Rakesh Saxena

Look at Earnings in Context Before Betting on Equities

David: Good observations and an interesting point made on bear funds. Regarding the wealth accumulation process, at this time we only need to ascertain if it will hamper or limit growth in the US. That is, if government intervention will generate any real growth in the first place! - Rakesh


On Oct 19 10:54 AM David Braunstein wrote:

> Rakesh,
>
> I don't believe the transfer of wealth from emerging countries to
> developed ones is on the verge of abruptly ending. Perhaps over time
> this thesis makes sense, but it will likely be a gradual process.
> Look at the China/U.S. relationship. China has effectively pegged
> its currency to the U.S. Dollar and other exporting countries are
> desparately trying to reflate the U.S. Dollar to help their exports.
>
>
> Over time, I beleive in the next 30 to 40 years, power will transfer
> to the 3rd world countries as the United States baby boomers shift
> out of their peak spending years.
>
> As far as the markets go, I agree, it's artifically propped up by
> stimulus. If the stimulus abruptly ends, it will cause a collapse
> of world markets and commodity markets. If stimulus continues too
> long, we will see bubbles in all the markets again followed by inevitable
> crashes.
>
> The new generation has never lived through a prolonged bear market.
> They have learned that you get rewarded to take on too much risk.
> I beleive we are close to the breaking point where too much risk
> is being taken and the prolonged consequences of running huge deficits
> will emerge.
>
> I am 100% in mutual funds with a vast majority of their holding are
> in U.S. Treasuries. I made 8% on my money during 2008 when others
> lost their shirt by heding my long positions using bear funds. I
> currently do not use the bear funds because I perceive that counter-party
> risks could interfere with their correct functioning during a crisis.
> This is similar to the 100% margin rules that were implemented on
> S&P 500 Index futures on October 19, 1987. Shorting futures didn't
> work on that day.
>
> I do not expect a crash, but a slow drawn out bear market that should
> begin between now and the end of 2011. Patience is the order of the
> day!

In Earnings Season, Who Cares About the Unemployment Rate?

I agree, phrases like "Listen nut cases" adds nothing to a dialogue. The simple point I am making is that we will witness a "delink" between the unemployment rate and equity prices, a delink which is common in third world countries. Arguably, the US economy has its own dynamics; but the reasons for the delink need to be addressed on an "unemotional" basis. - Rakesh


On Oct 10 08:05 PM User 492096 wrote:

> It would be much more interesting a stream of comments if authors
> would stay focused on laying out a cogent argument and minimizing
> the "commentary". "Listen nut cases" adds very little to the dialogue.

How Much Downside Could Still Exist?

You make a very valid point--communism and socialism are not similar by any means, and the sooner we in the US realize this the better. - Rakesh


On Mar 04 10:44 AM plumstupid wrote:

> Soviet Union and E. Europe were Communist. Communism and Socialism
> are not the same thing.

How Much Downside Could Still Exist?

Dear Professor: You obviously need to go to history school where you will learn how to place statistics in perspective. - Rakesh


On Mar 04 11:56 AM Professorsnape wrote:

> Random, self-indulgent tripe! Of course the markets are going lower.
> However, to say the world is more interconnected today than in generations
> past is erroneous. World trade as a percentage of GDP was higher
> in the 1920s and 30s.

U.S. Government Recreating Leverage, Offering New Trading Windows

Yes Robert, this T-Bill situation could be another window, given the CDS spreads on government risk. I'm looking at that now. Many thanks - Rakesh


On Mar 04 10:04 AM robert.b.ferguson wrote:

> When investors have fled to cash and many buisnesses that were leveraged
> to the hilt have folded no one is willing to borrow money even when
> it's available. Consumers and buisnesses alike are deleveraging as
> quickly as possible. For credit to "Flow freely." people must be
> willing and able to borrow and that does not seem likely any time
> soon. At this juncture folks are begining to wonder if cash is safe
> and those who are able are buying gold. T-bills are no safe haven
> any more and buying ETFs shorting them is about the only money I'm
> willing to put to work right now.

How Much Downside Could Still Exist?

Yes carey_jim, you are right about the various factors which shaped the 1929-1939 era. But the challenge remains to translate the political issues into economic terms. For example, was European fascism purely a political phenomenon or was it caused by the deterioration in economic conditions? Many thanks - Rakesh


On Mar 03 02:11 PM carey_jim wrote:

> Rakesh:
>
> Here are some forces that often minimize purely economic and financial
> explanations of human interactions, including the vicissitudes of
> the economy and the production of goods and services:
>
> Historical forces, e.g. grievances from past wars, revolutions, injustices,
> new wars, etc.
>
> Psychological forces, e.g. envy, greed, desire for power, lack of
> concern for one's own health, the health of others and the planet,
> etc.
>
> Sociological forces, e.g. racism, sexism, class consciousness, caste
> differences, language and cultural differences, mass hysteria, etc.
>
>
> Political forces, e.g. revolutions, newly elected governments, imperialistic
> wars, genocide, etc.
>
> Technological forces, or the invention of new devices which make
> the old way of life obsolete, e.g. railroads made rivers and river
> barges much less important for moving goods. Milking machines and
> other motorized and electrified farm machines lowered the demand
> for unskilled farm workers. Today, the internet makes brick and mortar
> stores much less important, etc.
>
> The Great Depression was caused by many things including the historical,
> psychological, sociological, political, and technological events
> mentioned above.
>
> Think of the rise of Hitler, the Russian Revolution, the German attack
> on European Jewry, the mass hysteria produced by fascism and communism
> and the dislocation produced by the electrification and motorization
> of Europe and America. And I've only mentioned the most obvious.
>
>
> Economics and finance are only part of the picture.

How Much Downside Could Still Exist?

Dear AntiCramer: The point I am making is that the systemic risks are fully priced with the S&P at 700, with the qualifier that risks emanating from the global marketplace have not yet been quantified. Many thanks - R


On Mar 03 09:11 PM The AntiCramer wrote:

> "From the prism of facts pertaining to previous recessions, the risks,
> including systemic risks, within the broad American financial framework
> are now fully priced."
>
> Please justify that statement.

How Much Downside Could Still Exist?

Dear Jim: Have you actually read the texts you are citing? These are either ideological documents driven by a particular world view or simply attempts to analyze the 1929-1939 period without any clear and fundamental knowledge of systemic risks in a capitalist economy. In any event, I will address the definition of self-serving in a forthcoming article and will await your comments---but, in brief, a self-serving document for our purposes is one which is planned and executed within the prism of a pre-determined vision of the where we are today and where we are (or should be) headed. As far as my article is concerned, it is indeed self-serving. Take it or leave it, but I stand by it and I invite cogent challenges. And do read the various previous articles before you rush to comment--you may not have the courage to admit it, but I have been right all along, on the mark. Many thanks - R


On Mar 03 01:56 PM Jim Hawthorne wrote:

> Sure!
> E. M. Jones & E. A Radice; An American Experiment, 1936
> J. M. Keynes; A Treatise on Money, 1930 (before fame)
> Caught Short! A Saga of Wailing Wall Street, 1929
> Only Yesterday; Harper, 1931
> Stock Exchange Practices, Washington Report, 1934
> The Liberty Digest, June1, 1929
> Bernard J. Reis; False security, 1937
> Federal Reserve Bulletins; monthly, beginning in 1929
>
> The list is long; but I can't wait to read your curious definition
> of ' Self Serving'! Let's see if it applies to yourself as well,
> shall we?

How Much Downside Could Still Exist?

Thanks Proximo: You are correct--this article actually summarizes the points made in previous months, in previous articles. I think people should be educated in how to use this information tool, i.e. SA. - Rakesh


On Mar 03 12:29 PM PROXIMO wrote:

> Rakesh--I enjoy all of your articles .Please keep posting. An observation.
> If a portion of the energy expended today attacking you and this
> article had instead been used to study virtually any of the 115 articles
> you have previously posted in the past 8 months(and your recommendations),
> there would be far less vitriol and far more gratitude. Thanks for
> what you write. Prox.

How Much Downside Could Still Exist?

Dear Jim: Can you cite me one text of the 1929-1939 period which you have read and which in your opinion is not self-serving? If we are to use this forum for a constructive discussion, then let's all do our homework. Otherwise, don't be ashamed to ask questions. Many thanks - Rakesh


On Mar 03 05:51 AM Jim Hawthorne wrote:

> I agree with Nikola;
>
> In addition you ask, 'How much more downside is there?' and claim
> there is lots based on a list of vague assumptions and generalizations.
> Yet, in spite of this you have exited your short positions because,
> based on your peerless research, the S&P reached the magical
> number of 700, coupled with those flaws in the banks' balance sheets
> that you oh so cleverly spotted!
>
> And after predicting more downside, you suggest that you will once
> again enter short positions if your once again vague set of conditions
> are met!
>
> You have the unmitigated gall to end this rambling river of drivel
> by slamming 1929-1939 authors as 'self-serving'! What hypocrisy!
> Your entire article is as self-serving as the proclamations of the
> lowest CNBC shill; or a Time's Square pimp, for that matter!

How Much Downside Could Still Exist?

Dear raytayzmd: I suggest you get out of the "plantation mentality" and let facts guide your investments. - Rakesh


On Mar 03 09:44 AM raytayzmd wrote:

> .....hmmm, he is a "risk pricing specialist" at Quote Platform Syndicate
> Group which "is part of an international network of risk buying pools
> engaged in the pricing of credit default swaps, synthetic collateral
> debt obligations, political risk insurance contracts, index put options,
> far-forward FX contracts and asset securitizations."...in other words,
> he helped create this mess to begin with...I vote we all get together
> for a good old fashioned lynching -- anybody know his address?

How Much Downside Could Still Exist?

Dear kruser53: You need to review my earlier articles and place the current one in context. Many thanks - Rakesh


On Mar 03 11:16 AM kruser53 wrote:

> Rakesh Saxena:
>
> You have written some good articles, but this is not one of them.
> There are too many unelaborated generalities. One example: "And,
> as far as systemic risk is concerned, Ben Bernanke’s definition is
> proving to be entirely academic, restricted by numerous, self-serving
> scholarly texts of the 1929-1939 era." What value does that statement
> have without an explaination of "self-serving"?
>
> You have enumerated a number of the important issues for the current
> time and coming years. But the value of the article stops there.
> It's like you started to make a sandwich and stopped when all that
> was done was to put out two slices of bread. Where's the beef?<br/>
>
> boats:
>
> You wrote: "There you go confusing freedom and capitalism. Capitalism
> makes slaves of 99% of the population."
>
> If I accept your statement, then I would add to it. Communism makes
> slaves of 99.9% of the population. But hunter-gatherers are 100%
> free.

How Much Downside Could Still Exist?

Dear morph: You raise a good point. The reason why I am reluctant to identify downside from these levels is that, in my opinion, there is likely to be gap between what the facts tell us on a "fully informed" basis and how investors trade in the midst of this ongoing discussion on the impact of rescues and bailouts. In brief, though I may consider 600 for the S&P500 as the next clear target based on facts, the market may not follow suit. Due to this "gap", I visualize a "trading" opportunity as opposed to a positioning. Many thanks - Rakesh


On Mar 03 10:26 AM morph366 wrote:

> Intrigued by the title to this piece I read through it but unfortunately
> I am none the wiser as to how much downside still exists.

How Much Downside Could Still Exist?

Dear Nikola: The details you are looking for have already been highlighted in previous articles posted on SA. The world being messy or not, we need to deal in facts, and many key facts have been cited earlier. Many thanks - Rakesh


On Mar 03 05:26 AM Nikola wrote:

> I liked the first two paragraphs. The rest is incoherent and non
> sequitur.
>
> The paragraph about emerging markets is wide sweeping and isn't supported
> by a single number.
>
> I suppose the argument is that the world is a messy place today and
> so.... S&amp;P will go down. But world's been a messy place for the
> last.... oh... twenty thousand years. Was the world more stable back
> during the Cold War? Around the two World Wars? In 1800s Europe?
> When?
>
>

Stimulus Packages: Conceptually Flawed and Historically Unproven

Dear carey_jim: I must stress that there are ample facts which tell us what actually got America finally and conclusively out of depression-mode: America's dominant post-war position, a development which opened up huge markets for American capital. I can grant you that the interpretations of what happened between 1929 and 1939 are subject to debate. But there is no disputing the facts as they evolved after 1945. In essence, what I am saying is that a "stimulus" must have an end-game, e.g. there must be visible value creation after a road or bridge has been built. Many thanks for your comments - Rakesh


On Jan 29 04:01 PM carey_jim wrote:

> As the commenters have remarked, it isn't really known (there is
> little agreement on) what caused the Great Depression or what got
> us out of it.
>
> Bernanke is simply working from his own hypothesis which is shared
> by some and not by others.
>
> There are strong arguments, for example, against the 'World War II
> got us out of it' theory.
>
> You said there was a collapse in 1937 after the Roosevelt stimulus
> plan but that isn't true. There was a strong recovery (but not in
> unemployment)
>
> If you compare the real unemployment (using the same measures as
> were used in 1937-42) unemployment today and during the past 10 years
> is not much different from then or at about 14%.
>
> America didn't enter the war until virtually 1942 but we were into
> recovery long before that.
>
> So we are in virtually 'uncharted waters' now but human beings feel
> very uncomfortable with the unknown and so they invent explanations
> as far fetched as religious and mystical to economic and social.
>
>
>
>