Equities are still up with emerging markets leading the way or to be more precise: China is pointing the direction. EM is about to get back and hit local highs. With that fact (and bear the 2.7% US10Y in mind) and the underweights in almost everyone’s portfolio, I’d seriously start considering selective buy-ins into some these markets (avoiding commodity driven ones for instance).

Slow trading sessions and the EM FXs are silently turning back upwards again. Not like during the summer but the inflection point might be behind us. LatAm lagging, Russia sluggish, the commodity driven regions are weak, only Asia stands out positively.

Miscellaneous:

http://www.bloomberg.com/news/2013-11-11/army-storms-caracas-electronics-stores-shoppers-follow.html

“The government, which devalued the bolivar by 32 percent in February to 6.3 per dollar, has been unable to arrest the decline of the currency on the black market, where companies and individuals not authorized to use the official rate pay around 60 bolivars per dollar.”

http://www.bloomberg.com/news/2013-11-12/israel-takes-to-home-grown-pot-as-wall-curbs-arab-hash.html

“The shift in Israel’s cannabis supply is an unintended effect of tighter border security. While Israelis long smoked hash from neighboring Arab countries, a new fence and more vigilance on the borders have thwarted shipments. In response, Israeli dealers are increasingly growing their own.”

Two entirely different topics but the point is the same: supply and demand will find a way.

The SPX practically sits at Wednesday closing levels. Personally I was surprised about the magnitude of this rebound and restored some confidence towards the bullish market. After the handsome growth figure it was a probable call to expect better employment data as well and the market to do the same as it did yesterday after the news came out.

Supporting news from developed world followed by some optimism but the entire gain was vaporized intraday. Doesn’t seem so good.

Bonus question for yesterday’s speculators (they are the wealthiest ones): Where will the indices will close if there is a surprising uptick in the US growth and the ECB loosen its monetary policy the same day?

A) Below their opening price
B) Above their opening price

There is a long term spread compression in terms of EU core (Germany) vs periphery (Spain) which reached a milestone recently – the Spanish 10Y went below 4% and the gap is around a two-year low. As the chart shows the premium had been significantly lower so there could be more room for the riskier asset to appreciate, especially if we take some recovery into the account. I wouldn’t say it’s a good opportunity but clearly this is the European trend nowadays. A risk however if there won’t be an other LTRO since EU banks are swimming in these sovereign debt but it is a highly unlikely scenario.

sg2013110562341

I wrote some thoughts about the car revolution we are witnessing and I couldn’t take my mind off the topic since. However reading about Tesla’s charger system expansion changed my focus. If we enter an era where a car is a gadget (even self driven) then users wouldn’t want to waste time with charging – petrol at least smells good but fueling is still just a quick chore – and it’s not smart to put so huge pressure on the electric system for supercharges. It makes more sense when the owners could swap their batteries to a fully charged one at a “battery warehouse” – yes, Tesla offers this service. This way everybody wins: i) users are easily able to use their car again; ii) chargers won’t have to boost the batteries and erode their life expectancy; iii) commuters won’t jump on the cables around the same time shutting the whole system down. The only problem I can see now might be the eventual shortage of available batteries.

When my brain was jumping jacking about this problem and self driving cars I came up with an idea. What if the future cars will have two main parts: the lower part and the upper part. Plain naming, but let me explain. The lower part would have the batteries and other mechanics. The upper part would be the actual cabin where the passengers are. The lower part could be some standardized platform with less added value but able to receive the partially standardized cabin (in order to accommodate the minimal computing capacities for solid self driving ability). This way car manufacturers could build in different extras into the cabins so there would be cheap and expensive options and whenever the car is low on juice the owner could simply send the car to a battery warehouse to change the batteries and the intelligent and automatic warehouse flats the electric usage needed to recharge the batteries in the area.

The markets look calm lately, suspiciously so. There was a notable reverse in EURUSD during the last two days but other than that… nihil

http://obs.rc.fas.harvard.edu/chetty/value_added.pdf

Education has always been and always will be a great investment for both the individual and the society. People can find pro and con researches about a given topic but I challenge anyone to find a negative paper about the overall impact of education :-)

school_startsSource of the picture: http://www.claybennett.com/pages/school_starts.html

Keeping the pedal to the metal – my short summary of the market for today. The price movements indicate that the markets assume the FED will not cut back the QE program for a while (in my opinion, this year they won’t – but greatly depends on the fiscal situation as well) which probably will slowly drive the equity market higher. Great oversimplification, I know, however the evidences of the main trend with ample liquidity are back on.

http://qz.com/137790/who-suffers-the-most-europes-austerity-misery-ranked/

Significant adaptations have occurred in the EU in the last two-three years and the periphery performed very well lately on the back of the overall bullish sentiment for European stock market. I can’t tell whether any of the countries will need more austerity but they are on the right track and ECB’s balance sheet is like the waist of a bride – thin but with room to get more robust… Latter eventually happens so it doesn’t come as a surprise.

I have a passion to drive cars but hate it on a daily basis. What does it have anything to do with speculation? The topic of the self driving cars has popped up in a conversation and we’ve been through the ordinary aspects of it. What’s more interesting is that given the self driving ecosystem will evolve then cars are going to “degrade” into a simple gadget. If it’s true then the next big thing can be a fully integrated system where smart houses, cars and gadgets (classic phones, PCs etc.) work together. F.i.: the house automatically shuts down when the car leaves; the heating system turns on when we get into our car and head home; we can easily add a new stop (finding a new place online and adding to the car’s route manager) without having to look at the map/gps how to get there… and the list could go on. My point is this might be a niche market right now and my best guess would go to Google for their self driving car and Android platform but it possibly can create a bunch of whole new companies yet to be established.

http://www.bloomberg.com/video/cash-on-hand-the-price-of-body-parts-iPrQ5ai9T763NNpOUGVTXg.html

Moral of the story (for me) is that the brain is the most important organ so investing into education is the best call. The brain can create something out of nothing (my opinion is that probably the artists have the best life – I’ll explain why if requested) and the tradeoff is repeatable – low cost, open ended investment.