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Whenever I travel, I like to do a full economic assessment of the locale, a post-trip post-mortem. Oftentimes, it is not worth writing up, but Berlin was fascinating enough to jot some thoughts down.

Quite a few things were memorable from this trip. (I’ll post some photos later below)

Berlin is a world class city, comparable in most respects to London, Paris or Rome. It is now the 3rd most popular destination in Europe, a marked change from a few decades a ago.

Flying in, you see lots of mixed use — plenty of farms, green fields, small housing and industrial centers. Plenty of wind farms too. I am struck by how green and open the area immediately around Berlin is.

The city is low and wide, minimal towers, lots of open spaces and green areas. A 18th century law requires all streets be tree lined (something that other cities should consider). A combination of new and old, history and modernity stand shoulder to shoulder.

The architecture is delightful – the pre-war buildings that made it through the war were quite impressive; the modern architecture ranges from cliched to Bauhaus to dazzling (photos here).

And, as a City, it is quite affordable -– a 2 bedroom apartment in the (Mitel ?) section just outside Berlin proper runs € 450-500 Euros. ($1.59 buys you a Euro today). In NY, that same apartment would run $2,200-3,300 and up; London is even pricier.

The economy has not been too badly hit by the economic downturn – the financial sector is much smaller here than London or New York. Hey, chase all of my people out of the country 70 years ago, and what you are left with is a nation with a smallish banking sector and not many great delicatessens.

I kept seeing T-shirts for sale that said Berliners – Poor but Happy. I asked several people about it – my Ghanese taxi driver, a staff member at the hotel, a waiter. They said that while there is plenty of economic activity, most people have jobs, but they pay poorly. The living standard of East Berlin is rising post-communism, but the West Berliners are paying the price for this as cheaper labor moves in.

I was staying at the Hotel Adlon, a few steps from the US Embassy and the Brandenburg Gates (photos here)

On a short trip, I tried to avoid the Holocaust museums, as they are a bit emotionally exhausting and require a day to recover from. On my next trip, its a must do. (Perhaps the Holocaust deniers out there can explain how the entire German nation has been fooled into believing the Nazi regime committed unimaginable atrocities).

Instead, I visited the spectacular Pergamon Museum (photos here) and Checkpoint Charlie, with lots of pictures of both. (photos here) The Checkpoint Charlie Museum was poignant and heart rending (photos here) – the many ingenius attempts to escape the Totalitarianism of East Germany were astonishing. The artwork was also inspiring; There is no doubt in my mind that the condition of mankind under the boot of communism is a crime against humanity. Humans were born to be free. Any totalitarian system is unnatural and cruel and crushing to the spirit.

One of the things I noticed were the cars – an intriguing mix of European and Japanese vehicles. I saw a few of the infamous Trabants – they make the mini cooper look spacious. Lots of small Japanese models – Nissan Micra, Toyota Yaris, plus Citroens, Peuegots, Alfas, plus a 4 door Smart car that makes more sense than the little version. There are BWMs and Mercedes that will never make it to our shores – BMW 320i Diesels, micro MBs, other variants. In terms of US made cars, they were very few — I saw a Jeep Grand Cherokee, a few PT Cruisers, lots of Opels, and a ’37 Ford. Speaking of Ford’s – there were plenty of Focus, Fiesta, Kas, Escorts – they seem to be the right size for Europe.

Two last items that were noteworthy: My last name (which is German) was frequently commented on by various people — Customs, Hotel Check In, Restaurants. “Ritholtz – dieses ist ein deutscher name?   “Ja, ist es” I would reply in weak German, which provoked a torrent of language I could not follow. I would meekly reply Mein Deutsch ist nicht guter der (my German is not that good). People seemed to appreciate the effort, regardless of how pathetic it was.

Second, I had a funny experience with the vaunted Teutonic efficiency. Check in at the airport was slow, as their system server was crashing — it took way too long to get a boarding pass. I was pondering this as I went through security, when my check on luggage got flagged for a knife. I have a mini screwdriver in the laptop bag, but it was my roller carry-on that was flagged. They show me the x-ray, and I cannot find anything — until I reach under the corner edge of the bag, and I find an old, rusty (literally) cigar cutter. The blade is in between two pieces of plastic). Must have been in there for 2 years, and no one else ever caught it.  That’s efficient!

“Ich bein ein Berliner” is the famous quotation from the June 26, 1963 speech by U.S. President John F. Kennedy. As I sat waiting to fly home, I thought of that speech, of the history of central Europe, of all I saw over the past few days as I made my way around Berlin.

I would love to come back – make a longer weekend of it – you need at least 3 or 5 days to really see and do everything.

I very much look forward to my next visit to Berlin . . .

November 20, 2009
By John Mauldin

Where the Wild Things Are
It Is Not Just Japan
The Euro-Yen Cross and the Dollar Carry Trade
New York, London, and Switzerland

From ghoulies and ghosties
And long-leggedy beasties
And things that go bump in the night,
Good Lord, deliver us!

–Old Scottish Prayer

Where the Wild Things Are is a beloved children’s book and now a beautiful movie. But in the investment world there are really scary wild things lurking about in the hidden recesses of the economic landscape. Today we look at one of the unintended consequences of the Federal Reserve’s low interest rate policy.

For quite some time, I have been arguing that we are faced with no good choices, not just in the US but in the entire “developed” world. I see a low-growth, Muddle Through world over the next years (with a double-dip recession just to liven things up). However, that does not mean that we will lack for volatility. Things could get volatile rather quickly. Let’s quickly set the background.

It Is Not Just Japan

Let’s look at today’s interest rate picture. Yesterday, we had the bizarre occurrence of banks actually paying the government to hold their cash. Three-month treasuries yield a miniscule 0.01% in interest. If you opt to buy a one-year bill you get all of 0.26%. You can see the entire spectrum below.

Look at the graph of the yield curve below. It is as steep as we have seen it in a long time. But that is almost the point. Banks are essentially getting free money. If you are a banker and can’t make money in this environment, you need to quit and find meaningful employment.

And that is part of the rationale that the Fed espouses with its low interest rate regime. Not only does it allow banks to repair their balance sheets, it also encourages investors to put money into riskier assets in order to get some return on their investments. Over $260 billion has gone into bond funds this year, and just $2.6 billion into stock funds. However, you have to balance that with the fact that some $400 billion has left money market funds paying less than 0.2%. So there is some movement to capture yield.

But is it just banks that are getting cheap money? And is encouraging investors to find riskier assets a sound policy? Maybe not.

Read the rest of this entry »

I will be incommunicado today, winging my way back from Berlin for acht und halben stunden (8 1/2 hours).  I wrote this back in 2005, but never published it widely.

Enjoy:

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What sort of crap do you have lurking hidden on your iPod?

That’s the question I stumbled across from my old essays & effluvia blog. It was based on an article from The Arizona Republic, which asked:

“Those saccharine pop tunes and schmaltzy ballads cloaked from friends? There’s no excuse anymore. No blaming it on a CD that had just one song you liked. No claiming it belonged to your wife, husband or friend.You selected each and every tune. Like it or not, these are your greatest hits.

Now, let the melodic mocking commence.”

Those of you who have read me for a while know my musical tastes are wide-ranging, sharp, and ahead of the curve. (New visitors to TBP should check out our annual “best ofs” from the past few years).

But saccharine pop tunes and schmaltzy ballads hidden on the iPod?

Guilty as charged.

Not only do I have a slew of really embarrassing guilty pleasures on my pod, but they have actually found their way on to various mixes I’ve made. That means, no excuses.

How about you? What embarrassing ditties would your close friends be aghast about — if they knew? Since our big interactive musical discussion — Greatest American R&R Band — was so much fun, let’s take another swipe at it:

What are the most horrendous, embarrassing, guilty pleasures on your iPod?

I’ll start the HD spinning with my hidden collection of pathetic guilty pleasures (‘tho music snob that I am, I foolishly believe my guilty pleasures are superior to most people’s — indefensible as that position might be).

These lists go from least (10) to most (1) embarrassing.

Generally embarrassing pop orotherwise awful commercial song:

10. Semi-Charmed Kinda of Life, Third Eye Blind
9. Undone – The Sweater Song, Weezer
8. Horndog, Overseer
7. Hey Leonardo (She Likes Me for Me), Blessid Union Of Souls
6. I Touch Myself, Divinyls
5. Closing Time, Semisonic
4. Complicated, Avril Lavigne
3. (I Hate) Everything About You, Ugly Kid Joe
2. She Hates Me, Puddle of Mudd
1. Mmmm Bop, Hanson

These are the utterly embarrassing songs on my “Gym Mix” :

10. I’m Just a Girl, No Doubt
9. Groove Is In The Heart, Deee-Lite
8. Take It Off, The Donnas
7. Fantastic Voyage, Coolio
6. Murder On The Dance floor, Sophie Ellis Bextor
5. Good Vibrations, Marky Mark
4. Steal My Sunshine, Len
3. That Don’t Impress Me Much, Shania Twain
2. I Just Want to Make Love to You, Foghat
1. Rico Suave, Gerardo

And lastly, a mix I named “Bad radio from my Youth” — and it is utterly ghastly:

10. Bad Time (for Being in Love), Grand Funk Railroad
9. Keep On Loving You, REO Speedwagon
8. Day After Day, Badfinger
7. Without you, Badfinger

A two way tie of simply awful for 3rd place:

6. (Shake, Shake, Shake) Your Booty, K.C. & The Sunshine Band
5. Keep It Comin’ Love, K.C. & The Sunshine Band
(I’ve actually grown to like some other KC stuff, but these 2 — shudder — sheesh!)

A three way tie totally lacking any redeeming qualities for 2nd place:

4. Cover of the Rolling Stone, Dr. Hook & The Medicine Show
3. When You’re in Love (with a Beautiful Woman), Dr. Hook
2. Sylvia’s Mother, Dr. Hook

Last, and actually least, a song beyond bad:

1. Coconut, Harry Nilsson

There, I’ve outed myself and my misspent youth . . .

There are some interesting comments on this issue over at kottke, which is where I originally saw the pointer for this. Since then, there have been over 100 entries of guilty iPod pleasures, including what must be the playlist from Hell.

Check it out . . .

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Sources:
iPod guilty pleasures
Don Fernandez
Cox News, Sept. 11, 2004 12:00 AM

http://www.azcentral.com/ent/pop/articles/0911ipod11.html

Most investors know that the S&P 500 hit a record high in October 2007 and a (the?) low in March of this year. But when you break it down by sector, things are a bit more complicated.

Otherwise, for those who are wondering whether there is more upside ahead, the fact that four groups — telecom services, financials, energy, and utilities — have not seen new highs this month while the S&P 500 has might be a cause for concern.

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Some good learnin’ here:

This web site stems from a personal interest in critical thinking and is a collection of links to articles and sites pertaining to numeracy and critical thinking. Links should be good for at least the date posted. After the posting date, link reliability depends on the policy of the linked sites. Some sites may require registration before allowing access.

The WSJ’s Greg Zuckerman has a new book out titled, The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History.

Here is an excerpt from his recent WSJ column on lessons on the subject:

1 Don’t Rely on the Experts

Many investors lost big in 2007 and 2008 as housing crumbled and the stock market tumbled. But no one lost more than commercial and investment banks caught with toxic mortgage-related securities. These bankers were the very same ones who created these investments, and Wall Street’s top analysts had vouched for their safety, even as Mr. Paulson and others bet against the investments.

Lesson: When Wall Street is wheeling out its latest can’t-miss product, be skeptical.

2 Bubble Trouble

Some academics argue that financial markets have become more efficient. But a rash of financial bubbles in recent years — including housing, energy, technology and Asian currencies — suggests that markets are becoming harder to navigate, and are more prone to overshooting. Today, investors of all sizes read the same articles, watch the same business-television programs and chase the same hot tips. They invariably head for the exits at the same time.

Lesson: Have an exit strategy — and cash to cushion any tumble.

3 Focus on Debt Markets

Most investors track the ups and downs of the stock market but have only a vague sense of moves in debt markets. That’s a mistake. Early signs of trouble were seen in sophisticated markets that don’t get much limelight, like the subprime-mortgage bond market. These problems eventually felled the housing and stock markets, and the overall economy, a set of falling dominos that Mr. Paulson and his team correctly anticipated.

Lesson: Debt markets can do a better job predicting problems than stock markets.

4 Master New Investments

Mr. Paulson scored huge profits by buying credit-default swaps, a derivative investment that serves as insurance on debt. When risky mortgage bonds tumbled in value, Mr. Paulson’s insurance soared. But many experts were flummoxed by CDS contracts or shied away from educating themselves about these relatively new investments.

Mr. Paulson and his team had no experience with CDS contracts. But they put the time into learning about them.

Lesson: Educate yourself about the range of exchange-traded funds being introduced, some of which can play a valuable role in a portfolio.

5 Insurance Pays

A number of investors worried about a bursting of the housing market, but few did much about it, even though insurance, such as CDS contracts, at the time were selling at dirt-cheap prices. Out-of-the-money put contracts — options that pay off only if the market tumbles — also were trading at reasonable levels. As cheap as this insurance was, many pros ignored it.

Lesson: Don’t underestimate the value of a safety net, such as put options.

6 Experience Counts

Some of the biggest winners in the meltdown were middle-aged investors dismissed by some as past their prime. But they had experienced past market downturns, while some of the bankers and analysts caught flat-footed knew only good times.

Lesson: A historical perspective can be a valuable tool.

7 Don’t Fall in Love

With an Investment

In early 2009, Mr. Paulson became more bullish about the banks and financial companies that he had wagered against in 2008, after determining that these companies had improved their balance sheets. The moves resulted in profits this year.

Lesson: Even the greatest trade doesn’t last forever.

8 Luck Helps

In early 2006, Mr. Paulson determined that housing was in trouble and set out to profit from the impending fall. But some housing experts already had determined that real estate was overpriced; others had wagered against housing but could no longer stomach their losses. Just months after Mr. Paulson placed his historic trade, U.S. housing prices began to fall.

Lesson: Don’t risk too much in any one trade, even one that seems like a sure thing.

Good stuff, Greg.

Best of luck with the book promotion slog ahead of you!

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Source:
‘Greatest Trade’: How You Can Make $20 Billion
GREGORY ZUCKERMAN
WSJ, NOVEMBER 15, 2009

http://online.wsj.com/article/SB125823321386948789.html

The Quote of the Day comes to us via Bloomberg’s Alice Schroeder:

“We’re in the midst of a deflationary trend that is temporarily being masked by inventory restocking and free lunches like Cash for Clunkers. Consumers are done with borrowing. They’ll keep refueling the deflation by going through their attics and garages to find stuff they can sell on Ebay to raise cash.”

-Gold Tells You U.S. Bubble Hasn’t Popped Yet

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Jim has run Bianco Research out of Chicago since November 1990. He has been producing fixed income commentaries with a circulation of hundreds of portfolio managers and traders. Jim’s commentaries have a special emphasis on: money flow characteristics of primary dealers, mutual funds, hedge funds, futures traders, banks, and institutional investors.

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It’s All About Supply, Not Demand

Asian currencies continue to sell off vs the $ on the heels of the news yesterday that South Korea said they will look into hot money inflows stemming from the $ carry trade and the Bank of Indonesia said they are looking into the foreign buying of bills. This follows the news a few weeks ago that Taiwan was limiting foreign deposit holdings and Brazil was taxing foreign inflow transactions. As I mentioned yesterday, we may have reached a short term pain threshold in terms of $ weakness and foreign countries are fighting back as they certainly won’t wait for the Fed to act. The $ is also at a 2 1/2 week high vs the euro helped out by political infighting in the Ukraine that is holding up the 4th tranche of an IMF loan. Comments from PBOChina Gov gave no indication that they plan to alter the band of their peg to the US$ anytime soon. With 6 wks left in the yr and investors holding their nose, $ action alone will exaggerate equity moves.

OK, it’s not quite the “magazine cover indicator”…

…but surely this must be telling us something about the gold market (lol)?

Hat tip LOLFed

Source:
Cats for Gold
http://www.catsforgold.com/