Friday, August 28, 2015

Driving around

Out to buy some food for dinner at North Shore Farms, I found myself unable to find a parking spot that worked, too high up the hill for my walk.  Driving out, the radio was tuned to Siri's Outlaw Country with Mojo Nixon.  The music was so good that I could have driven around aimlessly for an hour, which is just about what I did. Gas is cheap, and for this man it was cheap thrills.  The sound system is fine, the car is irrelevant in its unnoticed smooth function, and drifting around our town is relaxing.

Mojo's choice of music is exceptional for the most part.  It is rarely something from some artist or band that I recognize, and in the car I never have the ability to note who is being heard.  That is not a problem, it is just the joy of serendipity.  Earlier there was some semi-anthem type music on by a person/band that started with an L, and the singer had a fine gravelly type folk/country voice.  It was pull over on the side of the road good.

Driving around one can see the changes here.  So many.  There are houses being razed that are not much different from ours.  They are on good lots and not that old.  Our house was built in 1972 by a money focused oncologist, and it was meant to be the best that can be built without inherited wealth, which means that there were always areas of this town that could not be duplicated, or even found. With the finance and investment banking industry being the base of this town, that has all been changed.  It would not surprise us if the ground that our house stands on is worth far more than our treasured house.  Book cases on three levels, I do not look like a hoarder... but if we move?

The drive was a relief.  Our volatile market, our personal up in the air real estate transactions, the estates being settled, all of this keeps me awake at night.  This afternoon's musical ride was a time to lay back and drive.  I do like to drive.  I do like music.  I do like taking a break from talking to strange caretakers.

Volatility is what is expected now

With high speed traders, algorythmic traders, and  index fund traders, it is difficult on a day to day basis to determine who is running the U.S. stock market now.  Once upon a time one could look at the moves by the big brokers, the big investment funds, and individual activity in general and determine, while not an outcome, a possible direction.  For now that seems increasing difficult, if not impossible.  Volatility is now the lifeblood of the market, and for retail shareholders in general that is not good news.  It can bring back memories of '08/'09.

Wednesday, August 26, 2015

Standard phrases that linger for a decade, first "perfect storm" and now "new normal"

Some may call them clich├ęs.  They certainly become so standard that they don't require thinking.  For the 2000's it was certainly "perfect storm".  The film "A Perfect Storm" hit the theaters in 2000.  As all probably know, it was the story of a commercial fishing boat rushing back to port with their catch through two strong weather fronts and, by darn, a hurricane too.  Once the movie was off the screens the phrase lived on, and every major disaster, every corporate earnings miss, every significant financial markets event, every personal meltdown, was just reflexively called a "perfect storm".  The term continues today as a throwaway comment, but is dated and not as ubiquitous as before.

The phrase for this decade is "new normal".  Coined in 2011 by those geniuses at Pimco, the new normal was meant to describe the period after 2008/2009 financial market collapse and the sluggish recovery that took place in 2010 and 2011.  Looking forward, Pimco suggested that lowered expectations were appropriate and what we see was what we get, the norm.  Five years into the decade, the International Monetary Fund released a major economic report about China commenting that the country was "transitioning to a new normal".  The nebulous phrase is now ingrained in our minds.

Some toned down lifestyles can be referred to jokingly as "new normal" and toned down corporate earnings outlooks can get that title as well in a serious way.  Whereas "perfect storm" was generally meant to describe a negative event that was to some extent or a large extent outside of the control of those affected, "new normal" means slower, safer, not as risky, but with limited chance for any positive break out of consequence. While experiencing a "perfect storm" was terrifying, living through the "new normal" is some cross between stultifying and boring, but, thank God, reliable.  It is not exciting but it is meant to be sustainable.  To some, to me, the term "new normal" is not all that reassuring.

Halfway through the decade we can wait to see if the "new normal" sticks around for another five years. I even sometimes hope so. There is no appetite another "perfect storm" where responsibility does not seem to exist.  We are rooting without much hope for a "new awakening" type of mindset, and hoping to avoid the phrase "unmitigated disaster".  

Still, let's don't forget about "old normal" or just normal.

Tuesday, August 25, 2015

"Being Mortal"

This well known and widely praised book by physician and New Yorker magazine writer Atul Gawande had been circled around here for maybe eight months.  I guess, like many of the patients, family members, and doctors described in the book there was not an inclination here to read or talk too much about death.  Then a good friend whose book club had read it gave a recommendation, which was all that was needed to take the plunge.

I had read at least two excerpts from the book in the New Yorker pre-publication, but only recognized that while reading.  "Being Mortal" was a book that experience here in the past 10 years with parents and in-laws had already put me in touch with.  Some things here worked out well by chance almost, some poorly by what could be charitably called unintended denial, and it certainly would have been helpful to have had this thoughtful point of view before it all happened.  Now the focus is closer to home, or at least it seems that way at the moment.

To go further with personal comments would frankly be too personal for a widely accessible even if not widely known blog.  Gawande touches on important points, looking at the depersonalization of medical care that focuses on cures but not necessarily the ordeal of the patient, and looking at the science of a cure rather than the human needs of the person being treated. Well, to change my mind, I guess a few brief personal comments about just my parents can be mentioned to make this comment come alive.

My mother's end of life time was spent in a pristine and antiseptic nursing home.  She was taken care of well from a medical point of view, but from what could be seen during short visits to Virginia there was no stimulation or companionship intended or available. It was possibly available for ambulatory and almost healthy residents, but not for someone in my mother's condition.  Although frail, she could express her thoughts.  In her last months, when visited her primary message was "I want to go home".  That was not a decision that I could make.  It was heartbreaking and I do not choose to elaborate more about that difficult time. She died alone sometime in the middle of the night a few weeks after my last visit, two days after her 86th birthday.

My father's end of life period was in a hospital for several weeks and during that time I was able to be in Virginia for an extended period.  His home was an assisted living facility at that point, but I don't think he realized at first that he could go to that home.  The hospital and his attending doctor did not seem to realize it or want to allow it as well, but the excellent staff at the assisted living center helped me, and told me that he could come "home" if I arranged for hospice.  The attending doctor would not look at me or speak to me after that, and under her breath, but audibly, she cursed me.  It should be noted that a few other doctors and the head pharmacist quietly supported my effort.

As we left the hospital, my father marveled that all of the tubes and needles had been removed from his arms, rubbing them with wonder. He was overjoyed to get back to Stratford House, and his apartment.  For several days well wishers at the home came by,  and I cooked a prime rib dinner one night(cut into very small bites) and for once didn't set off the fire alarm.  He had his usual watermelon, toast, and coffee for breakfast, propped up in his just added hospital bed.  For three days he was content, and whether happy or just relieved to have some peace it didn't matter.  He slept more and more for a few days after that, with me or one of his wonderful small town caretakers at his side. As I was told might happen, he gave in when I took a break in another room of the apartment --- one big breath.  Pain, hallucinations, and aggravation, and ripping needles out of his arms in fits of anger was a hospital event.  Hospice was none of that.

What has just been described is part of Gawande's message played out.  "Being Mortal" is much more than this, and applying his prescriptions in real situations sounds daunting.  At times in the first part of the book, the message interpreted here seemed to be that everyone as they aged should check on their supply of Tylenol PM and vodka just in case.  As the book progressed it still dealt with situations in a positive if not necessarily easy way.  There is a habit here of making tiny dog ears on the bottom pages of personal books that denote something worth revisiting there.  Two chapters toward the end of the book, "Letting Go" and "Hard Conversations", easily won the dog ear award.

Gawande is a knowledgeable physician who is also a talented writer.  His grace on both accounts is visible here, and obviously why the book has built such a large following. Another major reason is that the book is ultimately not just about dying, but instead about what is required to have a life with meaning, one that causes a person to care about waking up in the morning.

Monday, August 24, 2015

In a pickle now?

So today was another weak, or dreadful, day in global equities.  It was a selling begets more selling type of day, an extraordinarily volatile day.  When does the poisonous mentality stop? That as always is hard to predict.  A few days is enough one could reasonably think.

What we do know is that most governments do not have much ammunition to use against this.  In the U.S., the Fed never had the guts to nudge interest rates even a slight bit higher, so the Fed's ability to use rates as a tool does not exist.  The Fed's weirdly named "quantitative easing" program has been ended, weirdly named because it means buying financial assets to raise prices, so restarting it would simply imply panic.  The Chinese government on Friday invested $17 billion across 14 major banks to give them more power to manage the market, and one can see where that got them on the first day after it was announced.  On a percent basis today the Chinese equity markets were down even more than the U.S. and European markets.

As mentioned in a weekend post here, major U.S. banks and financial institutions were neutered in their market making capability by the Dodd Frank bill so they now are much more limited in ways that they can staunch the decline on behalf of their clients than they were in the past.  Even keeled market strategists point out that the U.S. economy is performing well and that there have been no exogenous events to suddenly trigger this collapse of only the last few market days.  That's mostly true, oil markets ignored, but what they fail to say is that a rapid and large securities market decline has the potential to be a self prophesying event on its own.  Simply, money lost in the stock market cannot pay for vacations, new cars, eating out, or anything else.

The wall of worry is definitely building.  One should hope that it doesn't get too high and some opportunities show up as things settle down.  In the meantime, it's time for a nice dinner that can provide some needed gratification.

Saturday, August 22, 2015

Eye on the credit markets now

In times of equity market tumbles, there can be a follow-on attached credit market squeeze that has a broader and more fundamental impact on both individuals, small companies, and large corporations than does the tsunami of a serious decline in the S&P 500 or any other index.

1997 and 1998 began with the Asian currency crisis that morphed into the Long Term Capital Markets fund bust and the impact of extreme amounts of "trust me" lending by large private banks to Greek shipping magnates and others of dubious ethics. While the equity market was not doing well at all, especially anything related to finance, the resulting credit squeeze that led, for a week or two in the fall of 1998, to a real global credit freeze was terrifying to those who knew what was going on. As always with an event like that, going through it is a time when no one, or almost no one, has any idea what is going to happen next.

Of course, the most recent event of this type is fresh in the minds of most people over 25 who read.  Equities began leaking in late 2007 and through the first half of 2008 before the bottom dropped out completely on equities in the fall of '08, and at the same time the credit markets became almost inaccessible for a few months, culminating in March 2009 for equities.  Both the equity and the credit markets had a long climb back to normalcy.

What leads to this concern now is primarily the significant weakness in many country's currencies in the midst of this global stock market reset.  Currency, in a sense, could be viewed as a commodity. When the value of a currency is in flux there can be a period when determining value is difficult. When China devalued, it set in motion uncertainty that cuts across many countries, and is widespread in emerging markets. Lending, financing, and trading when broad swaths of the currency markets are unstable is difficult at best. Everything cannot be perfectly hedged, and with the shortsighted Dodd Frank bill now significantly limiting the inventories of securities that large U.S. or U.S related banks can hold for their market making activities, the desired hedges may not be easy to put together or even adequately available.  A credit crisis could ensue if markets don't settle down. As we learned painfully in 2008/2009, a credit crisis can lead to recession.

Given the gains of recent years for those that were in the market constantly, the equity decline so far is not especially alarming.  More declines may well come and change that view as most investors will be on the sidelines watching at first.  What would be severely painful is a full fledged credit market meltdown. That is not likely but, with the currency markets behaving the way they are and the usual market makers handcuffed relative to the past, it is not impossible.

Friday, August 21, 2015

Dreadful market, and no direction known at the moment

This post will take the risk of commenting on this equity market today before it closes.  One would think that trading is already just about over on a Friday afternoon in August, but actually that means less liquidity, aka light volume, and the remaining traders at their desks could drag this market anywhere, and meaningfully, if they have the will to do so.

Speaking about liquidity, that has been a big deal in the last two days.  With the two day extreme sell-off in the most visible and popular momentum names in tech --- see Netflix, Apple, and Facebook ---  it seems clear that we have reached a point in the recent downturn where some investors and traders are scrambling to cover margin calls.  That means they are in a position of selling parts of positions that are profitable overall but that can be sold to raise cash.  Valuation or long term potential or competitive positions have no place in this type of selling, which has its own momentum.

We know that concerns about China, the steady and not so steady, meaning destabilizing, decline in oil prices, and concerns about the potential for global growth prospects or lack thereof  are the primary causes for the downturn in recent weeks.  Significant turmoil in emerging market economic conditions and currencies is not helpful at all.  For two cents worth of additional comment it is suggested here that the possible collapse of the Iran deal and the emergence of the unpredictable and unattractive Donald Trump as a supposed legitimate contender for President of this country with the largest and most diverse transparent financial markets on earth are causes for serious concern here and more so in global markets.

Even for investors with a long term view this is not yet a market for trading, as there is no way to predict where this is going in the near term.  Batten down the hatches.  Be ready someday.


Saturday, August 15, 2015

Fake stone

For lack of anything better to do, I drove around our small fortunate town and found a striking similarity among mid-range houses.  Who cares?  It's obvious to anyone who is observant and just curious.

The neighbors on the angle across the street redid their house exterior completely.  It must have cost a a small fortune, fit to go with their three Mercedes in the driveway.  Still, they chose to go with the fake stone on the outside first floor of the house.  Somehow that is inexplicable to us here.  So much money spent for something that is clearly not real.  Our house nearby on the angle corner is brick downstairs and the chimneys and cedar shingle up.  The house across from this one is total brick.  The other corner has this amazing house that is total real stone.

The owner of the fake stone house is a successful dentist.  Everything can be replaced.

"Mississippi Masala"

We saw this 1992 film last night.  It was completely appealing.  It's really early Denzel, and a familiar portrait of a small southern town.  In my hometown almost every motel is owned by a family by the last name of Patel, and that is almost the norm, different names, across the small town south.  Koreans have city center delis, Chinese have the take-out food joints, and Indians have the motels...

The film is entertaining despite having some awkward dialogue and a few cliched moments.  Denzel is already charming.  The featured actress Sarita Choudhury is compelling.

Tuesday, August 11, 2015

Misguided efforts by governments to manage markets are widespread

China devalued its currency last night.  They said that it was a "one-off depreciation".  We have certainly heard that before, beginning in the 1980's with Latin America.  We learned long ago never to trust such a statement, in fact generally it was just a sign of the inevitable opposite.

This move hit markets globally as it was self serving in the short term and simply inappropriate as a longer term action.  Greece, in its crippled financial condition, most likely would have benefited from a currency devaluation but could not do so without its own currency.  China, as the most powerful economic growth story in the world and a country with huge reserves, is the most unlikely candidate to get any long term benefit from a devaluation, at least one that has any benefit for a healthy global market, which they of course need. Competitive devaluations could easily become rife in Asia, and it would not be a surprise if the U.S. Congress responded in a less than market intelligent way.

The Chinese communist political dictatorship thinks that they have the power to determine all outcomes. After the last two years of the party newspapers encouraging the Chinese people to invest in the stock market and endorsing the steep rises in stocks, they have approached the recent collapse in stock prices as something that they have the power to contain and correct.  In the short term they do have the power to partially contain and partially correct, but at the price of making large parts of the market illiquid, scaring away many foreign investors in their markets for the long term, and mandating that brokerage firms, government controlled banks, and public enterprises load up on stocks at prices and concentrations that may not be prudent, in fact they are not at all prudent.

Here at home, Governor Andrew Cuomo of New York has led the effort to focus on one small slice of the economy to mandate significantly higher minimum wages, up to $15 an hour.  That's of course the fast food industry and impacts companies with more than 30 restaurants nationally.  As almost everyone but Governor Cuomo knows and understands, most fast food restaurants are owned by franchisees and many of those entrepreneurs have far less than 30 restaurants but, being part of a chain, the mandate applies to them as well.  Many are in wealthy areas of the state like New York City and many are also in poorer areas upstate which creates a startling mismatch of outcomes.  Some economists who don't mind telling the truth note that this will impact small business owners in many other product areas in New York in a way that almost certainly will have unintended consequences. Cuomo, early in his second term, is now using leftover campaign money and running regular television commercials lauding his move and his standing up for low wage workers.  A broader plan was  the only economically rational way to do this, but it would not have received as much attention for him. Is he running for Vice President on the Democratic ticket? Or is he simply establishing himself as a more powerful and progressive alternative to the distinctly limited Mayor DeBlasio, who is a publicity hound himself, even nationally.

Then there is Hillary Clinton calling for a government regulation of stock buybacks. There are different schools of thought on this, but echoing Elizabeth Warren and calling all buybacks market manipulation is suspect.  Clinton's prescription is for companies to immediately announce publicly that they are buying back stock.  It seems like that would be market manipulation for sure as it could cause a precisely timed surprise rise in a company's stock rather than one determined by the dynamics of the market, meaning the balancing of buy and sell orders.  Some knowledgeable market participants have their reservations about the way that buybacks are done and their purpose, but if they are done by companies with adequate cash reserves for operational purposes and for needed investments, and if a company's stock is trading below its intrinsic value, they are constructive for shareholders and the company.  Does anyone want politically appointed government employees making those judgments? Clinton and Warren certainly do, but that is surely not a good thing for efficient capital markets.

The above are just a few examples of misguided efforts by governments relating to financial markets. Don't get me started on the capital markets side of the Dodd Frank bill. These comments do not reflect any hostility toward regulation in general, just for regulation that is not based on an understanding of financial markets and is simply politically motivated.



Monday, August 10, 2015

"Barbarian Days, A Surfing Life", from William Finnegan

"Barbarian Days" is an entertaining book.  It is unequivocally a book about surfing.  It is also an autobiography of sorts built around that theme.  Finnegan is a long term staff writer for the New Yorker who is best known for his insightful investigations of conflicts around the world, particular in troubled areas of Africa, Central America, and Latin America.

Not being a surfer, it took some adjustment to read this book.  The first part of the book was "nothing but net", to use a basketball analogy that can be related to here, as he wrote about his early life and his family.  Almost all of the areas that he wrote about in the beginning were familiar from first hand experience here, from New York City, to many areas in the greater Los Angeles area, to Hawaii.  Then as the book evolved and Finnegan's travels did as well, the realization here was that this was indeed a hard core surfing story. The reading slowed down until an adjustment was made.  It was not necessary to understand every nuance of surfing.  Back up to speed, there were still parts where some of the detailed surfing stories actually became dramatic as the book had sucked me in, or under.

The life story includes his parent's and siblings tangential lives, his devotion to both creative writing and journalistic reporting from an early age, and his success as his first article was sent to the New Yorker in 1981 and it was published in the next issue after he sent it.  It was about what he observed in Nicaragua at the time.  After Finnegan worked on a railroad earning decent money in his late teens and early twenties, he spent all of that money and much of his mid-twenties traveling around the world to surfing locations, and his commentary beyond the surfing is often both informative and wry.  He ended up out of money in South Africa, so he picked up a job teaching in a high school there in a black area for a year.  That was an enlightening experience to him, and led to the first book of his that was published.  He was hired by the New Yorker in 1986.

His articles have been read and enjoyed here for many years, and "Barbarian Days" exhibits his usual fluid, observant, and straightforward writing style.  Whether this book works for everyone is unclear, but it sure did its job here.

Saturday, August 08, 2015

The food delivery option

At times we seek out the small group of restaurants that deliver in our area.  They always charge menu prices so the extra expense is in the tip.  There are times when we don't have the time, take the time, or have the energy to cook, and after years of ordering take-out in those situations, and dropping off for a chat at a much wider array of restaurants, delivery is often necessary.  I liked going out for the socializing, but now it is often no longer possible for a variety of reasons.

We get into ruts with these various eateries and then take a hiatus.  One local Italian pizza joint has expanded their reasonably priced menu in the last couple of years.  Their pasta is reliably good, their salad is a classic American iceberg one but always extremely fresh and with roasted red peppers and plenty of olives.  They now have salmon and sole, welcome but not their specialty.  Grilled vegetables could be called that here.  For a month or so we ordered from there a couple of times a week, but recently they have been off the list, too much of a good thing.  That happens, and they will be back soon.

A hybrid Italian, continental, and Central American restaurant nearby has great food and somewhat high prices.  They were almost a hang out for a number of years.  Named Nick and Pedro's, it is run Jose and Victor.  Often they both burst into the house for delivery, patting me on the back and shaking the hand of anyone close.  Their salads are huge and exceptional, and their various seafood offering are all fine, with tilapia livornese with capers, olives, and julienne vegetables often being the choice. Because of the price and the intense bonhomie, we call them just once every two or three weeks. Also two of their best entrees are a steak and a veal chop, but just cooked medium rare meats are not necessarily best for delivery, or they are not.

There is an elaborate Chinese restaurant nearby that calls itself the "best on Long Island", which means that there are plenty of sugary dishes and bizarre combinations that sound good but don't necessarily work here for former aficionados of Manhattan's Chinatown.  Still, keeping it simple works.  Everything is fresh and there are enough non-Long Island "favorites" to do well.  Additionally, given their reviews and their advertising, the prices are reasonable.

One more restaurant that is on our regular list is a pan-Asian one that has some dishes that are unique for this area.  One is sliced almost rare tuna with soba noodles and seaweed salad  Their spring rolls are tops.  Being about nine miles away their delivery time is still faster than much closer places. Over time though much of their food seems to taste the same.  We will have a Wild Ginger splurge for a week or two and then not again for a month more.

We are always reading about other possible options, but this is not a major delivery area.  Our favorite Indian restaurant, which truly is the best on Long Island and compares well to Manhattan restaurants, unfortunately does not deliver and even take-out at the appointed time can be a wait.  As mentioned in a previous post, the wonderful Hummus Place recently closed.

But enough.  Pearl East has just delivered.  Steamed salmon with black bean sauce awaits.


Wednesday, August 05, 2015

Sultry nights

Believe it or not the crickets are out here at night.  It's so continuously hot.  In the southern town that I was raised in, we did not have air conditioned cooling and the windows were opein and fans were on all night. The crickets were then deafening.   It was in its own way reassuring.  When the rain would eventually come it was so welcome, a time for sleep finally.

Crickets here are unusual.  Ten days of constant 90 degree heat apparently have brought them out.

Sunday, August 02, 2015

2022 Winter Olympic Games --- Why not Kazakhstan?

The choice of Beijing to host the 2022 Winter Olympic Games was disappointing.  The other finalist was Almaty, Kazakhstan.  Almaty?  Or for that matter Kazakhstan?  Despite the general lack of familiarity, that would have been a bold and interesting choice for events that are more than six years away.

As has been noted by everyone, Beijing has little if any snow.  Events there based on winter weather or snow will be manufactured.  The main mountain areas of snowfall nearby, 100 miles away, will still need an extensive artificial snow making operations to assure adequate slopes.  There is little history of winter sports in China in general and certainly not near any major metropolitan area where prosperous people congregate.  What Beijing and China have is money and they will have the infrastructure to support the games without question, using some of what was built for the 2008 Summer Olympics.  They also have the safe success of those games under their belt.

What Kazakhstan had was beautiful mountains and significant snow around Almaty, the country's largest city, former capital, and its commercial and cultural center.  Doing some necessary research, it was learned that Kazakhstan is larger in land area than Western Europe but has only 18mm people.  It's primary economic resource is energy based but it also has traditionally been an agricultural country.  Their leader and head of state, apparently for life, is Nursultan Nazarbayev, who wins every election with more than 95% of the vote.  The country has a "balanced foreign policy" and maintains open relations with the U.S., Russia, and China.  The fiscal situation is stable.  70% of the population practices Islam and 26% Christianity, and there are little if any extremist elements related to religion.

That all seems rather innocuous and even attractive.  Strangely, Nazarbayev's election totals have been monitored broadly by international observers, from 19 countries this year, and deemed to be be fair.  If anyone questions that, they can just look at China as a comparison which some would say has the worst of both worlds, meaning a communist dictatorship without elections and totally unfettered and often corrupt financial and commercial markets unless they are randomly curtailed for political reasons.

For many reasons, Kazakhstan would have been an Olympics to look forward to, and one that could lead to adventure travel by tourists globally in the years ahead before, during, and after, and importantly economic development and inclusion for a strategically located country with meaningful potential.  The vote by the Olympic committee charged with picking the host was exceptionally close at 44 to 40.  Given that many of those voting "for" would have or do have some economic dependence on China and few of the voters would have any dependence on Kazakhstan,  it is easy to suggest that the real favorite for the games was Almaty with its mountains, snow, and winter glory.

Too bad about this wimpy move by the Olympic governing group.  Not far ahead of FIFA it seems.