Category Archives: History

Don’t Neglect the Forgotten

A forgotten sector comes to life
Miners decline relative to gold as investors give up on poor capital allocation by managers who paid high prices at the top of the last cycle 2007/2011. But that has changed as the sector has been starved of capital for years. Go where they ain’t.
A forgotten miner in an opaque market (Uranium). Eventually, the market MUST turn. An investor has to have a very (five years at least) timeframe for this market.


BANG stocks (Barrick, Agnico, Newmont and Goldcore vs. the FANG stocks–meaningless in the short-term but of interest to watch.

Short Squeeze

Posted for Reference

It’s the short squeeze of a vegan’s paradise. Shares of Beyond Meat (NASDAQ:BYND) jumped another 21% yesterday on an earnings beat, or really a loss beat, the company losing only $6.6 million on total net revenues of just over $40 million. The company now has a market cap of over $9 billion, and short borrowing costs keep rising. 51% of the company’s float is still being held short, which means the short squeeze can continue if the positions can’t be maintained, which would be especially relevant if the broader market starts to fall while Beyond keeps rising. There is about $800 million left in short positions on the stock. The short side is down about $400 million since January, while the stock is up about 650% since its IPO at $25.

Daniel Lacalle@dlacalle_IAQE is disinflationary because it perpetuates overcapacity and unproductive debt, yet it is massively inflationary on risky assets because the objective is to make rising government spending cheap. Hypernflation created in financial assets as sovereign bonds artificially inflated

Free Course on America’s Great Depression

One way to become a better investor and informed citizen is to study history.   an old pro gives advice:

“Learn history!” Joe Rosenberg (JR), Investment Officer at Loews 2017 L_Letter-to-Shareholders shouts.

My favorite book to recommend is The True Believer: Thoughts on the Nature of Mass Movements by Eric Hoffer.  CSInvesting seconds this recommendation. 

Review:

The book provides a concise and astute portrait of the personality type that is drawn to authoritarian institutions, whether political or religious. Hoffer makes an excellent case that the mass movements – the fascists, the communists, and the various brands of religious fundamentalists, that have caused so much death, suffering, and chaos throughout history in their attempts to impose their values and belief systems on others, have all depended on people of basically similar character to fill their ranks.

The true believer, as Hoffer portrays him/her, is someone who yearns for certainty and fears ambiguity; who sees the world in dualistic terms, black and white with no gray areas; who prefers to simply follow orders, letting others make the hard ethical decisions; who revels in belonging to an exclusive group and looking down on outsiders, particularly if they belong to a group the leaders have chosen as scapegoats.

Every voter should read this book and then look at the world today – the politics of fear and division, the growth of fundamentalist religion, the strident bigots on talk radio and TV – and then start working to reduce the danger they all pose to the freedoms in our Constitution, to the separation of church and state, and to our standing in the world.

—  Back to Mr. Rosenberg…………

There is no discussion about investing in the book, but in my opinion, it is extremely helpful in understanding markets. It conveys the nature of human behavior in mass–how people act as a group. One of his great examples is explaining why people riot. There is no reason and no logic. People just get caught up in it. Riots don’t end all at once, they end person-by-person—that is markets. People panic in a group, but they come back to their sense one by one. That is why stock move incrementally the way the do.

CSIMA (Columbia Student Investment Management Association): How should they think about investment and time horizon?

JR: Young people today in business are much more macro-oriented than micro-oriented. They spend much more time on what is going on in Europe or Federal Reserve policies. They don’t focus much on company specifics. Even when they do they have a very low level of confidence in what they are doing. It’s very unfortunate. I hate that they don’t teach financial history in business schools. If it was up to me, I would make financial history and all history a number one requirement for business schools. Understanding how a spreadsheet works can be learned on the job easily but understanding the continuum of history requires certain intellect. I cannot for the life of me under-stand why business schools are not teaching financial history.

My advice to young people, if they really want to be successful in this business, is to learn financial history. Learn history in general and then dig deeper into financial history and you will not be in such awe of everything that’s going on. I see the same problem in my office. People just don’t know any financial history and they think that everything that is happening is unusual. Everything else can be learned on the job.

The Course on The Economics of the Great Depression

In this five-lecture course, Dr. Robert Murphy reviews the causes of the Great Depression, the response of the Hoover administration, and the New Deal. The focus is more on economic analysis rather than historical narratives, contrasting the Keynesian interpretation of various events versus the Austrian explanation in particular. Topics include the operation of the gold standard and the allegation that it inhibited policymakers from implementing the “stimulus,” Herbert Hoover’s supposed austerity program, the Friedman-Schwartz theory that the Fed’s unwillingness to inflate led to the severe downturn in the early 1930s, recent academic research showing the cartelization effects of the New Deal, and the myth of wartime prosperity. Dr. Murphy’s book, The Politically Incorrect Guide to the Great Depression and the New Deal, would be very helpful for students, but it is not required for the course. All necessary reading materials are provided.

Sign up for free: https://mises.org/mises-academy/economics-great-depression

How to Get Rich

 

Value Investors Struggle–What Happened?

IWY “Value” shares (Brown line) vs. IWF “Growth” shares

What is going on? https://www.threepartadvisors.com/audio

Active Managers Horizon Kinetics  Worth a careful read.  Note the underperformance of several famous investors.   Did they ALL become stupid at the SAME TIME?

Indexation-The-Jury-is-Almost-In

Perspective Jesse Felder Chartbook July 31 2018 (1)

Perhaps a way to beat the ETF driven overvaluation is to search for companies that are in few indexes such as TPL or CVEO, for example.  And search for owner-operated companies. Owner_Op_Paper  With founder or owner-operated companies, there is less float so fewer of these companies end up in ETFs.   When you see that Blackrock is a majority owner in a stock that you own but the stock represents only .003% of their five trillion dollar portfolio, you have a festering problem.   Look for those founder led companies that treat shareholders fairly:

https://youtu.be/WDWQXaqsyr8  Berkowitz of Fairholme speaks to students.  My gosh, the interviewer is irritating.

 

 

 

50 Years of Financial History in Ten Minutes–The Yield Curve Comes Alive

Columbia Executive Value Investing Course

https://zoom.us/recording/share/RKV_9pE16WM3-JlzN_IKIkTFzydgq5DLO3aSpxAfbGuwIumekTziMw?startTime=1531400440000

Slides: Value_investing_webinar_7_12_18 (1)

Better than a MBA/CFA–A PhD in Financial History by James Grant

A Fantastic Offer

From: CSInvesting: I have no affiliation with Grants Publication whatsoever, but I am a fan of his work.   I post this because if you want access to an incredible library of the past 35 years of financial history, then this is your chance.  If you pay $349, ignoring the book and the six future issues, you have access to two issues per month from the past 35 years or about 840 issues at 42 cents per issue.   Besides financial data, there are excellent case studies of valuation and financial euphoria/despair.

If you read through those issues (Of course, skimming over articles that don’t interest you.), then you would have the equivalent of an MBA/CFA/PhD in financial history plus a vast course in valuation on certain companies, bonds, and real estate in real-time over more than a third of a century.   THIS IS A DEAL!    See the offer below

Grant’s versus…
Dear Almost Daily Grant’s reader,

The new edition of Grant’s Interest Rate Observer features a hard look at a zooming stock. The company behind the stock is widely appraised as one of the century’s greatest. Grant’s begs to disagree with that consensus view, as is our wont. Who or what might bring this shooting star down to earth?

Subscribers are also reading about. . .

–the newly crowned holder of the dubious title of America’s most indebted nonfinancial corporation. Would you buy these bonds? Your insurance company probably is.

–one of the few North American industries where value–and bearishness–abounds.

–a pair of struggling foreign debt collectors who may soon be getting a taste of their own bitter corporate medicine.

–a certain Asian behemoth which has managed to spawn a money supply nearly as large as that of America and the eurozone combined.

All this, plus an inspiring Fourth of July quotation by Thomas Jefferson, awaits you.

Sign up today for a trial subscription: six issues, access to the 35-year Grant’s archive and a signed copy of Jim Grant’s latest book, “The Forgotten Depression: 1921, The Crash That Cured Itself,” winner of the 2015 Hayek Prize, all for just $349 ($359 outside U.S. and Canada).

Click Here to begin a six-issue Trial Subscription to GRANT’S. This offer ends MONDAY, July 2, 2018.

– Philip Grant

Cliché Battle

 

Project Recovery: Finding Lost Airmen

https://projectrecover.org/media/

Condemned to Repeat the Mistakes of the Past

Here We Go Again……..

Financial bubbles are not accidents but rather inevitable outcomes of our asset-backed banking system. To illustrate: imagine a homeowner who owns a $1 million house free and clear. He goes to a bank and borrows $800,000 against the house. This credit money springs into existence as an accounting entry of a private bank—it is the creation of credit out of nothing. The borrower goes out into the market with these newly created funds and starts purchasing other assets: stocks, perhaps, or a weekend house. The new money drives prices higher, including those of the assets that form the collateral of the banking system. Since its collateral value has increased, the banking system is happy to increase its loans to borrowers, which pushes prices yet higher, and so on in a positive feedback loop. Price signals then prompt over-development, which
eventually lowers rents, which causes borrowers to default, the fractional reserve
process goes into reverse, and the banking system collapses.

Irving Fisher, whom Milton Freidman anointed “the greatest economist the
United States has ever produced,” described it thus:

In boom times, the expansion of circulating medium accelerates the
pace by raising prices, and creating speculative profits. Thus, with new
money raising prices and rising prices conjuring up new money, the
inflation proceeds in an upward spiral till a collapse occurs, after which
the contraction of our supply of money and credit, with falling prices
and losses in place of profits, produces a downward spiral generating
bankruptcy, unemployment, and all the other evils of depression.

CREDIT INSANITY

Performance_Update_2018_04 (1)

Speculation during the Great Crash of 1929

https://www.theatlantic.com/magazine/archive/1931/04/whirlwinds-of-speculation/307112/?utm_source=twb

This 1931 article written in the aftermath of the Great Crash of October 1929 and in the teeth of the Great Depression illustrates the pattern of human emotions in the boom/bust cycle. This should be read alongside Murray Rothbard’s excellent work, America’s Great Depression which analyzes in detail the causes of the depression.

But can speculation be fettered? Are we dealing with human emotions which defy control? Certainly, we cannot fetter speculation by our naïve American tendency immediately to enact a law. Making short selling—a that bête noire of the amateur economist—a crime or attempting to forbid speculation in securities by imposing a heavy tax upon the resale of stock recently purchased, would obviously be impractical as well as futile in a democratic state. So, too, an effort to distort and distend the functions of the Federal Reserve System, by charging it with the power and duty to ration supplies of credit to the stock market, would be an unworkable and paternalistic venture.

A Great Depression_Rothbard

Lecture on Studying Financial History (Russell Napier)

Russell Napier’s Lecture

on Financial History   (60 minutes)

https://event.on24.com/eventRegistration/console/EventConsoleApollo.jsp?&eventid=1568744&sessionid=1&username=&partnerref=&format=fhaudio&mobile=false&flashsupportedmobiledevice=false&helpcenter=false&key=7381A6A8D270C66A75C736D44257317E&text_language_id=en&playerwidth=1000&playerheight=650&overwritelobby=y&eventuserid=190902439&contenttype=A&mediametricsessionid=156958791&mediametricid=2247562&usercd=190902439&mode=launch

A good lecture on integrating past lessons into today’s current conditions.

A CFA composite book on Financial History: Financial History CFA Institute

If you do study financial history like the period of the Internet Boom then collect books and articles from many perspectives AND look at supply as well as demand. Also, incentives rule.

For example, read several books from different perspectives and the history of interest rates, the history of commodity prices, other equities, interest rate spreads, etc.