Friday, 30 March 2012

Are we there yet?

A long drive today by my recent standards. It should be about 4 hours. Its not a hard drive, lots of quality motorway between Geneva and Turin. You go through the Mt Blanc tunnel which can be problematic on Fridays if you're there after 3pm,  but luckily we'll hit there around lunchtime.


Did I mention I haven't had a glass of wine this week? I missed it last night with my dinner, but am determined to stay on the wagon until Sunday night. 
  



I'm not reading much of the financial press this morning as all we're seeing is the end of quarter ramp up in Equities. Tokyo had their best quarter for more than 20 years. Give me a break. In the meantime the 1% are doing nicely at a conference in Italy. I really enjoy following Noriel Roubini on  twitter, but I had to send him a twitter when I saw he picture from Lake Como at the Villa D'Este . . . it's a long way from teaching at NYU . . . .


Ciao and bon weekend to all.

Thursday, 29 March 2012

A slow day doing prep .... and something I missed

I did an hour at the gym today. Light weights and a slow run on the treadmill. I felt pretty good and didn't push it on purpose.

I'm not doing much market watching today as I'm really focusing on packing for Italy. Part of the preparation was reviewing the course. I found the below Garmin read out of the course and uploaded it onto my 800. I'm fairly sure it will be hard to get lost, but better to be prepared. 

 

I think the below elevation is interesting. Clearly the first challenge is Sardigliano / Vargo climb on the Via Roma. I think if I get over this I'll know if I can make it. Then that last climb becomes the challenge. Coming at 85k mark could really test me. I've done that sort of distance before, but not with 3 reasonable climbs that late in a ride.


Readers will remember my piece on the end of Japanese DRAM maker Elpida. What I missed on the day was Hon Hai taking a stake in Sharp. This is again an attempt to ensure supply of a standard product. The Japanese will no doubt see it as a vindication of Sharp's technical ability . . . the Taiwanese though would probably say it had more to do with them trying to dominate the personal electronics parts supply chain.

FT 27 March 12

Wednesday, 28 March 2012

No risk, no worries, no gym, no cycling . . .

My first day off from the gym or cycling in a couple of weeks. I took some time out to relax and rid my self of lingering muscle pain before the trip to Italy. I even found time to head up to a store and buy a better camera. I'll be the first to admit that as a photographer I really suck, but the camera on the iPhone 3GS is not going to help me get better so time to spend. 

Jessie and I take in another 20 degree winter Geneva day


Things are getting interesting fast. First up the end of Q1 always sees people take a second look at portfolios and transactions. Today I was shown two energy deals that may or may not happen. The reason these deals are blocked is because of trade financing. It's not a very sexy subject to discuss, but in a world of risk adverse under-capitalized banks it's becoming a major blocking factor in world commodities trading. You see back at the height of the GFC banks were finding that physical commodity transactions were becoming more risky as many small or amateurish players (such as hedge funds) had started to get involved in the area. Their ability to complete transactions smoothly was hampered by lack of institutional depth (i.e. logistics, refining or smelting connections). They had offered these guys leverage as though they were Glencore or Vitol. By 2011 banks virtually withdrew from the small and medium sized letter of credit / trade financing transactions leaving many small producers unable to find markets for their products. The transactions I looked at today would have been done in 3 - 5 days back in 2006, but today credit lines remain congested. 

The Bernanke bounce that we had in the last couple of days is a response to central bankers continuing to see credit lines being pushed out into the wider economy. Bernanke, King etc, are printing money to force cash into the system . . .  but it's not getting through. Much like Japan in the decades after the bursting of the great property bubble companies (think Apple etc.), banks and institutions are content to sit on cash as they don't believe that the risk reward scenario justifies them putting it to work. The small producers see Brent at 125bbl, but they can't achieve that, but they won't surrender to the inevitable and consolidate or sell out. Something's going to give .... but when?

A new camera

Tuesday, 27 March 2012

Sayonara Elpida . . . slowest horse in the race . . . and trouble for cyclists in Sydney

I once met the CEO of Elpida, the Japanese DRAM maker in an office in Sydney. At the time they were doing an IR roadshow about a new JV with a Taiwanese partner. The story was fine, but the dynamics were less so. Even in 2006 you could see that the pace of change was nowhere near what it had to be. In typical Japanese fashion it was all about stage 1 completion date and waiting for signals before stage 2 could start. It was a case of missing the point that DRAM production was a race to the bottom ... who could be the lowest cost producer the quickest. The CEO still believed he was adding value in some way to the end users, he thought he was in charge of Hermes, when in fact he was running Woolworths. So this week we see the delisting of Elpida from the Tokyo stock exchange.  I don't know off the top of my head how many share placements Elpida transacted between 2005 and 2011, but I bet its close to one every 20months. The only cash they were generating was through the sale of worthless share script. I kind of feel the same way about the screen industry. I remember when Sharp opened their state of their state of the art facility at Kameyama around the same time I met Mr Elpida. I was sure it would be unbeatable, but Samsung matched them straight away. Sharp changed their tune from quality to quantity pretty quickly. So quickly in fact that Sony spent countless investor hours talking about how it was the behind the screen technology that mattered more than the screens themselves. The truth is that its just another industry in the race to the bottom and if you believe otherwise you are going to be disappointed. 

Doesn't it look beautiful?

Another gym workout as taper towards Sunday. I'm really starting to feel quite relaxed about the prospect of a few hills in Italy. I should mention that I joined the Sydney Cyclist website today in preparation for my return.They had a cool instant message forum and I asked a few questions about cycling back home. 


Recently there's been some half baked campaign against bikes in the city lead by Murdoch's Daily Telegraph. Check out the ugliness in these comments from the The Telegraph in Sydney in relation to a story about a vigilante driver hurling batteries at cyclists who dare be get in his or her way:





It's kind of interesting that Murdoch managers are taking this view as in the UK The Times is running an aggressive pro-cyclist campaign in the face of a series of deaths of cyclists at the hands of motorists.

http://www.thetimes.co.uk/tto/public/cyclesafety/
Additionally there is the irony that Murdoch's son James was instrumental in setting up and sponsoring UCI world tour team SKY Procycling. I wonder therefore when the Telegraph.com.au will stop promoting the petrolhead line. Maybe after they get the word from Rupert himself?

http://www.teamsky.com/article/0,27290,17618_5879886,00.html

Monday, 26 March 2012

Spanish domestic politics and a Brazilian Eucalyptus scheme . . .

I don't follow Spanish domestic politics, but after last weeks moves in the bond markets I thought I needed to take a look at the Andalusian elections. The Socialists won and l wondered why it mattered? Well the Spanish have devolved a lot of power to the regions. This was obviously in response of the domestic terrorism of some separatists groups starting in the 70's. Politically this was probably sensible, but fiscally it is coming back to haunt them. Bloomberg pointed out this morning that 36 percent of public spending comes from the regions.Thus the central government is trying to fight the deficit and in turn meet its EU mandated targets with one hand tied behind its back. Europe is worried, even the dodgy Italians are putting the boot in. Get ready for more general strikes as the left becomes emboldened.


China Construction Bank reported today. Previously I said I was going to track the Chinese bank results as CAB reported last week and saw a sharp rise in impairment charges. Construction Bank’s non-performing loans rose 6.3 billion yuan in the fourth quarter, but thats only just over 1% of the portfolio. So whats the problem?The problem is that a huge chunk of that loan book rests with regional governments who have been under pressure to reign in their prolific credit growth. Obviously banks cannot write down any debt with these authorities as it implicitly would be a challenge to the central government .... Yet. Stay tuned for more.

I dropped off the broken pedal from the Pinarello this morning. The gents at Jean Brun are sending it off to the distributor at Look for repair, but reckon it will be back by Thursday. If not it's going to cost me bucks to get a new set for the grand fondo. After that it was a fairly straight forward session at the gym today. I kept the lower body work to a minimum in an effort to stay fresh for Italy.

And perhaps one final thing. I had to laugh today when the below ad banner appeared on my blog. I have no idea who is behind Brazilian Eucalyptus plantations, but I have seen these forestry schemes everywhere and I'd respectively suggest they are always linked with some unsustainable tax incentive that inevitably gets axed. I'm not suggesting there's anything inherently wring with the scheme, just that governments always over reach on these schemes and as a result it always ends in tears . . . . just ask the Spanish about what happened to there solar energy subsidies.

Sunday, 25 March 2012

The case of the cracked carbon blade and Barry's misguided missive ...

Saturday was superb here in Geneva. I guess it was close to 20 degrees in the afternoon. I rode in summer gear and a gillet and to be honest didn't need the gillet as I wasn't descending from any significant hills. A short 30k ride was all I got around to doing after finishing off the usual Geneva Saturday chores. One thing I couldn't shake though was this cracking noise whenever I went into a high tempo pedal. My first thought was that a spoke had come lose, but nope. Next I thought maybe it was just some dirt between my cleat and the pedal base. Nothing. 

On Sunday I was out early to check out the bike and the annoying noise on a long ride with 2 Cat 3 climbs. Another great day. No real noise until I raised the tempo out of Messery. Mind you I was more concerned with a malfunction in my cadence sensor for the first 35k's. I fixed that with a system reboot. After that the noise came back. Once I got home I decided to clean the bike and re-lube the chain gear. I was hoping I'd find it was something stuck in a tight nook. OK, so below is a picture of a Look Keo Blade pedal as per my bike. 



The last thing I did was wipe down the pedals. When I flipped them over I believe I found the problem. That piece on the left with the small red stripe is a carbon blade which on this model substitutes for a conventional spring. On mine the carbon blade on the left pedal has a crack almost clear through it running from left to right. Bingo. The noise is the flex of the blade along the crack as it fights to keep me in the pedals as I crank up the power. A new set is 300 bucks, but thankfully Look's website says that the blade can be replaced by a dealer. I guess the boys at Jean Brun are going to get a visit from me tomorrow. I hope they have the part as I don't fancy spending 300 or riding the Grand Fondo with such an obvious fault.

The summary of the weeks exercise looks pretty good to me. I rode or went to the gym everyday. Overall I increased the output to 280km's this week and although I'm looking forward to some carbs tonight I feel pretty good.


As for the weekend financial press I won't refer to the Spanish back-sliding over deficit targets. I think it's getting boring to continually flog the dead euro horse. Nope, my fun piece comes courtesy of the UK Telegraph. It would seem that the boys and girls of the Pru are none too happy with the FSA. Check out "Barry's Weekly Note"; Barry is of course deputy CEO Barry O'Dwyer. I'd like to know more about the personal prejudices he refers to. I reckon Barry has quite a lot of grovelling to do. It's also yet another reason why you should always pause before hitting send on this type of thing. Cheers Barry!


Friday, 23 March 2012

What the 99% don't know won't hurt them . . .

Markets looked steadier ahead of the weekend, but looking a little deeper the seeds of further risk off are all about. My favorite comes from the Bank of England's latest policy statement:


" . . . the Committee remained concerned that capital was not yet at levels that would ensure resilience in the face of the prospective risks. It therefore agreed on the need for banks to continue to restrain cash distributions, including via share buybacks. But the scope to build capital through this route was limited. It therefore advised banks to raise external capital as early as feasible."

I wonder what the rest of Europe's central banking elite think of this? We've already seen moves by Uni Credit in Italy and many other big banks can't be far behind. I just wonder what type of discount boards are prepared to offer to get rid of their increasingly low return equity paper? On the basis that there's a price for every thing I'm sure Q2 will be all about discovering that level. May be that's the reason UBS moved on Italian "stud" banker Andrea Orcel yesterday? What do they know that we don't?

I just hopped off the bike after 71k's of pain. It's a fantastic day here today. The Garmin tells me that the temperature on the bike got over 20 degrees, so I was happy to strip down to my summer gloves and undo my gillet and enjoy things here. Spring has truly arrived early here in Switzerland and as usual the Genevois are happy to use the summer weather as an excuse to cut out of work early in favour of a few crisp glasses of the local white. Switzerland is about the 1%, not the 99%.


Thursday, 22 March 2012

Ciao UBS! Ciao Chinese credit . . . .


My old shop is at it again. This time they've hired Andrea Orcel from hugely successful ML. According to the FT Mr Orcel is "one of the City’s most successful dealmakers". I'm sure his hiring had nothing to do with his close relationship with Sergio Ermotti, another refugee from ML and the current CEO of UBS. Can I please point readers to the WSJ's deal blog of 4 March 2009. In that piece the writers of the WSJ did an analysis of Mr Orcel's claim that he had earned ML $550m in fees in 2008. It seems to me that the WSJ's writers were intimating that there is no lack of hyperbole in the bankers claims. Therefore I suggest that someone at UBS read this piece and several others; it might just have some of the more cynical members of the board asking some more probing questions of the executive.

Elsewhere the Chinese banking sector has started to report numbers for the current period. As we already heard from the government things are starting to slow down. What we haven't had to deal with is what that means in terms of growth of bad debt. Remember a lot of debt is passed around like a hot potato. It's constantly being tipped back into the air by those quick enough to flip it on. The problem is that eventually the less dexterous investors get involved and when there's no one else to pass on the debt to they get stuck. Such is China now. All that massive growth in money supply in 2009 created a huge investment bubble that is now coming back to haunt the market. At this stage it's hidden in obscure numbers and ratios. Check out Agricultural Bank of China's numbers today.  Loan impairments are rising, but rather than going into that now I'll wait to see the trend across the entire space.

So, as for a workout today I headed to the gym. I tried the pre-programmed interval training on both the treadmill and the ski machine for the first time. I guess I've become concerned that I just do the same workout every time I hit the gym. I'm therefore officially mixing it up. I actually enjoyed it today. I probably started off with speeds and power settings to low, but I'll build up a knowledge base soon enough.

Wednesday, 21 March 2012

No time to budget ....

Its amazing how 90% of things governments intend to make big statements about get leaked well before the day. Case in point: The UK budget. Nearly everything I've see we've known about for at least a week. Mind you I'm not complaining as it takes away the shock factor that can rattle markets and people. I just wish it wasn't always so obvious. I like a bit of subtlety in my life as I get older. I guess the least subtle thing that we saw in the budget was that stamp duty on properties over GBP 2m will rise to 7%. You average European must have been confused by that as they already have transactions fees at this level or greater. I was expecting that the introduction of said duty would apply from some arbitrary date in the next couple of months, but alas the Tories are on top of that. We all know what would have happened; a variable stampede to avoid a fee that in the world of big time property is about sweet FA of the bid offer spread. I'll miss the insanity of people paying over the odds to avoid some comparatively small amount, only to find out that their property devalued by 10 or 20% within months.

The UK's budgetary problems look pretty awful next to the Germans. The Fatherland is predicting a balanced budget in 2014, rather than 2016 as previously f/c. Now I reckon thats good news even though it's no doubt predicated on the rest of the PIIGs not looking to get bailed out. I wonder if the German finance minister factored in having to bail out their own banks yet again. I note DB is saying that their legal problems could cost them another E3bn!

So enough about the economy.HEre in Geneva I managed to thump out another 45k's today. Annoyingly the stats won't be fully accurate as I switched off the timer when I stopped to take a phone call and forgot to restart until 10mins or so later. Doh! 

Turn the timer back on or it looks like you got a lift on a helicopter!



Tuesday, 20 March 2012

Better on a bike than in China . . . .

So BHP has decided to state the obvious and warn investors of a change in Chinese consumption of key commodity Iron Ore. It doesn't have to be the end of the world for BHPs share price, though it's going to struggle now ex- the petroleum divisions numbers. The stock trades on a single digit multiple from what I see, so maybe some of this is factored in. Having said that, readers of this blog will have noted my numerous concerns regarding the north south commodities pipeline and the potential effect on the Australian dollar. The AUD was back under 1.05, the only word of caution for the shorts is that RBA Governor Stevens shows no sign of cutting rates, therefore the carry trade will provide support.

Meanwhile overcast skies here cleared to a fine if slightly chilly day. I rode in winter clothes minus one layer. A reverse Ballaison with an adjustment here and there. 65k's it total. The bike is riding well since having the 12-27 cassette added to the Eastons. I'm happier with my form and want at least one more big hill climbing session before Italy. I already have an idea that it will be this Sunday. Stay tuned for more information.

Monday, 19 March 2012

The end of the Twist and Apple part deux . . .


Just as i said yesterday, Apple would structure any cash or stock buybacks according to where its cash was within the corporate structure: (as reported in the FT)
"Apple’s payouts will come from its domestic cash pile only, leaving unanswered the question of how the group plans to spend its $65bn in funds overseas. Repatriating the offshore cash would incur a substantial tax bill."  
“We do not want to incur the tax cost to repatriate the foreign cash at this time,” Mr Oppenheimer (Apple CFO) said.

On to more important things. Barcap today released a piece on the end of the Feds Operation Twist. There's only one thing I would point out from this report and that is the below chart of the SP500:


I had a short workout at the gym today as it was raining lightly here for part of the day. I'm not confident about riding in the rain and I wondered what I would do if it rained on the day of the Grand Fondo??? I'm pretty sure the Easton EA90SLX aluminium rims would be OK, but the problem will probably be in the bunch. I can't imagine what carbon wheels stop like on a 6 degree downslope.


Get on your bikes and hand me an Apple . . . .

After 3 hours on the bike on Saturday I spent the afternoon enthralled by the Milano San Remo race. Check out this race profile from Strava. There are 4 major climbs. That final one is known as the Poggio.  




Here's something even more interesting. It's the Strava stats of US rider Taylor Phinney from the BMC team.



Its hard to believe that you can spend 7 hours in the saddle at an average speed of 40 kph. Taylor finished 37minutes behind the winner, but thats nothing to be ashamed of. 

The finish was unbelievable. I loved the way Cancellara stuck with his plan to break the sprinters on the last climb. It was too bad for him that he picked up two in-form passengers in Gerrans and Nibali. After the race I couldn't understand the comments from people saying how they felt that it should have been Cancellara's race. If you watched the race you would have seen that it was Nibali and Gerrens who broke first on the Poggio and Cancellara who tagged on before deciding that he had no chance in a bunch sprint with men like Goss in the next group, thus making it imperative to make a clean break. The three of them then played tag just as track riders do, but remember this is all happening at 30+kph up hill and 80kph on the decent where Cancellara is an absolute god. The theatre of Cancellara asking Gerrens and Nibali to pass him was like a spider asking flies to go through his web. I loved it. It was a fantastic finish and even better if you caught it on Italian TV where the commentators went crazy. 

I really avoided most of the business press over the weekend, except for the latest speculation on Apple (AAPL). I mused on what the end of the cash pile might mean on this blog a while ago. Has Apple run out of ideas? Is this an exit strategy for employees who didn't get stock options back at the time that Steve Jobs returned to the company? Who knows what Tim Cook and the Board are thinking. I'm not sure where all the actual cash is given that so much gets booked through the Irish arm of the company. I guess the biggest risk for Apple is that its sitting in various un-creditworthy banks or maybe its been in US government bonds?

Friday, 16 March 2012

Beware of traders and your bike setup . . .

Anyone who knows me knows that I love Xstrata. I don't own any shares currently, nor do I plan to buy any given the current moves by Glencore. What worries me is that under GBP12.00 a share Xstrata in my view is a steal. And the people trying to steal it are some of the best traders in the business ... Glencore. Now Ivan and his boys already own a chunk of the stock and without a self-implosion they'll never need to sell it. The moment they listed was the moment Xstrata was doomed. For sharp operators like Glencore the very thought they could buy a company with paper that represents multiples of cash they currently make is just too juicy a proposition. So no, I'm not going to buy Xstrata, even though I believe the Glencore team will happily print shares to do the deal. No, I don't want to own the black box that is Glencore. 


More importantly the Dogma was in the shop today getting the broken spoke fixed and having the Grand Fondo killer (aka 12-27 cassette) added. So in order to keep the training going I hopped on the BMC for its first serious hill climb over 50k's.




A couple of observations. Firstly bike geometry can be so different that you're bound to feel uncomfortable when you change bikes for a long ride. In my case I noticed that the seat on the BMC was way too high for the type of climbs I was used to on the Dogma. I needed that extra centimetre or so of leg bend at the bottom for the 8 degree plus stuff. I stopped twice to make adjustments. Additionally there's no doubt that the reach to my hoods was also too long by about 20mm. This had me baffled, but on reflection I've really only used the BMC for flat riding where you like to be lower and more extended. If you hill climb you need bend in your elbows to help relax your upper body. 


Secondly the quality difference between this "sportive" level bike and the Dogma is really noticeable when you push to extremes. The Dogma is so stable and composed. I never understood what the bike reviews really meant by that until today. The BMC creaks and groans under power, which I think is the carbon quality showing up. The Dogma kind of sits on the road like a sports car and sucks into the tarmac. Obviously the wheels and Shimano 105 setup are not up to my Campy SR11 / Easton EA90SLX standard combo. 


Anyway I checked in at Jean Brun and said the BMC is coming in for some upgrades. I figure if its worth owning the bike it's worth making sure I get the most out of it. So it's going to be new 70mm stem. A better set of wheels. And if I get really inspired switch to SRAM or at least Ultegra Shimano.


Bon Weekend.

Thursday, 15 March 2012

Kamikaze bankers and the Geneva car show . . .

I got so busy yesterday that I missed publishing a blog for the day. Apologies.


You had to love the kamikaze resignation of Goldman Sachs derivative sales dude Greg Smith. For anyone who's dealt with an investment bank in the last 20 years none of what he had to say could come as a surprise. It's worth reading as a piece of hubris if nothing else. I remember my own version of this back in '87 when I resigned from a London publishing company. I regret it and I'll bet that our friend here comes to regret it. The thing is that with social media this type of thing will always be just a google away. Good for him saying what he felt, but will it change anything?


On the humorous side am I the only one who sees similarities between Smith and his former bosses Lloyd  Blankfein and Gary Cohn?


Bald Jewish men rock at Goldman Sachs
I saw the OpEd piece between sets at the gym yesterday. Just a quick hour to recover from Tuesdays big ride.

Today my wife and I went off to the Geneva motor show. Its funny place, a mixture of top end auto glamour and bottom end body piercings on the patrons. What is it with the Swiss-Germans? 

There plenty of cool cars, but with our impending return to Australia I spent most of my time at the more down to earth VW stand. I've recently fallen out of love with cars. Maybe its the sheer efficiency of my current Merc ML 350. Its the best car I've ever owned. I mean I've done the Porsche, BMW etc. This Merc just gets the job done and I figure that its proven to me that cars are a utility item, not a fashion item. Anyone who has been to Australia knows that the top speed on a highway is 120kph (though its rare) and unlike in Europe it is enforced, as are the seatbelt laws and child seat regulations. Even if I wanted another sports car, whats the point?







Tuesday, 13 March 2012

Sports car bike wheels and 100 year mortgages ...

I completed the reverse Ballaison run today. Another 65k's under the belt as I head towards my first Grand Fondo. I had a smile on my face for most the way as I found a nice family today to take over my lease in Geneva. I lost the sensor from my rear wheel on the downhill run from the highest point on the ride and therefore cannot give accurate statistics from todays ride. Sorry.

Today was the first time since November that I rode with my Campagnolo Bora One's. I forgot what amazing ride they provided. Think about it this way . . .  my Easton EA90 SLX's are like a really good BMW 5-series. Great ride, stable and look good. The Campys though, they're different. They ride like a sports car. You know that hard grippy feel. And when you put your foot down there's an immediate transfer of power. I don't want to ride it everyday, but if you want to put a smile on your face you really have to try them now and then.


The FTSE 100 is now at 5955. The SP500 is at 1390.55. The international ponzi scheme continues. My target for buying puts on the FTSE is 6200. No particular fundamental reason, just an old chart point I've been watching for months now. The thing is that most of the non-investment banking types I talk to have no idea why we're at these level. 


One hell of of a hill climb!
Geneva is not a fundamental place as the economy is dominated by money hiding from various tax men or comes from the completely recession proof UN. For the non-banking locals the only thing that matters is the Swiss National Bank's (SNB) willingness to print an unlimited number of CHF at 1.20 to the Euro. I hope that they have plenty of ink. You know you can get a 100 year mortgage here in order to pass down property (with debt) from one generation to another. The average 150sqm apartment in central Geneva costs somewhere between 1.75 to 2.5 million. Its terrifying to consider the affordability of this place. The tax rate is near enough to 40% for big salaries, though tax doesn't cut in too much below 100k ... thus explaining the number of 15 to 25 year old girls with CHF10,000 Hermes handbags. Its like living in Japan in the 80's ... and we know how that ended. The Swiss, especially the French side of the country just can't help themselves.

Monday, 12 March 2012

Something not so different ....

A slew of data from the saviours of the world economy the Chinese confirmed again that the global slowdown is real and with us now. The Financial Times reported that February exports fell 23.6 per cent from the previous month, and rose a slower-than-expected 18.4 per cent from the previous year. My Aussie brothers will probably prefer to point out that iron ore imports remain strong, but I'm not buying it and neither is the market today.


Back on the March 5th I pointed out the reduced expectations for GDP growth amongst the Chinese leadership. These latest numbers are confirming what Premier Wen knew when he made his pronouncement of a 7.5% GDP target. At the time we were still gripped with Greek bail-out fever and the market seems to want to believe that an increase in money supply was likely to be the result. I believe the only thing we have had confirmed today was that the Chinese economy has lost all its balance and it remains likely that the victim of a rebalance has to remain the construction sector. If Chinese exports continue to be under pressure it seems unlikely that the strong demand for iron ore, copper and oil can remain at the current levels.



I stopped in at Jean Brun with my damaged wheel. Father and son looked pretty bury this morning and were working on several newish looking bikes. Happily JP saw no great problem with the state of my rear Easton clincher happily putting it to the side and confirming that there shouldn't be problem. I hope my new 12-27 Campagnolo cassette arrives soon so I can have it attached to the Eastons and do some training rides on it before the Gran Fondo.

Exercise today was confined to the gym, which at least allowed me to catch up with some podcasts and an audiobook I've been listening to.

Sunday, 11 March 2012

Welcome to the weekend . . . nipple failure!

So, how many spokes can a bike wheel have fail before the whole thing collapses? One failure (see picture below) kept my 94kg frame safe for about 20km's today. Looks to me that the spoke thread failed and caused a separation from the nipple. The wind was awful - I'm told it's typical, but in the 2 years I've been here I haven't felt anything like it. Anyway, I was half way up a hill near Golf Club de Bonmont heading towards the abbey on the hill. Ping, ping, ping .... an awful sound, like a wire coat hanger being dragged across a steel grating. 

Dodgy nipple?

As this had never happened to me before and my experience with wheel failure basically stops at changing a flat I took it very easy on the ride back to meet my wife and some friends. 


The whole spoke failure episode had me thinking about the Greeks. So this week they managed to bully the holders of government bonds into a so called "voluntary default". What a load of rubbish. You see the Greek debt wheel has many spokes and just because the Greeks changed their own laws doesn't mean that they can change everyone else's. And here's the rub (or should that be hub?); the Greeks have issued billions in debt under a number of jurisdictions and guaranteed the debt issued by their banks. A lot of journalists and average men in the street types don't know about this. You see in order to get debt "away" bond holders prefer the English courts as a kind of independent arbitrator. My old friends at Zero Hedge provided me with the following table:


GREEK SOVEREIGN GUARANTEED DEBT                                AMOUNT
The New Economy Development Fund                              $139,000,000.00
The Hellenic Railway                                                          $2,240,000,000.00   
Structured Notes (Not counting Floating Rate Notes)         $20,683,000,000.00   
Athens Urban    Transportation                                         $837,000,000.00
Greek Bank Guaranteed Debt                                            $83,314,000,000.00
TOTAL GREEK GUARANTEED. DEBT                                $107,213,000,000.00
The whole thing is reminding me more and more of the Koreans or the Malaysians in 1998. In those days fortunes were made by playing chicken with governments over this "euro-debt". I predict that someone somewhere is going to make out like a bandit when the Greeks or their European masters realise they can't manipulate the English judiciary. Stay tuned for the fun and games.

------------------------------


Finally a mail reached me today saying that my writing style showed strong influence from my 20 years experience working for investment banks. This doesn't shock me as everyone knows the secret language used in these banks usually is aimed at giving all sorts of subtle avenues for exit when the shit inevitably hits the fan. There's a strong element of bullshit bingo in just about every invesment banks internal meetings.






I'm definitely in need of a strong injection of the real world. If you're looking for examples of this "writing for mitigation"check out some of the stories in Michael Lewis' The Big Short or better still some of US Treasury Secretary Geithner's testimonies to the Congress.


Bon weekend and happy investing.

Friday, 9 March 2012

Hard yards into the wind . . .

A deceptively strong wind was blowing here today. It was hard work cycling and after about 20k's I wished I was back at the gym. To make matters worse I took a break for drink and failed to restart the timer on my Garmin until I hit the foot of the hill at Ballaison. Guess I missed about 10k or so on the record. 


I stopped in after the ride at Geneva's best local bike shop Jean Brun to discuss upgrading the Shimano 105 groupset on my BMC to the new Ultegra Ui2. JP, Philipe and mother Bridget were all smiles as usual and I must say I'll be sorry to leave behind such a great service provider when I head back to Sydney. JP was keen to swap information with me about my latest exploits and of course to point out the the Cadel Evans edition BMC TeamMachine. Beautiful piece of machinery, but a size 54 which excludes me thank goodness. I also got to see them rigging up Ui2 on size 60 version of my BMC Roadracer SL02. I could have stayed all afternoon, but thought it best to let JP get back to work.





Speaking of winds what are we to make of the US job figures today. I'm not sure 227,000 is enough of a breeze given the various participation rates to stop Mr Bernanke from continuing the money flood. I think if we saw a 400k spike we would be closer to the end of QE fever. 










Thursday, 8 March 2012

Money, money everywhere . . . .

Apologies to Coleridge, but the money supply in the US looks likely to expand yet again. I'm not sure what sterilised QE really means. I'm an ex-bond trader and the idea of the Fed printing money and buying stacks of low quality paper from a back book that I've marked to zero would get me very excited about bonus year 2012. It's the typical arb your own bank moment where a new trader takes over a position marked at an unreasonably low level and proceeds to sell it out and print a large profit. Now normally no one would fall for this, but when management at many of the holders of these instruments has changed so much over the last 3 years no one remembers who is responsible for what. Meaning, that some kid not long out grad school is suddenly the new star trader on the floor and will need to get paid.

In the meantime I took it easy today and did an hour of upper body work at the gym. Yesterdays 70k marathon left me pretty stiff in the back and neck, so stretching and light weights were the order of the day. 20 minutes on the running machine loosened up the joints. The other good news for the day was that my new 66mm Pinarello water bottles arrived from Cicli Mattio in Italy. Grazie. I would preferred black or red, but hey these will do the job.


Wednesday, 7 March 2012

Picking Apples at Bassin . . . .

Anyone who knows me understands that I love Apple products for their user friendly software and "gotta touch it" design. So what am I to think today as I await the iPad3. First up I haven't bought a new release product since iPad1. Secondly I still use a 3GS iPhone. Now I haven't thought that I've missed much, sure the Suri voice thing would be cool, but is my life any less good for having missed out? I know my wallet is not as happy given I've never owned Apple shares - doh! Now looking at AAPL's cash pile edge up over (?) 40bn I wonder at what stage Tim Cook gets edgy and either pays out a big dividend or buys something for the wrong price. Can this stock go up for ever? As Microsoft proved cash alone is not enough.


AAPL (source: Yahoo Finance)

After yesterdays day off I was excited to get back on the bike and try something new. So I headed off to a little place called Bassins in the Canton of Vaud. 

It was a strange ride in many ways. I picked up a phantom rider who stayed glued to my rear wheel for 15k. He looked fitter and fresher than me, but just didn't want to take his turn leading into the wind. I don't know whether it was supposed to be annoying or some form tribute to my pace. I certainly didn't feel that I was doing the guy any favours. Looking at my speed chart I was averaging near enough to 30kph for the section he rode with me, which is good for me, but not special for many of the road riders here in Geneva. Anyway I dropped him as I headed up the hill at Bassin glad of my new forearm wind guards and my choice to wear a second shirt. It crests at just under 800m and the ride down the other side is pretty full on until you hit the town at Gland, some 10k's later. I hit the brakes as I edged up towards 60kph because experience has told me that I can't trust cars on the cross roads in these little rural towns. Anyhow I made it back safely after completing a 70km loop.

Now, where's that Apple webcast of the iPad3 launch.

Tuesday, 6 March 2012

Repeat after me - I love Geneva

So I took a trip today to Bourg-en-Breese in France. Home of the famous gourmet chickens. Unfortunately most of the restaurants in town take Tuesdays off leaving me at a small steakhouse contemplating the French paradox and Geneva prices. 

The average steak in Genevois restaurants is CHF 50. Even at the most down at the heel places prices rarely vary by a franc or two. You might score with a piece of flank or shoulder around the 35 - 40 mark, but forget about the glamour cuts. With that in mind I bring you the price in Bourg-en-Breese of two sirloins (one with pepper sauce, the other with a herb butter), fries, salad, a coffee and a bottle of very passable Cote du Rhone for Euro 48.30, or just under CHF 60! 


Enough to make me laugh at the first person I met in Geneva when I got home
Clearly the Swiss will get theirs at some stage. More evidence of this was brought to my attention today by the Brazilian GDP numbers. It seems that the lead-off hitter for the BRICS managed a very anglo-saxon / euroland expansion of 2.7% in 2011. What gives? Well it's a bit like my own homeland; big resource boom and cheap money international money ignite inflation. Central bank keeps rates high to kill off inflation, but in doing so kill off a chunk of the economy. 

So there we have it, the B and C in BRICS are shaky; we know India is a cooked goose with Brent Crude at these levels and Russia, well they just opted for another four years of corruption. I need a good 75k's on the Pinarello tomorrow or this will drive me insane.

Salvation in the form of a Pinarello Dogma

Monday, 5 March 2012

What, me worry?

I think it's a very big moment that China through the auspisious of the Premier Wen has lowered GDP forecasts to 7.5%. China’s economy is encountering new problems; there is downward pressure on economic growth and prices remain high,” quotes the FT. Now to those of us who've watched closely over the last 12 months this always seemed inevitable. Having said that, the natural inclination of the anglo saxon world and for that fact the G20 in toto has continually ignored the facts around them. Even now the bulls will probably suggest that China will pump money into their economy and thus bail out the rest of the world. This is a fallacy. A lot of the money that will now go into domestic China will be used to supplement the vast majority of the workforce and not the condo buying middle and upper middle classes of the mega cities. These people will clearly go through the same deleveraging that we've seen elsewhere in the world.


At no stage in the last 3 years have I been an outright Aussie dollar bear. The closest I got was a long CAD trade in a pair with the AUD on the basis of oil. I was short AUDCAD back in November and really it did very little. I'm still surprised at that, but the Aussie central bank put the rates cuts I expected on hold thus perpetuating the carry trade. No great damage done. I'd start to short the AUD now on the basis that Chinese imports of raw materials will likely start to weaken which will force the hand of RBA supremo Stevens into cutting rates. 


Times up, sorry Aussie brothers
Speaking of things I'm start worry about, it's less than a month now until my firs Grand Fondo. The GF Dolci Terre di Novi" is 105k's of pain on April fools day and I don't feel ready. Todays exercise consisted of a long hour in the gym. Thats clearly not enough to make the GF an easy task. I think I worry too much as after all the idea is to try something different, not to win the bloody thing! I've got to stop thinking everything is a competition. 

I'm not sure my cycling kit is going to be colorful enough!






Sunday, 4 March 2012

The Weekend Edition: Oil and the art of trading

I got a bit of grief today about what my plans were from the coming week. Well other than exercise and reading I've got to be honest and say I am not going near a trading account at the moment. 


Oil .... mmmm???? OK, so here we are WTI $110 etc. I kind of think this is more like '91 than '08. In '91 we were coming out of a recession and lurching towards the first Gulf war. In '08 we were sitting on a crest of a bubble driven by rampant demand even in the face of an economic disaster unfolding in equities. Remember what happened in '91 as soon as we saw saw shooting? Sell. Here's my fav instrument ... UOIL, also known as the VelocityShares 3X Long Brent Crude. This thing is a beast. If you can short it when the bombs start to fall you will be a brave and rich investor.


Here's Saturday and Sunday's Rides. Saturday was a fruitless attempt to find my way to the Cat 1 Saleve climb. Essentially I picked the wrong day as the roads were choked with the familiar "74" type French license plates all in a mad rush to do their weekly shopping. I wish I had an accurate count of the number of French parents trying to restrain children and talk on cell phones while driving, but alas I was too busy ducking and diving to keep track. Sunday was a far more sedate affair. I decide to forsake the joys of Cat 1 and do a reverse climb to Ballaison. I've never done it this way and I must say I was surprised how easy it was. Clearly this was a great lesson in alternative routes for "col-climbing" this season.


The reverse Ballaison



One last thing. I got my new Garmin heart rate monitor . . . which happens to be the old or classic version with the hard plastic front sensors. 


It worked brilliantly. I now no longer look down and see a heart rate of 240 bpm when climbing a significant hill! 

Thats better - but was I trying hard enough .... mmm????