USA
Two recent stories in US newspapers highlight the huge per-capita spending of Brazilians in the US. While one piece focuses on tourists in NY and retail sales, the other focuses on Florida and also mentions Brazilians buying up real estate. The big point: the taxation making imports so expensive in Brazil as to justify, in some cases, the airfare and hotel expenses.
After depicting both sides of the Eurozone crisis – Greece on the one hand and Germany on the other – Michael Lewis now turns his attention to the USA and to where he might find trouble. That he does, and plenty of it, in California. Our usual cautionary notes – about great writers sometimes skimping over a bit too much evidence for the sake of an argument – apply.
As per our post on Monday, Buffett’s article on taxing the mega-rich caused a wave of reactions – favorable, negative and the personal-attack type. Since then he went to Charlie Rose and discussed the article – and the deficit debate – for +50 minutes. There were at least three new strong reactions against the article as well, highlighted here.
Certainly one of the most-discussed articles this weekend, this NYT piece looks at the subset of American retail that is doing pretty well in this recession. Another article highlights the interest by big-name investors (Buffett, Ackman, Leon Black) in the segment. Signal or noise?
After such a strong sell-off in global markets, there’s one vital thing that can be said to investors (as per the Graham differentiation between investors and speculators): “don’t panic”. We’ll offer more: “Think long-term”. “Buy when you hear cannons, sell when you hear violins”. Any investor has read this before. Well, it’s still true. We take a look at the downgrade of the US debt and try to provide, through several stories, some perspective.
Just the title of this video in the Financial Times is enough of a brain-teaser. The point is: if you rely excessively in a “risk-free” rate, your models must be going crazy. As the “professor” in the video says, efficient market theory was always shaky ground in which to lay the foundations of any investment, and now it should be clear to everyone that we should question the very existence of something “risk-free”. In fact, there was always this choice.
The Financial Times has published several columns over the last week written by their own staff and by big-name guests such as Mohamed El-Erian, Larry Summers and Nouriel Roubini. When we say “big names” there’s no endorsement involved – we’re merely acknowledging the fact that these writers have high profiles. The danger in “big names”, “experts” etc. is pre-judging their opinions, always a bad idea – especially so when the subjects involved are economics, fiscal policy, governance structures, financial crises and so on.
Two quick notes: One on the irony of Brazil’s iBovespa index dropping along with the US’s indexes after the negative S&P outlook, despite two more bullish stories about Brazil. Another on Carl Icahn’s profile in the NYT highlighting succession issues at his firm (“key-man risk”).
“You might argue that the government is mostly working, and the budget deficit is just one wrinkle that will get ironed out in time. But given that we’re in a budget death spiral that will eventually derail every other function of society, I would say that all we’re talking about is a timing issue. By analogy, maybe your brain can remain conscious for a second after your head gets chopped off, but as a practical matter, you’re not less dead.” — Scott Adams, creator of Dilbert, jokes seriously about the US budget deficit and the government’s apparent inability/ ineptitude to deal with it. Light reading about a very pressing topic.
Official immigration decreasing, previously “hot” areas with unprecedented swings, NY’s staggering numbers… Sure, a data point does not a trend make, but demographics are too powerful to ignore as a long-term driver. And it’s hard to argue that the US is well-positioned. This WSJ story has lots of interactive charts and features, and here’s the primary source.
