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Welcome. The content below is free to the public. It might be worth what you are paying for it. Having studied economics and being in finance for over two decades, I have learned that only one thing is certain - that almost nothing is certain. As we endeavor to come up with our best analysis of the world around us, the opportunities and risks, we have to try to overcome a myriad of issues including our own ignorance, biases and emotions. What follows are my attempts to overcome those obstacles. Welcome to my view - publishing Monday and Friday afternoons.
Published by http://FundamentalTrends.com
On Monday, the U.S. Treasury revealed for the first time the amount of government debt held directly by Saudi Arabia. The amount reported was $116.8 billion which is far less than many expected. Interestingly, the accompanying chart from Bloomberg shows that direct Saudi treasury holdings have been on a steady rise upwards the past decade.
These are articles that caught my eye that I'll make sure to read this weekend:
The equity exodus by investors is getting worse at MarketWatch
China’s economy in doldrums: 8 factors driving the turmoil at The Financial Express
In Japan’s Economic Extremity, Few Ideas Are Too Extreme at Wall Street Journal
Fighting Corruption Critical for Growth and Macroeconomic Stability at International Monetary Fund
Stock Market Indicators: S&P 500 Buybacks & Dividends at Yardeni Research, Inc
While oil and gas have been a focus of ours for a long time, we are still watching OPEC with the same curiosity that the rest of the world is. In the biggest oil news, Saudi Arabia "retired" oil minister Ali al-Naimi who Forbes had ranked as one of the world's most powerful people. In his place now is the former Saudi Aramco CEO Khalid al-Falih.
On April 3, 2012 about when gold prices were near highs I said the following and got lambasted for it: "...with all due respect, the dollar is a better currency than gold. As an investor, if you didn't already make outsize gains on gold the past 10 years, then you won't make outsize gains in the next 10 either because gold is done leading." A year later I teased the gold bugs by saying that "predicting the gold collapse wasn't hard."
This summer is shaping up to a be a wild ride. One of the best places to benefit from the potential issues that are piling up could be in volatility investments. To be sure, investment instruments such as the ProShares Ultra VIX Short-term Futures (UVXY) and iPath S&P 500 VIX Short-term Fugures ETN (VXX) are not for the faint of heart, but, there could be outsize gains available soon.
I have seen literally hundreds of analysts, pundits and wannabes describe how they are "data dependent" in their approach to investing the past few years as the "big data" industry has made splicing and dicing numbers easier and easier. I have to say, I am not impressed with over 80% of these folks, roughly the same number I wasn't impressed with before the "data" drive to differentiate.
What I know is that no matter how much data you have, the effectiveness of an investor lies with how they interpret that data. In that regard, most people get it wrong, most of the time. Why is that? Simply, they don't understand the businesses or business sectors that they are trying to invest in. Because of that, they not only interpret the data wrong, but they often look at the wrong data to begin with.
Don't get me wrong though, data is very valuable when it's the right data for the right question. For example, I have been trading and investing in a particular oil and gas company for about six years now and most folks have no idea what the company is worth. They point to current free cash flow, current debt, yesterday's pipeline obligations and a host of other "data" to support their view of the company's share price, whether long or short the stock.
If you've been reading me the past couple years, you know I believe that the slow growth in the global economy is essentially a permanent circumstance. The short thesis is that aging demographics and massive accumulated global debt simply can not be overcome with easy money. The best we can hope for is slow growth, a smoothing of market forces and a preservation of standard of living. The worst we can expect is the type of depression, social unrest and war that many doom and gloom sellers rant on about.
Today's U.S. employment numbers demonstrate that growth, even on island America, is not likely to accelerate anytime soon past the 1-2% we've been seeing lately. While there is some seasonality to this month's number as employers wait for May graduates to hit the job market, it is more likely a harbinger of what I called a "skip straight recession" last winter.
U.S. employment numbers were not the only thing to look sluggish this week. Nations around the world reported slower growth than wished for.
Jeffrey Gundlach pointed out (make sure to watch that inteview) the deflationary problem nations are facing today. He followed up with talking about helicopter money and fiscal spending to bring back some growth and inflation. Those are the exact same ideas I talked about on MarketWatch in March.
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