New College of the Humanities

I am very proud to be a founding investor and Board Member of the New College of the Humanities.  AC Grayling, a leading public intellectual and philosopher, will be the College’s first Master.  Our first class will enroll for entry in September 2012.  We funded fourteen of the world’s leading academicians and an excellent managerial team to launch a liberal arts college in the heart of London. 

www.nchum.org -- Professor AC Grayling from New College on Vimeo.

Looks like a V to me

During this crisis, we have been hearing much about double-dip, U-shaped and L-shaped recoveries.  I share the worry of many about some of the structural global problems we face including horrific public sector balance sheets and deficits.  However, the shape of the Leading Indicator Index looks very much, dare I say it, like a V.  When times are tough, and they are for the millions of unemployed and underemployed in the US and Europe, it is difficult to imagine brighter times.  But, they do tend to come back.

Leading Economic Index (Index – Factor)

1. Average weekly hours, manufacturing - 0.2725
2. Average weekly initial claims for unemployment insurance - 0.0322
3. Manufacturers' new orders, consumer goods and materials - 0.0809
4. Index of supplier deliveries – vendor performance - 0.0715
5. Manufacturers' new orders, nondefense capital goods - 0.0192
6. Building permits, new private housing units 0.0263
7. Stock prices, 500 common stocks - 0.0373
8. Money supply, M2 - 0.3248
9. Interest rate spread, 10-year Treasury bonds less federal funds - 0.1058
10. Index of consumer expectations - 0.0295

Global Warming: We're toast!

Bill Gates gave an extremely compelling and informative talk at TED 2010. The bottom line of the talk is that the only way to stave off global warming is CO2 reduction through the use new nuclear power generation technologies because reduction in electricity demand and consumption is a political/social non-starter. 

My take away on the issue of global warming from attending TED 2010 (this talk and other sessions including a a debate about nuclear energy vs. renewable sources) is that we are, unfortunately, toast. The amount of energy and focus on the issue that Bill Gates and others bring to the table is beyond admirable, but the obstacles dwarf them. It will take 20-40 years to have a single new-tech nuclear plant authorized and built...too long for the problem we are facing.

We need to keep pushing with improvements in traditional coal and oil-based technologies, keep pushing with revolutionary renewable and nuclear technologies...and figure out how to live in a much warmer world. Bleak.

Get me some Swiss Francs!

Folks are buying Swiss Francs like there is no tomorrow.  Foreign exchange reserves have more than doubled in the past year. It is primarily a flight-to-quality away from the Euro and possibly the USD.  Switzerland has navigated through the current financial crisis extremely well.  While there may be a small budget deficit this year, after 10 years of surpluses, public debt to GDP is about 40%, unemployment about 4% and the export sector has not suffered as much as expected with the structural current account surplus firmly in the black.

Swiss Foreign Reserves (minus Gold)

The Swiss National Bank is hell bent on preventing a significant appreciation of the CHF against the EUR to protect exports.  However, it is unclear how much they can sustain these inflows.

The implication for Swiss Franc persons (citizens and residents of Switzerland), diversifying outside of the CHF may be perilous.  It has been for decades as the CHF has appreciated steadily.  In 1971 a US dollar got you 4.3 CHF.  Today you get CHF 1!

More in my paper "Why Switzerland?"

Emerging Markets Rally Not as Crazy As Dot-Com Rally - Another Silly Graph!

This chart just ran in a "Chart of Day" article on Bloomberg Terminal.  I can't link the article as it is not accessible on the Bloomberg website.  The gist of the article is that compared to other rally's, the EM rally may be in its infancy with significant additional upside.

I hate these kinds of articles.  What are they saying?  They are saying the following:  your gut tells you that current EM valuations have climbed unrealistically through the stratosphere, they are emerging markets with emerging markets type of political, legal, regulatory, social and economic risk which no one wants to discount anymore, the world financial system is in trouble, global GDP is just about turn the corner from its worst year in recorded history with no evidence of real economic momentum in the developed world, the drivers of world demand.  But, hey, when you overly this one graph over these other crazy bubbles we had, it looks as if we can get a lot crazier before everyone looses their shirts.

I believe in the EM story.  There probably is still a lot of upside.  However, the reason is not because people went even crazier in other bubbles.