Our Man is by nature a cynic, and hence considers himself more the Risk Officer of this PA portfolio than the Investment Officer, and has a primary focus on protection of capital rather than stellar returns. Below are the things he’s been pondering in his free-time; some of which he hopes to jot his thoughts (and analysis) down on in greater detail at some point…
- Commercial Lending & Consumer Lending
Our Man is a believer that inflation is not the primary threat, and that this is a balance sheet recession leading to deflation. Thus he makes sure to check in with the FED and purview the Consumer Credit (G.19) numbers and the Commercial Banks’ Commercial & Industrial Lending (H.8) numbers. Expect to see something in greater detail on those figures this week, but **Spoiler alert** a pretty picture they do not paint.
- Is everyone Long, despite their protestations, but with stops underneath their positions?
With Mutual Fund world getting to (or at) their year-ends, is there any incentive for managers to take risk? Our Man speaks to a bunch of people in the hedge fund world; some believe in the sustainability of the recovery, some believe that China will pull everyone along, and some are just skeptical. However, the significant majority seem to be Long risk assets in some way, be they domestic or international equities or just commodity-related (and a decent number are S the Dollar). Does that mean that there's the mother of all correlated trades on at the moment and that with the incentive for seemingly everyone to protect their performance numbers this year, that if we pull-back enough to start triggering all those stops (be they mental or actual), will we find a vacuum of buyers underneath…
- Does the make-up of GDP matter?
In the wake of the over-analysis of the US GDP’s figures and the celebration surrounding China’s GDP numbers, there’s been a spate of commentary on how Chinese stimulus is focused on investment and isn’t that clever. Is it or is this just looking at China through American eyes? Are they just doing the Chinese equivalent of the US; reinforcing their existing problems…
- Bankruptcies – does anyone care?
Given the role that Archstone-Smith, and MBS, had in Lehman collapsing will bankruptcies have broader implications? Does Capmark filing 2 weekend matters, or CIT? Will Stuyvesant Town, if it runs out of cash around year-end? If so, how long do their effects take to percolate?
- Commercial RE death spirals?
OM spent some of his early career looking at folks who traded convertible bonds and while they both never appreciated his nosiness and couldn’t help him learn more than 4 words of Greek, they did acquaint him with death spiral convertible bonds. Now as a reluctant apartment owner (damn you and your conventionality, Mrs. OM!) he was recently reminded about the undesirable impact of foreclosed homes in ones neighborhood (or an apartment in one’s building, as it were). While most of Our Man’s short-medium term value from his abode is derived it being a roof over his head this isn’t the case in Commercial Real Estate. And so OM has been thinking about what happens when that almost identical but nearly vacant building next door is foreclosed and sold to someone who will have smaller mortgage payments? Does it create a death spiral for the almost homogeneous buildings nearby?
- Population pyramids
They are pretty cool, and Our Man has used them very broadly to help think about investing. Now he intends to find out if they can help as a (very) long-term investment screen.
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