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Mark Bern, CFA  

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  • Quick Chat #281 June 1 2015 [View instapost]
    Early results predict landslide NO vote! 38 minutes ago from The Guardian

    http://bit.ly/1Cjgr0M
    Jul 5, 2015. 03:51 PM | 3 Likes Like |Link to Comment
  • Quick Chat #281 June 1 2015 [View instapost]
    WT - I think I probably caught the article referenced in this one that came out a week earlier. That one had projections of rising oil production in the US included. But the same theme. Thanks!
    Jul 5, 2015. 11:10 AM | 4 Likes Like |Link to Comment
  • Quick Chat #281 June 1 2015 [View instapost]
    LT - I agree with your assessment. I think this merger will go through because it just moves the US closer to a single payer healthcare system. That is the goal of those in charge now, so I see very little headwind other than the loss of jobs in KY, as you pointed out. If there is no longer much, or any, competition in health insurance industry there should be much less resistance to a single payer model.
    Jul 5, 2015. 11:02 AM | 3 Likes Like |Link to Comment
  • Quick Chat #281 June 1 2015 [View instapost]
    LT - Obfuscation and diverting blame seem to be the prominent tactics of politicians on both sides of the aisle. To some extent, this has always been the case but it seems like it is getting even worse; or maybe we're just paying closer attention.
    Jul 5, 2015. 10:58 AM | 2 Likes Like |Link to Comment
  • Quick Chat #281 June 1 2015 [View instapost]
    LT - Totally agree with tax burden spread evenly. The problem is that with the current tax system our Congress always leaves a loophole or two for themselves and the rich. Often only those who are really wealthy or who have a tax law background can afford to implement the loopholes due to the costly legal fees to set up. But for someone with lots of cash and very high potential tax liabilities it becomes worthwhile.

    My preference would be to lower tax rates while also doing away with all write offs. Leveling the playing field won't work, though, because it would take away 90% of Congress' power.
    Jul 5, 2015. 10:50 AM | 3 Likes Like |Link to Comment
  • Quick Chat #281 June 1 2015 [View instapost]
    LT - Protectionism isn't really where I was going. That just leads to trade wars and even worse outcomes. I just think that we need to understand that we can't continue to be the only nation responsible for policing the world. We need to work with other nations to protect trade routes and thwart terrorism. But we shouldn't keep trying to do all of the heavy lifting. We just can't afford it anymore. Choosing our friends more carefully and making sure we are all on the same page would be a major step in the right direction from my point of view. Maybe I'm wrong and we have to be in the middle of everything because others who would fill the void mean us harm. There just needs to be a more efficient way.
    Jul 4, 2015. 10:50 PM | 4 Likes Like |Link to Comment
  • Quick Chat #281 June 1 2015 [View instapost]
    D-inv

    My primary problem with our current foreign policy is that we don't really have one. Even our staunchest allies do not know if we will help during a disaster or insurgency. I feel similar to you in that we should not try to police the entire world. We need to be more selective in our alliance treaties and partners. We should only strike an alliance with those nations we can count on and in which it is in our best interests to be ready and willing to assist if necessary. Alliances with countries whose leaders constantly berate our way of life and who would turn against us in a heartbeat if they thought they could win makes absolutely no sense to me. Most, if not all, of our allies have gotten a free ride for far too long in terms of military spending and helping to carry the load in terms of their own defense. Europe jumps to mind, especially Germany.

    We don't need US military bases 357 military installations (or more) in 28 countries and 2 territories around the world. Think of all the money spent by US military and servicemen and women helping all those countries when we need them spending here at home. I realize that we need a few strategic bases located such that we have coverage and access where and when we need them, but 118 in Italy alone? And those are just the Army posts.

    We are spread out way too thin to be effective in my opinion. And spending money like it grows on trees (or can be printed at will). Sorry for the rant. I am a patriot and believe in a strong military and defense system to keep our nation safe, but I am not sure we need the same presence that seemed to be necessary during the cold war. And we don't need to fight every war for everyone in the world, especially since very few of our supposed allies really appreciate what we do. Instead, many of them are playing us like a fiddle to get what they want.

    If we are needed, it should be a planned, joint effort with predetermined objectives. Once objectives are achieved we need to exit. By concentrating our resources on our own defense and our own economy we can again be the light on the hill to be emulated. We won't change the world for the better by force. We need to set a better example.
    Jul 4, 2015. 07:43 PM | 6 Likes Like |Link to Comment
  • The Time To Hedge Is Now! June 2015 Update [View article]
    FIER - Good question! Like you, I own munis with a similar yield and duration profile. I consider this portion of my portfolio to serve two purposes:
    1. permanent fed tax-free cash flow that I can depend on.
    2. diversification to reduce the negative impact upon my overall portfolio value.

    I intend to hold these bonds to maturity and have been careful to keep them all at investment grade, buying only when muni yields rise when occasionally out of favor. Since I expect to get my money back upon maturity I ignore the the up and down movements in principal. This is the cash cow portion of my portfolio that I milk regularly for income. If I see problems that will affect the quality and tax preference of muni bonds coming on the horizon I will write an article about what my plays would be accordingly. Until then, I plan to just sit tight and collect the cash for additional portfolio purchases when I see a bargain available.

    That said, there are securities that could be used for hedging interest rate movements. However, I would think that much, if not all, of the future rate increases that are expected have already been priced into those securities so I hesitate to offer guidance at this time.

    Thanks for reading!
    Jul 4, 2015. 04:55 PM | 1 Like Like |Link to Comment
  • Quick Chat #281 June 1 2015 [View instapost]
    Thanks for the link, LT.
    Jul 4, 2015. 03:37 PM | 2 Likes Like |Link to Comment
  • Quick Chat #281 June 1 2015 [View instapost]
    LT - I saw that one, too. It seems the Euro leaders didn't want something released that didn't fit within their public line of rhetoric.
    Jul 4, 2015. 03:16 PM | 2 Likes Like |Link to Comment
  • Quick Chat #281 June 1 2015 [View instapost]
    WTI futures: Only about 1.5 million barrels open interest in 2017 and about 200,000 bbls total open interest in out years after that.
    Brent futures: about 1.5 times open int. of WTI with spread across expiration dates very similar.

    Well, so much for that theory! But I know I wouldn't be drilling today without a hedge in place for future production at a profitable level. I guess I'm just not wild cat material!
    Jul 4, 2015. 03:14 PM | 3 Likes Like |Link to Comment
  • Quick Chat #281 June 1 2015 [View instapost]
    LT - I just read an article the last couple of days that mentioned the first monthly increase in drill rigs in many months reported by Baker Hughes. I couldn't find the article again, but the gist was that we can expect US oil and gas production to begin increasing again through year end. So, there may be more than just the threat of more oil coming out of Iran pressuring energy prices now.

    I suspect that oil futures got as high as $68 in out years and that in some fields locking in that price will work just fine yielding a decent profit. If that's the case, it's just a matter of who and how many contracts were sold to determine how much more oil we can expect. I may be wrong, but maybe there is a trail. I'll take a look and report back if I find anything.
    Jul 4, 2015. 03:03 PM | 3 Likes Like |Link to Comment
  • Quick Chat #281 June 1 2015 [View instapost]
    I honestly expect our federal gov't to increase taxes on the wealthy with a top rate of 50% and for capital gains tax relief for the wealthy to be terminated, moving cap gain tax to individual income tax rate. This will hurt a lot of the middle class as the definition of wealthy will include incomes lower than expected (try $135,000 for individuals & $200,000 for couples). Those levels won't be hit by the full 50% rate, but will be the first layer of rates higher than today's top rate.

    All this in the name of fixing income inequality. It's the pendulum thingy. It always swings beyond equilibrium from one extreme to the other. Income taxes are higher than they should be on some now, but far lower than they were back in the 1960s-1970s. I don't think the pendulum swung to the extreme on the low side this time (at least not for the middle class), but I don't get a vote. The Dem. party seems to think we must raise taxes on the rich (and some high middle class). If they can retain the WH and gain back the majority in the Senate, I think we are in for a very bleak period, both on the domestic economic front and in foreign policy. Foreign policy is already bleak and likely to get worse, but domestic economy could sink into depression. We need major shifts in both domestic and foreign policy but I doubt either will happen fast enough regardless of which party gets elected.

    As LT points out, gridlock will probably continue to prevail at a time when we really need to address difficult questions. When "the money" figures it all out the profit taking could be the impetus to a crash.

    All this and demographics in the US, Europe and Japan point to slowing consumer demand into the early part of the next decade.

    When it all hits, heck I don't have a clue! All I do know is that, even with the Fed "having our backs," the system needs to correct and purge the excess debt from the system to return to a new period of robust growth and recovery.

    If interest rate rise much, and they will at some point, the portion of the federal debt that is financed short term to keep interest expense manageable will suddenly become unmanageable. Without higher full-time employment and higher workforce participation we will not be able to afford these debt levels.

    I am not trying to scare monger. Lord knows I've tried to look at the bright side and find a way out for the past year and a half, but the math just does not work. I am staying partially invested, selling calls to increase my income and not replacing those investment that go up further faster than I expect and get called away. I am slowly building cash while hedging my remaining positions. I know there will be some great buying opportunities sometime in the next few years and will be patient until then.

    The only positions I add are for income and I only pick them up when I get put the stock after selling put option below market after a stock I like has gotten hammered.

    That said, I just sold my MU July Put Options position from my hedge strategy for a nifty profit of over 500%. I already have a Jan 2016 position in MU puts also with a nice profit. All of my hedge positions don't work out this well while I wait, but so far at least 1 each year has done well enough to dramatically reduce the cost of my hedge strategy. Not trying to sell my strategy to anyone, but I am saying that I really think we should all be hedged. No one knows when the rug gets pulled out from under this market, but I really believe that it is coming. Be prepared, my friends!
    Jul 4, 2015. 02:56 PM | 5 Likes Like |Link to Comment
  • Quick Chat #281 June 1 2015 [View instapost]
    WT - US! It will protect us all from anything that happens anywhere in the world, even just across the border. The all-knowing FMOC can fix anything. Just ask Wall Street! (sarc)
    Jul 4, 2015. 02:23 PM | 5 Likes Like |Link to Comment
  • Quick Chat #281 June 1 2015 [View instapost]
    Well, add this to the list of what could go wrong: Canadian banks say Canada is heading for a recession soon.

    http://1.usa.gov/133xcXr

    As if the world needed that! But don't worry. The Fed has it handled.
    Jul 4, 2015. 12:10 AM | 4 Likes Like |Link to Comment
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