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Dr. Stephen Leeb

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  • The Long-Term Costs Of Trusting Things 'Flash' [View article]
    I see your point. Is there a limit to how long one should wait for real payoffs. I would not say you are necessarily wrong if you said enough is enough when it comes to Amazon. But when I look at China, I see a country that is very likely to trump us with its planning that is more than a generation forward-looking. Establishing a true Internet franchise in retailing is very difficult and, while somewhat frustrated, I believe Bezos is doing what needs to be done.
    Apr 27, 2014. 12:25 PM | Likes Like |Link to Comment
  • Shifting Market Bodes Well For Stocks Like Deere [View article]
    There is more iron ore than the world can ever use. The trouble is that it takes tremendous amounts of energy to mine and transport it and, of course, tremendous amounts of water as well. Unfortunately, you cannot get around the interrelationships among various commodities. Despite its recent drop iron ore has appreciated about as much as oil since the beginning of the century. Ditto for copper, where water starved Chile has the greatest reserves.
    Apr 27, 2014. 12:15 PM | Likes Like |Link to Comment
  • The Long-Term Costs Of Trusting Things 'Flash' [View article]
    Very good point about the meltdowns. I hate to say this but Russia has one of the best cyber attack groups in the world, possibly the best in fact, as their best and brightest are often recruited for defense activities.
    Apr 26, 2014. 01:43 PM | 1 Like Like |Link to Comment
  • The Long-Term Costs Of Trusting Things 'Flash' [View article]
    Thanks Dom, I will check out your blog. Steve
    Apr 26, 2014. 01:40 PM | Likes Like |Link to Comment
  • Shifting Market Bodes Well For Stocks Like Deere [View article]
    Thanks for the comments and discussion. I disagree but genuinely hope I am wrong. The interrelationship among commodities virtually assures that continued world growth will lead to a shortage in at least one critical commodity or metal and that shortage will likely be very difficult to deal with and imply much higher commodity prices across the board. We are already seeing that in energy. Today U.S. energy consumption is considerably less than in 2005-6, energy production in the U.S. is higher and rising, yet oil prices are stuck near 100. much higher than in 2005-6 and gasoline prices are twice what they were then though real median incomes are lower, etc. The relative scarcity of water, equipment, etc.explains the seeming contradiction in the laws of supply and demand. Unfortunately I don't think the supercycle in commodities is over. Indeed I think it will continue until we have built an infrastructure (which itself is commodity intensive) to accomodate alternative and renewable energies. My last two books detail these arguments in much more detail - happy to send them to you if you want to e-mail me your address. Again, thanks for the discussion and yes we can agree to disagree, and I think we can both agree that the world will be much better off if you are right.
    Apr 26, 2014. 12:34 AM | Likes Like |Link to Comment
  • The Long-Term Costs Of Trusting Things 'Flash' [View article]
    My point is that long-term thinking is common to both. In my other writings "Red Alert" for example, I argue that long-term thinking is one of the most critical distinguishers between success and failure. But I certainly would not argue with you that Bezos and Buffett differ in many ways.
    Apr 26, 2014. 12:17 AM | Likes Like |Link to Comment
  • The Long-Term Costs Of Trusting Things 'Flash' [View article]
    Thank you for your comments. Unfortuantely my article was not as clear as it should have been. The numbers are very clear in saying that productivity growth since the 1970's has been slow and was not helped by computers.
    Apr 25, 2014. 10:39 PM | 1 Like Like |Link to Comment
  • The Long-Term Costs Of Trusting Things 'Flash' [View article]
    Thanks for your comment. I should have been more specific when talking about Bezos. In his first annual report he advised shareholders to sell his stock if they were going to judge the company on the basis of short-term metrics. It is ironic to put Bezos and Buffett in the same basket but there is no conflation in that both epitomize the importance of long-term thinking.

    I am not sure what you mean by your second graph. Since 2009 the market has been driven by massive liquidity which is a consequence of resource scarcities - or, as I said in my 1999 book - the inability of information technologies to deal with these scarcities.
    Apr 25, 2014. 10:34 PM | 1 Like Like |Link to Comment
  • Shifting Market Bodes Well For Stocks Like Deere [View article]
    So sorry for the rushed and somewhat inarticulate reply. The third sentence should read - "I expected Deere's cyclicality to virtually disappear or at least lessen dramatically. I am still recommending the stock aggressively." I am sure there are other errors too but at least the rest is somewhat intelligible.
    Apr 25, 2014. 01:46 PM | Likes Like |Link to Comment
  • Shifting Market Bodes Well For Stocks Like Deere [View article]
    No need to carry this much further. History is fine as long as their are reuglar understandable patterns. The world changed in 2000 as I noted very clearly in my 1999 book. I expected its cyclicality to - if not lessen dramatically - it has I am still recommending it very aggressively. It is a similar story with CAT. You are living somewhere in the 1950-1990 period in my opinion. A few years ago CAT was not trading at trough earnings and did not have a FCF of 10 percent. That CAT had an historically high FCF yield prior to 2008 is like traing on the basis of sunspots. Everytime CAT's FCF reacheds historically high yields - in this case as the result of dramatic margin improvement - we shouild sell it. I recommended it prior to its recent advance, a bit in front of the trough but so far history has proved me right. Also true is that FCF yield was just one reason I gave you for considering the stock undervalued, the other was my belief that this is a trough. Clearly this is much more important. And to agree to disagree on that point is just that - except in the absence of any argument from you other than you don't agree, what am I to say. Maybe you believe the earth is a million years old rather than several billion. Okay fine, but tell me why. I love learning.
    Apr 25, 2014. 08:58 AM | Likes Like |Link to Comment
  • Shifting Market Bodes Well For Stocks Like Deere [View article]
    Thank you for your comment. And I do stand corrected about CAT's FCF yield in 2007. That said I think you are a bit mixed up between peaks and troughs among other things. For example to somehow connect the economic collapse in 2008-09 with CAT's high 2007 FCF yield is on its face utterly ridiculous. Your comment is either a remarkable conflation between peaks troughs, and valuations of particular stocks or a simple statement that you do not believe we have currently reached reached a trough. Assuming the later, I should remind you that CAT is a worldwide company and worldwide growth over the past three years is under 2.5 percent and barely 2 percent in 2013. The later figure is lower than world growth during several recessions in the post WWII period. Remember Europe - the largest economic bloc in the world - experienced six consecutive quarters of negative economic growth, a period that has just ended. I hardly think it wide-eyed, therefore, to call the current period a trough. If you doubt it you should try to counter the main arguments I make in the blog, which you don't even address. As to my forecasting record, I refer you to my books which are referenced on Wikipedia. I don't have a perfect record at maco analysis but it is pretty good. With respect to any metric P/S, FCF yield, etc to lump 2005-07 together is innane in that CAT from the beginning of 2005 to its peak in 2007 climbed by about 100 percent and valuation metrics drastically changed during the process. Why not take the period 1950 to 2000 as your measuring point. The trrouble with the P/S metrics is that they give very little credit to margin expansion due to either efficiencies or changes in business lines. In sum I do believe the current period for reasons I have expressed above is a trough and if so then CAT is an historically cheap stock. If you disagree about the trough argument tell me why. Wide eyed assertions about my shooting from the hip does not really cut it.
    Apr 24, 2014. 11:55 PM | Likes Like |Link to Comment
  • Shifting Market Bodes Well For Stocks Like Deere [View article]
    Thank you for your question. First on CAT, there are two metrics that make a compelling case for the stock. First as of 3/31/2012, free cash flow for the trailing four quarters amounted to $6.7 billion, leaving the company with a free cash flow yield of 10 percent, which is the highest in almost 20 years. While the current P/E as you rightfully point out is a relatively high 17, if you assume that 2013 represented trough earnings as the first quarter results certainly suggest, and I believe, then the stock is trading at a much lower multiple of trough earnings than in the past in which P/E ratios averaged about 25 times trough earnings.

    In answer to your second question I think the major differences between today and 2012 and 2013 is that Europe is not only growing but, as I pointed out, under pressure to speed up growth. Pro-growth policies not only Europe but in other parts of the world have become a matter of politcal necessity. Also true is that in 2012 and 2013 most major cyclicals did not make new highs as has been the case today.
    Apr 24, 2014. 09:22 PM | 1 Like Like |Link to Comment
  • Ukraine, Russia, Germany And The Real Threat Facing The U.S. [View article]
    Mike: There is no doubt that the U.S. has a navy that is superior to all other navies in the world combined. Unfortunately I am not sure what that means in today's world. The heart of our navy - aircraft carriers - are easy targets and have to stay 1000 nautical miles offshore to be safe. We were trying to build a new generation of aircraft carriers but I believe that has been squashed by defense cuts. Over the past two generations the performance of our military on many fronts does not suggest the kind of unilateral power we try to project. But yes I fully agree that we do have the most powerful military in the world by a wide margin. The question is what is that worth in today's world.

    More important I believe China has no desire to exert power for the sake of power - and that may be their major advantage. What they desire is the best for their people, not world hegemony, not military hegemony, not even economic hegemony, simply the best possible life for their people. Unfortunately in today's highly interconnected world a high level of well being may be tantamount to economic hegemony.

    You mention schools and our lead. You should check out the worldwide comparisons of Shanghai students vs. U.S. students. Our elementary education system is in shambles while theirs is ascending.

    I have spent some time studying China - reading a lot of books, befriending many Chinese people. The one story that has made the greatest impression on me is a short story written by Lu Xun called Ah-Q. What the Chinese fear more than anything else is being humiliated and being dictated to.

    I believe there is a lot or room for cooperation - real cooperation between the Chinese and Americans - that could make the world a better place. But we are going to have to play a much more active role in getting there than we are now.
    Apr 15, 2014. 01:53 PM | Likes Like |Link to Comment
  • Ukraine, Russia, Germany And The Real Threat Facing The U.S. [View article]
    Thanks for your reply mokle. One thing for sure I certainly would never try is to settle things with you hand to hand. I am glad you are not offended and I agree with you about the sea and the Jews. But I do disagree about your characterization of China. I believe it is an admixture of many things and among those things is a meritocracy. They are state run to a large extent but not in principle opposed to a democracy. Indeed within the "communist party" (which some Chinese characterize as loosely similar to our elite school) there is type of democracy. While Princlings play a major role in the government, so do individuals who have made it to the top like Li. And even in the case of Xi, who was a Princling he had to prove himself over and over again. And while the U.S. does rule the seas, ironically in today's integrated world, no country not even the U.S. can control all the seas. The other day the Wall Street Journal used the word "rebuke" when characterizing how his Chinese counterpart addressed Hagel, our Defense Secretary. Finally, I did not mean to say China controlled the world for 16 of the past 18 centuries, but rather that they had the strongest economy. But, in today's world the strongest economy might be tantamount to control because we are so integrated.

    Again my major point is not that the Chinese are destined to eat our lunch but rather lunch is served and they are at the table. We don't have a lot of time to cover the dishes and move them to our table, and certainly no time to be complacent.
    Apr 14, 2014. 10:14 AM | Likes Like |Link to Comment
  • Ukraine, Russia, Germany And The Real Threat Facing The U.S. [View article]
    Mokle, I certainly did not mean in any way to offend you. My point is that Sun Tzu' work has lasted and as with the Bible, when works last through millennia it suggests they have timeless value. That China has had the world's leading economy for 16 out of the last 18 centuries is, in most historical circles, a fact. That the West has ruled over the past two centuries is also a fact. One reason I spend so much time researching and writing is that I want to do whatever I can to keep America, whose values I cherish, from becoming complacent. I don't think we have lost the race yet but time is running out. If we do lose the complacent will be complicit.
    Apr 13, 2014. 06:02 PM | Likes Like |Link to Comment