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Michael Allen  

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  • Why Europe Is Doomed: The Euro Crucifix [View article]
    Your point seems pretty basic. If you really want to get to the core of the problem, ask how did we get to the point where there are so many people in charge who do not understand very basic economic concepts even after it is too late? We do not teach economics in our high schools. We don't even teach it to more than a small minority of under-grads. We teach physics and calculus and even Latin, but economics is either too dificult or not important enough?
    Oct 21, 2011. 02:21 PM | Likes Like |Link to Comment
  • The Household Debt Service Ratio And The S&P 500 [View article]
    Not only is the R2 of .35 unimpressive, if I read correctly, you used data from 1980, which means you only have 6 non-overlapping periods of data. All those other dots on your chart are just repeating the same information. The correlation may still exist. It certainly makes sense. Unfortunately, we have no meaningful evidence from your data and it is extremely unlikely that a one factor model of this nature should be all we need to know. It would be better to look at quarterly returns so at least you have enough data to be meaninful. Then we could add this one factor to our many other tools, among which, the most obvious would be government debt levels.
    Sep 26, 2011. 11:57 AM | 4 Likes Like |Link to Comment
  • Are Japanese Businesses Worth More Dead Than Alive? [View article]
    I think anyone would agree that Japanese stocks are cheap, but more experienced analysts in Japan know that there is nothing more dangerous than a Japanese company with excess cash. Management has the cash because they cannnot find good investments even when their cost of capital is essentially zero and in most cases, if you took away the cash, you would not have an attractive business. Cash/Market cap is an important factor in our search for stocks, which, by the way, have led us to 27% returns in the past 4 weeks, but it is also important to focus on sustainability of returns on capital and market capital. Small companies in Japan do not have anywhere near the same access to capital in Japan that they do in the US. That cash they hold is not really "excess" in the world that they deal in. Saving it for a rainy day is rational behavior. Many of the stocks mentioned in your examples are companies I've never heard of before (and I've only been doing this for 25 years). There are about 75 companies in Japan that trade at a discount to their cash on hand and have a market capital of more than $1bn, but of these, only 20 have 5-year average returns on assets of more than 2%. Do you want to trust these managers to spend that cash wisely? They will make higher returns in the next economic upturn, whenever that happens, but until then, choose very carefully.
    Sep 26, 2011. 08:27 AM | 3 Likes Like |Link to Comment
  • PIIGS Update: The Problem of Public Sector Obesity [View article]
    Suggesting that the source of the world's problems is obese public sector debt is like suggesting that the source of a trauma patient's problems are too many band-aids. Rip the band-aids off and you will see that the patient is bleeding to death. The real problem is inefficient allocation of capital and this problem is just as pervasive in the private sector as in the public. Markets are crashing because we finally see that the doctor in the house is really going to rip off those band-aids and he doesn't have any idea what he is doing.
    Aug 21, 2011. 11:07 AM | 1 Like Like |Link to Comment
  • Equity Market Sell-Off Has Nothing to Do With Credit Downgrade [View article]
    Incidentally, bear markets don't bounce because intelligent guys like yourself come in and buy up value. I agree, there is no value. But the fast-money shorts can't believe how much money they've made and are glad to take profits at this point. This will drive the slower-money shorts to panic and cover as well. Then, if you are really unlucky, the Fed will step in and make some meaningless gesture that will be mis-interpreted by panicky, but genuine buyers. Bear-market rallies have nothing to do with value, but you had better respect them.
    Aug 9, 2011. 10:33 AM | 6 Likes Like |Link to Comment
  • Equity Market Sell-Off Has Nothing to Do With Credit Downgrade [View article]
    If the market were a discounting mechanism, it would have already discounted the S&P's outlook. The S&P is irrelevant to anyone who does their own analysis.
    Aug 9, 2011. 10:27 AM | 2 Likes Like |Link to Comment
  • Equity Market Sell-Off Has Nothing to Do With Credit Downgrade [View article]
    When TIPS yield 0.15, there is nothing to do but trade. The risk-adjusted real-return on everything....... sucks.
    Aug 9, 2011. 10:17 AM | 2 Likes Like |Link to Comment
  • Why Loading Up on Precious Metals May Not Be Such a Good Idea [View article]
    Actually, you can make a very rational estimate of when irrational behavior will end: NEVER!
    Aug 9, 2011. 09:57 AM | 1 Like Like |Link to Comment
  • How to Find Opportunities After a Flood of 20% Decliners Last Week: Part 1 [View article]
    If the market is inefficient, why would you use price action as your main selection tool? If the market is wrong to sell off now, what makes you think it was right to bid these particular stocks higher from the beginning. This makes no sense.
    Aug 9, 2011. 09:32 AM | Likes Like |Link to Comment
  • Market Pricing In Armageddon: Positioning Ourselves for Returns [View article]
    Equity markets need to drop about another 30% in order to discount armageddon. Bond markets are already there, so we could get the opposite of stagflation: falling prices and rising bond yields.
    Aug 4, 2011. 07:00 PM | 1 Like Like |Link to Comment
  • Why the Market Doesn't Care About the Debt Ceiling - So Far [View article]
    Since real bond yields are negative, the bond market is telling you that it is more concerned about the solution than it is about the problem. Both parties base their aguments on campaign slogans rather than facts, and no compromise they may come to has any probability of doing anything good. The bond market knows this. Does the equity market? I doubt it.
    Jul 27, 2011. 09:30 PM | Likes Like |Link to Comment
  • Netflix (NFLX) +3.2% premarket after confirming that it will begin offering its Web video service in Mexico and 42 other countries in Latin America and the Caribbean later this year. Netflix did not announce a launch date for the move or pricing for the service, which goes for $7.99/month in the U.S. (PR)  [View news story]
    NFLX has been talking about Mexico for some time now. They have moved the date forward a couple of months. Even if they had never said a word, a rational market would have assumed that this move is on the way, since they already moved into Canada. How can you possibly not short the stock here?
    Jul 5, 2011. 10:45 AM | Likes Like |Link to Comment
  • Screening for Short Selling Opportunities [View article]
    What's the point of screening for criteria that you haven't backtested?
    Jul 1, 2011. 06:56 AM | Likes Like |Link to Comment
  • Nouriel Roubini Is All Wrong About China [View article]
    Never count customers on a one-time visit and pretend that you are doing analysis. Volume can change by 80 or 90% in an hour and every day is different. Whether you are running a rail line or a supermarket, capacity has to be set to the peak hours because it is not possible to roll the facilities up and make them disappear when no one is using them.
    Jun 26, 2011. 11:45 AM | 2 Likes Like |Link to Comment
  • More on Why Government Deficits Are Healthy [View article]
    Whoa! "...its savings are being funded by some other country's government spending or private sector debt"????? Savings fund spending. Spending does not fund saving.
    Jun 9, 2011. 11:22 AM | 2 Likes Like |Link to Comment
COMMENTS STATS
164 Comments
171 Likes