Hugh Hendry watch, belatedly -- Buttonwood conference

Here's the latest from Hugh Hendry at the Buttonwood conference a few weeks back. Sorry for the delay in posting this and frequency of posts in general; I've been very busy in the personal and business realm.

Watch live streaming video from theeconomist at livestream.com

ht: PragCap

Inflation expectations and QE(infinity)

I have posted before regarding inflation expectations in the US treasury market and I need to give you an update, especially so considering the recent round of QE as announced by the Federal Reserve.

A refreshed chart from the Fed of the inflation expectation spread (10 year nominal yield minus 10 year TIPS yield) teases out some interesting items to consider.

10 year nominal Treasuries minus 10 year TIPS (source: Federal Reserve) 

Note how we have recently broke above the 2.5%  Since the GFC it has rarely breached this mark and did not stay there for long.

Now look at when previous QE's were initiated. A graph by dshort.com does the job.

While they are not to the same scale, you will notice the first round of QE was initiated during the deep dark days of the financial crisis.  The inflation expectation spread was near its low of the series and the world looked bleak.

QE2 was discussed mid 2010 and also coincided with an interim dip in the inflation spread at around 1.5%

QE(infinity) was just announced and our inflation expectation spread is already near the highs of the entire series.  

While the Fed and other market participants have their own flavor of inflation expectations they look at this series is near its highs. Before the GFC this spread didn't venture much higher and the Fed thinks they can get it higher now? The future is subject to change (of course) but unless we get some serious wage growth it appears to me the Fed is pushing up against a long term inflation expectation wall.  

As an example here's nominal Personal Consumption Expenditures.  It has been on a secular decline since the inflation days of the 80's and also notice how it recently peaked and appears to be rolling over again (ahem)

Nominal PCE - Source Federal Reserve

For some additional context here's the 10 year nominal and TIPS yield since 2004. Notice how now 10 year TIPS are now going for a negative real yield.

Disclosure: Considering selling/shortening duration on some TIPS positions

Media: Stop being stupid with your Olympic headlines and tweets

I thought this would die down rather quickly once the Olympic games got under way but unfortunately it appears I was wrong. Evidently most major media organizations don't seem to understand the Olympic games.  Folks, some of us want to watch the games and not know who will win the event beforehand!  I know this may appear to be strange but yes, it's true. I happen to be one of them.  I also like to go to movies and not know the ending beforehand.  I must be peculiar because the major media outlets appear determined to ruin the tension and build up to various Olympic events.

STOP IT!

Are you so desperate to post that article or tweet that headline 2 seconds before some other organization does that you don't realize you are totally ruining the event for a significant portion of your viewership?

It's not hard, really... I'll give you an excellent example in contrast.

I censored some of the AP tweet so I don't ruin your Olympic experience.
Somehow this concept is beyond reporters with several years of college and degrees and stuff.

Two tweets about the same event, and the Small Town Tacoma News Tribune (and I mean that as a complement) @thenewstribune understands the concept of building tension in a story while massive Associated Press seems to be run by monkeys and spam bots (and I'm insulting monkeys in this comparison)

In case I'm not making my point yet, imagine if a reporter wrote a book review like this:

The new novel A Winter's House by rookie author June Anderson breaks new ground in the mystery/crime genre. In the end we find out the butler killed Mrs. Kavendish in the study with a candlestick, but not during the stormy evening as the author alludes to in her clever story telling.  No, she'd been dead for days...

The NBC Olympics web site titles some videos with the event and WINNER'S NAME. Um, we may want to actually watch the video before knowing who won, ok?

You are tweeting and publishing to a worldwide audience who may not be able to watch the events live.  I have my DVR at home filled to capacity with 3 channels of Olympic programming, please stop ruining it for me.

In short: STOP BEING STUPID WITH YOUR HEADLINES AND TWEETS!  I'm unfollowing every news source that does so. Trust me, if you are furiously tweeting spoilers about the Olympics, I can get whatever other 'news' you provide elsewhere.

p.s. I know I'm just one smaller blogger in a very large universe but I'm sure there are others who share my viewpoint.

Negotiating with the Chinese

I recently stumbled across this video given at the Google campus regarding negotiating with the Chinese.  While much has changed since this presentation in 2006 (Google is no longer in China and the consensus of  inexorable healthy Chinese growth is now questioned) the perspectives on Chinese and American negotiating goals most likely have not.

 I was a party to business negotiations in Taiwan in 2001 and personally experienced some of  the negotiating tactics discussed in this video. Fortunately I had brushed up on some of this before the event and wasn't flustered by the time delaying or subtle put downs employed.


If any of my readers can confirm or deny any of the topics covered in this video I'd love to hear from you.





ht: biztechday.com

Hugh Hendry - 'Bad things are going to happen'

Hugh Hendry has spoken to the media again, this time in a little more subdued manner.  Well known for his video antics over the past few years he's toned down his rhetoric recently.  From the article it appears he hasn't change his investment outlook much but he does delve a little more into his trading style...

Excerpts from ft.com article:

In a debate on Newsnight in 2010 Mr Hendry told Joseph Stiglitz, the Nobel laureate economist, “Um, hello? Can I tell you about the real world?” And, after a pugnacious appearance on the BBC’s Question Time, he briefly became the most-talked about person on Twitter.
For the genteel, wealthy investors in his funds, it was all a bit too much. So Mr Hendry stopped all media appearances and concentrated on making money. His $460m flagship fund gained 12.1 per cent over 2011 and is up about 3 per cent so far this year. It has returned a compound annual growth rate of almost 10 per cent since inception in 2002, performing best during bear markets.
“What I found was that when I speak in person, and especially when it’s television and timing is so acute, it gives the impression that I am cavalier and, if you will, full of myself,” says Mr Hendry, speaking by phone from his office in Bayswater, central London.
Mr Hendry insists that his reputation as a “contrarian” investor is wrong, and that his approach is in fact to take advantage of the prevailing momentum in markets. “Our ideas are harshly disciplined by market trends. You will never see us pursue a homegrown idea when it is to the detriment of the prevailing trend.”

ht: @FGoria 

My natural gas & LNG presentation at 2012 Vail ValueX Conference

Embedded below is my presentation at Vail ValueX on some aspects of the North American natural gas market and how LNG (liquefied natural gas) exports may close the worldwide pricing differential.

Dislaimer: I do discuss some economic winners and losers in this presentation. I own a few of them but I'm not going to tell you which ones.  As an investor you should make your own decisions about what to own and I don't know your risk profile or need for current income, etc.


The topics of natural gas and LNG exports are very large and compressing it down to 15 minutes was a challenge.  I could only present the major factors I see driving price differentials.

The full list of presentations can be found at the Vail ValueX hosts' Scribd site: http://www.scribd.com/VitaliyKatsenelson


ValueXVail 2012 - Greg Merrill

Jim Chanos' notes from 2012 Vail ValueX Conference

I had the pleasure of attending the 2012 Vail ValueX conference hosted by Vitaliy Katsenelson http://contrarianedge.com/valuex-vail/
While I will write more about my impressions here's a link to Jim Chanos'  notes.

VALUExVail 2012 - James Chanos


The rest of the presentations are available here -  http://www.scribd.com/VitaliyKatsenelson