Have you ever been shocked by your own behavior?

That’s how Robert Sapolsky begins his book “Behave”.

“No”, I thought, before I realized you were supposed to say “yes” and thus be enticed to read the book to find out why humans do things they can’t explain or feel ashamed of.

I just don’t see it. Why would you do things that shock yourself?

Pull the trigger if you want to. Go to the gym if it’s good for you. Party if you like, but don’t do it if you feel bad afterward — that is, bad-er than you expected.

HOW DO YOU TRADE?

Talk about being shocked, some stock traders surprise themelves – and me – again and again, when they keep trading on emotional impulse during reporting season instead of according to set parameters within a proven strategy. If you were that guy or girl the last four weeks, don’t be in April.

I hope this doesn’t come as a shock to you, but since daytraders create exactly zero value (negative even, due to the false liquidity they provide, and the exaggerated price swings they cause as they react to other people’s moves), a trader without a superior strategy will lose money over time. That’s before commission and fees.

In the corporate world, profit is of course created by providing goods and services to the client that have a higher value than they cost to produce. A daytrader is only trying to do one better than his or hers counterparty. It’s a zero sum game less commission for them, and a negative for the market and society in general. The more people engaging in non-research based trading the less real products and services are made available, and the poorer the society.

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Completely off topic, I caught the song Bloodline when partying about a week ago, and I just had to listen to it A LOT OF times.

However, when a song is that good and instantly catchy, it’s almost bound to fall out of favor just as quickly. Not completely unlike the current stock market rally for cyclicals, based on explosive credit in China and The Fed’s sudden dovish U-turn. Well, with the best start to the stock market in 30 years behind us, you know it’s not time to buy shares.

On the other hand, gold is really picking up some speed, despite s strong dollar and a stock market rally. I’m happily holding on to all my types of gold, including Nueva Granada and Gran Colombia. If you’re Swedish, you really should listen to my and Anna’s talk with gold and precious metals investor extraordinaire Eric Strand here.

Så säkert står Sverige

Sverige står stadigare än någonsin

OBS: det här är ett kraftigt förkortat utdrag från originalartikeln som skrevs för Vontobel här.

Inflationstakten ligger precis på målet, BNP-tillväxten ligger nära den uthålliga potentialen och sysselsättningsgraden är på all time high. Samtidigt är styrräntan den lägsta sedan Riksbanken startades med en dödsdömd ekobrottslings verksamhet som bas för 350 år sedan.

Den låga räntenivån medför även att hushållens ränteutgifter i förhållande till inkomsten ligger på på all time low.Det är svårt att tänka sig ett bättre läge för Sverige än ovanstående.

Tilltagande konkurrenskraft för Sveriges viktiga exportindustri

Alla de stora exportbolagen gynnas på ett eller annat sätt av fallande krona, t.ex. Sandvik, SKF, Volvo och Atlas Copco.

Många av dessa tillhörde dessutom förra årets förlorare och kan studsa tillbaka i år.

Om man vågar lita på trenden under första halvan av januari så är processen med stigande kurser för cykliska bolag redan igång. Det gäller dock att köpa med båda händerna om man ska hinna med, eftersom alla aktiva på börsen det senaste decenniet präglats att köpa alla dippar och blir klara allt snabbare. Läget kan mycket väl redan vara över för den här gången. 


Till och med en krasch som efter 2008 skulle bara normalisera sysselsättningen

Inga kor på isen

Rekordlåga ränteutgifter

Till sist så var hushållens ränteutgifter under andra kvartalet 2018 endast 2,5% av disponibel inkomst, vilket var den lägsta noteringen sedan åtminstone 1971. Om inte de svenska hushållen har råd att köpa allt från mat och skor till mode, bilar och bostäder nu, så har de aldrig det.

När allt är på topp kan det bara gå nedåt

Allt verkar vara i det närmaste perfekt. Roligare än så här blir det helt enkelt inte. Och med det ska alltså förstås att det är mer sannolikt att det här är toppen än botten

Riskhantering

De minimum bör varje ansvarsfull investerare passa på…

Det är svårt att inte se samma tongångar idag som…

I ett sånt läge lär — — — vara en bättre placering än…

Läs hela artikeln här om du vill veta precis hur stadigt Sverige står och vad det betyder för dina investeringar

Anti-elite clicks at your peril

Topic: gold, societal unrest, Davos, the credit cycle, macro reasoning

Summary: grab your gold and run for the hills when you see the Yellow Vests gathering

Reading time: 5 minutes? 10?


Kan du svenska? Är du intresserad av de praktiska tips om värdebaserade investeringar som jag sammanställt från mina 20+ år som analytiker och hedgefondförvaltare? Då är mitt veckovisa nyhetsbrev Finansbrevet värt att kolla upp. Ja, det är gratis.


When the Fed turned dovisher-er again last week, in order to stimulate the supposedly weak economy, expectations for economic growth in the US strengthened and the dollar consequently strengthened. A stronger dollar means cheaper imports and a lower trade deficit, and yet a stronger economy, reinforcing the stronger currency.

Alternatively, in the little longer run, the massive monetization of US deficits and debt leads to increasing inflationary pressures. More money chasing fewer goods in a stagnating economy, where the focus is turning toward finance instead of production, gradually leads to higher consumer prices and demand for higher wages.

It all comes to a head when the Yellow Vests of the world have had it with “the elite” leaving ordinary people behind.

Reasoning vs. the real world

Macro reasoning can take you in any direction you like. Financial market reasoning is even worse. There the logical jump from good is good to good is bad due to eventual overheating to good is good since the bad that comes from over-gooding will lead to policy measures that will turn all things good again is done in an instant.

The real world, however, doesn’t care about your reasoning, reflexivity be damned.

A Lööf in the eye of the storm

For now, we are enjoying a pause of sorts. We are in the eye of the storm, with more or less sensible political leaders like Trump, Macron and Löfvén-Lööf (the Swedish socialist leaning government that took five months of bickering to form) at the helm. Yes, sensible, moderate. Relatively speaking.

Just you wait and see what comes after if these boys and girls next door were to fail. Well, with “were to” I mean “when they will fail”. A deeper, more disturbing, nuance of populism is bound to color the political landscape in the wake of an increasing sense of injustice, where the crony-elite is perceived to be living off of the backs of ordinary citizens.

This is not a crisis of capitalism

There is nothing wrong with capitalism, nothing wrong with adults willingly agreeing to sell goods and services to each other, nothing wrong with the best producer, best satisfyer-of-wants, amassing huge wealth.

What is wrong, however, is when the banking elite is first allowed astronomical gains from risking other people’s money, and then after the inevitable crash are saved by the political elite in return for political funding in the next round. We are not experiencing a crisis of capitalism, what we’re seeing is a particularly nefarious brand of of socialism.

Crony central banking at the center

It may sound conspiratorical but it’s all the central bankers’ fault. Without their wanton manipulation of interest rates blowing bubbles in the economy and on the financial markets, and their setting the stage for subsequent crashes, politicians and central bankers wouldn’t be able to play the game they do.

Politicians want to win elections, so they promise more than they can keep. Central bankers willingly fund the difference between dreams and reality. The unrestricted money printing drives asset prices, which drives borrowing, which drives lending, which drives bank profits.

It doesn’t take many decades before the debts are too high to allow for a normal correction. Politicians and central bankers (as if they weren’t all politicians) then vow to do whatever it takes to salvage the situation they themselves created. And their solution is always the same: keep doing exactly what caused the problem — just at a bigger scale.

After longer time than a single human investor usually can or do care, the system re-sets. A new power, a new currency regime, new relative positions and prices. It’s not that the cycles are aeons, but half a human life is long enough to be forever on the financial markets.

You’re much too young boy

I personally know people who haven’t seen a single market crash and yet consider themselves market veterans. Imagine having only invested in stocks since 2009. You’d look upon ten years as a long time in the market, and twenty as looking back toward a completely and irrelevant era.

I first started talking about stocks sometime in 1985 when a friend told me about his investments. Around then I actually inherited a stock portfolio with some really old holdings: Aga, SKF, Asea, Sandvik and similar stocks. That’s 33 years ago. I have to look back an additional 33 years, to 1952, in order to feel what today’s newbies feel about the turn of the millennium.

Oz wizardry a case in point

Australia hasn’t seen a recession for 26 years. The continent has been riding the rising tide that is China, but that era might be coming to en end now. Imagine the unpreparedness of investors, banks and house buyers when a recession finally hits.

Try to imagine the repurcussions when one panicky domino hits another. Overleveraged consumers and house owners losing their jobs, banks failing, dividends being cut, pension funds falling underwater, selling begetting selling on the stock market, and cost cuts causing unemployment, in a vicious cycle not seen in more than a generation.

Try to imagine the policy response and the saving of the elite on unprecedented scales. Try to imagine the populism that ensues. That’s one more geographical win for the Yellow Vests.

The credit cycle is a cycle

Artificially low interest rates and money printing create a seemingly benign feedback loop over a handful of decades. But it’s just as misleading as the inflation leads to a stronger dollar narrative mentioned at the top of this article. Sooner or later the credit cycle shows why it’s called a cycle.

Healthy growth that was turned into a speculative boom and followed by stagnation and monetary magic morphs into deflation. Deflationary impulses are met with increasingly desperate fiscal and monetary policies that lead to a combination of populism and inflation. The latter wreak havoc with living standards and justice, not to mention financial markets, exchange rates and asset prices until a strong enough leader can set things “right” again.

Right meaning high enough interest rates to force fiscal prudency and a stop to rampant inflation.

At that point risk aversion peaks and liquidity (cash availability and willingness to lend and borrow) troughs.

At that point assets might be “cheap”, but only because you 1) truly can’t know how it will end, and 2) you don’t have any cash to buy assets for, and 3) banks won’t lend it to you. That’s the meaning of “it’s not your father’s market but your grandfather’s”. No matter, that‘s the starting point of another bull market, not the current multi-year topping process.

I hope. You never know. Perhaps buying stocks at 5x earnings won’t work. Perhaps social and political reasons force them to 3x before it’s over. Perhaps dividends will be illegal.

As Grant Williams pointed out in the latest Macro Voices podcast episode, what garners the most journalistic clicks these days are articles from Davos pointing out how much richer the elite has become since before the financial crash of 2008.

Pitchfork time

It’s all fun and games as long as the money illusion makes everybody feel rich. But when the wheels stop turning and you realize your increase was but a fraction of the increase in true prices, not to mention the multiples of that that befell the elite, then it’s pitchfork time.

The anti-elite clicks are accumulating. Populism is rising. You may not like what you see today, or support Trump, Macron and Lööf. But if they fail, Mordor and the winter of the seven kingdoms would be preferable outcomes to what’s in store.

The question is: will your holdings of physical gold (and mine) be a good or a bad thing in that environment?