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  • QE Worked, But Not As Advertised [View article]
    JasonC,

    I give them credit for being honest about their logic.
    Nov 3, 2014. 01:57 PM | 1 Like Like |Link to Comment
  • Why The Shiller P/E Is Useless [View article]
    Tony, I believe that the peace prize committee is different from the economics one. But, if any Chinese citizen deserves a Nobel prize, it has been Liu Xiaobo.
    Nov 3, 2014. 01:45 PM | 1 Like Like |Link to Comment
  • Why The Shiller P/E Is Useless [View article]
    I'm definitely not a big fan of Shiller P/E (CAPE), but I'm not sure I agree with some of the arguments here.

    1. The article seems to be saying that CAPE was built for a different world, back when the US was not a service economy, but I've found that CAPE has worked best as the displacement of the manufacturing sector by services has progressed over the last century. Compare CAPE with subsequent returns before the Fed learned how to produce smoother growth in inflation and earnings, and you will see that the CAPE tended to be almost perfectly wrong. Instead, CAPE has only worked consistently since earnings became consistently positive, which is also when the service sector took over.

    2. That leads to my second objection, namely to the claim that the only time CAPE produced a buy signal (supposedly in 1974) the market crashed. There was a buy "signal" all the way through the late 1970s. Therefore, it "worked" properly during that period. Historically, CAPE has failed to predict some of the biggest bull markets (the late 1990s, for example), not so much bear markets.

    3. The reason I object to CAPE is that it has only really been at its most effective when earnings growth has been constant. When earnings growth has been constant, as it has been since the Depression, then CAPE just measures the degree to which stocks have departed from their own long-term moving average. CAPE turns out to be a statistical trick, although a comforting one for many.
    Nov 3, 2014. 08:55 AM | 3 Likes Like |Link to Comment
  • The Gold Bull Market Is Not Over [View article]
    If stocks are being determined by the Fed's generosity and the world is slipping into Depression, won't the Fed keep it's foot on the gas, and therefore, by your logic, wouldn't it be better to buy stocks?
    Oct 21, 2014. 04:20 AM | Likes Like |Link to Comment
  • The Gold Bull Market Is Not Over [View article]
    SomaBull,

    Well, you still haven't shared with us, then, how you define bull and bear markets. It sounded to me as if you were saying 2000's low was the baseline. Perhaps you could be more explicit about your metrics?

    A three-year lull in a 20-year bull market wouldn't be abnormal? I disagree with that. First, the lull you're comparing this market to is the 1975 crash. That was relatively brief, as I recall, so I wonder what makes you think longer breaks are "normal" (in the comments below you kept the door open for further declines, so maybe a 4-5yr lull is what we're talking about). Doesn't it seem more likely that the 1975-style gold correction already occurred in 2008-2009, then recovered and popped in 2011? The same could be said for silver and most other commodities.

    Second, commodities rarely experience 20-year booms. I think the only example of that might be the 1895-WWI boom. The second longest, I believe was the post-Depression recovery which was 15(?) years. Commodity prices generally have been falling for the last sixty years, except for violent reversals in the 1970s and 2000s.

    I'm not sure how to respond to your claim that your article isn't an opinion piece. A quote from someone else's opinion, the IAEA's, is still an opinion, just not an original one. Why should I put any faith in their opinion? Are they ever right? These organizations put their finger in the wind and then forecast from there. Prices start crashing and they say, oh, demand must be falling or there must be an oil glut. These are just guesses.

    Finally, if oil and other commodities really have distinct supply/demand profiles AND those profiles are determinative, why is it that commodity prices are so highly correlated with one another? I think you have to make a much more robust case to convince those who are not perma-bulls that this time is different.
    Oct 21, 2014. 04:15 AM | Likes Like |Link to Comment
  • The Gold Bull Market Is Not Over [View article]
    SomaBull,

    There's no scientific measure of when bull/bear markets begin, but I don't think we could set the bar as low as you have. By your definition, using the 2000 low, gold could be at $400/oz and still be termed a "bull market". I'm not a technical analyst but I follow commodity prices fairly closely. A lot of them are smashing through their post-crisis lows.

    As for oil prices, I find it ironic that you discount the conventional wisdom of the markets over the last three years as expressed by relative performance but trust that a newspaper knows exactly why oil prices are dropping now. Commodity prices tend to move together over the long run, and oil often leads the way. Moreover, there are not many instances when oil dropped and the rate of inflation didn't drop, too.
    Oct 19, 2014. 02:00 PM | Likes Like |Link to Comment
  • The Gold Bull Market Is Not Over [View article]
    You say it's "ironic" that stocks have mopped the floor with gold for the last few years. So, the gold market is still a bull, but it just doesn't know it? How do you define beginning and end of bull and bear markets? Doesn't the scoreboard say gold is losing?

    And if you're looking for which way inflation is going, look no further than crude oil.
    Oct 17, 2014. 12:42 PM | Likes Like |Link to Comment
  • We Are All Charlatans! [View article]
    "One should remember that the markets always go up given sufficient time."

    What you mean is, they will always go up, and you know that because you think they have always gone up. This is a prediction.
    Oct 5, 2014. 08:05 AM | Likes Like |Link to Comment
  • So Long, Then, Cristina Fernandez De Kirchner [View article]
    Excellent writing style, as always, Mr Grant.
    Sep 30, 2014. 02:59 PM | 1 Like Like |Link to Comment
  • Emerging Markets Are In Trouble [View article]
    Hi, Doug, I see. I would say that that is a straightforward, traditional policy question for which I have no satisfactory answer. If I am right that the dollar strengthens against other currencies at the same time other countries, especially EMs, are in crisis (these tend to entail generalized societal breakdowns in many cases), I am not sure what the ultimate impact would be. A shock administered under such conditions may have the unintended consequence of further strengthening the dollar.
    Sep 30, 2014. 02:29 PM | Likes Like |Link to Comment
  • Where To Be Invested In The Fourth Quarter: Emerging Markets [View article]
    In emerging markets, the poorer they are, and the longer you wait, the weaker the returns. It pays to be prescient, not patient, in EMs.
    Sep 30, 2014. 10:22 AM | Likes Like |Link to Comment
  • Heavy Demand Appears In Gold And Silver [View article]
    Wasn't there heavy demand at the exact same time PMs tanked last year? This seems like a contrarian indicator.
    Sep 30, 2014. 10:11 AM | 1 Like Like |Link to Comment
  • Emerging Markets Are In Trouble [View article]
    I'm glad that scratched your itch. Treasury yields always seem to work themselves out as a function of stocks and inflation when I look at them, whereas we tend to think of them as decisive in and of themselves. I agree with you that it looks as if the yield curve looks set to flatten due to movement on the long end of the curve. Over the last 40 years, that sort of scenario has often coincided with a stock market parabola, and also largely coincided with disinflation and EM crises.
    Sep 30, 2014. 05:45 AM | 2 Likes Like |Link to Comment
  • Emerging Markets Are In Trouble [View article]
    Hi, contrarian,

    I disagree that a global bust will work out quite the way you have presented it. I don't think the stock market rally in the US will end until 2017, although a flashcrash akin to 1998 or 2011 is possible in the meantime. I think that US assets will continue to do well while others crumble, and only after that has gone on for a while will tge US succumb.

    I am much more worried that the global economy is entering an extended depression rather than a short and sharp scenario. The boom of the 1920s, just as with the boom of the 2010s, began with short-and-sharp and then a brief asset boom which was then followed by long and blunt. Of course, things have changed since the 1920s, but we still seem to be following the same script.
    Sep 30, 2014. 05:31 AM | Likes Like |Link to Comment
  • Emerging Markets Are In Trouble [View article]
    Thanks, Doug,

    Unfortunately, I can't give you even a bad answer to your first question, because I don't know what accounts for the imbalances in the first place, or which way the imbalance lies. Just based on the research I did for the article that set the stage for this one, and within the context of my other observations with respect to inflation, etc, it appears to me that the "imbalance" is the exceptional strength of EM growth and the weakness of the dollar against other rich-world currencies. In other words, the things we take for granted (eg Chinese growth, weak dollar) are the imbalance.

    As for your second point, I partly agree with you. I think the commodities indexes tell us more about what is going on in poor countries than they do the US. Over a medium-term timeframe falling commodities are good for US stocks and GDP growth (just consider the volatility of oil prices), but I am worried about the possibility that we are en route to a deflationary bust, although I still have doubts as to its nature and duration. In other words, will it be more like 1929 or 1999 or 2009? My fear is that at the moment, it looks like we're in 1926.

    http://seekingalpha.co...
    Sep 30, 2014. 05:12 AM | Likes Like |Link to Comment
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