage. The NWT flag was actually designed by a Manitoba high schooler, who in 1969 won $1000 for his inspiration, about thirty times what graphic design student Caroline Davidson was paid three years later, for designing the Nike Swoosh. (To Phil Knight’s credit — did I just write that? — he later gave her an envelope-full of Nike stock.)
Fair to say that things are pretty relaxed up in the Territories — someone outside can look all the way into the legislative chamber while they’re in session. Reinforcing this impression, the security guard at the offices of Joint Task Force North told me that, even though the Canadian Forces were a “diet Coke of a military” he was “pretty sure” the building didn’t offer tours. He then suggested a couple tourist venues I might consider visiting during my stay.
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* this is my list, in no particular order; readers’ private lists may vary:
- Ohio’s pride, the Cuyahoga River, which caught fire a record thirteen times over the years
(note: since cleaned up)
(note 2: I sure hope that’s a record…)
- the great manure lagoons of the factory farms of the American midwest
- the Yanacocha Mine in Peru: a “cyanide fortified” open pit gold mine as big as the tax havens where its investors probably hide their winnings: bigger than Luxembourg and Liechtenstein, it’s a whisker smaller than the Cayman Islands
- the Great Pacific Ocean Garbage Patch (filed in Wikipedia under that very name!)
- the Chernobyl Exclusion Zone
(note: in the quarter-century since 300,000 people were evacuated, wildlife seem to be thriving there)
- Alberta’s oil sands tailing ponds
- Exxon Headquarters in Texas - scientific illiteracy central
(incidentally, three score and ten years before Exxon started funding global warming deniers, the President of Union Oil bankrolled the publication and distribution of three million copies of the first American Christian Fundamentalist tracts. Fun guys, those oil barons…)
(Originally written March 18; posted April 10)
One of the first things you see at Yellowknife’s airport is that the diamond ads are bilingual — that’s English and Japanese. I noticed a slight difference between them, though…
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