The first question that arises from the Commodity Futures Trading Commission’s case against Navinder Singh Sarao is: Why did it take them five years to bring it?
Jason Zweig: Excited About the Nasdaq Record? Don’t Overpay for Stocks Again (LINK)A guy living with his parents next to London's Heathrow Airport enters a lot of big, phony orders to sell U.S. stock market futures; the market promptly collapses on May 6, 2010; it takes five years for the army of U.S. financial regulators to work out that there might be some connection between the two events. It makes no sense.
Charles Fabrikant's 2014 Letter to SEACOR Stockholders (LINK)
Our businesses deliver returns in lumps. Results for the last few years have been uninspiring, yielding meager single-digit returns on equity. Earnings have been punished not only by mediocre conditions in the offshore and inland markets but also by hoarding capital. Fallow cash earns very little. We have not been inclined to reach for returns better than obtainable in safe, short-term paper and risk cash whose immediate availability would be the key to seizing opportunity in our core business.21 I estimate that the negative carry is approximately 500-600 basis points (pre-tax), which is considerably more than it had been in the 1990s and early part of the last decade. With hindsight, parking cash for the eventuality of pouncing on bargains has been far too costly. I am justifiably subject to criticism for not figuring out a better way to access capital, if or when useful, rather than paying a high price for it while idle.
It was challenging markets in the 1990s that eventually produced attractively priced assets and were the impetus for consolidation; we may be staring at the next wave. My recollection (probably accurate enough for this purpose) is that in 1989 there were about 36 operators of supply boats and anchor handlers in the Gulf of Mexico alone. By the late 1990s that number had shriveled to under 20 with four or five having large fleets. Our informal count is that today there are over 300 operators in the international and domestic offshore vessel industry.
Until the recent downturn, finding opportunities has been like looking for a needle in a haystack. It is perverse to welcome a downturn in business, but it will make life more interesting. In searching for places to deploy capital, sadly for stockholders, one of the compelling investments, we believe, has been our own shares. We would be remiss if we were to fail to consider whether repurchasing our own shares would not be an equally, if not a more productive use of capital, than constructing new vessels, buying secondhand equipment, or pursuing acquisitions. During the past year, SEACOR repurchased over 2.5 million shares at an average price of $77.16 per share, 12.4% of primary shares outstanding. Our year-end book value was $77.15.22 Adding to our fleet—or making acquisitions—would, of course, be more interesting than purchasing our own shares, but that is sometimes an expedient way to acquire well-priced equipment. As a colleague in the offshore business humorously remarked some years ago, buying in stock is like kissing your sister.
Debt Builds in China Stock Rally [H/T Matt] (LINK)
Concern is growing over a surge in bets by mom-and-pop investors using cash borrowed from brokers to pile into, and fuel, China’s booming stock market.
Margin lending has more than tripled in the past year to a record 1.7 trillion yuan ($274.6 billion), according to WIND Information Co., a provider of financial data. The upsurge echoes past investment crazes among Chinese speculators, who have long shown a penchant for rushing into whatever is yielding the highest returns, from real-estate and wealth-management products, to bitcoin and online money-market funds.
The practice isn’t unique to China, where margin debt equals 3.2% of total market capitalization, compared with 2.3% in the U.S. But when compared with the value of stock that is freely traded, making it accessible to ordinary investors, the percentage for China rises because state entities own more than half of the market.
Amazon Reveals Just How Huge the Cloud Is for Its Business (LINK)
Some highlights from Mark Spitznagel's book, The Dao of Capital (LINK)
Five Good Questions for Paul Allen about his book, Choose Stocks Wisely (LINK)
Circadian Rhythms with Paul Jaminet (podcast) (LINK)
Related book: Perfect Health DietCalbuco volcano blankets towns in Chile with ash (LINK)
Two huge magma chambers spied beneath Yellowstone National Park (LINK)
Book of the day: The Great Beanie Baby Bubble