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Lawrence Fuller  

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  • 5 Hedges For A Bear Market [View article]
    Thanks for the analysis of all these hedging options Ted. Its amazing how long we had NO volatility, and then suddenly we have EXTREME volatility. Thanks to those HFT algos, our modern day market makers, for making markets run so smoothly. And shame on those Chinese for sending our market into correction territory, how dare they manipulate their market, as they should allow theirs to operate freely, as we do ours - a huge tongue in cheek!
    Aug 26, 2015. 07:49 AM | 1 Like Like |Link to Comment
  • SolarEdge now down 7.4% post-earnings; downgrade, target hikes arrive [View news story]
    I think what overwhelmed the stock was the trading that was going on in the solar sector in general. SUNE had a huge miss due to increased spending on expansion and the rest of the solar stocks followed. Oil continued to plunge to new lows, which is a knee jerk sell for solar, then you had the China/yuan debacle. SEDG volume is quite low, and it was simply overwhelmed (despite the positive report) by the macro trading in ETFs and other basket trading. Then of course you have the pending Fed rate increase that wall street is pricing in, which doesn't bode well for the small cap sector, hence the deterioration in IWM relative to SPY, even if it doesn't happen. Horrible timing for the earnings report. If it had been a few weeks earlier the response would have been totally different.
    Aug 19, 2015. 07:46 AM | 1 Like Like |Link to Comment
  • March Madness, And I'm Not Talking Hoops [View article]
    In response to your many points above, and I'll be brief, I will say this -

    Pre-crisis, as in late 2007, we (dad and brother) looked at Merrill Lynch's balance sheet following its quarterly and realized that it was holding $800B in securities with $40 billion in equity. A large % of these holdings were mortgage related, CDO, CMO, CLO, RMBS ect. This was an obvious time bomb. This was merely levered 20 to 1, but there were far worse examples. This was not hidden in an off-shore subsidiary. It didn't take a phd to realize that a 5% loss would wipe out the equity. This isn't criminal obviously, its stupid. Still, there have been countless examples, mostly at JP Morgan and Goldman, in which these banks have been caught manipulating markets (which is a crime) and no one is prosecuted. Its angers me to no end.

    I agree with you that loose lending standards should have been addressed. That does fall on the Fed's shoulders. Arizona was a hotbed of absurd lending. The state paid the price. I also blamed American consumers/borrowers for not being responsible, as I feel it was just as much their faults as the Feds. These individuals knew what they were doing when they bought 5 houses with no money down on a variable rate.

    I am a bear on the economy, mostly because I think the quality of the recovery is poor and unstable. I have been a bear on the US market for sometime, and inaccurately, as a result, not recognizing early on how dislocated the two are today. I did not expect monetary policy to have such a profound impact on financial markets, nor did I expect the wand to be passed from Fed to DOJ to ECB in such a calculated manner. I'm stunned at how the equity market can look through an earnings recession, maintain current high multiples, and bank on a re-acceleration to new highs in earnings and margins by Q4. I don't see it happening. I'm also disturbed by the changes that have occurred in market structure as it related to technology, high-speed trading and market-making (or lack thereof). I've wrote about this in great detail in an article last year.

    My strategy has been maintain a significant cash weighting along side my holdings of fixed income and individual equities, 3 legged stool approach. I have also used inverse ETFs to hedge exposure. I've over-weighting foreign markets, with China my most significant weighting over the past couple of years (and have finally realized some very respectable gains there in recent weeks, it took long enough).

    Its been enjoyable exchanging thoughts with you, thanks for reading and commenting, and I hope to see your comments in the future. You bring some great insights to the discussion.
    Apr 9, 2015. 08:47 AM | Likes Like |Link to Comment
  • March Madness, And I'm Not Talking Hoops [View article]
    Hi Lohengrin,

    You are correct in that the Fed did its best to influence long-term rates with its purchases, but no one institution can control that rate. Supply and demand is a function of inflation expectation and the nominal rate of economic growth.
    Apr 7, 2015. 06:23 PM | Likes Like |Link to Comment
  • March Madness, And I'm Not Talking Hoops [View article]
    Hi sfpdf,
    Thanks for reading and your thoughtful comments. My dislike/disgust with the Fed is a relatively recent development, post financial crisis, as I learned more and more about what it did, and didn't do, prior to 2008. It is not political for me, and I am not an ideologue. I'd like to think of myself as more pragmatic than anything else. Background - I was a disillusioned Democrat as well, before switching to Independent in 2000. I supported Obama in his first campaign, but knew that was a no-brain win for him the day McCain picked his running mate :) I have been less and less enthused with Obama as time has passed for a variety of reason I won't go into, but I think he has failed miserably in restoring our financial system in a way that will avoid another 2008.

    I view one of the Fed's most important responsibilities being to regulate and supervise banks. Thanks to the repeal of Glass/Steagall, that includes investment banks like Goldman, Lehman, Morgan, Merrill and the list goes on. Knowing what these banks were doing prior to the financial crisis, and understanding that it was ( and still it) the Fed's responsibility to regulate and supervise what they were doing (both domestically and in foreign activities), I do not understand how anyone cannot find them culpable in the crisis.

    My disgust also runs deep for many of these investment banks that repeatedly break the law, only to pay fines to regulatory bodies that seem to be nothing more than a cost of doing business. And they remain in the Fed's good graces, allowed to continue to have access to the Fed window, or serve as primary dealers. Good grief, look at what John Corzine did? MF Global was a primary dealer. I worked at Merrill and Morgan Stanley. I have hands-on experience with what goes on. Its absurd.

    As for QE, as originally advertised, it made a lot of sense. I have said that repeatedly. I think maintaining it and increasing its size had very little impact on the real economy. This is where it became manipulative. I think it had a huge impact on financial asset prices, which is a price we will pay for down the road during the unwind. It will be very difficult for the Fed to reduce the size of its balance sheet, and I suspect it will just allow it to run off. I don't think the Fed should be targeting assets of any kind. I don't think it is pragmatic. It should allow the marketplace to determine price. What the Fed has done is destroy the pricing mechanism of a free market, and I think there are consequences to this that we have yet to realize. I also don't think it knows how great the distortion is, based on its inability to monitor and control the financial institutions it supervises.

    Had I been Chair, I would have started the normalization process for interest rates two years ago in very small increments. I think the idea that interest rates will remain low for a considerable time is delaying economic activity that might occur if there was a concern they were on the rise. Moving fed funds back to 1% isn't going to depress the consumption of homes, cars, goods and services. Given our slow rate of growth, long-term rates (which determine borrowing cost) are likely to remain very low.

    I think the Fed is afraid of how securities markets will respond to the initial and subsequent rate increases because it doesn't know how much leverage is in the system, via the shadow banking system. It fears an unwinding of leverage will destabilize markets and have an adverse consequence for the economy.
    Apr 7, 2015. 11:12 AM | Likes Like |Link to Comment
  • March Madness, And I'm Not Talking Hoops [View article]
    Ok, not a political operative, perhaps a Dookie then?

    While not having read "Monetary History...," I'm quite familiar with Friedman's work and the Great Depression, as well as Bernanke's background.
    I believe the tax increases from 1935 to 1937, including the intro of social security tax in combination with the retrenchment of government spending had more to do with the 37' recession within the Depression, rather than monetary policy. I guess that is still up for debate to this day.

    I was a supporter of Bernanke's policies, despite thinking the Fed was asleep at the wheel leading up to Great Recession. I think ZIRP was appropriate as well as the first round and second round of QE. Then it became something quite different than originally advertised.

    I am very fearful that the unwinding of this policy in the years ahead will lead to a very painful "payback." One that will be very untimely for many investors that are just in, or are approaching retirement.
    Apr 6, 2015. 11:40 PM | Likes Like |Link to Comment
  • March Madness, And I'm Not Talking Hoops [View article]
    I've enjoyed dueling with you, as you obviously like it as well. I would guess your a political operative of some kind, but can't tell for who or what. Hate is a strong word, and I wouldn't use it to describe my disgust with the Federal Reserve. Perhaps you could use your professorship knowledge to write an article discussing your viewpoints. I would be interested in reading.
    Apr 6, 2015. 06:53 PM | 1 Like Like |Link to Comment
  • March Madness, And I'm Not Talking Hoops [View article]
    Oops? 2006, 2007, March of 2008 - Bear Stearns goes belly up and the wheels start coming off.......there was plenty of time for him to take charge. He was clearly unaware of what was going on.
    Apr 6, 2015. 03:09 PM | Likes Like |Link to Comment
  • March Madness, And I'm Not Talking Hoops [View article]
    I share your frustration. This is what I see - imagine a school of very small fish, but in the thousands, that are all swimming in a body of water as one, then they dart in one direction, and then a split second later dart in another. That's what I see at 10am, 11:30am, 3pm. It varies , depending on the data that day, but even on a slow day for data, specific times lead to algo trades that can send the S&P up or down 5-10 point very quickly.

    This is our liquidity, which is a joke, because it is not liquidity. These high-frequency traders, computers in essence, are our market markers, but with no responsibilities to make a market. There will come a time in the months or years ahead when this broken system shuts down markets. It will be triggers by some event and the liquidity will vanish. Then there will be an uproar, and the adults in the room will have to stand up and put the pieces back together again.
    Apr 5, 2015. 09:59 PM | Likes Like |Link to Comment
  • March Madness, And I'm Not Talking Hoops [View article]
    ...........the financial crisis that he allowed to brew to a boiling point. I've NEVER understood those that credit the Bernanke Fed with having saved us from something that he allowed to happen. Is the FED not suppose to regulate the banking system? They did NOTHING for years. Investment banks under the Fed's supervision were leveraged 40-1, like Merrill Lynch, until Bank America was forced to swallow it, and he told us not to worry, "its contained."
    Apr 5, 2015. 09:52 PM | Likes Like |Link to Comment
  • March Madness, And I'm Not Talking Hoops [View article]
    That is absolutely right Flash, the debt is the primary source of the deflation we see today. This is why the consumption-related stimulus measures we took were absurd - addressing a debt crisis by encouraging consumers to take on more debt.
    Apr 5, 2015. 09:41 PM | Likes Like |Link to Comment
  • March Madness, And I'm Not Talking Hoops [View article]
    I hate to disagree with your disagreement, but I disagree! Most especially on the aggregate economic vital stats you are referencing, all of which I've gone through at nausea. Aggregate numbers like debt as a % of disposable income tell very little about the health of the consumer. Its like comparing the average to the median and calling it the same thing. The wealthiest 1-10% account for the largest percentage of the improvement in the aggregate numbers. The numbers have not improved for the bottom 50%. So if your measuring stick is the aggregate measure of household debt to GDP, I guess your right, but if your measuring stick is the looking for improvement from the bottom up, the answer is no.
    Apr 5, 2015. 09:34 PM | Likes Like |Link to Comment
  • March Madness, And I'm Not Talking Hoops [View article]
    Hi concernedprof75,

    Thanks for reading and your thoughts. There was a tremendous amount of fiscal stimulus, it was just stimulating the wrong things. Post recovery act all of the stimulus was consumption-based programs for cars, appliances, houses - simply tax credits for things consumers were going to buy anyway. This was silly. We could have invested in a new energy grid, transportation system, highways, and the list goes on. There would have been a return in terms of productivity that we do not see from consumption-based programs.

    The Fed HAS failed, based on its mandate. If it can't create 2% inflation with ZIRP and $3 trillion over six years, then it has clearly misappropriated the credit - in this case, malinvestment.

    Lastly, you can't solve a debt problem with more debt. That makes no sense. Our recovery is slow because government and consumers are servicing too much debt, despite low interest rates.

    I agree with your point on the dollar, very complex issue and lots of moving parts. I didn't address the dollar in this article, but it clearly hurts large multinationals bottom line from an earnings standpoint.
    Apr 4, 2015. 05:25 PM | Likes Like |Link to Comment
  • March Madness, And I'm Not Talking Hoops [View article]
    Thanks George,
    Yes, stable prices are the Fed's only job in my book. Job creation is not in their domain... and is what has led us to this point. Yet I do think that one of the Fed's unspoken, but very significant, objectives has been to finance the budget deficits we knew we were going to have post financial crisis AND rebuild bank balance sheets, rather than have them take losses, buy buying a lot of the crap they didn't want to, or couldn't, sell.
    Apr 3, 2015. 03:09 PM | Likes Like |Link to Comment
  • March Madness, And I'm Not Talking Hoops [View article]
    I've tried my hand at both sides, but continue to find myself in the middle with no party at all, Independent since 2001 and still waiting for my savior.
    Apr 3, 2015. 03:05 PM | 1 Like Like |Link to Comment