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Michael Roat  

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  • Pan American Silver: An Inflation Hedge With An Excellent Balance Sheet [View article]
    I believe gold and silver will fall further on continued USD strength and then will rebound when the dollar reverses because of higher inflation. The USD rally will not last a generation or a decade. Inflation will cause a depreciation at some point.
    Jul 24, 2015. 03:45 PM | Likes Like |Link to Comment
  • TMV: An Aggressive Choice For Rising Rates [View article]
    Also, SBND. It rebalances monthly rather than daily. Much better to hold longer term than TMV.
    Jul 21, 2015. 04:44 PM | Likes Like |Link to Comment
  • Quit Worrying About Oil [View article]

    I believe the USD is a key factor for determining where oil prices are going. With inflation muted and the Fed planning on increasing the Fed Funds Rate while the majority of central banks are easing the divergence trade is still in effect. This is USD bullish and bearish for oil. I would be careful betting on U.S. shale oil. There will be a prolonged downturn in energy and many companies are highly indebted. There will likely be bankruptcies.

    Longer term oil should rebound as a result of higher inflation and a reversal in the dollar given the Fed's overly loose for too long monetary policy in my opinion. Zero interest rates are an incorrect monetary policy for this economy. Retail sales, stock prices, household net worths, industrial production, and total credit to the private sector are at or near all time highs. Household debt service payments as a percent of disposable income have returned to a historical norm while the banking system is awash with reserves setting the economy up for a massive expansion of credit.

    As for Chinese stocks, the Shenzen Composite Index is still up 84% from mid 2014. The market was overvalued so this is more of a major correction than a full crash. Chinese GDP growth although decelerating is still one of the highest in the world and the Chinese government and central bank are making efforts to support stock prices. This should have a positive effect and I don't expect much contagion risk for the rest of world markets.
    Jul 9, 2015. 07:34 PM | 4 Likes Like |Link to Comment
  • Why The Federal Reserve Could Better Achieve Its Mandate Through Oil Market Intervention [View article]
    Also, oil prices feed back into inflationary expectations. When the Fed begins increasing the Federal Funds Rate the dollar will likely rally higher and this could create a further collapse in oil as these assets trade inversely. Falling inflation expectations because of oil price declines could put the Fed in a bind as they would like long term interest rates to increase because of strong core inflation and a strengthening economy, but oil prices effect on headline inflation and expectations could cause an issue.
    Jul 7, 2015. 11:58 PM | 1 Like Like |Link to Comment
  • Is The Fed Making A Bad Bet Right Now With Zero Rates? [View article]
    I don't hear anyone else saying what I'm saying. In fact, mostly the opposite, especially from the IMF, that the risks of moving too early are greater than the risks of going too late. The Fed has already intentionally inflated the biggest bond market bubble in history. I simply think we're going to see higher inflation as an inevitable consequence of this Fed policy. I plan on betting on energy as well as shorting bonds via long term call options in the not too distant future. I think we'll see a major depreciation in the dollar circa 2017/18 although until then the USD bull market can continue based on divergence of central bank policies and muted near term inflation which is bearish for energy, gold, inflation hedge assets, so I'm holding off for now.
    Jul 6, 2015. 02:15 AM | 1 Like Like |Link to Comment
  • The Limitations Of Economic Theory In The Current Environment [View article]
    The variable the inversely correlates with unemployment is private sector debt growth. Economic theory completely ignores the importance of debt or credit in a debt/credit based monetary system.
    Jul 5, 2015. 03:51 AM | Likes Like |Link to Comment
  • The Chinese bear keeps growling [View news story]
    I think we should look at the transmission mechanism between the Chinese stock market and the Chinese economy. The Shanghai composite index is still up 1500 points from a year ago. Now all these retail investors have suddenly found themselves richer and this could provide a boost to the economy. The improved economy will then feed back into a stabilizing or rising stock market over time.
    Jul 4, 2015. 04:59 AM | 2 Likes Like |Link to Comment
  • Why I Would Sell United States Bonds And Begin Hedging Inflation [View article]
    I don't think we'll see a deflationary downturn in the near term. Commodity markets may fall further as the divergence trade is still in effect and rate hikes are dollar bullish. Oil could fall back to $40 a barrel on continued USD strength. The overall economy will be okay though, in my opinion.

    As long as Fed policy is accommodative I will be bullish on the U.S. economy. Once inflation begins substantially increasing, they will have to overcompensate with major rate hikes and that's when it will be time to go bearish on equities and the economy. The point I'm making is you will see a rebound in commodities and inflation before the next deflationary episode because it will be driven by a tightening Fed policy in response to inflation.
    Jun 25, 2015. 11:47 AM | Likes Like |Link to Comment
  • It's All Macro [View article]
    The fed is running a zero interest policy into the boom phase of a deleveraging cycle. They may well be behind the curve already once inflation begins increasing and they will have to overcompensate with major rate hikes. The current dollar appreciation is caused by a divergence in global monetary policies where the Fed is planning on tightening when nearly every other central bank is easing. Economic fundamentals will win in the end though. The USA is on the verge of higher inflation and we know currency depreciation is often caused by a spike in inflation. Bonds are a great short as I believe the future holds higher inflation and interest rates. Stocks will continue rising until the Fed begins substantially tightening in response to higher inflation above their target rate.
    Jun 20, 2015. 08:54 PM | Likes Like |Link to Comment
  • It's All Macro [View article]
    Jun 20, 2015. 07:53 PM | Likes Like |Link to Comment
  • It's All Macro [View article],

    As one can in the chart credit growth in the United States resumed in contrast with the Eurozone leading to a stronger recovery in the U.S.
    Jun 18, 2015. 07:36 PM | Likes Like |Link to Comment
  • Is Gold Finally Scraping Bottom? [View article]
    Longer term I believe higher inflation in the United States will send gold prices higher although as we know gold trades inversely with the USD and Federal Reserve rates hikes are dollar bullish so that could signal that gold has yet to reach a minimum. Until inflation increases.
    Jun 7, 2015. 03:39 AM | 2 Likes Like |Link to Comment
  • South Korea: Home Of The World's Best Equity Opportunities [View article]
    I've had bullish opinions on South Korea as well. It's one of the cheapest markets in the world. The won strength is a concern although their central bank is in an easing cycle and the won could depreciate. The government is implementing reforms to increase dividends and share buybacks. Cash hoarding from the large South Korean conglomerates is one of the reasons their market trades at a discount.
    May 5, 2015. 10:38 PM | 1 Like Like |Link to Comment
  • Molycorp, Lynas Surge As China Eliminates Export Tariffs On Rare Earths [View article]
    And you will see an offsetting 27% rise for medium and HREE, domestic and FOB, prices in the near term because of the Chinese tax reform. As well as a 7% to 11% rise for light rare earths from current levels. Prices have reached an absolute minimum and Chinese and international prices are converging. Now is the time to restock and I predict a tripling or more for the prices for some rare earths, lanthanum included, if restocking takes hold and demand comes back. This could also potentially coincide with a return of inflation in the United States, reversal in the dollar and rebound in the commodity sector. Lacaze in the Bloomberg article is correct. A lot of what is dampening demand, that is the price fall associated with the lifting of the tariffs, is now released or offset. Consumers will enter back into the markets and there will be a resurgence of demand now that prices are at a minimum.
    May 5, 2015. 09:32 PM | 1 Like Like |Link to Comment
  • Preparing For The Market's Collapse [View article]
    We're going to see inflation before anything prompting the Fed to throw on the brakes.
    Apr 28, 2015. 01:01 AM | 1 Like Like |Link to Comment