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Daniel R Moore  

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  • Investing In 2013: Remember 1977 [View article]
    Always interesting to go back in time a couple of years to check your work. I was looking at this just the other day. The reasons the projection was imprecise, as most are, was what I was looking at.

    The overriding thesis that stocks were a buy turned out to be correct. Up ten percent ended up to be up 30% primarily due to Fed QE and the coordinated policy of Japan.

    Rates did eventually spike on the ten year to 3% and the thirty year to 4%, but then promptly reversed.

    The question remains why inflation never materialized in consumer goods, but was amplified in stocks and luxury goods (and medical insurance). I can provide a simple answer - that is where the money went. A more general answer is that the rate of growth in government spending was capped by the sequester, and the normal bleed through of money to the mass population has been restricted. The National Debt overhang is highly deflationary. This is the opposite of the late 1970s.

    Now we have a bust in the oil patch, rather than a spike above the previous high of $140 a barrel. The WTI price topped at $110. Now it is a $50 per barrel, and still has not found a stable floor.

    The historical analog that most resembles the market currently is the late 1990s. But just as the 70s analog is imprecise, partying like its 1999 is likely to not pan out over the next several years.
    Jan 8, 2015. 09:41 AM | Likes Like |Link to Comment
  • SandRidge Permian Trust - Struck By The $80 Oil Lightning Bolt [View article]
    Oil demand is seasonal.
    Nov 14, 2014. 03:22 PM | Likes Like |Link to Comment
  • ECA Marcellus Trust I - 3Q Distributions Gap Down Again [View article]
    All the on-going earnings from any royalty interest in the development wells owned by ECT are included in the previous, current and yet to be announced future results. There are no more new wells being added to the ECT Trust.
    Nov 13, 2014. 07:29 PM | Likes Like |Link to Comment
  • Watch Excess Reserves Post QE3 To Gauge Stock Market Risk [View article]
    I agree QE is not a worry for stocks; historically the evidence is pretty clear that it is pro stocks. The only episodes where the Fed used open market bond buying operations (which they have done off and on since WWII) and big stock market problems is if the government is spending like a drunken sailor and the tax structure was such that new government debt was not required (60s and 70s). It seems that this creates a situation in which business owners just pass through the tax bill to consumers. Today, the government debt burden seems to control this dynamic and inflation is nil. I speculate that this can change if entitlements grow a little more in the next year and the government is forced to pay the bill. I suspect the market will change both from an inflation expectation standpoint and interest rate perspective when people least expect it to.
    Nov 1, 2014. 03:48 PM | Likes Like |Link to Comment
  • Watch Excess Reserves Post QE3 To Gauge Stock Market Risk [View article]
    I don't know if the 30% will hold this time around, but I agree we are not in the danger zone for recession with respect to loans right now.

    Delinquency data which I follow is benign, most likely because many of the loans are recently generated. Lack of high levels of mortgage lending also make a severe debt driven recession unlikely.

    The leverage in financial assets, however, is more troubling to me. I also point to business loan leverage in the oil patch. If oil prices stay at $80 per barrel, or drop further and stay at this level for a year or more, many drillers and projects are going to go bust. A large number of these firms are under-capitalized and deep in debt. Consumers will win short term, but many investors are going to be losers.
    Oct 30, 2014. 09:07 AM | Likes Like |Link to Comment
  • Watch Excess Reserves Post QE3 To Gauge Stock Market Risk [View article]
    I can't argue with the obvious - "banks don't make loans according to the amount of excess reserves they have on hand". Thanks for pointing this out.

    Before the change in 2008, there was only negligible amounts of Excess Reserves kept in the banking system. The game changed when the Fed was given permission by Congress to pay interest on Reserves. This paved the way for QE being used so extensively and the excess reserves to be accumulated at the Fed. The financial world has definitely changed as a result.

    The point about watching the Excess Reserve balance is that a visible move in the balance can be interpreted as activity in the market. My opinion is that the government demand for funds Post QE3 is going to dictate the interest rate market over the intermediate term as the expected entitlement spending growth materializes and potentially a negative impact due to lower tax revenue if tax law changes happen post election. The cash balances in the banks will chase the funding need when the price is right, and the excess reserve balance will fall unless the Fed intervenes again. The price is the interest rate. Higher interest rates will force the de-leveraging of the debt market I expect, and once it bleeds over into stocks, the market bias will turn negative. This scenario is a nightmare the Fed wants to avoid.

    With regard to the debt levels in the economy that have been growing quickly in the past 18 months (the data clearly shows this point), these are not Excess Reserves which have been lent (pointed out in the article). These loans have been generated against either accounted for reserves in the banking system or the shadow banking system (note the Fed balance sheet is $4.5T, excess reserves are $2.7T, net $1.8T; pre-Lehman the net was about $1T and there were negligible excess reserves).

    The Excess Reserve balance is a new variable in the Progressive era of governing. I offer that investors need to begin to pay attention to how and why it is changing in magnitude. It has been a good indicator over the past six years.
    Oct 30, 2014. 08:50 AM | Likes Like |Link to Comment
  • SandRidge Permian Trust: Solid Results, Fairly Valued [View article]
    Using the current oil futures curve thru 2019, the model shows a $10 fair value at a 10% implied rate of return. The change from $12 is completely due to the drop in prices.

    The current price is $8.40 (Friday 10/10 close) which seems to have occurred after a bounce off $8 which probably triggered a short covering rally. The market is very likely oversold; however, I advise patience at the moment to see if the low $80 long-term range holds (which is where the curve is today), or if it breaks through into the $70 range. If the break into the $70 range occurs, those that sell at the present level will likely be proven correct.

    I did not think the Suadi's would let the price break below $90. I doubt they are doing so without a firm node from the U.S. Treasury to keep the dollar strong. The trend may have farther to go.
    Oct 13, 2014. 08:30 AM | Likes Like |Link to Comment
  • Think The Market Is Peaking? Remember 2000 And 2007 [View article]
    Above should say "same possible surge as 1999 remaining as upside in the market"
    Sep 10, 2014. 09:26 AM | Likes Like |Link to Comment
  • Think The Market Is Peaking? Remember 2000 And 2007 [View article]
    My thoughts were put in an article a few months ago an article:

    Top line growth across the board continues to be weak, and valuations have been propped up by reducing shares outstanding in the face of declining absolute level of corporate earnings (I have tracked the DOW companies since 2008 and the data back up this statement). So, quality of earnings is weak in many companies, and the situation is just being masked by stock buybacks with cheap debt financing which inflate the p/e ratio. If you are involved in a company which is on this train, and there are many, the party will end abruptly if / when the Fed has to curtail QE, and fiscal spending in Washington shifts to a much higher supply of Treasury new issuance in the market (this is when rates will finally rise).

    M&A has and will continue to be in vogue until the market rolls over in my opinion. Having an inflated stock as currency is a good time to make acquisitions by dominant companies; and likewise is a necessity for many CEOs to satisfy the demands from shareholders and Board members who want growth, but the lack of capital investment by many companies make organic growth a non-possibility. The better move in this situation is to buy revenue and pare back operations to bleed out more profits.
    Sep 10, 2014. 09:21 AM | Likes Like |Link to Comment
  • Think The Market Is Peaking? Remember 2000 And 2007 [View article]
    Good point, but I think the likelihood that we are at a starting point like 1996 presently is close to zero. Maybe we got a boost in 2013 similar to the take-off in 1996; and the market has exhibited similar characteristics to the late 1990s. I see the same surge as you that happened in 1999. However, the overall structural underpinnings of the market are different right now, and I sense the outcome will play out differently.
    Sep 10, 2014. 09:02 AM | Likes Like |Link to Comment
  • Think The Market Is Peaking? Remember 2000 And 2007 [View article]
    Excellent point; all Treasury represent dollars which at some point were generated from trade with the U.S. Excess profits held overseas by multinational companies in order to avoid U.S. taxation is one definitive cause of the increase in foreign ownership since the 1990s. If the data could be parsed to show where these balances reside (I haven't found a way to do this yet), the magnitude of the issue could be quantified rather than politicized in the name of corporate tax reform.

    The other clear increase in the data when it is viewed on a country by country basis is the shift in production to China and related emerging markets which began in earnest in the early 1990s.
    Sep 10, 2014. 08:53 AM | Likes Like |Link to Comment
  • Think The Market Is Peaking? Remember 2000 And 2007 [View article]
    I have looked at a mountain of data concerning fiscal policy impact on the economy in developing the analytical model I use to review the market. The rate of change in fiscal expenditures year over year has the strongest correlation to inflation if it grows too quickly, and likewise deflation when it goes in reverse. The problem the market has in seeing this point is that actual absolute declines in government expenditures year over year, until just recently, had not happened since the late 1940's.

    The balanced budget data you point to in the late 1990s is also interesting to me. The growth in government spending in the 90's was on the low end of post WWII norms; and as you point out, the fiscal budget did move to a balanced position. I give the spending scenario in this case a neutral. The balancing of the budget was achieved mostly by improving tax collections based on the windfall of capital gains in the market, and relatively strong GDP growth in Clinton's second term; therefore fiscal spending was not as constrained from expanding as it is today. But it was held below what I would consider as inflationary growth levels. Ultimately it was tight monetary policy which produced very attractive Treasury rates relative to high flying equities in the face of escalating Geo-political tensions that slowly tilted the market into an extended period of decline post August 2000. Fiscal policy was not put into play until military spending began to escalate. The Bush tax cuts did not effect spending (taxes were just not collected from the taxpayers), but did create a growing need for the government to increase borrowing to finance government war-time operations. This led to Greenspan's very easy policy post the 9/11 crisis to come to an abrupt end in 2004, ultimately leading to another yield curve inversion when Ben Bernanke took over as Fed chair. (Ironic that Helicopter Ben's first move as Fed chair was to take monetary policy to an extreme tightening position).
    Sep 10, 2014. 08:40 AM | Likes Like |Link to Comment
  • Think The Market Is Peaking? Remember 2000 And 2007 [View article]
    I think a day of reckoning is fast approaching in the MLP sector, but you will likely need to differentiate between infrastructure MLPs and those focused on E&P. My focus is on watching the exploration and production segment of the market for signs of weakness, whether it is an MLP or C-corp. These companies are likely the worst offenders of what your note references, high yields funded by high leverage and becoming over-extended on debt.
    Sep 8, 2014. 04:07 PM | 2 Likes Like |Link to Comment
  • Think The Market Is Peaking? Remember 2000 And 2007 [View article]
    Analysis is based on rate of change, not order of magnitude.
    Sep 8, 2014. 03:07 PM | Likes Like |Link to Comment
  • SandRidge Permian Trust: Solid Results, Fairly Valued [View article]
    The model I used in the article adjusted for the change in the oil curve and ex-dividend now says $11.50 at a 10% return. I would say this is a good fair value mark given the updated market information.
    Aug 29, 2014. 03:19 PM | Likes Like |Link to Comment