Content adapted from this Zerohedge.com article : Source
The Central Bank sees growth and stable employment through 2020. They are looking at 3 hikes next year which should not take the market by surprise.
People are starting to accumulate more non-liquid assets like real estate. This could create a huge problem during the next illiquidity crisis. Investors simply are no prepared for an environment where they cannot get their money out.
Mark Zuckerberg is on damage control. He went on CNN to take responsibility for what happened. The problem is that Facebook is bigger than anyone thought. To marketers, we are the product. Every act is monitored and tracked for advertising purposes.
Submitted by Bill Blain of Mint Partners
Blain's Morning Porridge - March 22nd 2018
"Gybe: To shift suddenly and forcibly from one side to the other.."
Headwinds have become tailwinds, and Jay Powell opens his tenure at the FED by upgrading the outlook for the US Economy.
As a keen sailor, I have more than a passing interest in from where the wind is blowing. There are a number of things to bear in mind about tailwinds; i) they get you where you expect to go faster – meaning we shouldn't neglect thinking about how this Goldilocks recovery ends.
And, ii) sailing downwind (ie tailwinds) can prove the most dangerous point of sail – **things can go from smooth and stable to disaster in frighteningly short moments as a result of a sudden windshift causing a crash-gybe to flick the crew into the water, or the mast to come tumbling down. **I've attached a photo showing just how bad tailwind sailing can go….
The Fed's message was simple: stronger growth, lower but stable full employment, modestly rising inflation, and rates set to double to double to 3.4% in 2020. Three, maybe four hikes this year, but three next year…. It should not have come as much of a surprise to the market. Some of the news reports say it was "Aggressive", but what I heard was a dovish "middle-ground" back-loading of further tightening – further hikes to follow if justified. They are not slamming on the breaks, but gently brushing the pedals. Powell summed it up nicely: "The economy is healthier than it has been since before the crisis…"
Cynics might ask which particular crisis?
The world is an increasingly volatile place – a blusterous conflabulation of sentiment, facts, hopes and expectations that tends to spin very differently to Central Bankers scripts.
Perhaps its a modern update Chinese curse, but we live in "unconventional" times – while the Fed is considering tightening policy, the government is looking to Spend, Spend, Spend. We should be keeping a tight eye on employment – with the economy already looking inside NAIRU – how will tax-cuts and fiscal spending impact already tight labour costs? Meanwhile, what about the global economy? What about Populism? Or geopolitics and the threats of a trade-war with China? What about so many other unforseen things…. As we charge downhill with the spinnaker flying, just how stable is that mast?
Next on my worry list this morning is Facebook.
I was out with someone who knows about this kind of stuff – my 23 year old son Jack who is making a career for himself in advertising (and directing music videos in his spare time!). He explained it's not just Cambridge Analytica that's been exploiting Facebook and other social media sites through deep diving apps that amuse us with puppy pics, while measuring and tailoring product and messages to our desires and weaknesses.. Its happening across the board – it's a dimly understood marketing revolution. We just don't realise how social media users aren't customers – we're the product! It was a light-bulb moment…
Almost as revealing as Mark Zuckerberg's dollar-late appearance last night on CNN. **What struck me is that he has as little idea as the rest of us what a monster Facebook has become. Sure, he took responsibility – but does he actually understand what for? **
You can't uninvent stuff – but last night I deep dived my social media pages, changed all the options, put in new passwords and wonder just what a mess we've created.
Back in the real world – or is it?
Some interesting thoughts on alternative assets yesterday. According to some US research, global investors now hold around 25% of their total assets – accounting to some $7 trillion – in the form of Alternatives – ie things that aren't "financial assets" such as stocks and shares. We're very aware that assets like property tend to yield significantly more than financial assets – properly reflecting their lesser liquidity, but also how stocks and bonds have tightened and become inflated as a result of QE policies.
I was reading stuff about how much investors should demand for illiquidity – a base guess being a 1% spread over the risk free rate if you are locked into an illiquid alternative asset for one year rising to 6% for 10-yrs plus. Others say managers should be earning at least a 3% illiquidity premium on illiquid alternatives to justify themselves.
The trick is finding the right people to manage alternatives – for instance a global aircraft leasing firm or a firm with a fleet of ships under management, with all the technical and professional management skills to understand why planes fly and ships float, while also making sure they are working hard to earn a return. Or guys who understand the intricacies of private equity. There aren't that many conventional bond/equity long/short portfolio managers who've got a breeze of an idea on which particular renewable energy projects beats the rest – but there are specialists who do. One approach is to find the right experts to invest on fund's behalf – and we've got such managers we recommend.
That said, the research note yesterday made the case that many investors are utterly unprepared for illiquidity risks of alternative / illiquid assets. While the best case is to plan and hold illiquid alternatives through to maturity, its equally important to plan for need – have a plan to sell if you have to.
That said, I think I'll stick with my 2018 investment strategy: buy assets correlated to global growth, and avoid correlation with inflated liquid assets.
Non-adapted content found at zerohedge.com: Source
Mark Zuckerberg must have been knowing what was going on. There are already claims that facebook gives out data to many other government agencies to monitor people's activity. We the users shouldn't fall for he's pleas.. let alone suggestions to restrict the amount of access that developers get. It's we the people that are using facebook that should control the amount of data facebook can access. You even go ahead and monitor the minors who have completely no threat to anybody whatsoever.. this is indeed being monstrous.
It's indeed true many investors are unprepared for illiquid assets which i believe are difficult to sell especially during this period when the buyers are fewer than the sellers.
Facebook is the social media ..It is invention 2004 .Place in America ..
Zuckerberg is the perfect evidence to illustrate the fact that wealth inequality is completely out of control and the current rendition of American capitalism is hopelessly flawed. That he has become so insanely rich from a business he has no real understanding of or control over boggles the mind.
I can’t believe how much bluster there is right now as to why Zuck isn’t making more appearances or talking more about this. The reason is obvious. He’s a complete stooge who is totally out of his depth. His immense wealth is the result of being in the right place at the right time while taking advantage of the right people with the right ideas. In other words, he got lucky. Luck is reason enough to get rich if you happen to win the lottery, but things are pretty fucked up when a supposedly merit-based “businessman” owes nearly all of his fortune to luck.
Our economy is a fucking scam. The smartest, most talented, hardest working person in the world doesn’t deserve ownership of that kind of wealth, let alone a chump like Mark Zuckerberg.
Kanye tried to tell us. No one listened.
You have a minor typo in the following sentence:
it should be unforeseen instead of unforseen.Facebook is not alone but with millions upon millions of dedicated users it will take an extremely unlikely mass exodus to bring the corporation down.
I have Facebook as a strong buy.
If facebook is to change it problems it most use the smart media tokens. And the blockchn teachnology.
The public appearance Zuckerberg did was very late and investors got wary. For sure he had to act a lot faster after this broke out but he decided to hide ,lol. FB getting slammed, rate hikes, trade war - this might be a good reason for something big to happen ? We are pretty close to the 200 day, I gues we will test it very soon.
Thanks for your hard work. I liked your analogy with sailing that's quite unique. To take it one step further, all boats to heed of a the perfect storm. The Fed could be wrong on just about everything - growth will stagnate or decline, unemployment will increase and inflation will rise higher than interest rates. On the horizon, in just the direction we are heading, lies the coast of derivatives. dangerous waters indeed.