Thursday, September 10, 2020

Get ready to refinance. Again.

Get ready to refinance. Again.

At least there is one positive aspect to the COVID-19 crisis, the drop in interest rates.  And notice I said get ready.  It appears it would be better to wait to refinance. If you can.

The Green line in the image above is the difference between the 10 year Treasury bond rate and 30 year mortgage rates.  If you notice, during the 2008 and current recessions the difference between those two rates expanded dramatically before eventually closing.

I downloaded the data from the graph above.  The average difference is 1.76% with a standard deviation of 0.29%.  Right now we are at a ~1.65 standard deviation event, which is very unusual.  To put it another way, if mortgage rates were 'average', right now they would be 2.44%

Yes, a sub 2.5% 30 year mortgage.

Now, we may not get there.  10 year Treasury rates could rise before the mortgage market normalizes, or they could go down.  I'm not going to make a prediction on interest rate movements in this post.  But if nothing happens with longer term Treasury rates we could see a sub 2.5% 30 year mortgage rate in the future.

Refinancing your house is only an option if you can, and for quite a bit of America this unfortunately is impossible due to business or job dislocation. But if you are able, go to the link above and watch it weekly. I sure am.  

Tuesday, July 7, 2020

Predictions are hard, especially about the Future

One of my favorite books ever is the book Dune by Frank Herbert.  He built a universe with a complex religious, economic and political framework that transports you to a completely different world.  It is not a dry technical read about an alternate reality but a compelling and rich story with an amazing tapestry behind it. 

I will stop gushing over the man, but I want you to watch this video and remember the respect I have for this man and his capabilities.  It's short at around 4 minutes.  He explains his natural curiosity and his broad skill set that created the situation for him to write the book series.  However even Mr. Herbert gets the end of fossil fuel prediction VERY wrong. 

When you extrapolate out the current state too far into the future one will come up with very wrong results.  The world is extremely dynamic.  Humans are very clever.  New technologies and innovations which were too expensive drop in price enough to totally transform the dynamics of a system, rendering your prediction invalid.

In this 1977 interview he states we will run out of fossil fuels in 40 years.  We are 3 years past that deadline.  Even brilliant people can be wrong on occasion.



Another attempt at a Dune movie is near release. I hope it's better than the last one.


Wednesday, November 27, 2019

Keeping your packages and mail safe

The holiday season bring much cheer, and shopping.  In today's modern economy much of that shopping ends up being online with packages delivered to your door. Very convenient, unless they are stolen...

While my primary mission is managing assets for clients I have realized keeping those assets safe, while ancillary, is also something I should assist with as well. With the Great American Shopping Frenzy underway I thought this would be a good time to remind you to keep those packages and letters safe!  Here's a few ways to do so:

Amazon lockers
I use Amazon, too much most likely, for business as well as personal purchases. It's incredibly easy and very competitive on pricing.  Bulk dog food is cheaper from Amazon than my local pet store!  
Shopping via Amazon unfortunately creates an target for porch thieves unless you are careful.  Fortunately there are alternatives; Amazon allows one to have your orders delivered to a 'locker' in a nearby store of your choosing. 

Here's a link to find a locker near you:


Amazon Locker 

Physical security of mail
If you don't have a secure mailbox, you'll get your mail stolen.  It's not a question of when but if.  Even something which looks secure may not necessarily be so. Preventing your packages from being stolen may be topical, but getting your mail stolen a year round concern.

Mail theft happened to me several years ago and my solution has prevented any mail theft since. It's a severe response, but look at what a crowbar does to some other options out there

 

The solution, cold hard steel and lots of it, a quarter inch to be exact.  It's probably bullet proof as well, but I'm not going to test it for you.

https://www.fortknoxmailbox.com/product-category/mailboxes/


 

Shred
Once you've received your documents, make sure they don't leave the house intact.  My shredder gets a workout almost every day.  All financial and health documents no longer needed get shredded.  

It is frustrating to have to alter one's behaviour to prevent crime but it's an unfortunate fact of life.  I ask you to learn from my own and other's negative events to keep yourself safe.

Happy Thanksgiving.
Now go eat some Turkey.

Additional links:

Porch pirates stealing your online orders:


Health care fraud: Unfortunately people will imitate you for medical care or for identity theft.
https://www.fbi.gov/investigate/white-collar-crime/health-care-fraud


Physical security of the home

Monday, July 10, 2017

Chasing the next credit bubble. It feels best right before it pops.

A recent tweet by Kevin Smith of Crescat Capital  (someone I've had the pleasure of meeting in person) reminded me of just how far we've come since 2008 and the Great Recession.


By how far we've come I'm not meaning in a positive sense.  If you look at the selected ratios of debt to GDP for Canada, China, and Australia they've each grown tremendously since 2008/09.   While this has helped goose growth in each of their respective economies (and spilled out into the greater world as well)  it does not bode well for the future.  The thing about debt is it need to be paid off.  Somehow, someway (by default, payment or inflation) the ratios will drop when they reach such lofty heights.  

Crescat capital annotated the above chart rather nicely showing you the negative events which coincided with either a rapid rise in debt to GDP (like Thailand) OR a high ratio overall (Japan, USA, Spain)  Their implication is Canada, China, and Australia are heading toward a likely credit crises and I'm inclined to agree with them.  

These are not the only shimmering spheres on the horizon however.  Look below and you can see all three of the Scandinavian countries are above US levels before our little economic problem in 2008.


Source: Federal Reserve (link)

The challenge with calling the tops in a bubble is you are battling central bankers and their willingness to keep the debt flowing.  Who wants to say no when the money is flowing?  Even central bankers can exhibit human tendencies on occasion, they don't want to be derided for being the Grinch that stole Christmas...  As such it's very hard to know when they will finally start to restrict the lending and tighten liquidity.    While the US is not at the top of this rarified list it is entirely possible our current series of recent (and future?) rate hikes will be enough to tip one of these countries over the edge which could then get the dominos falling.  When is unknown, but that it will happen appears quite likely.

Update:  https://blog.pimco.com/en/2017/05/A%20Less%20Impulsive%20China%20Bracing%20for%20Lower%20Growth

Looks like the Chinese credit impulse may have turned negative recently.  As the data presented above is nearly 6 months old this is very interesting.  While it ripple through to the US markets? We shall see shortly.




Wednesday, June 22, 2016

Jim Chanos - Easier to Find Short Ideas as Bull Market Goes On

I've mentioned Jim Chanos before in this blog, and he's out again with some telling examples of late stage 'exuberance'

While Mr. Chanos is almost never perfectly timed with the market's current mood, he is rarely wrong longer term.

http://www.bloomberg.com/news/videos/2016-06-15/chanos-easier-to-find-short-ideas-as-bull-market-goes-on

Monday, May 2, 2016

Cool tool - IBorrow shows you short stock availability and borrow rates

While reading one of the many blogs I follow I ran across this cool tool which I'd like to share with you:

https://www.iborrowdesk.com/

Interactive Brokers provides data showing borrow availability and the rate you'll pay to borrow the stock.  Using this data however is a bit clunky.  Fortunately IBorrow has come along allowing one to quickly pull up and visualize the data.


For those looking at option strategies, which broad based etf's to short, or other strategies, knowing the quantity and rate of shares available can be important.  I suggest you give it a try.

ht: Glenn Chan

Friday, April 29, 2016

Never bet against The Chanos

Never bet against The Chanos

That may sound like an odd commandment, but it's a good one. I speak of Jim Chanos, the well known short seller.  Speaking highly of a member of such a profession may raise the hackles of some individuals, as well as governments, but I have been following his public pronouncements for quite a while and he may be early, but very rarely wrong.   Post the great recession of 2008-2009 he was one of the first to warn about the construction & credit bubbles percolating in China; and while ridiculed for it his warnings have played out.

I even  have a google alert on "Jim Chanos" (along with quite a few others) so as to catch everything he talks about. Recently I got a hit on a great 90+ minute podcast he did with FT Alphaville.

Podcast: Jim Chanos on the art of short-selling

I suggest you listen to all of it.