Over My Shoulder | Mauldin Economics

Over My Shoulder

Ira Sohn Investment Conference notes

May 12, 2016

These are notes a hedgie friend of mine took at the recent Ira Sohn conference, where famous hedgies share their best trading ideas. I can’t mention his name, but he can always get a job as a conference note taker. This was a good job and interesting. (Part of the conference is evidently called "Next Wave," focusing on new tech and edge companies.

Download - 2016_IRA_SOHN_Notes.pdf

Wells Fargo: “Bond Insurance and Distressed Municipal Credit”

May 7, 2016

OK, I usually don’t get this deep into the weeds, but my friends over at Wells Fargo did a deep dive on the muni insurers related to Puerto Rico. Some are not looking pretty. Then add in Illinois and NJ, which WF don’t do. Oops. Another possible credit problem in the brewing in muni land, as in the insurers have deeply impaired capital, which means that future muni bonds have higher risk, etc. Not clear what actually happens, but this bears watching.

Download - Bond_Insurance_and_Distressed_Municipal_Credit_050416.pdf

Ben Hunt: “Optical Illusion / Optical Truth”

May 5, 2016

This is the latest Epsilon Theory newsletter by my friend Ben Hunt. It is a definite must-read. Now, I have to warn you that the first four pages or so are mathematically complex, but just kind of struggle through it and get the gist, which is that, put most simply, correlation is not causation. Ben is in love with mathematical models and their history, so this is an opportunity for some of us less mathematically gifted types to learn.
 
But then he gets to the heart of the matter. He makes the key point out that monetary policy around the world has become a driver of markets – and in some markets more so than market fundamentals.
 
This is reinforcement for my contention that even though monetary policy in the US and the rest of the developed world is demonstrably taking us down the wrong path, it is not clear that even if we could get everybody at Federal Reserve to admit their error – which I don't for one minute think that they can – they might not be able to back out without causing massive disruptions. Which means they have to give us more of the same ineffective medicine, which is going to manipulate and distort markets even more. Oh dear gods.
 
Read this twice. Meditate on it. I normally don't get this emphatic, but Ben is pointing us in the direction of something we need to pay attention to.

Download - salient-epsilon-theory-ben-hunt-optical-illusion-optical-truth-may-4-2016.pdf

Joan McCullough on Productivity

May 5, 2016

Quick note: After my rant about productivity, first-quarter productivity numbers came in, and they sucked.

Joan McCullough wrote:

Q1 Productivity and Costs.  http://www.bls.gov/news.release/prod2.nr0.htm
Expect -1.3%.  Actual:  -1.0%.  I wanna’ kill myself, lookin’ at this one.
Because the quarter starts the year off with lousy Productivity after Q4’s -1.7%.
No consolation either from the Q1 y/y look at Productivity:  +0.6% which ain’t spit.
Here’s what they used to get the Q1 Productivity results:
Output was + 0.4%
Hours worked increased 1.5%
That’s trouble right there. 

(No PDF attached.)