Monday, August 19, 2019
Also I will be on the road for six weeks. Expect the posts to be sporadic at best.
The most interesting thing I have seen in the past three months was an interview on Real Vision by Shannon McConaghy of Horseman Capital entitled "Prepare for a Japanese Banking Meltdown?".
The title on the interview has a question mark. I am not sure that Shannon would include the question mark.
But the argument is pretty simple really. Japanese regional banks have - for decades - had excess funds. They have found it extremely hard to lend at adequate rates as excess funds is the Japanese condition. Rates the banks can achieve on loans are very low.
The result is that Japanese banks (especially regional banks) have very low returns on equity and generally trade below book.
As an extreme example about fifteen years ago I asked Bank of Kagoshima why they could not achieve their four percent ROE target and they said that it would "put too much strain on the local community." That bank is gone now - but the problem remains right across Japanese banking.
Shannon McConaghy's thesis is that "Abenomics" has made the problem much worse. He states that the average interest rate achieved on a loan by a Japanese regional bank in the first half of this year was about 79 basis points. The rate was 62 basis points in May but there may be some seasonality.* He thinks it costs about a percent to run the bank. There are staff and systems to pay and the like. So he thinks that Japanese regional banks will be loss making before they have any credit losses. Then of course they have been rolling credit losses in zombie businesses for decades and so after the credit losses settle there won't be any equity left to earn any return on anyway.
Shannon thinks the problem has been masked because the banks have typically invested their excess funds in Japanese Government Bonds (JGBs) and the yield on JGBs has gone pretty sharply negative. The banks this decade have sold significant amounts of these JGBs and reflected the gains on these sales as one-off income. They then shifted much of their securities holdings into a unique type of investment trust, largely invested in domestic equities, which under unusual accounting conventions allowed the banks to report capital gains as interest income. This means they are still showing positive ROEs but earnings are highly reliant on a constantly rising domestic equity market to generate gains, which is problematic as the Japanese equity market is still down by more than 10% from its peak last year. The situation is unlikely to improve as the underlying margins are already near zero and incremental loans actually lose money after costs.
[Shannon runs a Japan fund. This talk was so interesting I wrote to Shannon and got on his mailing list. I recommend readers do the same. There is plenty there that is interesting.]
Anyway all this accords a little with my view of bank margins and crises. The determining factor of how well your banks recovered from the financial crisis by-and-large wasn't how many or few losses your banks took (Iceland excepted), rather it was what was the underlying pre-tax, pre-provision profitability of your banking sector.
The US banking sector has pretty decent margins - and pre-tax, pre-provision profits were about $300 billion per year. In three and a bit years they had covered a trillion dollars in losses. The banks are mostly okay now.
German banks have very thin margins and whilst they had less credit losses they had considerably less income to offset them. The German banks (notably Deutsche and Commerzbank) look deeply problematic. Italian banks are also very low margin and slightly higher credit losses and they have been catastrophic investments.
Bank margins are really important
Bank margins were once a concern to bank investors and not really to the general public. After all low margins generally meant cheaper finance. High margin banks (like Australian banks) leave you with the uneasy feeling you are being ripped off.
But the world has changed. Abenomics - which includes the deliberate pushing of interest rates to very low or negative levels may suppress bank margins. And if you suppress bank margins enough your banks go bust. And if your banks are stressed they stop lending and your economy slows down.
In this view of the world monetary policy (cutting rates when you need a stimulus) not only stops working but becomes counter-productive. It blows up your bank and causes an economic crisis.
The Raoul Pal view of the world
Raul Pal runs real vision and has a twitter account that is absolutely worth following. He has been harping on about a single chart - the Eurostoxx Bank Index going back for thirty years.
This index is bouncing along its thirty year low. [No dear Americans, stocks do not always go up over a generation.]
Raoul rather grandly says that "this level in the Eurostoxx Banks Index is probably THE most important level of ANY chart pattern in the history of equity markets". [Emphasis is in the original.]
And to some extend I think he is right. What the Bank of Japan is doing to Japanese regional banks the European Central Bank is doing to European banks. The possibilities are that:
1. The ECB cuts rates further, blowing up the banking sector and causing the mother of all recessions starting with the weakest banks outwards (ie starting in Germany) or
2. At some point they can't cut rates and you get a recession anyway and as the banks have almost no margin left the credit losses leave them pretty darn impaired.
And the stakes couldn't be higher. A generalised collapse of the European banks would be a pretty big risk to the European experiment. It won't have been caused by Europe per-se, the English banks look pretty dire too, but it will be blamed on Europe, and the resultant unemployment will have large political consequences. When Raoul suggests that "this level in the Eurostoxx Banks Index is probably the most important level of any chart pattern in the history of equity markets" he is being appropriately alarmist - at least if the Eurocrats do not act accordingly.
Whatever - the Raoul Pal view of the world is unremittingly bearish. The usual central banks will bail us out narrative gets exposed as impossible. It gets ugly from here.
I am not sure it is that simple always - but the reason Shannon McConaghy thinks that Japanese regional banks are uninvestable is the same reason European mega-banks and the Eurostoxx Bank Index is uninvestable. The European banks are deeply problematic.
But it doesn't have to be that way and it isn't irrevocably that way for the whole sector. And the ECB isn't totally trapped either.
But those are really the subject of the next few blog posts.
PS. I have mostly equity market readers. For this series I probably should have a few readers in the central banks too. Pass it on if you can.
*I asked Shannon for the source of this data - he sent me this link.
Also for avoidance of doubt I am long some European banks and currently short only one. The banks look super-cheap. But Japanese regionals looked super-cheap for decades and got cheaper and cheaper and cheaper.
If I entirely believed the Raoul Pal view of the world I would not hold any European banking stocks. My doubts about th Raoul Pal view are explored in the next few posts.
Saturday, August 17, 2019
And it clearly has been. It took a charge (ie recognised future losses) in 2017 and 2018. In accounting parlance they RECOGNISED huge losses in 2017 and 2018 for payments they will have to make in the future.
And Markopolis points to these charges as the evidence that GE has the worst long term care business in insurance.
Here is a slide that had my jaw dropping:
GE's Employer Re subsidiary (one of the two places it has long term care policies) it seems has a 527 percent loss ratio.
Yes, it does, in the year they take the huge reserve hit.
Markopolis is arguing the provisions they have already taken is proof that the book is bad. And he doesn't recognise current payments are way way below these provisions.
The Employers Re cash flow statement
So here is another way of looking at it. This is the operating part of the cash flow statement of Employers Re taken from the statutory statements. You can find the original here.
Yes, you see this right. The company had 500 million of premiums collected and 597 million of investment income. It paid out 893 million in benefit loss related payments. After all the sundry expenses Employers Re was still operating cash flow positive by more than 80 million.
The main source of the massive cash draw central to the Markopolis thesis is still cash flow positive. The 527 percent loss reserve above isn't a current payment by Employers Re - it is an estimate of their future payments. Current payments are completely manageable.
Union Fidelity Life - the other GE insurance company - the one with a mere 280 percent combined ratio - is actually cash flow negative. And the combined is marginally cash flow negative.
But that is not the point. Current cash flows are not the issue. And the combined ratio that Markopolis trumpets are not indicative of current cash flow. They are the provisions that GE is making for future cash flows.
Future cash flows at the insurance companies
Employers Re will not stay cash flow positive. Not close. Several things are going to happen to make it worse. These things will also happen at Union Life and both companies will become deeply cash flow negative.
First investment income is going to go down. This is inevitable. These policies were written 15 years ago or more and some of the bonds that back these policies were also purchased 15 years ago. As investment income goes down the cash-flow of the book will deteriorate.
Further as time goes on the insured get older. And as they pass through their 80s they will be more likely to wind up in nursing homes. Claims will increase.
Finally, for better or for worse some of the insured will stop making payments. The main reason this happens is that they die. The average age of insured here is in the late 70s.
When everyone has stopped making payments of course the business has run-off. Any cash left in the holding company can finally be distributed to the holding company (that is ultimately the GE parent company).
So how did this impact GE holding company cash flow so negatively?
GE has an agreement with the insurance commissioner to maintain a 300 percent risk based capital ratio at these subsidiaries. When the subsidiaries take additional provisions for future claims it can cause a cash draw on the parent company even if the actual insurance companies are cash flow positive.
At year end last year the two companies had a capital adequacy ratio of 365 and 426 percent. They can take small hits from here without any cash charge to the parent company. But that is only after they took accounts of massive capital contributions by the GE parent company.
How does this run off?
After the capital contributions there are tens of billions of excess at the insurance companies. Alas this cannot be accessed for decades because of the promise to maintain 300 percent capital adequacy ratios. My guess - and at this point it is only an educated guess - that the company will still be under-reserved and further losses will be booked. But those losses will be insufficient to absorb the excess capital at the insurance companies. Over the next thirty years these insurance companies will be both a source of losses (provisioning) and a source of parent company cash (as the excess reserves get released).
This is so far from the Markopolis view as to be comical.
The average cost of a month in a nursing home is about $7000.
There are about 270 thousand policies outstanding. That number falls all the time because there are a lot of ninety year olds in the book and they die.
The statutory reserves per policy outstanding is about $75000. [You can multiply this out. It is a lot.]
In other words give-or-take there is about 11 months in a nursing home provisioned per policy holder.
The average length of stay in a nursing home seems to be about 29 months as per this.
According to this a senior citizen has about a one in four chance of winding up in a nursing home at some point.
So this looks fine. If the claim rate winds up being one in four and there is 11 months provisioned per policy holder it looks like there is 44 months provisioned per claimant. And the average claim is only 29 months.
But it is not so simple. People who are insured are more likely to wind up in a nursing home because either it is already paid for or at least it is already partially paid for.
If you know the claims rate (by age and sex) on their book and the age and sex distribution of insured you could work out whether the book was under-reserved for or not.
I suspect the provisioning is line-ball accurate here now. They haven't written a new policy in over a decade so the way the book runs off should be utterly obvious to GE now.
But I do not have the claim curves.
I guess this was the sort of information I was hoping for from Harry.
But I didn't get it.
Thursday, August 15, 2019
The report is I highly negative and I believe utterly misleading.
This report focuses on the Long Term Care business.
I guess all of these are "too good to be true" too. Indeed the entire high-end of US manufacturing is worse than Madoff if you believe Mr Markopolis.
For disclosure: we are long a little bit of GE with the emphasis on "small". GE is a problematic company and a zero is a possibility. However the Markopolis report is not an accurate guide to GE's problems.
Friday, August 2, 2019
In those 400 thousand people (as in any medium sized city) there are almost certainly people doing things that they should not and things that you would not want to see on the front page of the local paper. They are selling products that rip off customers, they are doing things that threaten the reputation of Berkshire.
It is unreasonable in any large company to expect that there is no corporate mischief, no customers that are being misled, no staff doing things that are wrong.
But you can expect the management to monitor staff behaviour and to create incentives to do the right thing and to appropriately deal with staff that do the wrong thing. You should also expect them to compensate customers who fall victim and that compensation should be expensive.
Warren Buffett will also endlessly talk about the things he is doing to ensure that integrity is what is rewarded at Berkshire.
The Sydney Morning Herald today led with a headline that in leaked letters to consultants Dr Ken Henry (then Chair of National Australia Bank) had said that bad things were being done - even as they spoke - at National Australia Bank. To quote:
[Dr Henry is] confident that there are products currently being sold now that they will need to remediate in the future ([and he] highlighted an example of SMSF borrowing to invest in managed funds).This looks pretty like the thing that Warren Buffett said about Berkshire. And it was said - as the context makes clear - to have the consultants who were hired to help in remediating the matter. In other words the admission is what is required to fix the problem.
A while ago I went to look at the lending practices of the Australian banks and I am confident that all four big banks had bad processes, and ripped off customers. As I have stated elsewhere I think that National Australia was the least bad of a bad lot. But it clearly had things to fix.
I still think NAB has things to fix. So does Westpac, CBA and ANZ [in that order I believe]. Stating it and acting on it is a necessary part of the process.
That Ken Henry actually stated it and presumably to a consultant he had hired to help reflects well, not poorly on him.
PS. I also think alas that Dr Henry is right. The mis-selling scandals cost British banks billions of pounds. PPI mis-selling alone was above 20 billion pounds. There has been so much mischief at Australian banks that this issue is certain to bite them in the future. Dr Henry clearly identified the issue and wanted to do something about it. He should be applauded.
Thursday, April 25, 2019
Alice was a war-widow who looked after me as a child, and I looked after a little in old age.
In memory, here is a post from 2009, the last time I went to the remembrance parade with Alice.
My mother was raised in an orphanage in Brisbane run by Legacy. As far as I know, she doesn't go to A.N.Z.A.C. Day parades, but does go to the Dawn Service. The "Legacy Kids"/orphans have their own get-togethers. Every August for the past 26 years, the orphans have a re-union on the birthday of the woman who ran the orphanage. She was a Legacy employee who had lost her husband on the Kokoda Track. One of her brothers was a Rat of Tobrook (9th Division) and El Alemein veteran, who later lost an arm at Milne Bay in Papua New Guinea. Another of her brothers is buried in France, killed while flying for the RAF. After her husband died, she lost her only child. She later gave back by running the orphanage for Legacy. She touched hundreds of orphan's lives. They never forgot her. She was also my Godmother.
My Grandfather was killed in Sydney during WWII while serving in the Australian Army. My mother has never visited his grave - its just too painful, even after all these years. My father has an uncle buried in northern France, a casualty of WWI's Battle of the Somme. No one from our family has ever visited his grave to pay our respects. There are many families like ours in Australia with similar stories to tell.
Lest We Forget.
The 7th Division left Australia in October 1940 for the Middle East. Over the next two months, the 7th was concentrated in Palestine. It was slotted for a move to Greece to help in the defence against Axis invasion, but instead moved into defensive positions in the Western Desert. Parts of the Division under the command of Maj General Allen crossed into Syria and fought a hard won victory in the campaign against the Vichy French . 18th Brigade excelled itself as part of the defence of Tobruk. With Japanese invasion of Australia imminent, the Division was recalled home. Elements of the Division (2/3rd Machine Gun Battalion, 2/2 Pioneer Battalion, 2/2 CCS,2/6 Fld Pk Coy and 105 Gen Tpt Coy)were diverted to Java. They fought a defensive campaign against overwhelming Japanese odds and were only forced to surrender after an early capitulation by the Dutch forces there.
The Division moved to New Guinea and established headquarters in Port Moresby. The timely arrival of the Division in New Guinea helped to halt the Japanese advance.. 21st Brigade fought a bitter campaign of attrition on the Kokoda Track,until replaced by 25th Brigade who slowly forced the Japanese northwards. 18th Brigade and other Australian units inflicted the first decisive defeat of the Japanese on land in World War 11 at Milne Bay and then at Buna and Sanananda in January 1943. 21st Brigade and the militia 39tth Battalion won a costly victory at Gona in December 1942. George Vasey took over command of the Division in October 1942, until his death in a plane crash in 1945. Major General Milford then took over command until the end of the war. In 1943, the Division was airlifted from Port Moresby to Nadzab in the Markham Valley. After an advance on Lae, the Markham and Ramu Valleys were soon swept clear of Japanese troops. A bloody campaign in the mountains of the Finisterre Ranges followed.
Saturday, April 20, 2019
You could turn a buyback into a dividend by selling your own shares in precisely the proportion that the company bought shares back. Then your percentage ownership was unchanged and you would have (in cash) your share of the monies that the company distributed to its owners.
Pay up or die.
Valeant instituted a patient subsidy program so that they could crank the prices to levels that no patient could afford and then drop the price (through the subsidy) to a level where they could strip every asset of every sufferer. They found precisely how much a Wilson's disease sufferer had, and they took the lot.
But Valeant didn't drop its price despite the promises of its (then) largest shareholder, because if they had dropped their prices on Syprine they would not have been able to pay their debt.
Normal people do not tell Congress they will do something and then do the exact opposite. But add in enough debt and decent people will become evil.
And the lesson for management teams is if you buy back enough stock at the wrong price you too can become evil.
When Fisher-Price agreed last week to recall all 4.7 million Rock ’n Plays on the market, it said it was not at fault for the more than 30 infant deaths the Consumer Product Safety Commission had linked to the sleeper.
Instead, the company said the reported deaths stemmed from the sleeper’s being “used contrary to safety warnings and instructions” to buckle babies in with the harness and avoid putting other items in the sleeper. (The safety commission advises that it should not be used once children reach 3 months or show signs of being able to roll over.)
One day I guess we will find out what Mattel will say to a jury.
Now they are Silicon Valley/social media types (which Hasbro has shown with Nerf might be better), but they seem too focused on selling their existing characters to Hollywood.
I am short a very small amount of Tesla and strangely I hope I lose on that bet. Elon Musk has demonstrated that electric cars can be better than internal combustion engines. He has improved the world. I think his finances are a mess and he has other problems. But deep down I hope he succeeds. I feel slightly dirty betting against what is fundamentally a good thing.
And I felt a little dirty betting against Barbie too. After all what is wrong with a toy company?
But there is plenty wrong with this toy company. It kills babies. It fails the basic test of a toy company.
And maybe the next deadly toy won't stay on the market quite as long. And there will be less grieving parents because this thing has finally filed chapter 11.
I truly hope so.
Monday, April 1, 2019
This is not an original thought - and there is a reason why Visa and Mastercard cannot crack the Chinese market.
But the Chinese government and its (compromised or stupid) proxies in the West tell us we should open ourselves to Huawei (which provides a much better mechanism for spying).
I would normally bet that wouldn't happen - but given the quality of Western political leadership these days nothing much would surprise me.
Just making an obvious observation that I have not seen elsewhere.
Thursday, February 7, 2019
I do not know Andrew Thorburn, but I know Dr Ken Henry well and am proud to count him as a friend.
In February 2016 Jonathan Tepper (of the English research firm Variant Perception) and I spent a week traipsing around the outer suburbs of Sydney checking out property developers, mortgage brokers and even some bank branches.
It was dead easy to find widespread evidence of mortgage fraud. It was pervasive - fraud was the way of doing business. Jonathan Tepper wrote it up in a now infamous report on the state of the Australian property market.
Jonathan Tepper was widely mocked in the Australian press when our findings were published. However the findings we had were confirmed by the evidence put before the recent Royal Commission.
For the record we found that all four Australian banks were problematic but that National Australia Bank was the least bad of a bad lot.
I went to have a chat with Dr Henry who took our findings seriously and began the (admittedly difficult) task of improving the National Australia Bank.
He was open about the difficulties in doing so, open about the incentives both within the bank and outside the bank and was cognoscente how difficult this was going to be. But he started.
I am not trying to defend National Australia Bank. It was the best of a (very) bad lot. But it was still not very good and Dr Henry started the task of making it directionally better.
Anyway come the Royal Commission Dr Henry talked to the Commission in a frank and open way about the problems. It was Dr Henry being Dr Henry: honest, competent, and realistic.
It came off badly. I remember the grilling he got from the Royal Commission and understood what was happening. It was clear that what was required from the Royal Commission was kowtow, rather than honest frank discussion. Dr Henry looked bad even though he was probably the single most reliable and honest witness the banks put up.
The Royal Commissioner made specific findings against Dr Henry and Andrew Thornburn. This surprised me because on my research National Australia Bank was the best of a bad lot, both in absolute level of moral decay and in direction.
The Royal Commissioner I believe misinterpreted the relative honesty of National Australia Bank.
Direct criticism was made of Dr Henry and Andrew Thornburn and today they resigned.
I am not sure that any Australian banker deserved to come out of the Royal Commission unscathed, but in a relative sense injustice has been done. The most honest party at the Royal Commission has paid with their career for their honesty.
I don't think Kenneth Hayne (the Commissioner) has done the country or the cause of banking reform a good job. And that is a pity.
A post script is warranted: one of the key conversations I had with Dr Henry I had in the presence of Rob Shears from Valor Private Wealth.
Rob is a financial planner and a friend of mine.
He has regularly (and appropriately anonymised) told me of the financial condition of prospective clients, many of whom are loaded with inappropriate mortgages on (sometimes multiple) investment properties.
He is a very good window on bad bank underwriting.
Anyway he was in the room when I had a phone conversation.
Today he tweeted this:
One of our clients friends is a bank manager of a NAB branch. Within 48 hours of the phone call you made to Ken a few years ago (I was in your office at the time) there were significant restrictions put on certain investor loans immediately. Ken is honest and competent.
I was unaware at the speed at which NAB acted when reliably informed of bad practices. But it confirms my impression of how NAB (and NAB alone) took our report seriously.
Monday, January 14, 2019
The Myth of Capitalism: Monopolies and the Death of Competition. Jonathan Tepper and Denise Hearn. A review...
Dr Dao - a doctor with patients to serve the next day - was "selected" by United Airlines to be removed from an overbooked plane.
As he had patients to tend the next day he did not think he should leave the plane. So the airline sent thugs to bash him up and forcibly removed him.
They apologised after what Tepper and Hearn think was true public revolt, but what I think was more likely the realistic threat to ban United Airlines from China because of the racial undertones underlying that incident.
The reason the authors assert was that United has so much market power you have no choice to fly them anyway - and by demonstrating they had the power to kick your teeth in they also demonstrated that they had the power to raise prices. The stock went up pretty sharply in the end.
Walmart for years used to talk in their conference calls about all the cost savings they were implementing. And analysts would want to put those cost savings into their model as earnings. Walmart would disabuse you of this. Cost savings are passed to customers.
The solution to the problem in capitalism according to the authors is more capitalism. They want more entrepreneurism, less barriers to entry in companies but also they want regulators to view skeptically (and stop) anti-competitive mergers. They endorse measures against tech companies that stop them leveraging monopolies on one sector into monopolies in another sector. They would have endorsed the break-up of Microsoft into an operating system company and an applications company.
Except that buying potatoes cutting them into french fries, par cooking them, freezing them and distributing them to fast-food chains is valued more highly by the market. (Again my measure is EV to sales but this is true by most measures...)
And it is pretty clear that they are right. French fries is a super-profitable business.
Tepper and Hearn would argue that the oligopoly is used to suppress payments to suppliers - and the main supplier here are Idaho farmers. Usually they would be pretty good at lobbying. But there is another possibility - which is that the oligopoly is super-strong - and some of the excess profits are used to pay over-market prices to the farmers and maybe the farmers have (in their own interest) chosen to lock up the industry with regulation (and lobbying).
Wednesday, November 28, 2018
This is perceived by some as very bullish for Afterpay. The stock is up fairly hard as I write this.
Afterpay (ASX:APT) is the big player in this industry and a cult stock and cult product amongst Australian millennials. There are several other players and ASIC's study covered six of them.
ASIC does not have a reputation as an aggressive regulator so that they are monitoring the company going forward is the expected result.
But the ASIC report (available here) does give some insight into Afterpay.
Here are a few extracts:
First an example of underwriting:
Case study 1: Debts on top of further debts
Vicki was in her early 20s and a mother to three preschool-aged children. She was unemployed but received Centrelink payments.
Vicki had multiple payday loan debts totalling $4,000 and a $9,000 car loan. Vicki also had a $1,000 debt to Certegy Ezi-Pay that had been referred to a debt collector and several telecommunications and utility debts.
Vicki explained that she then incurred a $740 debt to Afterpay to buy goods at a butcher and several clothing storesNote that Afterpay is the last lender here and lent after a previous debt had been referred to a debt collector.
And another underwriting example:
Case study 3: Sold goods that the consumer didn’t need
John received a carer’s pension. He was cold-called by a merchant who sold him a solar power system financed through Certegy Ezi-Pay. John said he did not have a job at the time and the salesperson said that he would write down John’s last job. 18 months later, he owed over $6,100. John also owed over $7,000 on a loan and $3,000 in other debt.
John said he started using Afterpay in early 2018 and now owes them $960. He said he doesn’t recall being asked about his expenses when he signed up for this arrangement.Note again Afterpay is the last lender.
And another underwriting example:
Case study 4: No inquiries about the consumer’s financial position
Ben was unemployed, received a disability support pension, and lived with his father who assisted him as a carer. Ben said he had a shopping addiction.
Ben reported feeling overwhelmed with debt. He had a $5,000 credit card debt, and he was able to accrue a $1,500 debt with Afterpay, and a $1,000 debt with zipMoney.
In this case Afterpay lent after the consumer was clearly in trouble. But they may not have been the last lender.
Afterpay - the worst lender in the group
Afterpay is considered the gold standard in this sector. It has the most highly valued stock. I have asked several bulls and they all tell me how much better Afterpay is than the competition.
But ASIC have the numbers. Here is a graph of the percentage of Afterpay customers who incur a late fee versus the competition. It sure looks like Afterpay has the worst credit quality.
All I can say is that ASIC have helped out researching a controversial stock.
The content contained in this blog represents the opinions of Mr. Hempton. You should assume Mr. Hempton and his affiliates have positions in the securities discussed in this blog, and such beneficial ownership can create a conflict of interest regarding the objectivity of this blog. Statements in the blog are not guarantees of future performance and are subject to certain risks, uncertainties and other factors. Certain information in this blog concerning economic trends and performance is based on or derived from information provided by third-party sources. Mr. Hempton does not guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. Such information may change after it is posted and Mr. Hempton is not obligated to, and may not, update it. The commentary in this blog in no way constitutes a solicitation of business, an offer of a security or a solicitation to purchase a security, or investment advice. In fact, it should not be relied upon in making investment decisions, ever. It is intended solely for the entertainment of the reader, and the author. In particular this blog is not directed for investment purposes at US Persons.