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John Overstreet

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  • How To Use Money Supply Statistics For Market Predictions [View article]
    I can't agree with much in this article.

    First, the notion that stability in the money supply over a 20 week period leads stock market crashes is only supported by two examples, one of which was certainly unpleasant but brief and forgettable.

    Second, why is it assumed that changes in the money supply disproportionately impact stock prices rather than earnings or commodity prices or bond prices or consumer prices?

    I haven't found any reliable relationship between money supply and prices of any kind, and I don't think anybody else has either, which is why we try to explain away the disconnect by the tautological concept of velocity.

    There needs to be more empirical evidence or theory to take this argument seriously. In my opinion, the author should at least address whether or not this signal worked before 2008 and whether or not it is more reliable than using the yield curve or oil prices.
    Sep 14 08:36 AM | 4 Likes Like |Link to Comment
  • Cambodia: The Second Last Frontier [View article]
    So, it is not a good idea to invest in Myanmar, but if for some reason you thought it was, you should invest in Cambodia, because it is not as bad as Myanmar?

    These countries have massive internal problems and are constantly exposed to external shocks. We are only a few years out from the conclusion of a EM/commodity super cycle. Even if you wanted to dabble in these markets, there must be more propitious times to do so.
    Sep 12 06:49 PM | Likes Like |Link to Comment
  • Exactly Where We Are In This Cycle [View article]
    {{Based on this simple chart, we are somewhere in the middle... Stocks aren't overly hated, or overly loved. Based on history, we are somewhere in the middle of this cycle.

    I will admit, this is not the most statistically robust way to look at things... }}

    So, not "exactly".
    Sep 10 02:23 PM | Likes Like |Link to Comment
  • Snow Job [View article]
    Don't you mean, "I catch your drift"?
    Sep 8 05:50 PM | 1 Like Like |Link to Comment
  • The 'Allocation Matters Most Hypothesis' [View article]

    You're saying, I think, that Cullen is technically right insofar as all actions are informed primarily (?) by the past, but that in practical terms, there are poles of more or less 'activism'. I'm not sure how I feel about your point.

    Passive forms of investing don't usually seem to be grounded in the "past" as such but according to what are regarded as natural laws of markets. Somebody does a study that goes back 50 years, and people take it as if it were as definitive as a scientific experiment.

    In a market that has consistently provided good long-term returns (at least since the 1930s), indexing will seem "passive", but were earnings and inflation to revert to pre-War levels of volatility, it would look speculative to have pursued a strategy that worked only in a specific historical period. Passive strategies are a bet that the future will look more like one segment of the past than another. That's okay, as long as it is acknowledged for what it is, but I don't think that's what's going on.

    To push the point a bit more, if I were Nigerian and I bought the Nigerian market, would that be "passive" investing? I don't think so. It takes all sorts of things for granted. But, why take these things for granted when we change the terms to American? We assume that the American market will look "american" in 20 years time and the Nigerian "Nigerian", but there's nothing set in stone. The assumption that that will continue forever or at least not cease until after one dies is not passive, just complacent.
    Sep 8 02:21 PM | 1 Like Like |Link to Comment
  • Today's Jobs Report And The Cult Of Central Banking: Counting Angels On The Head Of A Pin While Main Street Flounders [View article]
    Is Stockman saying buy or sell?
    Sep 8 01:02 PM | Likes Like |Link to Comment
  • Today's Jobs Report And The Cult Of Central Banking: Counting Angels On The Head Of A Pin While Main Street Flounders [View article]
    Nope. I'm pretty sure "flack" is the word he was looking for. One step up from a shill.
    Sep 8 12:57 PM | Likes Like |Link to Comment
  • What If Central Banks Aren't Responsible For Asset Bubbles? [View article]
    Salmon, I thought that paper had been 'declassified' on March 16, 1983. Do you have a link?
    Sep 8 07:05 AM | Likes Like |Link to Comment
  • Hot Coffee [View article]
    Deja Vu,

    Care to elaborate? Otherwise you're just being catty.
    Sep 7 10:16 AM | Likes Like |Link to Comment
  • The Emperor Has No Clothes: Emerging Market Investing Just Got Simpler [View article]
    《So there you have it. A more simplified approach to EM investing: avoid countries run by despots that have backslid on liberalization, have spotty track records in reigning in inflation or fail to keep government budgets and current accounts under control. 》

    《savvy investors may consider borrowing in ultra-low yielding European markets and investing in higher yielding emerging markets, especially as the ECB seriously considers going down the quantitative-easing path and keeping interest rates at rock bottom for years to come. These carry trades were all the rage before the financial crisis》

    Figuring out which countries are "committed" to liberalization and will remain committed is not easy. Is Indonesia "committed"? Or Myanmar? Or Turkey? EMs generally seem to be committed until they get hit by something unforeseen. To then mix that with the carry trade seems more than a little complicated. It seems like there are a lot of moving parts.
    Sep 7 08:21 AM | 1 Like Like |Link to Comment
  • The Emperor Has No Clothes: Emerging Market Investing Just Got Simpler [View article]
    《Do really believe the 80% approval rating? Perhaps there are consequences to dissenting?》

    We can't have it both ways. One of the supposed explanations for Putin's willingness to repeatedly up the ante is to "cynically" boost his approval rating. Everything I have seen suggests that his approval rating has risen with Russian intervention.

    But talk about confusing the horse for the cart!

    Whether Putin has pursued his policy knowing that it would boost his ratings or it is a "happy" side effect, it would appear that the Russian people have strong views about Eastern Europe. And, when we recognized Kosovar independence after promising the Russians that we would do no such thing, apparently they drew certain unexpected conclusions from that.

    Whether the sanctions will work or not and what "working" would even mean (I presume it would entail Putin's removal from power and a revolution in Russian patronage networks), I don't know. I think they are targeted more at the oligarchs than they are the ordinary Russian, and I think those oligarchs may have been as blissfully unaware as we have that the halfway house that Russian-Western relations have existed in was about to burn down. So, I think as the realization of this change in relations sets in both psychologically and materially, there are going to be some changes in Russia, although that does not mean they will have to break our way.
    Sep 7 08:06 AM | Likes Like |Link to Comment
  • The Fallacy Of The 'EMH Twist' [View article]
    The Pieria article is really good. Thanks for pointing it out. "[M]acroeconomics is bunk" sums it up nicely.

    I think there are some problems with the terms of the debate here though. Does efficiency really imply perfection? Isn't efficiency always relative? It seems to me that the debate about whether market pricing is efficient or not gets too easily conflated with the ideological question of whether the state can contribute to achievement of a higher degree of efficiency.

    We have no way of really defining the efficiency of the market to test it, except in relation to other markets (including future markets). The fact that crises (or booms, for that matter, or any behavior) occur or are unpredicted does not mean the market is not efficient. It means our theories are inefficient.

    The dinosaurs went extinct but other lifeforms did not. Were the dinosaurs inefficient? Well, I suppose so. Is nature? It doesn't make much sense, I don't think, to ask the question. Within the social realm, economics takes up a vast space that is comparable to nature. So, are markets a part of the economy or a synonym of it? It is strange to me that we can debate whether the Market is efficient or not, but we don't talk about economics (the total field of market behavior) being inefficient or not. Or, if we do say that economic behavior as such is inefficient, we do so on moral, anti-materialist grounds.

    If we are going to confine ourselves to the question of whether or not markets efficiently allocate resources, that seems to be a different question, although one I cannot make much sense of outside of reference to extra-economic principles. I can consider whether or not a given individual, company, or economy is producing a given good or set of goods efficiently, but is the market Efficient in the way it is so abstractly debated? That can only be determined after you know the outcome you are looking for. And that is a political question once we shift from analyzing a system's ability to produce goods to its ability to produce a common good.

    I could be wrong, of course.
    Sep 6 05:04 PM | 1 Like Like |Link to Comment
  • Even The Council On Foreign Relations Is Saying It: Time To Rain Money On Main Street [View article]
    I certainly don't agree with the Forbes article you linked to, but this is probably not the best space to debate that. So, perhaps I can rephrase my issue somewhat.

    MV=PY. How do we know that? Because V is defined as PY/M.

    Unfortunately, for whatever reasons, this has proven to be a useless way of predicting inflation. Apparently, V is not nearly as stable as we once thought it was, but the only way we can guess at that is that P no longer responds to M. We don't have to consider Y, because real GDP is or has been relatively stable for decades.

    So, your whole argument, unless I misunderstand, is that a judiciously placed dollop of M will boost Y, because V is so low and Y could be higher. But, if a tautological equation is so fraught with uncertainty that we have to resort to things like thresholds to keep it together, maybe the underlying equation is bunk.
    Sep 4 02:24 PM | 1 Like Like |Link to Comment
  • In Defense Of The Shiller CAPE Ratio - It Works! [View article]
    Not well during the decades before WWI or the mid-1990s.

    Very "overvalued" markets tend to coincide with very low inflation, BTW.
    Sep 3 12:17 AM | Likes Like |Link to Comment
  • Even The Council On Foreign Relations Is Saying It: Time To Rain Money On Main Street [View article]
    Obviously a provocative piece.

    Ellen, can I ask an elementary question? The CFR folks argue that low inflation is a function of people not spending enough money, but then you argue that the classic MV=PY is wrong. More precisely, I suppose, you argue that it is too simplistic, that, as I understand it, M and/or V have to hit certain thresholds to goose inflation.

    But, this seems like a curious solution to fix a bad equation. It is apparent, after all, that P=/=MV/Y, despite being outwardly logical. Why arbitrarily insert the output gap into the equation?

    So, setting aside all the ideological problems, doesn't this seem like a very risky experiment? In fact, it seems like the compelling argument to take this kind of action is humanitarian or ideological rather than economic. Or, have I misunderstood?

    Sep 2 01:30 PM | 1 Like Like |Link to Comment