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Michael James McDonald

 
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  • The Phoenix Housing 'End Game' [View article]
    You'll see from my comment history that I do defend my ideas when something has been presented that counters it. Show me a comment that contains a calculation that counters my calculation that, at the current rate of liquidation, the distressed inventory will be gone by next year? Then I can compare it to mine to see if they or I used a wrong number or added and subtracted incorrectly. In all honesty I might have missed someone’s calculation since I was somewhat put off by JGBHimself and his many lengthy but ultimately non quantifiable ideas. Give me the exact numbers and calculation, don’t give me any more non-quantifiable opinions. Where are the numbers? What are the numbers?
    Sep 19 09:03 AM | 2 Likes Like |Link to Comment
  • Emerging Markets ETFs: It's Still Not Too Late to Get In [View article]
    I'm sorry if the chart is confusing. The top red and blue lines are charts of EEM and SPY plotted as a % gains since Jun 2006.

    The bottom line is the difference in their 14 week RSI indexes. A negative number means that the relative strenth of SPY is better than EEM over the 14 weeks. But the rapid rise of the curve toward zero shows the rapid shift toward emerging markets. Emerging markets is starting to outperform (latest 4 wk return of 6.5% vs. 1.5% for SPY) and this shows as the rapid rise in the curve toward zero.

    The article basically is saying that the move in emerging markets at least won't end until the 14 week RSI actually shows EEM outperforming the SPY which would be near a reading of between +10 and +20.

    This second article is a follow up to the first and is best read after reading the first one. Hope the above makes better sense
    Apr 17 02:41 PM | Likes Like |Link to Comment
  • Silver Bullishness Driven by Fundamental Evaluation and Momentum Players [View article]
    I didn't know about the put trade; thanks for your imput. Shades of Buffet when, in 2008, he sold that billion dollar S&P put near the market bottom
    Apr 15 05:25 AM | Likes Like |Link to Comment
  • ETFs to Consider in Case of a Silver Blowoff [View article]
    Not at all. Observatons like your's are usually important. When I have them I notice they often exist for while, then fade away. They are real if you can make money on them and the only way to find out is to have the courage to take a position based on that observation.

    I often like simple time cycles - simply counting the days from a previous bottom to a previous top, then assuming the next cycle will be about the same time wise. Its a rough time guide. The last up cycle in silver lasted about four and 1/3 months. A corresponding time move here takes one to late May. In my opionion it would be abnormal to have the previous move last four months and this equally large move last only two.

    What would be normal in my opinion would be to have a measureable reaction right here back to around 33 or 34 for about a week. Throw a little doubt in here. Then stop, and for another two months, move up to a major high by late May.
    Mar 31 07:54 PM | Likes Like |Link to Comment
  • ETFs to Consider in Case of a Silver Blowoff [View article]
    YES! I'm writing a sister article right now that covers cash flows into and out of these funds. I think that together they form a more complete picture. Hopefully they will like it and decide to publish it. If so it should come out later today.
    Mar 31 10:50 AM | 1 Like Like |Link to Comment
  • ProShares Ultra Investors Help Locate Market Bottoms [View article]
    Yes. Go to www.proshares.com/reso....
    Mar 30 09:24 AM | 1 Like Like |Link to Comment
  • Use the VIX to Spot Opportunities [View article]
    Not necessary a better indicator, just a different way of looking at the situation.

    I've at times found it useful to watch a market decline start and notice that the VIX hasn't responded much yet (hasn't risen much). That decline has farther to go; the decline will usually continue until you see the VIX quickly rise - suddenly jump three or four points. Then that decline is finally close to an end.

    Or likewise a market does a big decline one day and the VIX that very same day jumps three or four points. That will often be a one day decline. This is the type of thing that I've found useful. This index is an attempt to find this type thing but on a longer time frame.
    Mar 28 09:15 AM | Likes Like |Link to Comment
  • Use the VIX to Spot Opportunities [View article]
    I have always felt or assumed that the effects of day or high frequency trading are price neutral over longer trading periods. Any price rise from buying is offset when prices suddenly decline as the position is unwound minutes later. This might not be correct however.

    What we are considering is whether an action that affects prices on one time scale can travel up and trigger longer time price movements i.e. can one cause a short term price movement that alarms or activates longer term momentum traders and so then triggers a longer term move?

    I think that it is knowable and possible to do this and I wouldn't put it past some very informed traders with access to deep information as to stop orders to do this. What I am certain of, however, is that it can't be done all the time. The market has to be just right to do it. There has to exist a certain level of investor instability at that higher level ready to be triggered. They can't set that instability up. They can only wait for it to form then try to trigger it into action.

    Knowing what to measure or calculate to indicate whether a market is unstable enough at a higher level so that a sudden price change at a lower time scale will trigger it and cause a longer term movement is the challenge.
    Mar 24 10:29 PM | 2 Likes Like |Link to Comment
  • We've Had a Large Trade Deficit and High Unemployment for 2 Years, So Why Worry Now? [View article]
    I'm not really as me, me, me, as this article implies. In fact I'm the opposite. The editors correctly rejected my first submission which was the same but with a different final section. That section was about the social and political aspects of this problem. They wanted a financial or investment section (rightfully, since that's what SA is all about) so I changed it.

    But basically the first submission said that the growing polarization in America centers around this very issue - record American corporate profits and record unemployment (except the extremes of the depression) with near zero wage gains for many of those employed. As an investor you want the first but as an American who cares and feels, you want the second remedied. But unfortunately you can't have both in the new global world at current high dollar exchange rates.

    However, business and investors must realize that a balance is almost always the best thing. It happens eventually anyway. The growing unemployed will have their say when they force congress to pay for their plight through higher corporate taxes. Thats why in the article I say:

    "What might threaten this bull market is not a weak U.S. economy or unemployment. It’s either a large corporate tax increase on foreign earnings or slower growth in those foreign earnings. Those are the two serious things that will stop this bull market."
    Mar 12 10:47 AM | 3 Likes Like |Link to Comment
  • Housing Recovery Potentially Right Around the Corner [View article]
    You're right that it doesn't make much sense. In non recourse states like CA and AZ the homeowners are boss and the banks the effect. Being at effect, banks try to react to teh action of homeowners by doing what will cause them the least amount of damage. The method you describe would be the very best way as you point out but banks seem to have limits to their thinking. They're more "followers of the rules" not originator of ideas. A short sale is a time approved solution with guidlines and procedures. To cancel a larger loan and then issue a new but arbitrarilly smaller loan has little precident guidelines or procedures established. The SS has the other advnatage of being an action originated by the homeowner. These are my best guesses
    Feb 21 11:23 AM | Likes Like |Link to Comment
  • Understanding the Housing 'Walk Away' Threat and Measuring Its Risk [View article]
    You are very right. I should have included it. In recourse states there is a very low probability of a price decline becoming self reinforcing. In non recourse states in areas with high levels of negative equity and over 12 months of sales, using an inventory of shadow plus MLS, there is.

    The only way to stop such a disaster lies with the banks. I think a number of them are starting to see this. A few are calling the owner after only two missed payments, sending registered letters etc., in a frantic effort to contact them . This is extremely positive. They want to determine which of the three problems they have. It seems banks are finally accpeting reality; if its a walk away they often make an immediate offer to settle the loan and issue another at or slightly below asses value. Its too hard to find qualified buyers so they accept the current one and take away their reason for "walking." They also get todays price and no longer have the risk of carrying it in a declining market.

    The only question is: can the banks take these huge losses all at once or will they draw it out over time. If they draw it out, they now have to sell the house and this risks triggering the positive walk away feedback. The best course is resolving the problem without bringing anymore homes to market.
    Nov 26 10:51 AM | 1 Like Like |Link to Comment
  • Why a Dollar Decline and World Crisis Is the Rational Expectation [View article]
    I missed a step that would have made the article a little clearer so I want to add it here. I didn’t mention how the Forex or foreign exchange market enters the picture. It’s just one more step in the cycle.

    Suppose an American wants to buy European stocks. It doesn’t really matter if it’s a direct purchase or it’s through a mutual fund, the mechanics are about the same.

    European stocks are bought and priced in EUROs, not dollars. So the American has to first sell their dollars, buy EUROS, then purchase the stocks. This selling of dollars for EUROs, like any selling, puts downward pressure on the dollar.

    Likewise, when they decide to sell their European stocks they receive the proceeds in EUROs. To bring the money back to America they then sell the EUROs and buy dollars. This pressures the dollar higher. This is an example of how financial assets can reenter the import-export trade equation again and again, something oil or cotton shirts can’t do.

    You and I don’t see these steps- they go one behind the scenes. Knowing the step is there, however, makes things a little clearer.
    Nov 21 11:29 PM | 3 Likes Like |Link to Comment
  • Why We're Going Back Down to S&P 1050 [View article]
    Well put!!
    Nov 19 07:26 AM | 2 Likes Like |Link to Comment
  • Is Buy and Hold Dead? [View article]
    The curves are plotted on semi log so a +1.7% difference per year doesn't diverge much like it does on an arithmetic scale.

    I never intended this article to focus on the MA study. In the text I said that many timing methods do as well as buy and hold, some better. I used the example just to show that the system doesn't have to be complicated. I'm not promoting or espousing it. The real problem with applying such a system is the whip saw - 2/3 of all trades are losses (usually small). But the method always catchs the meat of all the big gains and always avoids the big declines.

    Most people, who get in and out of the market, don't use a system. The real point being made is that people shouldn't do that - they should use a well designed system that will prevent them from making emotional decisions.

    For six years after the 1987 crash, investors were very reluctant to make stock investments. Showing them the moving average method allayed their fears enough to go ahead. They made good money because they felt they had a backstop. Never underestimate the psychology of investing. B&H doesn't address the psychological factor.
    Nov 15 03:18 PM | Likes Like |Link to Comment
  • Is Buy and Hold Dead? [View article]
    No it isn't. I picked the standard starting point Ibbotson and most analysts pick for measuring the total return for stocks. Even if I would have pick the most unfavorable starting point (August 1932) the risk adjusted return is still superior.

    But this misses the whole point. Its not the one that gets the highest return; its the one that an investor will actaully be able to apply over the whole period. As I said, I believe that market timing, even if it produces a lower return, is one the investor can use over 70 years.

    Using buy and hold, most would be long gone by 1932, 1974, 1982, 1987, 2003, 2008. Great on paper, but few can apply it.
    Nov 15 10:22 AM | 1 Like Like |Link to Comment
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