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James A. Kostohryz  

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  • The Bottom's Not In----Why This Market Is Dumber Than A Mule [View article]
    alcamo1940:

    "James Kostohyrz was one of my favorites to read, bc I agreed with his thoughts, that the stock market was highly priced and in a bubble!"

    I must correct you on this because I NEVER said that the stock market was in a bubble. In fact I have written no less than 5 articles in which I have explained why the market is NOT in a bubble. In fact, in 2011, I wrote several articles in which I stated that the market was attractive to neutral in terms of valuation, but that I believed it would fall due to problems in Europe.

    Unfortunately, people that are pre-disposed to believe that the stock market is in a bubble have looked for things in my articles that they believe validated their theory of a bubble. But the fact of the matter is that I have been very clear all along -- even when I was bearish on the market -- that the stock market was NOT in a bubble. And it's still not. I think it may very well inflate into a bubble, but it's not there yet.
    Mar 27, 2015. 09:48 AM | 1 Like Like |Link to Comment
  • The Bottom's Not In----Why This Market Is Dumber Than A Mule [View article]
    Rebel:

    You are partly correct that I should have addressed the substance, but there is little by way of facts to refute in this article.

    But there is no "ad hominem attack" in my comment. Stockman was the one that called the market "dumber than a mule." My intent in asking "so who's dumber than a mule?" was to highlight the rather blatant ironies in Stockman's own red herring about dumb mules.
    Mar 27, 2015. 03:35 AM | 3 Likes Like |Link to Comment
  • The Bottom's Not In----Why This Market Is Dumber Than A Mule [View article]
    BMC:

    Funny you mention it: Starting in August 2012 -- as you note - I have been positive on the market and most of the articles that you cite prove that. I was indeed wrong on the market for a short period between 2011 and August 2012, but never for any of the reasons that Stockman tends to harp on. I was bearish on global markets because of the situation in Europe, and I happened to be right about most of what happened there.
    Regarding, substance.

    You are correct in that I should have addressed it. I was mainly responding to his "dumb mule" comment. There is, in fact, little of substance worth noting in this article. For example, it shows a rising trend in durable goods orders -- which is utterly contrary to his point. It shows an utterly irrelevant graph on steel capacity utilization. This article mainly focuses attention on China, which is a subject that Stockman knows precious little about. Ironically, even if his predicted recession in China occurs (he has said nothing unique here about it) this would be a net positive to the US due to the depressing effect on global commodity prices. The US is a net commodity importer and benefits from lower commodity prices.

    Finally, Stockman calls the market as "dumb as a mule." That is not analysis, it's the complaint of a seemingly desperate man. He does not even know anything about the intelligence of mules.

    The bottom line is this: This is just another ideologically charged rant by David Stockman. There is little substance, and what little there is grasping as straws (like steel capacity utilization) to try to prove his entirely pre-concieved point. This is almost pure rant, starting with his headline about dumb mules.
    Mar 27, 2015. 03:27 AM | 2 Likes Like |Link to Comment
  • The Bottom's Not In----Why This Market Is Dumber Than A Mule [View article]
    The stock market has been rising for several years despite Mr. Stockman's predictions to the contrary.

    So who's dumber than a mule?

    Sounds like somebody that is desperate and resentful because the market has not gone they way he wanted it to.

    By the way, it appears that Mr. Stockman knows about as much about mules as he does about what moves the stock market. Mules are actually smarter than horses or donkeys. All farm-boys such as myself that have worked with horses and mules know that. And science has now proved it as well: http://bit.ly/1E77mrK
    Mar 26, 2015. 07:50 PM | 10 Likes Like |Link to Comment
  • The Future Of Seeking Alpha [View article]
    Reasonable people expect to have to pay a plumber for the service of going to their house and fixing their pipes.

    Reasonable people expect to have to pay for high quality investment analysis.

    Investment success - like success in many other fields -- takes much skill and a great deal of hard work. If you want skilled people to work hard for you to help you obtain things you want, you better to be willing to pay for it.

    That is the bottom line.

    There is a market for high quality investment analysis and services. SA is providing a market venue where the people that demand these services and those that can supply them are able to meet. This increases consumer choice and increases incentives for services to be provided that heretofore were not available to individual investors. This is a very good thing.

    It is important to keep in mind that nobody is going to be forced to purchase SA Premium products. It's a choice. If you think the product is valuable and can help you, you can buy it. If you don't think it's valuable or you simply don't want to pay for it, then you can choose not to pay for it. People have the choice.

    Objections to an initiative that increases the quality of services and choices available to individual investors are fundamentally strange, but predictable.
    Mar 25, 2015. 01:26 PM | 19 Likes Like |Link to Comment
  • Announcing Winners For Seeking Alpha's First-Ever Investment Pitch Contest [View article]
    Congratulations, Ian Bezek. I coincidentally read the article when it came out and thought that it was very good.
    Mar 23, 2015. 11:10 AM | 1 Like Like |Link to Comment
  • Fed Funds Not So Easy: Major Implications For Stocks [View article]
    avolossov;

    Thanks for your comment. I understand what you are trying to do and I salute you for searching for the truth. But the main problem is that you are looking at nominal rates while one should be looking at real rates. As the article states, when you look at real rates, and particularly when you take into account different regimes, the current Fed funds rate is not as "easy" as it seems.

    Cheers!
    Mar 22, 2015. 10:34 PM | Likes Like |Link to Comment
  • Fed Funds Not So Easy: Major Implications For Stocks [View article]
    marketwatcher23:

    What part of your question would you like me to address, that I have not already addressed? I answered the part about check-writing and loans.
    Mar 22, 2015. 09:39 PM | 1 Like Like |Link to Comment
  • Fed Funds Not So Easy: Major Implications For Stocks [View article]
    dnpvd51:

    "Of course, it is not like writing everyone a check. This would be too fair and equitable."

    The Fed is not authorized to do that. Why would anybody criticize the Fed for doing something that they are not authorized to do? If you think writing checks and handing them out to everybody is a good policy, you need to direct your criticism at Congress.

    Actually, Bernanke asked Congress - which is the entity authorized to write checks and hand them out -- to enact more expansionary fiscal policy.

    Regarding Stockman, you are entitled to believe whatever you want. Facts and logic are otherwise.
    Mar 22, 2015. 09:35 PM | 1 Like Like |Link to Comment
  • Fed Funds Not So Easy: Major Implications For Stocks [View article]
    RS055:

    Your dichotomy is interesting. I actually address it in one of my articles on my newsletter. Basically, I think QE1 had a huge and necessary impact, because it was supplying a spiking demand for liquidity. However, subsequent iterations of QE were not responding to a demand for liquidity -- it was supplying excess liquidity. And this is why the impact after QE1 and certainly after QE 2 was so minimal.

    So, the dichotomy actually has a logical explanation. QE1 was critical. After that, it's impact was marginal.
    Mar 22, 2015. 09:25 PM | 1 Like Like |Link to Comment
  • Fed Funds Not So Easy: Major Implications For Stocks [View article]
    RS055:

    You make a very interesting point about the "gut". I actually relate to that feeling in my gut somewhere. But, that gut feeling is directed at the policy, and as you know, I am addressing a matter of forecasting in a shorter time-frame here.

    Cheers!
    Mar 22, 2015. 09:21 PM | 1 Like Like |Link to Comment
  • Fed Funds Not So Easy: Major Implications For Stocks [View article]
    "I suggest that you read David Stockman, Peter Schiff and others with greater knowledge on this subject."

    Sorry, but those guys know very little about this subject. Worse still, they are in the business of selling misinformation.

    And of course they are "writing a check", but that is that is completely besides the point. The point is that this is not "free money". They are buying $100 worth of bonds for $100 in cash. It's an asset swap. It is nothing like a "helicopter drop" or "writing everybody a check."
    Mar 22, 2015. 07:14 PM | 1 Like Like |Link to Comment
  • Fed Funds Not So Easy: Major Implications For Stocks [View article]
    Thanks for your very kind words, freshlegacy.
    Mar 22, 2015. 05:21 PM | Likes Like |Link to Comment
  • Fed Funds Not So Easy: Major Implications For Stocks [View article]
    avolossov:

    Thanks for your comments. I welcome them.

    The problem with your analysis is this. Your points 2 and 3 do not take into account the real interest rate. It is not proper to "average" nominal interest rates in different regimes -- you would need to average the real interest rates during those regimes.

    For example, what was the average real interest rate when unemployment was between 5.3% and 5.7%? You will find that the figure is much lower and that on a relative basis, today's real interest rate is not nearly as high as your regime analysis of nominal rates would suggest.

    The nominal rate is virtually irrelevant in an evaluation of the "ease" or "tightness"
    of the Fed Funds rate.

    So do your analysis with the real Fed funds rate, and things will look very different.

    And that is not even the end of the analysis. For example, suppose that you found that the real Fed Funds rate during some point in the past was 3%, but inflation was at 5% and the unemployment rate were equal. Should that 3% real figure should be "averaged" to determine what a real Fed funds rate should be now? No! We are in a regime of low and falling inflation, so the above historical analogy is misleading. During a regime of high inflation a higher real interest rate is warranted (independent of the unemployment rate) in order to get inflation down to target (e.g. 2%). In a regime of low and falling inflation, a similarly high real interest rate does not - other things being equal - make sense.

    Thus, I'm afraid your analysis is not actually robust at all, no matter how you define it. That kind of analysis mixes apples with beef cakes. The whole analysis is invalid before you even do run any kind of statistical analysis of it.

    Still, I can tell that you are trying to get at the truth. It's just that you need to carry out the basic idea of your analysis several steps further.
    Mar 22, 2015. 03:24 PM | Likes Like |Link to Comment
  • Fed Funds Not So Easy: Major Implications For Stocks [View article]
    Peter:

    There is a spectrum of how "equivalent" to cash those instruments are. For example, you cite money markets. But money market funds hold T-Bills, which you say you don't consider to be a cash equivalent. And they hold commercial paper, which you should consider to be even less so. Furthermore, even though a savings account is a close substitute to a checking account, it is not a perfect substitute.

    But in general I agree with most of what you say. There is no reason why ST interest rates cannot -- in the short term -- be zero or negative. If this is determined by the market, so be it.

    What rate Fed Funds should be set at in this context is somewhat of a different matter. It's one thing to say that it is OK for a depositor to pay for a bank to hold his deposit. It's really another thing to say that the central bank should actually pay people to borrow money from them. You can have negative interest rates in private markets without having a negative central bank policy rate. Not that I consider a negative CB policy rate to be an absolute taboo; I simply think this gets into a whole other can of worms.
    Mar 22, 2015. 02:40 PM | Likes Like |Link to Comment
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