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  • President Obama: Don't Kill The Golden Goose [View article]
    Change, this is a game changer, in my opinion. Bernanke repeatedly emphasizes that what people take for absolute is in fact relative - prices, "substantial", risk , etc. I concur, you pointed out as an example the $1.8 trillion Excess Reserves - what should the real number be?

    Now, as usual, you ask the right question: who would replace him? Rewind. Volcker is credited with wringing the hyper inflation of the early 80's, while Miller, his predecessor, is still chastised for being an easy money guy. Guess what, when Miller took office in 1878, rates were at 6%. When he left it to Volcker in 1979, they were at 12%. Sure, Volcker had to face the 1980 recession and brought rates down to 10%, then upped the ante to 20% in 1981. While this required cojones, Miller had done a good chunk of the job. Yet, when Volcker left under praise - after all the S&P had gone from 100 to 250 under his tenure -, who knew Greenspan?

    This happened in August 1987, and I guess the answer was "not enough people". While the 1987 is widely attributed to James Baker's remarks on the dollar, the fact is, the market didn't know who was driving the plane. This is when Mr. G. made his mark, dropping rates so that bonds would offset stocks in terms of wealth effect.

    Same thing in 2006, when Greenspan left it to Bernanke. Rightfully so: under Mr. G's tenure the S&P went from $250 to $1250. Who knew Bernanke then, and what could he do for an encore? BTW, notice the pattern here: every time the potato gets too hot, it's passed on to the new guy - inflation in 1978, stock market bubble in 1987, real estate bubble in 2006...

    Well, when you look at it in those terms - market up 150% under Volcker, up 400% under Greenspan, and up "only" 30% under Bernanke - I could see why he gets a lower rating. However, none of his predecessors had to face a 1929-like scenario, so I think we need to compare his 30% to a potential disaster of historical proportions.

    So, back to your question, who is the unknown who could replace him "under the circumstances"? And what would this do to the markets? I don't know, and I don't pretend to know. What I know is this: if it works, don't fix it, especially when you're playing with nitroglycerin. What I also know is I do not trust any of the latest round of Obama's appointees - Kerry, Rice, Power, etc. What I also know is that the Administration had Jon Corzine as a potential Treasury chief, now a dismissed thought, and still has Tim Geithner as potential Fed chief. Wait a second. Wasn't Geithner NY President from 2003 to 2009? Wasn't he Treasury chief from 2009 to 2013? Isn't the IRS a Treasury Bureau? I don't need to connect the dots, this is simple Braille.

    Now, to be clear, there are two issues here. One, who is going to be the pilot? Two, chances are that the new pilot keeps the bird flying. Then, tell me, what would derail a consolidation of Dems power in 2016? Not that I have a personal problem against Dems, but I do have a problem with spending et al.
    Jun 19, 2013. 07:35 PM | 1 Like Like |Link to Comment
  • President Obama: Don't Kill The Golden Goose [View article]
    Unfortunately, that option was not available at the time. Rewind. There was no market for these assets, for many reasons including the worthiness of their "insurance". Here is the thing. Everybody thinks QE was, as I say, an IED. It was not, it had been carefully thought off, but never tested in real time. In retrospect, it looks to me like many large government securitizations. The most recent one was in the early 90's, RTC if you recall. This was a $400 billion program, when GDP was $5 Trillion. Forward to today, times 3: $1.2 trillion. OK, QE is $2,2 Trillion, but what's a $1 trillion delta? Actually, this number fits with my thinking - when all is said and done, and the banks' B/S risk is reassessed after this bout of financial assets and housing reflation, they will start to draw down on their $1.8 trillion Excess Reserves. This is when the Fed will regain control of the Monetary Base. Watch the M1 Multiplier as a coincident indicator.
    Jun 19, 2013. 06:28 PM | Likes Like |Link to Comment
  • President Obama: Don't Kill The Golden Goose [View article]
    Amouna, to my knowledge, under Martin's tenure: (a) there was no Stock Market Crash and worldwide Liquidity crisis, but there was one when Martin's father was President of the St. Louis Fed; (b) whatever the Fed did at the time didn't work Martin Sr. should have known - he drafted the Federal Reserve Act.

    As I said, Martin was a good chairman, but he wasn't faced with the circumstances Dr. Ben faced - and still does. He is the only on who has been telling Obama to put our fiscal house in order, and now that all is on track, Obama does not want to hear this any longer.
    Jun 19, 2013. 02:30 PM | 1 Like Like |Link to Comment
  • President Obama: Don't Kill The Golden Goose [View article]
    I actually disagreed on Romney on two things; Bernanke and his original Green Policy stance - he retracted the second, but had to echo Paul Ryan on the first.
    Jun 19, 2013. 02:23 PM | Likes Like |Link to Comment
  • President Obama: Don't Kill The Golden Goose [View article]
    Martin was certainly a great chairman, and he probably learnt his lesson from his father. Question is, would he have followed his father 1920's policies, or Dr. Ben's?
    Jun 19, 2013. 02:21 PM | Likes Like |Link to Comment
  • The Air Pocket Is Over - SnP 1643 Going Higher [View instapost]
    One thing though - the balloon floated by Obama yesterday re Chairman Bernanke. I submitted an article this am, let's see if it gets published. This is potentially a game changer.
    Jun 19, 2013. 09:40 AM | Likes Like |Link to Comment
  • More on Housing Starts: Total starts were up 6.8% from April, up 28.6% from a year ago. Single family starts in were about flat M/M. Total building permits of 974K fell 3.1% M/M, and gained 20.8% Y/Y. Single family permits rise 1.3% M/M. (full report[View news story]
    This is so good. I was a couple of months early on this one in July 2011, but I have been overweighed since, still am, and will be for the unforeseeable future. Steady as she goes, the industry was fat and stupid, it is now lean and mean.
    Jun 18, 2013. 12:16 PM | Likes Like |Link to Comment
  • The Air Pocket Is Over - SnP 1643 Going Higher [View instapost]
    Hi David, here is the link to my latest article

    I actually started a series called "S&P Target 2000" on April 6, and I am now at # 8, so the answer to your question is a bit long. The short version is this: (a) continued P/E expansion now that we are back in the historical 14 to 26 range; I take 20 as a target, times $100; (b) This is justified by a regression to the mean for the Earnings Yield: a P/E of 20 would mean an Earnings Yield of 5%, with room to go; (3) I don't care about QE, except to say that the end of QE will lag the recovery; we can't have it both ways - say QE is bad when it happens, and what when it goes away; in my opinion, QE was good, as it resulted in Household Net Worth being at an all-time high, beating Q3, 2007 not only on the number itself, but on the Debt-to-Net worth ratio; when banks start to revive the Multiplier, and draw down on their $1.7 trillion in Excess Reserves, you'll know their B/S is back in shape, to include the skeletons they still hold via CDS et al; a that point, the Fed will simply sell its QE funded assets, and I'll bet you they'll made money on these. Classic disintermediation, been there done that, in the early 90's it was called the Resolution Trust Corporation. This one is times four.

    You may want to pose your question on the article - it would fuel the conversation :)
    Jun 18, 2013. 12:08 PM | 1 Like Like |Link to Comment
  • S&P Target 2000 - Air Pocket Ahead - Part IV - III [View article]
    BTW, I just posted an Instablog. The Air Pocket is over. In my opinion, the catalyst is the surprise Iranian Elections. Rhowani may be much help, but he is a step in the right direction, and he certainly received a large mandate that even Khameni could not ignore. This is clearly not the beginning of the solution, but it's no longer the beginning of the end either. What does that have to do with the market? You tell me.
    Jun 17, 2013. 10:18 AM | Likes Like |Link to Comment
  • S&P Target 2000 - Air Pocket Ahead - Part IV - III [View article]
    This reminds me of the last bubble, when people were hiking prices because there was "no more land available in Florida". JOE may have sold "its best land", but I like land banks in what I believe to be a secular bull Housing market - see my June 2011 article, a bit old but still the basis of my long term thinking:
    Jun 17, 2013. 10:13 AM | Likes Like |Link to Comment
  • The Next Known Unknown - Europe? [View article]
    Thank you for the thought John. Two things. One, it seems to me that many if not all participants believe QE was invented in 2008, and not well thought through. I do not know the precise date when this policy emerged, but it is supposed to have been first introduced by BoJ in 2001, albeit timidly - the Japanese are not know to be bold innovators. Then, and that's a fact, Bernanke had a speech on November 21st, 2002, titled "Deflation: Making "Sure" It doesn't happen here". To quote:" Some observers have concluded that when the Central Bank's policy rate fals to zero - its practical minimum - monetary policy loses its ability to further stimulate aggregate demand and the economy. At a broad conceptual level, and in my view in practice as well, this conclusion is clearly mistaken". Then he goes on about the fiat money system, etc., which is clearly QE. The net result is that Household Net Worth is now higher than at its previous peak in 2007. As a consequence, he was able to convince Draghi - not Trichet who has no clue - and Abe. If you are correct on the 10-year, and I think you're pushing it a bit here, this will make for a very steep yield curve which will be interesting to watch.

    The other thing, I do agree with you re the European Debt. In my opinion, this is the only reason why banks hold $1.7 Trillion in Excess Reserves at the Fed, and a similar amount at the ECB. My article of October 2011 is a bit updated, but highlights the CDS risk which I think still prevails.
    Jun 15, 2013. 11:05 AM | Likes Like |Link to Comment
  • S&P Target 2000: Air Pocket Ahead - Part IV - II [View article]
    Thank you Change, bon week-end!
    Jun 7, 2013. 08:16 PM | Likes Like |Link to Comment
  • S&P Target 2000: Air Pocket Ahead - Part IV - II [View article]
    I completely agree, jawboning 101. As for the pilot, 1600 was a relatively good support - a combination of the channel bottom from the November 2012 lows, and the channel bottom from the May 2013 high - and 1634 my was next pivot point. It first broke at 10:00, then was tested at 14:30. The big resistance is around 1670: top of regression channel from the March 2009 lows, top of regression channel and normal channel from October 2011 lows, and top of channel from November 2012 lows. Strangely enough, they converge at 1666, exactly 1000 points above the March lows of 666. I know, the Devil is in the details...:). Unfortunately, what starts to bother me is the political outlook. I do not like the positioning taking place re the Middle East, I see no reason why the dollar should be so weak except for geopolitical concerns, and I think it will get worse before it gets better - it's the usual strategy, defuse the domestic problems by going international. I do not know how much weight to attribute to this yet, but my antennas are up. In the meantime, we should back and fill in the 1630-1675 area, hopefully for a couple of weeks until we get a read on Q2 - especially as leadership comes from cyclicals and consumer discretionary. Time to switch from greed to nimble.
    Jun 7, 2013. 06:10 PM | Likes Like |Link to Comment
  • S&P Target 2000: Air Pocket Ahead - Part IV - II [View article]
    Forgot this one. Friday I wrote some calls against my UTEK - Nov 40 for 2.4, potential return 15% and ADES - Jan 40 calls at 5, potential return 18%, Tough to resist. In the worst case, I'll own the stocks lower.
    Jun 4, 2013. 09:30 AM | Likes Like |Link to Comment
  • S&P Target 2000: Air Pocket Ahead - Part IV - II [View article]
    I actually bought some long HL calls yesterday.
    Jun 4, 2013. 09:27 AM | Likes Like |Link to Comment