Archive for the ‘Economics’ Category

Don’t Take My Word For It

Saturday, March 6th, 2010

In John Mauldin’s most recent letter, he had these wise words (among others) to offer…

I queried several venture capitalists, who see literally thousands and thousands of business proposals. While lots of people are working on it, they are aware of nothing on the near horizon. Water may be my #1 concern about the future. It is an intractable problem and one that must be solved. There is Microsoft- or Google-type wealth awaiting the team that creates an inexpensive way to purify water. Water management will be a major issue in the future. There are those who think we will go to war over oil or energy in the future. I rather doubt it. Water rights are going to be the issue that will divide nations and peoples unless we can find new technologies to create cheap supplies of fresh water and move it to where it is needed.

Backwardation of Government Paper

Wednesday, December 30th, 2009

Money is pouring from government debt, and not wasting any time bidding up the price of a Joule.

I’m not sure anybody noticed, but the backwardation on 30 year treasury futures, has become more grave over the last month or so, going into expiry of the december contract. Read the tea leaves as you like. Future demand for government paper, is declining.

If a bond falls in a forest, does it make a sound?

This is for you, Arnold!

Sunday, October 18th, 2009

I laughed, when I heard Dean Blundell, make a correlation with this song…

I think it might very well be, the eye of the inflation storm…brace yourself.

Also, check out Gregor’s words of wisdom…

Venga Boys are Back in Town

Monday, July 13th, 2009

Boom boom boom boom.

Best June on record, for Toronto real-estate

Update: No, I don’t really believe, that boom times are here.

The Biggest Opportunity Right Now

Monday, May 25th, 2009

…is the downside in US Debt.

I want to make sure everybody I know, who wants to learn, understands how bond duration and intrest rate risk combined with the current economic storm…is creating a dramatic climax and great opportunity out of the last 27 year bull market in fixed income products sold by the US Government.

lambo

So…if you start learning about the market on your own, and are curious about the derivative products available…just let me know, feel free to e-mail.

Buy-Write Brazil

Sunday, May 24th, 2009

The run in emerging markets, is no doubt, just getting started.  While there might be a pull-back, short-term, I think it’s worth hitting some EWZ and/or some 2011 $50 strikes….while selling front months, of course.  Does anybody really hold equity, without selling front months?

I’m going to put this trade on, on Monday.

I like brazil because of their energy reserves…but a little worried about how much water they waste.  Only 2nd to China, in terms on Non-revenue water levels.

Pissed Farmers

Friday, April 24th, 2009

While 1500 farmers are offing themselves…California farmers are protesting.

PissedFarmers

I’d love to sit down with one of these California farmers, and say something like “What exactly do you expect Arnold to do, about the environment you chose to farm in?  What exactly do you expect Arnold to do, about too many people living in an area that can’t sustain anymore growth? What exactly do you expect Arnold to do with a collapsed budget, peaky state, and energy costs rising? Is it maybe time, to move your farm, to where there is water rather than move the water to you? Yah, I realize, the mouths will have to follow the farm, sooner or later they’ll get the idea.  Promise, energy prices will see to it.”

What if Oil hasn’t bottomed?

Sunday, April 12th, 2009

Consider for a moment, hypothetically that the recent spike in oil brought just enough investment to solar and oil both, that combined with the supply side of oil, and solar R&D…could solar potentially be ready to breach a tipping point, towards grid parity?

Could expensive energy be behind us?

Look up the history, on how the internet got so cheap.  Recall: an investment boom of people looking to catch the trend, without enough demand (at the time), sent many of the hard assets the investors put money into back to the banks.  The banks sold assets off for $0.10 on the dollar, to new investors who gave away the service until economies of scale kicked in.

What if the ceiling is now $65, on the price of oil?

What will that do to the growth of civilization? Demand for commodities? Water? Technology?  What if energy isn’t the bottled neck that stops our growth?

What if economies of scale make our planet more effecient, as the population doubles quicker and quicker?

What if space, physical square footage, is the finite resource we one day value the highest?

If we hit 200 people / Km squared, assuming that’s where space will start to become a problem, that will mean ~30B people. 80 years of 1.9% population growth and we’re there.

So, what will it be, energy? water? both? or space?

Update: I started playing with the world usage stats, from 1993…from Wikipedia:

Arable land: 13.13%[6]
Permanent crops: 4.71%[6]
Permanent pastures: 26%
Forests and woodland: 32%
Urban areas: 1.5%
Other: 30%

I don’t know how it totals to 107%, so for argument sake, lets just say Other is 26%, because the data doesn’t show a “rural” area, and lets set permanent pastures to 23%.  Both of these assumptions, are likely more conservative…for my argument I’m about to make. So, we have:

Arable land: 13.13%[6]
Permanent crops: 4.71%[6]
Permanent pastures: 23%
Forests and woodland: 32%
Urban areas: 1.5%
Other: 26%

Redefining the 26% and 32% (58% total) as “free and ready to turn into effecient crops or efficient cities at the drop of a hat”, then  58% of the planet left to violate, and turn into crops.  So, if we did that, it would take 2.4x the current population to use up all the land, using the ratios we currently use.  That means 3.6% of the land will need to house 16.3B people, or living conditions of 3000 people per Km squared of urban land or ~109 people per square Km of land, footprint wise.

50 years, at 1.8% population growth, and we’re there. Huh. And, I’d say, my asumptions were very conservative.  100% of the land, isn’t livable nor farmable…sooo…shit, should I be buying farm land instead of oil? Screw dollars, gold, education…real stores of wealth will be in memories and real-estate.

And there it is, Nikkei vs 10 yr

Sunday, January 4th, 2009

Nikkei vs 10 yearclick to enlarge 

Behold…it starts!

Friday, January 2nd, 2009

What was it, like less than a week ago, when the online discussion steered towards getting all aboard an increase/creation of gas/oil taxes (depending on the state), and I said they just need to spin right way.  Well…ta da.

Oil Gets Taxed?

Sunday, December 21st, 2008

Soo…I spent the week, talking to some amazing new friends.

1. An engineer from Jacobs Engineering. 

2. A doctor who works at the Aramco compound in Saudi Arabia. 

3. An engineer who works here in Toronto in the industrial liquid storage industry -> ie a booming business to be in, if you’ve seen the oil contango curve.

After a very lively discussion from a group of informed people with different market perspectives, I took away, that it is likely that the new American administration eventually taxes oil imports.  This is just one theory.

Thoughts?

For Sale: Call Option on my Condo

Saturday, August 30th, 2008

This is the stuff I think about.  Do you own any asset at all, where the price fluctuates with a predictable volatility?  Consider the following.

I will sell, the right, but not the obligation, to buy my 568 sq foot condo, in one of the most central places in Toronto, for $275K, in 3 years from today, in exchange for $21K in cash today.  Considering futures (pre-sales for 2011) are selling for approximately $300K today, it may or may not, be a good deal.

I will also buy, the right, but not the obligation to force the sale upon somebody, for $240K, in exchange for me paying them $2K.  This may be worth it to you – is it? 

This $21K, and $2K, is derived from my intrinsic expectations for what the market could potentially do, as well as a binomial method.  In the first case, the money is worth more to me to have the cash, rather than the potential.  And in the later, the $2K worth of insurance, is worth it. 

Measuring the implied volatility, this is works out to 7.5%.  Way cheaper, than any stock which usually clips between 25% and 45%, and it’s not rare to see IV approach the double digits on say – a pharmaceutical company, where perhaps the implied volatility is in fact worth it.

Before you comment, you must understand, that this is an offer, it is the bidders responsibility to assess the value for themselves.  That is, REALIZE: the market is not guaranteed to move in ANY direction, or ANY magnitude.  If you think it is – slap yourself.

Getting long Chemicals & Meat(?)

Thursday, July 24th, 2008

Growing middle class, consuming more and more meat and processed foods…what do you think, get long SDA, or am I too late?

Fertilizers and Pesticides for agiculture…good. Lithium for mobile…good. Soda Ash for paper, glass, and detergents…good. What do you think, get long FMC?

No position…yet.