A CNBC interview of Rep. Barney Frank turns into a train wreck after Frank and CNBC's Mark Haines can't stop talking long enough to listen. Are these two related?[View news story]
I try to put aside my personal opinions about Frank or any other guest. I am just trying to get the best possible information about what is likely to emerge from Congress. This is in sharp contrast to those who start with an opinion about the source. More here:
The State and Local Government Crisis Looms Larger [View article]
The key points from the Don Boyd paper are the following:
1) Stimulus has not yet hit 2) The effect is quite significant, but temporary 3) More action might be required
In an environment with so much economic uncertainty, it is well to shorten our time horizons a bit.
There are some who think the stimulus was too little, and some who think it was unnecessary. If something seems to be helping in the near term, there is a large group assuring us that eventually it will be a disaster.
I agree with you. If you look at my past articles, you will see that I have written extensively about the under-estimates of employment effects. Employment dynamics reports show that 7.5 million jobs are lost each quarter, while 7 million are created. I have also cited the JOLTS report, showing job loss each month.
There is plenty of pain, and I try to make that clear.
To the point of the article -- we want to look beyond the individual effects and attempt to find economic indicators. Continuing claims fails for this purpose.
I might also point out that others, also taking the personal perspective, take the opposite viewpoint.
It is a story about indicators -- what is useful, and what isn't.
Thanks for helping us all to focus on this.
Jeff
On May 20 10:23 AM wpdragon wrote:
> I'm going to repost a comment I made on another SA article today... > not because I'm spamming but because it is pertinent to this discussion. > > > First, some additional comments: The people I wrote about are all > hard working middle class American professionals who have strong > work ethics and strong employment histories. They AREN'T trying to > ride any unemployment insurance gravy train for as long as they can > scam it. Hundreds of thousands of our newly unemployed are of a similar > background I would venture to "guess". They are not the type of people > who want to game the system, and they do NOT want to lose the homes > they have put so much blood, sweat and love into over the years. > But they will lose them nonetheless, and many will eventually run > out of unemployment benefits as well. > > My buddy's wife who just lost HER job was in TEARS, crying her eyes > out calling the local unemployment office to try to find out what > her options were - a hard working, upwardly mobile, promotable architect > whose life just got ripped apart through no fault of her own. Gaming > unemployment? Bullcrap, she would have done ANYTHING not to have > to apply in the first place. > > The original: > > Markets can remain rational OR irrational much longer than a "reasonable" > person would expect, depending on that so-called reasonable person's > perspective and resulting "bets" on market direction and velocity. > > > There are massive pools of competing capital that can move the markets > in either direction, as we have seen quite clearly over the past > 18 months, and the rationale behind those movements can not always > be easily perceived, subject as it is to the whims and spins and > machinations of the largest investors in the world, both government, > public and private. > > What I CAN perceive, and be rational about, however, is what is happening > all around me. And it is not pretty. > > Yesterday I ran into a workout friend who was until yesterday an > investment advisor to customers at a credit union here in a rural > New England area. He lost his job. His wife doesn't work. He has > a few young kids. He was (I'm taking an educated guess) making close > to $100K. He was distraught, never saw it coming, has no backup plan > and said he will most certainly have to put his house up for sale. > > > Six weeks ago a friend of mine making $200K + as an architect in > a Boston architectural firm lost his job, in a firm-wide layoff. > No problem, his wife still had HER $125-150K job at another architectural > firm in Boston, so they could get by for awhile. She lost HER job > two weeks ago. > > So I don't know where the market is going anymore than the next jamoke. > But I do know that what this "recession" (I will be polite) is doing > is continuing to tear the heart and soul and lifeblood out of the > middle class American consumer without any sign of letup, green shoots > be damned. Those 3 persons alone represented well over $400K in consumer > "spending" and one more house about to go on the market that just > got sucked out of the system. These weren't $40K/year blue collar > jobs, altho there are plenty of them as well no doubt, and I do not > wish to demean the losses of any member of our society by suggesting > that their pain is any less or greater than another's. > > So take your charts and your opinions and your propaganda and your > spin machine s and your program trading desks at GS and everything > else and throw them out the window. Just look at what's going on > around you, and WHO its happening to. > > This is an unmitigated disaster of terrible proportions, its tearing > the fabric of the American middle class apart, a middle class that > has heretofore been the engine that drove all US (and much international) > growth for the past century, and we have much more pain ahead before > we will see any meaningful recovery. > > ... and miles to go before I sleep
It is interesting that non-economists think that other non-economists are better sources than real economists. I wonder if Josh knows how many in his top group (A.P. Economics) are actually economists.
And also, why does SA think that this is a great resource? There are many lists of economic bloggers, using a variety of criteria.
Most often, people look at traffic. This tells us a lot about the Internet audience, but very little about the content.
JJason -- You ask a tough question. It is not because I am concerned about returns. (16% last year, over 10% annualized for ten years, beating the S&P by 7 points per year in our individual program).
If I do not answer, it seems like I am offering opinion without expertise.
The problem is that returns alone are not a good answer. Each investor is different -- needs, risk tolerance, etc. As a Registered Investment Advisor I qualify each client and tailor the program. What we do is not suitable for everyone.
I obviously welcome inquiries from interested investors, but my mission in these articles is oriented to education.
Thanks for the question, but I hope most who are interested will inquire via email at my site.
What the Bear Stearns Resolution Tells Us About the Fed [View article]
I am delighted to see that several people have taken the time and effort to comment.
I am not surprised that those who choose to write disagree so strongly. It is always difficult to reconsider strongly held opinions. My conclusions about government action come from many years of study and observation. Readers can and will choose whether to find this helpful, or to follow the lead of the many pundits who have no background or understanding government institutions, organizational behavior, or economics.
I get no monetary benefit from allowing my work to appear on Seeking Alpha. My hope is that some readers can look objectively at evidence.
I am less interested in analyzing how this happened than figuring out how to profit from the current circumstances.
I strongly suggest that readers try to understand FOMC motives in order to predict their behavior.
As always, I am happy to engage any well-reasoned comments.
Market Rallied 3 1/2% in Seven Trading Hours: How Did You Do? [View article]
Valueplay98 -- If you think writing about blogs is "lame" then you will not be a good candidate for my book. One chapter concerns individual investors and how they can use information from various sources, including blogs. There is a wide range of blogging purposes. I expect to include a review and analysis of many.
There is a difference between an MSM blog written by a professional journalist and the average financial site. The reader is going to have different expectations. (I discuss this in more detail in other comments and articles on my site).
There is also a growing tendency for news bulletins and headlines to distort the facts in the articles. Google "stagflation" or "recession" and you will see scores of examples.
You are probably sharp enough to make excellent decisions about what to read and how to interpret it. Not everyone is so good.
Understand the Fed's Actions by Examining the Past [View article]
Barry - As a lawyer, you know that it is possible to make a narrow and literal interpretation, and that is what you are doing. I think my article makes it quite clear that the Fed sees market disruption as an important factor affecting the dual mandate.
I believe that you should read the article again, starting with the part with "But why speculate?"
For investors who want to profit from following the Fed, they should pay more attention to what Fed members think rather than to what you, or I, or a bunch of other pundits think they should do.
Employment Report: Beware Of Interpreters With An Agenda [View article]
Leonard --
Well put! Those making specific contentions should be willing to defend them. I encourage you to check out my site as I consider each of these points in more detail. I hope that Seeking Alpha will pick up the stories, but they have been much more reliable on posting Barry's stories than mine (including the stuff that would make the most money for investors -- my ETF series).
What Is The Downside Of New Market Highs? [View article]
I am using the bottoms up forward earnings from Thomson Financial, currently $104. In my experience these have proved much better than other approaches, especially calendar year. Looking four quarters forward is a rolling method. You can set up your own spreadsheet using that figure and a decline of 18%. A key point is that forward earnings "look through" some of the bad times in recessions.
Fundamentals And The Market: Review and Expectations [View article]
MD -
You have provided an extensive and thoughtful comment, which I appreciate. A complete analysis of the Hussman approach is beyond what I can do in a comment reply. At some point I suppose I'll have to take it up more completely. I do appreciate your pointers, but they are not really satisfying.
John Hussman has a very successful business and an approach that he invented and defends aggressively, even when it does not seem to be working. That's fine. I find his arguments rather difficult to follow and analyze -- and I am pretty good at doing this kind of work. So far the hurdle to clarifying it has not been worth the effort.
To summarize my concerns with Hussman:
He does not use forward earnings. He likes to predict by looking backward and I do not. He wants pefect data about the past and then tries to guess at the cycle. I prefer to look at forward-looking data. He complains that the Fed Model is not an empirical fit. I do not think it is either. I think it shows broad periods of market euphoria or skepticism about future earnings. It is more a gauge of sentiment.
As to bonds and stocks both being overvalued (and alleged trends in interest rates) -- this is a frequent argument of those who start with a conclusion and then go back to the facts. Basic financial theory holds that any two assets should be equal on a risk-adjusted basis. Even if you believe that both assets are overvalued, the two should be in balance.
As to trends in interest rates, this is completely bogus. The market offers a choice each day. The holding period need not be ten years. One can revalue yearly or even more frequently. If these asset classes came into line tomorrow, investors should respect the move. If one really believes that bonds are overvalued, then this is even more reason to buy stocks instead, since bonds will have capital losses. Mr. Market offers us a daily choice....
As to analysts, I suggest that you are fighting the last war. If you search for that phrase on my blog, you will find several discussions. Analyst behavior has changed dramatically since 2000-01. Firms were sued. The analysts are required to have a balance of recommendations. They do not get rewarded for investment banking recs as they did in 2000. Many of the higher-paid analysts left with these changes.
I read hundreds of analyst reports. Many of them are guessing the economic and market cycle in their estimates -- just as you seem to be doing. Do you really believe in their ability to do this? They are not economists. The actual earnings results have outpaced estimates for several years running. Guessing the top in this cycle is a dangerous enterprise.
But you have highlighted the key issues for our readers, reflecting a viewpoint that many endorse.
Thanks, and I'll try to look at the specific Hussman articles more carefully.
Stocks Are No Longer Cheap [View article]
Here's a thought. Interest rates matter. The media P/E ratios include many times of much higher interest rates. Asset allocation is a comparison.
Let's suppose interest rates were the 70's era 14%. We would all choose bonds over stocks at current earnings forecasts.
With the ten-year at 3.5% or so -- well -- it makes a difference.
A CNBC interview of Rep. Barney Frank turns into a train wreck after Frank and CNBC's Mark Haines can't stop talking long enough to listen. Are these two related? [View news story]
oldprof.typepad.com/a_...
The State and Local Government Crisis Looms Larger [View article]
1) Stimulus has not yet hit
2) The effect is quite significant, but temporary
3) More action might be required
In an environment with so much economic uncertainty, it is well to shorten our time horizons a bit.
There are some who think the stimulus was too little, and some who think it was unnecessary. If something seems to be helping in the near term, there is a large group assuring us that eventually it will be a disaster.
In practice, policy makers adjust to events.
Seeking Alpha and Xignite Partner to Broaden Access to Free Corporate Transcripts [View article]
The transcript search is already very valuable for my research. This will make it much easier to share with readers.
Continuing Jobless Claims: Dubious Economic Indicator [View article]
I agree with you. If you look at my past articles, you will see that I have written extensively about the under-estimates of employment effects. Employment dynamics reports show that 7.5 million jobs are lost each quarter, while 7 million are created. I have also cited the JOLTS report, showing job loss each month.
There is plenty of pain, and I try to make that clear.
To the point of the article -- we want to look beyond the individual effects and attempt to find economic indicators. Continuing claims fails for this purpose.
I might also point out that others, also taking the personal perspective, take the opposite viewpoint.
It is a story about indicators -- what is useful, and what isn't.
Thanks for helping us all to focus on this.
Jeff
On May 20 10:23 AM wpdragon wrote:
> I'm going to repost a comment I made on another SA article today...
> not because I'm spamming but because it is pertinent to this discussion.
>
>
> First, some additional comments: The people I wrote about are all
> hard working middle class American professionals who have strong
> work ethics and strong employment histories. They AREN'T trying to
> ride any unemployment insurance gravy train for as long as they can
> scam it. Hundreds of thousands of our newly unemployed are of a similar
> background I would venture to "guess". They are not the type of people
> who want to game the system, and they do NOT want to lose the homes
> they have put so much blood, sweat and love into over the years.
> But they will lose them nonetheless, and many will eventually run
> out of unemployment benefits as well.
>
> My buddy's wife who just lost HER job was in TEARS, crying her eyes
> out calling the local unemployment office to try to find out what
> her options were - a hard working, upwardly mobile, promotable architect
> whose life just got ripped apart through no fault of her own. Gaming
> unemployment? Bullcrap, she would have done ANYTHING not to have
> to apply in the first place.
>
> The original:
>
> Markets can remain rational OR irrational much longer than a "reasonable"
> person would expect, depending on that so-called reasonable person's
> perspective and resulting "bets" on market direction and velocity.
>
>
> There are massive pools of competing capital that can move the markets
> in either direction, as we have seen quite clearly over the past
> 18 months, and the rationale behind those movements can not always
> be easily perceived, subject as it is to the whims and spins and
> machinations of the largest investors in the world, both government,
> public and private.
>
> What I CAN perceive, and be rational about, however, is what is happening
> all around me. And it is not pretty.
>
> Yesterday I ran into a workout friend who was until yesterday an
> investment advisor to customers at a credit union here in a rural
> New England area. He lost his job. His wife doesn't work. He has
> a few young kids. He was (I'm taking an educated guess) making close
> to $100K. He was distraught, never saw it coming, has no backup plan
> and said he will most certainly have to put his house up for sale.
>
>
> Six weeks ago a friend of mine making $200K + as an architect in
> a Boston architectural firm lost his job, in a firm-wide layoff.
> No problem, his wife still had HER $125-150K job at another architectural
> firm in Boston, so they could get by for awhile. She lost HER job
> two weeks ago.
>
> So I don't know where the market is going anymore than the next jamoke.
> But I do know that what this "recession" (I will be polite) is doing
> is continuing to tear the heart and soul and lifeblood out of the
> middle class American consumer without any sign of letup, green shoots
> be damned. Those 3 persons alone represented well over $400K in consumer
> "spending" and one more house about to go on the market that just
> got sucked out of the system. These weren't $40K/year blue collar
> jobs, altho there are plenty of them as well no doubt, and I do not
> wish to demean the losses of any member of our society by suggesting
> that their pain is any less or greater than another's.
>
> So take your charts and your opinions and your propaganda and your
> spin machine s and your program trading desks at GS and everything
> else and throw them out the window. Just look at what's going on
> around you, and WHO its happening to.
>
> This is an unmitigated disaster of terrible proportions, its tearing
> the fabric of the American middle class apart, a middle class that
> has heretofore been the engine that drove all US (and much international)
> growth for the past century, and we have much more pain ahead before
> we will see any meaningful recovery.
>
> ... and miles to go before I sleep
A who's who of financial bloggers. (Great resource, but why oh why no hyperlinks?) [View news story]
And also, why does SA think that this is a great resource? There are many lists of economic bloggers, using a variety of criteria.
Most often, people look at traffic. This tells us a lot about the Internet audience, but very little about the content.
Fear, Investors, & Marketing [View article]
If I do not answer, it seems like I am offering opinion without expertise.
The problem is that returns alone are not a good answer. Each investor is different -- needs, risk tolerance, etc. As a Registered Investment Advisor I qualify each client and tailor the program. What we do is not suitable for everyone.
I obviously welcome inquiries from interested investors, but my mission in these articles is oriented to education.
Thanks for the question, but I hope most who are interested will inquire via email at my site.
Jeff
What the Bear Stearns Resolution Tells Us About the Fed [View article]
I am not surprised that those who choose to write disagree so strongly. It is always difficult to reconsider strongly held opinions. My conclusions about government action come from many years of study and observation. Readers can and will choose whether to find this helpful, or to follow the lead of the many pundits who have no background or understanding government institutions, organizational behavior, or economics.
I get no monetary benefit from allowing my work to appear on Seeking Alpha. My hope is that some readers can look objectively at evidence.
I am less interested in analyzing how this happened than figuring out how to profit from the current circumstances.
I strongly suggest that readers try to understand FOMC motives in order to predict their behavior.
As always, I am happy to engage any well-reasoned comments.
Jeff
Market Rallied 3 1/2% in Seven Trading Hours: How Did You Do? [View article]
There is a difference between an MSM blog written by a professional journalist and the average financial site. The reader is going to have different expectations. (I discuss this in more detail in other comments and articles on my site).
There is also a growing tendency for news bulletins and headlines to distort the facts in the articles. Google "stagflation" or "recession" and you will see scores of examples.
You are probably sharp enough to make excellent decisions about what to read and how to interpret it. Not everyone is so good.
Thanks for your observation.
Jeff
Why Do Investors Look at the Wrong Information? [View article]
Jeff
Understand the Fed's Actions by Examining the Past [View article]
I believe that you should read the article again, starting with the part with "But why speculate?"
For investors who want to profit from following the Fed, they should pay more attention to what Fed members think rather than to what you, or I, or a bunch of other pundits think they should do.
Employment Report: Beware Of Interpreters With An Agenda [View article]
Well put! Those making specific contentions should be willing to defend them. I encourage you to check out my site as I consider each of these points in more detail. I hope that Seeking Alpha will pick up the stories, but they have been much more reliable on posting Barry's stories than mine (including the stuff that would make the most money for investors -- my ETF series).
What Is The Downside Of New Market Highs? [View article]
Thanks for the question.
Jeff
What's the Probability of a U.S. Recession in 2008? [View article]
Fundamentals And The Market: Review and Expectations [View article]
You have provided an extensive and thoughtful comment, which I appreciate. A complete analysis of the Hussman approach is beyond what I can do in a comment reply. At some point I suppose I'll have to take it up more completely. I do appreciate your pointers, but they are not really satisfying.
John Hussman has a very successful business and an approach that he invented and defends aggressively, even when it does not seem to be working. That's fine. I find his arguments rather difficult to follow and analyze -- and I am pretty good at doing this kind of work. So far the hurdle to clarifying it has not been worth the effort.
To summarize my concerns with Hussman:
He does not use forward earnings. He likes to predict by looking backward and I do not. He wants pefect data about the past and then tries to guess at the cycle. I prefer to look at forward-looking data.
He complains that the Fed Model is not an empirical fit. I do not think it is either. I think it shows broad periods of market euphoria or skepticism about future earnings. It is more a gauge of sentiment.
As to bonds and stocks both being overvalued (and alleged trends in interest rates) -- this is a frequent argument of those who start with a conclusion and then go back to the facts. Basic financial theory holds that any two assets should be equal on a risk-adjusted basis. Even if you believe that both assets are overvalued, the two should be in balance.
As to trends in interest rates, this is completely bogus. The market offers a choice each day. The holding period need not be ten years. One can revalue yearly or even more frequently. If these asset classes came into line tomorrow, investors should respect the move. If one really believes that bonds are overvalued, then this is even more reason to buy stocks instead, since bonds will have capital losses. Mr. Market offers us a daily choice....
As to analysts, I suggest that you are fighting the last war. If you search for that phrase on my blog, you will find several discussions. Analyst behavior has changed dramatically since 2000-01. Firms were sued. The analysts are required to have a balance of recommendations. They do not get rewarded for investment banking recs as they did in 2000. Many of the higher-paid analysts left with these changes.
I read hundreds of analyst reports. Many of them are guessing the economic and market cycle in their estimates -- just as you seem to be doing. Do you really believe in their ability to do this? They are not economists. The actual earnings results have outpaced estimates for several years running. Guessing the top in this cycle is a dangerous enterprise.
But you have highlighted the key issues for our readers, reflecting a viewpoint that many endorse.
Thanks, and I'll try to look at the specific Hussman articles more carefully.
Jeff