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Philip Mause  

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  • Did Affordable Housing Policy Cause The Financial Crisis? [View article]
    One of my solutions would be to limit the kinds of mortgages which could be securitized.
    I think that the uncertainty about what was behind the mortgage backed securities was a big factor in the debacle. While many tranches collapsed in price, it turned out that in many cases investors came out better than expected. Perhaps the industry can develop uniform categories of mortgages which could facilitate disclosure and might limit the panic associated with uncertainty.
    Jun 1, 2015. 06:55 PM | Likes Like |Link to Comment
  • Did Affordable Housing Policy Cause The Financial Crisis? [View article]
    My thinking sometimes inclines in this direction but, when it does, two disquieting thoughts occur:
    1. If you look at the world, the overwhelming bulk of population, land and resources is in the Eastern Hemisphere. But the dominant nation is in the Western Hemisphere. We have a strong interest in preventing any single state from dominating the Eastern Hemisphere - or even a large part of it.
    2. We are still humanities last, best hope. Our industries are innovative, our media is provocative, our commitment to freedom is inspiring. All sorts of people have been encouraged by us to hope for more. We should not turn our backs on them.
    On the other hand, we must:
    1. Be very sensitive to local conditions in fashioning policy (Bush apparently had no idea about the Sunni/Shiite split in Iraq).
    2. Act primarily as part of a broad coalition.
    3. Clean up our own house (our criminal justice system is a disgrace and an embarrassment).
    4. Get our own economy growing again with an infrastructure investment financed if necessary with deficit spending to drive demand and drive the dollar down so that our industries can compete.
    Jun 1, 2015. 06:51 PM | Likes Like |Link to Comment
  • Did Affordable Housing Policy Cause The Financial Crisis? [View article]
    I don't think lending standards are anywhere near relaxed as they were at the height of the bubble. However, the housing market is still - to a great extent - on life support with a very high level of federally guaranteed mortgages and standards which, in some respects, are more relaxed than in the pre-bubble market.
    May 31, 2015. 01:09 PM | Likes Like |Link to Comment
  • Did Affordable Housing Policy Cause The Financial Crisis? [View article]
    Thank you. I agree that we need more and better data to properly assess what happened. One of the problems seems to be that we still don't really have uniform definitions of things like subprime loans, traditional mortgages, etc. In examining who did what in this market, it is also hard to allocate blame because a mortgage may have been originated by a private player, then sold to a GSE and then packaged in a mortgage backed security which was sold back to a private player. Other mortgages may have been originated by private players, sold into private mortgage backed securities which, in turn, were sold to GSE's. In these cases, it is very important to define exactly what one means by a "GSE mortgage." Finally, many mortgages have been and are still being "put back" to originators or packagers by buyers who learned that the mortgages did not conform with reps and warranties so that we still probably cannot be sure exactly where all the losses will ultimately fall.
    May 31, 2015. 01:06 PM | Likes Like |Link to Comment
  • Are We In The Midst Of A Stock Market Bubble? [View article]
    As noted above, even with absolutely horrible short term timing, buy and hold has done well over the very long term. One thing to bear in mind is that over a very long term, the constituents of the various indices change and so the stocks that are in the Dow 30 now are very different from the stocks which were in the index in the 1970's. A lot of money would have been lost with a buy and hold strategy devoted to Bethlehem Steel, Woolworth's, etc.
    May 21, 2015. 01:57 PM | Likes Like |Link to Comment
  • Are We In The Midst Of A Stock Market Bubble? [View article]
    We certainly had this pattern after the Great Depression - lots of people swore they would never get into the market again. And I see it when I write about certain stocks (e.g. ACAS) - I get comments to the effect that the investor lost money and will never make the same mistake again. All of this helps create the base for a bull market.
    May 21, 2015. 01:53 PM | Likes Like |Link to Comment
  • Are We In The Midst Of A Stock Market Bubble? [View article]
    A couple of points -
    1. Over the long term, populations and GDP and corporate earnings probably grow exponentially (at a very slow rate),
    2. Mathematically how do you determine which stocks are growing exponentially and which are not? Why exactly is it that you characterize AAPL's growth as exponential?
    3. Why is it not possible for there to be a leveling off after a certain amount of exponential growth (e.g., by the time we get to the 20th square of the chess board growth becomes linear rather than exponential)?
    May 19, 2015. 11:00 AM | Likes Like |Link to Comment
  • Is A Strong Dollar Really Such A Bad Thing? [View article]
    In answer to your question - at a time when there is a significant danger of a deflationary recession which could spiral out of control because of its self-reinforcing nature - a strong dollar is a very, very bad thing.
    May 18, 2015. 12:01 PM | 1 Like Like |Link to Comment
  • Are We In The Midst Of A Stock Market Bubble? [View article]
    I will definitely look at this. I find this to be surprising because it is my impression based on other data that inflation is well below 1% and trending toward zero.
    May 18, 2015. 11:56 AM | Likes Like |Link to Comment
  • Are We In The Midst Of A Stock Market Bubble? [View article]
    My thought experiment involved a "can't sell" for only 5 years - after that, you could sell and be subject to the normal long term capital gains tax. One issue I neglected was how to treat sales of stock in IRA's and other tax advantaged accounts. However, we can simplify things by imagining ourselves to be not in the possession of such accounts and having to deal with only taxable accounts.
    May 18, 2015. 11:55 AM | Likes Like |Link to Comment
  • Are We In The Midst Of A Stock Market Bubble? [View article]
    As to AAPL, the strong balance sheet and cash flow suggest that, if the stock were to decline 10%, the number of shares repurchased could go up and increase earnings per share and cash flow per share significantly. So you have an automatic corrective mechanism. This makes it more difficult (but not impossible) for the stock to decline in the absence of very adverse developments to its fundamental business.
    May 18, 2015. 11:51 AM | Likes Like |Link to Comment
  • Are We In The Midst Of A Stock Market Bubble? [View article]
    Longer because if you cut your expenses in half, you will withdraw less principle each month so that the earnings of the corpus will increase.
    May 18, 2015. 11:25 AM | 1 Like Like |Link to Comment
  • Are We In The Midst Of A Stock Market Bubble? [View article]
    Can you define what you mean by the price growing at an exponential rate?
    May 18, 2015. 11:23 AM | Likes Like |Link to Comment
  • Are We In The Midst Of A Stock Market Bubble? [View article]
    Very interesting. As to AAPL, with $20+ in net balance sheet cash per share and earnings at about $8 a share, AAPL is really trading well below market multiples. On the other hand, its price history may make it look like a bubble but - once again - if the cash flow is there, investors should do well in the long run.
    May 17, 2015. 04:37 PM | 3 Likes Like |Link to Comment
  • Are We In The Midst Of A Stock Market Bubble? [View article]
    Sounds like a good strategy. I think we are moving to the point where the risk of recession outweighs the risk of an interest rate increase. Thus, a shift to consumer staples and stocks benefiting from addictive behavior (tobacco, alcohol, etc.) probably makes sense.
    May 17, 2015. 03:04 PM | Likes Like |Link to Comment
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