Jim Hawthorne

This Is Just the Beginning

An excellent analysis that will hopefully lead to a healthy debate!

We all seem to have a tendency to 'telescope' time, and I think that many of the trends described will happen later rather than sooner, but may well come to fruition with even more explosive volatility than we've seen to date.

'Investors' will have to learn to be 'traders', IMO.

How Much Downside Could Still Exist?

I agree with Nikola;

In addition you ask, 'How much more downside is there?' and claim there is lots based on a list of vague assumptions and generalizations. Yet, in spite of this you have exited your short positions because, based on your peerless research, the S&P reached the magical number of 700, coupled with those flaws in the banks' balance sheets that you oh so cleverly spotted!

And after predicting more downside, you suggest that you will once again enter short positions if your once again vague set of conditions are met!

You have the unmitigated gall to end this rambling river of drivel by slamming 1929-1939 authors as 'self-serving'! What hypocrisy! Your entire article is self-serving

Evidence That Big Inflation Is Coming

Thanks for a most controversial submission, Adam! Contrarian it most certainly is!

I agree that there is a widespread tendency to confuse simple falling prices with deflation, and you are correct to label deflation as a sustained contraction in the money supply coupled with a sustained contraction of credit. In addition, these contractions take place with an inflation rate below 0%.

By several accounts then, we entered a deflationary trend sometime back in October/early November, when real inflation dipped below the line and we saw a dramatic increase in the purchasing power of money. Credit had dried up to the extent that it appeared that nobody was lending much of anything!

Currently, and most troubling, the the 10-year TIPS yield is running at about 1.85% compared to about 2.60% for a T-bond, and this seems to imply a trending 10 year annual inflation rate breaking at about -1.0% to -1.1% annually.

So if it looks like a duck, walks like a duck and quacks like a duck, let's go ahead and call it a duck. It looks like we are in a deflationary dip at the moment.

The question is, are we about to enter into a deflationary spiral which leads inexorably to depression?

You supply some very credible reasons why Central Banks (this is, after all a global event) are doing and will continue to do everything in their power to more us back across into the inflationary lane so they can deal with the devil they know, inflation being the better choice.

Whether or not this move will once again move us way over into inflation's fast lane is the big question. There is also, as always, the thorny question of timelines. The Bank of Canada's latest report predicts rising commodity prices in expanding global markets and a rapid recovery from the current recession.

Many economists, and a few of us skeptics find this assessment overly rosy and optimistic, at least in the short term.

If you're right, Adam, and you might well be, we will witness a monumental shift away from paper assets and a tsunami of money piling into hard assets. Gold has certainly become more attractive recently. Perhaps movements in the spot price of copper and corn/soy contracts will give us the first clues as to whether or not you're correct!

The Great Awakening: Boomers, Your Crisis Has Arrived (Part 3 of 3)

James Quinn will rattle a few chains with this one! I fear that there is a danger that emotion will trump logic in the reaction to it.

As a boomer born in 1946, I found some of James' generalizations about my generation applicable, and and others not so much, as is the case in all generalizations. I have also found that my generation is a rather difficult one to quantify, and as such is not really amenable to broad generalizations.

I have never lived in a McMansion; materially, I have always tried to balance my pursuit of personal goals with an awareness of my civic responsibilities and duties; rather that permissiveness, I instilled in my children and grandchildren the principle that every right carries the equal weight of responsibility, and so on...

Personally, I have always had the attitude that 'if the shoe fits, wear it; if not, let it go'. (Perhaps this also a characteristic of many in my generation!)

Yes, it is easy to criticize the boomers for the excesses of some, and just as easy to ignore the contributions and sacrifices of others.

As for leadership, we will get exactly the quality of leader we deserve. The crisis we face was of our own making, and the solution must come from us as well. Those solutions might be painful and demanding and difficult. We don't require a secular messiah; all the resources we need are really right here within ourselves!

Interview with Peter Schiff: Reflating the Bubble

Excellent, thought provoking article! Thank you!

Peter's opinions are always a valuable addition to the ongoing inflation/deflation debate here at SA.

We should note, however that the current contraction is both global and synchronized; and that both the US and China appear thus far to be coping far better than Europe, Asia (ex China), Latin America, or the CIS/Baltic region.

Peter's prediction may well be come true in the long term; it may just be a matter of timing. Short term we may very well experience a deflationary period where the forces of increased savings, reduced consumption and price declines stave off the inevitable inflationary run-up.

I would look far a well-tested bottoming process to end prior to jumping into any commodities save precious metals, which seem to do fine in both deflationary or inflationary periods!

Is 'Buy and Hold' an Antiquated Theory?

'Buy & Hold' is not a theory; it is an investing strategy.

You state; 'If we buy and hold, we continue to allow mutual fund managers to continue their good work, which is identify and buying great companies, while selling underperforming ones.'

Wow! I find this an odd statement in view of the fact that so few mutual fund managers manage to beat the market consistently!

Along with Bloomberg and Morningstar, MarketWatch reports that, 'Mutual fund investors in 2008 yanked more money out of actively managed stock-funds than they put in for only the third time ever, and index-fund rivals took the spoils.'

This indicates again that actively-managed mutual fund managers aren't doing much great work at all, a fact clearly demonstrated by their clients' move into indexed funds!

'Buy and Hold' is just one of many investment strategies. It may be suitable for some investors in some economic environments while being totally unsuitable for other investors with different goals, risk profiles, abilities and inclinations. There is no 'one size fits all'!

Many of us have successfully employed strategies ranging from 'buy & hold' to 'active swing trading' to 'day-trading', and even a 'sitting it out' strategy 100% in cash. We can spend days arguing back and forth about the relative merits/shortcomings of any and all of these in different time-frames and positions in the business cycle.

The simple truth is that if you engage in ANY investment strategy that is at odds with current market conditions and sentiments, or economic realities or is just plain out of sync with your goals, skills, abilities and predisposition, then you will most likely fail.

Post 1999, buy and hold worked well from spring 2003 through spring 2007. In other time periods, the flexible and nimble trader fared better; and there were even times that cash was king. Right now, cash still looks pretty good to me!

Obama's Role in the Market's Next Breakout

Matt, you begin your mini bull-thesis with a statement that strikes me as more than a little strange; (quote) 'Yet a few things need explaining. First, why the markets have been moving sideways since the end of September ’08'

Moving sideways since September 2008??? What markets are these???
The DOW? down +26%
The NASDAQ? down 29.5%
The S&P500? down +29%
The Russell2000? down 34.7%
The Japan index? down 28.4%
Eurotop 100? down 24.3%
Druggies? (DRG) down 11.7%
Homies? down 44.8%
Semis? down 32.1%
Even gold (XAU) has had a 5.5% haircut!

If this is 'sideways', I can't wait for your really BIG move!

Look, everybody hates bear markets! Yes, Everybody! We all know how tough it is to squeeze a buck out of this meat-grinder of a market!

When we do finally turn around, it will not be due to ANY government stimulus, bail-out, program, incentive, or initiative whatsoever! Over the last 18 months, we've seen just how fleeting and unsustainable the effects of EVERY government intervention has been!

When we do finally turn around, and we will, it will be because there have been substantial improvements in both market fundamentals and investor confidence that will give us that kind of market climate that brings us sustainable rallies!

Debutantes and old maids can wallow in hopes and wishful thinking! As investors and traders, we cannot afford that luxury!

I Have a Bad Feeling About This Market

'Seeking Alpha' is exactly about that: 'Seeking'!

This a forum for opinion, comment, agreement and dissent.

I appreciate any and all articles that give a clear point of view, whether I agree or not.

The purpose of SA is not to give yet another platform for the exclusive use of the army of so-called 'well qualified talking heads'! Rather it is a forum for discussion and opinion.

As such, SA provides a wealth of ideas for the fertile mind. I have learned far, far more from 'ordinary' contributors like Alex than I have from the 'well qualified' bozos on CNBC!

The U.S. Is Spending Its Way Out of the Recession

You advice for investors "to go long on the overall markets" without a word of caution is dangerously premature!

The "gamblers" today are both taking profits from the rally and shorting for a retest of the March lows. I would be extremely careful about diving into this frothy market at the present time!

USO: Black Gold Waiting to Erupt

This article implies that a quick turnaround for oil is just around the corner, and that we are 'close to an appropriate entry point'. I hope you're right, and am likewise watching for a good entry.
Peak oil is indeed a fact. So too, is oil in the low $30 range. Oil will trade in this annoying $30-$60 range for some time until global demand begins once more to pressure supply.
Trading assumptions, both long and short, have resulted in many lost fortunes over the past 26 months. Spot the trend, up or down, and ride it out, but don't assume that USO at current levels is a great buy!
As USO's price is still below the (falling) 5, and 10 day MA's, and just managed to squeeze above the 15 day MA, the trend is still lower.
Rather than set an arbitrary entry point of a breakout >$27, why not wait until the 25 day MA is breached and held, irrespective of the price at that time? This would give a better indication of the trend!

Adjusted Jobless Claims Suggest Recession Has Ended

Dr. Spin! Please!
The deeper one examines the employment picture, the worse it gets!
(See: www.ritholtz.com/blog/.../ )
There certainly is meaningful debate ongoing as to whether or not the recession has ended. But to attempt to use the Initial Jobless Claims as support for the recession's end at this point is truly silly!
Just we can't have an 'earning-less' recovery, so too is a 'job-less' recovery and "Alice in Wonderland" fantasy!

The Coming Depression: See It Clearly Through Historical Eyes

The essence of what you're saying is that we have to apply both quantitative and qualitative analysis to both past and present, or, if you like, both technical and fundamental analysis.
I agree. But what I fail to see in your article is any reference to the paradigm shifts or the seismic changes that have always marked movements out of deep recessions in the past.
The climb out of our current predicament will require both recognitions of these changes and policies that are suited to them.
If we think we can simply spend our way out of this mess in the same way we have done so in the past, we are mistaken. On the other hand, policies and stimulus packages that address fundamental weaknesses in our economy and that target areas of future potential growth and leadership through tax cuts &etc. will do much to get us back on track.

Wall Street Breakfast: Must-Know News

re: "Bracing for a bad bank"...

Looks like yet another milestone on the slippery slope of taxpayer bailouts!

As Ron Paul correctly points out, "Bad Bank+Bad Debt+Bad Bankers=Bad Idea"

Are the foxes about to be given a free pass to the hen house? Looks like we can see no end to this! What on earth happened to free markets?

We can say goodbye to responsibility, accountability and I suppose the value of the dollar in the process.

Secular Bear Markets and a River in Egypt

Good article, Tim!

My faith in 'buy and hold' and 'stocks for the long haul' has diminished in inverse proportion to the amount of grey hair at my temples! Time horizons become more important with age!

It seems that only those with magazines to sell and viewers to entertain still profess to believe that stocks are now cheap and a great bargain.

Experts Weigh In on the Shape and Size of This Recession

These are experts???
“housing must hit bottom at some point,”
"... not willing to predict when that will happen."
“Before you know it, the stock market, and the residential real-estate market, too, will be on their way back up again — just don’t ask when.”

Pessimists on the one hand and optimists on the other; if you interview any 6 people waiting at a bus stop you'll learn about as much!

The blind continue to lead the blind! We'd all be better off just listening to what the market is telling us and ignoring the incessant babbling of the 'experts'!