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Pompano Frog

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  • Market Timing Report: Indicators Are Cued Up For A Bear Market [View article]

    The reason this recovery was not a V shaped one given the level of monetary stimulus is simple. The politicians have attacked three of the key industries that account for the economic cycle.

    The real estate industry..

    The financial industry..

    The energy industry..

    The Central Bank does not control what these politicians do. Their destructive actions have slowed this recovery and cost the American public hundreds of billions of dollars of lost GDP.

    In some sense, this is better for the investor class, these industries would be sucking out of the financial markets money that ended up pushing financial assets higher. Corporate expansion competes with financial assets for the same pool of funds.
    Aug 22 09:18 PM | 1 Like Like |Link to Comment
  • Market Timing Report: Indicators Are Cued Up For A Bear Market [View article]

    My problem with this is that every one of these indicators could easily be backtested for its ability to predict markets over different time periods. Including the number of false positives.

    Every time I have run the numbers on indicators of this type I have never..never found anything that was useful.

    Combinations could be tested. Why is the data not presented in a useable format. These charts are useless.

    What bear market, in the last 50 years, has started without tightening of monetary policy? The answer is none.

    I was just doing a spreadsheet and looking at 1998.06. The market rose 29.6% in the following 18 months in the face of a yield curve of .47.. What is the yield curve today?

    Rising interest rates are bullish. It's the yield curve that is important. It's not the cost of money, but the availability of money.

    I don't see Seeking Alpha readers bullish and they were not bullish in 2009, 2010, 2011. My fingers need a rest.
    Aug 22 02:25 PM | 7 Likes Like |Link to Comment
  • 7 Questions For Janet Yellen (If I Had Her Phone Number) [View article]
    Just a few comments..

    Are there problems with the growth estimates of the FRB. The Federal Reserve is well aware of the slight timing problem of GDP relative to monetary stimulus. So what.

    If you look at their statements in front of congress in 2009 you can certainly see that they got the picture right. This article contains the same litany of complaints that are still available on Seeking Alpha from 2009. They cost readers a fortune.

    The Federal Reserve and others in the Central Bank community can not attack the political class who could and have attacked them. They are caught in the same choke hold as the Banks.

    The weakness of this recovery versus a typical recovery was as pointed out due to the slow rebound in housing construction. The FRB is afraid of the politicians which have demanded policies which have hamstrung the recovery in real estate values and therefore the demand for new construction.

    There is not one implication by this author that is true. If you think they are true you will not make money in the financial markets because understanding FRB policies is central to deciding what asset class and what strategy to follow.

    It was always this way. Read, a recently published, economic history of the U.S. entitled "A Nation of Deadbeats." Brilliant author and book.
    Aug 22 11:40 AM | Likes Like |Link to Comment
  • Inflation - The Usual Suspects [View article]
    Thanks Columbia for the best presentation on inflation factors that I have seen on Seeking Alpha. My spreadsheets over the last 55 years show the exact same factors.

    David..I would like to see a "real life" example of inflationary expectations. I know this is what is taught. Try to find it. They teach it in order to justify their economic models which rely on rational decision making and efficient markets. What a joke.

    Inflation can be either good or bad. There have been numerous economic papers showing that a 2% inflation target for a developed economy is too low. For an emerging market economy an efficient inflation rate might be 6%.

    To achieve economic growth you need to create incentives for everyone to expand and invest. A 6% inflation rate in China, for example, would create an environment where any investment would cost 30% more in 5 years. This creates enormous incentives for the economic growth machine.

    A low inflation rate creates incentives for holding cash and investing in bonds.
    Aug 21 11:20 AM | 1 Like Like |Link to Comment
  • Insights On China's Growth, Real Estate Market, And Shadow Banking [View article]
    Dear anonymous..

    Before starting work I want to thank the CFA exam developers for doing such a great job of mindlessly repeating the failed economic theories of the past.

    That's too harsh.

    That's true.

    All of the facts expressed in the article are true.

    I guess all of the movements in GDP must be a simple representation of demographics and "economic reform." The reader should know that what the phrase "economic reform" means are the failed economic policies of Western Europe and the U.S.

    I would argue that China, Korea, Taiwan and Singapore achieved their economic growth rates because their political elites decided they were not going to accept their predicted destiny. In fact, their political elites may have decided that they needed that economic growth to fund their military hardware desires to keep themselves in power.

    I think the Chinese government has shown a continual ability to adapt to current circumstances. The quotes about the dialing up of government expenditures is enormously misleading.

    I am recommending portfolios consisting of 60% investment in FCA a China H share ETF. China is selling at the same pricing as the U.S. in March, 2009. The train is leaving.
    Aug 19 08:42 AM | 4 Likes Like |Link to Comment
  • Barclay (Jonathan Glionna) Vs. Wells Fargo (John Manley): Who Is Right? [View article]
    Dear Reader..

    This is a well written expression of the common view that financial markets should be a representation of the real economy. This view holds that the real economy predicts movements in the financial markets.

    Nothing could be further from the truth. The economy was booming in 2006 when you wanted to be liquidating.

    The economy was a disaster in February of 2009 when you should have been buying.

    This is the way it has always been. There is no excuse for this in the age of the internet. You can go to the Federal Reserve Bank of St. Louis and download thousands of economic series to an excel spreadsheet at the touch of a button.

    Actually, financial markets, whether banking or corporate bonds or venture capital or stock markets are what create long term economic growth and also create cyclical changes in the real economy.

    Specifically, your complaint about p/e ratios has some validity. My numbers for the last 55 years are that a p/e of between 15x and 17x are the middle 1/3 of valuations. With BAA corporate bond interest rates under 5% how can equities yield less than 20x earnings or a 5% earnings yield?

    Oh, did I tell you when the stock market moves to 20x the economy will boom.
    Aug 19 08:13 AM | 3 Likes Like |Link to Comment
  • Signs Of An Approaching Bear Market [View article]

    I searched google and found no evidence that Shiller is a successful investor. He owns an island and is rich because he has a business telling his views to others and providing a face to other's investment strategies.

    He certainly would not have invested in March, 2009 because his main indicator was showing stocks were only fairly valued. Anyone who misses one of the six huge moves in the market over the last 50 years is missing, probably multiple, critical components on what makes financial markets function.
    Aug 15 09:16 AM | 6 Likes Like |Link to Comment
  • Signs Of An Approaching Bear Market [View article]
    To whom it may concern..

    First, I would like to thank the writer's of Seeking Alpha and their professors for their continuing financial support.

    In October, 2005 M1 was running at a negative pace from 12 months prior, for the first time in that business cycle.

    That continued until January, 2008 when you still had negative M1 over the prior 12 months. Something was bothering the Central Bank.

    The yield curve was negative from August, 2006 until July, 2007.

    I would be the first to agree with the Central Bank for taking action, but those actions had consequences for those holding financial assets.

    The money supply numbers are going to be released after the close, Thursday.

    They are double digit increases from the year prior. That is a top decile event over the last 55 years. What has been the historical performance of financial markets in the following 12 or 18 month periods following such monetary behavior?

    I wrote comments such as this in 2009 on Seeking Alpha.

    The author's facts about employment are totally correct. The problem is that if you run the numbers the worse the employment situation is the better for the financial markets. Why? Because all central banks respond to political unrest if they can.

    My bank stock spreadsheet is so boring, but necessary.

    Shiller is the worst. His numbers have no relationship to future equity prices over the last 55 years. I don't take my numbers back to the civil war. I don't take my numbers back to World War II. That is just me.
    Aug 14 12:05 PM | 16 Likes Like |Link to Comment
  • The Collapse Of Our Monetary System [View article]

    I thought I was reading an aritcle on Seeking Alpha from 2009. Nope.

    Long term currency value is an important consideration when investing on a global basis. But, in a modern world do you need to use gold. If one currency is declining then another has to, by definition, be rising.

    Why wouldn't you be investing in assets with cash flow in those appreciating currencies?

    Gold does still serve a purpose in our modern global economy. If you live in a country where there is a potential for political and/or economic instability it might be wise to hold some assets in gold.

    This is certainly the case in most of the emerging markets especially India and China.

    On top of the demand from individuals there is enormous potential demand from particular Central Banks. I am talking about Central Banks representing countries that are under, or might be in the future, economic embargoes.

    If you are engaged in terrorism or expecting to engage in military adventures with your neighbors gold is the way to go.

    During an embargo you can always find someone who will sell you critical supplies if you can pay in gold.

    I wonder what Iran, Russia and China have in common? If these three central banks were not buying gold where would the price be?

    That's enough on this. The China stock market could double in the next 24 months. GLD ($126 U.S.) or FCA ($23.93)?
    Aug 13 03:05 PM | 1 Like Like |Link to Comment
  • A Few Thoughts On The State Of The Financial Markets [View article]

    I have the numbers on a spreadsheet. There is no correlation with Shiller cyclically adjusted p/e and future movements in the equity markets over a 12 month or 18 month period during 1959 and 2014. That's 55 years.

    I presume you are implying Shiller. Their are methodologies that cyclically adjust earnings that do have future correlations.

    The media creates this anxiety among the retail investor and the public because that is their job. They distort economic news and all other types of information.

    Large institutional investors that move money on a global basis are not concerned with political events except elections that might signal future changes in domestic monetary policy.
    Aug 11 07:56 AM | 4 Likes Like |Link to Comment
  • Growth In Lending Increases Even As Banks' Equity Ratios Approach 2008 Levels [View article]

    I would answer that increasing money supply (M1) by any central bank does not create money. We use that terminology because it simplifies an explanation of the financial system.

    What is actually happening is you are creating a deposit in the banking system. Until that deposit is utilized to buy securities or make a loan money has not been created.

    This is why you saw business activity pick up in the U.S. in the fall of 2009 only after equity prices increased and then the economy picked up again when lending and equity prices started to work in tandem.

    There was never the need for the financial crisis to be as severe as was the case. Political decisions which restricted the Central Bank's ability to provide liquidity during a crisis was the main reason for its depth.

    If the banking system was at fault why did the providing of liquidity cost the American taxpayer zero? Why has Lehman been able to cover all of its liabilities? Elizabeth Warren is another psychopathic politician-is that too harsh?/No- preying on the public with easy answers so she can become powerful.

    The blaming the financial system is coming from the political parties who are trying to explain to the American people why the average American is not better off than 20 years ago.

    These two political parties and Seeking Alpha are mired in the economic theories of the 1930's. Read about economic development theory from Korea, Singapore or China. They all have think tanks turning out papers. We need to emulate them otherwise the world will be under the thumb of China.
    Aug 10 12:43 PM | 2 Likes Like |Link to Comment
  • IMF's China: Blind Men And The Elephant? [View article]

    The Chinese are no different than any other human. They are genetically programmed to herd. As soon as the stock market starts to move they will jump. The retail investor is always very late.

    The China advantage is not in crude labor cost, but in engineering cost. A Chinese engineer costs $20,000. That is an enormous competitive advantage. None of the other Asian countries realize that competitive advantage in the modern world is the percentage of your population with STEM degrees.

    China can easily grow at 8%. Korea, Taiwan and Japan did when their GDP per capita was 10% of U.S. GDP. China is the best managed, from an economic perspective, in the world. Singapore is too much smaller to include.

    As I have said before I have been creating portfolios with 30-60% FCA. I personally invest in small cap. I can handle the extra volatility and the additional unknowns. Investing success is about moving before everyone else. It is part art and part science. It requires imagination.
    Aug 9 06:09 PM | 3 Likes Like |Link to Comment
  • Growth In Lending Increases Even As Banks' Equity Ratios Approach 2008 Levels [View article]
    The views expressed in this article are the same views expressed by many authors since 2009. If you believe these views of the world you have not participated in one of the great bull markets of the last 50 years.

    These views imply that Ben Bernanke and Janet Yellen are totally mistaken about how the economy operates. It seems to me, if you go back to their testimony in 2009, it was the politicians and their quasi religious/economic theories that were mistaken.

    I notice that the author has not bothered to run the numbers of the historical relationship of bank lending or any of his other charts to the equity markets. I do appreciate the coverage of the topics.
    Aug 8 09:34 AM | 2 Likes Like |Link to Comment
  • IMF's China: Blind Men And The Elephant? [View article]
    Thank you for the China coverage.

    One question, where has the IMF created economic development? It seems to me that Europe, India, Africa, and the U.S. have not benefited from following the Economist magazine's economic policies.

    Maybe, at some point, you need to admit a mistake and adopt the Asian economic model.

    The four instances you quote from the IMF economic report involved countries with radical internal economic distortions in addition to credit expansion. China, as an investment at 9x p/e is where the U.S. was in March, 2009. Using an ETF such as FCA (23.00) is an easy way to gain access.

    If I controlled a pension account I would have a 60% exposure to this ETF. China will be growing at 8% per year, not 7%, for the next 3-5 years because of the strong China stock market. Just like the U.S., the stock market movement will increase GDP growth.

    Investing is about valuation and monetary/liquidity flows. Global institutional investors are going to buy China equities at 9x rather than the U.S. at 16x with new funds.
    Aug 8 08:59 AM | 4 Likes Like |Link to Comment
  • China On The Home Stretch [View article]

    Thanks for the China coverage. Seeking Alpha readers are missing out on the same opportunity for investing in China that they had in the U.S. market in 2009/2010. I prefer the First Trust AlphaDex (FCA 23.28).

    As you point out China with a GDP per capita of $12,000 and a U.S. GDP per capita of $52,000 is at a 23% ratio. Most of this negative approach to China is, I think, being sourced by the media and the academic establishment. They rightly see China's huge income gains versus little to none for the average American as an embarrassment.

    China's per capita real disposable income rose by nearly 10% last year within all income categories. Our two political parties and their lack of economic focus have restricted U.S. industrial dominance.

    What is going on with banking system regulation is appalling. We once dominated global banking and the highly paid jobs that go with that domination. Not one dime was lost in providing liquidity to the banking system during a liquidity crunch. There was no reason to have allowed Lehman to fail other than to satisfy some quasi religious/economic theory.

    I feel better and I will go back to work.
    Aug 6 05:04 PM | 3 Likes Like |Link to Comment