U.S. Economy: 4 Simple Reasons Recession Lies Ahead [View article]
Hello Econdoc,
Thanks for your comment. I'll be following up with a variety of data points on these topics in future posts in the coming days and weeks. As mentioned in this article, my intent here is to keep things in this post is to stay out of the data weeds and introduce themes on a more qualitative conceptual level for this article. But your point is well taken, as a statistician I am also someone that relies on data to draw conclusions. I look forward to exchanging comments with you on future posts.
Stocks: Why One More Major Correction Still Lies Ahead [View article]
Hello bbro,
Thanks for your comment. Related to your point, the fact that we had secular bear markets long before active policy interventions shows that the forces of the economy and markets in the end are greater than the actions of any individual or set of individuals that try to manage them.
Thanks for your comment and for calling me to participate in the discussion. If you've followed my past articles, you'll know that I almost always jump in an actively participate in the comment discussion. Given that I posted the article late Saturday night and today is Sunday, I was spending the day with my family and have only had the chance to get online late this evening. I've enjoyed the discussion so far and look forward to posting more in the coming days.
Gold: The Fate That Awaits Once Fed Stimulus Ends [View article]
Hello boatman,
Thanks for your comment. You're right that this is a key week with the Fed potentially hinting (or not hinting) at additional policy support in the coming months. This will be very interesting to see and will go a long way in setting the tone for the market over the next couple of months.
But in the end, I believe you are absolutely right that no amount of monetary support will solve the problems that continue to plague the economy several years on from the beginning of the financial crisis.
Gold: The Fate That Awaits Once Fed Stimulus Ends [View article]
Hello Dennis954,
Thanks for your comment. I agree completely with your conclusions, as many of the actions taken to this point by global sovereigns in response to the financial crisis are favorable to Gold over the long-term. Great point.
Thanks for your comment and for raising a lot of thought provoking points and questions here. To your points, one of my genuine concerns over the last few years and particularly since the summer of 2010 is the fact that so much power in terms of monetary policy decision making is essentially concentrated in a single individual at the Federal Reserve. The article that ran in the WSJ back on December 12 in a way gets to this point - a select few individuals all from the same school of thought that manage the worlds money supply over appetizers, wine and small talk gaze out over the Rhine and wax about the grand global monetary experiment that continues to unfold.
While I believe their intentions are good, I'm not sure this is the best structure to administer monetary policy in the end. I suppose only time will tell.
U.S. Economy: Why The Looming Fiscal Cliff Matters [View article]
Hello Asbytec,
Thanks for your comment. You hit on a key point in your comment that has been a source of frustration for years. And the blame falls on both sides of the political aisle. All of the rescue policies that were enacted back in late 2008 and early 2009 were supposedly designed to buy time so that the system could properly clear itself and actions could be taken to change the functioning of certain markets to avoid future excesses and potentially catastropic unwinds. Yet here we are over three years later and while a good deal of resources have been deployed, little if anything has been solved.
Apple: A Canary In The Stock Market Coal Mine [View article]
Hello nguyenvanphouc,
Thanks for your comment and I agree with your point. My intent with the correlation chart is not necessarily to say that the stock market is going to follow the exact same path that Apple set out on six months ago or that the market is on the brink of a -38% decline over the next six months. Instead, the design was to show that both individual securities and broader markets have the tendency to move in familiar patterns in regards to the duration and relative magnitude of rallies. It is also provided to show that even the most revered investment themes can be subject to extended declines even in an environment where such investments are receiving the full support of monetary authorities such as the Fed.
I appreciate your raising this point and offering the opportunity for clarification. Thanks again.
Thanks for your comment. You raise a good point. I completely endorsed the Fed's implementation of QE1 and understood the principles behind the decision of fiscal policy makers at the outset of the crisis to increase deficit spending in order to use government spending to help offset the decline in consumer spending and business investment on total output. My objections with fiscal and monetary policy have been more centered on the fact that instead of allowing the economy to gradually cleanse itself in an orderly once the system was stabilized perhaps as early as the summer of 2010, extraordinary policy measures have been perpetuated and have instead further delayed the necessarily corrective processes to finally take place. Once this is allowed to occur, and hopefully in a managed and orderly way, I believe we will find ourselves at the beginning of a new secular bull market.
So in short, I agree with your point that any unwinding process must be gradual. And the sooner we enter into this unwinding process, the more gradual it can be.
Thanks for your comment. You raise an interesting point.
I went back and looked at the P/E data for the S&P 500 both at the start and end of each round of QE and this is what I found.
P/E Ratios: QE1 start: 18.6 QE1 end: 17.7
QE2 start: 14.5 QE2 end: 14.5
QE3 start: 14.8
As a result, the latest round of QE is beginning at a point that is roughly equal to lower than past rounds.
But the point that you've raised here is key. These lower P/E numbers have been heavily driven by the sharp improvement in corporate earnings that appears unsustainable going forward given the global economic outlook and the fact that corporations are operating at peak profit margins that are more than +2 standard deviations above the mean.
Thus to your point, we could see a ballooning in the P/E number that has the potential to place even more fundamental downward pressure on the overall market.
Who's Benefiting Most From The Recent Stock Sell-Off? [View article]
Hello readers,
Thanks for taking the time to read my article. As an additional note, the 47% of Americans that don't own stock is based on the results from the latest Gallup poll from April 9-12, 2012. I've included a link here for reference.
Sysco: Building A Case For A Return To Growth [View article]
Hello Chuck,
This is an absolutely superb article. Thanks for your excellent work.
I was an owner of SYY for nearly a decade prior to the financial crisis. To your points above, it is an outstanding company that has done a superior job managing its way through what has been a difficult environment for food service distribution over the last several years. And I have found myself revisiting the name in my stock research for the first time in a while in recent months for the reasons associated with valuation that you have cited here.
Thanks again for your excellent article on SYY. I appreciate it and look forward to reading your future articles.
Market Tremors Signal That Something Wicked This Way Comes [View article]
Hello PalmDesertRat,
Thanks for your comment and for these additional points. You are exactly right. I found that the warning signal list was so long that I ended up going with about half of the items that I had on my list. AAII was also on my list, and have included the decelerating M2 to my list based on your recommendation - I went out to the St. Louis Fed's FRED database and saw what you were referring to.
Gold: The Rally Is Just Around The Corner [View article]
Hello Interesting Times,
Thanks for your reply. I appreciate it and you have once again raised an excellent and important topic.
I think we are on the same page when it comes to precious metals, as I share your view that the most ideal way to own gold and silver is to take possession of the physical metal. To your point, if you hold it in your possession, you know without question that it is yours.
But for those investors that either cannot or do not wish to delve into the additional responsibilities associated with taking possession of the physical, I think the next best step is owning the exchange products that we've talked about in GTU, CEF and PSLV that have the most explicit and straightforward prospectus information. These exchange traded securities are also useful for investment managers like myself seeing to establish and maintain exposure to these precious metals in a portfolio setting on behalf of clients.
But I agree with you completely. Owning the physical gold and silver is the best way to go.
Great comments and I appreciate your sharing your thoughts and perspectives, as they've added a lot of value to the article.
Gold: The Rally Is Just Around The Corner [View article]
Hello Interesting Times,
Thanks for your comment and providing me with the opportunity to clarify. I share your view on SLV and am not recommending it for purchase other than as a short-term trading instrument. I included the ticker in the article only for reference since it is the largest silver etf by trading volume and is often the best known as a result.
To your point exactly, the pure silver holding that I would recommend most would be the PSLV. And for those interested in owning both gold and silver as part of an overall strategy, the Central Fund of Canada (CEF) that consists 55% gold and 45% silver is also a far better alternative.
Thanks for your comment and raising this point, as it is an important one.
U.S. Economy: 4 Simple Reasons Recession Lies Ahead [View article]
Thanks for your comment. I'll be following up with a variety of data points on these topics in future posts in the coming days and weeks. As mentioned in this article, my intent here is to keep things in this post is to stay out of the data weeds and introduce themes on a more qualitative conceptual level for this article. But your point is well taken, as a statistician I am also someone that relies on data to draw conclusions. I look forward to exchanging comments with you on future posts.
Thanks again.
Stocks: Why One More Major Correction Still Lies Ahead [View article]
Thanks for your comment. Related to your point, the fact that we had secular bear markets long before active policy interventions shows that the forces of the economy and markets in the end are greater than the actions of any individual or set of individuals that try to manage them.
Thanks again.
Bernanke's Kryptonite [View article]
Thanks for your comment and for calling me to participate in the discussion. If you've followed my past articles, you'll know that I almost always jump in an actively participate in the comment discussion. Given that I posted the article late Saturday night and today is Sunday, I was spending the day with my family and have only had the chance to get online late this evening. I've enjoyed the discussion so far and look forward to posting more in the coming days.
Thanks again.
Gold: The Fate That Awaits Once Fed Stimulus Ends [View article]
Thanks for your comment. You're right that this is a key week with the Fed potentially hinting (or not hinting) at additional policy support in the coming months. This will be very interesting to see and will go a long way in setting the tone for the market over the next couple of months.
But in the end, I believe you are absolutely right that no amount of monetary support will solve the problems that continue to plague the economy several years on from the beginning of the financial crisis.
Great points as always. Thanks again.
Gold: The Fate That Awaits Once Fed Stimulus Ends [View article]
Thanks for your comment. I agree completely with your conclusions, as many of the actions taken to this point by global sovereigns in response to the financial crisis are favorable to Gold over the long-term. Great point.
Thanks again.
Fear And Loathing On Wall Street [View article]
Thanks for your comment and for raising a lot of thought provoking points and questions here. To your points, one of my genuine concerns over the last few years and particularly since the summer of 2010 is the fact that so much power in terms of monetary policy decision making is essentially concentrated in a single individual at the Federal Reserve. The article that ran in the WSJ back on December 12 in a way gets to this point - a select few individuals all from the same school of thought that manage the worlds money supply over appetizers, wine and small talk gaze out over the Rhine and wax about the grand global monetary experiment that continues to unfold.
http://on.wsj.com/VO0N1u
While I believe their intentions are good, I'm not sure this is the best structure to administer monetary policy in the end. I suppose only time will tell.
Thanks again.
U.S. Economy: Why The Looming Fiscal Cliff Matters [View article]
Thanks for your comment. You hit on a key point in your comment that has been a source of frustration for years. And the blame falls on both sides of the political aisle. All of the rescue policies that were enacted back in late 2008 and early 2009 were supposedly designed to buy time so that the system could properly clear itself and actions could be taken to change the functioning of certain markets to avoid future excesses and potentially catastropic unwinds. Yet here we are over three years later and while a good deal of resources have been deployed, little if anything has been solved.
Thanks again for your comment.
Apple: A Canary In The Stock Market Coal Mine [View article]
Thanks for your comment and I agree with your point. My intent with the correlation chart is not necessarily to say that the stock market is going to follow the exact same path that Apple set out on six months ago or that the market is on the brink of a -38% decline over the next six months. Instead, the design was to show that both individual securities and broader markets have the tendency to move in familiar patterns in regards to the duration and relative magnitude of rallies. It is also provided to show that even the most revered investment themes can be subject to extended declines even in an environment where such investments are receiving the full support of monetary authorities such as the Fed.
I appreciate your raising this point and offering the opportunity for clarification. Thanks again.
Bernanke's Kryptonite [View article]
Thanks for your comment. You raise a good point. I completely endorsed the Fed's implementation of QE1 and understood the principles behind the decision of fiscal policy makers at the outset of the crisis to increase deficit spending in order to use government spending to help offset the decline in consumer spending and business investment on total output. My objections with fiscal and monetary policy have been more centered on the fact that instead of allowing the economy to gradually cleanse itself in an orderly once the system was stabilized perhaps as early as the summer of 2010, extraordinary policy measures have been perpetuated and have instead further delayed the necessarily corrective processes to finally take place. Once this is allowed to occur, and hopefully in a managed and orderly way, I believe we will find ourselves at the beginning of a new secular bull market.
So in short, I agree with your point that any unwinding process must be gradual. And the sooner we enter into this unwinding process, the more gradual it can be.
Thanks again.
Where Has The QE Rally Gone? [View article]
Thanks for your comment. You raise an interesting point.
I went back and looked at the P/E data for the S&P 500 both at the start and end of each round of QE and this is what I found.
P/E Ratios:
QE1 start: 18.6
QE1 end: 17.7
QE2 start: 14.5
QE2 end: 14.5
QE3 start: 14.8
As a result, the latest round of QE is beginning at a point that is roughly equal to lower than past rounds.
But the point that you've raised here is key. These lower P/E numbers have been heavily driven by the sharp improvement in corporate earnings that appears unsustainable going forward given the global economic outlook and the fact that corporations are operating at peak profit margins that are more than +2 standard deviations above the mean.
Thus to your point, we could see a ballooning in the P/E number that has the potential to place even more fundamental downward pressure on the overall market.
Excellent point. Thanks for raising it.
Who's Benefiting Most From The Recent Stock Sell-Off? [View article]
Thanks for taking the time to read my article. As an additional note, the 47% of Americans that don't own stock is based on the results from the latest Gallup poll from April 9-12, 2012. I've included a link here for reference.
http://bit.ly/LVqRUb
Thanks again.
Sysco: Building A Case For A Return To Growth [View article]
This is an absolutely superb article. Thanks for your excellent work.
I was an owner of SYY for nearly a decade prior to the financial crisis. To your points above, it is an outstanding company that has done a superior job managing its way through what has been a difficult environment for food service distribution over the last several years. And I have found myself revisiting the name in my stock research for the first time in a while in recent months for the reasons associated with valuation that you have cited here.
Thanks again for your excellent article on SYY. I appreciate it and look forward to reading your future articles.
Market Tremors Signal That Something Wicked This Way Comes [View article]
Thanks for your comment and for these additional points. You are exactly right. I found that the warning signal list was so long that I ended up going with about half of the items that I had on my list. AAII was also on my list, and have included the decelerating M2 to my list based on your recommendation - I went out to the St. Louis Fed's FRED database and saw what you were referring to.
Great points and thanks again.
Gold: The Rally Is Just Around The Corner [View article]
Thanks for your reply. I appreciate it and you have once again raised an excellent and important topic.
I think we are on the same page when it comes to precious metals, as I share your view that the most ideal way to own gold and silver is to take possession of the physical metal. To your point, if you hold it in your possession, you know without question that it is yours.
But for those investors that either cannot or do not wish to delve into the additional responsibilities associated with taking possession of the physical, I think the next best step is owning the exchange products that we've talked about in GTU, CEF and PSLV that have the most explicit and straightforward prospectus information. These exchange traded securities are also useful for investment managers like myself seeing to establish and maintain exposure to these precious metals in a portfolio setting on behalf of clients.
But I agree with you completely. Owning the physical gold and silver is the best way to go.
Great comments and I appreciate your sharing your thoughts and perspectives, as they've added a lot of value to the article.
Thanks again.
Gold: The Rally Is Just Around The Corner [View article]
Thanks for your comment and providing me with the opportunity to clarify. I share your view on SLV and am not recommending it for purchase other than as a short-term trading instrument. I included the ticker in the article only for reference since it is the largest silver etf by trading volume and is often the best known as a result.
To your point exactly, the pure silver holding that I would recommend most would be the PSLV. And for those interested in owning both gold and silver as part of an overall strategy, the Central Fund of Canada (CEF) that consists 55% gold and 45% silver is also a far better alternative.
Thanks for your comment and raising this point, as it is an important one.