Kurt Shrout

Portfolio strategy, long equity, bonds/cds, special situations
Kurt Shrout
Portfolio strategy, long equity, bonds/CDs, special situations
Contributor since: 2011
Seeking Alpha, like the Yahoo message board and many other American entities, are also guilty of censorship on a fairly regular basis. It may be, though, that it is only individual editors on Seeking Alpha that censor. The organization as a whole may not be responsible, although I suspect they are responsible for, at least, some of it. My experience is that, if you pursue a specific incident with Seeking Alpha management, you will get your piece published―if it is a good enough piece to begin with. I have seen some instances where people thought that they were censored, but their article was simply not strong enough for publication.
Censorship on Seeking Alpha works like this: (1) There are quality standards for publication that only about a quarter of all articles submitted meet. (2) Most articles, by far, are treated fairly; but editors vary in quality and perspective, and they are reviewing and editing a lot material quickly―so their work can be less than perfect. (3) On some topics, if your article takes a certain stance, the quality standards may be lessened or, even, waived. If your article takes the opposite stance, the quality standards may be heightened. In fact, sometimes, criticisms are simply contrived.
To my current knowledge, the following types of articles have been subject to bias and censorship: (1) Articles in favor of smaller-cap U.S.-listed Chinese stocks for which a short-side article(s) was already published. (2) Articles against Chinese stocks fear mongering. (3) Articles against dividend stocks investing. (4) Articles against gold investing.
If your article is well-enough organized and written, but does not present a strong case, it may get published to give the appearance of being fair. It is the articles that present a strong case that are more prone to be censored. Also, there can be attempts to weaken the case presented within strong case articles under the guise of editing.
By the way, do not expect to always be treated fairly in the Comments section beneath the articles either. There is, sometimes, bias in what comments get censored (deleted) and which do not.
The reason for the bias and censorship is, very largely, money. America, as a whole, is far from having freedom of speech―due, in part, to the undue influence of money. Seeking Alpha has a policy that states that workers are not supposed to attempt to profit from the knowledge of what will be published. Policies like this cannot be policed well though. In brief, workers can simply have an acquaintance invest for them. I suspect this is, in part at least, what has been going on in terms of the Chinese stocks short-side articles.
Seeking Alpha has a large section for Dividends & Income investing and a large number of authors who make money by pushing dividend stocks investing. A lot of Seeking Alpha’s advertisers push dividend stocks investing (although they very often push other things as well). None push the opposite. Gold investing is another thing that Seeking Alpha authors and advertisers often push. There are some short-side gold ETFs, but there is a relatively tiny amount invested in them.
Also, realize or remember that Americans have been propagandized on a huge number of subjects. The Chinese system(s) versus the American system(s) is one of these subjects. There is very little accurate understanding of the strengths and weaknesses of the Chinese and American systems in America; so most Americans, by far, are overly biased against things that are Chinese.
I have followed the L&L Energy (LLEN) story some. If what you are saying about the Chinese media’s reporting regarding LLEN, et cetera, is true, it is important that this information is published. I suspect that it is true. Although something like 30% of the Chinese companies listed in the U.S. as of a while back were committing fraud, it is also true that well over 90% of the specific criticisms leveled against these companies by short sellers were false, grossly exaggerated, or largely misleading―whether the company was actually committing fraud or not. Make certain the article is well organized and written and, then, insist upon its publication. Be open to editorial changes, but do not allow a strong case to be weakened via editing. If GeoInvesting misrepresented the situation, you should be able to politely but clearly say so. I have seen GeoInvesting misrepresent many things in the past. If they misrepresented even more things, I am not surprised.
Remember, though, you are bucking up against the greater money direction. People involved, and/or people they know and are inclined toward, are shorting LLEN. GeoInvesting publishes a lot on Seeking Alpha and has over 25,000 followers. What counts the most on Seeking Alpha, and many other websites, is not right or wrong or true or false―it is the money. Also remember that LLEN is a communist country company and that we also live in a propagandist state. Your road toward publication of something genuinely good and not significantly watered down will probably be difficult.
Your comment above is inappropriate for attachment to this article. YONG is just one stock and a small cap. Also, the halt of YONG is currently under review. You did not do so in the past and you are not doing so now, but please consider showing more class in your comments.
I sold my YONG investment a long time ago. I sold all of my U.S.-listed Chinese stock holdings once I knew there genuinely was a much greater issue with fraud in the space and that, even though most of the companies in the space were probably not significantly fraudulent, the stock prices of all of the companies in the space were very likely to be drug and, then, held down. Afterwards, I actively searched for special opportunities in the space which I knew might appear due to the very large amount of disinformation regarding the space and some of the companies in it. You were one of the many sources of this disinformation. I ended up making rather good money on CSR and HRBN calls prior to each company being privatized. Even before this, I was ahead on my U.S.-listed Chinese stock investments. There was a third special opportunity I failed to take advantage of, partially due to a further heart issue. I have been relatively healthy now for a while, and I figure to remain so.
I no longer monitor the U.S.-listed Chinese stocks space nearly as closely, as the special opportunities seem to have ceased; but I still keep a greater eye on the space because I think there may be more special opportunities in the future. It is rare to be able to invest with the odds ridiculously in your favor, as I was able to do on the CSR and HRBN calls. Without the strong disinformation campaign from you and others like you, this would not have been possible. I cannot thank you for doing something unethical, but it did turn out well for me.
If you wish to comment further, please do so beneath an appropriate article. As you know, if you do comment further, I may not reply. You were and may still be associated with Muddy Waters Research. As many of us know, both you and Muddy Waters belong in jail―just like the upper management of some of the U.S.-listed Chinese stock companies. People should not be allowed to create and distribute disinformation for the purpose of making money at the expense of others.
If you compare gold to an individual stock, versus stocks a class, the stock is more prone to fall to zero in the not distant future. As I explained in the article above though, gold’s price can fall to “relatively close to $0 an ounce”, and gold’s price could very possibly fall to about $300 from here―creating an over 80% loss.
The difference with stocks and bonds is that you can greatly diversify your risk. For example, through stock ETFs, I currently own over 800 stocks. The average stock is about 0.12% of my stock holdings. If I owned enough gold to equal the amount I have invested in one stock, it could only be about as risky as holding one more stock; but, at this point, it would be warranted for me to sell the gold because it historically rather pricey.
We may have to just agree to disagree on this point, especially since we are discussing a rather fine point. Even though there are other elements involved in the limitations on central banks and the like selling gold, one of the core elements or the core element has to be price support. When I say “price support”, I’m not talking about holding the price above any specific level. I’m just talking about the central banks and the like not being the cause of or a contributor to a large price fall.
For example, I want to limit the sales of gold because I “like the fact that reserves are held in gold”. If other banks sell to much gold, it lessens the systemic pattern of gold being held as reserves which lessens the strength of the view of gold as a reserve versus merely a commodity. However, this effect is partially irrelevant if the price of gold holds or rises, as the price of gold also supports the strength of the view of gold as a reserve versus merely a commodity. You can’t escape the price aspect. Also, limiting the sales of gold reflects a limited belief in gold as a reserve. People largely believe in gold as a reserve to the extent that others won’t stop using it as a reserve.
This is a very tricky conversation, and I can see you seeing it a different way.
You can always find some people predicting a market collapse even. I skimmed through the Early article. I was rather unimpressed by the quality of the work. (This is simply my intellectual judgment, and it is not personal in any manner.) I don’t think I’ve ever read any of Hussman’s work. Currently, my regular reading includes certain articles from Reuters, the AP, and Bloomberg, Seeking Alpha’s Wall Street Breakfast: Must-Know News… (The list is rather long.) I tend to only read Seeking Alpha articles if they relate to something specific I am tracking via Seeking Alpha (like a stock) and the title of the article indicates to me that I should read it. I am particular about what I take the time to read.
That’s an interesting train of thought you expressed. I don’t see sufficient justification for viewing gold and the Dow as if there is an ongoing relationship. I don’t just think, but know, that there are a whole bunch of elements to the value of gold other than inflation. As I see it, each of these non-inflation elements can either lift the price up or drag it down, whereas inflation consistently lifts the price up. Also, I see a phenomenon whereby, in the very long run, people figure out that things like gold were far overvalued in the past.
If you can well-explain how limiting the sale of gold does not, somehow, reflect a limited belief in it, I am in the realm of supposition. If you can well-explain how limiting the sale of gold does not, somehow, have a price-supporting effect, I am in the realm of supposition. I do not think these things can be done.
Thanks. It takes time and effort too. I really discuss, and don’t defend. Due to this, sometimes you will see me refine or, even, change my position. I don’t do this often since, by the time I have completed the research to write an article, I am rather certain about what I am saying. Of course, this doesn’t mean I am correct about everything; but what I am saying will be factually based and well thought out.
Because: “The earnings of the DOW companies, combined, have increased greatly over the years. Gold has no earnings.” I generally don’t recommend the DOW or any other basket of very large U.S. stocks over other U.S. stocks because they do not perform as well as other U.S. stocks in the long run. I lean toward midcaps. That said, from a historical perspective, the DOW is about fairly priced now (based on P/E ratio). If you account for interest rates being so low, the DOW is far underpriced now. From a historical perspective, gold appears to be rather pricey now. You can see this by viewing the inflation-adjusted price of gold over time, as is available in my article above.
For stocks and bonds, particularly bonds, the amounts of money received were not so “widely varying”. (For this statement to make complete sense, you need to account for the fact that the earnings of the stocks increased greatly over the years.) Gold fell from about $850 to $300 in the early 80s. That’s about a 65% loss; and, about 20 years later, it was trading around that same $300 level. Over the course of the next 10 years or so, gold rose to as high as $1,900. That’s a more than +500% move in only about 10 years. You can’t make any statements like this about stocks or, particularly, bonds. Also, for stocks and bonds not held to maturity, the amounts of money received were only somewhat, versus “largely”, “based on perceptions”. (They were based on earnings, interest rates, etc.) Also, if you hold your bonds to maturity or buy and hold an ETF that does so, the money you receive has nothing to do with perceptions.
I view the Central Bank buying with skepticism. For example, European banks are in their third five year agreement limiting the amount of gold that can be sold. This kind of agreement wouldn’t be necessary if the banks actually had a strong belief in gold. It’s a way of artificially supporting the price of gold.
Your point about getting money for gold and silver isn’t meaningful. In recent decades, people have received widely varying amounts of money for gold and silver, and the amounts they received were largely based on perceptions. Also, all sorts of things can be traded for money. It’s just a question of how much.
Good question, but I have not been following that particular situation closely enough to provide a good answer. Sorry about that. (I do a wide range of business and investment reading and investment analysis. My interest in gold, particularly currently, is limited, in part because of what of wrote in the article above. [Gold is too speculative for a retirement portfolio and, currently, seems too pricey to capture my speculative interest. I don’t short much, and I need a rather strong and certain reason[s] to go long on something so seemingly pricey and speculative. I also need a rather strong and certain reason[s] to short something.])
I already read an article very much like that one as a part of my regular reading. I just read the one you posted above, as I did not have time to read it before.
The recent Japanese currency devaluation thing is very overblown as an issue. The Japanese are now moving to an inflation target like the one the U.S. and many other developed countries have―2% versus 0%. If the relative value of their currency drops when they do this, as they somewhat quietly hope it will, so be it. They are simply moving from what they used to do to what the U.S. and many other developed countries already do and have done for many years. Faulting them is the same as blaming them for not continuing to play the game at what now seems to be a disadvantage. I like this ongoing story a lot. It will be fun and informative to see how the change works out for the Japanese. For example, what will happen re interest rates, exactly, and their very large national debt?
I don’t think having currency values determined by the marketplace is the best approach. There is too much volatility, perception, and gamesmanship involved. The world would probably be better off if currency values were determined by a different system. For instance, values could be determined by what it costs to buy a like basket of things within each country, etc. A lot of wealthy capitalists don’t want anything like this because they want something they can manipulate and potentially, at least, make money off of. They also want themselves to, essentially, be in charge, not the governments. They won’t admit to these things, but this is the case.
The U.S. dollar will continue to slowly lose importance around the world. This is inevitable, and not worth fighting. It’s actually a good thing in that, as the world’s most important currency, it is, naturally, overvalued. This hurts our competitiveness within the world. Plenty of countries do well without having a currency that is very important to the world. The real problem is that the U.S. has become relatively corrupt and incompetent. How large will the national debt be 10 years from now? How good will the U.S. be, then, at creating a balanced or debt-reducing, sensible, and fair budget? Should people lend money to the U.S. then? Etc. Our politicians and our people are, generally, less knowledgeable, intelligent, and ethical than they are in many other parts of the developed world. This is America’s actual big issue.
By the way, you may find it interesting that I no longer view 30-year U.S. Treasuries as almost a sure thing. (“Sure thing”, in this context, means that you will get all of your principal back.) I think this is still true for the 10-year, but not the 30-year.
And I can provide plenty of quotes from reputable or seemingly reputable sources saying that gold and silver are not money. Also, always consider the motivation and integrity of the source. Were they pushing gold and/or silver investing at the time? Did they cast aside their integrity, if it was in the way to begin with, and say something simply in pursuit of their personal financial agenda(s)?
Based upon the facts and good logic, gold is definitely not money―regardless of what anybody says. For one, look at the chart in my article above. The U.S. dollar doesn’t change in value anywhere near as strongly over time. Speculations spike and dive in value like this, but the U.S. dollar doesn’t. For another, gold’s value is, clearly, far more perceptual than the value of the U.S. dollar is. (This is one of the reasons it spikes and dives in price so much.) For example, someone choosing gold jewelry over costume jewelry or the like is often simply making a superficial judgment regarding how pretty it is and/or what their family, friends, and/or acquaintances will think if they know it is or isn’t real gold. (About 43% of gold demand is for jewelry.) The U.S. dollar is extremely rarely judged on how pretty it is; and, in America, we don’t have U.S. dollars in our wallets versus some other currency to impress people.
Many years ago, when gold coinage was important to the world, gold was money. In the more recent past, gold was money to the extent that the world had gold-backed currencies. This is the modern world, not the Roman Empire, etc.
The Recusant,
Overall, the EU’s debt level is about the same as the U.S.’s; and the EU is in the process of getting its act much more together. When it is done doing this, it should be ahead of the U.S. in that it will have better and more formalized budget discipline. The EU is in the process of (1) doing things now that it didn’t intend to do until many years from now, if ever, and (2) going through the economic growth rough patch you need to go through when you reel in far outsized government spending and can’t do so at a more casual pace like the U.S. can. Putting together the funds that can lend to the countries whose free-market interest rates are too high, having the ECB willing to lend to these countries, agreeing to more serious budget rules, and agreeing to a wider banking union (with deposit guarantees) are examples of (1). (2) is self-evident; and the EU has learned that it isn’t good to be too aggressive, in terms of timeline, in cutting budgets.
The situation in Italy isn’t really that bad. The market place was treating it as a lot worse than it really is. The national debt is high (It was about 120% of GDP.), but the Italians aren’t far away from having annual budgets that only run over by the amount necessary to pay back matured debt―at which point debt doesn’t increase. The situation in Spain is bad, but the Spaniards have time on their side because the Spanish national debt was only something like 60% of GDP when things blew up on them. The scariest thing is the about 25% unemployment, which I think is going to require more creative and, maybe, EU-wide solutions to fully resolve. The economies of the other troubled countries aren’t very large; and, to my knowledge, the ECB hasn’t had to lend to any of the troubled countries recently. All the ECB had to do was express a willingness to do so, and the interest rates for the PIIGS countries tumbled way down.
Almost everyone knew the U.S. unemployment rate would drop slowly over time, and that is what is happening. I think it may not get as low as people generally think it eventually will. I think the world’s developed countries may now be faced with a new paradigm, wherein the old techniques for lowering unemployment are no longer sufficient. I think this may be the point where all of the computerization, etc., and the better functionality of the developing countries lessens the number of jobs there will be in the developed countries.
The real U.S. unemployment rate is always much higher than the one that is regularly quoted. They don’t count people who stopped actively looking for work but want to work, and often-low-paid part-time workers are counted as if they are fully employed.
QE and government support of the banks are two different things. Once a central bank sets its benchmark short-term interest rate at near zero, QE is all that is left for monetary easing. The banks, and other companies supported by the governments, have been paying back. This can be confirmed via some research.
When something like gold has the very strong run up it had since 2001, it is a signal to stay away from it or short it in some manner. It is not a signal to buy it. That said, as I said before in different words, it is a complicated determination as to whether gold is currently a good buy.
I rescind: “The U.S. dollar is not depreciating.” I wasn’t thinking well when I wrote that sentence. I was thinking of something different than what I wrote.
Do keep in mind, though, that every currency I am knowledgeable enough regarding has inflation by design. The Japanese Yen used to be an exception, but it is no more. The developed countries, including the U.S., seem to shoot for about 2% or a bit lower. The developing countries seem to have less ambitious targets.
The real question is whether your currency is genuinely depreciating versus other currencies. This is good for exports, and I generally view it as a good thing.
The Recusant,
The EU is, now, strengthening (although this hasn’t occurred and will not occur on a straight line), and its governments, and other governments, are getting their debt under control; U.S. unemployment is improving; and the global private banking system is paying back the infusions of public money. Also, as demonstrated in the article above; gold is definitely not a “safety net”.
The chart clearly indicates that today is much more akin to the early 80’s than 1975, etc. The relationship between the article’s title and Verdi is a coincidence. I vaguely knew and know who Verdi was. I’m not big on classical music or opera, though I do appreciate them a little. I am more inclined toward things like the blues, rock, film, etc.
As I stated in the article: “Given (2) and (3), gold figures to be worth relatively close to $0 an ounce some time in the future. There is no scenario of which I am aware of that will lead to this occurring anytime soon; but it is clear that buying and/or holding gold is a speculative endeavor.” (I wrote “…nearly soon…”; but the editor removed the “nearly”, and I don’t blame him as it was questionable writing. [Soon isn’t a definite amount of time.])
Gold fairly recently had one heck of a good run, and, essentially, it hasn’t come down from that run. Extra caution is advisable. All of this said, as I wrote in a Reply above: “I am neither predicting a fall or rise in gold prices in the days, months, or nearer-term years to come. I do know that, eventually, although it may be a very long time from now, the price of gold is going to be very low.”
Well said. My view, subject to revision as we move forward, is that interest rates are going to return, upward, to more normal levels―like those prior to the financial crisis (e.g., 10-year Treasuries at about 4 or 4.5%)―and inflation is going to increase, moderately, to about what it was prior to the financial crisis (e.g., 2.22%). The interest rates rise may take a few years or happen much more quickly than people expect. Inflation will vary, somewhat, in its path toward and at about 2.22%. (It could, of course, temporarily get a little above the sort of 2.5% cap the Fed wants to keep on it.)
Good point. I never thought of that. Excess fear of the stock market post the financial crisis, which is dissipating, and lousy interest rates, which will rise, are positives for the price of gold that are coming to an end.
You wrote: "On a non-inflation-adjusted basis, the U.S. dollar price of the DOW has never been anywhere near as high as it has been recently." (1) This statement is false. (2) The earnings of the DOW companies, combined, have increased greatly over the years. Gold has no earnings.
The U.S. dollar is not depreciating. U.S. dollar inflation will not remain this low, but there is no real indication that it will be relatively high going forward.
I knew that I would make very little money for writing this article. I wrote it, partially, as a public service.
The chart in my article above readily shows that gold prices were on a tear upwards until more recently―from April 2, 2001 to September 5/6, 2011. The increased and more convenient means for investing in gold were a contributing factor. Also, the price of gold appears to have responded positively to being “untied from its moorings” in 1971. This is a case where past performance is deceptive, in that there were important circumstances unique to the timeframe, and does not necessarily reflect what can be expected in the future. Also, remember that, when something like this rises strongly in price, it is, generally, more likely to fall in price than it is to further rise in price.
All of the above said, I am neither predicting a fall or rise in gold prices in the days, months, or nearer-term years to come. I do know that, eventually, although it may be a very long time from now, the price of gold is going to be very low.
Sleek wasn’t talking about just holding dollars and not (wisely) investing in anything. Neither was I in the article above.
Gold is definitely not money. The U.S. dollar is very important and respected around the world. (The U.S. dollar’s importance will slowly fade over time, though, as the world slowly moves toward a world currency, or some other mechanism, to replace the U.S. dollar as, by far, the most important currency. [A loss in importance does not necessarily equate to a loss in value.]) The amount of gold being recycled barely fell from 2012 to 2011. The general public is not “divesting themselves of the metal”. Etc.
Gold and silver coinage used to be important to the world. It no longer is. After that, gold backing of currencies was important to the world. It no longer is. The macro direction is clear. The world of today is extremely different from the world of hundreds or thousands of years ago, and the world is evolving at a rapidly increasing pace. In this case, ignoring evolution is a greater risk than ignoring history.
The U.S. dollar’s value is only a little perceptual. The U.S. dollar’s value is backed by many strong social systems and a rather large populace―not just in the U.S., but around the world. (This is a very long conversation, but this is the gist of it.)
You may be correct regarding the direction of the value of the U.S. dollar, but predicting the direction of the value of the U.S. dollar is a sophisticated and difficult matter. Also, there are many other ways of hedging against a declining U.S. dollar. Also, it is not very bad for an American living in America if the U.S. dollar falls in value.
Your story is anecdotal. It in no way negates the fact that higher dividend stocks have done worse than the stock market in general in the intermediate term. It in no way negates the fact that higher dividend stocks seem to be overpriced currently. It in no way negates the fact that most stock investors, by far, cannot beat the market significantly over a long period of time, less simply being lucky. (This is true of professional stock investors as well as amateurs.) It in no way negates the existence of the general phenomena involving older investors that rokgpsman described in his Comment above.
P.S., Few, if any, stock funds didn’t have a loss from 2007 to late 2009; so you seem to be talking about other-than-stock funds there.
I wrote: "I even think that folks like you will do better if you mostly hunt elsewhere (for the time being, at least)." When I did this, I had differentiated you from “average investors”, in that I was viewing you as someone more skilled.
If you are looking across the entire market and your stock evaluation system weights a higher dividend rate as a positive, you are playing at somewhat of a disadvantage. If you are looking across the entire market and your stock evaluation system does not weight dividend rate, you are playing without a disadvantage (and you should, probably, end up with more no or lower-than-average dividend stocks at this point in history). (I’m just more precisely communicating my thinking here.)
Generally, I only keep extra cash on hand in special circumstances―like when the market was collapsing in 2008. Instead, I sell one investment to buy another. (Using margin, I can, if I want, do the purchase before the sale in the same trading day.) It’s a technique for staying fully invested and capturing the long-term advantage associated with this. You may not do this, but others can buy an ETF if they don’t have another specific stock(s) they want to purchase at the moment.
As I wrote about your other Comment: “There are, of course, different ways of explaining the situation well and other aspects to it. With these qualifications understood, your explanation is a rather good one. Thanks for sharing it with us.”
By the way, I particularly appreciate your strong understanding of how people think.