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John Lounsbury  

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  • Government Growth Steals From Ordinary Americans but There Is a Bigger Thief [View article]
    rm - - -

    Your question is very penetrating. I have not run all the analysis so all I can do is mention a couple of factors to consider.

    1. If the higher income was hidden, where could it have been secreted? One possibility is that the wealthy did not have as large cash (or taxable cash equivalent incomes) because they "hid" the income in building equity in businesses. If that is how they "hid" the money that would be a good thing. In a recent article, in doing a different analysis, I put a label on a graph indicating that the decades up to the early 80s were the time of "building and saving". The time since I labeled as the time of exploding consumption. See

    I would summarize these thoughts as saying we spent decades building a cake and then 30 years eating it without baking a replacement.

    2. The rate of growth of government spending seems relatively constant from 1970 through 2000 and then accelerates. There were two periods on increasing personal incomes, 1985-90 and 1995-2000; otherwise personal income growth was nil or minimal. There are those who would ascribe the credit and the blame to political factions for the successes (few) and the failures (many) that appear in this picture. Those that take such a course are mere political hacks or their clueless minions! The failures we are witnessing are societal. They represent the maturing of the "free lunch syndrome".

    rm, I doubt that you had such a diatribe in mind when you asked your question. If you wanted a simpler answer, I apologize. However, saying anything less would not have made my point.
    Feb 21, 2010. 11:24 AM | 13 Likes Like |Link to Comment
  • What the Public Is Paying for Healthcare [View article]
    yellowhoard - - -

    Great point. A follow-on thought would be to ask how only one doctor could stay in that position. Yes, one doctor can make a breakthrough but your situation would only apply for a short period of time, as others would adopt the new procedure. Then competition would establish the proper cost. Maybe it would still be the same price, maybe less.

    What about the intervening time? There would be a problem with insurance companies not recognizing "an experimental procedure". So only the persons with $100,000 or access to that amount of credit could get the treatment. That is the way things should be. The only question I have is how long the classification of "experimental procedure" is appropriate. Sometimes the extension of benefits to new procedures seems to be unnecessarily delayed.

    Of course, the more things that are covered, the higher the insurance premium. If 100 procedures are performed each year at $100,000 each, the incremental cost conveyed to premiums of many millions of insureds is negligible.

    Obviously, if these brain tumors become endemic and large numbers of people need the treatment, say 1% of the population every year, insurance premium costs would increase by $1,000 to $1,500 per year per person to cover that cost plus administrative costs and profits. That is the way insurance is supposed to work - sharing the risk of the $100,000 expense.

    The type of situation you have brought up is very amenable to being handled by insurance. The problem that we are wrestling with is centered on something that is seldom discussed. Our healthcare "insurance" system has become a "prepaid healthcare system". What is called insurance is actually a monthly payment to cover health care expenses from simple office visits all the way to the rare disease or accident. Many of the problems in the current debate would be easier to characterize if the prepaid health care plans and the true insurance plans were separated.

    I have written articles about this throughout the year, but it is not something that gets much attention.
    Dec 8, 2009. 05:04 PM | 13 Likes Like |Link to Comment
  • The Global Oil Scam: 50 Times Bigger than Madoff [View article]
    There have been commenters who felt that no two large traders could establish an artificially higher price in a public exchange. It can be done very easily and here is an example:

    Let's take two hypothetical traders, A and B. Both have full visibility to all bid and ask prices. Let's say a particular time the last trade was 80 and all bid and ask orders are between 79 and 81. A and B can agree that one will put in a large order to buy stop at 81.50 and the other will put in a sell limit order for the same quantity at the same price. The trade will clear at 81.50. Neither order will execute below 81.50. Immediately after the trade clears, they can (instantaneously) place the same orders, but reversed. Another large trade clears at 81.50 and a new market level is established. Both A and B have exactly returned to their original positions, but the market price has moved 1.50. Other traders will be adjusting bid and ask orders to the new reality.

    A and B can repeat this many times with small moves each time. If 100 round trip trades are executed with 1.50 moves each time, the market moves $150. Of course, there will be independent market movement and some of that will be down, so it might take 1000 ten cent manipulations to move the market $50 up if between manipulations the net slippage was $50.

    A and B are not making the bulk of their money on the overall move. They are making it on each manipulation. Prior to each rigged round trip, they can accumulate current and futures contracts and/or options and then dump them after the manipulated move.

    Is it trading genius that Goldman Sachs had only one losing trading day in the third quarter? I have just described one form of genius.

    You don't have to buy everything to own the market. You can simply keep taking money from the other owners.
    Nov 12, 2009. 11:57 PM | 13 Likes Like |Link to Comment
  • The Hindenburg Omen [View instapost]
    Albertarocks - - -

    Thanks. I have always waited for someone else to flash me the signal. It all goes back to the information overload problem when I try to track too many things myself.
    Oct 25, 2009. 03:06 PM | 13 Likes Like |Link to Comment
  • What's Citigroup Really Worth? [View article]
    Bruce - - -

    Very interesting article and comment stream. I have come to the conclusion that the following is a reasonable description of the progression of C through time:

    First - Big
    Second - Bigger
    Third - Huge
    Fourth - Too big to suceed
    Fifth - Too big to fail
    Sixth - Too big to understand

    I believe the seventh life stage for C will be - Too big to exist.

    The only reasons that C still exists are (1) government largess and (2) accounting scullduggery. I believe that the future for C involves divestiture of the viable business entities and ultimate failure of the residue. In July ( ) I pointed out that C's quarterly reports indicate a cumulative loss of more than $22 billion dollars over the past five quarters, calulated by subtracting the proceeds from asset sales (divestitures) from the reported earnings. As C sells more and more profitable parts, the buoyancy of the remaining hulk just settles lower in the water, eventually to submerge.

    When it comes to C, my advice is "trade, don't invest". This is true for some other banks, as well, but C is the poster child.
    Aug 28, 2009. 10:52 AM | 13 Likes Like |Link to Comment
  • AMERICAN IDIOTS [View instapost]
    Jim - - -

    I thoughly enjoyed your article on education on The Burning Platform. It caused me to think about the education system, and I came up with an education pyramid, which I posted on my Instablog. I think it is a good opportunity for stimulating discussion. I also posted a topic addressing the pyramid on The Burning Platform, looking for additional discussion there.

    With regard to Seeking Alpha not posting what I try to link from my Instablog (and submitted directly before the Instablog was implemented), I have always found that they either (1) asked me to flesh out what I was trying to say (they don't like me to just offer data snippets or quotes from others without extensive original interpretation/commentary from me) or (2) to relate the topic investment activity. I suspect the second is the reason for difficulty with the editors looking at "American Idiots".

    With regard to reason (1) above, I have observed they do not have editorial review restrictions as rigorous for some contributors. I live with that situation and hope that the rigor applied to me will become universally applied, and not that requirements on my contributions will be relaxed.

    Jim, just keep writing. Your readers will find you even when you have something good not accepted by SA.
    Aug 12, 2009. 03:12 PM | 13 Likes Like |Link to Comment
  • No One Saw This Economic Crisis Coming? [View article]
    Thanks for all the effort commenters have put in to expand and extend this discussion.

    skwestorange - - -

    I agree the list of 12 by Bezemer may be far short of the possible full list. He goes to great length to describe how he narrowed the list down to just 12. I did not try to critique his process, being more interested in the results of his analysis. White most certainly might possibly have been included, in my opinion, as could others mentioned by GlenL and texpat.

    doc tari - - -

    You wrote: "Anyone with half a brain saw it coming 4 years ago..and the smart people were writing about that. Where were you."

    Was the second sentence a question?

    I'll assume it was. I was not writing four years ago. I guess I qualify as one not smart enough even to be writing for the public four years ago. I apologize for that dumbness.

    I was busy in the fall of 2007 into January, 2008 systematically moving my clients portfolios away from stocks and into bonds and cash. By the end of January, 2008, the average portofio position was 30% stocks for my clients; by mid-summer 2008 it was 20% long stocks and 20% short stocks (different stocks long vs.short); by fall, 2008 it was 10% long and 30% short. I closed all short postions the last two weeks of February, 2009. I did not participate substantially in the big rally since March and remain under 20% in stocks. In the past 4-5 weeks I have reopened some smaller short positions.

    I started writing on my own blog in November, 2007, to keep my clients informed of how I was thinking regarding the investment outlook. This was done because many clients indicated they would prefer this form of communication to the hardcopy letters I had been sending them 3-4 times a year.

    Less than a year ago I started writing for Seeking Alpha, and recently started writing for Real Money at

    doc tari, be careful when you ask a question (even without a question mark). You may get far more information than you wanted.
    Jul 12, 2009. 01:33 PM | 13 Likes Like |Link to Comment
  • Jim Welsh on the Economy: Past the Point of No Return [View article]
    Glen L. - - -

    It is not necessarily the magnitude of a change as much as the speed of the change. If a major change occurs over one or two decades (or longer), individuals and businesses have a chance of adapting. If they occur in a matter of months, there can be mass extinctions.

    This may be part of the thinking of the government and Fed approach to the financial crisis. If they recognize that we are dealing with change, they may have some success. If they think their actions can avoid change, the end result could be even worse than chnage accepted now.

    The biggest problem I have with the current course of action is lack of strategic transparency. Even worse question: Is there a strategy?
    May 6, 2009. 01:36 PM | 13 Likes Like |Link to Comment
  • Fiscal Responsibility: Obama Takes the Reins [View article]
    Jeffrey - - -

    Excellent article. I have several thoughts:

    1. Obama seems to have the ability to tell the truth and not to pull punches. This may or may not stand him in good stead because it does not fit the mold of our political system. (Yes, the word "mold" has two meanings, and I meant both to be considered.) It is one thing to tell the truth and quite another to get politicians to take appropriate action based on the truth.

    2. One of the biggest mistakes Roosevelt made in The Great Depression was to raise taxes in 1937. Consequences of raising taxes before there is a well established recovery must be carefully considered.

    3. Improving efficiencies in government and other broad service areas, such as medicine, will involve challenging entrenched economic interests. Can Obama be effective here when all too many legislative branch politicians are bought and paid for? Especially when many of these people may not be consciously aware that they are acting in response to "bribery", but feel they are acting on "principle". Too many politicians have frozen their brains in an ideological rigidity that prevents them from engaging in pragmatic reasoning.

    Abraham Lincoln was able to overcome such handicaps, but that was in the day when media exposure took place in terms of days, not minutes. Obama may or may not have all the political acumen of Lincoln, whom he apparently wishes to emulate. But could Lincoln have been successful if he lived with our modern media?
    Feb 24, 2009. 10:43 AM | 13 Likes Like |Link to Comment
  • The Team Alpha Retirement Portfolio: The Only Retirement Strategies Guaranteed To Work [View article]
    RS - - -

    My father was an economics professor, specializing in money and banking, and also an independent businessman. He had the unique perspective of a Ph.D. academic (university teaching for 26 years) as well as a very successful business builder and operator (agriculture based business - without direct government subsidies, by the way) for 22 years. He understood complex economic issues and also the subtle details of small business and personal financial. But when I decided to start a financial planning business he had only one statement on the matter:

    "Be sure your clients understand there is only one formula for financial success and that is to never spend more money than you make. There may be times where use of debt is possibly indicated but the bottom line over time: success is all about income and expense."

    RS, you have delivered that message very ably.
    Jul 19, 2013. 02:35 PM | 12 Likes Like |Link to Comment
  • Stock Market Warning Signs Become More Pronounced [View article]
    Erik - - -

    As you know I read your e-mail bulletins every day. You have been doing a great job of reporting the state of market internals and I can only recommend to others that they consider your findings.
    Dec 16, 2010. 01:32 AM | 12 Likes Like |Link to Comment
  • To those who lament the debasement of the dollar, or who think the game is rigged - or who always fight the tape and simply missed the latest rally - you can pound your chest if you want, but would you rather be right, or would you rather make money?  [View news story]
    One problem is that stocks did not make money in the recent rally compared to the Euro or gold. The dollar simply lost value. So the two (debasement of the dollar and change in stock prices) are related. You could have been 100% invested during the last rally and still complain about the dollar.
    Oct 6, 2010. 06:55 PM | 12 Likes Like |Link to Comment
  • Banks Recruit Investors to Oppose Honest Valuation of Assets; Just How Unprepared Are Banks for Major Losses? [View article]
    Mike - - -

    There is a big mis-match between what the banks are reporting ($7 trillion loans and leases, some of which are not home mortgages, with a 5.5% non-performing rate) and what the Mortgage Bankers Association reports ($11.5 trillion in mortgages with a 14.4% delinquency rate, 9.5% seriously delinquent). Of course some of the mortgages are held by non-banks in MBS (try the Fed for $1 trillion plus and numerous institutional investors like pensions who bought this AAA junk) but how can it be credible that 5.5% non-performing exists on the same planet with 9.5% to 14.4% delinquency rates?

    Mortgage obligations are necessarily the elephant on the bank's books (or held off their books in various securities). It's called liars' poker. Unfortunately the liars continue to conceal their cards. How can the banks be experiencing 5.5% non-performance? If that were real, then all other mortgage and mortgage security holders would have a non-performance rate averaging somewhere between 14% and 23% if each group (banks and others) each held half of all mortgages.

    It just does not seem credible that bank mortgage assets could be that much better than mortgage assets held by other. It must be simply that many delinquencies are not recognized as non-performing by the banks.

    I am not making any new accusation here. Many others have pointed this out.
    Aug 30, 2010. 02:44 PM | 12 Likes Like |Link to Comment
  • The Hindenberg Omen Blog - August, 2010 [View instapost]
    Two points:

    1. The HO has generated a flurry of interest in the past when it has triggered. It then fades to the obscurity of spaces occupied by a few like Robert McHugh, Jim Miekka and Albertarocks.

    2. TA is an attempt to assess investor psychology. FA is an attempt to assess relative financial situations. The FA adherent who can not remain solvent as long as the market remains irrational could definitely benefit from TA. The TA adherent who buys a high momentum stock just before it craters might have avoided that with some FA.

    Now I will concede to Erik that he is correct - FA and TA do have intersections and overlaps.
    Aug 19, 2010. 01:05 PM | 12 Likes Like |Link to Comment
  • The Employment Depression [View article]
    DH - - -

    I think you make a good argument. The U.S. still produces about 25% of the world's manufacturing output, although it is slowly declining as China increases rapidly. The manufacturing continuing here is highly automated - the labor intensive jobs have gone to the developing world.

    Following your argument further, the cost of capital will tend to rise in the developing world and the developed world in a similar way (globalization) while the cost of labor will gradually equalize around the world. After all, as higher labor costs induce higher unemployment in the developed world, the developing world will only grow by growing their internal markets (rising wages) as the developed world reduces consumption.

    The ultimate outcome of this process is a more uniform economic situation in much of the world. Of course, political activity can be disruptive of this process - wars being one of the most notable political tools. We may never get to the point where Asians are North Americans and vice versa (economically speaking).

    The above discussion assumes some sort of economic growth continues. If we have a global depression (I think low probability, but not impossible), all labor becomes cheaper, as you point out. Liquidity dries up (hoard your currency, it will be worth more tomorrow) and capital may remain cheap, but unavailable. People become willing to work for food and shelter and not much more. Automation is no longer attractive vs. cheap labor. The world gravitates to the lowest denominator - labor working for subsistence.

    There is a lot more to be said on this topic, and I'm sure that it could be delivered with more detailed sophistication than you and I have done. However, you have started a good discussion with some sound logic.
    Jul 4, 2010. 01:30 PM | 12 Likes Like |Link to Comment