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Michael Allen

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  • Harry Dent's Outlook on Demographics, Debt and Deflation [View article]
    Harry Dent's book, "The Roaring 2000s," predicted that "we are on the brink of the most exciting boom period since the Roaring 20s." What we saw was a 50% decline in stock prices (in real terms) - one of the worst 10-year periods in history. Dent bases his theory on the fact that stock prices followed population trends during one single peak to peak episode. Unfortunately, we do not have enough data to test his theory during any other episode of population expansion or contraction. Although his theory is intuitively attractive, statistically, it is nothing more than an interesting coincidence.
    Sep 5 09:15 AM | 12 Likes Like |Link to Comment
  • Netflix CEO Reed Hastings Responds to Whitney Tilson: Cover Your Short Position. Now. [View article]
    Wow! Thanks for that input. All CEOs should do the same. I am still short your stock. I've no doubt that everything you said was true. If you sell a $9 service for $9, customers will be happy. That does not allow you to sell an $80 stock for $180.
    Dec 20 11:29 AM | 10 Likes 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 10:33 AM | 6 Likes Like |Link to Comment
  • What Happened To The Part-Time Employment Issue? [View article]
    Careful. Just because we can't see the impact doesn't mean it isn't there. We do not know what employment would have been if there were no ACA. Also, seasonally adjusted data do not give any indication that our labor market is healthy. Suffice it to say that ACA effects, whatever they are, are difficult to pinpoint, and therefore, probably not the most important reason that so many people still find it difficult to find meaningful employment. We have serious structural problems that began long before the most recent recession that have not been addressed by either party.
    Oct 24 08:57 AM | 5 Likes Like |Link to Comment
  • Equity Returns And Inflation [View article]
    Real total returns on equities have exceeded inflation about 3.2% per year since 1890. There were only three periods when 10-year total real returns were negative, so for the most part, stocks are a reasonable, if imperfect hedge against inflation. What hurts equities is not so much inflation itself, but abrupt and unexpected rises in the rate of inflation. The reason for this is that during extreme inflationary shocks, input costs and output costs typically rise at very different rates, making it difficult for corporate profits to advance. If you can forecast these shocks accurately, you can probably make a lot of money. If there is any evidence that anyone can make such forecasts consistently, I would appreciate being educated about it.
    Jun 9 10:01 AM | 5 Likes Like |Link to Comment
  • Here's Why QE2 Isn't Really Ending [View article]
    While it is true that QEII has not had the intended effect of increasing bank lending, our Alice in Wonderland market has discounted QEII as if it had succeeded. The question is, has the market discounted only an eventual success of QEII, or has it already gone completely mad and discounted QEIII. Valuations certainly suggest that the market is calling Bernanke's bluff. If so, the end of QE could come as a shock. Even if QEIII is not discounted, and even if QEII does eventually work, clearly at least that much is already discounted, so there would be nothing silly about the market going into correction mode at that point. Nor would there be anything surprising if the consensus were to conclude that, "You know what, this QE stuff never worked anyway." There seems to be no upside to me.
    Jun 2 10:10 AM | 5 Likes Like |Link to Comment
  • Bernanke on '60 Minutes': Pants on Fire [View article]
    The way people waited with baited breath for this interview is amazing. How is it possible that anyone cares what Bernanke says about the economic outlook? I care more about what my pet fish says about the economic outlook.
    Dec 6 03:21 PM | 5 Likes Like |Link to Comment
  • Warning: Bond Bears Might Be From The Twilight Zone [View article]
    I was never a top rated “advisor.” I was an analyst, where institutional investors consistently voted me in the top 3 in my industry for more than a decade. My hedge-fund clients never suffered a down year in 6 years of trying. I left because I wanted to raise my son in the United States, where I felt he would have better opportunities, and yes, it may seem as if I have paid a high price career wise, but I have never regretted my choice. I write for Seeking Alpha because I enjoy sharing what I have learned from my research with others.
    Jun 17 01:32 AM | 4 Likes Like |Link to Comment
  • Why Iran Thinks It Can Get Away With A Blockade [View article]
    Iran is playing right into our hands. The only reason we don't blow them back to the 3rd century right now is that we can't attack their homeland without causing unacceptable levels of civilian deaths. On the other hand, if they bring us a war on the open sea, they are doing us a favor. We can obliterate their navy and most of their air force within weeks, and their citizenry will never even see a puff of smoke. Then we can probalby even get our drone back.
    Dec 29 04:09 PM | 4 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 11:57 AM | 4 Likes Like |Link to Comment
  • The Active Quest for Alpha: A Loser's Game [View article]
    Of course the average investor cannot outperform the average. This is a tautology. I admire only the author's ability to say nothing new or useful and still make money at it.
    Apr 9 06:21 PM | 4 Likes Like |Link to Comment
  • SoftBank: For Exposure To Alibaba, Look To Tokyo, Not Sunnyvale [View article]
    1. I don't see where you have charged a tax that Softbank would incur if it divested any of these assets. These charges would be significant.
    2. There is no arbitrage opportunity unless you can show evidence that the stock market does or is likely to value indirect ownership of these assets through Softbank the same way that it values direct ownership. Indeed, your evidence is all to the contrary. If I own Softbank only, and all three of these other stocks collapse, what will be my reward?
    3. If your argument were valid, the only way to lock in the value would be to short the shares of these three companies and buy Softbank, but then you have to show more than that the assets are priced differently. The market knows that they are priced differently and appears to be happy about this. What will make the market prices change? I have seen this type of mis-pricing in Japan for the last 25 years, and they never get corrected, mainly because when you dig deeper, they are never quite as illogical as they often seem.
    3. At the end of the day, you are confusing price with value. Share prices are often disconnected from value. A proper sum-of-the-parts analysis would value the cash-flows of these parts, not the share prices.
    Feb 16 10:00 AM | 3 Likes Like |Link to Comment
  • The Importance Of P/E Ratios In Selecting Stocks - An S&P 500 Case Study [View article]
    1) Obviously, you have a small-cap bias in your data, since every decile outperforms the market, even if you include dividends, and it's entirely unclear why you chose not to. 2. Rebalancing monthly is totally impractical. If you replace your portfolio every month, as you could with this strategy, the commission and slippage costs could be as much as 12% annually for an individual investor - maybe more. All of your gains would be taxed at the short-term rate, which, for anyone who has enough wealth to engage in this kind of strategy after state and local taxes, could easily be half of your gains.
    Jul 29 05:35 PM | 3 Likes Like |Link to Comment
  • How The Experts Were Wrong: Gold Failed To Hold $1,400 And The Taylor Rule [View article]
    I find it difficult to believe that there are very many professional hedge fund managers who are unaware of the Taylor rule. It is neither obscure nor magic. It is basic economic theory that you would have to know about (but not necessarily fully agree with) if you were qualified to be investing other people's money.
    Jun 1 03:39 AM | 3 Likes Like |Link to Comment
  • U.S. Demographics And The Likelihood Of A Housing Recovery [View article]
    Can any of you imagine Jamie Dimon sitting down with these numbers and thinking them through carefully and meticulously and then honestly discussing his real conclusions with the public? He would get fired for doing that. Taking his anlaysis seriously is absurd.
    May 17 10:54 PM | 3 Likes Like |Link to Comment
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