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Ned Brines, CFA  

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  • Weekly Market Notes: Housing on Life Support [View article]
    I'd like to make a correction to the Baltic Dry Index chart. The chart is from, and the attribution should have included a full link to

    Sorry for the oversight.
    Jun 29, 2010. 04:12 PM | Likes Like |Link to Comment
  • Weekly Market Outlook: Credit Crisis Part Deux [View article]
    The states are acting much like the banks, extend and pretend.
    May 25, 2010. 10:51 AM | 1 Like Like |Link to Comment
  • Weekly Market Outlook: Credit Crisis Part Deux [View article]
    that's what happens at 1:00AM. thanks for the correction.
    May 24, 2010. 03:37 PM | Likes Like |Link to Comment
  • Weekly Market Notes: Why All the Complacency? [View article]
    Dan-my point about individuals being better allocators of capital runs along the logic that if you earn the money, the bulk of it should belong to you and you should be able to do with it what you wish (within legal bounds). If you want to spend it all on coconuts, fine.

    I was not suggesting that individuals were more intelligent allocators of capital. However, at least they are allocating (usually) to something they want versus where government spends their money. I think we all agree that government spends too much capital in areas in which we don't agree on items we don't feel like we want.
    Apr 14, 2010. 02:48 PM | 1 Like Like |Link to Comment
  • Weekly Market Notes: Why All the Complacency? [View article]
    I guess this is a philosophical discussion. I believe that individuals are better allocators of capital than the government. If a wage earner, whatever the level of earnings, gets to keep an extra 10% of their earnings, they can allocate it to the goods/services that best meet their needs. That 10% has an immediate impact on the economy, and with the normal velocity of money that 10% is spent a few more times and creates a job. The alternative is that the government confiscates that 10% and there is a minimal multiplier effect. Net job creation is lower.

    Regarding high versus low earners, everyone earning a living should pay some level of taxes. Without being a tax payer, the incentives amongst voters is to buy into the "class warfare" perpetuated by politicians. We shouldn't be envious of higher earners, we should be trying to create opportunities for others to become high earners if that is their desire. Confiscating higher portions of capital in the form of taxes doesn't help lower income workers, it only penalizes higher income workers.

    Finally, what really is a fair level of taxes and what constitutes a high earner? Penalties now begin at $150K of annual income, which in most states, unfortunately, is now upper middle class. The truly rich aren't beholden to W-2 earnings, so raising marginal tax rates only keeps the moderately successful from joining the rich.

    When the Bush tax cuts expire, the marginal Federal rate will be in the 43% range. Add medicare, social security, capital gains taxes (and the upcoming medicare penalty), the health care premium, and state taxes, and marginal rates are in the 55-60% range (these are estimates, please don't attack me on tax laws or rates here). Is that fair or right?

    The bottom line is everyone in this country has an opportunity to improve their position in life, and government's role should be to ensure that opportunity exists. Government's role should not be to "spread the wealth around" as our President has asserted. Moving up the socio-economic ladder doesn't typically occur in one generation, but takes multiple generations to achieve. My goal is to move up a notch from my father's socio-economic level, and my hope is that my children are able to move up an additional notch from where we reside now. Unfortunately, I'm facing the real possibility that government programs and tax policy won't even allow my children to equal the economic position that my wife and I have achieved.
    Apr 12, 2010. 02:08 PM | 1 Like Like |Link to Comment
  • Weekly Market Notes: Cyclical Recovery in Secular Bear Market [View article]
    This is what happens when you write at 1AM. Two typos, my bad. Thanks for picking those up. The figure is $100K, not $1 million per person. The comment also should have said "secular bear market" to match the article of the title.

    Any viable solution for the entitlement programs is probably beyond the ability of our present political structure, which focuses on short term band aids and pandering for votes. When social security was first created, we had 7 workers for every retiree. Today we have just less than 4 per retiree, and in a generation will have only 3 per retiree. Since this is a pay as you go program, either the contribution rate will have to be hiked so high it will crush employment and stagger the economy (ala Europe, Greece being the prime example) or we will have to make major changes to the benefits. The first small step towards altering the benefits came in the early 90's when the CPI calculation was altered to include hedonistic pricing changes. That allowed SS to pay annual increases at a rate less than inflation. Unfortunately, it only pushed out the day of reckoning by a few years.

    Without dramatic changes to the entitlement programs, take a look at Europe if you want the road map for the US future. Slow growth, high unemployment, and huge social welfare costs.
    Mar 29, 2010. 12:21 PM | Likes Like |Link to Comment
  • Weekly Market Notes: 2010 - One Week Down, 51 to Go [View article]
    It is a percentage of the overall population. Typical employment measures will give you more of what you are looking for, as a percentage of the eligible workforce.

    There are two reasons I liked this chart. first, it shows what percentage of the populace is paying for social services via taxes. With the aging of the population it helps demonstrate that social security, etc, are unsustainable without significant growth in the workforce.

    Second, this chart takes out the subjectiveness used to determine who is in the workforce and who isn't. That determination is one of the most controversial parts of employment calculations.

    It isn't a perfect chart, just a different way of looking at the employment picture.
    Jan 11, 2010. 10:59 AM | 1 Like Like |Link to Comment
  • Weekly Market Notes: Is the Recovery Priced In? [View article]
    buybuybear-we moved bearish on residential real estate a touch early (late 2004), with the thought that a NORMAL real estate cycle bottoms in five years and takes about 10 years from the peak to regain its peak. This is not a normal cycle, and the response from the Feds has been anything but normal. We feel there is another leg down on the residential side of real estate, but it may not be significant (<10%) and I'm not sure how to short it. The banks may be too propped up to serve as a viable short. The MBS market is a possible short, but again, the Fed is buying so aggressively there it becomes a battle of checkbooks-and theirs is much bigger than yours. This close to the bottom may create a buying opportunity for the long term investor, especially if you can find cash flow neutral/positive properties.

    Commercial real estate is a different story and a bit more complex. Commercial real estate typically lags the cycle, and this time is no exception. As I've commented in prior notes, some of the smarter money has been stepping in on commercial properties in distress. We have been seeing deals completed at 50% of recent cost (example-a recently completed $480 million development just sold for $280 million, completely wiping out the equity in the deal). The fundamentals are still deteriorating in commercial real estate, so there may be a greater opportunity on the short side. The banks have large exposure to the commercial side, and there may be better shorting opportunities in smaller banks which have large exposure to commercial loans, especially recently completed projects.

    On Dec 14 11:43 AM buybuybear wrote:

    > Thank you for your posting, I am a starting investor and read all
    > I can to become familiar with all the terminology. I love these posts,
    > touching on all aspects.
    > I've been a bull since March and turned bear this Oct/Nov. I am finding
    > it's hard to be a bear when there's so many tricks on the table to
    > make results look good.
    > One question I have is whether no one calls the US/markets on changing
    > the rules all the time? Will there be a backlash at some point? If
    > this is all acceptable should we not relax rules even more? That
    > way the markets can keep going up.
    > I am currently short (real estate), but it just doesn't pay off to
    > be short.
    Dec 14, 2009. 12:51 PM | Likes Like |Link to Comment
  • Weekly Market Notes: Jobs Summit a Success - Just Look at Employment Numbers [View article]
    Deregulation has its pros and cons, and like all dogmas can be taken too far. The obvious mistake (among many) was the repeal of Glass Steagall. Let banks bank, let investment banks take risk, let insurers insure. Don't mix the three.

    On Dec 07 08:51 AM kingaj12 wrote:

    > Good stuff Ned.
    > For the "anarchy is best" crowd, though, I do have to observe that
    > the credit bubbles appear to coincide with periods of major financial
    > sector deregulation and/or unregulated activity.
    > So, please advise: how does the argument go? Partial deregulation
    > is worse than no regulation?
    Dec 7, 2009. 10:39 AM | 1 Like Like |Link to Comment
  • Weekly Market Notes: Jobs Summit a Success - Just Look at Employment Numbers [View article]
    Agree-both groups have been complete morons.

    On Dec 07 08:35 AM MarketGuy wrote:

    > Fantastic round-up article Ned. Many of your points, the TARP points
    > in particular, are what I've been touting for some time now.
    > My only comment is with your "political appointee experience chart",
    > we see opposite ends of the spectrum with GWB and Obama with different,
    > but equally devastating, results. It may prove several things:<br/>1.
    > A balance is essential for governing success or,
    > 2. "It's the government stupid", and doesn't matter anyway because
    > there's always Congress there to throw a stick in the spokes. (a
    > bit more on the cynical side, I know)
    Dec 7, 2009. 10:38 AM | 1 Like Like |Link to Comment
  • Weekly Market Notes: Jobs Summit a Success - Just Look at Employment Numbers [View article]
    enigmaman-the average investor should be cautious. We have been advocating higher quality names at reasonable valuations. There are still high quality companies out there (think some of the multinationals like JNJ), however, valuations are getting stretched. From an equity standpoint I'd be taking profits on higher beta, lower quality companies (think small caps, energy and tech).

    From an asset allocation standpoint it's a bit of a conundrum. On one hand treasury bonds are extremely overvalued, yet corporates have also moved. There are some opportunities in munis, but stay away from anything that isn't a GO (general obligation bond). That means avoiding project related munis such as toll roads, bridges, etc that aren't repaid from the general budget.

    On Dec 07 08:15 AM enigmaman wrote:

    > And the over riding good news is, what? What or where is the opportunity
    > for the average investor?
    Dec 7, 2009. 10:37 AM | Likes Like |Link to Comment
  • Weekly Market Notes: Jobs Summit a Success - Just Look at Employment Numbers [View article]
    Papaswamp-we show those numbers quite often. The title of the note was obviously very tonque in cheek. Longer term readers know that I am very skeptical of the government statistics. Sometimes they are so obviously manipulated that they don't deserve comment.

    On Dec 07 06:16 AM Papaswamp wrote:

    > How about showing a total number of those 'no longer in workforce'?
    > The government is merely peeling a larger percentage of unemployed
    > from the stats making it appear the unemployment rate is going down.
    > It seems they really are trying to talk their way our of this recession.
    > 'Convince people everything is better and it will be.'
    > This tells me that the economy is so bad nothing can be done. Our
    > debt insurmountable, similar to Japan, that this is the new normal
    > everything is ok level."
    Dec 7, 2009. 10:32 AM | Likes Like |Link to Comment
  • Weekly Market Notes: Don't Fight the Fed [View article]
    Here is the exact quote "Now the Fed wants to be the systemic risk regulator. But the Fed is the systemic risk. Giving the Fed more power is like giving the neighborhood kid who broke your window playing baseball in the street a bigger bat and thinking that will fix the problem. I am not going to go along with that and will use all my powers as a Senator to stop any new powers going to the Fed. Instead, we should give them less to do so they can do it right, either by taking away their monetary policy responsibility or by requiring them to focus only on inflation."

    On Nov 09 11:15 AM Rick S. wrote:

    > Did Senator Bunning actually say "systematic risk"? Twice?
    > When you don't have the right word, you very likely don't have the
    > correct concept either.
    Nov 9, 2009. 02:57 PM | Likes Like |Link to Comment
  • Weekly Market Notes: Finish Line Is in Sight [View article]
    I'll dig around and see what I can find on the growth of food stamps. It is logical that usage is at an all time high on an absolute basis as the total number of unemployed, under-employed, and those near the poverty level has never been higher. On a percentage basis this period is second to the '30's. Also, I'm not sure when the food stamp program came into existence. As I think of the famous soup kitchen lines of the '30's, it makes me wonder if food stamps existed then or were another outgrowth of that downturn?
    Oct 29, 2009. 11:28 AM | Likes Like |Link to Comment
  • Weekly Market Notes: Finish Line Is in Sight [View article]
    As Alan Reynolds said "Unfortunately, the eternal ambition of Robin Hood economics is to steal money from those who earned it and "redistribute" it to those with more political clout." Regarding the income contribution of the top 5% in CA, I don't have that number in my hands right now (will obtain and post it later). The most recent figures I can find on a national basis come from CBO estimates which show that in 2003 the top 10% of earners accounted for 38.3% of pretax income and 33.7% of post-tax income versus 39.3% of pretax income in 1979. Nationally the top 10% paid over 70% of the personal income taxes in the US in 2007 (and 66% in 2003). They are paying more than 2x their share of the income. The numbers for the top 5% and 1% are even more concentrated, paying 61% and 40% respectively.

    On Oct 26 11:20 PM User 425118 wrote:

    > What % does the top 5% make of the state's income? If it's 80% and
    > they only pay 55% of the taxes then the fairness issue shifts from
    > your conclusion, on the other hand if they earn less than 55% of
    > the state's income then your argument is correct.
    Oct 27, 2009. 10:50 AM | Likes Like |Link to Comment