Tuesday, 12 February 2013

Triggers . . . .

It's become popular on line through social media for crackpots and tin hat wearers to jibber on about all sorts of crazy conspiracy theories. My first thought yesterday when I saw tweets about Pope Benedict XVI resigning was to think that the usual nuts were at work. But how does a staunch conservative skip 600 years of history and decide to abdicate? Who knows? Maybe, just maybe this is the start of one of those cycles of crazy things and maybe it's not. We shall see . . .

The S&P is pushing new highs this year and so to are valuations. The index now trades at 14.4x trailing PE and needs some new catalyst to really take it higher. The M&A is in my mind the biggest reason the market can go higher,  . . . oh that and Bernanke buying 85bn in MBS etc. every month.

There are number of stale shorts still in the market, one them is Canada. Like Australia Canada has largely sidestepped the GFC. Also like Australia they have ridden the commodity boom, or more specifically the oil sands and energy boom to safety. Their American cousins though have long believed that the Canadian consumer is as vulnerable as they were as credit levels peaked in 2007. Bloomberg today printed the following:

"Canada’s major banks have more than tripled their lending to car buyers since 2007, the year before the global credit crisis struck, and automakers are increasing dealer financing. The appetite for cars may undermine the Bank of Canada’s forecast that consumer debt will stabilize around a record 165 percent of disposable income, one reason policy makers cited last month for delaying plans to raise interest rates."

Reading the full piece it felt like some guy at a hedge fund had written the story. The problem is that merely citing a fact such as non-mortgage debt per person reached a record average C$27,485 in the fourth quarter of 2012, up 5.9 percent from a year earlier, gives you nothing without a trigger. In the beginning of the GFC that trigger was a whole raft of resettable mortgages that started the ball rolling. A lot of the consumer loans that get cited in articles like this one are fixed and unless people lose their jobs it's not likely that they will go into stress en-masse.

A quick word on those hoping an iWatch could be a trigger to get the stock and margins growing again at Apple. Maybe it can, but by definition it seems less likely to me given the consumer's preference for quality jewellery on their wrists rather than small computers. I have a Garmin 210 GPS watch that links to my heart rate monitor and a foot pod that measures my running cadence. The point is that I don't wear it when I'm going out to dinner or to meetings because it just doesn't look serious enough. I can pull an iPhone out at a meeting and people don't think anything about me other than I have a smart phone. I doubt an iWatch will replace a Rolex as most desired time piece in Asia anytime soon.

I got some Elite Custom Race Bottle Cages today to replace the ultra expensive Cannondale carbon fibre ones I had on the Evo. I lost faith in the carbon fibre model after I cracked my second one and at 60 bucks and limited availability I just can't be bothered. I had intended on going with the Arundel Mandible, but honestly given the pro's race with the 10buck Elites I felt that was good enough for a Clydesdale like me. One of the things I found with the Cannondale cages was they were almost too tight for a standard water bottle. Maybe I just needed to get smaller bottles.

Rain in Sydney has me off the bike. I was hoping to try out my new Vittoria Open Corsa CX II's that I've chosen to replace the Mavic tyres I currently have on the Cosmic Carbone SLR's. They have a 320 tpi thread count, so essentially they should be about as close to a tubular as you can expect. I ad thought about trying latex tubes with them, but Sydney streets seem littered with glass and latex is nowhere near as resilient as butyl tubes when treated badly.



  1. Awesome post !! Thanks for sharing.was a fantastic read.

    1. You're welcome and obviously happy to be doing the blog.