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Jake Huneycutt

 
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  • Italy: The New 'Powder Keg' Of Europe [View article]
    Shareholders Unite,

    Thanks for the kind words.

    I agree that there is a good deal of low-hanging fruit. On the other hand, the skeptic in me says that national politics rarely seems to push towards those solutions, as they inevitably stomp on someone's toes, and normally that "someone" is well-connected.
    Feb 19, 2014. 05:53 PM | Likes Like |Link to Comment
  • The Turkish Debt Dilemma [View article]
    Excellent article, Jon. Thanks for this.
    Feb 19, 2014. 05:04 PM | Likes Like |Link to Comment
  • Italy: The New 'Powder Keg' Of Europe [View article]
    TCD,

    Good comment. I'd say that's part of the problem. The end-game will be determined by politics (either at govt level and / or ECB), which can be extremely arbitrary. That's one reason why I've not taken many positions (long or short) in regards to the eurozone.

    If you think about it, the ECB could devise a scheme to beat Italian interest rates down to virtually 0%. The Italian debt crisis would be averted, but it would shift problems to other eurozone states. This might breed resentment in Germany and other stronger Eurozone states.

    Or Italy could leave the Eurozone and devalue, causing the euro to strengthen, hitting exports in the rest of the Eurozone.

    Or Germany and France might agree to allow Italy to take a hair-cut on its debt. This could create banking crises, and ironically would hit the Italian banks the hardest.

    There's pretty much an endless stream of possibilities and I don't think anyone really has a clue what will happen.
    Feb 19, 2014. 04:59 PM | 1 Like Like |Link to Comment
  • Italy: The New 'Powder Keg' Of Europe [View article]
    AnandR,

    Thanks for the excellent and well thought out comment.

    I'd disagree with you on government debt for a few reasons. The comparison to Japan isn't completely apt IMO, because Japan is a sovereign issuer of its own currency. My view is that most investors (and the broader financial community) have a misunderstanding of the differences between the two types of government bonds. Japan can technically print as much money as it wants to in order to fund its deficits. For this reason, Japanese government debt is more similar to equity in a lot of ways; whereas Italian debt is true debt (paid in an external currency).

    I don't disagree that total debt is also important and that surging private debt can create big crises, as well. Italy looks a bit better on that front. At the same time, government debt ends up being more integral to long-term growth, and the reason why Italy looks to be in terrible shape is because its long-term growth record over the past 20 years is horrendous. Add in the demographic problems and the already-oppressively high tax burden, and it appears to me that it will be very difficult for Italy to "grow its way out."

    The only way I can see "out" (aside from a euro exit and devaluation) is if the ECB / Eurozone states find a way to stealthily lower Italian interest rates at the expense of the rest of the eurozone (w/o the wealthier nations revolting). Technically that's what the LTRO did, but it hardly seems permanent to me.
    Feb 19, 2014. 04:27 PM | Likes Like |Link to Comment
  • Italy: The New 'Powder Keg' Of Europe [View article]
    Thanks for the comment 62Dylan. Why the Netherlands, out of curiosity? I'm not disagreeing, mind you; just curious on how the Euro is perceived there. I view one of the distressed nations as more likely to exit first for trade reasons, but I don't think it's completely out of the question that one of the stronger economic nations could leave, as well.
    Feb 19, 2014. 11:24 AM | 1 Like Like |Link to Comment
  • Italy: The New 'Powder Keg' Of Europe [View article]
    Thanks for the comment, poshest. Interesting to hear what young Italians think of their own economy.
    Feb 19, 2014. 11:01 AM | 1 Like Like |Link to Comment
  • Italy: The New 'Powder Keg' Of Europe [View article]
    dieuwer,

    Thanks for the comment. I'd like to a broader eurozone series, but due to limited time, it's probably unlikely. I am now very curious, though, about how the individual French and Spanish banks were impacted by LTRO.
    Feb 19, 2014. 10:58 AM | 2 Likes Like |Link to Comment
  • Italy: The New 'Powder Keg' Of Europe [View article]
    invest2bfree,

    Italy would be much better off with a eurozone exit, but I think you're being a bit naive to suggest it wouldn't have an impact on the rest of the eurozone. Take a look at German bank exposure to Italian debt and it's immediately evident why the German banks want to hold the eurozone together at all costs.

    Don't forget that an Italian exit would almost certainly result in a strengthening of the Euro, as well, which could possibly expose some of the asset bubbles (and reduce the massive trade surpluses) in northern Europe. Germany's current bubble is dependent upon many of the weaker states' keeping the overall Euro subdued.

    Absolutely --- the Italians would be better off without the Euro. But it will just as certainly create collateral damage. Long-term, I think it would be for the best; short-term, it will create a lot of chaos.
    Feb 19, 2014. 10:38 AM | 2 Likes Like |Link to Comment
  • FitLife Is Very Cheap, But Probably Not For Long [View article]
    Excellent article, as always, Igor.
    Feb 15, 2014. 12:50 PM | Likes Like |Link to Comment
  • The Marie Antoinette Rule [View article]
    Excellent article!

    The Fed's dual mandate has always been flawed IMO. Monetary policy is not the primary driver of long-term employment or wages and the idea that monetary stimulus can "create" jobs is flawed. The primary focus of monetary policy should be price stability, with a particular focus on assets, such as housing, real estate, and energy.
    Feb 12, 2014. 09:59 AM | 2 Likes Like |Link to Comment
  • The Crisis Of Modern Economics [View article]
    William,
    Great comments, as always.
    I can see the case that China's stimulus has yielded real assets, but I think you also have to look at the other side: corruption. What often happens in these large infrastructure binges is that massive amounts of money are allocated to special interests, so even when there are good projects, their economic viability is often destroyed by "the process", so to speak. In pure financial terms, an infrastructure project with a +15% IRR could suddenly turn into a -15% IRR once you factor this in.
    Also a great case to be made that much of the infrastructure being built in China was not economically viable to begin with (Jim Chanos has taken this line of argument frequently). This isn't a case against infrastructure, per se, so much as a case against funding it in large spending packages by a central government for the purposes of "stimulating the economy." Whenever this process / rationale is used, it's almost always bad, because the goal becomes not to build "economically viable" or "needed infrastructure", but rather to build "anything" to "create" jobs.
    Feb 7, 2014. 03:56 AM | 3 Likes Like |Link to Comment
  • High Margin Debt And Quantitative Easing [View article]
    And US housing prices were up 14.7% in 2005.
    Feb 5, 2014. 09:31 PM | Likes Like |Link to Comment
  • High Margin Debt And Quantitative Easing [View article]
    William,

    Great comment!

    I've been following Hussman's views closely over the past year and agree with him on a lot about the current environment. I've found from researching historical data that most market crashes tend to be driven by an overestimation of earnings growth. Once earnings growth picks up in a recovery, investors tend to assume that the growth in the high-part (i.e. boom) of the cycle is the "new normal", rather than factoring in slower growth or even a contraction in earnings (i.e. "reversion to the mean"). Hussman has been better in analyzing this than anyone else out there.
    Feb 4, 2014. 05:54 PM | 1 Like Like |Link to Comment
  • Who's To Blame For The Emerging-Market Crisis? [View article]
    I'd say both economists here are partly wrong and they agree on way too much. What seems to get overlooked:

    1.) The Fed's QE program has resulted in a significant misallocation of resources, pushing money into hard assets (such as real estate), stocks, and riskier economies, while creating no real economic growth,

    2.) Meanwhile, across the Pacific, China's own flawed "stimulus" measures, which includes direct fiscal stimulus, as well as currency manipulation, and artificially low interest rates, has also created a monumental misallocation of resources, which has favored hard assets and commodities,

    3.) The inevitable result of both China's and the US's flawed policies is that it creates asset and market bubbles all across the globe, from housing bubbles in the US and China, to mining bubbles in Chile, Australia, and Canada.

    4.) Things aren't totally black and white. Some of the nations struggling (e.g. Turkey, Argentina, and even Brazil) can be blamed for most of their own problems. It's more difficult to assign blame to a nation like Chile, however, which has mostly benefited from external demand that it had nothing to do with. Chile isn't in any crisis, mind you, but it could certainly enter into a deep recession as a result of softening demand for copper, as China's asset bubble deflates.

    5.) I disagree with Krugman on everything being the fault of the US, but I also disagree with Rodrik's claim that liberalizing capital flows has been bad for places like India. Yes, it makes them more dependent on the rest of the world, but ultimately, you'd rather have volatility than poverty. Rodrik's argument seems to be a rejection of free trade.

    What it comes down to is that both of these economists agree on a flawed ideology that promotes constant and never-ending government stimulus. To call it Keynesian is a misnomer; this ideology is a gross bastardization of Keynes.
    Feb 3, 2014. 01:03 AM | 2 Likes Like |Link to Comment
  • Kenya, Ivory Coast, Nigeria, And Ghana: The African KINGs [View article]
    Excellent article, Belgrad. I've been fascinated by everything going on in Kenya and the East African Community.
    Jan 20, 2014. 08:37 AM | 2 Likes Like |Link to Comment
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