Disqus - Latest Comments for Thiago

Re: Canada’s oil and gas industry gets left in the dust as other nations take advantage of opportunity

Thiago — Thu, 28 Jul 2016 23:39:57 -0000

You have got to take into account two things: A)climate and B) our industrial output.

Canada produces things that are required by the global economy: agriculture, minerals, energy and lumber. Unless we are doing those things inefficiently those should not count in our total negatively. They need to be produced and will by someone else. If we convert our entire industry to services and finance our production of co2 goes down... but the products we consume will require those same raw materials be produced somewhere else...

Lastly its colder here than other countries... we need heat. Comparing co2 intwnsity without standardizing for heating is ... misleading.

Re: Long-run? Devaluation or Growth « Step Away From the Fiat

Thiago — Mon, 11 Apr 2011 21:42:33 -0000

Yeah I agree. Print to Infinity, Fed buyer of only resort, Rates rise... permanent demand destruction as the US moves to a less consumer based economy... Killing the US consumer may hurt commodities... but the dollar weakness and emerging markets will fill in the crack...

"Both of these, bode well for commodities, stocks, and real-estate in the long run, like they have for the last century. If North America could switch to a cheaper energy source, before market forces, force their hand, this would become a competitive advantage. That’s happening in Ontario, right now. That has me very excited, to see the competitive advantage being grown, right in my back-yard."

With this though I have some doubts... I think it is fairly ridiculous for Ontario to pay subsidies for energy, driving out industry through higher electricity prices than competitors... while we have one of the largest undeveloped large scale Hydro resources in the world which are among the cheapest sources of energy. When Solar and Wind make sense they will do so without subsidies... I see Ontario spending billions putting in technology that may be considered a 486 in a decade... not that it isn't good, but that money is coming at the cost of higher short term electricity prices to the real economy.... at a time when we export power....and our breaking all-time electrical exports.

...kind of sounds like the US subsidizing farmers... and then exporting corn, cattle and grain at a loss.

Re: Deflationists, I think you lost the debate « Leveraged Theta

Thiago — Fri, 12 Nov 2010 00:15:35 -0000

Hey Jeff. Not arguing with the recent crazy pace of inflation (aka if the prices never fell / and inputs costs are going up then earnings are going to get hammered or retails prices are going to shoot up).

A few points though as futile and equally not as impressive:

Copper and Corn both had higher average prices in 2007-2008. And I believe in the mid 90's for copper or corn... forget which one, all in nominal terms.

As for Cotton, there is some fairly 6 sigma stuff going on with the supply side (major droughts in asia, and export limitation from India).

Despite that... the Corn and Copper thing does not bode well for industry and most meat prices in general. With cotton they are expecting some serious supply to come online fairly quickly and I would hope to see some demand destruction. Nothing solves high prices... like high prices... The US is going to make China rethink that US dollar peg.

Can't believe Harper is supporting QE2... the strong dollar is not particularly good for Ontario/Quebec... and really doesn't help the West all that much.

Re: Good News is Good News, Bad News is Good News « Leveraged Theta

Thiago — Sat, 06 Nov 2010 17:34:03 -0000

Based on the data... the result seem to be to buy stocks...Up Up Up and Away!

So by the FED just saying "we are going to buy X amount of Y"... Arbitrarily and without regard to fundamentals of that asset... Does that mean the the FED is stating that Capitalism and Value are out the window? They are literally saying "He don't bother valuing risk and fundamentals because we will just buy it anyways, you just need to guess how much I am going to buy and when... and then sell it to me (FED)"

Jaded Investor

Re: Come Join me Up Here « Leveraged Theta

Thiago — Sat, 06 Nov 2010 11:26:02 -0000

This is something that is really got me puzzled too. I know on the West Coast, Foreign buyers are bidding up prices and this is well documented and was featured on Bloomberg a couple of months ago. It is possible that the same thing is occurring in Toronto given the same level of immigrant diaspora and family back home.

Stuff like this is kind of disturbing http://realestatetalks.com/viewtopic.php?f=8&t=39580 and this article is very well documented with official stats from Stats Can. http://runningofthebulls.typepad.com/toros_running_of_the_bull/2010/03/the-canadian-housing-bubble.html

Several of my friends recently bought houses and the stuff they were telling me the banks encouraged was not good. One bought a house and had no downpayment, The bank opened a line of credit for them to draw on for their minimum downpayment for CMHC. Another who is way overleveraged was also granted a mortgage based on his variable rate, with 5% down. This is really not good news, and BoC reducing lending standards for first time buyers will end in flames. I simply cannot see how $200K in a town as shitty as brockville buys you crap, when there is very little employment in the city that pays well. It is supply and demand... Sellers will not take a loss on their property (and view improvements on the house as dollar for dollar investments) and pull the house off the market if they can't get their price... and buyers encouraged by all time low interest rates to take on duration risk they simply cannot afford. If Canada ever experiences a shock... watch out...

The thing I can't grasp my head around is...Commodities drive Dollar higher... Foreign inflows from Asia will rise putting a floor under luxury home prices (similar thing is happening in Brazil, RE is shooting through the roof). Dollar Crashs and foreign money pulls out and but Canadian businesses become more competitive... helping the middle class (this is offset by greater inflation taking away money from disposable incomes).

So outside of demographics, I can't think of a shock that would pop prices. The graphs definitely show some sort of stimulus in 2000 for RE prices vs incomes. That would have to be money flow out of equities into RE... I don't believe anyone in our generation believes in the stock market...

Also a good read http://runningofthebulls.ty...

Re: Come Join me Up Here « Leveraged Theta

Thiago — Fri, 05 Nov 2010 06:52:55 -0000

I was just looking at the correlation of temporary applicants to permanent residents actually let in, The numbers corresponding with 2005 -2008 do not show a 5% annualized increase but a decrease due to the recession. The 2005 - 262,241 2006 - 251,643 2007 - 236,754 2008 - 247,243.

And looking further into the data, the same period does not correspond with an increase in high quality affluent immigrants. The economic immigrants (aka educated unsponsored immigrants coming to canada for better opportunity) has remained flat for the last 12 years at 60K +/-2K. Family Sponsored / Refugees are not high quality immigrants, but immigrants that canada lets in to reunite families or for war reasons.

Again Jeff look at the link I sent. At the bottom it shows all the total immigration numbers since 1988 in chart and graph form. In 2004 we let in 262K.... Which is more than 2009. I don't think 3 years is enough to call a sustainable trend especially with no stated increase in the target policy. Not saying they may not let in more immigrants this year, but looking at the past 20 years data... we have always been in the same range and the target has not moved much (at all) since 1992.

Re: Come Join me Up Here « Leveraged Theta

Thiago — Thu, 04 Nov 2010 06:58:03 -0000

Yeah man,

Sorry but these are just applications. And they are not approved. Both Permanent and temporary residents have quotas based on Federal/provincial government targets for family, economic and refugee claims for permanent residents. The quota was lifted in the late 80's but has been 225-250K per year for all classes combined. I don't think that is enough to offset an aging demographic and a low birth rate. Might be in large cities where these people tend to concentrate.

See http://www.cic.gc.ca/englis... for more info,

Re: Corn and Oil Disconnect « Leveraged Theta

Thiago — Sun, 24 Oct 2010 14:08:36 -0000

Jeff I have done a bit of research on this disconnect that is growing and I feel that Oil is going to disconnect more and more from other commodities.

WTI vs Brent - Brent should not have a premium to WTI. Brent is more sour and harder to refine. But it does because Cushings have so much oil and no one wants to take delivery.

Second and I think this is the big factor is that there is so much open interest in the futures market but the majority needs to be rolled over. It is putting a lot of pressure on prices.

China is working hard to limit demand by weakening their market. They have put in policies to limit bank lending, increased banking reserves and jacked up rates. A higher Reminbi will also hurt their demand in the short term... but in the future will increase demand. So will he filling of their strategic reserves. If they want to fill it on a relatively short timeline then it will definitely put quite a bit of pressure up.

This article was particularly good. http://www.straightstocks.c...

Re: Bernanke! It’s Working! Hyper-Inflation Is Here « Leveraged Theta

Thiago — Fri, 15 Oct 2010 17:41:44 -0000

LOL if it's like the CPI maybe its because commercial RE is in the shitter... or the intermediary companies are getting squeezed so those up the food chain get isolated...

Whatever it is ... it is crap. They really need to fix the substitution rules for the CPI... like you can't do that with technology. Cost of a netbook today versus laptop 3 years ago.

Thanks for the B-day wishes. I keep missing your calls because I am working the night shift...well the 7 days 15 hour day schedule for the last month (N.B. It sucks). I'll give you a call this weekend.

Peace T

Re: Two Scenarios. No Recovery. « Leveraged Theta

Thiago — Sun, 19 Sep 2010 23:06:26 -0000

All else equal. A crash in the JGBs would collapse the banking system and we all now what happens to equities... Also major corporations in japan store their cash in JGBs so if their balance sheets get weak unless they hold to maturity.

Re: Toronto Real-Estate Inflation Adjusted: What if they are wrong? « Leveraged Theta

Thiago — Thu, 16 Sep 2010 06:34:50 -0000

The problem with one is that it tracks a fixed basket of items. And based on my previous post I think Canadian housing has gone up-market.
The other major problem is the mix of housing, housing prices aren't standardized to represent a particular house. During a credit expansion when standards are relaxed the types of houses being purchased are on average down market. After a credit crunch when standards rise, more affluent buyers will be purchasing a larger share of homes than pre crisis. So the mix of house being represented by both the CPI and housing prices are different.

2. It's all relative to the base price. Toronto will have a higher appreciation because there is more competition due to the poor infrastructure. In Ottawa, you can live in the equivalent of North York and get to parliament in 15-20 minutes. As things get worse, appreciation in the city will get higher since there is a higher cost as the city expands. I don't think it has as much to do with amenities as it does with traffic. Montreal is a great example of this. Lots of amenities, yet housing are appreciating slower. If Toronto has a third the traffic is does, I bet the housing in Toronto would tank and the suburbs would increase dramatically.

3. I don't think this cost is significant on a fuel standpoint. As I stated on 2, I think Time is the killer factor. Toronto needs to do something with roads. That is seriously the only reason I would never move to Toronto. I love the ability to get to Ottawa faster than you can drive from Mississauga to the CN tower.

4. I think it all goes back to an affordability model. 40 years ago most households got by with a single earner... not dual earners often spend 30+% of a household income on housing. That extra cash went straight into RE... sucks to be single. On the G20 Canada does not rate good at all on housing affordability, on virtually all metrics it can be said that Canadian housing is less affordable than it used to be and higher than other countries in the G8 on a net cost basis (after discounting incentives). I think Australia is the only one trending worse and that is due to their RE policies, similar to San Francisco's.

On the bonus I think, I need some more clarity. If the inflation adjusted price is 2% higher today than it was in 1990 bubble... that is a problem. I am not so sure that your last sentence makes any sense since the comparison is in Real dollars. The 1990's were a period of moderate nominal price increases, which is where the CREA see the next few years.

Re: Price of Toronto Homes: Below 44 Year Average « Leveraged Theta

Thiago — Thu, 16 Sep 2010 06:12:05 -0000

I didn't really mean to offend you. Just bringing up some counterpoints, and offering some criticism on your choice of commodity.

The following graph pretty much sum it up
http://www.tradersnarrative...

Long term, housing can never extend past affordability standards for long, no matter what commodities do. People can always reduce consumption of a commodity, housing is a basic need. At some point if a house costs become too expensive (>50% of income) people will just be forced out of the market... and the price will have a cap. I use the term "never" loosely to mean rationally lol.

The problem isn't the market itself it is gov't intervention and the participant.... well ok yes it is the market. When everyone believes that housing is the best investment, and the gov't makes it possible for everyone to own one by relaxing standards you have the possibility of irrational exuberance. You guys are anomalies. Most "rational people" would take whatever the bank is willing to say they can afford and go and buy whatever size house that gets you.... because they think that Canadian housing is the best thing since sliced bread.

Before when you needed a significant downpayment and you have a 15 year term... housing prices tracked income, since a large percentage was based on principal repayment. I am personally of the opinion that all we have done with "this great financial innovation" is prop up housing prices to the point where monthly costs are on par where they have historically been, but people spend their entire working lives paying it off (30+ year amortization).

Investors pay what a house is worth, a couple will pay whatever it costs to shut her up.

Some points on the long side that I think deserve some merit:
House size vs price. Newer homes entering the market are definitely a lot bigger than historically.
The standard of the houses have also gone up considerably. 20 years ago no one had granite countertops, hardwood everywhere ...etc.
Today, almost all new developments have those as standard items.

Re: 2011 S&P 500 Top Down Operating Earnings Estimate Climbs 7.4% « Leveraged Theta

Thiago — Tue, 24 Aug 2010 17:31:54 -0000

Hey Jeff. When I wrote the article it wasn't in particular reference to you. I had started reading it everywhere and decided to dig in.

Now... question... with S&P yielding so much more than Treasuries... The 2Yr was bought at .49 and then traded at .47 right after the auction... I am no math whiz... but I would have to say that PIMCO is predicting that equities are going to fall flat... and with a lot of money. Why would you buy US debt when high quality US corporations are yielding so high like utilities and conglomerates. The FED being so undecided about Stimulus Leakage isn't helping.

Re: Bidding on Euro Volatility « Leveraged Theta

Thiago — Thu, 05 Aug 2010 11:26:38 -0000

Good call. The CDS spreads on Greek debt are still at elevated levels. Last I checked the Yield was 10% on 2-Year bonds. Portugal was the only other PIIG at still high levels. I think once we see the Austerity measures impact the economy there (6 months) and with that the US mid term elections in November... There is definitely going to be some volatility.

If I had to pick a direction I would bet the Eur hits a wall in the in the mid 1.30's and retests the low. USD has been on a freefall since the stress test. The focus is changing to deficit reduction so that should help bolster the dollar. Funny that Timmy wants to let the tax cuts expire but doesn't want to let unemployment expire.

Re: Leveraged Theta

Thiago — Tue, 03 Aug 2010 08:41:45 -0000

Jeff another possible and most likely possibility is that we are in a liquidity trap.

All the signs are showing: Low interest rates failing to stimulate the economy (people aren't borrowing more at lower rates, they are deleveraging), companies are hoarding cash (deflationary environment) and carry trade is established on the USD.

All the asset classes are screaming deflation and the prices are still to high relative to income. Only differences this time is they can't borrow to sustain the prices. This is looking more and more like Japan circa 1990's.

Re: In Search of a Yield [Part Two]

Thiago — Tue, 06 Jul 2010 16:30:51 -0000

Jeff you are overlooking a pretty big assumption.

PE ratio basically overlooks time value of money, and assumes that current earnings are representative of future earnings.

Earnings have increased dramatically over the past year, but sales haven't. The earnings are coming from cost reduction in staffing, reduction in capex, and inventory. Banks for instance make up a large percentage of the S&P EPS and are currently running historically low compensation ratios mainly due to public outcry, and deferred compensation. This is not sustainable, nor is the current EPS priced in the EPS hurt due to regulation changes.

Secondly, government intervention. This recovery isn't stimulus induced. It is 100% government. Debt loads are still high, unemployment is showing no signs of even making a turn around. Congress is inflating a giant balloon of unemployed people by continually extending benefits. When you are losing 600K+ people a month from the work force things look worse then the nice 9,5% number. Banks are making a mint from historically low interest rates. I think if you took a stab at determining what the EPS help from low rates, mortgage purchases and stimulus demand; I wouldn't be surprised if it was somewhere between 30-40%.

Third, The levels of delinquencies/default on mortgages, credit cards and student loans are rising. Current figures indication from Sallie Mae that they are preparing to write down 30-40% of their student loans are not reassuring. Car sales and home sales are still at depressed levels.

I don't think we will see a meaningful recovery until the we start seeing sales growth and a further reduction in home prices, and a serviceable debt load at historically normal rates.

Re: Voluntary Carbon Markets: “Size of a Mouse…Roar of a Lion”

Thiago — Mon, 28 Jun 2010 11:56:15 -0000

Market is kind of dead. People are double selling credit and no one seems willing to do anything about it. This is particularly a problem with european countries trying to make money. If people have no confidence in what they are buying the price will always be arbitrarily low.

Re: With WebSupergoo’s PDF Solution…

Thiago — Tue, 04 May 2010 16:18:51 -0000

This is pretty cool.

Glad you liked RapidMiner. Pretty powerful stuff. Even better when you export the model as Java and build it into an app.

How has your RM adventure go? Crazy times on the market.

Thiago

Re: Solve for Implied Volatility in R

Thiago — Tue, 16 Mar 2010 22:35:50 -0000

This is what genetic algorithms are made for. Finding global maxima/minima where there are multiple local solutions. You need to make the switch sometime. Try RapidMiner!

Re: Outlook? I got one…

Thiago — Fri, 29 Jan 2010 08:46:03 -0000

It could happen. It is really a black swan prediction.

Fed is looking like it is not unanimous, US Fiscal deficit (freezing of budgets) looks ineffective,and growth in emerging countries stalling... could theoretically cause this to happen. But your right the chances are slim.

Re: Outlook? I got one…

Thiago — Thu, 28 Jan 2010 16:43:55 -0000

Gold over 1100 Us dollar falls. Oil below 70. Djia below 10k. S&P below 1040. Recovery stumbles on deficit talk and stimulus withdrawl. Just to make it fun.

Re: Tax The Rich — Now!

Thiago — Sat, 09 Jan 2010 17:59:50 -0000

Yeah I agree. Prices in the markets are crazy and has been increasingly volatile. But of there has been a lot of information to digest and the response is somewhat rational. With all of the instability in the US and world political environment, I see it being very hard to assess a lot of long term macro issues.

But do you really think a tax designed to remove liquidity and a well arbitraged market is going to help? It is going to make things much more volatile by removing trading volume and increasing the weighting of that marginal investor. And it would disproportionately affect the people not responsible for this mess. Real Estate and Securitizing loans... are not highly traded issues. The expense would come out of other sectors of finance. Not efficient method of taxation. It would be like increasing gasoline tax to make the domestic automobile sector pay for its bailout.

Re: Tax The Rich — Now!

Thiago — Sat, 09 Jan 2010 17:21:57 -0000

Articles such as this are pure one sided and play on the current media frenzy.

I hope they do put a transaction tax so the individuals here can see how much of this tax will hurt the lives of the poorest Americans. Sure it will hurt finance companies but it will quickly flow down to the price of goods. This tax unlike others will hurt capitalism at its core but creating inefficiencies in free markets. Spreads on Forex, Stock markets, Real Estate and almost all traded items will increase. It will prevent efficient price discovery and the ability for effective arbitrage. The financial markets are used by main street to a HUGE extent. Procter & Gamble, Airlines, Car companies can hedge the price of commodities, currency and equity. By taking that away you are adding risk to their business or at the very least increasing the cost. For low margin items there will be a fairly large effect.

This is a TERRIBLE IDEA. But yeah tax the bankers... by hurting market efficiency. Sounds good.

Side note... taxing the rich... also a bad idea. You may or may not believe the trickle down theory... but you can't dispute the fact that venture capitalists/investors provide the majority of startup capital and feed innovation. That money comes from the rich... and they will move. If you didn't have to work... there isn't much reason to stay. The mobility of the rich is much higher than the average Joe. So in a way you are sacrificing short term pain (restructuing the tax system, financial regulation, asset devaluation) by funding the deficit with higher taxes.

Good Luck...from Canada.

Re: Haymen Analysis

Thiago — Wed, 15 Jul 2009 18:34:46 -0000

It is actually listed as negative and for many years the US have been losing capital. Their best case scenario shows a small gain though, but I doubt anytime soon that net capital flows will reverse especially with all the downside on US assets and the fear or quantitative easing.

Re: Haymen Analysis

Thiago — Mon, 13 Jul 2009 20:06:46 -0000

Wouldn't that be the net capital outflows?