Now I know what happened to my portfolio in 2015

Here is an interesting factoid from Eric Delamarter's Half Moon Capital 4th quarter report:

"We found it noteworthy how narrow the breadth of the S&P 500’s 1.4% performance was in 2015. Remarkably, five mega-capitalization technology companies drove the whole market—accounting for over 300% of the indexes return. In other words, if it were not for that handful of stocks, the market would have been down approximately 3%. Further, stocks within the S&P 500 with market capitalizations less than $10B were down an average 12.6%."

This divergence of price movement among large categories is remarkable.

(You might take a look at friend Eric's fund: http://halfmooncapital.com/ His performance is solid and he is a meticulous value investor.)

Dire Situation in Venezuela: Widespread food shortages. Debt default seems inevitable.

Russ Dallen of Latinvest in Caracas just emailed me an article about the dire situation in Venezuela. The Central Bank is selling the country's gold reserves to meet near term debt payments. Food shortages are widespread.

The low oil prices has brought to a climax a situation that was already spiraling downward.

The article is in Spanish and can be accessed at by clicking on the picture.

Here is an excerpt, courtesy of Google translate:

Venezuelans are beginning to suffer situations of anguish and despair at the lack of food. Over the weekend, more than 10,000 people closed an important avenue of Caracas to protest food shortages, while scuffles among people queuing have become everyday despite the surveillance of armed officers of the National Guard.

On Monday, a resident of the town known as "The Cambur" Carabobo state, sent the following message to a radio station through social networks: "No food, no nothing. There are children and the elderly. Please help".

But today much of the country's ports are vacant, by the shortage of hard currency, and forecasts for the remainder of the first quarter of the year look very encouraging.

"I think we are between four and six weeks in a really extreme situation," he said from Caracas economist Orlando Ochoa, speaking on current levels and projected shortages worsen in the near future.

Ochoa added that the country needs additional funds to overcome the situation, but above all requires a general reorganization of the economy to correct the major imbalances in the economy accumulated along the Bolivarian Revolution.

And the economic collapse of Venezuela really is not being caused by falling oil prices, he said.

The crisis was caused by a series of measures implemented in the country since 2005, including the loss of independence of the Central Bank and the use of international reserves to finance public spending, the nationalization of the telecommunications, steel, cement industry and food, the financing of public sector deficits with inorganic money, the implementation of exchange controls and the system of price controls, he said.

"Then, in 2013 and 2014, Maduro does not take steps that could have been taken to correct, and problems caused by inaction are now accentuated by the fall in oil prices," noted Ochoa.

"Maduro insists on treating the macroeconomic problem as a problem of Marxist sociology. There is no doubt that political bias, ideological bias, the burden of the legacy of Chavez, it is choking and choking him simultaneously to the country, "he said.

http://www.elnuevoherald.com/noticias/mundo/america-latina/venezuela-es/article56657168.html#storylink=cpy

Tautology of the day

from the FT article on hedge funds today (p. 13,"Ackman falls . . ."):

"The returns for hedge funds in 2015 overall were unsatisfactory because they lost money for investors," said Rick Sopher,LCH chairman, "However, once again the top managers outperformed the average hedge fund manager."

This sighting is, in fact, that of a particularly rare sub-species, the double tautology. But I repeat myself.

Most of the world's oil production is unprofitable at today's prices, figures the Economist

The Economist calculates that most of world oil production is unprofitable at $30. (The snapshot is at $40, still mostly unprofitable.) Their calculations, if correct, point to $100/barrel in the long run because that is what a lot of the production needs. I was guessing the the equilibrium price would be around $50 and I suppose I'll stick with that and point to Saudi Arabia's plans to increase its production in the future, which would indicate a lower equilibrium than that of the Economist, which assumes a static world.

They have a calculator that allows you to see which countries can produce profitably at a given price. Here's the link: http://www.economist.com/blogs/graphicdetail/2016/01/daily-chart-6?fsrc=scn/tw/te/bl/dc/st/adjustingthetapsonoilprice

New Hampshire Primary Update: Voters are cowed.

Vive la différence! France's secret defense against excessive immigration

In today's FT, which I am reading online because it still has not been delivered even once this year due to trouble with the paper carriers, there is an article on page 3 that says that asylum seekers consider France a stop-over and not a destination.

The reason? Here it is:




It's not so much the language that is difficult to master but more the pronunciation.  As Prof. Henry Higgins said in My Fair Lady, "The French don't mind what you say as long as you pronounce it correctly."

We have almost won the global war against extreme poverty

The World Bank defines "extreme poverty" as living on less than $1.90/day/person. By this measure, extreme poverty has fallen from almost 40% of the world's population in 1990 to less than 10% today, according to the World Bank.




The Wall Street Journal, in its "Outlook 2016" special section on January 20, 2016, where I got this graph, wrote: "Unprecedented economic growth over the past quarter century has lifted an estimated 1.25 billion people out of poverty, in one of the greatest recent (sic) achievements in human history."

The following chart from Branko Milanovic at CUNY, recently circulated by Prof. Zonis, is the flip side of this good news. The decline in world poverty has resulted from a partial equalization of incomes with the first world middle class.




The effects of globalization on middle class incomes are well known. This data shows that Trump is more correct about the source of the problem than is Sanders, although Sanders is also correct that the results are not desirable.

I think it safe to say, however, and I believe that I speak not only for myself but for the entire world, that we are all happy that extreme poverty has been so greatly reduced.