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Michael Nau

 
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  • Letter To John Hempton From A 'Clueless Short Seller' [View article]
    Also, anther article a while back pointed out that shipping and handling fees are a huge profit center for HLF. So they win even with a "100% back guarantee". Its quite a racket.
    Mar 25 01:38 PM | 5 Likes Like |Link to Comment
  • Herbalife, MLMs And The Unhappy Folks Of Whoville [View article]
    Good article, you got right to the heart of the heart of the issue. For the sake of the public interest, I hope this thing gets shut down.
    Mar 21 11:21 PM | 7 Likes Like |Link to Comment
  • 3 Reasons Not To Tap Into Home Equity To Buy Stocks [View article]
    I agree that this is a terrible idea, but the intuition behind it is very real: middle class families have way, way, too much of their wealth tied up on their homes. This reduces their liquidity and increases the risk of default. I think more reasonable advice would be:

    1.) Don't consider the home you live in as an "investment". It is primarily a consumption good.

    2.) Don't put all your wealth into your home. Have a large stockpile of safe, liquid assets (Bank accounts, short duration treasurys, etc).

    3.) If you don't have a large stockpile of safe, liquid assets, don't buy a home. Rent.
    Mar 21 01:22 PM | 5 Likes Like |Link to Comment
  • Federal Reserve Continues To Supply Foreign-Related Banks... And The World [View article]
    gggl, I agree with your prediction of global economic instability in the next few years, and that this instability will affect exchange rates.

    The question is what the key drivers of exchange rate instability will be. Will capital flee Europe, or will the U.S. become a capital exporter (run a trade surplus)? These two possibilities have potentially divergent implications for EUR:USD exchange rates. And will capital flee from China and go to Australia, Europe and the U.S. as its credit bubble pops, weakening the Yuan, or will China be able to stabilize its currency through the PBC and capital controls? I have no idea how exactly this will unfold for a particular currency, but I would definitely bet on rising volatility.

    Overall, though, I'd guess that the U.S. is in the best position to ride this one out. The U.S. economy is much less dependent upon export growth or credit growth than Europe or China. Moreover, Europe and China have much less flexible systems for dealing with debt overhangs, either because businesses are rarely allowed to fail (China) or default leads to debt peonage (Europe).
    Mar 21 01:11 PM | Likes Like |Link to Comment
  • Federal Reserve Continues To Supply Foreign-Related Banks... And The World [View article]
    I'm not sure if I agree. Capital outflows from the U.S. are presented in this article as a sort of abberation creating imbalances, but I'd suggest that they work to remedy global imbalances.

    The U.S. has run a massive current account deficit in the last few decades, meaning that we are net importers of goods and services. By definition this also means that were were capital importers at the exact same level as our trade deficit. We should not be in such a position where we consume more than we produce, with foreigners lending us the difference- the end result will be bubbles and crises.

    We should work to have a roughly equal balance of payments. We can do this with a mixture of importing less capital, importing less goods, exporting more capital and exporting more goods. The problem is that if global demand growth is weak, export growth prospects are poor, and restricting imports or capital flows is not on the policy agenda. We are then left with exporting capital, which QE has done magnificiently. Our trade deficit to gdp is at a much better levels.

    Other countries are having difficulty with this largely because their economic models depend on the U.S. soaking up all their excess supply. Their imbalance-based approach to growth doen't work well in the long run, and China and Germany will find out soon enough the problems with the Japanese growth model. Remember how everyone said that Japan was unstoppable in 1988?
    Mar 21 12:01 PM | 1 Like Like |Link to Comment
  • Bofi Holdings Inc. - Online Banking Is Here To Stay [View article]
    A consensus estimate of 18% growth over the next five years is quite optimistic. I'm not saying that BOFI can't achieve this, but I do think that it will be quite difficult without ratcheting up risk. And the current valuation leaves no margin for error. I think investors should move along until the stock falls back down to earth.
    Mar 21 11:35 AM | Likes Like |Link to Comment
  • Seeking Alpha Crowd Wisdom Predicts Future Stock Returns [View article]
    I agree with the comments here, the SA community is a unique and valuable resource that benefits both users and the capital markets generally. Hats off to the folks that run this thing.

    That said, I think a little caution and reflection is in order. As a hardcore cynic and pessimist, maybe I'm the only person with this reaction, but the following quote from the article gave me pause:

    “It’s clear that we’re sitting on valuable data,” Seeking Alpha CEO David Jackson said. “We need to mine and share more data about what the community is thinking and doing.”

    True, and the data are valuable and absolutely should be analyzed and shared. But that value derives from the community and websites like SA have fragile ecologies. That data should only be used in a way that furthers SA's brand as a neutral, objective forum that provides value to all participants. The sell-side shenanigans during the tech bubble opened up a space for sites like SA, but the reality is that power, prestige, and wealth are corrupting. SA has become powerful, prestigious and valuable, and insiders will be tempted to take advantage of their positions.

    I have nothing but the highest regard for SA staff, but I know that it will take a lot of moral fortitude to preserve the SA brand over the next decade.
    Mar 20 09:46 AM | 6 Likes Like |Link to Comment
  • The Economy Is Still Weak [View article]
    Agreed. Macroeconomic policymakers need to top focusing on monetary and fiscal policy only and look at balance sheets. Until we find a way to wipe out the massive private sector debt overhang, growth will be anemic. Printing money just inflates bubbles, and fiscal policy won't help long-term growth if the private sector is drowning in debt.
    Mar 20 09:18 AM | 2 Likes Like |Link to Comment
  • China to accelerate projects in order to support growth [View news story]
    Not a good idea, they have enough empty cities.
    Mar 20 08:31 AM | Likes Like |Link to Comment
  • I Love My 'Magic Pants' And My Partners Wear Them Proudly [View article]
    Agreed.

    According to MPT, it would make no difference if no publicly traded companies ever paid dividends. I bet investors in HPQ or companies with similar acquisition boondoggles would disagree.
    Mar 19 02:55 PM | 3 Likes Like |Link to Comment
  • BofI Holding: A Bank Model Fraught With Peril, 65% Downside Based On 1.6 X Book Value [View article]
    Excellent article, in the last year I've gone from an unabashed bull to a convinced bear on BOFI.

    My first concern was valuation risk (sold my last shares at about $70), but I've also wondered about their reserving policies. I also don't like how management is so promotional, and how the structured settlement business seems like piggy bank they use to goose short-term earnings. Haven't thought much about interest rate risk, I guess I'm convinced rates will stay low for a while, but that is also a good point.

    Also, thanks for linking to my article, looks like yours produced a similar drop. Such short-termism alone should give longs pause. Congrats on your call (I don't short momentum stocks myself). Probably won't win you any friends.
    Mar 19 01:35 PM | 3 Likes Like |Link to Comment
  • New York Mortgage Trust: The Best mREIT In America Is Firing On All Cylinders [View article]
    I don't like NLY either, there's a lot of the same rent-seeking issues as NYMT.

    But the biggest difference between NLY and NYMT is temporary mark-to-market book value declines versus permanent capital impairment. When spreads widened in 2008, NLY booked losses on its hedges, but when markets revived, the spreads compressed again and all was well. But NYMT made the mistake of buying stuff that was worthless and whose price never recovered.
    Mar 18 11:45 AM | Likes Like |Link to Comment
  • Tesla's Deflationary Creative Destruction Has Not Even Begun [View article]
    Nobody will be able to afford TSLA cars unless the company turns into a bank with a car factory attached. So if anything, TSLA will encourage credit inflation if it succeeds, not deflation.

    But I think it cars will remain toys for the elite rather than the next GM. More like google glass than an iphone.
    Mar 18 09:56 AM | 3 Likes Like |Link to Comment
  • Dividends And 'The Magic Pants' [View article]
    Fama and French do have some interesting findings, but its hard for me to take seriously a theoretical framework that assumes capital structure is irrelevant.

    What if all the companies in the S&P 500 quadrupled their leverage tomorrow and used to proceeds to buy stock? The price would probably not stay the same and would probably go up, even though many would be cruising towards bankruptcy. But according to these guys, the value would be exactly the same. Or what if BAC got the go-ahead from regulators and paid out 50% of its equity as a dividend, leaving a company leveraged 50:1? No value created or destroyed, right? I'm just glad none of these theorists actually run companies. Oh wait, they did in the 2000s.....
    Mar 18 09:26 AM | 3 Likes Like |Link to Comment
  • New York Mortgage Trust: The Best mREIT In America Is Firing On All Cylinders [View article]
    I think that NYMT should be assessed in terms of 10-year performance. The company loads the boat on credit risk when spreads compress while management gets fat payouts (with little skin in the game). Then when the credit cycle turns south, there is a loud sucking sound emanating from retail investor portfolios.

    The key is risk-adjusted return, and NYMT just does not deserve a premium to book value given that it tends to massively destroy book value during downturns. Or put another way, investors are paying almost double for NYMT relative to AGNC, which is much more conservative and is better positioned for the coming end of the liquidity cycle. Don't pay too much attention to recent performance.
    Mar 17 09:56 PM | 1 Like Like |Link to Comment
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