Next Big Thing? Weed Beer, Folks

❝ For large beverage companies, the push into pot is all about the fear of missing out. After getting beat on trends including craft beer, coconut water, and flavored seltzer, the drink giants don’t want to miss the next trendy ingredient: cannabis. Whether it’s the THC that gets you high or the nonpsychoactive CBD, weed components are being infused into drinks with an eye toward the mass market…

Legal marijuana sales are expected to rise to $11 billion in the U.S. this year, from $9 billion in 2017, and cannabis-infused beverages account for less than 1 percent of that. But a recent report from the bank Canaccord Genuity Group Inc. estimated that sales of drinks infused with THC or CBD, forecast to make up 20 percent of the edibles market, will reach $600 million in sales in the U.S. by 2022. In Colorado, which became the first state to legalize recreational marijuana in 2014, sales of cannabis drinks almost doubled in 2017 and are up an additional 18 percent in the first half of this year, according to Flowhub LLC, which tracks marijuana sales data.

If you’re an investor don’t miss the chance to catch the next wave. Someone like me who doesn’t smoke ANYTHING and simply stopped drinking most anything alcoholic, as well, from lack of interest years ago is only interested in products which might make for tasty scones or Alice B Toklas brownies. Though I admit to owning a few shares of a leading grower in the Great White North.

Top 25 U.S. hedge fund managers take home $13 billion — while half of hedge funds lost money


Or you could find yourself a good old-fashioned Ponzi scheme to invest in

Hedge funds lost money for their investors last year but the industry’s top-paid managers had a banner year, with five men earning more than $1 billion each in 2015…

Together, the 25 best-paid hedge fund managers took home $13 billion, 10 percent more than the previous year. For many, computer models played a critical role in their success….

The higher payday came “despite the fact that roughly half of all hedge funds lost money last year,” said Institutional Investor Editor Michael Peltz. He added that “about half of the 25 highest-earning hedge fund managers used computer-generated investment strategies to produce their investment gains.”

So, they’re selling their “talent” to investors. It seems to lie mostly in picking the right statisticians and coders to license an investment package from.

Hmmm.

China’s economy is bigger than you think

With China set to announce its third-quarter gross domestic product report on Monday, skepticism over its economic data is arising anew.

Recall that Bill Gross has described China as “the mystery meat of emerging-market countries.” Premier Li Keqiang, before taking that post, said he didn’t rely on official statistics. He preferred things like rail freight and electricity use to gauge activity.

So is China about to puff up its economic report card once more?

Quite the contrary, according to one of the world’s foremost emerging market investors, Mark Mobius.

“I know there’s a lot of debate as to whether the numbers are true, whether it’s really 7 percent, but our numbers indicate that it is at least that,” the chairman of the emerging-markets group at Franklin Templeton Investments said in a recent interview with Bloomberg TV. “We think that a lot of the economy is not really being counted because China is being converted from a manufacturing-oriented economy to a service economy.”

That gels with the view of Rhodium Group analysts in a September report for the Center for Strategic and International Studies.

Their 200-plus page study found China’s GDP methodologies are largely in line with international practices and charges that estimates are sheer fabrications are “misinformed.”…China’s economy is bigger, not smaller than official data suggests, the analysts found, with the services sector the hardest to measure and real estate even more important than currently reflected…

As for Monday’s reading, economists forecast the government will say GDP growth slowed to 6.8 percent in the three months through September from a year earlier. That would be the slowest quarterly pace since 2009.

That isn’t deterring Mobius, who says: “The transition is definitely on its way and is going to be successful.”

I could write pages on the topic – and won’t. I honestly don’t think the average American cares enough to look beyond the party line fed officially from the White House and Congress – and willingly, by the Beltway Press like the Washington POST. And, of course, that includes the New York TIMES. Just let me back up a Wall Street minute.

I was never interested in serious investing for the future. My bad. So, I was really pissed-off when the criminal derivative called the Great Recession hit all of us. What little I had squirreled away in what I thought were safe, conservative funds was diminished by over half in a matter of weeks.

Pissed-off, I decided to manage my savings myself. Took what I had left to cash and studied business and industries I knew something about and prepared for the start of the slow turnaround I expected. After all the creeps in charge had damaged the world economy as severely as the Wall Street Crash of 1929. Some aspects of economic life might never return.

I started investing just a few months before March, 2009 – the bottom. Since then, the cash I had has multiplied over 500%. The industries I knew about were mostly geeky, tech-oriented. My business experience the last 30 years was grounded in Asian producers, American companies invested in Asia.

I spent those years witnessing all the usual crap about Asian misconceptions: country by country, Japan, Taiwan, finally China. I learned how to survive a culture of bribery that was thousands of years old – and changed dramatically in just the past few years. I chuckled over Americans discovering Chinese Marxists figuring out how to heat up the achievement of socialist ideals through a market economy – something I was berated for seriously discussing in the late 1950’s. Really.

I’ve watched and listened to the same official crap, pandered and promulgated by everyone from the Compradore pimps who fled China with Chiang Kai-shek in 1949 to the short sellers who make a quick fortune with their quarterly expose of one or another corrupt little corporate entity – blathering about crooks who couldn’t even stand in the shadows of the truly corrupt barons of Wall Street – or Wolfsburg.

But, I also paid attention to folks like Stephen Roach, Peter Nolan, Richard Evans and, yes, Mark Mobius…and former White House advisors like Ian Bremmer because after all, even if Obama’s foreign policy can’t and won’t improve upon that of John Foster Dulles – he still really needs to know what is going on.

I guess I probably should have gotten pissed off, sooner, eh? 🙂

Climate change, responsible investing and divestment

Around the world, institutional investors – including pension funds, insurance companies, philanthropic endowments, and universities – are grappling with the question of whether to divest from oil, gas, and coal companies. The reason, of course, is climate change: unless fossil-fuel consumption is cut sharply – and phased out entirely by around 2070, in favor of zero-carbon energy such as solar power – the world will suffer unacceptable risks from human-induced global warming. How should responsible investors behave in the face of these unprecedented risks?

Divestment is indeed one answer, for several reasons. One is simple self-interest: the fossil-fuel industry will be a bad investment in a world that is shifting decisively to renewables. (Though there will be exceptions; for example, fossil-fuel development in the poorest countries will continue even after cutbacks are demanded in the rich countries, in order to advance poverty reduction.)

Moreover, divestment would help accelerate that shift, by starving the industry of investment capital – or at least raising the cost of capital to firms that are carrying out irresponsible oil, gas, and coal exploration and development, despite the urgent need to cut back. Though no single institutional investor can make a significant difference, hundreds of large investors holding trillions of dollars of assets certainly can.

Indeed, divestment by leading investors sends a powerful message to the world that climate change is far too dangerous to accept further delays in the transition to a low-carbon future. Divestment is not the only way to send such a message, but it is a potentially powerful one.

Finally, investors may divest for moral reasons. Many investors do not want to be associated with an industry responsible for potential global calamity, and especially with companies that throw their money and influence against meaningful action to combat climate change. For similar reasons, many investors do not want handgun manufacturers or tobacco companies in their portfolios…

Of course, the need for climate action does not stop with investors; sustainable consumption and production practices by businesses and individuals must be part of the solution as well. The transition to a safe, low-carbon future requires all parts of society to act responsibly and with foresight. As leaders in education, research, and problem solving, universities have a unique responsibility and opportunity to lead, including as responsible and ethical investors.

RTFA for alternatives suitable to the somewhat-ethically-challenged. Plus – a historical comparison to a blast from the past from the tobacco industry. An example of profits and dividends from an investment with no socially-redeeming value whatsoever.

Rising wealth for the wealthy — continued decline for the rest of us

During the first two years of the nation’s economic recovery, the mean net worth of households in the upper 7% of the wealth distribution rose by an estimated 28%, while the mean net worth of households in the lower 93% dropped by 4%, according to a Pew Research Center analysis of newly released Census Bureau data…

These wide variances were driven by the fact that the stock and bond market rallied during the 2009 to 2011 period while the housing market remained flat.

Affluent households typically have their assets concentrated in stocks and other financial holdings, while less affluent households typically have their wealth more heavily concentrated in the value of their home…

Overall, the wealth of America’s households rose by $5 trillion, or 14%, during this period, from $35.2 trillion in 2009 to $40.2 trillion in 2011. Household wealth is the sum of all assets, such as a home, car, real property, a 401(k), stocks and other financial holdings, minus the sum of all debts, such as a mortgage, car loan, credit card debt and student loans.

During the period under study, the S&P 500 rose by 34% (and has since risen by an additional 26%), while the S&P/Case-Shiller home price index fell by 5%, continuing a steep slide that began with the crash of the housing market in 2006…

The different performance of financial asset and housing markets from 2009 to 2011 explains virtually all of the variances in the trajectories of wealth holdings among affluent and less affluent households during this period. Among households with net worth of $500,000 or more, 65% of their wealth comes from financial holdings, such as stocks, bonds and 401(k) accounts, and 17% comes from their home. Among households with net worth of less than $500,000, just 33% of their wealth comes from financial assets and 50% comes from their home…

Looking at the period from 2005 to 2009, Census Bureau data show that mean net worth declined by 12% for households as a whole but remained unchanged for households with a net worth of $500,000 and over. Households in that top wealth category had a mean of $1,590,075 in wealth in 2005, $1,585,441 in 2009 and $1,920,956 in 2011.

Ain’t no one in that 7% living on my block – or in my neighborhood for that matter. And I don’t begrudge anyone the money they earned. Last job I had before retiring I worked for a subcontractor and my specialties often found me working on McMansions. Easily 98% of those folks earned their money. Almost no trust-funders.

What pisses me off is the power their money has over our elected officials. Politics in America is deliberately guided by the almighty dollar. Politicians prefer it that way. Corporate lobbyists prefer it that way. The greed breed that’s stolen the mantle of what is now conservatism in America absolutely loves it.

So, we get screwed.

Trial run of Twitter IPO declared a success

twitter ipo test

The New York stock exchange has declared a test of Twitter’s stock market debut a success as it tries to avoid the technical problems that marred Facebook’s flotation last year.

While the NYSE often does testing on the weekend, this was the first time the exchange conducted a mock initial public offering of shares. Traders from member firms gathered with NYSE staff on Saturday to run simulated buy and sell orders and test the flow of those orders and open the stock…

Twitter will be the biggest technology IPO since Facebook went public in May 2012. While Nasdaq won Facebook’s listing, one of the biggest flotations in years, the debut was hit with trading delays and order failures.

The Securities and Exchange Commission, the US regulator, later fined Nasdaq $10m (£6m), the largest sum ever levied against an exchange.

Twitter plans to sell 70m shares between $17 and $20 each for a possible valuation of $1.6bn. Shares will trade under the ticker TWTR.

While I have experimented with a stock-tracking site – one that followed my personal investments – I’m not about to start offering anyone advice about picking stocks, investing for their retirement, whatever their goals may be.

This test was particularly interesting to me because of my years as a geek and an interest in global markets, global business, that flows naturally from modern economics.

The Political Economy of 2013

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Watching America’s leaders scramble in the closing days of 2012 to avoid a “fiscal cliff” that would plunge the economy into recession was yet another illustration of an inconvenient truth: messy politics remains a major driver of economic developments.

In some cases during 2012, politics was a force for good: consider Prime Minister Mario Monti’s ability to pull Italy back from the brink of financial turmoil. But, in other cases, like Greece, political dysfunction aggravated economic problems.

Close and defining linkages between politics and economics are likely to persist in 2013. Having said this, we should also expect much greater segmentation in terms of impact – and that the consequences will affect both individual countries and the global system as a whole.

In some countries – for example, Italy, Japan, and the United States – politics will remain the primary driver of economic-policy approaches. But elsewhere – China, Egypt, Germany, and Greece come to mind – the reverse will be true, with economics becoming a key determinant of political outcomes.

This duality in causation speaks to a world that will become more heterogeneous in 2013 – and in at least two ways: it will lack unifying political themes, and it will be subject to multi-speed growth and financial dynamics that imply a range of possible scenarios for multilateral policy interactions…

How politics and economics interact nationally and globally is one of the important questions for 2013 and beyond. There are three scenarios: good economics and effective politics provide the basis for a growing and more cooperative global economy; bad economics interact with dysfunctional politics to ruin the day; or the world muddles through, increasingly unstable, as a tug of war between economics and politics plays out, with no clear result or direction.

Part of the answer depends on what happens in three countries in particular – China, Germany, and the US. Their economic and political stability is essential to the well-being of a world economy that has yet to recover fully from the 2008 global financial crisis.

Current indications, albeit incomplete, suggest that the three will continue to anchor the global economy in 2013. That is the good news. The bad news is that their anchor may remain both tentative and insufficient to restore the level of growth and financial stability to which billions of people aspire.

Mohamed El-Erian pretty much speaks in moderate terms even when discussing immoderate and opportunist politicians. He’s a nice guy. Even for a NY Jets fan.

He’s worth listening to if for nothing else his experience within and without the boundaries of international economics. Between the IMF and PIMCO, politicians stand in line asking him to run for elective office. But, then, he’d have to spend even more time with politicians. Most of whom – I’m afraid – aren’t any better than the hyenas we have in Congress.

China offers to buy Greek debt


Wen Jiabao and George Papandreou
Daylife/Getty Images used by permission

China has offered to buy Greek government bonds, in a show of support for the country whose debt burden pushed the euro zone into a crisis.

Wen Jiabao, the Chinese prime minister, made the offer on Saturday at the start of a two-day visit to Greece, his first stop on a tour of Europe.

During talks with George Papandreou, the Greek prime minister, Wen said China would double its trade ties with Greece over the next five years, underscoring Beijing’s use of economic strength to win friends.

“China will undertake a great effort to support euro zone countries and Greece to overcome the crisis,” Wen said…

Chinese state entities have been generally conservative about investing in foreign financial markets and the Chinese government faces domestic political criticism over losses incurred by these entities during the global financial crisis…

A senior Greek government official said Wen made clear his offer concerned buying bonds only when the country returned to markets.

Greece, which is currently funded through a 110 billion euro ($150 billion) EU/IMF bailout, is only issuing short-term treasury bills for the time being…

This is a pretty good chuckle for anyone who was bored silly with the daily whine from witless Wall Street analysts over Greek debt. Because you know what will follow this announcement.

A daily whine from timorous Wall Street analysts over China buying Greek debt.

Bears and the State of Housing

Of all the uncertainties in our halting economic recovery, the housing market may be the most confusing of all…

I can’t claim to clear up all the uncertainty. But I do want to suggest a framework for figuring out whether you lean bearish or less bearish: do you believe that housing is a luxury good and that societies spend more on it as they get richer? Or do you think it’s more like food, clothing and other staples that account for an ever smaller share of consumer spending over time..?

There is a third stream which has had even more influence – ignored in this article: Flippers and others investing in housing for a quick buck.

The difference between these two views ends up being huge, and it’s become the subject of an intriguing debate…

No one doubts that prices rose roughly with incomes from 1970 to 2000. The issue is whether that period was an exception. Housing bears like Barry Ritholtz, an investment researcher and popular blogger, say it was. The government was adding new tax breaks for homeownership, and interest rates were falling. These trends won’t repeat themselves, the bears say.

As evidence, they can point to a historical data series collected by Mr. Case’s longtime collaborator, Robert Shiller. It suggests that house prices rose no faster than inflation for much of the last century.

The pattern makes some intuitive sense, too. As people become richer, they spend a shrinking share of their income on the basics. Think of it this way: someone who gets a big raise doesn’t usually spend it on groceries. You can see how shelter seems as if it might also qualify as a staple and, like food, would account for a shrinking share of consumer spending over time. In that case, house prices should rise at about the same rate as general inflation and well below incomes.

Here’s the scary thing, at least for homeowners: if this view is correct, house prices may still be overvalued by something like 30 percent. That’s roughly the gap between average household income growth and inflation over the last generation…

The second, less bearish group of economists doesn’t buy this. This group includes Mr. Case, Mark Zandi of Moody’s Analytics and Tom Lawler, a Virginia economist who forecast the end of the housing boom before many others did. They say they believe that house prices rise nearly as fast, if not quite as fast, as incomes, and that real estate is no longer in a bubble…

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