James Brumley

Small Caps Worth a Look: UIS, SIRI, LUV, SLAB, KIRK

Hi Tugturf.... not exactly sure what you mean. I'd be interested in hearing more of your thoughts. (I hope I never implied that my writing was complete - just a quick observation).


On Aug 23 11:21 PM tugturf wrote:

> Your analysis or lack of it on Krik is creepy.(Yes, I’m getting to
> like that word too. Most analyses seem to be afraid of it for the
> reasons you point out but the time has come and I'm in!!!...

Small Caps Worth a Look: UIS, SIRI, LUV, SLAB, KIRK

True, it's technically a large cap, though on the 'small' end of the large cap scale. But, if you want me to say you're right, then you're right - it's not a small cap stock by definition.

Sometimes - in the interest of brevity and trying to help investors make money (without muddying the waters) - I have to group things efficiently. Were it relevant or material to the commentary, I wouldn't mis-classify anything. In this case, I was more concerned with getting the idea publicized than I was interested in adding more words that didn't add anything material to the write-up.

If it makes ya' feel better though, everyone, LUV isn't a small cap. LUV has gained 24% since the article was published though.... and that's the reason I get paid to write this 'fluff'.


On Jul 23 05:26 PM mr research wrote:

> FYI ... Southwest is not a small cap stock.
>
> and you get paid to write this fluff...

Small Caps Worth a Look: UIS, SIRI, LUV, SLAB, KIRK

Hey relm, I'm not quite sure what your intended message is here, but I assume you're talking about one of the MF's SIRI articles? Just wanted to confirm.

On Jul 17 08:53 AM relmar2003 wrote:

> I did it anyone one the first one. Heres WHY he really wrote the
> article. TO hammer this point hom, as it was close to the Iphone
> release. See my unsophisticated friend, timing is everything.<br/>
>
> "Buzz matters. Few are talking about the streaming application that
> launched through Apple's (Nasdaq: seekingalpha.com/symbo...)
> App Store just 11 days ago. It's gone from being the second most
> popular free app in Apple's iTunes storefront to a still-respectable
> fifth. But the fadeout will continue. Rare are the apps -- among
> them Facebook, Pandora Music, Google (Nasdaq: seekingalpha.com/symbo...)
> Mobile, and AT&amp;T's (NYSE: seekingalpha.com/symbol/t) account
> tracker -- that remain fixtures on the Top 25 list.
>
> The app may generate new interest if Howard Stern is added, or if
> it takes a page out of the Netflix (Nasdaq: seekingalpha.com/symbo...)
> playbook by making itself available at no additional cost for existing
> subscribers. But Sirius XM is well-served by keeping the press releases
> rolling, to maintain its flagship satellite-based service relevant"
>
>
> Got in the no Howard, and got in the app dropping, and will continue
> too. Nothing to do with his article whatsoever. Be like me writing
> any article about Google Earth, and mentioning that they lost market
> share, and then told us why. You could say, well its a bullish article
> on Google. Went over google earth nicely. The "draw the reader in
> hook" was only to deliver negative information. I see this TIME
> AND TIME AGAIN with the Fool. But most of there articles are just
> downright negative. You want to debate this further wtih me, ill
> be right here.

Small Caps Worth a Look: UIS, SIRI, LUV, SLAB, KIRK

Are you more 'sophisticated' than me? I don't know. I don't care. It's not a contest. Does one of us being more sophisticated have any bearing on the discussion above?

I would never deny that the MF has been pounding SIRI recently. Go back in time though.... even when the company was entering a toxic financing situation, the MF's chorus was still singing its praises. Not so much lately, but before and during, it was creepy. The description is an opinion word, of course. You may describe it as odd, or quirky , or not creepy at all. Whether it's creepy to everyone else or nobody else though, it's mostly irrelevant relative to everything else.

I also agree that the MF is late to most parties. I don't know that I would call the MF a joke though. I agree with some of the sentiment posed here, though the site has value in many regards. Some criticism is deserved, some is not. Life is gray.

I too agree that they're a little too promotional at times, and occasionally over the top in terms of 'advertorials'.

Even when they're not, they usually leave themselves an 'out' in terms of a recommendation. Welcome to the industry. When one of their picks is right, it's the investor who's a genius for heeding the advice. When one of their picks is wrong, it's the author who's an idiot. Investors can rationalize inconsistency like that.

I'm not exactly sure how linking to their articles weakens my argument. You made a broad, sweeping statement, and I illustrated that the statement wasn't as broad and sweeping as you implied. If you want to argue opinions, great. If you want to argue whether information exists or not, you'll be doing that alone.... we both have other things to worry about.

Bigger picture, I have to confess I'm kind of baffled that the discussion has mostly focused on a half sentence about the Motley Fool's opinion, while the rest of the article above has been untouched. Tangent? Is there an ego agenda at play here? I don't know...I'd just rather argue the pros and cons of my picks, which is where money is made and lost.

On Jul 17 08:48 AM relmar2003 wrote:

> Author...
> Thanks for replying.
> I must be a more "sophisticated" reader than you. As you cant see
> the bias, nor the timing issues of there articles. Rick A. is a
> closet bear on the company. Issues just enough bullish teasers to
> always claim "being right" about the company. MF is a joke, and
> linking there articles to make your point weakens yours. If you
> think MF is bullish on SiriusXM, I have some GM stock you may like
> to buy from me. I can go over each article to prove my point, but
> it would be for you, not for me. THe readers here know that the
> MF is a joke. If you want to think otherwise, like I said, maybe
> you want to buy some GM stock from me too.

Small Caps Worth a Look: UIS, SIRI, LUV, SLAB, KIRK

Not only do I read the Motley Fool, but I write for the Motley Fool on occasion....

www.fool.com/search/in...

As for excessively (and moderately) bullish comments from the Fool....

www.fool.com/investing...

www.fool.com/investing...

www.fool.com/investing...

www.fool.com/investing...

Never let the facts get in the way of a good argument.

Healthcare as a Recession Indicator: Right Symptoms, Wrong Diagnosis?

Interesting take. Thanks

Detroit: Please Bring Back the Stripped Car

Interesting debate - a lot of good points on both sides. Ultimately though, I think the author's premise is flawed not in principle but in practice.

If it were just quality, or just coolness, or just reliability, or just features, or just a good price that the average consumer wanted, then Detroit's big three could compete.

However, consumers want (and understandably) at least measurable amounts of all five of those qualities in anything they buy, A stripped down car is cheaper, but if the other key criteria aren't met, then it's just not good enough - a stripped car doesn't meet four of the five criteria (usually)

To be clear, I'm not saying every car Detroit makes has to be off the charts on those five criteria, but each criteria has to be addressed.

Fact is, Asia has managed to meet all five criteria - affordably - and still managed to ship cars over here, and still beat Detroit on price. American consumers don't want the world, but the marketplace isn't wrong...ever.

I think (though respectfully) the author doesn't recognize that the stripped car was popular at a time when lifestyles didn't require us to be in our cars more than in our homes. 40 years ago, putting 15K miles on a car per year was unheard. Now it's the norm, and consumers can't roll the clock back that much. As much as I'm in my car, I want something that's reasonably nice... nicer than the average stripped auto from the 70's. Japan has supplied something comfortable, affordable, as well as semi-stylish for me. Detroit hasn't.

As for the fleet argument, I don't know what fleets are like where you're all from, but near here we still have large fleets....made up of relatively-stripped Japanese imports.

Missing the Secular Forest for the Cyclical Trees

???

I'm not entirely sure what you mean by your first comment (> "Such is the nature of a secular bear market - two words..." 1, 2, 3), so I can't respond.

Regarding your second comment, if you're wise enough to get off a sinking ship, then good for you.... but then this article wasn't written for you. It was written for the vast majority of investors who did not get off a sinking ship despite all the red flags. It's far easier said than done - hopefully this will help them pull the trigger when the time comes.

Is it cliche? Maybe. I don't really care if it is, if it gets my message across.

I think you're trying awfully hard to argue something that is (1) relatively benign, and (2) well worth understanding, particularly when very few other sources are discussing this possibility.

But, if leaving semi-random comments keeps your SA commenter 'Top 100' status intact, then I'm glad my take was of use to you.

On Dec 24 11:58 PM Kunst wrote:

> "Such is the nature of a secular bear market - two words..." 1,
> 2, 3.
>
> "If they start to sink, say three to five years from now, then sell
> ‘em." OK, I'll remember that.
>
> Are you sure you couldn't find any more cliches to use?

Artificial U.S. Dollar Rally Is Coming to an End

I appreciate the article, and understand the rationale. However, there's no such thing as an artificial rally....things rally for a reason. It may not be the best reason (or even a good reason), but there's nothing artificial about it..... the dollar rallied because FX traders saw more value in dollars than in other currencies - at that time. I can't say I blame them. If there weren't artificial rallies, the market would return about 2.5% per year, on average. There's no net 'return' on forex markets, but the idea still applies. What is and what 'should be' can be vastly different things.

How Treasury Created the Crisis: An Interview with Jeff Saut

Amazingly, neither the Fed nor the Treasury has figured out that both agencies need to be pro-active rather than re-active. If you're waiting for undeniable proof of a problem, then it's too late to prevent it. How have they not figured this out yet?

OPEC: Too Little, Too Late

Yep, there's no better cure for high prices than high prices themselves.

Rampant Inflation Paints Fed Into a Corner

Vindication is sweet.

Like I said (often repeatedly) in August and shortly after in the comments section....

"The argument against higher rates is simply that it will push the economy, the lending market, and the real estate market all over a cliff. If that's the worry, I have some bad news for you...all three are already on their death bed. You can't kill something twice. What have we got to lose at this point?" (credit markets froze two months later)

and

"Of course, the fear of an inverted yield curve is clear - the last two inversions did indeed jump-start a bear market." (which we got in spades)

and

"THINGS AREN'T BAD? Seriously? Yeah, they can always get worse. But brother, yes, things are bad. " (and the market got destroyed)

and

"I don't know that the yield curve caused a bear market. I do think it was a symptom of what causes the bear market. Cause or symptom? Doesn't really matter. The CORRELATION is too uncanny to ignore though." (yep...bear market followed)

and

""As for those of you in the 'things aren't that bad' camp....If you're ok with the fact that inflation is above 10 year yields, and above the Fed Funds rate, for the FIRST TIME EVER IN MODERN HISTORY...""

and then followed that up with.....

"Do I think 74 to 80 is modern history? No, I don't, but I'm glad you do. We had the same inflation scenario then (inflation higher than funds or interest rates). The market returned (SP500) returned about 10% for the entire span. THAT'S WHY I'M WORRIED NOW! Like I said, if you don't want to worry, be my guest. "

Those who ignored the signs paid the price. I'm not saying I saw it coming the way it did to the degree it did, but I had a lot of folks argue my points only to eat their words when the economy wiped out. The Fed chose the 'low rate' route after the market imploded and credit froze (as a warned of). They were still painted into the corner though....thank God commodities got crushed.

Rampant Inflation Paints Fed Into a Corner

Rerun the correlation, but this time start both at a base level (of 1) or whatever. You're finding a relationship, but that may only be because both are rleatively low. To compare 'apples to apples' , the change in one relative to the change in the other, you have to compaare the change - not raw data of each. Also, you didn't specify if you were using monthly or annual data. I used monthly. I'm not sure what you meant by the 'opening value of 10 year bond series', so I can't comment.

You asked why would long bond holders be worried about short-term inflation if their time horizon is ten years? Great question - you tell me. You were the one who brought it up initially. My question for you is, why are they not worried about it now, but were worried about it previously? Back to square one.....because they aren't worried about inflation now, but were then. Fine, but it raises the other question...why were they worried then and not worried now? What's different?

You also stated... "just because the thousands of actors in the market have determined the current yield of the 10-year bond, it doesn't mean it's the appropriate level."

That was the whole point I made in the initial article....it's not the appropriate level. You said it was because inflation wasn't a worry, and now you're saying it's not. Make up your mind.

Do I think 74 to 80 is modern history? No, I don't, but I'm glad you do. We had the same inlfation scenario then (inflation higher than funds or interest rates). The market returned (SP500) returned about 10% for the entire span. THAT'S WHY I'M WORRIED NOW! LIke I said, if you don't want to worry, be my guest.

I've read 'Wisdom of Crowds'. Good book. I recommend 'The Art of Contrarian Thinking'...an equally good book.

Final thoughts....

*"Why do you think the dollar is suddenly on the rise?"
Um, because it is.

Is that a serious answer? Try, because Europe bought about $15 billion worth of dollars versus the eurs over the last month.

*"Part of it has to do with weakening currencies overseas."
Weakening relative to what?

Again, seriously? Against the dollar.

*"Most of it has to do with the likelihood of rising interest rates (from the Fed) here in the United States." ...If you're talking about currency moves, I'd say you're leaving out half the story. This kind of change happens due to changes in the relationship between interest rates in two (or more) countries. The Euro is just as likely to weaken against the dollar if the EU is expected to cut interest rates - which it is.

Fair enough - that was half the story. We got word today the eurozone is quite fearful of recession now, which could drive their rates lower. That will fuel the problem. The question is, has it already been priced in? (our rates move higher while their's move lower)

* "The Fed saw what happened in July, and the market factored in the likely action the Fed would have to take. The effect was seen (for the dollar) before the Fed even needed to take action." ...If so, then why haven't rates reversed course since the Fed did not act in the way you think the market expected?

Rates never changed direction to reverse from. Give it time though (for movement in either direction)

* "...the dollar is completely linked to domestic interest rates. Like it or not, interest rates here are on the rise one way or another, or will be soon."...Again, half wrong, the relationship between currencies is linked to the relative rates of return available in different countries.

See previous answer.

Other thoughts....

Sorry about 'if you understand then you agree'. I phrased that badly...you can understand and disagree.

When should the NBER call a recession? If they can't do it until it's half over (or more), they shouldn't at all - unless for academic purposes. That's why I don't really care what they say. The only reason I brought it up was because you brought it up - as evidence that we weren't in one yet because they didn't say so.

Also, you wrote this...

"First off, you again seem to be indicating a causal link between the market (and an inverted yield curve) where there is none. Here's the difference - credit markets were not in the same kind of sire straits they are in now.....The more damaged the credit markets, the more difficult borrowing becomes, the less investment occurs, the slower the economy grows... are you following me? If wide spreads are helping to ameliorate problems in the credit market at this time, great - they need it.

I agree - if it helps spur lending, I'm all for it. There is a causal link though....you said it yourself - tighter spreads diminish investment. Ultimately, that hampers corporate growth. The price to pay is inflation....which also hampers corporate growth.

You said go ask lenders if an inverted yield curve would hurt lending, but I don't have to....I agree with you that it would. Now I'll ask you to go ask any corporate management team if inflation is hurting their business....they'll say the same thing.

So once again, the Fed needs to find the balance, because one or the other is going to kill us.

On a side note, the reason it's hard to respect you is just that you're argumentative at the expense of being objective. I'm not always right, and may well be wrong now. My goal is to inspire thought and conversation. Your goal is just to argue.

You're a smart guy (or gal, maybe) with valid points. Thanks for that. But, when you start using arguments that you and I both know are shaky (specifically, the NBER data and the 74/80 'modern history' questions), it just makes me wonder what your agenda is.

You should be writing these articles rather than just picking apart others. (You can do both, I think.) You've only commented though....take a look at your comments - your goal looks destructive rather than productive.

seekingalpha.com/user/...

This is my last post here, as I have to move on to other things.

Rampant Inflation Paints Fed Into a Corner

I linked an earlier article, but it didn't have the NBER data I wanted. Here's the point I was making about the uselessness of the NBER (this is from the NBER web site)

The November 2001 trough was announced July 17, 2003.
The March 2001 peak was announced November 26, 2001.
The March 1991 trough was announced December 22, 1992.
The July 1990 peak was announced April 25, 1991.
The November 1982 trough was announced July 8, 1983.
The July 1981 peak was announced January 6, 1982.
The July 1980 trough was announced July 8, 1981.
The January 1980 peak was announced June 3, 1980.

Six months to a year late every time. The fact that they haven't said we're in a recession yet means nothing.

Anyway...

One last thing.....you asked for the correlation relationship between long-term (10 year) yields and inflation. I can't show you my math, but I can tell you how to find it and do it for yourself.

Excel has a tool called 'correlation coeffecient', which measures how related or unrelated two data sets are. A 'high' correlation would score in the high 0.90's, while a low correlation would score closer to 0.00.

The correlation cooefficient of the change in 10 year yields and the change in inflation (monthly) is -0.01244....extremely low.

You can find the 10-year yield data here....
finance.yahoo.com/q/hp...

(To do the correlation test yourself, be sure to start them both at the same value - or normalized - and change each one appropriately for each month.)

Or, you could do the easier thing and just look at this chart :)

bigtrends.com/images/0...

BS correctly pointed out the dollar's recent rise should help ease inflation. What he didn't point out was that the dollar is still just slightly above multi-decade lows, and that inflation is still at multi-year highs. The dollar could rise more, and inflation could fall, but we'd still be at almost-unprecedented levels for both. It's a good start, but we need to see about 12 more months of the same before we're healthy again.

On the chart you can also see the correlation between the dollar and the Fed Funds rate.

BS also pointed out that the failure of the bond market to demand higher rates from 10 year bonds meant that they weren't worried about inflation. He may well be right - bond owners may not be worried about inflation. However, what he he failed to point out was that they weren't worried about it in 2006 either, AND THEY WERE WRONG NOT TO HAVE WORRIED ABOUT IT. The 10 year yield didn't even begin to creep higher until after inflation popped above 10 year yields then....right as inflation started to sink - way too late then. (Just because someone does something doesn't mean they're right.)

As for those of you in the 'things aren't that bad' camp....

If you're ok with the fact that inflation is above 10 year yields, and above the Fed Funds rate, for the FIRST TIME EVER IN MODERN HISTORY, well, then we'll have to agree to disagree. I just know when I see things I've never once seen in my lifetime, caution is merited. If you don't think things like that are a problem, then do what you gotta' do.

Rampant Inflation Paints Fed Into a Corner

BS Detector, you just exposed yourself as a fraud. You should know better than anybody the NBER won't declare we're in a recession until we're just about out of it....as I wrote in January. ( seekingalpha.com/artic...)

Of course, you've failed to define 'bad', or establish the various degrees of 'bad'. Until you can do that, I'm unable to compare now to any other recession. You're unable to do the same. Moot.

Yes, things can get worse for the economy and its barometers. They can't get worse for the consumer...even if they get worse for the economy. (Sorry if there was any ambiguity there)

The last half of the 90's, and between 2002 and 2006, spreads were tightening. Yet, the market (stocks) did great then. If you don't believe it, go look at the yield curve chart. Why would narrowing the spread - without inverting the yeild curve - be different this time? As I said, the trick is raising rates enough to temper inflation, without inverting long and short-term yields.

Yes, I said the lending market is on its death bed. Whether you agree or don't is irrelevant for now....if you understand my point, then by default you agree that raising rates isn't going to do any more damage. (If you think the lending market is still breathing, then you disagree with me....and you think rising rates would create more pain.)

With that in mind, I'm back to a previous point....I want to avoid the inverted curve. It has nothing to with lending though....there's nothing that can be done to salvage lending (IMHO). I just don't want the curve to invert for the market's sake. You can't' REALLY' kill anything....something only dies once - like lending.

With all that being said....

Why do you think the dollar is suddenly on the rise? Part of it has to do with weakening currencies overseas. Most of it has to do with the likelihood of rising interest rates (from the Fed) here in the United States. The Fed saw what happened in July, and the market factored in the likely action the Fed would have to take. The effect was seen (for the dollar) before the Fed even needed to take action...adn they might now now. But make no mistake - the dollar is completely linked to domestic interest rates. Like it or not, interest rates here are on the rise one way or another, or will be soon. Which brings me back to the original point....

The Fed needs to raise rates to temper inflation, but not so much that the yeild curve inverts. That's tough - but not impossible - to do.