Including: the witchcraft of technical chartists, Herbalife’s pyramid scheme, Bill Gross tweets, an unsurprising Swiss Housing Bubble, and the wisdom of Eurozone finance ministers.

Good morning

The headlines:

  1. S&P sued.

    Link: wrote about it here. 


  2. Switzerland’s housing prices.

    Link: the money must flow somewhere.

    Switzerland is very concerned that it’s experiencing a housing bubble. And so it should be – because in a financially apocalyptic world of dollars, euros and pounds, the swiss franc is Shangri La.

    But it doesn’t make sense to just hold swiss francs in a bank account – investors also want to do something productive with that money. So they buy Swiss property, because that’s the easiest thing to do. And seeing as all the demand made Swiss housing prices rise by 6.3% last year, compared to the Eurozone’s collective negative 1.8%; the investing public will confuse past performance with future performance, continue to buy Swiss property, and make the whole prophecy self-fulfilling.

    Until something unexpected happens.

    Hence the Swiss concern.

  3. Is Europe really out of its crisis?

    Link: optimism ≠ realism 

    European politicians all over have been declaring that Europe has managed to by-pass the worst of the crisis. Until this weekend, when Berlusconi started trying to bribe the Italians into voting for him, and Spain started accusing Mr Rajoy’s government of corruption.

    At which point, German Finance Minister Wolfgang Schaeuble announced:

    “The euro crisis is not over.”

    True dat.

  4. Herbalife is a “pyramid scheme”.

    Link: why yes, it is.

    Herbalife is famous for coaxing middle-aged housewives into hosting parties à la tupperware to sell herbal supplements to their offspring through a process of guilt trips and pleading.

    The housewife has usually been persuaded to buy-in to become a salesperson by a sharply-dressed woman that she met in her pilates class. She then discovers that she gets to share in the profits of the firm AND her profits increase every time she persuades someone else to buy-in (because, obviously, that brings a whole new set of guilt-ridden young adults to the supplement table).

    The whole thing looks, smells and talks like a pyramid scheme. And as the rule goes: if it looks like a duck, smells like a duck, and quacks like a duck…

    The Federal Trade Commission has announced that Herbalife has been the subject of multiple complaints, and it’s rumoured to be under investigation by “law-enforcement” agents.

    It’s like the storyline of a retail mafia movie.

  5. Richard III found in a parking lot.

    Link: my kingdom for a bentley.

    I just wanted to express some amazement that they managed to identify a skeleton, which they found beneath a Leicester Square parking lot, as, in fact, Richard III.


  6. Buy Italian bonds!

    Link: listen to PIMCO, darling, listen to PIMCO.

    Bill Gross, famous for being the CFO of one of the largest fund managers in the world (PIMCO) has tweeted an investment view (#BigNews). He tweeted:

    Don’t retreat – just be cautious. Central bank check writing creates bubbles/distortions in all markets. What to do??

    And then answered his own tweet with:

    Sell long term bonds. Buy low P/E stocks, TIPS and Italy bonds.

    Why? Because long term bonds are destroyed by inflation (so you don’t want those if the Central Bank is engaged in quantitative easing), low P/E stocks are more likely to be underpriced than high P/E stocks (and stocks are a great inflation hedge, so you should buy them), TIPS are bonds that are adjusted for inflation (also an inflation hedge), and Italy bonds are priced to default (but the more inflation that takes place, the easier it will be for Italy to pay back its bonds, which makes default unlikely).

    I like it.

  7. A technical chartist’s commentary on Apple.

    Link: smells, bells and superstition.

    Technical chartists are financial quacks. They’re right about 50% of the time – which would be the same outcome as if you were flipping a coin.

    They look for signs in the charts, mapping out lines and crosses and the interchange of randomly selected periods of average share price.

    It’s crazy, but entertaining. Like checking your horoscope.

    This guy is saying that the Apple share price downward spiral isn’t over. But he also only sold out when the stock price had fallen from $700 to $637. So…where were his charts then?

That’s all for now.

Have a good day.