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Lawrence Fuller

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  • Bernanke's Kryptonite [View article]
    Great article Eric! Everyone obviously has their own inflation rate. I know that mine is a lot higher than others simply based on the fact that I purchase my own health insurance. The premium rose 16% this January. About average over the past 5 years. The rise in food and energy furthers that wealth disparity that grows thanks to QE. Food and energy are a lot larger % of the bottom 80% of consumers compared to the top 20%. I think I'd worry about 2.5% inflation before 6.5% unemployment if I were Bernanke.
    Feb 17 03:19 PM | 28 Likes Like |Link to Comment
  • The Fed Is Not Pushing Stock Prices Higher [View article]
    Hi Paul,
    I think what those that suggest the Fed is driving the equity bull market mean, is that that they are providing the primary dealers with $4 billion a day in fresh liquidity to invest. They may use some of this to buy Treasuries, but they then borrow against those secure holdings to fund their own proprietary trading in equities, commodities, derivates, ect. Take a close look at the JP Morgan fiasco. That's was a $100 billion derivatives trade for a bank with $138 billion is assets. They alone have $400 billion in their spec investment account. You have nearly $2 trillion in excess reserves that are not being lent. These reserves are being invested.
    Apr 2 11:11 PM | 23 Likes Like |Link to Comment
  • The Fed Is Not Pushing Stock Prices Higher [View article]
    I respectfully disagree. I think you should research this. I'm not sure what your are talking about in regards to "commissions". The Fed is purchasing debt from primary dealers, which they purchase from the US Treasury. They supply these dealers with new electronically created dollars. The primary dealers then invest these reserves in high-grade securities, which are held on their books for regulatory purposes. They then borrow against these holdings, hypothecate, for cash that they then invest. Where do you think the hoards of pooled investment assets come from at the large money-center banks? Whose money is the $400 billion that JPMorgan plays with every day? Its not theirs. It couldn't be yours or mine....
    Apr 3 12:38 AM | 22 Likes Like |Link to Comment
  • The Good News, The Bad News And What's Very Ugly [View article]
    Ha, no alias here. Let em haul me off. I feel much better about speaking or exposing truth than chugging from the bowl of bull.
    May 10 11:33 AM | 18 Likes Like |Link to Comment
  • The Good News, The Bad News And What's Very Ugly [View article]
    No worries here in the US discoman,
    We have socialized the losses on educational loans thru new programs that minimize the amount you must pay back to a % of your disposable income, once you find a job, and after 20 years the remaining balance is forgiven. Guess why education costs are soaring? The same reason healthcare costs soar - subsidies. Now $1 trillion in student loan debt with 18% delinquent and counting, right where sub-prime loan debt amounts and delinquency rates were in the mid-2000s.
    May 10 11:19 AM | 18 Likes Like |Link to Comment
  • The Greatest Danger For Stock Investors Today [View article]
    "Dead on" implies his account of the real economy and fundamentals, although I think he is correct on the market front as well. The two have been divorced for some time. You are quite liberal with your account of what I said in my articles, as i never called anyone "stupid." I did say that in order to be optimistic, you have to be living an illusion, and that is still true today. If you think that the Fed-fueled run up in equities over the past 18 months is based on sound economic fundamentals, then (I'll say it again) you are living an illusion. Profiting from the Fed's illusion is a dangerous game. Its been profitable, very profitable, up to this point.

    I think that a recession did begin at the time I mentioned more than a year ago, and based on the latest NBC/WSJ poll, 57% of Americans think we are still in one today, so the numbers are on my side. Pointing out the horrible economic backdrop for this market shouldn't be frowned upon, or criticized, unless it isn't true. It should actually be applauded. Making a bearish market call based on a deteriorating economic backdrop, and being wrong, is something that I can live with.
    Mar 21 07:40 PM | 16 Likes Like |Link to Comment
  • Are The Markets Rigged? [View article]
    Hi Eric,
    Well written and thought out, as usual. I respectfully disagree with your conclusion to the extent that I think the large primary dealer banks are able to "rig" many markets. I think of oil rising to $150/barrel in the summer of 2008. I think of Morgan Stanley cornering the heating oil market during the winter of that year. I think of the relentless selling of VIX futures in order to create the reflexive response by HFT algos to buy equity futures. I think many of these markets are easily manipulated, if you want to call it that, by derivatives - which are now the tail wagging the dog - as in cash markets. High frequency trading algos account for 70% of trading volume. They begin and end every trading day in cash. These are having a tremendous manipulative impact on prices.

    Retail investors generally don't care, nor do regulators or politicians, so long as the manipulation is UP! I am reminded of when Morgan Stanley's CEO complained to SEC Chairman Cox that his stock was being sold short on a "naked" basis, unfairly at that point evidently, because he was the victim of it. The illegal practice was shortly thereafter banned - ha.

    I better take off my tin-foil hat and get back to work :)
    Mar 22 08:25 AM | 14 Likes Like |Link to Comment
  • The Greatest Danger For Stock Investors Today [View article]
    Eric, good summation, but as I mentioned today in my article, I think the eventual "correction" will not be drawn out as there is a tremendous amount of leverage in risk assets/stocks and bonds dependent on ZIRP that must unwound when the Fed raises short-term interest rates. This "carry trade" is global, and the Fed has no idea how big it is - they never do.
    Mar 21 06:11 PM | 12 Likes Like |Link to Comment
  • Cash Hoards On The Sidelines And The Great Rotation: Old Myths Meet A New Reality [View article]
    Hi James,
    Enjoyed reading your article. On the topic of "market markers," I would argue that they are predominately high-frequency trading algos owned by the some 40 for-profit electronic exchanges. They don't hold inventory. They are in cash at the end of every day. They attempt to rip me off on a daily basis when I place transactions by floating illegitimate bids and offers that vanish once my order is open. I wish things were the way they were in the 90's and even pre-2005. Its a new ball game now, which is why volume has plummeted.
    Feb 16 03:08 PM | 11 Likes Like |Link to Comment
  • The Greatest Danger For Stock Investors Today [View article]
    But dead on...
    Mar 21 06:51 PM | 10 Likes Like |Link to Comment
  • The Fundamentals Don't Matter Anymore [View article]
    Hello Fear&Greedtrader,
    Interesting comments coming from another professional that provides investment advice. Respectfully, your suggestions and position sounds like a strategic buy and always hold, long-term investment program. I take a more tactical approach. I'm not interested in going through another 2001 or 2008.
    I'm continually entertained by the "missed the rally" comment. I'm not sure what rally investors like yourself suggest others who are more cautious have missed when they make that comment.

    As for earnings and P/Es - I've written 3 articles that discuss S&P earnings extensively. That wasn't my focal point here. Earnings and P/Es are fairly worthless in terms of forecasting the market indices moving forward. Those that use them as tools for investment are driving in the rear view mirror.

    These sour grapes are very serious issues, the most serious being the continued decline in real wages. It was in June of 2007 that real average hourly earnings began to decline yoy. Corporate profits continued to soar through the end of 2007, into Q1 2008, that is until they were revised a year later in what is now sequential declines beginning in Q4 2007.
    Apr 15 01:39 AM | 10 Likes Like |Link to Comment
  • The Fed Is Backed Into A Corner With No Way Out [View article]
    I have no idea what's really going on. All I know is that after watching a screen for 20 years, I know that somethings different, and I started noticing it a few years ago, as did others I work with. I spoke with a good friend yesterday in the hedge fund community that tells me hedge funds are no where near as leveraged as they used to be, in fact sitting on large cash balances, which is also confirmed by some of the large net exposure surveys I have access to, so the typical speculators (hedges) are not the manipulators in my view. They also don't care which way the market moves, and prefer volatility both ways- their returns are also horrible, indicating they are not the manipulators.

    All of the research I have done on HFT tells me that could be a big part of it. I know that the perfect market environment for them is a slow steady uptrend that pulls back gently every so often, allowing them to "layer" in and out rapid fire. Every time I enter an order, the bid is complete BS, as is the ask, both of which disappear the second I place my trade. I feel like i'm going through a toll booth on every trade, even with a limit. Its an abomination.

    The correction comes when valuations are so absurd that even the invisible hand must back off, as I think we are starting to see in R2K. There is clearly underperformance starting to show there in recent days, and look at today. That's the beginning of it in my view - biotechs, social media, small caps. Then it works its way up.
    Mar 26 10:06 AM | 9 Likes Like |Link to Comment
  • The Fundamentals Don't Matter Anymore [View article]
    I'd argue that corporate earnings are a lagging indicator. Corporate earnings looked great in Q4 2007. They looked great broadly in Q1 2000. If you have confidence in the forecast for $111 in EPS for the S&P this year, then I suppose your are right, the market is fairly valued. If you adjust trailing earnings for the fairly recent decision by the consensus of earnings aggregators to eliminate pension costs from earnings, and instead include them, as S&P Dow Jones Indices does, then you have $97, and not $103.50 in trailing earnings. I remember when we accepted telecom corporate earnings for what was being reported, without excluding the vendor financing deals that were being done by the likes of Nortel, Lucent, ect. The numbers looked a lot different.

    If you are comparing dividend yields for stocks to a manipulated Treasury yield, then I think you are making a mistake. The yield on stocks can become unattractive rather quickly with a rapid move up in long-term Treasury yields, similar to what happened in 1994. This is the argument that Mr. Bernanke wants you to buy though, so he is doing a good job.
    Apr 15 01:21 AM | 9 Likes Like |Link to Comment
  • Market Outlook: The Game Has Changed [View article]
    The Fed is buying new issues, indirectly from the primary dealers that are obligated to buy the new issues at offering, and not the existing float, so when institutions and individuals sell existing float, it has an impact on current Treasury yields. The Fed can continue to cover the required purchases to fund our deficit, which will end up being a lot larger than current OMB projections by year end, and it will have minimal impact on yields if investors (foreign and domestic) decide to sell. QE kept rates from rising more than they otherwise would have. Yet with GDP growth of 1% and the govt's version of inflation at 1.5%, the 10 yr yield should probably be no more than 2.5%. Either faster rates of economic growth and/or inflation will push yields higher, but we have neither at the moment.
    Jul 9 09:26 AM | 8 Likes Like |Link to Comment
  • The Good News, The Bad News And What's Very Ugly [View article]
    Appreciate it,
    I'm holding out to see if the fundamentals actually do turn. I'm not smart enough to definitively say, "IT WONT WORK." If real wages begin to rise, I'll have to change my tune to some degree. If rates of corporate revenue begin to grow again, I'll have to reconsider. I'm not ideological about it.
    May 10 11:22 AM | 8 Likes Like |Link to Comment