August 28, 2012
From MRB Partners, via Idea Farm

From MRB Partners, via Idea Farm

March 5, 2012
Median US Home Price vs. Gold, 1970-2012

From Jeff Gundlach’s presentation: The Decline & Fall of the Roman Empire

Wish we had house price data for India for a similar, long-term analysis.

February 29, 2012
From FT Alphaville: Is it any wonder that gold is loved and Greece hated?

From FT Alphaville: Is it any wonder that gold is loved and Greece hated?

January 13, 2012
Modeling The Limits To Global Growth

From Cassandra’s Legacy and New Scientist:

For more, read the book and the 2004 update.

January 7, 2012
Go Long The EM Middle Class

From GMO’s Arjun Divecha: Capturing Domestic Demand in Emerging Markets - Neither Small Caps Nor Multinationals Are a Good Proxy

Beat your market blues with GMO’s optimism:

… while Chinese per capita GDP quadrupled from $1,000 to $4,000 during the past decade, auto sales rose from one million vehicles per year to over 17 million. Markets rarely anticipate this kind of non-linear growth. 50% of all emerging markets (by market capitalization) are now in this sweet spot of shifting from savings to consumption. 

Bottom line?

… the best way to access demand from the burgeoning middle class in the emerging markets is to invest in companies globally that directly serve that demand, rather than using emerging market small caps or global multinationals as a proxy. 

January 2, 2012
The World’s Strongest Economies: 1870-2030
(From The Atlantic: The Most Important Graphs of 2011)

The World’s Strongest Economies: 1870-2030

(From The Atlantic: The Most Important Graphs of 2011)

December 16, 2011
Heading for Credit Crisis Lows

Morgan Stanley’s 2012 Outlook for India: Heading for Credit Crisis Lows

Government slowdown

We believe that the biggest driver of growth following the credit crisis was the spike in the ratio of government spending to GDP. This ratio has risen by 4pp between F2007 and F2009; a large part of this took the form of increased transfers to households, which revived consumption spending. Indeed, we believe that a major part of rural demand in recent years was driven by this rise in government spending. Central government spending has risen at a CAGR of 19% for the three years ending March 2011.

Capex slowdown

We do not have good real-time indicators for investment trends, but it appears that investment spending is likely to slow sharply. The quarterly results of a select few engineering and construction companies indicate a slowdown in their sales. More importantly, the forward-looking indicator growth in order inflows for these companies has now decelerated to eight-year lows. As of June 2011, order inflow growth for these companies declined to -27%Y.

Credit slowdown

Indeed, our favourite leading indicator for assessing the near-term growth outlook has been M1 growth, which measures the transactionary demand for money and has been an accurate predictor of corporate revenue growth trend in the last few years. M1 growth, which leads corporate revenues by about two quarters, is indicating that the depth of the growth slowdown will be at least as bad as that seen in 2008-09, if not worse. 

Dark clouds everywhere. No silver linings.

December 15, 2011
Nonlinear Dynamics in the BSE Sensex

Didier Sornette’s Financial Bubbles Experiment predicted a crash in the BSE Sensex a year ago:

Now you tell me!

December 13, 2011

From McKinsey: “The emerging equity gap: Growth and stability in the new investor landscape

December 2, 2011
Riding The 1/5 Year Government Waves

From the Hindu Business Line: Bunching up of Govt orders hits capital goods firms

Customers, especially Government utilities such as the State Electricity Boards (SEBs) and central power utilities that form a bulk of BHEL’s clients, generally tend to drag their feet on order placement in the initial years of the Plan period. Most orders tend to come in only by the second or third year of the Plan and as a result, the equipment manufacturing firm is full up and focussed entirely on execution of the orders by the terminal year of a Plan period, as is the case in fiscal 2011-12, the terminal year of the 11th Plan period.
So by the fifth and the last year, as SEBs and other Government utilities come under increasing pressure to meet targets set at the beginning of that Plan period, pressure keeps mounting on equipment firms to rush through deliveries.

There is indeed seasonality on both annual and five-year time-frames. Each year, the January-March period tends to have a surge in activity involving government agencies. The five-year plan period further amplifies this cyclic behavior. Savvy vendors eventually learn how to ride these waves!

November 30, 2011
Fascinating chart: Long term price of US timber, from Sewall. Note that timber remains GMO’s best investment recommendation on a 7-year horizon.

Fascinating chart: Long term price of US timber, from Sewall. Note that timber remains GMO’s best investment recommendation on a 7-year horizon.

November 28, 2011
Chart of Gold ($/oz) vs. Currency in Circulation* ($billion) from Don Coxe’s latest: It’s the Economy Banks, Stupid!

Chart of Gold ($/oz) vs. Currency in Circulation* ($billion) from Don Coxe’s latest: It’s the Economy Banks, Stupid!

November 28, 2011
Corporate BS BS

The latest from Hussman Funds: Are Corporate Balance Sheets Really the Strongest in History?

… while the amount of cash and cash-equivalents on U.S. (nonfinancial) corporate balance sheets has increased significantly, particularly relative to the cash-strapped lows of 2009, corporate cash is certainly nowhere near historical highs relative to debt. 

… While cash holdings are relatively high compared with total assets and net worth, even those figures are in the range of 5-10%, only about 3 percentage points above historical norms. Cash levels are “high” in the sense of being a larger percentage of total assets than normal, but the “excess” cash amounts to roughly $700 billion, versus total assets of non-financial corporations of about $28.6 trillion. The excess is fairly second-order from the standpoint of overall balance sheet “health.”

… at an aggregate level, corporate balance sheets look reasonable, but are certainly not “stronger than they have ever been in history.” Cash levels are elevated, but this is at best a second-order factor (with excess cash representing only a few percent of total assets), while debt remains near record levels relative to total assets and net worth.

In other words, beware of analysts spinning B.S. about corporate balance sheets.

November 26, 2011
INR - The Drama Queen

From The Economist:

Mumbai’s financial types say that firms are scrambling to find dollars and that desperate euro-zone banks, which supply about half of India’s foreign loans, are cutting off credit lines. That sense of fear strikes some as overdone. Jonathan Anderson, of UBS, a bank, has tagged the rupee a “drama queen”. India’s high inflation and chunky current-account deficit, financed by capital flows, mark it out from most of Asia.
And a lower rupee will fan inflation, which is already at 9-10%. The Reserve Bank of India (RBI), India’s central bank, and the government have been praying that it will slow. But a rough rule of thumb is that a 10% depreciation adds 60-100 basis points to inflation, says Mr Chakraborty at Standard Chartered. That’s unhelpful.

Once again, there’s talk of USD:INR at 55, 60, … and about time for the bankers to show up with their hedging strategies.

November 22, 2011
World Industrial Production - % Growth Per Annum
Via John Mauldin, the Simon Hunt November/December Economic Report has several interesting charts related to global demographics and implications for economic growth & wealth.
[Note: The red line is missing, but I think it’s meant to be the projected one, 2011 onwards.]

World Industrial Production - % Growth Per Annum

Via John Mauldin, the Simon Hunt November/December Economic Report has several interesting charts related to global demographics and implications for economic growth & wealth.

[Note: The red line is missing, but I think it’s meant to be the projected one, 2011 onwards.]