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Joseph Stuber  

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  • The Paradigm Shift Has Begun - This Isn't Going To Be Pretty [View article]

    I enjoy your comments and views - most of the time - so thanks for the input. We are going to have a day toward the end of the year where we can re-visit this subject to see who was right. If I am wrong I will give you your due credit - if I am right I hope you do the same for me.

    In the meantime opposing views are what make markets. Thanks for the comments.

    Jun 11, 2013. 11:45 AM | 12 Likes Like |Link to Comment
  • Sorry Bears, We're In A Secular Bull Market [View article]

    In rough numbers GDP is $16 trillion. In rough numbers our deficit on average since the recession is averaging $1.4 trillion or about 8.75% of GDP.

    That $1.4 trillion is being spent in the economy for extended unemployment, SS disability, SS, food stamps, government employee paychecks, etc. In other words it is going to buy goods and services - that is GDP.

    Structural GDP is GDP less the impact of stimulus. The last time we were at these levels on stocks deficits were running about 80% below what we have post recession. In other words the difference between strucural GDP and nominal GDP was within a percent vs about 8% today.

    Earning are driven by spending which is represented as GDP. If spending were 8% lower sales would be 8% lower in the aggregate and that would have around a 30% to 40% negative impact on profits.

    Feb 22, 2013. 04:24 PM | 12 Likes Like |Link to Comment
  • Sorry Bears, We're In A Secular Bull Market [View article]

    Are you suggesting they aren't?

    Stocks are not unreasonably priced today based on earnings and earnings have been propped up by a government that has borrowed about $7 trillion - about $1.4 trillion a year and equal to about 8% of GDP in the last 5 years.

    Take that fiscal stimulus away and tell me what happens to corporate profits or stock prices.

    I'm not suggesting the US taxpayer is carrying the load - I am stating that it is a fact. The Obama "weath transfer" agenda has indeed transferred a lot of wealth but from the American people to a relatively small number of major corporations.

    Feb 22, 2013. 03:35 PM | 12 Likes Like |Link to Comment
  • Why Hyperinflation Is No Myth: The Shadow Banking Component [View article]

    I tend to agree with Stephen if I understand his point. The trajectory of M2 is not a lot different pre and post recession. Excess reserves have shifted dramatically though and do set the stage for an incredibly rapid expansion in M2 if banks do suddenly move to lending.

    A point I have continued to make though is that the money paid on excess reserves is not what has kept lending subdued. Occasionally one has to step back and take a look at how the man on the street sees things. Banks can be ready and able to make loans but the matter is not entirely in the hands of the banks. A loan is a transaction between 2 parties - a lender and a borrower.

    Sentiment indicators suggest the man on the street - and that includes businesses and consumers - is not as optimistic as stock market participants seem to be at the moment.

    The reasons are numerous - not the least of which is a totally dysfunctional government. In truth, I don't even think stock market participants - at least the well informed ones are optimistic.

    That climate and sentiment doesn't bode well for a large expansion in lending. After all, what would one wish to borrow money for? Plant expansion maybe, equipment, inventories. I can just see a small business owner saying to himself, " I know things are really getting ready to take off and I am going to get ready by ramping up inventory, expanding capacity and hiring a lot of new workers."

    The small business owners I know and I know a lot of them are not thinking this way at all. One of my closest friends fits in this catergory. He owns an electrical contracting company founded by his grandfather decades ago. He is well positioned financially to borrow several million and the banks would gladly lend it to him but he is so risk adverse today that he wouldn't borrow $5,000 - let alone anything significant. His only concern is how to navigate Obamacare and keep his income statement marginally in the black.

    That applies to businesses up and down the size scale. Cost cutting to protect bottom line margins has been the mindset post recession and nothing has changed. That also applies to the consumer. They don't see things from an optimistic perspective at all and are taking a very cautious and conservative stance - after all the next layoff notice could be the one they get. Best to be prepared.

    An interview with the CEO of Regions Bank recently was informative. He noted that they had expanded lending by a few percentage points in the past year but their net outstanding loans had remained flat as the new lending had been offset by those paying off loans. That is the trend and it will continue in my opinion until main street sees that things have really changed and we are finally at a bottom.

    That means that deleveraging will occur at some point just as it is now occuring in Europe. We will be forced to mark underwater mortgages - roughly 20% - to market and take the needed action of bringing these properties to market at whatever price the market dictates meaning big losses for those holding the mortgages and a lengthy liquidation period as inventories surge and push all real estate values lower.

    When this cycle completes itself we will then see borrowers willing to take risk as they will see bargains to be had and they will be right. At that point and based on current reserve levels inflation may well explode but not until then.

    Just an opinion but I see deflation first and then inflation. Much like we saw in the early 80's when rates spiked and the weak sisters were washed out and thereafter M2 expansion fueled growth for 20 years. After that wash out occured those left standing saw great opportunity and began the borrowing and spending.

    Feb 13, 2013. 08:25 AM | 12 Likes Like |Link to Comment
  • Reasons Not To Buy Gold? [View article]
    "Furthermore, since 2001, gold has functioned as such without the benefit of there being perceived inflation, as measured by the Government reported CPI. Just imagine what will happen to the price of gold if/when real price inflation starts to rear its ugly head, forcing both prices and interest rates significantly higher."

    Gold has gone down recently - in my humble opinion - because it went up in the post recesssion era soley on the basis of "perceived inflation" that has not occured.

    So many weigh in on this but the truth is gold does attempt to price in monetary policy that will strengthen or weaken the dollar. The expectation since the introduction of ZIRP and QE is that it would destroy the dollar. These policies should have - in mormal circumstances - done just that but looking at the dollar over the post recession period as measured by the dollar index shows that these highly inflationary conditions never materialized.

    The dollar is actually about where it was pre QE and ZIRP. That means that gold overshot substantially to the upside relative to the dollar and is therefore overbought at present.

    Stocks - at least in part - have also moved higher attempting to price in what they see as a significantly lower dollar based on monetary policy.

    Markets move in anticipation of certain outcomes and usually overshoot. The matter is made more troublesome when the expected outcome - in this case the lower dollar - doesn't actually materialize over time.

    Today there is a very good case to be made for the dollar gaining in value. That case has to do with failed monetary policy that will likely result in a market imposed deleveraging within the US similar to what is now occuring in the eurozone.

    As we enter this deleveraging phase - assuming we do - M2 will shrink and the dollar will gain in value. Gold has priced in the exact opposite of this occurence and therefore is substantially overvalued - at least relative to the dollar.

    It is not at all unreasonable for gold to reset itself by moving lower and the magnitude of that down move could be substantial if in fact the dollar does climb higher if and when we enter the deleveraging cycle. The same applies to equities.

    Bottom line - gold went to far and to fast based on a premise that turned out to be wrong - at least for now.

    Feb 12, 2013. 07:35 AM | 12 Likes Like |Link to Comment
  • Dow 14,000: Are You The Sucker? [View article]

    Why do you feel so bad for the bears? I am decidely bearish and made the decison at the time the Fed announced QE3 - a move suggesting fear and desperation. The Fed is terrified of deflation and has said so time and again.

    In any event I sold tech stocks back in September as that sector was obviously the most overbought and Apple was the reason. My Apple short is up 35%. The broad market measured by the S&P from that date is up 2%.

    Please don't feel sorry for this bear - I'm doing just fine and adding to my short positions on this rally. You can buy the dips and I will short the rallies and we can compare results at the end of February.

    Feb 6, 2013. 09:37 AM | 12 Likes Like |Link to Comment
  • 3 Key Metrics That Show Why We Can't Avoid Recession [View article]

    I've offered my perspective - hopefully with a modicum of civility - with substantive data to support my premise. You've offered your perspective with much less civility and no substantive data.

    Wonder who who makes the more compelling case?

    Why all the hostiltiy toward those who differ with your view. Simply state your case and back it up with whatever data or arguments you deem appropriate and leave it at that.

    What in the world is up with you people?

    Nov 25, 2012. 09:59 PM | 12 Likes Like |Link to Comment
  • 3 Key Metrics That Show Why We Can't Avoid Recession [View article]

    You seem to think I prefer one solution over another. Not true.

    I believe in Keynesian theory which proposes to resolve slow growth or high unemployment with monetary and/or fiscal stimulus. Had I been in charge I would have tried the same policies.

    The difference is in recognizing when the policy initiatives are not accomplishing the desired end. I would never have moved to QE3 and I think Bernanke has come as close to admitting QE is not a solution as one can expect.

    Congress, on the other hand is sort of stuck. It is a legitimate "Catch-22". They are at a point where they are damned if they do and damned if they don't.

    Don't assume they don't know that though. It is hard to mix politics with policy and therefore, not likely that many will admit to defeat even though they recognize defeat.

    The political solution is to posture for the inevitable by blaming the other side when it happens. Of course the same goes for those in the Krugman camp who want to monetize away all problems.

    They too will find a way to blame the opposing camp. The problem is that no viable solution exists at this point and the presumption by many is that there is a solution. Consequently, everybody is assuming the "blame the other guy" posture.

    While they do that I am positioning to profit in the markets based on what I see as the ultimate outcome - recession.

    Nov 23, 2012. 10:33 PM | 12 Likes Like |Link to Comment
  • 3 Key Metrics That Show Why We Can't Avoid Recession [View article]

    You said:

    "subprime mortgage product inventions and securitizations thereof, which had nothing to do with Congress)."

    It had everything to do with Congress. It was Congress that set MBS's as equivalent to US treasuries and then mandated a downgrade in the quality of MBS's by setting a 55% compliance rate for low income mortgages relegating them to junk status after directing banks to embrace them as equivalent to US treasuries.

    You disagree with that point?

    Nov 23, 2012. 09:16 PM | 12 Likes Like |Link to Comment
  • 3 Key Metrics That Show Why We Can't Avoid Recession [View article]
    untrusting investor

    Natural market forces will prevail in the end and force fiscal responsibility in some fashion. Absent borrowing and spending on the part of the government we would have already completed the deleveraging that was started and then interrupted with a government in denial.

    Our system is broken and political incompetence is, perhaps, at an all time high and across the globe - not just in the US. If I were going to plan an economic collapse and given a 30 year time window to achieve it I don't think I could have done a better job than our fiscal leaders have managned to do.

    I do encourage you to read my blog. It will be an eye opener.

    Nov 23, 2012. 06:09 PM | 12 Likes Like |Link to Comment
  • Even With A Fiscal Cliff Deal, Stocks And The U.S. Economy Will Unravel In 2013 [View article]
    Maybe more relevant to the discussion is what will you do when the wealthy people fire everyone and retire.

    Don't be so sure that isn't what Mr. Obama wants either.

    On another matter - has anyone seen or heard from Bernanke. Can we assume that his goal was to hold the markets higher through meaningless rhetoric long enough to get his man elected?
    Nov 9, 2012. 04:31 PM | 12 Likes Like |Link to Comment
  • Why This Is The Most Hated Bull Market Of All Time - Understanding The Folly Of Financial Engineering [View article]

    I so hate it when readers extract one or two comments, take it out of context, and then label me a certain way or extrapolate a few words into something that goes well beyond my thesis.

    Some choose to take note of my comments on the Marx conflict and extend that to mean that I am a socialist/communist. Others take my position on capitalistic efficiency to skew things to their advantage and assume I am a democrat, a liberal, and a socialist.

    I am not those things. I am just a passionate researcher who is more than willing to look at the evidence, define the problem, and offer solutions.

    And the problem today is that too much of the money supply that exists is held by those who have no way to spend it. If they don't spend it to buy goods then we don't need to produce goods at the same rate. if we drop goods production then we lay off workers who then have no money to buy goods. It ends up getting worse and worse over time to the point where the whole system collapses on itself - a point we are very close to right now.

    You can cling to whatever belief you choose - Keynesian, Austrian, Classical, Marx, supply side, market based - whatever. There are elements in each school of thinking that are useful but none that is all encompassing. If unions were so strong that their collective bargaining power was enough that corporations couldn't make a profit then that side of the equation would be out of control and we would need to move the needle back the other way.

    And I would advocate for that if that was the case. Today that is not the case and so we need to move the needle the other way. Tax policy is just one way to do so and doesn't constitute the whole of my solution to the problem. Aggressive enforcement of anti-trust laws would be another area that would produce good results.

    Jul 26, 2014. 09:03 PM | 11 Likes Like |Link to Comment
  • Why This Is The Most Hated Bull Market Of All Time - Understanding The Folly Of Financial Engineering [View article]

    "They will invest heavily in automation and off shore in order to reduce costs."

    They've already done that. I don't fault capitalists and consider myself a capitalist but the truth is capitalists don't have a lot of benevolent blood coursing through their veins. Their goal is to exploit all things to their advantage and they have done so.

    And there is no such thing as a large cap domestic company anyway. Big companies see the world as their market and the world population as their work pool.

    I do get weary of the propaganda that suggests these companies will retaliate in some way if taxes are raised. Walmart is a good case in point - they can't use workers in China to sell goods in their stores in the US. And I doubt that GM, Ford, Toyota or any of the other car makers who have factories in the US do so because they have a sovereign loyalty that compels them to do so. They do so because it is the most efficient and cost effective way to build cars that will be sold in the US. Were that not so certainly Toyota would choose to build them elsewhere and import them to the US.

    Jul 24, 2014. 04:55 PM | 11 Likes Like |Link to Comment
  • Obama And Lew Say This Is Serious - Are They Just Grandstanding Or Is This Time Different? [View article]

    What possible motivation would an analyst have to "con" readers. Do you think I have some sadistic desire to mislead my readers? I don't know you and have no interest at all in how you choose to invest your money. I am investing mine in SPY puts, FAZ, UVXY and PCLN puts and not looking for any company on these trades.

    I don't have a website offering investment advise and I don't handle customer accounts - in other words I am not selling anything. Sometimes I decide to share my work with readers on this website and I did so with this one. If you don't care for my views then don't read my articles but you are way off base by suggesting that I am con artist or possibly insane.

    I will tolerate you as I don't believe in censorship but an apology is in order.

    Oct 6, 2013. 07:43 PM | 11 Likes Like |Link to Comment
  • Obama And Lew Say This Is Serious - Are They Just Grandstanding Or Is This Time Different? [View article]

    "Worse than useless" suggests it could actually be harmful. I assume that means you think taking profits on stocks at these levels and under these circumstances would have negative consequences.

    Not sure how you lend much to the discussion with a statement such as "the politics of debt is never easy".

    Then you say that "if it is fixed" - and I assume you mean the level of debt by that statement - then we "will be poorer than most thought possible". If that is what you think then I would agree with you that if we go to a balanced budget and fix debt levels that we will indeed be "poorer than most thought possible." In fact I am certain that I stated that in this article.

    My view is that we can't continue to support GDP with deficit spending as it is not sustainable. The CBO agrees with that. My view is that if we impose the austerity that the Tea party and the conservatives want we will crash the economy and the CBO also agrees with that.

    There is no easy solution here. We can kick the can for a while but I don't think that will be tolerated by the BRIC's much longer. There is an immense body of work out there on this and fully embraced by Donald Kohn and Obama but one has to be intimately involved and informed to understand that and to grasp the implications.

    Believe what you choose but to suggest that I am "uninvolved or uninformed" seems to be a position that lacks objectivity.

    Oct 6, 2013. 10:29 AM | 11 Likes Like |Link to Comment