Lawrence Fuller

Registered investment advisor, portfolio strategy
Lawrence Fuller
Registered investment advisor, portfolio strategy
Contributor since: 2013
Company: Fuller Asset Management
I know you mentioned this fund before, and I have it on my list among others. There are also some with terminations dates within 18-24 months that are at discounts, which presents opportunities as well, assuming you distribution is the original nav. Lots to research in these closed end fund names.
Nice summary of fact Jason.
Thanks Thomas,
My point is, in part, that the mechanics of going to a negative interest rate when the Fed has a $2 trillion reverse repo facility in place, plus having just raised fed funds to .50, is a very lengthy a time consuming process. It couldn't happen anytime soon. I also think the Fed is seeing how it has failed in Japan and EU, so they will be less inclined to use it as a tool If it was working in either place, that would be different.
Hi Tom,
I haven't noticed the boost in junk, thanks for mentioning, and I'll have to take a look this weekend. Not that I'm interested in buying junk now or in the near future, but its a significant signpost. I know that there are sectors of junk that were thrown out with the bathwater in the demise of energy sector debt, so i'm sure there are opportunities for junk debt managers.
I don't see the energy sector demise as having any thing similar to the impact that housing had on the banks in 2008, but that 's the way they are treating US banks. European banks have been force fed sovereign debt for years, bloated with this crap as the buyer of last resort. That is a result of ECB QE. Not in the US. I think this rally has legs, but I'm not getting sucked into a buy and hold mentality in anything. Still, there is 20% upside in some of these simply recouping what they have lost in Feb alone. Even a bear has to look for long opportunities when they can be found.
I have shares of Newmont Mining, also IAU and SLV, but I didn't buy them recently, instead as a QE hedge against inflation that never came. Now gold is running for an entirely different reason, that being safety and in defense of depreciating currencies around the world.
I think that makes a lot of sense, but I have a hard time adding to gold, or better yet GDX, which seems to be the best of the ETF bunch, at current levels. It has just had a tremendous run since the beginning of the year. I think its a sensible hold right now. If the market rallies up to resistance levels in this current downtrend, it is a logical long that should appreciate when the market resumes its decline.
Hi Ted,
There are plenty of pressures on bank stocks, no doubt, but I think that where they are trading relative to tangible book these pressures are priced it, and that the fear of NIR has pushed them well below that level month-to-date. The banks would surely fall further if the SP500 declined to 1500, even 1700, which is why I'm using a tight stop loss of 1810 for my position in BAC. I suspect that the banks may outperform on a relative basis from here though given valuations, but I'm not investing in these banks for any length of time. I'm just looking for singles where I can find them.
I can see them reversing course and going back to zero, but not negative interest rates after the disaster it has brought on in other countries.
I am maintaining my position for price targets mentioned or stop loss hit.
The loan exposure to the energy sector for these banks is not a systemic risk, but I agree that it is a detriment to long-term fundamentals. Hence this being a shorter-term opportunity.
Sorry your comments were deleted Jason, I didn't get to read them.
That's it DWD,
They needed to have consumer QE, not bank QE.
Go Lakers,
With lots of respect, please, these are all former wall street people. When they are done they go back to Wall Street. The monetize their so called public service with books, tv appearances, and speeches for which they are paid tens if not hundreds of thousands. They are doing no one service.
We have no oversight of what they do behind closed doors at the NY Fed in terms of their trading activities. NONE. Dexia Bank ring a bell? Look it up.
Markets are not transparent, we have dark pools everywhere in which there is no oversight of what is happening. We have exchanges beholden to high-frequency trading scams, its worse than ever.
Yes, the Knicks are horrible and I love Rambus, not sure he'll make a difference though. We need to build around our new center.
Go Lakers
The issue that I have with the Fed is that it is not a part of the government. It is a bank owned and operated institution, with no oversight for what it does. It has supreme power. No accountability. That's what bothers me.
Go Knicks.....
Lots of charts, a little self-promotion, and a review of what's happened over the past couple of months............ I'm not sure I see the point of this, or why its being highlighted, other than to say ? there might be inflation ahead?
They are living and learning Thomas, so we hope. The first thing they need to do is squash this absurdity about negative interest rates. You can't improve the lending channel by charging the banks a negative interest rate, which feeds back to the consumer in the form of a tax. Makes no sense.
Yes, it is mindboggling that they didn't see this coming. Econ 101
shale was a boom, then bust.
It created a lot of jobs and economic activity, but led to over- or mal-investment that we are now paying for in the opposite direction, job losses and economic contraction in energy, industrials, materials.
I agree aarc,
Its called monetizing the debt. The Fed is financing the federal gov't deficits, and paying the Treasury the interest at the same time. This was part of the plan all along. Its like taking out a loan on your 401k and you pay yourself the interest on it, but you never have to pay back the loan.
Great game until no one values your currency anymore because you have monetized it to zero.
I agree that there is a need for swf to sell to meet other demands, ok, but I would be careful about buying the bulls argument that this is all energy on the earnings decline front. It always starts out as one sector, then it spreads. The financial sectors was expected to see 10% earnings growth this quarter, and 5 weeks later that is now down to 1%. That is a tremendous decline. Is that going to bonce back up next quarter? Or turn negative? It is heading in the wrong direction.
A weak dollar isn't going to turn exports up unless demand overseas turns up with it. That isn't happening either. It will soften the blow to the earnings decline.
Housing is on a steady, slow recovery path, a clear positive.
We may not realize a recession, unless the market declines too much, as that could slow spending to such a degree that it creates a recession. The top 10% account for near 40% of spending.
You don't have to run bigger deficits to have fiscal stimulus. you have to redirect the funds that are already being spent so that they produce a return on capital.
McTeer is right Mort19,
I wish I'd thought of it first and I could have included it in this article, but there is no way they can go negative with a $2T reverse repo facility in place that took 18 months to implement. No way.
There is probably a very good bank stock trade in here once the market recognizes that.
Yes, by Corker today and I can't remember by who yesterday. If she had any common sense she would have squashed the idea, saying that it hasn't worked in japan with the Nikkei plunging 10% since they went negative, and it hasn't worked anywhere else.
I don't think the Fed could go negative if it wanted to given the repo facility that is in place. Its not like they can't just make the decision to do it, and its done. It would take months if not years to implement from here. Its won't happen. But it sent US bank stocks plunging, which is ridiculous. That's probably why Dimon bought 25M worth of JPM in recent days.
I would love to cash in on that Ted. I thought it was coming a week ago, and that we wouldn't retest the jan low, but if this holds at 1812, it could be the start of a run to the 200 day. So hard to tell.
Dimon buys 500k shares of JPM and OPEC talks about cutting supply. Energy and banks would be a powerful combo for a counter trend rally.
Just heard a very interesting comment from former fed gov McTeer of Dallas, smart guy. He just said that the Fed can't implement negative interest rates because of the repo facility they currently have in place that sets the floor on interest rates at 25 basis points. That took two years to establish and test. It would take at least a year or more to unwind that and go in the other direction, according to McTeer.
Why Yellen would suggest that this is still on the table is beyond me. Its clearly not.
Should that happen mobyss, our 10 year might just go to zero. I can't say that won't happen, but I sure hope it doesn't.
Very well put Original Grouch.
My estimation of a summer conclusion is that at the rate we are headed south, we will be in the 1500-1600 range very quickly. 1450 would be a 32% decline, average for declines greater than 20%. SO in part, it is the rate at which we are falling.
Also, I see some support at the 1575 level, which was resistance back in 2007. Lastly, I think by summer the comparisons for earnings will improve dramatically, because the steepest rates of contraction may be behind us. Markets move based on rates of change, not absolute numbers.
So from a rate hike to more QE?? I'll bet you a dollar that won't happen LWCDGI. Too much time must pass to much such a dramatic shift in policy, at which point all the damage will be done. That's why I think this bear concludes this summer.
Proof is in the pudding today Fred, thanks for reading.
I think the markets are saying that the stimulus doesn't work anymore. Its done. Now its time for the great awakening, close the gap between perception and fundamentals.
Thanks for reading.... i've been blabbing quite a bit myself the past couple of months on SA, lots of ideas, lots of market action, lots of things to write about. Its quite different than the paint drying session we had thru most of last year leading up to October.
Hi North Gate,
That's my focus, day and night. Looking for the turn. Its one thing to be negative for the sake of being negative, the polar opposite of the perma-bulls, but I'm looking for changes in the rates of growth that signal the beginnings of a recovery. The stock market will discount an earnings recovery before it happens. That's always been the case.
It now looks like earnings will continue to decline yoy into Q2. But the rate of decline slows. That's the first signpost of a turn. If we start to see growth again in Q3, it means the market may bottom in advance of that, late Q2. Perhaps its not until Q3 that we see the turn, I don't know yet, as consensus estimates still look too high. I also think margin estimates are way too high.
Trust me, I'm looking for the turn, and it relates to a lot of variable, several you mention.
The more likely scenario is certain sectors bottom in this fashion and begin to turn in advance of the broad market. Just because energy and materials have seen the greatest decline doesn't mean they will be the first to turn up - that seems to be where everyone is looking on SA, but I don't agree. We are seeing earnings growth accelerate in the telecom sector, small sector, but still growth. Healthcare is also still seeing earnings growth.
At this stage of the decline, there arent many place to hide.