Sean Maher

Research analyst, portfolio strategy, macro, currencies
Sean Maher
Research analyst, portfolio strategy, macro, currencies
Contributor since: 2008
Company: Entext Economics & Strategy
It's not my definition; all the data including depreciation are as calculated by the U.S. Bureau of Economic Analysis and is a blended average of public and private sector assets, and that sort of level is typical for advanced economies. There is plenty of evidence including reports from the American Society of Civil Engineers that most of the physical 'stuff' in the U.S. from highways to water treatment plants is becoming increasingly dilapidated and will requires several trillion dollars to be upgraded. As someone who travels regularly to Asia, Europe and the U.S., it's hard to argue that the country's transportation network, for instance, is any longer even remotely world class...you get what you pay for.
On the contrary, natural gas is the only economically viable 'green' fuel out there right now; solar, wind etc needed huge subsidies to be competitive with oil even at $150, and at these levels are hopelessly uneconomic. If you want to cut carbon emissions and import dependence, it's logical to switch a chunk of electricity generation to gas (half the CO2 emissions of coal) and nuclear...this will dawn on the fiscally constrained Obama administration before too long.
On Mar 24 12:07 PM jack kreg wrote:
> Sean, you said nothing about the steep and massive increase in energy
> taxation that Obama is going to impose on energy company's and America's
> people. Hence, with NG a regional fuel, its priced to meet a strongly
> slumping economy in Obama's America. But, oil, a global fuel, is
> being priced to meet future growth in the more free economy's, namely
> BRIC's.
> OObama's energy taxation plans will not only hurt Americas energy
> industry, but its people and the broader economy as well.
BrunoT, I suggest you read my posting from 28 August, and those all through September and October...you will find I made clear and urgent warnings of an imminent equity crash in very good time based on severe credit market deterioration evident from late August, but retained a positive dollar view throughout. I'll hold my track record up against anybody's over the last year...including your palm reader.
On Mar 08 03:43 PM BrunoT wrote:
> On Aug 5, 2008 Sean Maher wrote:
>
> "it's now a good bet that on a 12m view, inflation concerns will
> have abated, the dollar will be in a surprisingly strong uptrend,
> and US equities will be materially higher from here."
>
> Beware of those dispensing readings of the future for money. They're
> not much more reliable than palm readers. And like psychics, they
> never seem as proud of crowing about their abject failures as they
> do about the twice a day the stuck clock is correct.
>
> Does about half sound like being "materially higher" to you?
Shaun, indeed they have, and the PBOC is now frantically slashing rates, but given the lags in monetary policy it's all too late to avert a deep slowdown in 2009...the point is that the Fed has been quick to react to the looming US slowdown from late 2007, while the PBOC has retained a very tight stance (notably to squeeze rampant real estate speculation) until very recently, exacerbated by the reversal of opaque speculative flows circumventing official capital controls. Controlling an economy via monetary policy is like steering a supertanker, and China is now way off course.
On Dec 17 08:46 AM Shaun Rein wrote:
> "A key mistake made by the Fed in the 1930s Depression (and one identified
> by Ben Bernanke in his PhD thesis) was to constrict money supply
> at a critical juncture after the Wall Street crash, and that is an
> error the current Fed is taking extreme pains not to repeat. However,
> Chinese authorities, lacking that institutional memory, are set to
> repeat this mistake just as the country's merchandise exports slump
> despite ever increasing export subsidies and a recently depreciating
> currency."
>
> Ummm... China announced 2 days ago that it was increasing money supply
> by 17%...
Yes Deryl, I was referring to the Maunder Mininum period, which most sources place between 1650-1700 or so, I think the key point is to strip out the signal from the background noise, as in the financial markets. There is a lot of natural variability in temperature over time, both in the oceans and atmosphere, and humans are flattering their importance in the big scheme of things to conclude that their role is dominant and that we can fine tune this inevitable variability.
On Dec 03 09:43 PM derryl wrote:
> Sean,
> The Little Ice Age lasted much longer than 50 years, though its actual
> duration is somewhat disputed. In 2000 Brian Fagan published a book
> titled, "The Little Ice Age". Fagan's timeframe is 1300-1850, which
> is the longest I've seen.
>
> You might be referring to the coldest period within these cold centuries
> which was between 1645-1715, which coincides with the Maunder Minimum
> of sunspot activity. According to Wikipedia, between 1610-1681 only
> 50 sunspots were recorded as opposed to the typical 40,000-50,000.
> On the face of it it looks like a less active Sun leaves Earth too
> cold for comfort.
>
> Prior to the little ice age was the Medieval Warm Period, from maybe
> 800-1300. This is the age of the Vikings and their 450 year colonization
> of Greenland (now mostly a frozen glacier), when reduced pack ice
> on northern seas allowed their ships freer range.
>
> Recent climatology is focusing on the relationship between solar
> output and Earth's temperature (duh, turn up the planet's furnace
> and it gets warmer on Earth!) and the relationship between sunspots
> and solar output.
>
> For about 30 years between the 1940s and 1970s planetary temperature
> was dropping which is the reason for the ICE AGE! scare of the 70s.
> From the 1980s to about 2000 the temperature was warming which led
> to the MELTDOWN! scare that global warming alarmists are still shouting
> today, even though the planet stopped warming in about 2001 and actually
> cooled the past couple of years.
>
> The most damning evidence against current global warming alarmism
> is the fact that about 2.5-3 million years ago Earth entered into
> a cycle of ice ages and interglacial periods that we are still in
> today. The most recent Wisconsin era glaciations began about 70,000
> years ago and the most recent interglacial began about 13000 years
> ago. The Laurentide ice sheet extended as far south as Nevada. Utah's
> Great Salt Lake is the remnant of a glacial "puddle" of meltwater.
>
>
> Sea levels declined from preglacial levels as much as 100 meters
> at the trough of the deepest glaciations. You could walk across the
> Bering Strait and England was part of continental Europe, until some
> of the ice melted and raised sea levels closer to 'normal' levels.
>
>
> This geological era is called the Pleistocene. The damning question
> is, why did all those other global warmings occur which ended all
> those other ice ages, when humans didn't have SUVs yet? If humans
> cause global warming, what caused all those OTHER global warmings?
>
>
> For some reason, wishful thinking maybe, the most recent 12000 years
> since the end of the last ice age is called the Holocene era, as
> if the Pleistocene glaciation cycle has ended for some unexplained
> reason and we're into a permanently warmer new era called the Holocene.
>
>
> This planet is about 4.6 billion years old and is continuously evolving.
> The planet is geologically active, and the Sun is geologically active,
> and there has never been any kind of geological "stability" in the
> solar system. The only constant is that things keep changing. <br/>
>
> So anybody who thinks we can stabilize Earth's climate by riding
> bicycles has not done any homework in geological history. The planet
> did not exist in a state of ecological Eden until us sinners started
> driving trucks. Climate stability is a myth and a wish, not reality.
> The climate will keep changing no matter what we do.
>
> About 300-250 million years ago the continents were still joined
> together as Pangaea (plate tectonics is the science of "continental
> drift"). About 55 million years ago the area that is now the Arctic
> was a little further south and enjoyed an average temperature of
> about 70 degrees F, like Florida today. The entire planet was much
> warmer and lusher than it is today.
>
> There is no evidence of permanent polar ice caps until about 13 million
> years ago, then we had the Pleistocene with its deep ice ages beginning
> about 3 million years ago. The long term trend certainly seems to
> be that the planet is cooling, which makes sense.
>
> The planet began as a collection of hot gases and dust about 4.6
> billion years ago. Over the first maybe 500 million years enough
> energy radiated into space to cool the surface so the crust began
> to form. The crust has been thickening ever since, so it's now between
> 20 and 200 miles thick. The core is still molten, but much of that
> heat is now stored in the thick crust rather than radiating out to
> warm the surface. That's my theory of why we're into this geologically
> recent pattern of ice ages, this ongoing reduction in the geothermal
> component of our surface temperatures.
>
> So Sean is right. We should welcome some global warming and fear
> global cooling, since in fact the planet is cooling in the long trend.
>
>
> In 2005 William Ruddiman, former chairman of the U of Virginia enviro
> sciences dep't, published a paper in the Quaternary Research Reviews
> arguing that "human activities may have averted the next ice age".
> By studying ice core data (the same data Gore misused in his movie)
> Ruddiman concluded, "Without any anthropogenic warming earth's climate
> would no longer be in a full interglacial state (warm period) but
> be well on its way toward the colder temperatures typical of glaciations."
> He thinks human economic activity over the past 8000 years, such
> as burning forests to enhance gathering and hunting and later for
> agriculture, irrigation in Eurasia, livestock production, etc., may
> have generated enough greenhouse gases to blanket the planet and
> forestall the next ice age.
>
> So maybe we better hold off on crushing all those obsolete SUVs.
> One cold winter soon we may want to leave them idling 24/7 to try
> to kickstart some global warming.
Good analysis, which reflects John Hussman's cyclically adjusted earnings model, suggesting 900 as a valuation floor on the S&P with expected returns in high single digits from here. Stocks are cheap, and having been aggressively bearish, I'm buying into the climactic panic...
I agree, and I called the commodity bubble right in the Spring, and have been aggressively short equities since August (see blog)...900 on the S&P is 10.4 (or the long time average) times cyclically adjusted peak earnings and was my floor target in this selling panic. Bombed out value opportunites abound, and on the first significant reversal in Libor/TED spread, stocks will have a record rally...we'll see how Lehman's CDS auction goes today.
Good point re Fannie and Feddie, see latest blog post re closing my short positions (the one above was actually posted on the blog on 5th October, SeekingAlpha are a bit slow these days!)
Great blog, I posted a very similar analysis on Seeking Alpha today, this is the best second chance shorting opportunity since oil hit $147 twice in July; the short-selling rules will have the perverse effect of removing a key revenue stream for MS and GS and also reducing their available cash (hedge fund margin deposits)...the law of unintended consequences will mock the whims of politicians!
Good analysis, I posted on the wildly risky strategies many hedge funds are now employing on my markets blog last week, their is now serious deleveraging acrosss hedge funds caught long and wrong at the top of the commodity bubble; it proved a great contrary trade for me, but I fear we will Amaranth style blowups in coming weeks as the redemptions and margin calls kick in.
Good summary of the deleveraging pain now facing US consumers; I've discussed a structural downshift in US consumption (and necessarily huge rise in infrastructure spend) on my blog many times; while attention is focused on the slumping subprime mortgage market, the biggest risk going forward is in superprime 'McMansion' loans, of $500k-$2m where default rates are climbing fast; the greatest overconsumption/debt accumulation in the boom years has been among the professional middle classes striving to maintain their 'deserved' lifestyle in the face of stagnating salaries and soaring service inflation. As white collar job losses rise, this may cause a whole new wave of foreclosures in upmarket suburbs nationwide.
To address some of the points raised above:
1. If you knew anything of the geography and economy of China, you would realise that the earthquake had minimal effect on manufactured exports or the relevant infrsstructure; it affected agriculture and coal production predominantly. Exports are slowing rapidly...
2. Who cares what China is doing in the Congo, it's irrelevant; I'm describing an illegal speculative scheme that the authorities are unaware of, although some corrupt officials are undoubtedly involved.
3. Try to keep emotion out of your investment decisions, my previous calls speak for themselves. It's flattering to think I could single handedly crash the copper market, but I'm simply taking an informed view of a clear anomaly. Everyone in the copper market suspects something is up, but won't talk publicly about it...
A nice summary of tumultuous events; both the decision to engage the Iranians and ban naked shorting in many financials (soon to be extended to the rest of the market I suspect) probably reflect the growing role of Hank Paulson in managing this crisis and were perfectly timed for maximum impact; the Fed is pretty much out of ammunition (just look at their balance sheet) and more muscular market intervention is now required. Goldman Sachs has taken over the US government, and it's no bad thing...
Agree with your analysis that we are set for a tradable bear rally (10-15% on the S&P) as posted on my finance blog Dead Cats Bouncing, and leadership is already rotating away from commodity exposed sectors; airlines, refiners, and financials/housing are all high beta rally plays if we head toward $100 on crude as I expect. Good sell call on China last Autumn; after the subsequent crash it's now on 21x trailing earnings and will benefit from falling global energy and food prices.
I agree with the target at either side of $100; given marginal production costs at the most expensive conventionar fields of $70-80, that leaves a significant geopolitical risk premium in the price. I have analysed the Peak Oil hysteria in depth in my finance blog, and absent a major hurricane, the path looks a one way bet after last week's technical carnage.
I wrote about the longer term prospects for Japan recently on my finance blog; economically destructive demographic and social trends (such as the 'freeter' phenomenon), plus a sclerotic political system undermine the undoubtedly positive short term technical picture.
deadcatsbouncing.blogs...
Thanks for the feedback, we have seen a dramatic bank rally in Europe in recent days as short selling has been restricted during rights issues in the UK and Barclays is looking at a £4bn placing with SWFs. We may have reached an important bottom for the sector in the face of an overwhelmingly bearish analyst consenus...
I agree that Vietnam is a great LT story; I have written about the Vietnamese (and indeed Chinese) stockmarket slump extensively on my investing blog deadcatsbouncing.blogs.../; both countries have negative real interest rates in an environment of spiralling inflation (25% in Vietnam and almost 9% in China) but both markets now look reasonable LT value, currency risk is the key unknowable, China might revalue 10-15% at any time to control inflation while the Dong looks ripe for a slump in value.
The recent Senate testimony of hedge fund manager Michael Masters says it all re the speculative bubble now ready to burst:
"prices have increased the most dramatically in the first quarter of 2008. We calculate that Index Speculators flooded the markets with $55 billion in just the first 52 trading days of this year; that's an increase in the dollar value of outstanding futures contracts of more than $1 billion per trading day. There is a crucial distinction between Traditional Speculators and Index Speculators: Traditional Speculators provide liquidity by both buying and selling futures. Index Speculators buy futures and then roll their positions by buying calendar spreads. They never sell. Therefore, they consume liquidity and provide zero benefit to the futures markets... traditional policy measures will not work to correct the problem created by Index Speculators, whose allocation decisions are made with little regard for the supply and demand fundamentals in the physical commodity markets. If OPEC supplies the markets with more oil, it will have little affect on Index Speculator demand for oil futures. If Americans reduce their demand through conservation measures like carpooling and using public transportation, it will have little affect on Institutional Investor demand for commodities futures."
Conclusion: OPEC are right; it's not fundamentals, but rampant speculation that has driven oil prices above $100 (marginal cost of the most expensive new fields/alternatives like tar sands is $70); time to either dump SPR crude on the market, or for the CFTC to suspend new index buying of oil futures before the US economy slumps into a nasty and intractable recession. As with the sub-prime debacle and the tech bust before that, weakly regulated financial capitalism is increasingly self destructive.
The looming inflation crunch is a theme I've addressed many times on my finance blog, and indeed the wise comments of Paul Volcker on the issue. The bizarre (and self serving) changes made to the CPI calculation methodology under Clinton (such as the highly imaginative hedonic pricing) are now coming home to roost and we could face a credibility crisis for US stats in the next few months, with dire implications for the dollar and US bonds. The emperor, if not quite naked, is wearing very tattered rags...