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Alexander Mizan

 
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  • The Unsustainable Lie of Inflation [View article]
    Paco,

    I tend to agree with you that the government in the last few decades (probably since Nixon took us off the gold standard completely) has shown consistent euphoria in printing dollars and devaluing the currency vis-a-vis real goods. I also agree that real wealth is derived from efficiencies, technological and educational, not from economic policies.
    Yet, I think you should reexamine your thesis when it comes to controlled inflation coupled with responsible fiscal and monetary policies.Studies in history, psychology and economics have clearly shown that the best environment to operate an economy is in fact controlled inflation.
    The reason for this is that an economy can only grow when people are willing to spend money. An economy where people expect money to be worth more in the future than the present is going to be inherently stagnant. Due to game theory, the people who save while the rest are spending are better off, but if all of us were saving and nobody spending we would have a phenomenon of a protracted recession or depression.
    That would result in economic contraction and lack of productive investment because nobody would be willing to invest or consume. With lack of productive investments, you would not see the technological breakthroughs that do in fact bring progress, prosperity and eventually wealth to a society as a whole.
    I think the problem lies herein and if we exclude the last 2 years, I think the Fed has been a responsible actor in managing monetary policy. The underlying problem lies in the fact that the last 20-30 years, the percentage of REAL productive investment in technology, R&D, education etc has declined vis-a-vis consumption.
    This is a direct result of government policies that focused more on maintaining consumption rather than investment and unfortunately that is the responsibilty of the government and sorry to say the people that voted for it. I can still recall a previous President calling for the American People to "go out and shop". And this comment is not partisan. I think the leaders available that can re-focus on the long-run well-being of their voters are greatly diminished compared to the 40s, 50s and 60s but that has to do more with the people who elect them. Unlike Nazi Germany, we do live in a free country, so the ultimately responsiblity falls on the shoulders of the American people who fail to vote out the incumbents and ask for REAL change.
    Nov 11 03:11 AM | 2 Likes Like |Link to Comment
  • Portland General: Profiting from 'Static Electricity' [View article]
    Nice trade suggestion.
    May 17 05:51 PM | 2 Likes Like |Link to Comment
  • Netflix: The Long Term And The Short Term Of It [View article]
    I actually do not disagree with most of what you wrote.

    That said:
    1) NFLX is TRYING to become HBO. It is not HBO and that is not where the business model is sitting at right now. This is neither where the revenues nor the contribution margins are coming from. House of Cards, although expected to be hot, it is its FIRST exclusive show and so far it has only cost them $100M and earned them nothing. So, this is where Hastings is trying to take the business model but this is definitely not where it is... We are FAR from it.
    2) Just as you said, TW, Disney etc are indeed playing both ends. They have to. It is not a perfect world and they do want access to NFLX's existing subscriber base because selling content is part of their business and that's where the subscribers currently are. That said however, if part of your business is Hulu or HBO, wouldn't you see your subsidiary in a favorable light compared to a big competitor? I would. I would raise content fees to the competitor and try to compete with him/her at the same time. This is what is happening. And usually in this game, the guy with the bigger pockets and the most industry experience stands the test of time and wins a slow game. That is not to say that NFLX will die completely but it will be a much smaller player in a competitive environment. NFLX went to$15B market cap because they were doing DVD-in-mail at 50% Gross Margin. This is never coming back. And I say usually because there is of course the remote scenario that execution in the original exclusive content programming can be so outstanding that NFLX will turn into HBO. Yes - House of Cards looks great but what do you think are the chances for a non-Hollywood company to put together shows like Sopranos, Mad Men, Boardwalk Empire etc back to back? I think those chances are very slim. Huge bet and it can pay off big as you said but with remote probability.
    3) In terms of the content wars, If you think that NFLX CHOSE not to pay for content, you are mistaken... It simply got outbid from people who don't care about losing money because they have 10x its market cap and 10 other lines of business (AMZN) or it deemed that the content fees are too high. The content fees were too high but they will stay high because now there is more game in town. Their content deals that expired in 2011/2012 were ridiculously cheap because the library providers had not clue that streaming would become so dominant when they signed those deals in 2005-2008. Now they do. Content fees are never going to be so cheap again.

    So you are right. NFLX will become just like another TV channel. A rather big one maybe but to bet that it will surpass HBO in exclusive quality programming and make enough money to justify a 10B valuation when they have never even aired a show yet is a big gamble. It's a business model you want it to become but it's not that yet.
    Jan 27 07:12 PM | 1 Like Like |Link to Comment
  • Sovereign Default: Stuck Between Dire and Disastrous [View article]
    Solid article! Great job.
    Feb 15 09:01 PM | 1 Like Like |Link to Comment
  • The U.S.: Land of the Free and Home of a Nearly Failed Treasury Auction of Its Own [View article]
    Nice article with good, clear explanations and with good statistics. I was wondering where you can get this information on the buyers compositions at Treasury Auctions.

    Also a note here on your analysis on an item worth examining. The decline in indirect purchasers and the rise in direct purchasers might have to do with a structural change on how buyers are represented in the market. For example, with the rise in online trading back in the late 90s, traditional dealers were increasingly executing less trades for clients while online brokers saw their transaction volume rise. Maybe something similar is happening in the Treasury Auction market where people who used to be represented by Primary Dealers (indirect purchasers), are now going direct to lower transaction costs or hide their identity? In that case, it's possible that foreign governments are still buying the same amount of Treasuries but in a different way. This is something worth examining. It is however intresting that the Fed is a major purchaser in the Treasury auctions and it does reveal the cracks in the market for US Govt. Debt. BTW, Where is this information publihsed?
    Feb 14 04:11 AM | 1 Like Like |Link to Comment
  • Is the U.S. Solvent? [View article]
    I am not sure but from what I remember from my Macro class in college it should go something like this:
    1. Fed lends money to banks throught the discount window at the discount rate (fed funds rate + 50 bp)
    2. Banks right now instead of lending it out to businesses, individuals etc are afraid. Instead they are hoarding it. They don't really lock the Ben Franklins in vaults. What they do is Buy Treasuries at ridiculously low rates (10-year is now trading at 2.40%). The Fed is basically forcing them to borrow at the window due to the so called "target rate" but that's a topic for another discussion.
    So, as of right now the excess monetary supply has not yet hit the real goods market (main street) and that's why we are not seeing any signs of inflation. But at some point the banks will realize that it's stupid to buy T-bills at these stupid levels and find "better" return scenarios in other investments. The spreads between the G-bonds and the C-bonds will close and the corporate market will get flooded with money. That will be the bottom and possibly (if the fed doens't start raising rates quick) the start of runaway inflation like some pundits claim.
    So, watch out for the corporate bond market and watch those spreads. Once the banks flood that market with money, it's like a show of confidence that there will be no bankruptcies. The companies basically take all this cheaply borrowed money and start spending it in investments, goods, you name it. Then you have too much money chasing too little goods (i.e. inflation).

    My two cents.



    On Jan 09 09:51 AM Long John Silver wrote:

    > When the Fed starts buying up all the new Treasuries that need to
    > be issued, exactly how does that result in monetizing the debt? I
    > know intuitively that this must be correct, but technically, how
    > does the money that the Fed gives the Treasury get into circulation?
    > Is it through government expenditures (e.g., procurement on contracts,
    > Social Security payments etc?). Insights?
    >
    Jan 10 01:41 AM | 1 Like Like |Link to Comment
  • Why the U.S. Should Learn from China's Foresight [View article]
    Great article and excellent comments from everyone. I am a European living in the US for the last 11 years...
    I came here because this country use to export hope. It used to export jeans, music, cars, movies, Coke, computers. Even if you are a fan of guns & ammo, it used to do that too. We produce less and less by the day. Instead of debating the automobile bailout but approve the banking bailout in a second, maybe we should have let the banks falter and maybe think of how we can save the auto industry (never mind with the fools in place, we cannot even do that) because they actually produce something, albeit broken at the time...

    Well, the good old US of A is still the biggest superpower in the world. Both economically and militarily, so for the next 5-10 years, we will just keep seeing erosion of the middle class, greater wealth disparity and decline of our relative standard of living vis-a-vis other countries, primarily Asia. The vehicle for doing this would most likely be the massive, yet gradual, depreciation of the dollar. The fed and the government HAD TO choose between:

    A) Depression-era unemployment and credit destruction so large, which in the 30s eventually led to greater problems such as trade barriers, rise of fascism and communism (yes, those forces were strong in the US as well if you look at the history books) and eventually WWII

    B) Slow destruction of the dollar, so that the average American does not realize that his purchasing power is declining compared to the rest of the world. In fact, what is happening now if only acceleration of what has been happening in the last 15 years. Just faster continuation of the trend.

    So, how can you blame the Govt? If you had to make that choice, I am sure you would choose B as well. Who would want millions of people to suffer. You could have riots, hunger and most importantly a quick change in those who are holding office!!

    But the long-term (10-20 years) is a whole different story and it's all in the numbers. Crystal Clear! We are 5% of the world's population consuming 40% of the global resources. I don't need to speak about Asia's population, population growth and what they will need to consume to bring them to parity with our standard of living.

    So, here are my thoughts:

    1. In the best case scenario, our standard of living will decline and theirs will go up. That will happen slowly and the rebalancing will take place via dollar depreciation. No major run on the currency. They will keep investing in Treasuries but also start investing in their own economies. If we are lucky, once we get out of the recession, our government will be smart and politically skillful enough to raise rates ala Paul Volcker in the 80s to reign in the money supply. At the same time, we will be smart enough as Americans to start living within our means, start producing more and consuming less. Eventually, China WILL become the world's largest economic power. That is inevitable (barring scenario #2). We will probably still live a little better than them but the disparity will not be as large as it is now. We will have to adjust our lifestyles to live within our means, and some industries will return to the US.

    2. In the worst case scenario, the US govt will implement a policy of segniorage to purposely devalue the dollar and therefore its debts to foreigners. China will keep investing in infrastructure and its people. By pure numbers, it will be come the largest economic power. At some point, the foreigners will demand higher rates from the US for its Treasuries because they will have the better options of investing in their own economies. There will be rivalry and we will feel as if we are being dethroned as the de-facto superpower. In reality, the US will still be the most powerful military power the world has ever seen BUT it will not be the most power economically. Sounds familiar? If one reads any history, one would know what this is the most likely scenario for a great power to start a war: to restore its economic power by brute force.

    At this point, moneywise, we are relative losers either way but I am just praying for the best case scenario... And if we have to make a small sacrifice for other people in the world live better than they used to, so be it. I'll just settle with one instead of 2 cars in my driveway knowing that the great American Dream became International. And when I see Jefferson, Hamilton & Franklin in the other world, I'll tell them they were the winners!
    Dec 18 11:54 PM | 1 Like Like |Link to Comment
  • 11 Places to Find Foreclosed Real Estate [View article]
    Hi all REO seekers,

    In response to Bret's request: Here's another link with a long and comprehensive list of Bank REOs all over the country:
    marketplacelists.com/R...

    Enjoy,
    Alex.

    Sep 28 11:36 PM | 1 Like Like |Link to Comment
  • Netflix: The Long Term And The Short Term Of It [View article]
    Hi Videoman,

    1) I stand corrected on the Epix Deal.

    2) AMZN knows very well that Prime and Kindle is a cash burner. Just lIke HP sells (or use to sell - i don't follow it any more) printers at a loss and makes up the money in overpriced ink, the AMZN business model on Prime is that they lose money in it but once you are signed up for it, you are more likely to order everything you buy from them(you have no shipping cost), so they make much more on the products they sell because they sell a lot more... They can sustain this for sure for longer than NFLX because they do have more cash. Indeed streaming is just a side note on their business but just because of that, they can afford to lose money for a long time, whereas NFLX cannot.
    Jan 27 09:42 PM | Likes Like |Link to Comment
  • How to Profit from First Day of Month Gains in the Markets [View article]
    is this based on the SPY?
    Feb 3 01:36 AM | Likes Like |Link to Comment
  • Celebrating the 'Recovery': I'm Disgusted [View article]
    Very good points but your article seems like you are sitting on the sidelines and complain. I don't like it either but as Bernanke said and you state, the Feds are in control.
    They will unfortunately keep bailing us because we, as voters, are either indiffernt, complacent or just sitting pretty and simply quiet co-conspirators in this game.
    American voters are just too fat and happy and once someone is born with a golden spoon in mouth, one is very hard to go back to hard work. The Senators & Congressmen are merely reflecting this weakness. They want to get reelected so the listen to the voter's pulse that does not want any pain and simply wants to postpone the day of reckoning.
    And so the story goes. Bernanke said the governemnt has the power to do that, will exercise this power. Eventual victim will be the dollar and our lifestyle vis-a-vis what it used to be 10 years ago and vis-a-vis the rest of the world. America will still be the most affluent country in the world but this time a little poorer than it used to be...
    Aug 26 04:14 AM | Likes Like |Link to Comment
  • To Monetize or Not to Monetize: Who Cares? [View article]
    Fed lends money to banks throught the discount window at the discount rate (fed funds rate + 50 bp)

    Banks right now instead of lending it out to businesses, individuals etc are afraid. Instead they are hoarding it. They don't really lock the Ben Franklins in vaults. What they do is Buy Treasuries at ridiculously low rates (10-year is now trading at 2.40%). The Fed is basically forcing them to borrow at the window due to the so called "target rate" and they do that by buying the treasuries themselves in competition with the banks. I guess some people here argued that they do that to make them so unattractive so that the banks start lending to real causes again. That's Monetization and it does hurt the currency. Simple laws of supply and demand. Someone also called it very accurately displacement.

    So, as of right now the excess monetary supply has not yet hit the real goods market (main street) and that's why we are not seeing any signs of inflation. But at some point the banks will realize that it's stupid to buy T-bills at these stupid levels and find "better" return scenarios in other investments. The spreads between the G-bonds and the C-bonds will close and the corporate market will get flooded with money. That will be the bottom and possibly (if the fed doens't start raising rates quick and drain the market off the excess supply) the start of runaway inflation like some pundits accurately claim. Obama seems to be on top of that (thank god Bush is out) as I heard him talking about it in an interview the other day.

    So, watch out for the corporate bond market and watch those spreads. Once the banks flood that market with money, it's like a show of confidence that there will be no bankruptcies, defaults etc and a sign that they are tired of the 2.5% unheard-of yield in the 10 year.

    Next step: The companies basically take all this cheaply borrowed money and start spending it in investments, goods, you name it. Then you have too much money chasing too little goods (i.e. inflation), unless of course you have the political muster to stop the bubble, which I haven't seen anyone so far do...

    And as far as Gold: I doubt the world is coming to an end. You'll know of WWIII when you see trade barriers going up but we are not even close to that... I would rather much go with Yen or Euro or Commodities...
    Jan 10 02:11 AM | Likes Like |Link to Comment
  • U.S. Dollar: The Trade of the Decade [View article]
    PATHETIC!

    You are talking about future appreciation in the assets the Govt is buying (Uncle Sam is buying on the cheap) and then in the immediate paragraph afterwards you are talking about deflation, crashing commodities prices and a stong dollar and savings rate.

    Write a new article when you start making sense and stop contradicting yourself. Oh, and can you sell me some Yuan futures vs. the Dollar. I cannot buy them as a small investor in the currency market becuase of restrictions but if you are so eager, then maybe we can trade off the books.

    Dec 18 09:07 PM | Likes Like |Link to Comment
  • America's Real Wealth [View article]
    The United States and Western Europe have dominated and monopolized free democratic governance for decades or centuries. As someone who grew up in Western Europe and moved to the US at a young age to pursue the American Dream, I can 100% understand your viewpoint. Nevertheless, it seems that times have changed. The Chinese have finally caught up. After centruries of one kind of repression or another (Opium Wars of Britain, Mao's despotic regime), the China of today has empowered its people. Same with the rest of Asia and many countries under Soviet rule after WWII. Take a look at the back page of the Economist. You will see that the countries that run constant budget & trade deficits are always the same. The same thing happens with the ones that run the surpluses. I'll leave the Petro-countries out of the list here, but look at Germany, Japan, China, Scandinavia and the Asian Tigers. People actually work there. In the US, nobody works any more. We all consume.

    I pray and hope that you are right. That the American People will stand up to the challenge. But both the regular folk and our leaders have repeatedly failed to live up to that challenge since the end of the Cold War. It finally seems that when other Peoples get a shot at democracy & capitalism, they are better than Americans. It's just that they didn't have that chance before ever in their lives.

    It's the end of the Empire!
    Oct 6 02:52 AM | Likes Like |Link to Comment
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