Tuesday, 20 November 2012

I prefer not to ride in snow . . .

Good call from one of my investment bank sources yesterday prior to the move on Wall St to sell the downside Apple 90% puts and buy multiple calls against them. I've seen this move work a bit over the years and requires very accurate execution and a bit of luck when you're in a bearish environment. The guy that sent me the idea said I could get 4.4%'ish for the put expiring in the middle of April. That's appealing to me if I'm sitting in zero yield bank deposits and desperate for some income. The risk that Apple falls another 14.4% (10% + 4.4%) by expiry is out there, but with Xmas coming and sales for products likely to be at least OK, then I think I can stomach it. And let's not forget that there's always another round of QE-ternity! I think I'd prefer to that than sell downside puts in Chinese dependent resource stocks.

It's hard to sit on cash with rates so low and some people will buy anything. At this time of year one of the purest wealth indicators is the auction held in France to support the Hospices de Beaune in Burgundy. The auction, which is the highlight of a three day festival (Les Trois Glorieuses) has been held since the 1850's. Unlike a normal wine auction where you bid on particular cases of various bottle size composition, the auction in Beaune requires that you bid on entire barrels. You then specify how you would like your wine bottles. It means that you better be a serious buyer because a barrique holds 225ltrs. FT wine critic Jancis Robinson put the results up on her website and it does make for some interesting reading for investors and drinkers. Highlights were:
  • 407 bbls of red and 111bbls of white were auctioned
  • 12% of bids by value came from Asia based buyers
  • The President's barrel fetched €270,000 and was acquired by a Ukrainian (Igor Iankovskyi) 
  • Some of the records included - Clos de la Roche, Cuvée Georges Kritter €55,667 (without premium +94.2%) and Mazis-Chambertin, Cuvée Madeleine Collignon at €38,318 (without premium +57.7%)
This all tells me money is too cheap in some parts of the world. So while I find it difficult in recommending a wine section in an investment portfolio (because it's an asset that usually doesn't last, I have to say that there's probably some good turns being made by merchants at the moment.

The Chinese hopefully didn't use todays CNY 45bn (about USD7.2bn) in reverse repos to finance any wine purchases. The people in the know in Asia keep a close eye on such money market operations as China looks to add money to the system. Todays operation wasn't particularly large for the Chinese, but it's always worth watching.

I had some interesting feedback from people looking at property opportunities in Europe. People are always fairly passionate about residential property and my point was never for you to buy it to live in, but if you did want to leave your current domicile for the high taxing environment of Europe then you'll like the fact that Reuters is reporting that the country's commerce secretary said on Monday that his government is thinking of offering foreigners a residency permit if they buy a property worth 160,000 euros or more. So does that mean I can get a passport and move to Germany etc. without having to worry about the niceties?

My friends have gotten sick of me telling them how much equity global banks have to raise to meet Basel III requirements. Sine June US banks have raised 10bn worth according to the FT. I've always liked pref shares as you get a kicker in dividend and end up slightly up the capital structure. I'm not a great buyer of the banks as a wealth creator at the moment, but if you have to be involved why not get a  better yield for your trouble? Here's a table of hybrids on Citigroup:

Citigroup Hybrids
Notice the 5.95%'s? These were issued in October and it says they are unlisted. Now I'm a little out of the loop, but I bet if you're an appropriate institution then you probably got to buy some and Citi themselves will make you a market if you want to get out. Look for these to adventually make their way into private banks etc. Well worth a look.

Another 30 k's on the Cannondale today in what is a strangely cloudy and wet Sydney. I managed to get out the door at 0610hrs after catching up with the overnight news:

Lots of peloton's out there this morning. I'm a bit surprised at how some of these guys ride, some pretty aggressive stuff and not much talk, no jaunty "bon jours" to be had in Sydney amongst the more serious riders. It makes me miss Geneva. I've heard that some of the training peloton's in Centennial Park have recently been telling slow and younger  riders to get out of their way. A bit rude in a public park in my view . . . and let's face it, if you're capable of riding at a steady 30 - 35kph in a big group of 8 - 12 for more than an hour than perhaps, just maybe you really should be on a road? Food for thought?

A mate of mine is buying some new wheels for his bike. I sent him a quick note, but perhaps I needed to add something about riding in the northern hemisphere during winter? For a laugh I reckon you could do worse than watch the following video:

Just in case you're a warm climate guy like me let me suggest that you want to be very careful on a road bike in a northern winter.


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