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Joseph Stuber  

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  • Are We Really This Stupid? Well, Maybe So. [View instapost]
    Flash

    Valid point, but a shame. A lot of profits are going to be squandered by those who simply don't take the time to understand.

    Does anybody give even the slightest consideration to the fact that the Fed has stepped aside and is no longer supporting the market, but instead, is deliberately bursting the bubble they created. That is what they are doing.

    JS
    Sep 1, 2015. 07:12 PM | 1 Like Like |Link to Comment
  • Are We Really This Stupid? Well, Maybe So. [View instapost]
    Thanks Sal. Best to you as well.
    Aug 31, 2015. 05:38 PM | Likes Like |Link to Comment
  • Are We Really This Stupid? Well, Maybe So. [View instapost]
    tampat

    Thanks for catching my mistake. We are already well below the 50 day mean. I wrote an article the other day where I showed the 100 day mean on a monthly chart, and that value is 1105 today. I will make the correction right now.

    The second question is simply a way of pointing out that the big banks are heavily long cash. The thesis behind this piece is that the Fed has created a bubble in risk assets for a reason, and it has nothing to do with stimulating economic growth. The point is this - they are in a stronger cash position today than anytime I know of in history while every other group is in debt at extreme levels. I do believe they created this market bubble for a reason, and the reason is a self-serving one. I also believe they are now ready to burst this bubble, and theoretically if we do revert to the 100 day monthly mean we would see the total value of publicly traded stocks fall by $12 trillion or so. Their cash reserves put them in position to create twice that much new money through loans. I am not suggesting they will do that, just saying it is mathematically possible.

    I am currently long VIX but plan to buy stocks at the 2012 highs if we hit that level, but I think we are now in a bear market and so I won't hold those positions for a long time.

    JS
    Aug 31, 2015. 04:22 PM | 1 Like Like |Link to Comment
  • Weekly Market Update - August 22nd, The FED And EARNINGS, Amidst A Strong Dollar And Weak Crude Oil [View article]
    F & G

    Is this really the message you want to deliver:

    "I had to amend many items for this weeks missive as the swiftness of the market downturn was simply mind boggling. It is at times like these, that an investor needs to look at the situation, stay grounded, and not let their emotions take over."

    My question - mind boggling to who? Certainly not me. This is the most contrived bubble in history. The idea that one stay calm in the face of this collapse is absurd.

    People that are giving this advice are doing small investors a horrible disservice. Exactly how many times did you tell readers to stay calm and don't panic? Wondered what you would say when the inevitable happened.

    I do believe you told me you would recognize the top in time. Apparently you didn't. My August 6th warning seems well timed so not all were surprised:

    http://bit.ly/1i0Yv1X

    My advice - it is time to panic, not stay calm. The Fed deliberately created this bubble, and they are deliberately deflating it now. Why doesn't anyone ask why all the FOMC members have gone silent this time? Answer is simple - the Fed never was "your friend", and those that chose to chase this contrived bull were duped.

    JS
    Aug 26, 2015. 03:50 AM | Likes Like |Link to Comment
  • A Brief Respite Before Surging To New Highs? Maybe Not This Time. [View article]
    tampat

    I was being a little cynical there, but no problem on the mention :)

    I got a pretty good discussion going with that piece, and some who are well informed on the subject matter. That part was good.

    But I've never had an article I published see such a low readership. About 3% of the reader volume I received in September when I wrote Anatomy of a Bubble.

    JS
    Aug 7, 2015. 03:08 PM | Likes Like |Link to Comment
  • A Brief Respite Before Surging To New Highs? Maybe Not This Time. [View article]
    perplexedtex

    The dollar clearly had a negative impact. And the stronger it gets the more the negative impact. And if the US is the best house in a bad neighborhood, then it will get stronger, and the negative impact will become more pronounced.

    I don't agree with everything Stockman says, but I do agree with the direction the dollar is headed. It brings us back to the problem of the US dollar as the world's reserve currency.

    We are bloated with debt globally, and fully dependent on more government debt to keep GDP above the zero line. This is not a good business model. There is absolutely no way this gets better from here unless we deal with the root problems - the one I spoke of in my previous article that nobody read.

    JS
    Aug 7, 2015. 10:04 AM | Likes Like |Link to Comment
  • Why Organic GDP Growth And Inflation Elude Us - The X Factor [View article]
    David

    Solutions?

    Well, I think there are a lot of solutions but they don't set well with those who have rigid dogmatic views on things.

    Obviously one solution is progressive tax rates. Another is strict antitrust enforcement in lieu of focusing on more and more M&A. Another is to swing the balance back in favor of labor for a time with higher minimum wages and efforts to bring effective collective bargaining back to the table. Tariffs. Higher estate taxes based on size of estate. Closing loop holes that allow the wealthy to perpetuate that wealth without constraint.

    As a life long capitalist, and one who never had much use for unions, I have come a long way here by the way. And only because I realize that it really is a zero sum game, that money begets more money, that politicians sell their services to the highest bidder, and that if we don't address the wealth disparity we will end up in a plutocracy, not a capitalistic democracy. And if the truth be told we are very close to that plutocracy right now.

    There are opposing forces in play here. The working class on one side and the capitalist on the other side. And for the economic machine to function properly we need to seek that perfect balance between the two as each is dependent on the other. When either side gains to much advantage the whole system is at risk. And it is the political class who must seek to achieve that balance, not sell out to the group with the deepest pockets.

    JS
    Jul 30, 2015. 07:00 PM | 3 Likes Like |Link to Comment
  • Why Organic GDP Growth And Inflation Elude Us - The X Factor [View article]
    Copacetic

    Cash would be my answer. But, that is the same answer I've been giving for a while now as stocks just keep on climbing.

    I am convinced of one thing, the Fed seems determined to avoid a market crash at all costs. And as long as the sell volume is light they can control markets by direct intervention, or by intervening through surrogates.

    We've seen just how shameless this charade can become with China of late. Maybe we follow China's course at some point and outlaw selling of stocks. I am being a little cynical here but only just a little.

    Might be better to get out while it is still legal :)


    JS
    Jul 30, 2015. 05:10 PM | 3 Likes Like |Link to Comment
  • Why Organic GDP Growth And Inflation Elude Us - The X Factor [View article]
    David

    I have been writing for 3 years now that monetary policy has no impact on the economy with Fed Funds already at close to zero. Monetary policy's only real tool is to do what they can to increase borrowing, and therefore M2 by lowering rates. And the only rate they directly control is the Fed Funds rate. With interest rates as low as they can go the Fed has no way to impact economic growth.

    And QE is not what I would deem monetary policy, it is direct, and in my opinion, borderline illegal attempts to manipulate stock market price.

    Fiscal policy on the other hand has had a direct impact on the economy, but simply borrowing and spending to keep GDP above zero is not a sustainable policy.

    There are solutions to our problems but how can you solve the problem if you don't even know what it is which seems to be the case with our policy makers, both monetary and fiscal.

    JS
    Jul 30, 2015. 05:03 PM | 2 Likes Like |Link to Comment
  • Why Organic GDP Growth And Inflation Elude Us - The X Factor [View article]
    David

    Certainly agree that an economy that is growing results in capital expenditures to meet the demands of a growing economy. Also, agree that monetary policy in our current state is completely useless, with one caveat, QE does reduce supply of risk assets and therefore produces an upward bias on the price of those assets. But that is what most angers me in the first place. Monetary policy has done virtually nothing to ignite economic growth, and the only reason we aren't in depression right now is a function of fiscal policy, not monetary policy.

    Where I take some issue though is the matter of getting the cart before the horse. The idea that we would see capex spending ahead of the need for that spending is kind of flawed thinking. We will see it when demand justifies it, and not before. So it is a little hard to ignite economic growth with capex spending when it is the lack of economic growth that is keeping capex spending low in the first place.

    If I misunderstood your point I apologize.

    JS
    Jul 30, 2015. 04:56 PM | 2 Likes Like |Link to Comment
  • Why Organic GDP Growth And Inflation Elude Us - The X Factor [View article]
    copacetic

    Good point. I just looked at the link. You are right about slow down in M2.

    I just pulled the GDP chart - both real which shows +2.3%, and nominal which shows +1.08%. The deflator used to calculate real is the basis for the difference. And the lower we see inflation, the higher we see real GDP. Hard to think that is a good thing. The last thing we need is to see GDP growth resulting from deflation.

    JS
    Jul 30, 2015. 03:47 PM | 1 Like Like |Link to Comment
  • Why Organic GDP Growth And Inflation Elude Us - The X Factor [View article]
    Salmo

    I said this in response to your comment:

    "Not sure what your point is. You claim I am delusional - apparently for explaining that shadow bank lending doesn't expand M2 which is true."

    You responded with this:

    (A) The commercial banks create new money (in the form of demand deposits) when making loans to, or buying securities from the non-bank public; whereas lending by financial intermediaries simply activates existing money.
    (B) Bank lending expands the volume of money & directly affects the velocity of money, while intermediary lending directly affects only the velocity.

    You reference comments that establish that only banks create new money, yet you said I was "delusional" for stating that point. Don't get that.

    My argument isn't that shadow bank intermediation doesn't have an impact on M2V. It absolutely does. When money moves from an investor account to a consumer it moved from the risk asset system into the real economy system and that is a good thing. And it gets spent in the real economy and that too is a good thing.

    But, even though M2V is positively impacted through shadow bank lending, it is not impacting it enough to offset the money flowing out of the real economy system as M2V is collapsing. I've offered what I think is a very compelling reason for why that is. You haven't offered anything in my opinion that suggests my reasoning is flawed.

    JS
    Jul 30, 2015. 03:16 PM | 3 Likes Like |Link to Comment
  • Why Organic GDP Growth And Inflation Elude Us - The X Factor [View article]
    David

    You said:

    "Gross Domestic Product (GDP) is most certainly not a function of money supply or velocity. You are misinterpreting the Equation of Exchange. MV = Py where M is the stock of money, V is velocity, P are prices, and y is the sum of all goods and services for sale"

    I am more than willing to debate Monetarist vs. Keynesian economic theory, but fear we will confuse readers and neither of us will convince the other that he is right, so probably just an exercise in futility.

    That said, when you make the statement that GDP is not a function of money supply or its velocity what can I say. GDP always equals M2 times M2V. It is just math. And M2V can only be determined by knowing the other two values.

    I will concede that GDP is a function of demand, but will add that demand tends to increase with the increase in money supply. Either that, or we see price inflation. Monetarists accept only inflation as the outcome of increasing money supply don't they? Well, we have seen money supply expand dramatically since the end of the recession, and inflation is the least of our concerns. We are in disinflationary mode and deflation in some instances.

    Maybe you can expand on this statement:

    "People have more money to buy when they have jobs and more jobs are created when capital is created."

    How, in your view is capital created. And, how does that impact jobs?

    JS
    Jul 30, 2015. 02:53 PM | 2 Likes Like |Link to Comment
  • Why Organic GDP Growth And Inflation Elude Us - The X Factor [View article]
    David

    You are over complicating the matter. My point is a simple one - GDP is the metric we use to measure growth. And GDP is a function of money supply and money velocity.

    Regardless of the transformation we've witnessed in the economy, the basic equation GDP = M2 * M2V still stands. And, if we want to expand GDP we must increase one or both of these metrics. That is just math.

    If government would increase deficit spending to $1.5 trillion we would see M2 expand and GDP expand. Again just math. If traditional banks would start lending again we would see M2 expand and GDP expand. Again just math. That math would hold in spite of the condition you describe - that is the transformation from a manufacturing to service economy.

    You might want to help us understand your point by expanding on this comment:

    "The decline in Gross Domestic Product that you describe is caused by declining rates of capital formation and a transition from manufacturing capital to service and finance capital."

    JS
    Jul 30, 2015. 01:02 PM | 2 Likes Like |Link to Comment
  • Why Organic GDP Growth And Inflation Elude Us - The X Factor [View article]
    Salmo

    Not sure what your point is. You claim I am delusional - apparently for explaining that shadow bank lending doesn't expand M2 which is true.

    I assume your point is that shadow bank lending puts savings to work and that increases M2V. Is that your point?

    If so, your point is that M2V increases, not M2. Not very compelling support for your point that I am delusional for stating that M2 remains unchanged when shadow banks lend vs. traditional banks.

    Keep talking - maybe we will get your point with a little more clarification.

    JS
    Jul 30, 2015. 12:47 PM | 2 Likes Like |Link to Comment
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