The semi-annual KKR macro report

For those of us (you) currently concerned with global macro trends, KKR’s periodic report (click here), is a must read. I will read it slowly on the plane tomorrow, but FWIW, my quick take.

I agree with most of their secular trends– less regulation,  more fiscal than monetary stimulus, less trade and more domestic. These are fairly obvious themes, but the process by which they arrive at these conclusions is what students should pay attention to. Of equal interest should be how they translate this global macro analysis into short and long investment recommendations and you should admire the boldness with which they make them (Note to the PGP networth folks who sent me something recently- this is what some of you could aspire to!)

I particularly liked their discussion of credit markets, and their pronouncements on the interplay between emerging market currencies, credit and the “bumpier” bottoming process in those regions. There is much for readers from emerging markets where I now reside. I was a bit surprised at their bullishness on the US dollar, but who am I to argue with a 40-year veteran firm in the private equity space with tens of billions of dollars to invest globally.

It is long, thorough and, as usual quite well done. Thanks Tim.

Not Yet Finance: The Post’s annual neologisms

Once again, The Washington Post has published the winning submissions to its yearly contest, in which readers are asked to supply alternative meanings for common words. The winners are:

1. Coffee (N.), the person upon whom one coughs.

2. Flabbergasted (adj.), appalled over how much weight you have gained.

3. Abdicate (V.), to give up all hope of ever having a flat stomach.

4. Esplanade (V.), to attempt an explanation while drunk.

5. Willy-nilly (Adj.), impotent.

6. Negligent (Adj.), describes a condition in which you absentmindedly answer the door in your nightgown.

7. Lymph (V.), to walk with a lisp.

8. Gargoyle (N.), olive-flavored mouthwash.

9. Flatulence (N.) emergency vehicle that picks you up after you are run over by a steamroller.

10. Balderdash (N.), a rapidly receding hairline.

11. Testicle (N.), a humorous question on an exam.

12. Rectitude (N.), the formal, dignified bearing adopted by proctologists.

13. Pokemon (N), a Rastafarian proctologist.

14. Oyster (N.), a person who sprinkles his conversation with Yiddishisms.

15. Frisbeetarianism (N.), (back by popular demand): The belief that, when you die, your Soul flies up onto the roof and gets stuck there.

16. Circumvent (N.), an opening in the front of boxer shorts worn by Jewish men.

Thanks Christa!

Some posts are not tweets.

In recent months, my typical post has been short, with short-term consequence, largely reflecting this mad dash that I call a life. I also tend to stay away from talking about and pointing to content that is non-finance. Once in a while though, something comes along that makes you pause, take a step back,  go hmm, something that is worth reading more than once.  Appropriately titled “The long read: Welcome to the age of anger..” it evokes big things, goes back centuries to provide perspective on the current moment. Here it is.

 

Cramer cares about Banco Monte Paschi today…..

Cramer: Why Does No One Care About Banca Monte Paschi?

By JIM CRAMER | DEC 09, 2016 | 11:04 AM EST

Twenty years before Christopher Columbus sailed the ocean blue, the oldest surviving bank in the world, Banca Monte Dei Paschi (BMPS), was founded in the Italian city-state of Siena. If you ever go to Siena, it’s one of the standouts on the tour of one of the great towns in the world, with a headquarters befitting its more than 500-year-old history.

But Monte Paschi, as people call it, is now broke.

We may discover this weekend that it has to be bailed out, as there seems to be no plan right now to save it in its current form.

When a bank goes bust in Italy, everyone connected with it gets hurt. Common Stock holders get totally wiped out, subordinated debtors can be, too. Finally, depositors can take a hit as there is insurance to 100,000 euros, but after that you are on your own.

This is not a small bank. It has $48 billion in public debt that could take a monstrous hit. This one could force Italy to take action: Can they really let the oldest bank in the world fail? Italy has the third-largest bond market in the world. This is the third-largest bank in Italy. I just don’t think there is enough money currently in the till to get something done without a huge amount of pain in anything even remotely involved with this bank.

And yet no one seems to care.

There was a time when this was all we would be talking about. It would be the focal point of everything — other than the strong dollar hurting earnings, and the spike in interest rates.

In that sense, though, it is just one of three things that no one seems to care about.

Now, I would like to be as glib as the world in not caring, but I only really care about these kinds of events when they are unknown.

This one’s known.

Still, it’s a rather remarkable moment that it means so little to people.

Let’s see what happens over the weekend. Right now though, stay tuned.

Days of future past.

Today’s Italian referendum news brings back talk of Banca Monte dei Paschi di Siena SpA(here). I have found their derivative involvements and sequential bailouts fascinating, perhaps because they claim to be the world’s oldest bank!  The headline is sensational, the information on what they did continues to remain sparse. Although a cop-out to link to my own posts (from 2013 no less, click here), it is worth a mention since one of the derivatives trades that got them into trouble appears to have been an interest-rate swap, which we are talking about in class. Also pertains to our discussions about never-ending bailouts, restructing and defaults. Plus, I like the way I wrote in those days…..