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Articles by Capitalist Exploits

An Absurd Unintended Consequence Of Abnormally Low Rates

April 22, 2017

By Chris at www.CapitalistExploits.at
Market dislocations occur when financial markets, operating under stressful conditions, experience large widespread asset mispricing.
Welcome to this week’s edition of “World Out Of Whack” where every Wednesday we take time out of our day to laugh, poke fun at and present to you absurdity in global financial markets in all its glorious insanity.

While we enjoy a good laugh, the truth is that the first step to protecting ourselves from losses is to protect ourselves from ignorance. Think of the “World Out Of Whack” as your double thick armour plated side impact protection system in a financial world littered with drunk drivers.

Selfishly we also know that the biggest (and often the fastest) returns come from asymmetric market moves. But, in order to identify these moves we must first identify where they live.

Occasionally we find opportunities where we can buy (or sell) assets for mere cents on the dollar – because, after all, we are capitalists.

In this week’s edition of the WOW: An Absurd Unintended Consequence Of Abnormally Low Interest Rates

Even the dullest amongst us have heard about compound interest.

The story goes like this: you can become wealthy – not rich, but wealthy – by foregoing those lattes, $100 haircuts, and saving a decent portion of your income. You earn interest on those savings and let it compound.

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How Heavy Is This?

April 18, 2017

By Chris at www.CapitalistExploits.at

Here is a glass of water. You’re holding it.

How heavy is it?

The answer is: the actual weight probably doesn’t matter. It’s just a glass of water. What matters is how long you hold it.
Hold it for a minute, it’s no problem. An hour and your arm will ache. A day and your arm will feel paralysed.
The weight doesn’t change but the longer you hold it the heavier it becomes and the greater the probability you finally just have to put it down or risk dropping it altogether.
Now, take a look at this graphic which I nicked from Hugo Salinas:

Betting against the ability of governments and their central banks to keep holding the proverbial glass of water has been a losing proposition for a looooong time.
Now, simple math tells us that although this debt growth is pretty damned fantastic it needn’t be a problem if income growth has kept up with it. Income, after all, services debt.
Since income growth hasn’t kept up clearly that’s not the case. So what is it?

The answer lies in this chart which shows the cost of capital across the major economies of the US, the EU, the UK, and Japan.

When the cost of debt servicing is low or zero, then the size of debt really doesn’t matter much. It’s as if the glass of water has no weight at all.

Now here’s something worth pondering…

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Trump Wall – How Exactly?

March 12, 2017

By Chris at www.CapitalistExploits.at
Market dislocations occur when financial markets, operating under stressful conditions, experience large widespread asset mispricing.
Welcome to this week’s edition of “World Out Of Whack” where every Wednesday we take time out of our day to laugh, poke fun at and present to you absurdity in global financial markets in all its glorious insanity.

While we enjoy a good laugh, the truth is that the first step to protecting ourselves from losses is to protect ourselves from ignorance. Think of the “World Out Of Whack” as your double thick armour plated side impact protection system in a financial world littered with drunk drivers.
Selfishly we also know that the biggest (and often the fastest) returns come from asymmetric market moves. But, in order to identify these moves we must first identify where they live.
Occasionally we find opportunities where we can buy (or sell) assets for mere cents on the dollar – because, after all, we are capitalists.

Join the INSIDER membership and find out what we’re doing with our own money…

Read More »

An Entrepreneur Talks Iran

March 7, 2017

By Chris at www.CapitalistExploits.at
I chatted with Mahdi Kazemzadeh who was recently introduced to me by a mutual friend.

Mahdi is the founder and managing director of Afraz Advisers, a firm providing analytical tools and data services on the Iranian oil and gas industry. Their clients are international companies navigating the Iranian oil and gas industry as well as institutional and private investment funds.
I wanted to talk with Mahdi for a number of reasons, chief among them getting a better understanding of things from the perspective of a Western educated entrepreneur working on the ground in Iran.

Why Iran?

Unless it turns into ground zero for the next mushroom cloud, you’re staring at a country with a massive middle class, great demographics, very high level of education and a very high savings rate. It’s literally the flip side of the West!
I recorded the conversation and after editing out, ahem, private for-your-eyes-only sections I’ve got the finished "product" for you to listen in on.

Highlights Mahdi and I discuss:

Why Iran could be "yuuuge" for investors (and why the emphasis on "could be")
A boots-on-the-ground perspective on the effect of the Trump election on Iran.

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Things You’ll Never Believe

February 6, 2017

By Chris at www.CapitalistExploits.at
So today I’m going to leap all over the place and show you some some interesting things that’ve come across my desk in the last week. Why no full fledged blog?
Well, if you didn’t notice, this week’s WOW on the "Trumpification" of US foreign policy (and its winners and losers), was, I dare say, a bit of a beast. And so for all my avid readers who managed to get through it all, it was worth it for me. Also, I’ve been spending some time on my latest Insider alert and time is running short.
First out of the gate, a funny conversation I had with my dear wife:
Wife: So, let me get this straight: you’ve got thousands upon thousands of people on your list but only 42% of them read your work?

Me: Well, I guess only 42% open their emails, yes. I couldn’t understand it for a while.

Wife: You’d better step up your game, that’s awful.

Me: Well, I’m told it’s actually quite good as open rates for this blogging stuff are typically around 20%, so in theory I’m killing it, honey.

Wife: Well, that makes no sense. Why would someone sign up and then not read your emails? It must be that you’re just not that good. I think you should just focus on your fund and leave all this stuff alone.

Me: Well, this helps me to concentrate on thinking stuff through so that the fund will do well. And look, it’s working.

Wife: Seems all backward to me.

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Trump, TPP, And Taking On China

February 2, 2017

By Chris at www.CapitalistExploits.at
Market dislocations occur when financial markets, operating under stressful conditions, experience large widespread asset mispricing.
Welcome to this week’s edition of “World Out Of Whack” where every Wednesday we take time out of our day to laugh, poke fun at and present to you absurdity in global financial markets in all its glorious insanity.
While we enjoy a good laugh, the truth is that the first step to protecting ourselves from losses is to protect ourselves from ignorance. Think of the “World Out Of Whack” as your double thick armour plated side impact protection system in a financial world littered with drunk drivers.
Selfishly we also know that the biggest (and often the fastest) returns come from asymmetric market moves. But, in order to identify these moves we must first identify where they live.
Occasionally we find opportunities where we can buy (or sell) assets for mere cents on the dollar – because, after all, we are capitalists.

Join our Insider membership and find out what we’re doing with our own money… targeting asymmetric investment opportunities

In this week’s edition of the WOW we’re covering the US withdrawal from TPP and the repercussions

There’s always something new.
Take US presidents.

Read More »

Pressures Mount On Aussie Banks

January 19, 2017

By Chris at www.CapitalistExploits.at
Market dislocations occur when financial markets, operating under stressful conditions, experience large widespread asset mispricing.
Welcome to this week’s edition of “World Out Of Whack” where every Wednesday we take time out of our day to laugh, poke fun at and present to you absurdity in global financial markets in all its glorious insanity.
While we enjoy a good laugh, the truth is that the first step to protecting ourselves from losses is to protect ourselves from ignorance. Think of the “World Out Of Whack” as your double thick armour plated side impact protection system in a financial world littered with drunk drivers.
Selfishly we also know that the biggest (and often the fastest) returns come from asymmetric market moves. But, in order to identify these moves we must first identify where they live.
Occasionally we find opportunities where we can buy (or sell) assets for mere cents on the dollar – because, after all, we are capitalists.

In this week’s edition of the WOW we’re covering Australian bank funding costs

My sister-in-law just bought a new cupboard apartment in Sydney. AU$1.4 million, the going price for an inmate of the city’s digs, gets you enough room for a cat, its litter tray, and a wine rack, which you’ll be emptying regularly in order to keep your sanity, living in confinement.

Read More »

Indexing Lunacy

January 15, 2017

By Chris at www.CapitalistExploits.at
Market dislocations occur when financial markets, operating under stressful conditions, experience large widespread asset mispricing.
Welcome to this week’s edition of “World Out Of Whack” where every Wednesday we take time out of our day to laugh, poke fun at and present to you absurdity in global financial markets in all its glorious insanity.
While we enjoy a good laugh, the truth is that the first step to protecting ourselves from losses is to protect ourselves from ignorance. Think of the “World Out Of Whack” as your double thick armour plated side impact protection system in a financial world littered with drunk drivers.

Selfishly we also know that the biggest (and often the fastest) returns come from asymmetric market moves. But, in order to identify these moves we must first identify where they live.

Occasionally we find opportunities where we can buy (or sell) assets for mere cents on the dollar – because, after all, we are capitalists.
In this week’s edition of the WOW we’re covering an update to indexing lunacy
In a previous edition of the WOW I wrote about a bubble in dumb money, and in it we looked at the massive drawdowns in capital from hedge funds in favour of "passive investing" via ETFs. Investors have a point. Why pay 2/20 when you can pay as little as 0.

Read More »

Collateral Damage

December 18, 2016

By Chris at www.CapitalistExploits.at
This article is a follow on from two previous articles discussing the eurodollar system. Part one can be found here, and the following one here.

Today we cover what I believe to be the critical component as to why the eurodollar system isn’t functioning correctly, and why what central banks have been doing with regards monetary policy is actually destructive to the functioning of a healthy global economy.

Central Bank Activity Has Led Us Nowhere, and Here’s Why

Let’s begin by asking a question: What forms the basis of the global financial asset system?

To answer this question let me tell you a story…
I grew up in Southern Africa and have traveled the continent extensively. I can tell you this: Africa in general has issues, and there is a fundamental reason kids have flies in their face and eat just one meal a day of questionable nutritional content.

This problem is the single most important reason why this is the case and it’s the abject failure to create collateral. 
Not even Bob Geldoff and the world’s funkiest rock stars managed to fix this. Countless others have tried, including U2’s Bono and Bill Gates. Billions raised and the kids still have flies on their face. On the other hand, the soldiers all have new guns and Swiss bank accounts continue to be topped up.

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Mark Yusko – A Conversation Between Capitalists (Part 1)

December 13, 2016

By Chris at www.CapitalistExploits.at
It was over a week ago now that I had a conversation with CEO and CIO of Morgan Creek Capital, Mark Yusko. It’s one of the true pleasures of my work: speaking with the sharpest minds in the investment world – from the fine, dignified, and exceptionally bright, right through to the unrefined, rough as guts, look-at-me-wrong-and-I’ll-bust-your-nut folks. What drives my desire and conversations is always the intellect and knowledge behind those who have proven time and again to have an edge.
Mark is one gent who definitely has an edge. What’s more, is he’s extremely likeable, and for a guy who’s as successful as he is, very approachable.
I’d never spoken to Mark before even though we have a number of mutual friends. I’m really glad I managed to connect since it was one of the most enjoyable conversations I’ve had in years. I expect it’ll be the first of many "stress testing" conversations to come. We chatted about a number of things such as:

One emerging market currency that has been smacked and treated like a failed state.
The most moronic thing Mark has seen in his entire career (which is saying something).
The opposite of reflexivity, and a market setup for what will assuredly be a catastrophic outcome, and
The one bet that Mark is prepared to make over the next decade with anyone. And I’ll gladly join him in this.

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Asymmetry In Action: These 6 Charts Are Most Telling

November 13, 2016

By Chris at www.CapitalistExploits.at
I think perhaps this is a good time to bring you all up to date with what we’ve been up to the last few months.
If nothing else it’ll serve to answer the many questions I receive on the topic. Questions such as:
"Hey Chris, as a small retail investor it’s hard to impossible for me right now to buy options or warrants to participate from a yuan devaluation. What’s your take on other financial vehicles where a yuan devaluation would have a huge (optionality) impact, that a retail trader could position himself with? Not talking FX or Futures, more like companies or sectors or commodities that would profit, something where it might be easier to find options for."
Some three months ago we launched a small fund dedicated towards asymmetric opportunities. I run this together with a long term great friend and ex-hedge fund manager. Our target is the sort of opportunities which are akin to subprime "Big Short" type trades. We have been very careful about our positioning, being extremely focussed on many of the trends I talk with you about here.
In addition to the fund launch, I wanted to provide a dedicated service for investors. Investors who, while they may not have hundreds of thousands or even tens of thousands of dollars to invest in a fund or even a desire to invest in a fund…

Read More »

While The World Watches US Presidential Elections

November 9, 2016

By Chris at www.CapitalistExploits.at
Market dislocations occur when financial markets, operating under stressful conditions, experience large widespread asset mispricing.
Welcome to this week’s edition of “World Out Of Whack” where every Wednesday we take time out of our day to laugh, poke fun at and present to you absurdity in global financial markets in all its glorious insanity.
While we enjoy a good laugh, the truth is that the first step to protecting ourselves from losses is to protect ourselves from ignorance. Think of the "World Out Of Whack" as your double thick armour plated side impact protection system in a financial world littered with drunk drivers.
Selfishly we also know that the biggest (and often the fastest) returns come from asymmetric market moves. But, in order to identify these moves we must first identify where they live.
Occasionally we find opportunities where we can buy (or sell) assets for mere cents on the dollar – because, after all, we are capitalists.
In this week’s edition of the WOW we’re covering China’s forex reserves
While we all sit here aboard the planetary asylum watching and waiting to see if the fetid swamp of corruption US political establishment reaches a crossroads or probably a road off a cliff, a hop and a jump away in the ancient land the PBOC has been forced to deal with their own ugly truth.

Read More »

Military Miscalculations

November 3, 2016

By Chris at www.CapitalistExploits.at
Market dislocations occur when financial markets, operating under stressful conditions, experience large widespread asset mispricing.
Welcome to this week’s edition of “World Out Of Whack” where every Wednesday we take time out of our day to laugh, poke fun at and present to you absurdity in global financial markets in all its glorious insanity.
While we enjoy a good laugh, the truth is that the first step to protecting ourselves from losses is to protect ourselves from ignorance. Think of the "World Out Of Whack" as your double thick armour plated side impact protection system in a financial world littered with drunk drivers.
Selfishly we also know that the biggest (and often the fastest) returns come from asymmetric market moves. But, in order to identify these moves we must first identify where they live.
Occasionally we find opportunities where we can buy (or sell) assets for mere cents on the dollar – because, after all, we are capitalists.
In this week’s edition of the WOW we’re covering military miscalculations
When it comes to the stock and bond markets, the mandate’s pretty simple. Deny, then inflate another bubble. The central banks will continue to do this until the market takes their ability to do so away. It’s going to be quite something to witness.

Read More »

Risk Happens Fast

November 1, 2016

By Chris at www.CapitalistExploits.at
As a teenager brimming with testosterone my reptilian brain loved action movies.
Top of my list were Steven Seagal movies. Clearly it wasn’t for his acting skills, which are only marginally better than Barney the dinosaur.
What I loved about Seagal was that he was both deadly and terribly fast. His opponents had mere seconds before their arms, legs, or other bones were snapped like twigs. Or they suffered a severe beating leaving them either dead or in a bludgeoned unrecognisable mess. Fabulous stuff!
With Seagal risk happened fast. The targets of his aggression never had time to get out once the onslaught began, and then it was all over in seconds. None of this drawn out biff-baff nonsense, taking forever to finally get to where you knew things were headed anyways.
Back in January of 2015 the currency markets had a "Seagal moment".
The Swiss National Bank (SNB) had pegged the Swiss Franc to the Euro at 1.20 and by the end of 2014 had already spent billions defending the peg.
All the numbers told us the peg was untenable. We didn’t know how long the peg would hold but we did know that with every passing day what was clearly untenable simply became more untenable. The stress was building.
Failing to participate is one of my regrets.

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How Do You Invest In The ‘New Normal’?

October 19, 2016

By Chris at www.CapitalistExploits.at
Today I spoke with an old friend, Chris Mayer. Chris is the investment director at the Bonner family office. We covered a lot of things including:

The rise of passive investing and the inevitable consequences of what is almost certainly a bubble.
How investors are increasingly buying equities and treating them as bond proxies.
How it’s harder to say which sector is cheap and which isn’t – more than at any time in Chris’ 25 years of investing and why this is the case.
How we’re in a market which rewards companies for buying back stock and increasing dividends (even to the detriment of the overall financial position of the company) and what Chris focuses on as a consequence.
Why holding cash is exactly what companies should be doing in this market environment (despite being penalised for it).
How index weighting is perversely penalising stronger companies relative to their peers.
Two short ideas he took away from Jim Grant’s recently concluded conference.
Thoughts on investing in frontier markets.

(Click on the image to listen to the podcast)
Enjoy!
– Chris
"Balance sheet strength is more important than price paid. It does no good to get a bargain on a zero." — Chris Mayer
————————————–
Liked this podcast? Don’t miss our future articles and podcasts, and
get access to free subscriber-only content here.

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Is A Short Squeeze Coming From This?

October 13, 2016

By Chris at www.CapitalistExploits.at
Market dislocations occur when financial markets, operating under stressful conditions, experience large widespread asset mispricing.
Welcome to this week’s edition of “World Out Of Whack” where every Wednesday we take time out of our day to laugh, poke fun at and present to you absurdity in global financial markets in all it’s glorious insanity.

While we enjoy a good laugh, the truth is that the first step to protecting ourselves from losses is to protect ourselves from ignorance. Think of the "World Out Of Whack" as your double thick armour plated side impact protection system in a financial world littered with drunk drivers.
Selfishly we also know that the biggest (and often the fastest) returns come from asymmetric market moves. But, in order to identify these moves we must first identify where they live.
Occasionally we find opportunities where we can buy (or sell) assets for mere cents on the dollar – because, after all, we are capitalists.
In this week’s edition of the WOW we’re covering volatility ETPs (Exchange Traded Products)
Before we get into what exactly is Out Of Whack with volatility linked ETPs let’s cover what the heck a volatility ETP actually is.

Read More »

Collapsing Collateral, Derivatives, And Systemic Risks

October 12, 2016

By Chris at www.CapitalistExploits.at
Last week I published the first part of a conversation I had recorded with Daniel Want, the CIO at Prerequisite Capital Management. Today I have the second part of our conversation for you. In it Daniel and I dug into:

The collapse in collateral in the system.
How derivatives pose systemic risk as high quality collateral is diminishing in the global economy and derivative exposure relative to this collateral has risen, creating counterparts risks.
Why and how trust is the basis for the development of high quality collateral and how this and all the other metrics Daniel measures are pointing down.
Daniel’s model for an investment portfolio that is both resilient AND efficient.
How Daniel focuses on analyzing multi-year trends in asset classes.

I invite you to listen to the second part here:

(Click on the image to listen to the podcast)
Enjoy!
– Chris
“Derivatives are like sex. It’s not who we’re sleeping with, it’s who they’re sleeping with that’s the problem.” ? Warren Buffett
————————————–
Liked this podcast? Don’t miss our future articles and podcasts, and
get access to free subscriber-only content here.

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Bank Of Japan Throws In The Towel

October 6, 2016

By Chris at www.CapitalistExploits.at
Market dislocations occur when financial markets, operating under stressful conditions, experience large widespread asset mispricing.
Welcome to this week’s edition of “World Out Of Whack” where every Wednesday we take time out of our day to laugh, poke fun at and present to you absurdity in global financial markets in all it’s glorious insanity.

While we enjoy a good laugh, the truth is that the first step to protecting ourselves from losses is to protect ourselves from ignorance. Think of the "World Out Of Whack" as your double thick armour plated side impact protection system in a financial world littered with drunk drivers.
Selfishly we also know that the biggest (and often the fastest) returns come from asymmetric market moves. But, in order to identify these moves we must first identify where they live.
Occasionally we find opportunities where we can buy (or sell) assets for mere cents on the dollar – because, after all, we are capitalists.
In this week’s edition of the WOW we’re covering BOJ monetary policy
Let’s state the obvious, if only to clear the decks and get it out of the way: Japan’s continued failure with monetary policy has been surpassed only by the BOJ’s persistent belief that someday it will finally work.
To remind you – the Bank of Japan’s policy has been to fight deflation, creating an inflation target of 2%.

Read More »

Is There A Global War Coming?

September 20, 2016

By Chris at www.CapitalistExploits.at
This week I speak with Erik Townsend, entrepreneur, hedge fund manager, and co-founder of Macro Voices as he joined me on the Capitalist Exploits Big Question Podcast for a discussion where we sweep through the gamut of financial issues plaguing the global landscape.
This is a conversation you won’t want to miss. We covered a lot, beginning with Erik explaining how – after selling his software company in the 90’s and joining the 1% – he was robbed blind by "the world’s most prestigious investment bank" who managed to lie, cheat, and steal from him, obliterating about half his net worth. This is a man after my own heart who chose to kick the parasites to the kerb, educate himself, and he now successfully manages his own money full time.
We discussed where we’re at in the global commodity cycle and he highlights the soft commodities, an area my friend Raoul Pal is very bullish on (you can listen to Raoul and I here):
"Grain prices are half of what they were a couple of years ago…."
 
"I think that by the end of 2016 we’ll have seen another low around the inventory and refinery maintenance season, that will probably be the final low and we’ll start looking for recovery in oil prices.

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Where Do We Go From Here?

September 8, 2016

By Chris at www.CapitalistExploits.at
A great deal of human behaviour is unmistakably genetic.
Usain Bolt is clearly genetically disposed to outrunning drowsy cheetahs, while Michael Phelps is only part human with the other part clearly fish of some kind. Both have a physiological edge compounded by what I can only imagine must be a vomit inducing amount of punishing hard work.  But I suspect in order for it all to work they have a deep love and passion for their chosen profession.

While I’m not Buddhist, I think the Buddha summed it up nicely when he said:

"Your work is to discover your work and then with all your heart to give yourself to it."

Passion is infectious and felt when talking to someone who clearly loves their work, and Worth Wray, the Chief economist and global macro strategist at STA Wealth Management, is definitely one such gent with such passion. No doubt this is why I enjoyed so much speaking with him.
Last week I published the first part of a conversation I had with Worth.

And today I have for you the second part of the recording where we dive into:

The type of world that Worth is positioning for right now.
The effect of robotics on emerging market economies and a really interesting impact that this could have on Japan – something I had not thought about at all and which has given me a lot to think about and research.

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Security? Yes, Please

September 4, 2016

By Chris at www.CapitalistExploits.at
Personal security is going to be a huge growth industry and here’s why.
Economists and other people with pointy shoes in shiny office buildings will tell us that the vote for Brexit was an economic decision. They may be right but they’re wrong on the majority.
Nope, the amount of people in any given populace who understand the financial system, interconnectivity of global trade, trade agreements, currency hedges, and the myriad other aspects entailing said "economic decision" are about the same percentage as those who can touch their toes without something popping. Many couldn’t tell you how the chicken breasts at Tesco make it to the shelf, and they sure as heck don’t understand the implications of Brexit.
To the vast majority of Brits Brexit was based on far simpler to understand issues. A middle class who increasingly feel less "middle" and in fact more "lower" may not have known what they would be getting by voting for Brexit. But they did know that what they had is not working for them.
A topic which has been given very little thought by academia is that of security. It’s right up there in Maslow’s hierarchy of needs, well ahead of cling wrapped chicken breasts on the supermarket shelf and waaay ahead of figuring out global trade or derivatives tied to currency swaps affected by Brexit or any of the other good stuff.

Read More »

Gold and Bonds

September 1, 2016

By Chris at www.CapitalistExploits.at
Market dislocations occur when financial markets, operating under stressful conditions, experience large widespread asset mispricing.
Welcome to this week’s edition of “World Out Of Whack” where every Wednesday we take time out of our day to laugh, poke fun at and present to you absurdity in global financial markets in all it’s glorious insanity.

While we enjoy a good laugh, the truth is that the first step to protecting ourselves from losses is to protect ourselves from ignorance. Think of the "World Out Of Whack" as your double thick armour plated side impact protection system in a financial world littered with drunk drivers.
Selfishly we also know that the biggest (and often the fastest) returns come from asymmetric market moves. But, in order to identify these moves we must first identify where they live.
Occasionally we find opportunities where we can buy (or sell) assets for mere cents on the dollar – because, after all, we are capitalists.
In this week’s edition of the WOW we’re covering the relationship between Bonds and Commodities
As our monetary overlords swallow up more and more of the sovereign bond market, punching bonds higher, and kicking yields into negative territory, the inevitable consequences are showing themselves. Bonds are now being traded and priced in much the same way as commodities are.

Read More »

Navigating The Fracturing Global Macro Landscape With Worth Wray

August 30, 2016

By Chris at www.CapitalistExploits.at
When I decided to set myself the task of recording one phone call I have each week I never realised how much fun it would turn out to be. Often, I figured if others were ok with it I’d hit record when on the phone to a friend, an advisor, a colleague, or even a client. Easy.
Also, because I’m selfish, I realised that it was also an opportunity to follow through on conversations that I should have been having but for any number of reasons never took place. Oftentimes a friend will say something along the lines of "you should chat to so and so, I think you guys will get along great" and then just as often I’d get busy and it wouldn’t happen. Well, setting a weekly "must do" is proving a formidable means of correcting that.
Speaking of fun: I was introduced to Worth Wray by a friend and have been reading and listening to his thoughts on the markets for the last couple of months.
As such, I really shouldn’t have been at all surprised to have so much fun as I did when I rang him up and we began chatting and getting into some really fascinating stuff. We blew through the 2-hour mark like a drunk through a red light before other duties called and we weren’t even done yet. I felt cheated.
Worth has a really great grasp on the global macro landscape.

Read More »

Another Cog In The Exploding Resentment Wheel

August 25, 2016

By Chris at www.CapitalistExploits.at
Market dislocations occur when financial markets, operating under stressful conditions, experience large widespread asset mispricing.

Welcome to this week’s edition of “World Out Of Whack” where every Wednesday we take time out of our day to laugh, poke fun at and present to you absurdity in global financial markets in all it’s glorious insanity.

While we enjoy a good laugh, the truth is that the first step to protecting ourselves from losses is to protect ourselves from ignorance. Think of the "World Out Of Whack" as your double thick armour plated side impact protection system in a financial world littered with drunk drivers.
Selfishly we also know that the biggest (and often the fastest) returns come from asymmetric market moves. But, in order to identify these moves we must first identify where they live.

Occasionally we find opportunities where we can buy (or sell) assets for mere cents on the dollar – because, after all, we are capitalists.
In this week’s edition of the WOW we’re covering rising inequality

Warning signs are flashing everywhere that the status quo isn’t being tolerated anymore. We know that the elites are getting a little nervous and the natives… well, they are getting restless.

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How To Invest In A World Of ZIRP And Stupidly Cheap Capital

August 14, 2016

By Chris at www.CapitalistExploits.at
Questions require answers and lots of questions require lots of answers.
You’d be wrong in thinking that you’ll get either since the missing ingredient to both is lots of time. Someone invent me a time machine and I’ll answer more questions. Until then I have a select few to share.
I do read all emails and questions sent but obviously can’t answer them all. Sorry about that…

It’s been a while since I did a Q&A on the blog so here goes the first one:

Quick note to let you know I really enjoy the podcast. I discovered it through a republication on the Zerohedge blog.
 
I greatly appreciate the focused, intelligent, macro-economic discussions without the spin and sensationalism. I work for a hedge fund, and have (like many others) been struggling to make sense of these QE fueled, Central Bank driven markets. Retail investors (friends & family, not clients) ask me all the time where to put their money, which is a tough one because where do you go if both stocks & bonds are at historic highs?
 
There is also not a ton of value for real estate buyers & investors, and nothing to be had for money in the bank (except for fees). Not a good sign when guys I play pickup basketball with are talking about buying vacation properties as an investment since rates are cheap.

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7 Steps To The Easiest Short In Recent History

August 7, 2016

By Chris at www.CapitalistExploits.at
This article is a follow on to last week’s article. I encourage you to read it if you have not done so already as it lays the groundwork for today’s article which delves into the myriad moving parts which are all working simultaneously creating an environment for the easiest short I can think of in recent times. 
This is not a judgement call on any political, religious or other affiliated group but merely lays out the facts and the conclusions we must come to if we are to be honest with ourselves.
A question being asked by many European citizens regarding refugee immigrants is, "Why – when we provide them with food, shelter, and access to our civilised country – do they reward us with demands for more, demand that we instil their societal values, traditions, beliefs, and behaviours, and – even when we shrink into the corner like a dog with its tail between its legs – do they hate and murder us?"
On the face of it this looks to be a valid question. But it’s first level thinking – a result of a populace brought up on a steady diet of mainstream politically correct media which not only fails to inform but actively and destructively misinforms.
In order to understand the problem let’s cover some brief history as we can better understand the probability of outcomes that way.

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Answer This!

July 2, 2016

By Chris at www.CapitalistExploits.at
I’ve been inundated with questions from many of you following the recent events. Brexit, that is, not Justin Timbertrouser’s latest antics. While I can’t publish all of them, I’ve selected what I think are some of the most important ones.

A lot of questions were related to positioning during and post Brexit. I hate to mention it as I may choose to trade out of whatever I mention at any given moment so please bare that in mind.

Sold a bit of GLD on Thursday and will look to buy back after the shock/euphoria subsides.
Long GBP/EUR and USD/EUR.
Net short equities.
Lightened up by 25% on short Spanish 10-year and long US 10-year. (hint: you get paid to do it and are synthetically short EUR which I’m OK with).

Ok, onto the questions…

"By the way, your latest article " World out of whack" was great. I believe the next crisis country will be Italy with their massive banking problems. The Euro is simply too strong for them and in the old days they were able to compete against Germany by constantly depreciating the Lira.

 Best,
H."

Excellent points on the historical situation with Germany and Italy, and pinpointing the currency aspect.
Not everyone agreed with Italy as it came in a close second to France, as you can see below from the poll I ran in the recent World Out Of Whack.

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Brexit: Why The Wrong Question Is Being Asked

June 23, 2016

By Chris at www.CapitalistExploits.at
Market dislocations occur when financial markets, operating under stressful conditions, experience large widespread asset mispricing.
Welcome to this weeks edition of “World Out Of Whack” where every Wednesday we take time out of our day to laugh, poke fun at and present to you absurdity in global financial markets in all it’s insanity.  

While we enjoy a good laugh, the truth is that the first step to protecting ourselves from losses is to protect ourselves from ignorance. Think of the "World Out Of Whack" as your double thick armour plated side impact protection system in a financial world littered with drunk drivers.
Selfishly we also know that the biggest (and often the fastest) returns come from asymmetric market moves. But, in order to identify these moves we must first identify where they live.
Occasionally we find opportunities where we can buy (or sell) assets for mere cents on the dollar – because, after all, I’m a capitalist.
In this week’s edition of the WOW we’re covering Brexit.
In a show of just how disjointed British society has become with previously held cultural values, London’s mayor just banned all advertisements of models who are essentially non-sharia compliant.
"Sadiq Khan, London’s first Muslim mayor, announced Monday that “body shaming” advertisements will no longer be allowed in London’s public transport.

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5 Reasons This Country Is In For Big Trouble

June 5, 2016

By Chris at www.CapitalistExploits.at
My little girl came into my office the other day and was looking over my shoulder. Suddenly she ran out of the room calling to her brother. “I know Dad’s password! I know Dad’s password!”, she yelled. “What is it?”, my son asked? “It’s 8 stars.”
Sometimes we look at things believing with sincerity we know and understand what we’re seeing. But we’re really as dumb as a box of rocks.
This brings me to our “trusted” friends at the rating agencies.
In March of this year Fitch took out their big rating agency stamp and hammered a AAA rating on Australia:
“Australia’s ‘AAA’ rating is underpinned by the economy’s high income, strong institutions and effective governance. The free-floating exchange rate, credible monetary policy framework, low public debt and growing recognition of the Australian dollar as a reserve currency allow the economy to adjust to changing economic conditions.”

Reading rating agency reports is like being immersed in a warm bath, with a glass of hot milk, while being read Winnie The Pooh and Peter Rabbit. You feel all warm and fuzzy inside but it’s one big fairy tale.
Let me take a necessary sledgehammer to the above statement.
“The economy is underpinned by high income, strong institutions and effective governance.”
Actually there are 4 pillars underpinning Aussie economic growth:

The investment bubble in mining.

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A Massive Shift Is Underway!

April 3, 2016

By Chris at www.CapitalistExploits.at I was abruptly awoken yesterday by a "PMS day." A Richter-like force, brimming under the surface, evidenced by the stomping, grumbling, and frustration that accompanies this phenomenon. As a husband, I’m grateful for the warning signs; I can hide (I mean prepare) accordingly. It’s not hard to see change when it’s upon us. Identifying it ahead of time is a little bit trickier, but not much. The signs, like a grouchy wife, are often there if we care to look. I have often wondered if the average Joe in the midst of the Industrial Revolution ever looked around and noticed the change that was coming? The amazing changes witnessed since the late 1700’s are easily understood in hindsight. What is not commonly understood (in large part because we’re in the midst of it) is that today we stand on the brink of a technological revolution that will fundamentally alter the way we live work and play. But first, to understand the future we need to look to the past. Let’s take the aforementioned Industrial Revolution, which can be broken down into 3 key areas of innovation and disruption: The First Stage The first stage of the Industrial Revolution, around 1780, entailed harnessing steam power.

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