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Mark Bern, CFA  

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  • Fiscal Stimulus and Economic Performance: Where's the Connection? [View article]
    If you dig down into the details of the Q4 GDP report, you will find that inventories did not increase. They merely decreased much less than they had during the corresponding period a year earlier. The difference, a large negative number less a smaller negative number equals a positive number, rendered an improvement of 3.44% in GDP. It's only the difference that matters. So, the economy is still heading south only at a much slower pace. And that, by government standards, is growth.
    Feb 5, 2010. 12:59 PM | 1 Like Like |Link to Comment
  • China Real Estate Risk Quantified [View article]
    "when China fears blow over." This is the telling phrase for me since it has been the China miracle that has supposedly drug the world economy out of recession. If the Chinese economy takes a hit what will sustain the recovery? There is no real answer to that question. There is renewed fear in Europe. China may not save us. Japan is in trouble (and would have crumbled if not for their high domestic savings rate and ability to finance their own sovereign debt). The US consumer isn't back in full force yet. US real estate looks shaky again. Sovereign debt around the world looks to be downgraded. But in Washington, DC everything is "getting better" and we are definitely on the road to recovery now.

    Does anyone notice a little disconnect?
    Feb 5, 2010. 12:45 PM | 3 Likes Like |Link to Comment
  • Unemployment Data: A Closer Look at the Discrepancies [View article]
    Absolutely! I'd actually be very happy if it did. I really want the recovery to happen, but I'm just not buying into the fantasy created by the spin. When real jobs are created I will be a believer in recovery. Until then, I'm hunkered down and in disbelief.
    Feb 5, 2010. 12:33 PM | 12 Likes Like |Link to Comment
  • The Unburst Property Bubble [View article]
    What happens if the Chinese government tightens credit too much? If mortgage availability shrinks or interest rates make holding real estate too expensive, will their bubble burst? These questions seem academic at this point because the government can intervene anytime and anywhere. It is also amazing that they have built an entire city that stands vacant, all apparently owned by investors who are content to wait until people begin moving into the city. The problem is that people can't afford to move into the city because the houses cost too much already. And yet, the bubble has not yet burst. I can't find a reasonable explanation why. Real estate in China should have already imploded but it hasn't. If things get bad enough, I suppose that the government can subsidize housing for a while to extend the run. How long this can go on is a question with no answer. We'll just have to wait for it to come to us.
    Feb 5, 2010. 12:28 PM | 4 Likes Like |Link to Comment
  • Welcome to the Horror Show: Starring Europe and Global Currencies [View article]
    "Today, of course, sees the release of US payroll data, which is usually good for some Harry Potter-calibre fantasy."

    And BLS did not disappoint. They came up with more fiction and fantasy than I even expected. With the unemployment rate dropping from 10% to 9.7%, I expect the Administration to announce that we are on the right track and that their efforts to create jobs are beginning to bear fruit. The only problem is that I can't really understand what they are saying through all that sand they have their heads stuck into.
    Feb 5, 2010. 12:05 PM | 15 Likes Like |Link to Comment
  • Unemployment Data: A Closer Look at the Discrepancies [View article]
    Mad Hedge - The graphics map was very illustrative of how quickly and deeply things got bad in the unemployment picture.

    The seasonal adjustment is huge in January because, I suspect, there is the expectation of a large number of layoffs of temporary Christmas help. I wonder if the number of temporaries was significantly less this year resulting in fewer planned firings. Either way, it is difficult to accept a report of 60,000+ jobs net jobs created (which is what I read in a MSM column this morning) when payrolls actually shrunk. The bottom line is that the employment picture is far worse than our government is willing to admit.

    If our government is in denial about how bad things really are, how can we expect our leaders to take decisive action to rectify problems they believe don't exist? If things aren't that bad, why do anything? If things are getting better on their own, they'll just wait. They are deluding themselves into an illusion and the average American is paying dearly.
    Feb 5, 2010. 11:47 AM | 6 Likes Like |Link to Comment
  • Percentage of Stocks Above 50-Day Moving Averages [View article]
    Asian markets are tumbling in early trading. As bad as the US economy is, at least it is in better shape than much of Europe (at least in some respects). Or, at least, there seems to be a perception that the US is safer. How long will that continue with budgets like the once recently unveiled?

    Technically, I have been expecting a strong correction back down to at least the 200-day MA which would also fill the last gap generated by the market rally since March. That would take us down to around 9,000 on the DJIA. After that, it's up to the psychology that drives the market, fear or optimism. Hope is for politicians, not investors.
    Feb 4, 2010. 11:05 PM | 4 Likes Like |Link to Comment
  • Hindenberg Omen - Twice Extended [View instapost]
    John - Thanks for re-starting this stream. I would hope it may lure Alberta or some other HO follower to comment. I find the logic very fasinating and the accuracy very reassuring. What I mean by that is if we do not have a signal, then we are likely to see no more than corrections instead of a major fall which makes it easier to sleep at night having at least a few selective investments riding in these times of uncertainty.

    On the accuracy, I realize that it can give false signals that end up as corrections, but knowing that a major drop has never occured absent the HO signal helps calm the nerves.
    Feb 4, 2010. 02:56 AM | 6 Likes Like |Link to Comment
  • Senator Shelby: We Don't Need No Stinkin' Volcker Rules [View article]
    I only have one more thing to say on this matter: Get Out Of Our House ( Neither party is representing the will of the people. They all need to be replaced by non-career politicians! We need honest Americans leading our country again.
    Feb 4, 2010. 02:45 AM | 3 Likes Like |Link to Comment
  • IRS Form 4506: Another Reason Why Real Estate Defaults Will Explode This Year [View article]
    A three legs are at least cracked, if not broken. All the weight of the streamlined system is intended to bring closure to more homeowners sooner and a lot more could end up in foreclosure sooner rather than later. But there is still one more bottleneck: the courts. It seems as if the courts are working at full tilt (but still not fast enough to keep up with the demand) already. If that is so then there will not be more foreclosures coming into the market sooner. It will just queue up a few million cases and the process will continue to take as long as it takes.

    That's just the way the courts do business. They only move as fast as the always do. There is no express line in the judicial system. Or, at least, if there is I haven't found it. We process as many as 300 court actions a year (that's a lot for a two person small business) and we have found that usually the bigger the metropolitan area the slower the courts are and the more corrupt the local government seems to be the slower the courts are.

    We certainly don't need more lawyers. But to increas the through put in the courts system, we would need more judges. The courts don't make a profit, at least not to my knowledge, so there is no incentive to hire more staff or appoint more judges. So, the case loads just keep piling up and the backlog/time to hearing just gets longer and longer.

    In other words, there may come a time later this year when people can expect to stay in their homes for up to two years without making payments if the courts get overwhelmed. If word of that gets out, it may influence more people to stop making payments so they can ride the wave. They'll be able to pay down other debt. Or people may decide to run up their bills systematcially big time and file bankruptcy in the end. The may figure why not - if you're credit is going to take a hit why not go out in style?

    No matter how you look at it, the prognosis for real estate is not good going forward. That's why I recently bought some SRS (ultra short real estate ETF) and intend to sell calls at about 25% above the current level every few months. If the options get exercised, I'll only make 25% plus the premium from the calls. If they move more slowly (which I suspect will happen for a while at least), I'll be able to sell calls and collect the premiums maybe two or three time, while raising my target (strike price) each time until I get a profit of 50% or more (plus the premiums).

    If I'm wrong? I just keep selling calls for the next couple of years, continuing to reduce my basis until I can see that real estate isn't going to drop enough and then sell out with the premiums offsetting most, if not all, of my loss.
    Feb 4, 2010. 02:40 AM | 4 Likes Like |Link to Comment
  • Swine Flu News Concentrator (January 25 - February 12) [View instapost]
    I've ridden up and down so many times I don't even want to think about it. You'd think we'd all learn and become great experts. Every time I realize that the best thing for me (not for everyone) is to identify a stock because it has good fundamentals and future prospects (like an unassailable competitive advantage), then look at the charts and trends to determine a good entry point, stay patient, buy when the price finds support on a good down day (I try never to buy on up days because if feels like I'm chasing and because I've been sucked in just before the fall a few times), then determine a price/profit I could be happy with in the short term and sell calls against about 75% of my position, collect the premium, and repeat the sale of calls over and over again (reducing my basis to zero over time) as long as the fundamentals remain positive and the macro picture is supportive of future growth. I then sell only when the macro picture turns bad, the stock price gets too far ahead of earnings (in which case the options will most likely be exercised), or the fundamentals of the company begin to deteriorate. When the macro picture disintegrates I go into turtle mode. That is where, for the most part, I have been for the last four months with only a few exceptions.

    It sounds as though much of my strategy is similar to that of HTL, except that I suspect he may get in and out more frequently than I do and trade smaller cap stocks more than I do. I say that because many smalls that I would like to trade for long term do not have options available on them.

    Just thought I'd throw in my two cents. My way takes a lot of patience and conviction. And, as I pointed out in my first sentence, it's not for everyone. But the older I get, the more conservative I get, too.
    Feb 3, 2010. 10:37 PM | 4 Likes Like |Link to Comment
  • Senator Shelby: We Don't Need No Stinkin' Volcker Rules [View article]
    "A strong regulator can handle this if it is alert," says Shelby. The key word here is "alert." The two words "alert" and "regulator" obviously do not belong in the same paragraph, let alone in a single sentence. I think the Senator is either dreaming or on something illegal (and I don't mean steroids).
    Feb 3, 2010. 10:15 PM | 10 Likes Like |Link to Comment
  • $1.32 Euro Under Construction [View article]
    Einstein would have loved the global economy. It is relativity in action. Today everything is relative in the world as actions taken in China, the U.S., Japan, or Europe affect the economies of nations around the globe. Who would have thought that a problem in Greece could create a problem for banks in Germany, France, Switzerland, Italy and elsewhere which, in turn, would create problems, for banks in the U.S., China, Japan?

    If Spain continues down its path, along with Italy and Portugal, the domino effect could become very dangerous, indeed.

    Great article! Thanks.
    Feb 3, 2010. 10:08 PM | 2 Likes Like |Link to Comment
  • Portuguese Debt: Another Reason to Like the Dollar [View article]
    From a demographics standpoint, it appears that Italy and Japan are in the worst shape and getting worse at the most rapid rate. There was a chart at a conference a year or so ago that spelled out the trends and those two nations' populations are aging rapidly due to low births rates and rising longevity.

    The crisis we are facing now is simply shortening the time these countries have to get their fiscal houses in order. They won't, of course. But instead of being someone else's problem it is all coming to a head much, much sooner.

    And even though the U.S. picture was far from rosy, demographically speaking, it was much better than that of Italy and Japan, putting the pain further out into the future so our current leaders could ignore it. Now, all that has changed. The difficult decisions will need to be made here and abroad very soon. I don't have much confidence in the current Congress or Administration to cut spending. And I don't like the alternative, not just because it will be painful financially personally, but because it will wreak havoc with our economy by making us far less competitive.
    Feb 3, 2010. 09:52 PM | 2 Likes Like |Link to Comment
  • There's Nothing Good Here [View instapost]
    It looks like a good time be a turtle!
    Feb 1, 2010. 03:58 PM | 2 Likes Like |Link to Comment