ECRI: Recession in the Yo-Yo Years

Thanks to Will for passing this along.

ECRI's Lakshman Achuthan shares images and notes from recent presentations in Oslo and Chicago.

We are now in the Yo-Yo Years as described by ECRI early last year. Meanwhile, even though some economic data seems stronger on the surface, U.S. Nominal GDP growth is recessionary and we are below a "stall speed" measure highlighted by the Fed. And this isn't the first time the stock market has risen through a recession.

Life’s Lessons from Byron Wien

Byron Wien was Head Equity Strategist with Morgan Stanley for 21 years before moving on as Chief Investment Strategist for Pequot Capital, and ultimately landing at Blackstone. We’ve enjoyed reading his Top Ten Surprises which he has published regularly, at least as long as I can remember. The advice below is a supplement to his regular monthly commentary and represent lessons learned in his “first” 80 years.

Nassim Taleb quote

“In the complex world, the notion of “cause” itself is suspect; it is either nearly impossible to detect or not really defined—another reason to ignore newspapers, with their constant supply of causes for things.” –Nassim Taleb, Antifragile

John Mauldin: An Infinite Amount of Money

The three major blocs of the developed world are careening toward a debt-fueled denouement that will play out over years rather than in a single moment. And contrary to some opinion, there is no certain ending. There are multiple paths still available to Europe and especially the US, though admittedly none of them are bright and carefree. There are very few paths available to Japan, as they have skipped too far down the yellow brick road of debt. None of Japan’s remaining paths have good endings. In the US, even as numerous voices declaim on the crisis that awaits if we don’t act, there is seemingly no collective will to actually do anything as yet. Perhaps it will take… a crisis. In Europe, the peripheral countries can already be said to be in crisis.

This week we will look at the mindset that ignores warning signs, and reflect on a hard-to-believe comment from Mayor Bloomberg of New York. It is a teaching moment that does not bode well for my hopeful outcome in the US. Meanwhile in Europe, the risks have been heightened with the recent vote in Italy. We must remember that Italy is the world’s third-largest issuer of bonds – its problems matter on the world stage. While it may all be molto divertente for those of us sitting on the sidelines, the potential consequences are anything but amusing.

Meet the world's top NBA gambler

A big thanks to Sean for passing this along.

Bob Voulgaris had become one of the most successful sports gamblers in the world when, in 2004, he started to lose. It wasn’t just a streak of bad luck, a series of randomly unfavorable outcomes that could last only so long. His edge, he realized, was gone.

He had begun betting on sports in the late 1990s, and within five years, before he had reached his 30th birthday, Voulgaris had accumulated a fortune. He says he routinely wagered a million dollars in a single day of NBA games. He considered his mean to be an unholy winning percentage that approached 70 percent. A man of no fixed address, he dated models and traveled the world. He was also an accomplished poker player, buying his way into high-stakes games from Las Vegas to Macau. He was essentially leading the fantasy life of your basic under-35 North American male.

A specialist in the NBA, his sports gambling success was almost completely the result of a kind of studied perspicacity, born of a talent for pattern recognition and the stamina to watch uncountable hours of televised basketball. In betting parlance, the man could suss out an edge -- and in 2002, he discovered one that would line his pockets for years. It all had to do with how most bookmakers set their halftime totals, the predicted number of points scored in each half of the game. Each half, of course, is its own discrete period of play, and the fourth quarters of close games can end in elongated foul-clogged stretches of free throws, timeouts, fast play and, hence, a burst of scoring. But incredibly, bookmakers at the time didn’t account for this fact; they simply arrived at a total for the full game and cut that figure roughly down the middle, assigning some 50 percent of the points to the first half and 50 percent to the second.

For years, Voulgaris exploited this edge, playing both sides of it repeatedly. It is possible to say that it alone made him millions, combined with some keen observations regarding the game-management tendencies of three head coaches: Eddie Jordan, Jerry Sloan and Byron Scott. “Those were three coaches I had nailed perfectly,” Voulgaris, now 37, says. “I knew exactly what they were going to do. I mean, it was a joke, it was so easy.”

In retrospect, he regrets only not having bet more aggressively during this halcyon period. “I thought it would last forever,” he tells me when I visit him at the house he was then renting in the Hollywood Hills for $12,500 a month. “But it didn’t.” Eventually, the bookmakers did finally catch on. Responding specifically to the money they saw Voulgaris minting -- though, for the most part, they didn’t yet know the identity of the gambler winning with such consistency -- they forever altered the method by which they set their NBA halftime totals.

And that’s when Voulgaris started to lose. And lose big. He lost a third of his bankroll in the final month of the 2003-04 season alone. Exasperated, his patience gone, he started to “tilt,” boosting the volume of his wagers in an effort to win back what he’d already lost. He won’t quantify exactly how much he gave back to the bookmakers all told except to describe it as a catastrophic time. He took the second part of the 2004-05 NBA season off. Mulling things over, he realized he needed a new approach. In essence, he decided he could no longer rely on his ability to suss out edges by his wits alone. He needed the help of a new machine.

…………….

Related link: Billy Walters on 60 Minutes

“Trying Too Hard” by Dean Williams (1981)

A big thanks to Trevor for passing this along. If you are pressed for time and can only read one thing on your to-read list today, I think this would be a great choice.

Link to: “Trying Too Hard” by Dean Williams

TED Talk - Allan Savory: How to green the world's deserts and reverse climate change

Link

Bill Gates: We cannot stand still on polio, but we can push ahead and end it

At Microsoft I learned that innovation is the most powerful force for change in the world. Today, I see that same excitement and promise in my work in philanthropy.

Thanks to the accelerating pace of innovation, we are making new discoveries to drive progress against poverty, hunger, and disease.

Consider the decline in childhood deaths. In 1955, the year I was born, more than 20 million children under the age of five died. In 2011, that number was 6.9 million.

One of the key reasons behind that amazing progress is the power of immunisation. Vaccines work to save lives and protect children for a lifetime.

Vaccines have also brought us to the threshold of eradicating polio. In 1988 when the world set the goal of eradication, 350,000 children in 125 countries were paralysed by this horrible disease every year. Last year, there were fewer than 250 cases of polio worldwide.

Stanley Druckenmiller on CNBC

Also be sure to check out THIS previous post, where I updated the links to Druckenmiller’s longer interview on Bloomberg. The summary of his short comment on the investment landscape is that all of the money printing and manipulation by the Fed of the financial markets will end badly; the longer it goes on the worse it will be; it will likely either be a malinvestment event (i.e. deflationary bust) like in 2007-2008, or very high inflation, but which one is too hard to predict, as is the timing.

Links to videos:

Power Panel Examines Health of Markets and Economy

Is Unbridled Government Spending Generational Theft?

Doing the Math on Entitlement Programs

Long-Term Investment Trends: Pros

The Absolute Return Letter, March 2013: Expect the Unexpected

With real interest rates being negative in many countries we expect low returns on both equities and bonds going forward. Many investors have responded to that by allocating more and more of their assets to passive strategies such as ETFs. We believe it is the wrong approach for this type of environment.