Monday, November 24, 2014

Yet another empty Chinese city - New York version

Stumbled across another empty Chinese city, this one thanks to @TheCreditBubble and his blog post

He so kindly provided a video link showing the full scale of the project.  While some may claim there is progress and construction still going on, please compare the level of activity to the massive size of the project.

Here's a Google Maps screenshot of the place.  Just look at all those skyscrapers that need to be filled.

So what happens when all those skyscrapers go up, no one fills them, and the 'need' for more slows down? Iron ore prices fall back into the earth

ht @soberlook

Thursday, November 20, 2014

Weather and Energy - Hurricane free for another year

The continental US made it another year without a hurricane making landfall. (Winter snow storms are another matter!)

How many more years will the US extend this streak before we get slammed by another one? I have no idea, but it will eventually happen.

A lack of past volatility can lull people into a false sense of security and that's when one can lose quite a bit of money (and lives as well as property in this case)

Some are even opining (Washington Post, 2014 October 7) the recent lack of hurricanes creates a dangerous future situation, and there's some credence to that.

The catastrophic bond market is something I've examined over the years as an alternative asset class but haven't invested any capital in this area yet. We've been in a relatively benign environment and pricing for risk has dropped in this area (sound familiar?)  I'd rather wait for a some 'volatility' to re-enter the system before dipping my toe into this area. examines this a little more

We've been recently lucky with hurricanes. This will eventually end.

Tuesday, September 16, 2014

ValueX Vail - A most excellent adventure

How I felt at times during the conference:
"Dude did he just tell us value guys to buy that expensive subscription based technology stock?
Yeah.  It kinda made sense."
This last June I had the pleasure of reconnecting with a most excellent group of people at the ValueX  Vail  conference hosted by Vitaliy Katsenelson

The conference does not consist of large rooms with speakers presenting their case to attendees who then shuffle off to another seminar. Instead the members present and later discuss their ideas amongst a much smaller audience and it is this interaction, defense, and intimacy (only 40 people) that initially drew me to attend last June and in 2012.

Presenting and defending your idea to a small crowd provides an opportunity for feedback and insight as to how others view the markets.   While the ideas are always interesting and varied I find it as valuable to try to discern how people think about the markets; short term flippers, deep value buyers, GARP, growth, distressed investors (and more) all have their own perspective and even within a value stock themed conference there are varied techniques and perspectives.

The profession of security analysis and selection can be something of a lonely, boring one. Staring at a computer screen for the majority of the day becomes tiresome -- getting the opportunity to actually chat with others who share the same passion is a rare pleasant opportunity for me.   I made it a point to spend time with newer attendees as well as some returning friends.  Trying to balance the goal of being a social butterfly with a desire to really converse in depth with folks was a challenge.

Skynet is becoming self aware, buy the right stocks!
While not all the presentations were released for public consumption you can find quite a few of them here:
In both instances it was an excellent crowd with everyone having something to offer.  The 2012 conference gave me a new respect for Southerners.  As they are quiet, speak slowly and and with a funny accent (just kidding guys) they tend to be underestimated by us Northerners.   If a Southern investor comes up and says he just wants to leeaarrrn from you, Run, run fast. (thanks Alex Rubalcava

In 2014 I learned what to buy before Skynet becomes self aware and what to buy after China's infrastructure binge goes pop.  2014's session also included a very cordial opposing pair of presentations on why you should be long and short the same stock.   Showing both the bullish and bearish case for the same stock was a nice addition that I hope continues at Vail and is an excellent idea for other conferences.

Get Real

While this post praises the ValueX Vail conference it also is a suggestion to you - find others who share a passion to invest and actually talk, present, kibbitz, challenge each other.  Not everyone can or would want to attend next years' conference (actually, please don't, you may bump me out!)  but if you have an opportunity to join or create a group / conference nearby I would suggest you do so.

While today's technology allows for various methods of communication they don't yet completely replace the advantages of real human interaction. At ValueX Vail I learned just as much during casual conversation as during the organized presentations.   Until Sheldon dramatically improves his Virtual Presence Device, getting together in the same room is a lot more fun and productive.

Fortunately there are some opportunities.

A ValueX in Lennox, MA hosted by Vail attendee Ethan Berg is coming this fall.  More information can be found here:!valuex-berkshires/c1r9z
The window for applications is closing soon so please apply if interested.  Unfortunately my to-do list overextended enough already (it took 2+ months to finally post this entry!) otherwise I'd go.

@AlexRubalcava in Los Angeles hosts a monthly 10K 'book club' where people get together and dig into the financial documents of various companies.  I'm also gently prodding Alex to start up a ValueX LA, so if you are interested in attending one in LA please gently prod him to get that rolling. Thanks.

Finally, I myself am starting up a '10K book club' /  value investing discussion group for the Seattle / Tacoma area. If you are interested please leave a comment below or email me at:

While today's hyper connected world allows us the opportunity to virtually connect in a manner not even conceived of a generation ago, very low tech human conversations should still be a part of your continual discovery of the financial markets. I suggest you give it a try.

Wednesday, June 4, 2014

Natural gas has a very big hole to fill this summer

The Polar Vortex winter dramatically drew down natural gas stocks as the numerous cold fronts worked their way through America.  While a decline is natural gas inventories is expected each year, this year America ended the winter with dramatically less natural gas in inventory.

US Natural Gas inventories - via the US EIA

As of the most recent report, inventories are 40.1% below their 5 year average. To graphically show what this means going forward, here's an estimation of how much needs to be injected into storage every day until the maximum fill date date of November 11th.

The 2014 line is the one much higher than the rest.  Note how the 2012 line was the lowest, when we experienced extremely low prices.

While it's always a guess as to when we'll hit the maximum in storage each year, (going back 19 years the average date was November 11th with a standard deviation of 9.5 days)  it is quite apparent this year is unlike many others in recent history.  Injecting ~40% more each day looks like a challenge which will not be overcome.  Injection rates depend upon the increased production, weather, industrial activity, hurricanes, and I'm sure a few other factors I have forgotten.

 IF we get a nasty hurricane barreling through the gulf, a hot summer, or an early cold winter we could have some serious inventory problems in early 2015.

I am not attempting to estimate how much natural gas will be in the ground for this coming winter but it is something to watch this summer.