Är alla dessa bli-ekonomiskt-fri "FIRE-bloggar” ett tecken på att börsen börjar bli övervärderad?

Ingen som är intresserad av ekonomi, finans och aktiemarknader kan väl ha undgått den snabba ökningen av antalet bloggar med temat ekonomisk frihet. Fenomenet kommer som så mycket annat från den anglo-saxiska världen, d.v.s. framförallt från USA. Där har s.k. FIRE-bloggar kraftigt ökat på sistone, så vitt jag, utan att vara expert på området, kan säga. FIRE står för ”Financially Independent Retire Early” och handlar för det mesta om hur man gör för att spara ihop ett kapital som är stort nog att leva på och hur man sedan fördriver sin tid i en förhoppningsvis både tidig och lång existens som pensionär!

Jag har förstås inget emot detta. Jag önskar att sparandet i samhället ökade samtidigt som låntagandet minskade. Jag har inte heller något emot att folk drömmer om tidig pension. Jag tycker det är en mycket bra idé. Good on ya mate! Mitt problem är helt och hållet att jag inte tror att det är realistiskt att kunna pensionera sig så tidigt som de flesta av dessa bloggar hävdar och med ett så pass litet kapital som de flesta tycks ha (återigen jag är ingen expert på detta, jag forskar inte i ”Household Finance” och allt jag skriver här är baserat på magkänsla).

För att kalla sig ekonomiskt oberoende måste väl ändå minimikravet vara att man kan utan att arbeta kan leva som en typisk svensk resten av livet på sitt kapital. En del kanske t.o.m. hävdar att man ska kunna leva på god fot, kanske som en 1-procentare, men oavsett vilket tycker jag dessa bloggar verkar se alltför optimistiskt på hur långt låt säga en eller två miljoner kommer att räcka framöver. Ett, av många, exempel från bloggosfären är ett norskt par som med tre miljoner kronor pensionerat sig i 30-årsåldern! Med ett barn dessutom!! Dvs 1 ½ miljon kr per person ska räcka att försörja 1 ½ person i 30 år. Sorry, jag tror inte att matematiken funkar! Börsen skulle vara tvungen att gå upp med kanske 15% varje år i 30 år för att detta ska fungera. I reala termer. Vad är sannolikheten för det? Nära noll om du frågar mig! Visst, den första FIREern som gör detta kanske kan leva några år på intäkter från sin FIRE-blogg, likt ett pyramidspel, men hur ska det gå för alla de andra som sparar ihop 1 ½ miljon? Det skulle ju kunna vara hundratusentals individer/familjer det rör sig om. [och om man planerar att jobba parallellt av och till i gig-ekonomin i 3 decennier som råkar sammanfalla med aldrig tidigt skådad potentiell robotisering och jobbslakt är man FÖRSTÅS inte ekonomiskt fri så det argumentet håller inte]

Vad jag istället tror är att denna uppsjö av småsparare som tror sig vara ekonomiskt oberoende egentligen bara råkar ha börjat intressera sig för aktiemarknaden (det är mest fokus på aktier i FIRE-världen) just när den råkat gå som tåget i nära nog ett decennium. Och vill man vara pessimistiskt lagd kan man kanske misstänka att det stora antalet FIRE-bloggar helt enkelt är ett tecken på en bubbla på aktiemarknaden, mer exakt då på den svenska dito. Jag kan inte hjälpa det men jag kommer osökt att tänka på Metallica mästerverk FIGHT FIRE WITH FIRE från 80-talet. Hoppas inte det blir som i musikens värld….. :)

”Fight FIRE with FIRE
Ending is near
Fight FIRE with FIRE
Bursting with fear
We shall die……”

Bitcoins gone wild!

You would need more than 20000 of the recently minted Swedish copper-alloy-coin in the picture to buy one bitcoin today! As for the old French gold-coin from 1874 you would need some 50 of them! In other words, a bitcoin is a very expensive bit of computer code right now! I think you all know that. The price has gone from $700 to $14000 in 12 months. That is, it has gone up 20 times! 2000% in one year. Meanwhile the stock market has gone up som 10%..... and the inflation and the interest rate is around 1% or 2%.

Bitcoin prices are also very volatile! An interesting development related to that is the introduction of bitcoin futures on two futures exchanges now in December 2017. Any day this or next week CME and CBOE will launch their products. I am looking forward to this for several reasons:

- First, of course, as an investor, is the possibility the launch will give anyone to bet on a falling bitcoin price, not only on a rising one. Also, for someone who likes the idea of the bitcoin but sees the danger from an ever rising price, the introduction of futures is likely to bring the benefit of putting some downward pressure on the bitcoin price. Maybe a lot of downward pressure!! There will be some interesting coming weeks in the bitcoin market.

- Second, as a researcher, the launch will be a nice example of how to choose (or not to choose...) margins in futures exchanges. That is, the collateral that the bourse demands from participants. Considering the extreme volatility of the bitcoin price I expect extreme margins as well. The initial margin required from investors at CME will be 35%. On CBOE the margin will be 33%. In other words, the allowed leverage will be a puny factor 3! For the Investor, it means, nonetheless, that a fall in the bitcoin price with one third will wipe out their entire position. Now, is that a likely scenario? Or put differently, what is the risk that CME or CBOE will suffer losses due to unexpected large price movements?

To answer these questions, let’s look at the price history of bitcoin. Over the last 12 months there are 17 daily price movements that are larger than +/-10%. The largest is 25%. Over the same periods there are 10 weekly price movements that are larger than +/-30%. The largest is 70%! This means that the margins would have been exceeded 10 times within a week over the last year. Luckily, though, the margin would never have been exceeded between two closing dates. Based on this I nonetheless think margins as high as 33% make sense. In fact, I would probably have demanded slightly higher ones if I were in charge. But, of course, for an exchange it is not only a matter of being safe, you also need customers. And I would guess that customers in this particular market like to fire up their stakes with as much leverage as possible! But do they, and their brokers, know that they are playing with fire when doing so...?

---------------

PS. As of lately, journalists, friends and colleagues have all asked me whether the bitcoin market is in a bubble. My answer has been the same every time: Yes, I think so, but I would not bet my house on it! As I see it, either there is a bubble or the bitcoin market knows something we don’t! Perhaps they have some insider information about an impending collapse of every currency in the world (one dollar buys 0.00007 bitcoins) plus Elon Musk already successfully mining huge amounts of gold on asteroids (one oz of gold buys 0.09 bitcoins).... It can happen :)

Gold is Gold is Gold is Gold! Or is it?

I have friends that are self-declared gold bugs! They think gold is good as a short-term investment as well as a hedge against disaster! They might have a point. I am not able to tell! However, in any case, I think my friends, as well as many others, seem to miss a couple of things:

• Not all gold is created equal! If you buy coins or bars, then it is fairly easy. South African Krugerrands contain 1 oz of gold and even if it is not pure like in a Canadian Maple Leaf (the Krugerrand is only 22 karat) it is a well-known asset that is likely to be bought and sold by gold dealers all over the world. With jewellery it is worse! Most gold in Europe is 18 or 24 karat, I guess. However, in other places in the world, like in Asia, other levels of fineness is used. The gold in the picture, for instance, contains 96.5% gold, i.e. it is 23.16 karat (you can see that if you have good eyes…)! Have you ever heard of that fineness before?? OK, the point is this: we live in a global world and who knows where you will be located when the proverbial “disaster” strikes! If you are a gold bug and you are/live in Asia, then you need gold bought there and if you are in Europe, then you need gold bought there! At least if you do not want to lose too much in transaction costs.

• In case of a disaster, the government might ban gold ownership outright! From 1933 to 1974, gold ownership was forbidden in the bastion of liberalism, the US! It was made illegal by President F.D. Roosevelt when he signed an executive order (no. 6102) almost exactly 84 years ago. We have a new president in the US and with him we have all learnt the importance of presidential executive orders... This means that big professional gold investors, and here I am talking about investors in physical gold, are likely to store their gold in jurisdictions that honor the private ownership of gold. Personally, if I had large amounts of gold, I would have put most of my gold in a safe in a bank in Singapore. The large (gold-loving) Chinese and Indian populations in the city-state are probably a guarantee that gold ownership will continue to be legal even in disaster situations.

• Finally, of course, you have to diversify, even within your own little gold-universe! Even if you only invest in gold you should of course spread out your stash across jurisdictions, cities and bank vaults! You should also diversify by buying coins as well as bars and jewellery! And, as mentioned above, you should also diversify across fineness, country of issuance and item-size!

A terror attack through the mirror of the stock market

The graph shows the broad Swedish stock market index OMXS PI on April 7th, the day of a hideous and cowardly terror attack in the centre of Stockholm that killed and wounded dozens of random innocent friday shoppers/commuters.

The police was informed about the attack at 14.53 and after that the Swedish stock market was open for roughly two hours (see Picture). All public transpot in Stockholm (including the metro and buses) was closed down during these two hours and at 16.30 there were at least three confirmed deaths due to the “alleged” terror attack. Meanwhile the stock market reacted in the way shown in the attached picture! Except for one little blip the market steadily climbed throughout the turmoil. And it seems the market started climbing at 14.50, exactly when the attack seems to have taken place!

From the graph it seems that the market went up some 0.8% during the two hours the market remained open. Of course, this could just be random noise, and maybe the market had gone up even more without the attack.... Who knows?! But, at least, it seems that Sweden is standing strong in more ways than one!

Venezuela: povertá e miseria straordinario!

Dagens Industri skrev igår att den reala löneutvecklingen i Venezuela 2016-2017 väntas bli deppiga -373.9%!

”I Venezuela är läget betydligt värre. Löneökningarna i reda pengar väntas bli hela 111 procent, men inflationen är samtidigt ofattbara 485 procent. Den reala löneutvecklingen blir således ytterst deppiga -373,9 procent.”

D.v.s. Venezuelanernas kommer nästa år få betala för att jobba! Och de får betala nästan tre ggr så mkt 2017 som de tjänade under 2016! Che poveracci! Hur är det möjligt?? Finns det inga gränser för den Bolivariska revolutionen?

Venezuelanerna kan dock andas ut. Detta är lyckligtvis siffror från fantasins värld! Idag har Dagens Industri ändrat siffrorna och helt korrekt angivit -63.9%. Det är den siffra man får om man antingen (i) använder sitt sunda förnuft och höftar lite eller (ii) använder formeln ovan. Man kan inte bara subtrahera bort inflationen från nominella ändringen om siffrorna är så stora som i Venezuela!

Basta!

PS. DI är inte ensamma. Tidningen Affärsvärlden får siffran till 77%! Vet ej hur. Och konsultbolaget som räknat ut siffrorna verkar genomgående räkna fel i sitt 2015-dokument.....

The investor that predicts stock returns without even knowing it!

What are investors’ current stock return expectations? That is a question commonly found in the financial press. Typically, the type of investor one has in mind is the stock market investor. Not commodity investors, property investors or other investors. That makes sense since zinc investors or apartment block investors have other things to think about than whether the typical publically listed stock will go up or down in the future.

There is one other group of investors that actually care about the future valuation of public companies, however, and that is the credit market investor. Investors who buy corporate bonds (or credit default swaps) also care about the future wellbeing of the company. What’s more, these investors often take a long-term view of the company and its valuation.

In the paper Stock Return Expectations in the Credit Market (which you can find here) I suggest a way of extracting these investors’ expectations of future stock returns. To do this I compute long-term stock return expectations (across the business cycle) for individual stocks using information backed out from the credit derivatives market.

Empirically, the paper demonstrates a close relationship between these credit-implied stock return expectations and future realized stock returns. I also find stock portfolios selected based on credit-implied stock return forecasts to beat equally- and value-weighted portfolios of the same stocks out-of-sample. Basically, it seems that credit investors are good at predicting stock returns, without really even knowing it!

I have an Erdös# = 5 and an Einstein# = 7!

I only write about very important stuff on this blog! :) And here comes a particularly important entry.

What’s your number? If you ever got that question it probably was about how many millions you need to retire or something. I doubt it was about your degrees of separation from Albert Einstein or from the famous Hungarian mathematician Paul Erdös in the context of research collaborators!

Mathematicians love numbers, however, and they have come up with the so-called Erdös number. If someone called X co-authored work with Paul Erdös, then X has an Erdös number equal to one. If you co-authored with X you have an Erdös number equal to two etc. etc.

Now, using the web site of the American Mathematical Society I found out that even though I am not a mathematician I actually have an Erdös number myself! And even better, I have an Einstein number as well!! Erdös wrote a lot of papers but Einstein did not. And Einstein died many decades before the more productive Erdös, so I would expect, ceteris paribus, that I would have a smaller Einstein number.

OK, so my Erdös#=5 and my Einsten#=7. Not the smallest numbers, but at least they are finite... And I like to point out that I am an empirical finance researcher, not a theoretician or a mathematician! And I only have six co-authors in total!

If you do not understand how important this is, google “Erdös number”! And perhaps you better google “irony” as well before you remove me from your RSS feed... I promise to be back with more on the global markets!

Brexit!

Well, we had a night with record thunder storms here in southern Sweden but the biggest thunders were evidently saved for this morning when we were served BREXIT with our breakfast! A big disappointment for an anglophile like me personally, and for 48% of the British population! And for the financial markets (USD/SEK +39öre, Gold +56 $/Oz, Nikkei -8% and counting....).

Let’s hope both the good things and the bad things that come out of this will turn out to be better than expected... It is not impossible!

Scheisse!

Brexit?

Today it is June 23, 2016. And tonight we will know whether Britain stays in the EU or not....

Today, The Independent reports two different poll results where the first says 44% for Remain and 45% for Leave and the other one says 43% for Leave and 41% for Remain.

Today, The Telegraph reports 51% for Remain and 49% for Leave.

In other words, a close call! A most interesting day for all investors out there! My guess, however, is that many undecided voters will vote for the safer option and vote Remain! I also think media etc. are biased and thrive on polls being close to 50/50. Therefore, my bet is that Britain will stay in the EU!

AND, PER DIO, I CERTAINLY HOPE SO!!!!!!!!!!

Blockchain – the New Kid on the Block?

Hands up everyone who thinks the blockchain is the new internet, the new finance disruptor, the new TCP/IP! Now, am I the only one with his hands in the air? Well, if so, even better! Then I can pick all the low-hanging fruit and you get the left-overs... OK, on a more serious note, of course, this is very early to start investing in firms focusing on blockchains. But, personally, I remember when I studied engineering in Berkeley in 1994 and followed a course on something I barely understood called The Internet. We used something called gopher to connect to something called the world wide web to read uninteresting things (texts only) on other computers in boring places like NASA and CERN. There were no browsers (Mosaic came the next year and Netscape after that) and few people even used email. I studied, got bored, studied, got confused and graduated.... Then, I went home to Sweden and no one knew what I was talking about when I mentioned internet, Arpanet etc. And, then, nothing! For a year or two! And then it took off! Big time! And I missed the train, completely! I moved to the most backwards country in the northern hemisphere (Italy) and then started working on my finance phd. Internet thrived and internet companies took over the business pages. I made no money. My friends made, and lost, millions just by being hired by internet firms. And the rest is history.

Now, the question is whether blockchains could play a similar role. In finance. Well, who knows? But, first, what is a blockchain? Most of the readers of this blog have of course heard of bitcoins, the virtual currency. Less, though, have probably heard of the blockchain, the technology behind the bitcoin. While, this far, the blockchain technology has been used primarily as the plumbing for the bitcoin, blockchains can also possibly be used for the infrastructure of traditional financial products such as debt contracts and financial derivatives. And in accounting, blockchains could potentially improve the quality of information reaching investors by making the accounting information both more trustworthy and by making the information more timely. If firms were to keep their financial records on blockchains, each and every transaction in a firm’s ledger would be instantaneously available and difficult to tinker with.

I have worked a lot in the field of credit risk and this is another area where blockchains could have a huge impact. I have written about this in a short paper called BLOCKCHAINS, REAL-TIME ACCOUNTING AND THE FUTURE OF CREDIT RISK MODELING. In that paper, my focus is on credit risk modeling and on how a possible future wide-spread use of blockchains could affect the way we model credit risk. It is well known that accounting information, such as balance sheet data and income statements suffers from being of quite low quality. Therefore, since most credit risk models rely on accounting data, the increased transparency, accuracy and timeliness of financial statements brought about by firms keeping their books on blockchains could significantly improve credit risk modeling. I think! Spread the word!

Emerging market stocks + currency mismatch

I am not too fond of the label ”Emerging Markets”, at least not in discussions about investment opportunities. I mean, what, exactly, is an emerging market? And which countries should count as emerging? Another thing that is often misused, or misunderstood, is buy/sell recommendations. Very often you hear someone recommending a buy or sell for this or that stock without adding a time horizon. I mean, isn’t it possible that a stock could be expected to fall more before it starts climbing? Yes, of course! Also emerging markets stocks…. I will come back to this particular issue in the last paragraph below.

Anyway, this entry is not about these naïve observations. Instead, what I want to highlight is a rather unknown (I think) negative (sell) observation that is applicable, first and foremost, to emerging country stocks. As of lately, many emerging market currencies have weakened dramatically against particularly the US dollar. Whether we are talking about BRICS or MINTS or any other group of up and coming countries, weaker commodity prices, the slowdown in China and the bizarre monetary policy in rich western economies have put a lot of pressure on their currencies. So far so good! Everyone knows this and everyone expects this to continue for some time with the trillions of dollars that flowed into these countries now possibly departing. Everyone also knows that this could be a problem since household plus company debt now roughly equals total GDP in these emerging markets. And, unfortunately, much of this debt is in US dollars! This amount is higher, even, than the amount of debt in the developed markets before the financial crisis.

Now, what my (very timely, indeed) research shows is that dramatic currency falls, of the size seen recently in many emerging markets, coupled with actual historically observed currency mismatches in company books in selected emerging markets, could lead investors (and banking regulators) to materially underestimate the actual company credit risk. While it is obvious that the default probability increases if the debt is issued in a foreign currency and the assets are in local currency, my research shows that the increase in default correlations due to the mismatch is very important as well. For more on the latter issue I refer to Byström (2014) The impact of currency movements on asset value correlations. Journal of International Financial Markets, Institutions and Money, Volume 31, July 2014, Pages 178–186. That paper looks at the asset correlation bias resulting from firms’ assets and liabilities being denominated in different currencies. It focuses on the time-variation in the bias and on the dependency of the bias on currency movements.

So, again, regardless of whether you are optimistic or pessimistic about emerging market stocks I think my research should be acknowledged. I do not think the increased credit risk is priced (fully) in the stock market, particularly for local EM banks, and it should therefore bias any stock market forecast downwards. Personally, referring to the first paragraph above, I believe in emerging markets stocks (whatever that means…..) in the longer run. Based on the discussion above on currency mismatch, however, I think (ceteris paribus) that it would be wise to wait some time before one increases the proportion of emerging market stocks in one´s portfolio. If I had to make a prediction it would be that 2017 or so could be a good time to enter the market. Earlier if the prices drop quicker than expected and later if they hold out. In other words, I am pessimistic in the short run and optimistic in the long run. It is obviously possible……

Caveat emptor!

Chinese News, English News and the Chinese Stock Market Crash

In my research I am not only working on credit and credit risk but I also focus on financial stability, performance measures, commercial microfinance, and market behavior in general. I have also written academic papers on the use of news aggregators in finance. Considering the recent Chinese stock market correction, my latest paper on this topic turned out to be very timely! In the paper Byström (2014) “Language, News and Volatility” I use Google News to study the relation between news volumes in both English and Chinese and stock market volatilities in China and elsewhere.

In collect more than nine million stock market-related news stories in English and (Mandarin) Chinese and find that the stock market volatility and the number of publicly available global news stories are strongly linked to each other both in English- and Chinese language. The relationship between news and volatility is weakest in mainland China, however, and a possible reason for this is that Chinese retail investors do not read traditional news, neither in Chinese nor in English.

Interestingly, the other day I read an article about Chinese authorities allegedly telling Chinese media not to use words such as “slump” and “collapse” when reporting on Chinese stock markets! To avoid volatility and panic! This is fascinating news for me who scan the media universe for exactly those words, in Chinese, when studying whether stock market-related news is related to stock market volatility or not. Maybe the authorities have also realized that news and volatility are closely associated?! But maybe they have not read my paper that shows that the link is weakest in, well, China!!!

I guess they have to find some other way to boost Chinese share prices.......

Insta Fashion

Some weeks ago I attended an interesting conference at Lund University named “Shopping Asia”. Among all the topics that were discussed, there were some interesting presentations on Fast Fashion. Fast fashion is a term used to express that designs move from catwalk to consumers very quickly in order to fully capture current fashion trends, enabling mainstream consumers to buy current clothing styles at a really low price. H&M, Zara, Forever21 are examples of company names that are associated with fast fashion.

One thought that I got when listening to the talks was that there seems to be an ongoing race towards the bottom! A race that takes us from Fast Fashion to Insta Fashion (my term for really cheap clothes that the Instagram generation buys for Saturday night). It is like a second wave of fast fashion, where the journey from drawing board to shop floor is a day or two instead of several weeks.

What would the implication of such a second wave of fast fashion be for the environment and for working conditions (back home)? And what would the implications be for investors? On the first question I think it is likely that conditions will grow worse rather than the opposite. Bar a revolution, there does not seem to be anything that is able to stop the worsening of working conditions in the west. At the same time, it is possible that lower wages and insta fashion’s demands for local manufacturing could lead to more job opportunities in richer countries. And for the environment fast fashion seems like a very bad idea, for obvious reasons. The second question is possibly more interesting (for us). How will a potential race to the bottom, if it exists, affect us investors? Possibly, private equity investors and the likes will be able to invest in portfolios of insta retailers and be able to gain if the idea fully takes hold. For the rest of us, who do not have the financial muscles to buy entire companies the only hope is that listed firms such as H&M and Inditex will successfully adapt to a possible shift in the anatomy of the fast fashion industry. I think that could be one important point to scrutinize for any retail analyst. Or, if you are a firm believer in insta fashion, perhaps the Boohoo stock which is trading at 28 GBP, down from 70 GBP a year or so ago, is ripe to be picked? I wouldn’t know…..

Kreditmarknadens åsikt om volatiliteten på aktiemarknaden

Ett nytt ”Byströms Börstips” titulerat Kreditmarknadens åsikt om volatiliteten på aktiemarknaden har publicerats i LINC MAGAZINE #7 2014 s.36-37. Börstipset kan hittas här och handlar om hur man kan prediktera aktievolatiliteter över längre tidsrymder. Detta kan vara användbart om man t.ex. vill veta vad sina personaloptioner som löper ut om 10 år egentligen är värda idag. I en sådan situation är historiska volatiliteter inte särskilt användbara samtidigt som implicita aktievolatiliteter från optioner med flera års löptid typiskt saknas.

Börstipset bygger på min artikel Stock Prices and Stock Return Volatilities Implied by the Credit Market där jag föreslår att man i stället för att förlita sig till aktiederivatmarknaden vänder sig till kreditderivatmarknaden. Ett typiskt företag är ju finansierat dels med aktiekapital och dels med lån (krediter). Detta gör att såväl aktieinvesterare som långivare har goda skäl att noga övervaka och analysera företagets verksamhet. Och det, i sin tur, gör att inte bara företagets aktiepris utan också dess lån- och obligationspriser är användbara indikatorer på marknadens tro om företagets väl och ve. Med andra ord, inte bara aktiederivat utan också derivat på företagets obligationer och lån är starkt kopplade till företagets framtida med- och motgångar.

Is the stock market really overheated?

As of lately I have got numerous questions from friends, colleagues and students as to whether I think the stock market rally is getting close to an end. The arguments are always the same: S&P is at its all-time-high, stocks all over the world have been lifted by ultra-low monetary policy, company earnings are declining and geo-political concerns abound. In addition, many commentators and “experts” in the media, not only the perma-bear journalists of mainstream business news but also various seasoned investors, claim to be concerned.

I would like to make one small contribution to this discussion. Particularly since I am sometimes, mistakenly, taken to be a local Dr Doom. It can be summarized in one short sentence: measured in the only hard currency there is, gold, S&P500 is neither cheap nor expensive at this point! Look at the two attached graphs. The first graph shows gold and S&P500 from 1968 until today, measured in US dollars. And the second graph shows S&P500 measured in gold instead of US dollars. There are two points that I want to make:

1) Seen over the (really) long term the cost of buying gold and the cost of buying shares of US companies has increased with roughly similar amounts.
2) According to price history, the price of a piece of corporate US is not cheap when counted in number of gold bars. However, it is not excessively expensive either!

Of course, there are many issues with this simplistic analysis. While S&P500 has changed since 1968, a gold bar is still a gold bar, at least from the mid-70s onwards when the US legalized gold possession. Also, gold prices fluctuate a lot and some of this could of course be due to market overreactions.

Predictions are always difficult, particularly of the future! On one hand, the last time S&P500 cost 1.5 Oz of gold was in September 2008.... :( On the other hand, the second last time S&P500 cost 1.5 Oz of gold was in 1995... :)

Kakao – på börsen!

För många år sedan intervjuades jag i studenttidningen Nådiga Lundtan ”Chokladkonnässör med känsla för ekonomi” och i intervjun nämnde jag att jag kunde tänka mig att köpa en kakaoplantage någonstans i Afrika eller Sydamerika i framtiden. Någon sådan har det inte blivit men tanken, och kakaosuget, finns fortfarande kvar!
Därför är det för mig intressant att läsa att den första börsintroduktionen av en kakaoplantage står för dörren. United Cacao planerar att börsintroduceras på AIM, Londonbörsens småbolagslista i december. Information kan hittas här och en sammanfattning av verksamheten följer här:

Description of business:
United Cacao Limited SEZC is the holding company for Cacao del Peru Norte SAC, the Company's wholly owned Peruvian operating subsidiary, which owns approximately 3,523 hectares of freehold agriculture land near the city of Iquitos, the state capital of Loreto, Peru's northern region. The Group's business is centred around the cultivation of cacao, one of the key ingredients in the production of chocolate, on its freehold agricultural land.

The web site www.unitedcacao.com will go live on the day of admission

Jag tror det märkliga fenomenet att små kakaobönder i växande utsträckning byter gröda från kakao till allsköns olika alternativa grödor för att öka sina intäkter, samtidigt som efterfrågan på kakao bara ökar, tyder på att någon någonstans i kedjan drar in övervinster. Vi misstänker alla vilka de är (inga namn nämnda men de börjar på N och på B och...) och kanske existensen av sådana övervinster (om de nu finns) kan göra storskalig kakaoproduktion till framtidens melodi? Nu är ju inte kakao som palmolja eller liknande råvaror och det är högst osäkert om det går att driva storskalig kakaoproduktion. Som storkonsument hoppas jag förstås det och även om det är mkt spekulativt tror jag att jag ska kolla upp United Cacao när den börjar handlas på London Stock Exchange. Kanske det kan vara mitt (tråkiga men bekväma) alternativ till att köpa en plantage!

-----------------------------

Jag hoppas att storskalig kakaoproduktion kan göra att jag i framtiden kan äta chokladen på bilden varje dag utan att ha dåligt samvete.... Amedei Porcelana är den godaste choklad jag någonsin ätit men tyvärr kostar den 40 ggr så mycket som Marabou. Och nu är kaka nr. 10517 nästan uppäten....

The third edition of my book!

Since a couple of months, my book Finance - Markets, Instruments and Investments is available in a new (third) edition.

Trevlig konferens i trevligt Sydkorea!

Har precis kommit hem från en derivat-konferens i Busan, Sydkorea. Det var mkt intressant. Bl.a. var jag opponent på ett papper av Ho & Lee (ni vet, från Ho-Lee modellen), det händer inte varje dag, och sedan vann jag Second-Best Paper Award för mitt papper om Credit-Implied Stock Volatilities! Och sedan var där en hel del andra intressanta papper om derivat.

Det var också intressant att titta lite närmre på det sydkoreanska undret! Jag blev mäkta imponerad! Busan är Koreas andrastad och där bor runt tre miljoner människor. Överlag var Sydkorea mer modernt än jag hade väntat mig. Det var t.ex. mer likt Japan än Kina. Av någon anledning såg jag mest unga människor, kanske är den demografiska profilen annorlunda än t.ex. Sverige eller Kina? Konferensen var på ett hotell vid en strand (Haeundae Beach, se foto) och åtminstone där var nästan alla mycket moderiktigt klädda (tror jag….) med grälla färger, asessoarer, hattar och höga klackar (på strandpromenaden….). Som tagna ur PSYs Gangnam Style video! Inbillade mig också att det var mycket botox, restylan och silicon i omlopp….. Återigen, detta var en stor skillnad mot t.ex. Kina eller något av alla de andra asiatiska länder jag besökt. Det rådde inte heller någon brist på förmöget folk och till mitt förtret väcktes jag i mitt budgetrum som vätte mot strandvägen på nätterna av accelererande Ferraris och Lamborghinis med högvarviga V8 och V12 motorer och snabbväxlande (paddel)automatlådor. Mycket irriterande men också intressant för någon från lilla lugna egalitära Lund…..

Jag hade också turen att få följa med på en exklusiv båtfärd i Busans jättehamn (se foto). Verkligen stort och verkligen imponerande. Har aldrig sett något liknande; men så ligger Sydkorea också bara någon timme från Japan, några timmar från Kina och ytterligare några timmar från Ryssland. D.v.s. det ligger mitt emellan tre jättemarknader. Man ska dock inte glömma att Sydkorea har en fientlig granne norrut och i alla avseenden är som en ö. Inga landförbindelser till något anat land. Överlag tyckte jag dock det luktade mkt bubbelvarning i Korea. Visst, de är bäst i världen på PISA-testen, de jobbar och pluggar stenhårt och lägger mkt tid och pengar på sitt yttre. Men sådant brukar ha ett pris! Jag tror inte koreaner är speciellt annorlunda från oss andra och det kostar att ligga på topp! Och jag tror det stavas LÅN! Slutsats: för den som tänker investera några större summor i Sydkoreanska aktier hade jag rekommenderat att ta en tripp dit eller åtminstone läsa på ordentligt. Visst, KOSPI har inte gått upp lika mkt som t.ex. OMX30 sedan botten mars 2009 men det finns kanske skäl till det. Och vem säger att det inte finns bubblor även på hemmaplan….. Själv behåller jag de aktier jag har i Korea men köper inga fler aktier. Skulle dock kunna tänka mig att flytta till Haeundae Beach……

1%-klubben (bostäder)

Den senaste tiden har det i media diskuterats mycket om ojämnt fördelade förmögenheter och inkomster i olika länder. Mina två senaste blogginlägg har också fokuserat på denna fråga och huvudskälet till detta är att inkomstfördelning påverkar konsumtion som påverkar såväl företags försäljning och aktiepriser som länders bytesbalans och växelkurser och räntor. Med andra ord tror jag fördelningen av hushållens köpkraft är av stort intresse för den som är aktiv på finansmarknaden.

Jag har funderat en del på fastighetspriser och deras kraftiga uppgångs effekt på fördelningen av köpkraft över landet och över generationerna. Inte minst är det intressant att studera vad det har för effekt på förmögenhetsöverföringen mellan generationer. Som ett första steg tänkte jag i detta inlägg visa hur rika de allra rikaste i Sverige, i bostadsmening, är. Idén till detta fick jag då jag häromdagen läste att du för att kvala in som ägare till ett av de 1% dyraste husen i San Fransisco måste punga ut med 35Mkr! Naturligvis är många hushåll kraftigt belånade så kanske är siffrorna här framförallt intressanta för just arvtagare (då de idag troligen ofta ärver nära obelånade hus av sina 40-talistföräldrar). D.v.s. hur mycket ärver egentligen de som ärver de dyraste husen i Sverige?

Vad jag gör är att jag tittar på alla villor, radhus och bostadsrätter som är till salu just nu i respektive tätort (enligt en välbesökt bostadssajt) och ser hur dyra bostäderna behöver vara för att ägaren (med nöd och näppe) ska kvala in i 1%-klubben respektive 5%-klubben på olika orter i Sverige.

Stockholms tätort 1% 18Mkr 5% 7.2Mkr
Lunds tätort 1% 8.4Mkr 5% 5.1Mkr
Malmös tätort 1% 8.7Mkr 5% 5.0Mkr
Ronnebys tätort 1% 5.9Mkr 5% 3.8Mkr

Vilka slutsatser kan man dra?
- Det finns rika bostadsägare även i småstäder.
- Stockholm ligger dock i en klass för sig när det gäller de riktigt rika (1%) bostadsägarna. Faktum är att San Francisco krösusarna bara är dubbelt så rika.
- Jämfört med hur mycket Medelsvensson har på banken så är det intressant att var tjugonde arv i en typisk tätort tycks ligga i 5-miljonersklassen (eller mer). Med två arvtagare ger det ungefär 2Mkr per arvtagare efter skatt.
- Jag vet inte om dessa siffror tyder på en ojämn fördelning eller ej. Vad jag tycker är intressantare är vad de beror på (dubbelarbetande inkomstmatchade par?), hur de kommer att utveckla sig framöver (bostadskrasch, italienifiering?) och framförallt hur fenomenet med en relativt stor grupp (ett par hundra tusen hushåll bara i Sverige) välbesuttna påverkar finansmarknaderna runt omkring i världen framöver (börsuppgång?).
- Naturligtvis ignorerar dessa siffror belåning. De tar förstås inte heller med annat ägande än primärbostaden. Och så är de ju bara ett snapshot taget från ett litet urval av tätorter.

An (un)friendly tax!

I wrote a short (ironic) piece in Financial Times last week that has attracted some attention. It was titled (by Financial Times) “Tax the socially wealthy, too!” You can find it here. From the title it is easy to draw the conclusion that I advocate more taxes. In fact, this is far from the truth. Instead, the letter was an ironic critique against the taxation of wealth, regardless of the shape of this wealth (i.e. savings, stocks, houses, social capital, human capital and so on).

What I try to do in my Financial Times letter is to give an illustrative example demonstrating the problems with wealth taxation. I suggest a way for social capital to be treated just like other forms of capital, and how those with a lot of social capital could give some of this capital (N.B. not money but social capital) to those who are poor in social capital. I exemplify this using Facebook since those with many Facebook friends probably have more social capital than those with fewer friends. In other words, some are socially wealthier than others. Ergo, if you have many Facebook friends, why not give some of these to those with fewer friends? In the name of fairness! Needless to say, such a tax could probably not be implemented successfully. The interesting question is instead whether a tax on peoples savings can be designed more successfully? And then we are back to the reason for why I wrote the article in the first place.....