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Joseph Stuber  

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  • Time To Prepare For The Next Euro Crisis And A Market Correction [View article]

    Can't do it. Gotta know what I am risking and what I can make if I am right. My upside has to be twice as much as my downside risk or I just don't play. So if you figure I have to 1600 on the S&P I would have to put my stop at about 1545.

    Get that trade structure at 2:1 and hit 50% of the trades and you will make a lot of money. Buy and hold, sell and hold and trying to scalp a little here and there is a suckers play.

    Mar 31, 2013. 11:28 PM | Likes Like |Link to Comment
  • Time To Prepare For The Next Euro Crisis And A Market Correction [View article]

    OK boys - so if I were going to go with you on that what is my upside target over the next 6 months and should I use a stop or isn't that necessary?

    Mar 31, 2013. 11:10 PM | 1 Like Like |Link to Comment
  • Time To Prepare For The Next Euro Crisis And A Market Correction [View article]

    I would really rather be wrong than right on this. Really I would.

    We have a horribly broken system and in so many areas. I have no doubt that spending spiked for two reasons - one the Bernanke "wealth effect" and two the dividends in the 4th quarter. We will find out in short order how far that carries the spending as rising incomes aren't going to be the driver.

    Just as MI stated - the markets are going up on the belief in QEternity and I believe that is true. I also believe the Fed has changed their agenda and doesn't want to be responsible for a stock market bubble. They now have a problem though in that they have the herd running wild - finally.

    Fair value at 1100 - market at 1565 and up 10% in 3 months. You guys are really seeing some phenomenal growth in 2013 coming off a flat GDP print last quarter to justify futher upside. Corporate profits are really going to have to soar to justify further divergence aren't they?

    Mar 31, 2013. 10:11 PM | 1 Like Like |Link to Comment
  • Time To Prepare For The Next Euro Crisis And A Market Correction [View article]

    We aren't talking generations but that is opinion. We do know that post war recoveries have been tremendously successful in certain cases after nations were completed decimated.

    It can't happen anyway as the resistance to change would be overwhelming - at least until a complete economic collapse occurs. At that point anything is possible.

    I am just talking by the way. You posed the question as what would I do if I were Supreme ruler. I am not nor will anyone else be.

    While we are on the subject of fixing what is broken income disparity is a problem. I am a capitalist and believe in that system but I recognize the need for an affluent middle class as they are a tremendously important cog in the wheel that drives the system.

    I think collective bargaining is a good thing but the union heads sell out with all these deferred compensation arrangements that don't put money in workers pockets now in exchange for promises in the future that end up being deferred liabilties that may or may not be performed on. We need to close the gap in income disparity some way. I need to work on that one a little though.

    Mar 31, 2013. 09:51 PM | 1 Like Like |Link to Comment
  • Time To Prepare For The Next Euro Crisis And A Market Correction [View article]

    You can't tell me why QE is driving stocks or why it should but you are still banking everything on it.

    Anyway, if I were the Supreme ruler I would force all financial instituitons to come clean on exposure to derivative risk and to mark assets to market. If the numbers were what I think they are I would force them into bankrutpcy. If not, great.

    I would then dismantle the Eurozone experiment and let the chips fall where they may on that as well. I would then convene a new Bretton Woods for the purpose of establishing a non-sovereign reserve currency.

    I would allow interest rates to float freely and I would raise the Fed funds rate by 2% to 3%. I would eliminate IOER. That would end up completing the deleveraging process that is much needed.

    I would also force municipalities and corporations to deal with deferred liabilities and go through Chap 11 if need be to put things back in order and on a sustainable path. I would prohibit future pension contributions from being treated as deferred liabilites and require that all contributions be held in trust. I would do the same with Federal deferred liabilities and pass similar legislation that would require SS/medicare contributions be held in trust.

    I would reinstate Glass Steagall. I would pass legislation that strictly restricted or prohibited lobbyist activities and I might impose Congressional term limits. I would also pass laws that allowed for criminal prosecution of public officials - no more immunity.

    I would by the way leave the Federal Reserve just as it is. Remember I am still a strong believer in Keynesian theory and think it would work just fine if we didn't have so many problems that were being hidden from view and if we actually had a little integrity in government. We would get that if we limited terms and prosecuted them for engaging in back door deals that make almost all of them very rich in a term or so and I did say almost as there are some who are above reproach.

    I would also do everything I could to reduce burdensome regulations and require that regulations be put to a cost/benefit test before being implemented. I would implement stronger anti trust rules and severely restrict tort actions in the medical industry. I would also try to implement legislation that gave all the population access to legal representation in some manner but put limits on awards.

    That is a short list. It would be hell to pay for awhile but we would be back on a path to real growth driven by faith and confidence in the system in a few years.

    Mar 31, 2013. 09:22 PM | 2 Likes Like |Link to Comment
  • Time To Prepare For The Next Euro Crisis And A Market Correction [View article]

    I am not going to say the economy is improving if it isn't and it isn't. My short positions can be turned to long in about 5 minutes tomorrow morning. I really have no problem with the long side of the market if it is warranted.

    What don't you get? We are up a ton right now. What do you really think the odds are of adding more to that number from here? Do you really want to see a "fedacaine" induced bubble?

    I won''t convince you and you won't convince me but here is a good article though that Doug Short did the other day - his S&P fair value analysis. Here is an excerpt from that article:

    "Professor Shiller's latest chart (as of March 21st) puts the current P/E ratio at 22.79. The Long Term Interest Rate (red line) provides general information regarding historical values. Comparing the current value of 22.79 vs. the long term mean at 16.47 represents an overvaluation."

    Here is another:

    "No surprise - both show the S&P 500 would be fairly valued around 1100. With nominal data producing a number so close to the CPI-adjusted Shiller data, readers must be baffled toward why Prof. Shiller uses CPI adjustment at all (I second that opinion)"

    I have never read a comment from Doug that offered an opinion on the direction of the market. He just crunches numbers and gives the reader the data.

    Again, we are at all time highs with incomes shrinking, massive debt and a huge Fed balance sheet, a eurozone recession, a China slowdown, spending cuts and tax hikes kicking in and a market that is already up 10% this year.

    Please - what do you see as the upside from here and based on what by the end of 2013?

    Mar 31, 2013. 08:36 PM | Likes Like |Link to Comment
  • Time To Prepare For The Next Euro Crisis And A Market Correction [View article]

    On what metric? I am most interested in the 4 components of GDP as I think that tells the story. We are going to get the first round of numbers on 1st quarter GDP soon. I don't know what we will print on that. A very wild guess is -.5% to +1.0%. If that is where we land then we are making no progress.

    2nd quarter will factor in more of the payroll tax cuts that should impact spending. Also, sequester which should impact spending and govt consumption/investment - more so in 2nd quarter than 1st. The deepening recession in Europe and the slowdown in China will cause a negative print in export/import numbers. Maybe private sector investment prints up due to dividends in 1st quarter.

    I guess my answer is that by the middle of 2nd quarter if the numbers on spending are holding I will be shocked. We will see.

    Mar 31, 2013. 08:21 PM | 1 Like Like |Link to Comment
  • Time To Prepare For The Next Euro Crisis And A Market Correction [View article]

    "BUT, February was a blockbuster month and somehow the market did get it right. Business inventories posted a +1% reading in Feb, best in 2+ years, private sector job growth was +240K best in 2+ years, durable goods +5.7%, all the Fed manufacturing surveys are in the positive now, leading indicators is up 3 months in a row. I am sorry but all this points that investment (the I) is up; the corporations are starting to loosen the purses and invest in the economy and let's not forget the massive dividend payments of +84B in 2012Q4 which are effectively a "private sector stimulus" that outweighs the sequester amount for the year."

    We had a huge spike in income and spending due to tax planning/dividends. That was a one and out. The number is right back down to flat. Doug Short - who has no bias in him at all from what I can tell - did a nice piece on this.

    70% of GDP comes from personal consumption. We need real gains and we aren't seeing them. The numbers did look OK - not good - but again we have already fallen back off on the income side and that is the key component. The dividends you metioned are largely reinvested and not a driver of GDP. Additionally, we did go about 50% over the fiscal cliff with "sequester and tax hikes. That is a little less than 2% drag on GDP as a best case.

    If the improvements you mention turn into a trend then I am wrong but so far it looks like a one and out. Some of these numbers are very volatile and best looked at in the context of a moving average.

    Mar 31, 2013. 08:01 PM | 1 Like Like |Link to Comment
  • Time To Prepare For The Next Euro Crisis And A Market Correction [View article]
    "If you want a number try 1490 on the S& P."

    Now we are talking. So, please do let us know if you change that number and I will do the same if I change mine. Now we have something to gauge analytical accuracy on.
    Mar 31, 2013. 07:41 PM | Likes Like |Link to Comment
  • Time To Prepare For The Next Euro Crisis And A Market Correction [View article]

    "Would you say that we are in a period of high unemployment now and the economy needs to be turned around through borrowing and spending?"

    Absolutely if I thought it had a chance of working. I don't though. We've tried it and it has failed. We've almost doubled the debt and the Fed balance sheet is up by a factor of 4 and what do we have to show for all this - flat GDP, high unemployment, and almost no money velocity.

    How far can we take this? The only way we have a chance of making this work is to get the private sector banks in the game. That is where real money supply growth occurs and the banks aren't lending and the borrowers aren't borrowing and that is after how many years?

    Here is what has happened though. The Fed prints and buys a bond. The bank get the cash and it sits at the Fed drawing IOER rates. No money supply growth and no inflation. WE NEED INFLATION and we can't get it and don't tell me everything is going higher and the governments numbers are wrong.

    All the Fed print is doing is monetizing the new debt that the treasury issues to pump the system with free money to those on food stamps, extended unemployment, SS disabiltiy, etc.

    That is keeping above water on GDP but it has worked as a transfer of tax payer money to major corporations who have cut costs while GDP has stayed above water thanks to the free handouts that are spent in the economy.

    That is not the way to grow an economy.
    Mar 31, 2013. 07:37 PM | 1 Like Like |Link to Comment
  • Time To Prepare For The Next Euro Crisis And A Market Correction [View article]
    "since we have been indulging for awhile now"

    "I am sure. That must be why we have minimal inflation and high unemployment, the classic signs of indulgence."

    And isn't that my point. We've almost doubled the debt since the recession - a number that almost equals all the debt created by all the administrtations going back to GW the first. Additonally, we have multiplied the Fed's balance sheet by a factor of 4.

    What do we have to show for it - high unemployment, flat GDP and an economy that refuses to register any inflation at all.

    That seems evidence in support of the fact that policy has failed.
    Mar 31, 2013. 07:25 PM | 1 Like Like |Link to Comment
  • Time To Prepare For The Next Euro Crisis And A Market Correction [View article]

    I am as Keynesian as they come but you can't define Keynesian economics as just throwing money at a problem. That would be Keynes first line of attack but Keynes also saw the inherent problems in a reserve currency that is also a sovereign currency. He warned that the arrangement was flawed and would never work. He was right and this is a much bigger deal than many understand.

    Keynes also didn't see monetary easing or excessive fiscal stimulus based on borrowed money as a way to drive an economy -- he saw it as a way to turn the economy when the contraction cycles produced high unemployment and negative GDP. It is a tool to be used selectively.

    Our incredible abuse of debt and leverage has taken us well beyond anything Keynes ever intended. I suspect he would roll over in his grave if he saw the degree to which his theories have been abused.

    Monetary and fiscal policy as practiced in recent years was worth a try but it hasn't worked. We have no choice at this point. Austerity is the outcome whether we choose it deliberately or the market forces it upon us.

    Keynes work can't be condensed into "borrow, spend and print." I have no doubt that Keynes -were he alive today - would say that we need to abandon the idea that a sovereign currency will work as he told us in no uncertain terms that it wouldn't. He would also tell us that the Euro experiment is even more flawed and must be abandoned.

    There is no easy answer. We created this mess through a "give the people what they want so they will vote for us" policy. It is an absolutley massive problem. And the risks taken on by financial firms is off the charts. Some estimates of the notional value of total derivatives run in the $600 to $700 trillion level - 10 time the size of the global economy. Had Glass-Steagall not been repealed many of today's problems would not exist - in fact most would not exist.

    The magnitude of the problem is well beyond what most think. It is uncomfortable to talk about but it doesn't help much to ignore it either.

    Mar 31, 2013. 04:54 PM | 3 Likes Like |Link to Comment
  • Time To Prepare For The Next Euro Crisis And A Market Correction [View article]

    I went short the market in September of 2012. My gains were substantial from those levels as the market fell 125 points before turning back higher. My trades were short gold, crude, Apple and financials and long the dollar.

    I took profits on crude and Apple. I never actually bought the dollar or shorted gold but those trades would be profitable today as well. The financials have been horrible and I did make that trade. In January I went long bear etf's and the VIX. Those trades have current losses.

    However, just based on the S&P as a method of measure I was short at 1475 and at 1500 I added to my bear etf's and at 1525 I added more and at 1550 I added more. My average basis the S&P is 1512 and my cash committment is minimal relatively speaking.

    "And of course if someone actually heeded any of that advice and shorted, well, I can suggest they are no longer with us"

    I assure you I am still here. If anyone thinks they can take a statement made by any analyst in isolation and trade off of it he is a damned fool. My advice has been to go to cash - not short the market.

    A few have asked me what I thought about shorting the market and my advice has been to do so with a very small portion of their cash and add to those positions on a scale up as you won't be able to pick the top. The bulls won't either by the way and this market will sell off although some of you would have readers believe it won't.

    Anyway, that is what I have done and just using the S&P my average would be 1512. If we go to 1600 my average will be 1537. If from there we sell off by just 10% I end up net winner 100 points. Further more 75% to 80% of total portfolio value will be in cash.

    If we do pull back by 10% from here we will be back to 1400. Are those that suggest buying these levels going to say that they were wrong. I doubt it. They will say nobody times the market perfectly and you will be fine if you just hang on.

    I am guessing that you won't get out of your longs if we have a pull back and if I am right the jury is still out on who is right and who is wrong. On the other hand, if you do plan to take profits at some point PLEASE LET US KNOW WHERE THAT POINT IS SO WE CAN JUDGE YOU ON YOUR CALL as you are surely making one here by disparaging those who see it differently than you.

    Mar 31, 2013. 03:54 PM | 2 Likes Like |Link to Comment
  • Time To Prepare For The Next Euro Crisis And A Market Correction [View article]

    "Since Bernanke announced QE3 we have been moving toward a market collapse. The truth is there are no buyers out there. I am being redundant as I have said this before but no one wants to get in and buy this market."

    Your point is a good one and I don't always get it right.

    However, I do still believe that the announcement of QE3 was a defining moment - an act of desperation on the part of the Fed - and I still believe we are headed for a market collapse.

    As to the point of no buyers - this market rally has been defined by a lack of volume.

    The last point I would make is that the Fed went even further on December 12 and doubled down on QE with QE4. We do have a moving target after all. Keynes was once asked why he changed his mind so much and his response was that conditions in the market keep changing.

    That said, I have not - as yet - changed my mind. I still think there is a lot of reluctance to buy this market and volume suggests that is true and I still think QE3 was a defining moment that set the stage for a market collpase.

    That isn't a defense though as the market clearly moved higher after I made that statement. So, here is another question - if the market does in fact collapse from here and moves to 700 or 800 - was I right or wrong?

    The answer - in my opinion - is that I was both right and wrong if that occurs. I was right on my call but wrong on my timing.

    I would never encourage anyone to take a single statement made by any analyst and act on it. Analysts do change their mind as they should based on new information. For what it's worth I haven't changed my mind though as I still think we will see a market collapse this year and a test of the 2009 lows.

    Mar 31, 2013. 03:24 PM | 1 Like Like |Link to Comment
  • Time To Prepare For The Next Euro Crisis And A Market Correction [View article]

    I think you already know the answer but . . . .

    Definition of 'Austerity'
    A state of reduced spending and increased frugality in the financial sector. Austerity measures generally refer to the measures taken by governments to reduce expenditures in an attempt to shrink their growing budget deficits.

    The opposite of austerity is to increase spending. There are many antonyms for austere or austerity. Perhaps the one best suited in the context used here is 'indulgent'.

    Definition of 'indulge'
    1. to yield to an inclination or desire; allow oneself to follow one's will (often followed by in ): Dessert came, but I didn't indulge. They indulged in unbelievable shopping sprees.
    verb (used with object)
    2. to yield to, satisfy, or gratify (desires, feelings, etc.): to indulge one's appetite for sweets.
    3. to yield to the wishes or whims of; be lenient or permissive with: to indulge a child.
    4. to allow (oneself) to follow one's will (usually followed by in ): to indulge oneself in reckless spending.
    5. Commerce . to grant an extension of time, for payment or performance, to (a person, company, etc.) or on (a bill, note, etc.).

    Mar 31, 2013. 02:42 PM | Likes Like |Link to Comment