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Entries in John Hempton (4)


Other Alpha Sources

These two are specifically designed for some early Sunday morning reading (I might update with some more) and should preferrebly be enjoyed alongside a good cup of tea or coffee.


I swear that if John were ever to consider buying a company making, selling or moving coffee he would probably take a barrista course, open up a coffee shop and/or take a three month tour to Guatemala to learn everything about the commodity he was implicitly buying into. This time though it is about computing, hardware, software and everything in between I really should have pointed earlier towards Hempton's recent endeavors into the world of virtualization, computing, market power in the software/hardware industry and all other related topics. Basically, John has been to school and whether he ends up buying or selling Apple, MS, Dell or Intel/McAfee (?) I don't know. Yet, reading John's posts took me back to the grand days where I was tinkering with my 800Mhz AMD power house installing my own custom fans and graphics cards/chips. Those were the days, but as John explains very eloquently the market has changed and it is not sure who of the big boys will win. As such, don't read this if you need an investment tip; it is so much more than that!


One ongoing an enviable theme over at Waldman's Interfluidity is a deepfelt need to do something about the current economic mess and to pinpoint just where we made mistakes. I like this approach since it offers a refreshing perspective different from the perennial discussion of when and where the next collapse will emerge. I mean, I am pretty bearish but I am also convinced that in the event of a relapse of the Lehman days I won't be particularly surprised about the source of such a debacle, but I will certainly be unable to predict it. Anyway, I digress; back to Waldman and his latest piece on monetary policy in the 21st century which is a very good read. 

Here’s my proposal. We should try to arrange things so that the marginal unit of CPI is purchased  with “helicopter drop” money. That is, rather than trying to fine-tune wages, asset prices, or credit, central banks should be in the business of fine tuning a rate of transfers from the bank to the public. During depressions and disinflations, the Fed should be depositing funds directly in bank accounts at a fast clip. During booms, the rate of transfers should slow to a trickle


Other Alpha Sources

A piece today in the Global & Mail shows the downsides of homeownership when crisis strikes. Indeed, Spain is in risk of producing a very large number of people who will effectively never be able to pay off their debt if, of course, this same debt is not written off on the balance sheets of the banks.

The 44-year-old construction worker sat at the folding table in the tiny living room of his basement apartment on the outskirts of Barcelona and tried to grasp the larger meaning of a letter from the bank informing him he no longer owned the property.

The apartment will be auctioned at a fraction of the price he’d paid for it four years ago, when his fast-rising salary seemed a sure ticket to middle-class stability for his family. If a buyer is found this week, he and his four teenaged children will be evicted. As Spain has no personal-bankruptcy law, he will still owe the bank almost €200,000 – more than the current market value of the apartment – even if he loses it.

What is so diabolical here is the fact that he will still(!)l owe money even after getting evicted. The bank should take part of (if not the entire) loss if they choose to evict him. Alternatively of course, Cedena should be able to stay (pay what he can) and then of course effectively never own his property again as it will be under water. Even here I think the bank should assume some of the losses on their balance sheet. It is basically as follows. If they let him stay and pay whatever he can it can be a bet that the property price will re-surface at some point in the future. In my opinion this is stupid and the bank should assume a large chunk of the CURRENT loss on their balance sheet today. Then Senor Cadena stays and pays what he can and the banks will be able to take the loss now up front and move on. What we see here on the other hand is effectively just moving around the liability since there is no way that these people can pay, ever!


John Hempton does some soul searching on his portfolio and discusses whether US banks are turning Japanese. This is a really a must read and puts the suggestions to overhaul the financial industry in the US into perspective. Moreover, it is an excellent exposition into the issue of what ZIRP really means.


I am currently reading the Predator's Ball by Connie Bruck and as I am consequently submerged in the wizardry of the 1970s and 1980s junk bond raiders I enjoyed this story by Bloomberg a lot. Basically, these guys are still at it and this particular story is a wonderful tale about how Leon Black (who was part of Milken's inner circle) is pitted against Carl Icahn who himself was one of Milken's pawns in the 1980s. Great stuff ...


Google Shuts Down John Hempton's Bronte Capital ... Why?!

[Update: By the way; here is John's latest post (that caused the shut down presumably) nicely tugged away in the Google cache.]

[Update 2: Bronte Capital is back online. I will leave it to John to explain the what and how of this. Nice to see swift reaction no doubt due to John himself pushing hard in the background, but it still begs the question of why the heck it was pulled in the first place.]

[Update 3: Here is Google’s Rick Klau who picked up on Felix' post and commented in the comments section. 

We don’t go into great detail about what triggers a takedown, for the very reason you mention: we don’t want to make it easy for spammers to game the system. That said, we also have a number of protections to avoid precisely this situation – before I document what those are, I’ve asked the engineers responsible for maintaining them to explain to me why they didn’t work. Generally speaking, there were a number of indicators for John’s blog that should have very easily avoided any false positive spam classification – and I’m trying to find out how/why those got bypassed.

Rest assured that this is an internal bug – not any external players gaming our abuse reporting to try and take down John’s blog.

John – for restoring access, we actually met just ahead of the holidays to go through several ideas about making the resumption of service for legit blogs caught in a false positive situation (like yours) more seamless. Your idea is quite similar to reCAPTCHA ( – a service Google purchased in 2009, and one which we will be incorporating into Blogger in Q1. Glad we’re thinking along the same lines.

So, I might have jumped the gun on Google here, but I am not totally convinced that it had nothing to do with John's most recent post.]


I really don't have time for the details here, and the details are actually quite important in this case. However, since this is about a blog (on Google's blogger account) written by fund manager John Hempton which is shut down exactly, one would presume, because of these details I really cannot oblige you (yep I can, see below).

Felix Salmon, however, provides the gist of the situation and I fully endorse his points and arguments. On a personal note, I have semi-regular contact with John and I know his blog quite well. The idea that it should be spam is absolutely nonsense. Google has a big problem here! But then again, this is Felix' point too.

Here is to hoping that the situation is rectified very quickly by Google (and preferebly with an apology too).