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  • Remembering Rockefeller's Promise - A New World Order Where International Bankers And Intellectual Elites Rule [View article]
    Stephen

    James does seem to have issues with me. Always on the attack for some reason. In fact, I think he suggested I might be anti-Semitic.

    A close read of my article - which I am guessing James didn't do - would not leave one with the opinion that I have an issue with anyone. I think my analysis is sound, and I don't think central banks have a solution to the problem. Clearly I noted in the article that as long as we continue with high levels of deficit financed fiscal stimulus we can keep GDP positive. And, there is ample reason for the Fed to buy the debt as it doesn't require a tax hike on the assets they own since the interest flows back to the Treasury. In my opinion, that is not an altogether bad solution if we want to maintain the status quo. Problem is, it just exacerbates the real problem by continuing to widen the gap between the working class and those they work for.

    I've pretty much bowed out of these discussions as the commentary is so off point that I see no need for it. Readers that post comments seem to be of two types - those who want to pontificate on their own perspective with little regard for tying that in with the articles subject, or those - like James - who seem to get some sort of gratification out of calling somebody else stupid. I have no use for either. I don't have a website to promote, and I am not looking for clients. I do a lot of research, and on occasion share that with others.

    I will add that your comments are always appreciated and respected, and in fact I usually agree with you. Wish more were like you.

    JS
    Feb 5, 2015. 06:45 PM | 3 Likes Like |Link to Comment
  • Remembering Rockefeller's Promise - A New World Order Where International Bankers And Intellectual Elites Rule [View article]
    This one is akin to the other. I suppose he didn't say this either. The message is the same.

    “Some even believe we (the Rockefeller family) are part of a secret cabal working against the best interests of the United States, characterizing my family and me as ‘internationalists’ and of conspiring with others around the world to build a more integrated global political and economic structure – one world, if you will. If that's the charge, I stand guilty, and I am proud of it.”
    - David Rockefeller, Memoirs, page 405
    Feb 4, 2015. 05:39 PM | 10 Likes Like |Link to Comment
  • Anatomy Of A Market Bubble [View article]
    Tack

    So you're pretty smart huh? When will you take profits? 10% down, 20%, 30%. Won't those just be really good buying opportunities. After all you fully reject the analysis I have provided so why wouldn't you see these as great buys.

    I don't think you have profited from this market because you are smart. I have an acquaintance who has turned $20,000 into $250,000. He is a plant worker who knows almost nothing about the markets. When I mentioned the possibility that we would see a bear market he asked me what that was. Point being, this has been an easy market for idiots to shine in. That's the way all bubble markets are though.

    I have seen this arrogant, gloating, I am invincible and a genius thing play out many times over the last 40 years and it always ends bad.

    JS

    Sep 21, 2014. 08:14 PM | 3 Likes Like |Link to Comment
  • Anatomy Of A Market Bubble [View article]
    MI

    I actually started to respond to your last comment until it occurred to me you failed to respond to any of my points so I am still waiting.

    JS
    Sep 21, 2014. 07:59 PM | 1 Like Like |Link to Comment
  • Anatomy Of A Market Bubble [View article]
    MI

    When the crash comes and we do move back to the 2009 lows will it matter to you that those who listened to your giddy bull market forever regardless of the economic metrics that are screaming bubble rhetoric get crucified because they listened to your wholly unsupported nonsense about my inability to call a top.

    When we pull back 10% and they buy the dip, and then we move down 20% and they wish they could buy the dip but have no money left, and then when we go into full crash mode and they are clinging to hope will it matter to you.

    Timing a market peak or calling the high price of a market peak is just as difficult for you as me or any of the others who are sounding warnings. I've seen so many like you over the years - puffed up at the success you've had and reveling in your brilliance, end up getting crushed in the end. It's great while it lasts though, isn't it?

    JS
    Sep 21, 2014. 07:13 PM | 4 Likes Like |Link to Comment
  • Anatomy Of A Market Bubble [View article]
    Tack

    The average consumer has adjusted, deleveraged, cut back, etc. The bubble isn't in consumer debt - it is in risk assets. GDP is already in the tank, so is disposable income, quality of jobs, wages, etc.

    The idea that the economy and stock PE's are correlated is nonsense. The average consumer never came out of recession.


    JS
    Sep 21, 2014. 06:55 PM | Likes Like |Link to Comment
  • Anatomy Of A Market Bubble [View article]
    student

    I agree that the last time was different than now. A lot of the impetus for the market crash had to do with naked derivative exposure that banks and others had. And had AIG been allowed to default the consequence would have been catastrophic. The government did the right thing in the bail outs.

    I think we may still have risk here but nothing like we had in 2007-2008. And I agree that the government will not deleverage - that just doesn't happen. Furthermore, consumers are in a much better shape today relative to leverage than pre-recession. No question about that.

    The problem is that disposable incomes are falling due to an oversupply of labor leaving the consumer unable to really re-leverage. We have remained relatively flat in total household debt for a number of years now so there is no expectation on my part for the consumer as it relates to consumers ramping up borrowing.

    And the government is attempting to slow down on deficit financed fiscal stimulus. We are at a sort of tipping point here and an interest rate spike will only worsen the condition as far as public and private sector debt creation.

    We have been slowing down on the rate of growth of combined public and private debt growth for almost 10 years. Bottom line - we never really completed the last deleveraging cycle - just interrupted it. When interest rates spike we will see default and delinquency rates spike.

    But honestly I don't see the consumer being impacted as negatively this time around. A high percentage of the working class is still in recession and they have acclimated to that condition.

    The stock market crash that I expect will be a very typical bubble bursting situation much like we saw in 2000-2001. Bernanke even said as much in one of his last FOMC statements noting the difference in the 2008 crash with other recession induced crashes.

    The problem is that the bubble has been blown so large that the crash will take us right back to the 2009 lows when it happens - at least that is what I expect. When is the big question.

    JS
    Sep 21, 2014. 03:29 PM | 1 Like Like |Link to Comment
  • Anatomy Of A Market Bubble [View article]
    dnorm

    Your answer to that question has already been provided in the comment I made in response to South's comment of a similar nature. Read it and get back to me.

    JS
    Sep 21, 2014. 02:36 PM | 1 Like Like |Link to Comment
  • Anatomy Of A Market Bubble [View article]
    tack

    And you think government backed securities won't fall in value? What's the short term impact to a 10 year if the 10 year yield spikes to 5%? There is arguably more risk in bonds than a lot of low PE stocks right now.

    JS
    Sep 21, 2014. 02:29 PM | 2 Likes Like |Link to Comment
  • Anatomy Of A Market Bubble [View article]
    South

    You have no idea whether or not I have experienced failures. None.

    Just because I am not willing to risk my balance sheet assets in a market that is in another bubble doesn't mean I am experiencing failures. My approach has been to take a very small percentage of monthly income and take highly leveraged bear positions in options. Mind you I said a small percentage of monthly income. For arguments sake let's call it 10% which is about right.

    That means net worth has not fallen, and has in fact increased over the last two years. You don't have to be a one trick pony here. There are some really good places to invest money today outside the stock market. For instance, I have a partner who has done extremely well drilling oil wells in proven fields, and fracking the zones. A 50 bbl well generates about $1.8 million in annual revenue at current prices and costs roughly $1 million to drill. Since the fields are proven the miss rate is like almost nothing.

    Another great investment right now would be in the freight business. You can buy a 10 year old over the road semi for about $20,000. That truck will clear about 65 cents a mile after fuel, labor, repairs, taxes, and insurance so a truck running 2,500 miles a week makes roughly $1600 a week. Multiply that by 50 weeks and you get $80,000 a year. Are you getting those kinds of returns on stocks?

    Given choices like that versus investing in a bubble market that nobody will time the peak on is a fools play. Yeah, I have left money on the table but believe me I haven't played the fool.

    And I do intend to ramp up my short side plays to a higher percentage of income - maybe eventually up to 40% or even 50% - but it will still be money invested from income and at no point would I risk balance sheet assets. In other words under no circumstance will my net worth fall from year to year regardless of my stock market losses.

    Furthermore, there is great opportunity in playing the short side of a market in leveraged trades using options. A lot more money can be made playing the bear market when it starts than can be made in a bull market. Bear markets are of short duration and bubble bursting bear markets are particularly profitable. Where would AMZN be if the PE on this stock was 50 instead of 500? Answer - about $30, not $330. A $350 put for April of next year costs in the $30 range getting you close to 10:1 leverage.

    Opportunities abound on the short side of this market when the bubble bursts. That said, I don't think anybody should take a $500,000 investment portfolio and use if to short the market. Why - who knows when the bubble will burst? By the same token, I don't think it makes a nickels worth of sense for those who have seen their assets increase by 40% or 50% to stay with the trades at these valuations. We could, and may well see a price crash of 50% or more at some point.

    Those who gloat today are probably those who lack the sophistication to identify when the market has turned until well after the fact. I do like the adage "picking up pennies in front of a steam roller and in my opinion that is what perma bulls are advocating at the moment.

    JS


    Sep 21, 2014. 02:15 PM | 3 Likes Like |Link to Comment
  • Anatomy Of A Market Bubble [View article]
    bartpr

    Don't forget the impact to corporate profits when 30% to 50% of their assets are in securities and we see a pullback of 10% or 15%. A 10% correction in stocks could cost Apple $13 billion as they held over $131 billion in marketable securities at the end of their 2013 fiscal year.

    Talk about a feedback loop that pushes stocks well below mean when the market corrects just modestly. As stocks do correct it will create a panic to exit first by these corporations.

    As I have said over and over, this whole thing is a complete house of cards that can't stand even a normal 10% pullback. Therefore, as long as "They" - whoever that is - are able to prevent a normal correction the bull market continues but if it does pullback 10%, that will be the beginning of another 50% plus market crash - just like all bubbles.

    This is a bubble - plain and simple. It can continue for a time perhaps - who knows - but it is a bubble.

    JS
    Sep 21, 2014. 01:27 PM | 2 Likes Like |Link to Comment
  • Anatomy Of A Market Bubble [View article]
    South

    That is more of an article than a comment. You seem particularly disturbed by my analysis. Gloating over your good fortune is one thing - making vitriolic comments about those who offer analysis that doesn't fit with your bull for ever mindset is another.

    Why does it so upset the perma-bull community when those with no faith in the longevity of this bull market explain why we believe that. If we are wrong you can continue to gloat - as distasteful as that is. But why not just leave it as that. Just tell me I've been wrong on timing a top. Keep in mind that is the single most difficult thing to do in the markets though.

    In any event, as I said, I did the research for this piece for my own edification, not yours. I chose to share it with my readers but it seems you would prefer I keep it to myself. When the vitriolic comments from my readers outweigh the comments of my readers who appreciate my efforts I will probably do just that - keep it to myself.

    JS
    Sep 21, 2014. 12:33 PM | 7 Likes Like |Link to Comment
  • Anatomy Of A Market Bubble [View article]
    mano

    Not entirely true as it relates to only the Fed can create money from nothing. That privilege actually lies with the fractional reserve banks when they make a loan. Let's say they bank credits bank cash to make a loan. Their cash went down and their loans account went up. Then the second part of the entry is to deposit that money in a checking account that increases the deposits account - a credit balance on the banks books and increases the banks cash account. Leaves the banks cash account just where it was but now they have a new asset - the interest bearing loan and they have a new liability - the customers deposit. At the conclusion of the cycle the bank has the same cash balance (bank reserves) that they had at the start but M2 went up as did the banks total assets.

    However, when the Fed buys bonds from banks they are effectively making that bond a non-liability to the government, and therefore the taxpayer, in the sense that all the interest that accrues to the Fed on those bonds gets paid back to the Treasury.

    What we see happening today is similar to what we would see if money were created without debt - in other words the government is allowed to print money at will and as needed. Technically only about 1/2 of the new debt we have created ended up being an obligation of the government in that the government gets back the interest cost they pay out on those bonds held by the Fed.

    There is nothing I am aware of that would prevent the government from printing all the money they desired through the issuance of new debt and it would have no consequence on taxpayers if the Fed bought it all.

    That is a great strategy by the way for injecting money into the economy to stimulate GDP growth, and therefore jobs growth. Where the whole process breaks down is when the newly created money flows through to corporations that choose to invest it in risk assets instead of the economy.

    We won't fix this problem until we do something to swing the pendulum back toward the working class. When those profits generated by fiscal stimulus are hoarded or moved into risk assets we are left with a variation of the Keynesian liquidity trap. Not enough money churning in the economy and driving demand for goods and services.

    JS
    Sep 21, 2014. 12:11 PM | 2 Likes Like |Link to Comment
  • Anatomy Of A Market Bubble [View article]
    James

    You said:

    "First, bank reserves have not increased by the amount you signal, and if they had, it wouldn't be "missing."

    It isn't the amount I signal. I didn't make the M2 number up nor did I make up the amount of new public and private debt that has been created. And you are right- the money isn't missing. The banks have it.

    Then you said:

    ". . . there is absolutely no evidence to suggest that primary dealers have been using reserves to buy stocks and that corporations have been buying their stocks from primary dealers.."

    That statement is patently absurd. What do you think primary dealer banks use to buy stocks with? And the second part of that statement is even more absurd. Do you really think large public companies don't buy stocks from primary dealer banks? Please.

    Then you said:

    "Third, there are many potential explanations for the "missing money," the simplest being that -- and you can find this in many academic papers . . there has been a breakdown since the mid 80s in the relationships of measures of money and measures of credit."

    To be credible you need to do a little more than make reference to " many academic papers". Perhaps you can direct us to some of these "many" papers.

    Then to your real question:

    "Why is the 'missing money' money even relevant".

    As you stated, it isn't missing - it went to the primary dealer banks. And it is relevant in that it establishes malinvestment when corporations choose to buy stock - their own and others - in lieu of all other investments they could make. Corporations don't normally act as hedge funds after all. But when demand for the goods and services they produce isn't sufficiently high enough to justify hiring or making capital expenditures it is hard to see how buying their own stock or the stock of other companies - who are also suffering the same plight - is anything but malinvestment.

    Sorry you didn't understand the points made in the article but it is a little esoteric I suppose for many readers. That said, all I can do is attempt to present the information in a way that readers can understand. Obviously I missed the mark in your case but a lot of my readers seemed to get it so it wasn't a complete exercise in futility.

    JS






    Sep 20, 2014. 10:53 PM | 2 Likes Like |Link to Comment
  • Anatomy Of A Market Bubble [View article]
    Robert

    In my opinion the conditions leading up to the '29 crash best describe where we are today. And it is my view that when this bubble does burst that we will have a very prolonged recession - call it a depression if you like - much like the 30's. In many ways we are already there. U6 unemployment is already at depression era levels if we wouldn't continue to play with the Labor Participation Rate. Wealth disparity is closer to the pre-29 crash period than anytime since the 20's/30's. Tax rates at the upper end of the scale are at the lowest levels we've seen since the 20's. Most important though is the fact that we've run out of ways to create new money - money that is needed to support economic growth.

    JS
    Sep 20, 2014. 12:59 PM | 4 Likes Like |Link to Comment
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