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Jeff Miller

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  • How To Handle A Big Gain [View article]
    ron3637 -- Yes, you are correct. You need to estimate both the fair price and the odds. Nonetheless, the approach can give you an idea of the true value, perhaps warning you against just playing for the upside.

    Jeff
    Apr 3 12:14 PM | 1 Like Like |Link to Comment
  • How To Handle A Big Gain [View article]
    DD -- Yes, I did choose the numbers in a way that showed there could still be an edge, but mostly I want to illustrate a method. The market often does not achieve accurate pricing for these situations.

    Another good example would be after a takeover has been announced, but the acquired company is not yet at the final price. Professional risk/arb traders take big positions while waiting for the gap to narrow. If the deal falls apart, there can be a big loss. It is almost always right for the individual investor to sell in these cases. Even anti-trust experts, for example, are sometimes wrong.

    The options approach can certainly work, but the prices are usually high, so you still need to calculate your edge.

    Jeff
    Apr 3 12:13 PM | 1 Like Like |Link to Comment
  • How To Handle A Big Gain [View article]
    Mark -- I have been selling some positions that have reached targets and I plan another article (soon I hope) on more criteria for selling.

    Thanks,

    Jeff
    Apr 3 12:07 PM | 2 Likes Like |Link to Comment
  • Missing Indicators And Confirmation Bias [View article]
    Ted -- The problem is your choice of starting point. Last year began with worries about the fiscal cliff. The first 8% or so just relieved that worry. There was also a lot of other negativity built in. We have been dealing with a multi-year period of skepticism about the economy. If/when it returns to something like normal, the skeptics will STILL be way behind on earnings growth.

    So I think you are stating it backwards, but I appreciate your comments!

    Jeff
    Mar 23 02:03 AM | 3 Likes Like |Link to Comment
  • Weighing The Week Ahead: Yellen Takes The Stage [View article]
    GaltMachine -- UBS has a fine weekly report that includes a comment on your question, citing the same figures as you. They note that the revenue weakness is centered in financials (a sector that they like, as do I). There was a huge decline in sales at one company (PRU). Excluding that, the revenue growth would have been 3% -- still not great, but more in line with the economy.

    I don't like to "throw out" data, especially things like the worst sector, the ten worst days, etc. Sometimes there is a noteworthy reason for results.

    I hope this is helpful. It is all I have on the topic without a lot more research.

    Jeff
    Mar 17 11:18 AM | 3 Likes Like |Link to Comment
  • Weighing The Week Ahead: Yellen Takes The Stage [View article]
    avolossov -- Your source cites $4 trillion in reverse repos so far this year -- about the size of the Fed balance sheet. He seems confused about the difference between temporary and permanent operations, something that is well known to those who are Fed experts.

    Taken from the site which he cites :)

    "To implement monetary policy, short-term repurchase and reverse repurchase agreements are used to temporarily affect the size of the Federal Reserve System's portfolio and influence day-to-day trading in the federal funds market."

    More fundamentally, the Fed is completely transparent on these actions. If not, why would the list be published at all?

    There are some legitimate questions about the best Fed policy, but a secret reversal of QE is not one of them. The popularity of such articles is an example of the free market at work!

    I hope this is helpful.

    Jeff
    Mar 16 08:26 PM | 4 Likes Like |Link to Comment
  • Weighing The Week Ahead: Yellen Takes The Stage [View article]
    dd - Concerning the Fed and the inverted yield curve -- the Fed has always controlled the short end, so that is nothing new. Rates have been held low on many occasions in the past. The difference is the influence on the ten-year and the MBS market. Without QE, the curve would be even steeper.

    Concerning the 2007 comparison, a big factor was that the "side bets" on subprime with AAA ratings were larger than the subprime market itself. No one knew the size of this market and it was not regulated. Even the heroes who predicted it were baffled by the trading, as I noted in my review of The Big Short. The final factor was FAS 157, the dumb experiment with mark-to-market accounting. As I often wrote at the time, I believe in market prices. The prices used in this exercise were thinly traded CDS swaps -- not a valid market. These things are all different.

    The SLFSI did not exist then, but if it had, it would have captured financial stress.

    We all try to use the best information available, revising conclusions as we see more data. It starts with trying to make a reasonable estimate of the global effects. Suppose that China is growing at 4% as some doomsters say, instead of 7.5%. That is probably meaningful for emerging markets and some specific stocks that I follow, but much less so for the overall US market. I have repeatedly noted that it is difficult to get good data and a good read on China.

    On just about everything else, my methods have been very accurate -- Europe, recessions, and especially US political outcomes.

    As to nagging doubts, that is why I start the process with every client -- all of them -- by right-sizing risk. I sense that many people joining in the comments are focused on the next market move. Since I am managing six different programs, weighted for each client, I start with the client needs -- not the market. It happens that I like the market here, and I have been correct. That has helped, but it is not the main factor.

    Unlike others, I have clearly defined rules for changing position size to reflect risk. In 2011, for example, I cut back position size when the SLFSI triggered, even though my predictions about the debt ceiling debate were completely accurate.

    There is a big difference between managing risk and letting fear guide your investments.

    Jeff
    Mar 16 07:37 PM | 4 Likes Like |Link to Comment
  • Weighing The Week Ahead: Yellen Takes The Stage [View article]
    dwdallam --- very good observations.

    Thanks for joining in.

    Jeff
    Mar 16 05:11 PM | 1 Like Like |Link to Comment
  • Weighing The Week Ahead: Yellen Takes The Stage [View article]
    GaltMachine -- Partly it is a matter of profit margins ( discussed here: http://bit.ly/Ol5BQ2) and partly share buybacks.

    As an investor, I think share buybacks are a legitimate approach, especially in companies where I am also enjoying dividends and selling some calls.

    It would not be right to adjust for inflation and then call it deflation, but I agree that revenue growth continues to disappoint. We have below trend economic growth -- a multi-year fact of life. Every time there is a little progress, something seems to happen to create a new "soft patch."

    As you know, I think we are still in the middle innings of this prolonged business cycle.

    You are raising a key point.

    Jeff
    Mar 16 01:49 PM | 1 Like Like |Link to Comment
  • Weighing The Week Ahead: Yellen Takes The Stage [View article]
    dd -- I appreciate your regular comments, and it is certainly not personal. When you are looking at a list like the one from your source, you might note that it is completely one-sided (as opposed to the source I cited). That was true of most of the laundry list articles last week.

    As to the frothy nature of some stocks -- in 2000 this spread to everything -- all values. Every indicator I followed was flashing a warning. What I see now is many investors who think they have missed out are trying to hit home runs. They are afraid of regular stocks with earnings and fundamentals that you can analyze. Instead, we get an emphasis on story stocks that defy normal analysis.

    From following some individual investor comments on scutify.com, for example, I think that many market skeptics are the ones buying the frothy stocks:)

    Jeff
    Mar 16 01:14 PM | 2 Likes Like |Link to Comment
  • Weighing The Week Ahead: Yellen Takes The Stage [View article]
    billcharlesdixon -- I stopped with the millionaires, but there are also more with over $100K, if you read the entire piece.

    We have to measure improvement somehow. The question of inequality is important for us as citizens, but I'm not sure about the investment relevance. Higher wealth and income is good for markets, so that is why I mention it.

    I take your point, and thanks for sharing.

    Jeff
    Mar 16 11:42 AM | 1 Like Like |Link to Comment
  • Weighing The Week Ahead: Yellen Takes The Stage [View article]
    jamestsherry -- Sorry to disappoint a regular reader, but there is only so much I can do in the weekly summary. Your kind of questions would require a separate post on the topic. Since I think it is mostly a distraction for investors and too unpredictable for traders, I will not be the one to write that post.

    I did provide a good link, and I also suggested several excellent sources over the last few weeks.

    I try to stick to subjects where I can add value. Trying to predict Monday's opening based on unknown events is out of my "happy zone" (to invoke Ted Williams once again.

    Thanks for reading and commenting, and I hope other points were helpful.

    Jeff
    Mar 16 11:38 AM | 3 Likes Like |Link to Comment
  • Weighing The Week Ahead: Yellen Takes The Stage [View article]
    dancing diva -- Let me comment on your link, included for "balance."

    1) Most articles that I read do not make it into my final post, including the one you cited. It was republished by Cullen and Doug, so it got wide circulation.

    2) I made clear my reasons for highlighting some "lists" and not others. The cited source (Lance, not Cullen) has been singing the same song for years with a changing group of indicators and warnings. Can you find a time when he thought it was right to buy stocks?

    3) My definition of "balance" includes a focus on real risks. I report those every week, no matter the result. What I write is balanced. Most investors are overwhelmed with the laundry list approach which you can use to prove anything. It seems persuasive, because all of the individual pieces are true, but the result is a mess.

    4) I have already written extensively on several of the items on that list. Margin debt is a good example.

    To summarize -- I am trying to help investors. Pointing them to a list of misleading charts is not helpful, nor does it provide balance. I am not going to do a critique of the particular article in the comments, but it would be easy to win a debate on these points.

    A real problem is that articles like this have already defined the agenda for many investors. If we have learned anything from the behavioral finance work, it is the power to establish fear through confirmation bias and anchoring of beliefs --- even without data.

    Jeff
    Mar 16 11:34 AM | 11 Likes Like |Link to Comment
  • Dancing With The Stars And Confirmation Bias [View article]
    B. Gibbs -- While everyone has a personal level of risk that is appropriate, your ZIRP conclusion is that the stock allocation should be higher than normal.

    I agree.

    Jeff
    Mar 12 06:45 PM | Likes Like |Link to Comment
  • Dancing With The Stars And Confirmation Bias [View article]
    thanks :)
    Mar 12 06:43 PM | Likes Like |Link to Comment
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