February 5, 2016
At current spreads, high yield seems to be no worse than fair value and probably better than that, even if we assume (as we do) that we are entering a fourth default cycle. In today’s environment, that makes it one of the best available risk assets for investors. But the nature of the high yield market suggests it is a good candidate for overshooting fair value to the downside whenever defaults begin to rise in earnest. Our response for BFAS at current levels is to continue to search for credit securities offering a superior combination of expected returns and downside protection while augmenting this at the margin with more index-like credit exposure. ... It would be lovely to claim we will be able to time the bottom for credit precisely. We will not, and unlike with equities, even if we did know the timing perfectly, getting material exposure to the asset class quickly would be extremely difficult. This leaves us with the hunch we are probably getting in a little early, the fear that we might not get all the exposure we would like before spreads move to less attractive levels, and the sure knowledge we won’t get the bragging rights of having called the turn. In other words, it seems to be an utterly classic value investing opportunity.
Part I: I would like to examine two areas where the U.S. really does have documentable advantages. They are both incredibly important, one especially for good times with thriving capitalism and the other as a protection against possible bad times in the future that I for one fear ... In a world in which most things continue to work well, or at least well enough, the U.S. has the advantage of simply being more entrepreneurial. More of us risk starting new enterprises than do others in developed countries. ... You can even be associated with several bankruptcies and still be a strong-running candidate for President! How unlikely that would be anywhere else. And if three times more of us charge at the Internet, medical research, or social enterprises than in other countries, then we do not have to be better. ... The list of our advantages in Canamerica, as we could call it, is a very long one. First, we are uniquely defensible and difficult to attack. We are well-armed and well-organized. Less obviously, perhaps, we are more than self-sufficient in food production, energy, and mineable resources.
Part II: The positive effects of low resource prices are underestimated. The U.S. and global economies are likely to do significantly better this year than recent opinions predict. The U.S. has plenty of spare capacity to grow above its longer-term limits. The biggest risk would be China’s GDP becoming much more disappointing. ... The U.S. and global markets do not look like they are in bubble territory. They can always suffer a regular bear market (and are almost in one now). But I still believe we will have to wait longer for the BIG ONE and that global equity markets will regroup once more. ... Currently ultra-low resource prices are not sustainable, particularly those of grains and oil. Oil producers need $65/barrel and rising to finance new oil exploration. Resource prices will inevitably rise and as they do they will reduce once again the growth rates of the global economy.
CargoMetrics, a start-up investment firm, is not your typical money manager or hedge fund. It was originally set up to supply information on cargo shipping to commodities traders, among others. Now it links satellite signals, historical shipping data and proprietary analytics for its own trading in commodities, currencies and equity index futures. ... There was an air of excitement in the office that day because the signals were continuing to show a slowdown in shipping that had earlier triggered the firm's automated trading system to short West Texas Intermediate (WTI) oil futures. Two days later the U.S. Department of Energy's official report came out, confirming the firm's hunch, and the oil futures market reacted accordingly. ... in this era of globalization 50,000 ships carry 90 percent of the $18.5 trillion in annual world trade. ... "My vision is to map historically and in real time what's really going on in economic supply and demand across the planet" ... building a "learning machine" that will be able to automatically profit from spotting and publicly traded security that is mispriced, using what he refers to as systematic fundamental macro strategies. ... CargoMetrics was one of the first maritime data analytics companies to seize the potential of the global Automatic Identification System. Ships transmit AIS signals via very high frequency (VHF) radio to receiver devices on other ships or land.
Flipping a metal disk to determine which group of muscle-bound men gets to play with a football first may sound like a nonevent. But like everything else about the Super Bowl, the simple act has evolved into one of the rites of that pseudoreligious ceremony. The first nine coin flips, like the first nine Super Bowls, featured relatively little pomp, just a referee and the competing teams’ captains. From there the stakes grew with the TV ratings, gaining honorary coin-flippers from sitting presidents (Ronald Reagan, via satellite) to military heroes (David Petraeus) and becoming a popular wager for casual gamblers and junkies alike. The betting site Bovada offers more than 500 bets on the Super Bowl—How long will the national anthem last? What color Gatorade will be dumped on the winning coach?—and says the coin toss is among the top five most active. ... Meadlock discovered that Irving, a Montreal native, was well-known to securities regulators around the world. By the time of their initial meeting in Montreal, the elder Kott had survived two assassination attempts, including a prematurely detonated car bomb, described in the Canadian press as mob-related, and had received what was then the largest civil fine in Canadian history, for stock fraud. Irving had also run what Dutch authorities described as the most successful boiler room in the world.