The Other Street

The Other Street
Contributor since: 2011
Company: Capital Max, Inc.
Actually, a bit of inflation could help too. I am not too concerned about the size of the B/S. I have not checked it lately, but if most of it is comprised of excess bank reserves, it means this money did not get into the real economy. Question is, did it inflate financial asset prices, I am not even sure. Take mortgage securities for example. It was simply a gigantic Resolution Trust Corporation - a bridge to normalization, and they are now no longer toxic (for most). Same for AIG, and soon for Fannie and Freddie. I think the main metric remains the Earnings Yield to 10-Year ratio, and with earnings growing, it's as good as it's been.
Hi Prateek,
You are right... I see no reason to change the 2000 target, and while I can argue that Index wise, 1850 is a good approximation coming from where we were, I think we are now clearly in a market f stocks, as opposed to a stock market. I have two types of portfolios, one with a high beta, one with a low beta, but in either case I don't feel confident in sharing these names - one, I am not paid for the advice, two, the corollary is that these may not be tailored to specific risk-return-tax-liquidity profiles of everyone reading my comments. I can share an overall concern with you, however, and this is also the reason why I am not contributing to SA - I am writing a book focusing on this Administration's foreign policy, which may be a game changer in terms of world equilibrium.
good idea.
I agree Rock, and it's going to last longer than people are used to because structural unemployment gets higher with demographics.
Sorry, I just saw your comment today October 19. I usually answer pretty quickly, don't know what happened here. If you look at my comment above dated September 16, I thought this was quite positive. We basically avoided a takeover of the Fed by the Administration, which would have been an historical disaster. Also, don't forget that Dr. Ben is still on the Board until 2021. So target 2000 is back on.
Change, for some reason I did not see your comment until today October 19. I would have answered earlier otherwise, as you know. It's going to be interesting to watch how the Reps are going to revert the fingerpointing. McConell is certainly not helping. My quick take, if I were them: the $26Bn the shutdown has presumably cost comes mainly from money Washington has not been able to spend. That's a good thing and that's why Obama vents instead of smiling. Where it becomes shameful on the Administration part is that part of the money should and could have been spent under special appropriations bill, like for the veterans families. Also, what's this closing of parks which forced some land lessors to close their personal businesses. But that's politics, let's see what side gets traction. Re the market, with Yellen in there and Ben still on the Board for several years, we're good.
One other thing. do not forget that Bernanke's term as Fed Board Member ends in 2021 (I think).
This is Monday September 16, 2013. The market did look weak since I wrote this note but it's time for a quick update. The Summers news shows that the President, badly damaged as he is by the Syria crisis and the looming Debt Ceiling, understands he no longer can lie to everyone on every front. And he knows that if the market tanks, housing tanks and if the economy goes, he goes. I never said he was not a smart politician. So, to make it short, enjoy the Yom Kippur rally. The only thing to worry is that the Russians are winning the Cold War, but that's another subject. The wheels are back on, Target 2000. For the record, pre-open the SnP futures are up 16 to 1698.
Completely agree Ironman. Obama is desperately trying to gain control over the Fed, while taking the credit for what Dr. Ben did. See http://seekingalpha.co... and http://seekingalpha.co...
Change, you know how I feel about this. For some reason, "they" always find a way to kill the Goose. Usually, it's Wall Street, with a flurry of fluffy IPOs, this time it's Obama. I have started writing a book on the subject which I may not finish, but the research involved yields some fascinating results. Whether this colors my thinking, I don't know. What I do know is that it is difficult for this President to deviate from some very stubborn concepts.
Barbara, let me put it this way. From 1995 to today, the market went up 300%, down 50%, up 100%, down 50% and up 155%... So anything could happen. The main differences today are, on the one hand, a much lower Debt-to-Household Net Worth, around 19% - but this could possibly deteriorate fast as Stocks represent some half of Net Worth, at $32 trillion; and on the other, a much higher government Debt. My concern with Summers, or any other pilot than Bernanke for that matter, is that the risk premium for stocks is likely to increase, which mean a P/E decompression. If we hit the 14 level, which seems to be an historical pivot point (see previous articles), this would mean a 12.5% correction. This would equate to 1485. This is a pretty recurrent area of support: it is the 25% retracement from the March 2009 lows (1444), the 38.2% retracement of the October 2011 lows (1460), and the 61.8% retracement of the November 2012 lows (1478). I am not saying we are going there, but this illustrates your point.
Robin thanks. There was a bit of short term support around 1680 yesterday, with the bounce in the pm. However, I had around 1692 has a longer trend resistance, which we hit upon, and this morning things look pretty weak. With the break through the channel support, I am looking to Fibonacci as a guide: next level 1664 and 1945. We could easily go down further, given the egos involved - both Obama and Summers are probably also watching, and if things do get worse, Obama may think twice about falling down with him. Remember, he can make an announcement anytime - as I told Rock above, he reappointed Bernanke in August 2009, and there was a reason for that: to calm the markets.
Rock, good question actually. There are seven Board members whose term is 14 years and expires on January 31, with staggered terms. The Chairman and Vice Chairman have four year terms. However, while in some instances the reappointment news comes close to that date, more often than not it can occur at any other time. Bernanke was first nominated on October 25, 2005, and confirmed on January 31, 2006, then renominated on August 25, 2009 for 2010. Greenspan was nominated on August 11, 1987 effective that day. Volcker took office in August 79.
The god news is that Bernanke's term as a Board member expires in January 2020...
All good ideas, thank you.
Scarkmott I agree on Summers, obviously but this is Obama's game plan: take the credit for Bernake's work, then take control of the Fed. He'll do it if the markets don't scare the wits out of him. If they do and Housing stalls, he is done. Let's see what happens.
On Geithner, I have another problem. He was President of the New York Fed when the s...t hit the fan in 2008, and he was Treasury Chief until recently. Last I checked, the IRS is a bureau of the Treasury...
I have written a letter to Bernanke, Boehner, Rubio and Scott (I live in Florida) basically saying that if Bernanke leaves, not only it creates a vacuum in which QE will have a life of its own, but more importantly it creates a political problem as Obama will take the Fed over. No reaction so far. Only a vocal support of Bernanke could work, eventually. Then, one of two things happen. Either Obama listens, or he does not. If he does not and the s...t hits the fan again, the Republicans have a chance in 2014. It would be a dangerous back game, but better than the guillotine. Write your Congressman and Senator.
Thanks for the suggestion bd4uandu. Inflation has been off my radar for long, so I don't have a full list of picks. I am going to look into this one. Same for HL actually, except there has been a bit of insider buying lately, I have liked the chart for a while, production cash cost of $7 an ounce ex by-products leaves room for a good cash-flow, which the company is using to consolidate smaller miners. My portfolios are concentrated, around 25 stocks no more, so I picked one. I am open to another one.
SilverD, I actually wrote it today but yes, this was after a conversation yesterday about my outlook. I have had the chart ready since this week-end, but I wanted to see some more results. Strangely, I had another chart showing a pivot point at 1692, but I don't know where I put it. When we broke it, I put the pen to paper.
Funny, my conclusion is the same as yours, stock specific, but you are net short, I am net long, in particular Housing. This is the one sector Obamers will support. My favorite spec is TST. I don't like Cramer (at all) but he is beefing up the story in time for his retirement when the next bear cometh...
Bradlesl, good point. I'll keep this in mind if indeed it unfolds. In the meantime, HYG has shown excellent correlation with the S&P.
Freya, I actually did same, and I agree with Silver as not just a passive hedge. I am also waiting to see how NILE results shape up on 7/31. I took profits there but I kind of like the Diamond story.
OK. This is July 11 at 11:40 EST. We are done with 1660, and we are testing 1666.... who says 1691?
Hopefully Congress and the Administration got the message: you're the ones screwing the economy with your Fiscal Policy. My Monetary Policy works, thank you - Housing jobs and related, Auto jobs, and Household Net Worth, in particular deleveraging. Sounds familiar... Good for Dr. Ben. Now that the market is saluting his work, it's going to be pretty tough for anyone to steal the credit, and to steer the boat astray. Enjoy, and tough luck Pisani.
Fair enough. I am watching both, good ideas. I own TOL on the high end, PHM in the low to middle - I think after its merger with Centex, its eaarnings power is untested, and JOE for land/Berkowitz. I also own FNMAT, AGM (extremely thin), WCC and WSBC.
SilverD, looks like you're going to be right...We'd better hold between 1588 and 1593.
Somebody opposed my line of reasoning by stating I was forgetting the increase in Public Debt which QE was enabling, shame on Dr. Ben (The Tea Party and Paul Ryan's line). This is true, but here is how I look at it. One, since 2008, Public Debt has increased by $8 Trillion, and Household Net Worth by $20 Trillion, trough to now. Two, what the Fed has actually bought in the period is $2.4 Trillion, which includes $1.7 Trillion that banks hold as Excess Reserves, i.e. money they don't need to lend. While this Excess is probably destined to clean any skeletons that remain in closets, particularly in Europe, I believe there will still be a large amount that will be returned to the Fed with the end of QE. The point is, QE pundits have no case, in my opinion, except at the margin. The fact remains that the Administration's Spending is the cause for the Debt increase, not Dr. Ben. He is simply making sure the banking system works. If you know of a better solution, rewind to 2008 and tell me what it was.
John,
TPH does look interesting. BRP may have a bit of a short term issue with $185Mn in STD and only $30Mn in cash, but it's a big company which should have no problem refinancing.
On TPH, I need to understand why they fell why the builders were rallying in April-May. This suggests to me that they were priced to high, yet I don't see anything wrong in their comps. Maybe the question is why they issued so much stock as opposed to leverage their balance sheet a bit more. Certainly, the ROE looks much greater going forward than the cost of debt. Also, any thoughts as to Starwood's 38% stake, and why did TIAA sell (a bit, for sure, but still).
Jason, please look at the Household Net Worth table in http://seekingalpha.co... as well at the speech which Dr. Ben delivered to the National Economists Club on November 21, 2002.
One, Fiat money creation is called the Monetary Base, and in a fractional reserve banking system, it should expand into larger Money aggregates - in the case since 2008, M1 Multiplier has dropped from 1.5 to 0.80, so big problem here, but that's another story.
Two, it is very difficult to say how money translates into prices, but there is clearly a relationship. If you take stocks for example, the incremental dollar which buy stocks usually translates in more than a dollar increase in price. Wealth, as you look at it, is the product times the price, whether it be housing or anything else.
Hope this helps.
OMG, Gold must be going through the roof! Let's buy Dave's fund before "people" pick up on this!!!
OMG, Gold must be going through the roof...!
I didn't realize you also had a Master in Philosophy. Impressive. Have you read Mark Twain?
Dave, you do sound a little pompous for somebody who surely must be making a ton of money managing your fund, yet who looks to save $300 per month on rent. BTW, care to share your performance record?
Thanks Honus, didn't see that. I love industries that are priced for wholesale bankruptcy. I picked HL for lack of better knowledge, and the chart is impressive. Also Najarian picked up on this call volume a couple of weeks back. In addition to the stock, I was long the Jan15 $4 calls - I sold them at $0.50, a huge premium, and bought the Jan 14 $2.5 for $0.80. BTW, this is the first time in a long time that I own Metals - actually, I started with Diamonds a couple of months back, with NILE. Whether we like it or not, we're in for a bit of asset reflation.
Hey Russ, care to revisit...?