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Joseph L. Shaefer

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  • Cracks Show in the Shanghai Market [View article]
    Advocates of "decoupling" tossed their money willy-nilly into China, accepting at face value the numbers provided by a statist central government intent on painting a happy face on what is a crumbling decline in real exports.

    The equation is simple: if Americans and Europeans aren't buying, the Chinese aren't selling.

    Fudging the numbers will work for awhile, even long enough to suck in more of the unwary and inexperienced. Look how well Wall Street has been able to fudge the numbers closer to home!

    But sooner or later, as Shakespeare said over 400 years ago, "the truth will out." It's later...
    Aug 31 01:02 PM | 4 Likes Like |Link to Comment
  • Wall Street Breakfast: Must-Know News [View article]
    "...in the nine months that ended June 30, investors withdrew around $300B from hedge funds..."

    It's worse than we think if this story is accurate and investors actually << withdrew >> $300 billion. Not long ago, I addressed the annual GAIM Fund of Funds (hedge funds) conference and uncovered a little-known facet of hedge fund management. The hedge funds have FAR more than this $300 billion in liabilities to their investors.

    Once a hedge fund investors "requests withdrawal" the hedge fund has a contractual obligation to refund anywhere from x months to x years. However, the hedge fund then effectively becomes a liquidating trust. It cannot buy anything with the funds earmarked for refunds but must only hope for a rising market in order to get the best price for assets earmarked for refund.

    In other words, they have every reason to hype, fabricate and cheerlead stocks higher but no ability to fan the flames of a higher market with actual purchases.

    If $300 billion is already withdrawn, there is at least that much ready to be sold at the first hint of lower prices...
    Aug 31 11:14 AM | 4 Likes Like |Link to Comment
  • Will Virtualization Undermine Network Equipment Vendors? [View article]
    Brave New World...
    Aug 30 12:25 PM | 1 Like Like |Link to Comment
  • Cost-Benefit Analyzing the Financial Sector [View article]
    Translation: Outsized quarterly rewards for generating short-term profit for actions the true cost of which will not be known for 1-5 years, and may cost 100 times more than the quarterly profit recorded, are stupid.
    Aug 28 02:34 PM | 4 Likes Like |Link to Comment
  • Mixed Housing Data: Clearing Up the Picture [View article]
    John, you dealt admirably with the demand side of the equation -- how many homes are being sold and what factors might affect future sales.

    But what about the supply side? Much as I'd like to share your cautious optimism, I note that even as home sales increased 7.2%, the inventory of unsold homes (buried a few paragraphs further down in the official report) showed a CLIMB of 7.3%. So even with 7.2% more homes selling, there are still more homes for sale this month than there were last month!

    With most sales occurring at the low end and the $8000 in taxpayer funds being diverted to make the down payment for any FHA loan, so even more new buyers can "own" a home with no (none of their own) money down, I fear we may simply be perpetuating the kind of lending / home selling that got us into this mess in the first place...
    Aug 28 02:28 PM | 17 Likes Like |Link to Comment
  • Wall Street Breakfast: Must-Know News [View article]
    “The FDIC's watchlist of potentially problematic banks grew by more than a third to 416 in Q2, the highest level in fifteen years…”

    If the FDIC shutters all 416 it is still treating only SYMPTOMS, not underlying CONDITIONS. if instead we saved those 416 smaller banks (for FAR less money) and let Citicorp or B of A or Megabank Inc. die the natural death they should, given their mis-steps, mis-takes, and mis-appropriation of taxpayer largesse, we could probably safely move all Citi (for instance) depositors to smaller banks that would then be able to continue as growing concerns. And we’d have removed one more “too-big-to-fail” bloated cancer from our nation.
    Aug 28 02:18 PM | 1 Like Like |Link to Comment
  • When the Chinese Sneeze, Commodities Catch a Cold [View article]
    "both [the US and China] have now adopted a central command style economy."

    Regrettably true. And China has failed miserably whenever it tried large, sweeping Stalinesque 5-Year Plans to do ANY thing. Central planning and execution don't work; China's successes in recent years have come only when they "let a thousand flowers bloom." But when things get tough they go back to what they know best -- edicts from Beijing that may or may not work beyond the walls of the Forbidden City.

    Maybe we should learn from their failures before we set up a similar regime where Washington does everything and the states become nothing more than counties...
    Aug 27 11:58 AM | 1 Like Like |Link to Comment
  • Dow 7-Day Winning Streak [View article]
    There are 7-Day Winning Streaks and there are 7-day winning streaks, however. I fear this is one of the latter. There's a maxim on Wall Street that a market that’s stronger in the afternoon is in bull market mode, but a market that’s weaker in the afternoon is in bear mode.

    The 4 up days last week (as almost always happens during options expiration week) indeed finished the day stronger. The 3 this week all started strong, then fizzled. That often describes a market that needs a rest or a decline before climbing further.
    Aug 27 10:54 AM | 5 Likes Like |Link to Comment
  • Craigslist: Free Trumps Fee [View article]
    No meetings? Sign me up! Mr. Marron, you and I both share too much time inside the Washington D.C. bureaucracy to even conceive of such a nirvana.

    For Craigslist, content is king, of course – but a lack of meetings for the sake of buy-in, teamwork, keeping others from feeling as if their ox may be gored, etc. must make those 30 employees far more productive!
    Aug 27 10:43 AM | 1 Like Like |Link to Comment
  • Debunking the China Growth Myth [View article]
    "What I’m trying to say is that China’s 'boom' has almost entirely been the result of financial speculation."

    Gee, Graham, why so dour? A boom based almost entirely on financial speculation worked out SO well for those of us investing in the US!

    If China is traversing the same path, look out below...
    Aug 26 04:01 PM | 13 Likes Like |Link to Comment
  • Bullish on Homebuilders [View article]
    I imagine the – obviously institutional, probably hedge fund – trade on ITB is designed as a short-term play. (Yes, expiration is April but that gives the greatest time value even if re-sold tomorrow.)

    In the short term, of COURSE home sales are up. Summertime is the time almost all military and corporate transfers take place in order not to disrupt the kids’ school year. Summertime is also the time you build if you are in the construction trades. Would you rather work outside in June or in January?

    As sales increased, I notice (buried far down in the report) that inventory increased even more. When the government reports NET sales – number of new listings minus number of homes sold – we’ll have greater faith that things are actually changing.
    Aug 26 12:27 PM | 4 Likes Like |Link to Comment
  • How PHEVs and EVs Will Sabotage America's Drive for Energy Independence [View article]
    Going beyond the argunents for HEVs versus EV/PHEVs and lithium ion versus lead carbon batteries is the question of NET fewer barrels of imported oil and NET fewer carbon emissions.

    Assuming natural gas-fired electrical generating plants to provide all that seemingly-clean electricity we plug in to every day, the trade-ff is a good one. I question, in the case of coal-fired electrical generating plants, whether the same environmental and economic parameters apply.

    "Look at me! I drive a clean EV!" is a bit hypocritical when one is increasing carbon emissions and acid rain on another citizen who lives closer to the power plant. Just another consideration when looking at the whole picture...
    Aug 26 12:13 PM | 21 Likes Like |Link to Comment
  • Good News for the Economy: Consumer Is Gaining Confidence [View article]
    The "present situation" might be referred to as the perception of realized "change;" "expectations" as the "hope" for the future.

    In the most recent election, President Obama ran on a platform of hope and change. With the numbers for "change" still unmoved, we are being asked to trust that the triumph of hope over present reality will lead to a consumer-based resurgence.

    I'd rather give immediate credence to the present situation numbers -- unimpressive -- while ardently desiring to see follow-through on expectations which, for now, is a meaningless number which can be altered with each day's headline.
    Aug 26 10:44 AM | 5 Likes Like |Link to Comment
  • Where Are Energy ETFs Headed? [View article]
    Natural gas is unlikely to remain depressed. As the winter season cranks up in 12 weeks or so, utilities don't just produce natural gas-generated heat. As the days grow longer, lights go on earlier in the day, people travel less, spend more time on their computers and watching TV, and cook more at home.

    This is a seasonal play that hasn't changed in 50 years, yet the financial media always project declines or rises -- in any commodity,trend or stock -- as if they were linear. The market, however, is cyclical, not linear...
    Aug 26 10:08 AM | 2 Likes Like |Link to Comment
  • What Happens in China Doesn't Stay in China [View article]
    The Chinese Miracle has placed the Chinese government between a rock and a hard place. Unlike most nations which can endure normal contractions in the form of recessions, China MUST ensure growth every year at all costs or risk rioting in the streets and the shedding of much blood and treasure to maintain order.

    Determined to hurl themselves into the 21st century, they are now denuding the rural areas of strong and capable farmers, losing agricultural land to desertification, depleting the water they depend upon from high Tibetan mountains, and poisoning the next generation with filthy air and undrinkable water. All this is endured by the populace in exchange for the promise of better jobs and better wages in the cities. If jobs growth slows, civil unrest will surely follow.

    I don't envy them their situation but I find other ways to play the "China Miracle" -- like owning shares in US, Canadian and Australian firms that provide China the raw materials it needs. If suddenly those needs contract, my companies will earn less but they will continue as going concerns. I'm not so sure about many Chinese companies...
    Aug 25 03:38 PM | 9 Likes Like |Link to Comment
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