Luck & Good Fortune

Which countries had the most search interest in Valentine’s Day?

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Iran

Syria

Iraq

South Africa

India

Bangladesh

Equador

Honduras

Nigeria, Egypt and Saudi Arabia also featured.

…according to Google Trends

Interesting to see so many predominantly non-Christian countries feature relatively higher than St Valentine’s Day searches.

Valentine’s Day according to Google Trends

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Gender stereotypes? Google Trends just threw a spanner in the works in a study on Valentine’s Day gift searches for a loved one. It seeems like women are far more proactive and engaged in searching for gift ideas than their boyfriends appear to be. What could explain it?

Could it be that men simply are too hard wired/unimaginative? Many women could attest to their men sticking with boring flowers, chocolates, and dinner reservations through experience or a sense of duty.

Tales out of school. At my old firm I used to buy 120 individually wrapped cakes for my female clients on Valentine’s Day and spend all morning delivering them personally. Never did I receive more sincere thank you’s for thinking more creatively than dropping off boring chocolates. So a note to the lazy men out there – women seem more likely to praise the “effort” over the “result” – hopefully ladies can confirm this so we can get “equality” back into Valentine’s search engines.

Could it be that males are harder to shop for causing women to have to search harder? Could it be that women are kinder and more thoughtful souls than men?

Most women get that men probably don’t want flowers or chocolates, but what will he like? Season tickets to watch his favourite team? A sports magazine? Golf balls (dangerous territory if he’s a keen golfer), motorcycle parts (extremely high risk)? A tie? Socks? iPhone goods? Underwear? Don’t laugh. Studies show that women are behind 80% of the purchases of men’s undies. Indeed it may well be that men are pickier (or lazier) about gifts causing women to search 2-3x more.

If we look at the above chart it seems that women searching for gifts for their boyfriends keeps making higher highs as the deadline approaches. Men too albeit at a flatter trajectory.

Maybe the devil in the data is what Google could really do for men and women. Instead of judging a partner’s devotion by the scale of money dished out on such a grossly commercial day, perhaps Google could let one know how much they meant to their significant other by the timeline on when the Valentine’s Day search began and to avoid gaming the system informing hours spent online during the process.

There are millions of factors which trigger Valentine’s decisions but isn’t that what diversity is all about – freedom of choice.

When you’ve seen something truly masterful

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What a fantastic innings by Mitchell Marsh. Recalled into the side after an 8 month break and he has even outplayed his captain, Steve Smith. While Smith has played a brilliant innings so far, Marsh has scored more boundaries and his straight drives have just flat demoralized the English bowlers. Enjoy. It is worth signing up to watch the video. Who said cricket was boring? Perhaps the trophy cabinet of Australian sports might start to fill up again.

Gold Coin vs Bitcoin – just go on a crypto blog and invite a fatwah by criticizing it

The Bitcoin debate rages again. I’ve been asked more times by friends about whether to buy Bitcoin in the last 3 months than I care to remember. This video is about as telling as it gets about understanding raw value. At the moment Bitcoin pricing is as random as a Lotto ball dispenser although only higher numbers are being drawn for now (despite the 20% flash crash yesterday, shows panic is a server outage away). My answer to them is I wouldn’t touch it with a barge pole but everyone’s risk is their own. I answered along the lines below.

As a contrarian investor, this video warms my heart. When everyone seems to love something it tends to be a sign that ‘greater fool theory’ is alive and kicking. The video shows a woman unwilling to trade a stick of gum for a 1oz gold coin. If there was ever a better example of mean reversion, this must be it. Mark Dice did a similar video with people asking if they wanted a Hershey’s chocolate bar or a silver bar. Everyone chose the Hershey’s! While I am sure the response on Wall Street would elicit a different response it shows how few people understand the value of barbarous old relics.

The biggest issue with Bitcoin or any other crypto is that it is mined in cyber space. Do you ever wonder why you need to update your Norton anti-virus software every other day? Yes because some criminals are phishing/hacking your data trying to rob you blind. That’s just the amateur cowboy stuff by the way.

Gold needs to be dug out of the ground with considerable effort. The thing that spooks me about crypto (without trying to sound conspiracy theorist) is that state actors (most top end computer science grads in China end up working in the country’s cyber warfare teams), hackers or criminal minds (did you know 70% of top end computer science grads in Russia end up working for the mob (directly or indirectly) the value of coins in the system could be instantaneously wiped out at the stroke of a key. We’ve had small hiccups ($280m) only last week. So as much as the ‘security’ of these crypto currencies is often sold as bulletproof, none of them are ‘cyberproof’. Just like your home software, crypto at every stage has to constantly update its protection to prevent vulnerabilities and it is naive to think it can keep a 100% safety record.

It only takes one serious hack to bring most if not all the crypto down as vulnerable. In order for Auric Goldfinger to crush prices in Gold he’d need to smelt lead bars and paint them, were any left over from the pail and brush used on Jill Masterson. Gold is one currency that governments often threaten to confiscate (India springs to mind). Imagine if North Korea turns Bitcoin into the state currency?

I have just been on a Bitcoin forum and the insults being hurled at disbelievers has all the hallmarks of Tesla share ownership. It is a religion. Not an investment. I was accused of having no idea on crypto to which I argued 90%+ of those that own it probably don’t either. So having owners in Bitcoin or other cryptos knowing a tiny fraction of the risks means they’ll stampede faster than the servers can process data should ‘bit hit the fan’. One crypto ‘expert’ tried to tell me that artwork has no value as it is not tradable. It is tradable, just illiquid. I argued that the latest sale of DaVinci’s artwork fetched $450mn or 45,000 bitcoin. Storage costs aside over the long run I’ll have a Leonardo thank you!

As Mark Twain said, ”It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

My assessment is that the fascination of those around me about Bitcoin suggests that many of the fan base are punters trading on the greed of others. It has no underlying core value other than those prepared to pay more for it. That indeed is the tenet of all investment but like most manias, the risk/reward ratio can turn on a dime (no pun intended). At some stage the fall out from crypto will be ugly. As financial pundits know

the market can stay irrational longer than you can stay solvent”

Japan Travel – Otaguro Park in Ogikubo

Otaguro Park in Nishi Ogikubo. Go!! It is the former residence of Motoh Otaguro, a music critic, whose dying wish was his house (and grounds) would be open to the public. While I hope I am some way off leaving this world, it is an amazingly beautiful and tranquil place to visit and may I be in a position where I could give something back to the community which all could enjoy. The evening lights will only be available til December 3rd. It is honestly worth it. I am too much of a Phillistine to list all of the different types of trees inside the gardens but you won’t regret it.

The “bigger” point about the FANG sell off

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While the press is waxing lyrical about the unprecedented loss caused by a sell off in FANGs (Facebook, Amazon, Netflix & Google) we should note that it overlooks one factor. Before getting to that, to start with the sell off in gross dollar terms it is unsurprising given the already highly inflated value of the base stocks. So if A $500bn market cap Facebook loses 4% it is equivalent to $20bn. On one day FB lost a Fiat Chrysler. It’s math. Let’s not forget that Bitcoin is now worth $165bn but let’s not let that bubble spoil the party.

The problem that faces financial markets is the advent of ETFs. While stupefyingly simple to understand as an investor it is that same simplicity that breeds complacency. ETFs are simple products that enable investors to pay much lower fund management fees to buy easy to understand baskets- whether coal, gold, oil or FANGs. There are 106 ETF products that own Facebook as a Top 15 holding with that averaging between 5% and 10% of the entire fund.

Yet on the way up things are rosy. It is what happens on the downside that has yet to be fully tested. Around two years ago, CM wrote a report which warned of the risk of ETFs on the downside, especially levered ETFs (i.e. you buy a 2x levered FANG fund which means if FANG stocks go up 5% you theoretically get 2x the return for any given move up or down.

However in times of uncertainty (i.e. heightened risk) the options markets that price risk move magnitudes on the downside vs the upside. Meaning for an ETF to replicate what it proclaims on the brochure becomes much more difficult meaning the fund may under or overshoot the promises. Also in certain markets (e.g. US & Japan) where stocks on the exchange have limit up/down rules on the physical stock, should a market crash ensue, the ETF prices on the theoretical values of stocks that may not have opened for trading. What that means is that the ETF may reflect a market that is 10-15% below where it actually eventually opens. Meaning poor ETF buyers get gouged. However the computer algorithms in the ETF end up chasing, not leading the market which in and of itself creates more panic selling further reducing market confidence. Where a market might have traditionally fallen  3% on a given piece of bad news, ETFs tend to react in ways that might cause a market to retreat 6%. Indeed market volatility is amplified by ETFs.

At the moment market behavior is exceedingly complacent about risk. Before GFC highly complex products like CDOs and CDSs were the rage. 99% had next to no clue how they operated but they found their way into the local government investment portfolios of even small country towns in Australia.

ETFs on the other hand are strikingly simple to grasp but that also means we pay far less attention to the risk that goes with them. That is the bigger worry. People complacently thinking their portfolios are safe as houses may wake up one morning wondering why some flash crash has caused Joe and Joanne Public’s retirement nest egg to get decimated.

 

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