'Sell In May And Go Away' Might Come Early This Year [View article]
David,
CRA did not mandate that interest only loans be 70% of the total in CA.
As for being long banks, here you have an industry that controls the government, the financial system and the economy, has a license to steal, and is accordingly not punished when caught.
A lawyer can steal more money with his briefcase that ten crooks with guns. A bankster, supported by hundreds of lawyers to fill his contracts with weasel words and delay justice in the courts with interminable dilatory tactics, can steal more than 10 lawyers with briefcases. So you have an exponential factor of 100, in favor of banksters.
'Sell In May And Go Away' Might Come Early This Year [View article]
CRA didn't make the banks lend in California, Nevada, Arizona and Florida, none of which is known for ghettos. California is a mecca for flakes, Nevada is a mecca for gamblers, Arizona and Florida a retiree destinations.
You are falling for your own right wing ideology, you will blame CRA until your dying day, meanwhile the banks have destroyed millions of jobs and created the GFC which in turn created the federal budget and deficit problems.
The devil made me do it defense is great, both left and right blame their own version of the devil, meanwhile the banks get away with it.
'Sell In May And Go Away' Might Come Early This Year [View article]
randall,
Fannie Mae and Freddy Mac were not the government. They were Government Sponsored Entities. You could own their shares, if you wanted to, at the time, they were expensive, compared to where they wound up after the GFC hit.
The Fed is now buying MBS. Again, the Fed is not the government. The Fed is big banks.
So you have to watch the banks, and when their act gets too sleazy, you have to head for the sidelines.
'Sell In May And Go Away' Might Come Early This Year [View article]
DC,
Nobody forces banks to do anything. They're too big, and too sly, and they employ too many lobbyists.
They develop their excuses before they are caught, and well before the shit hits the fan. "The Devil made me do it" is a good one, as old as the hills, and it still works, you can get an argument going on who is the devil here, some say GW, others say Barney.
It's very similar to when the government "made" the oil companies use MTBE, actually the oil companies pushed for the legislation, since the substance was harmful enough that they needed the devil made me do it defense before they could get away with it.
'Sell In May And Go Away' Might Come Early This Year [View article]
Z,
I remember it differently, GW going on about the "ownership" society, which meant loans were made to those who could not repay, and the banks were permitted to make the loans and then dump them on Fanny, Freddy, or sell them as private label.
'Sell In May And Go Away' Might Come Early This Year [View article]
The US government was not the main cause of the crisis: the main cause was crooked banks, such as but not limited to Lehman, GS, Bear Stearns, Merrill Lynch, JPM, C, BAC, Countrywide, Indy Mac, WAMU, Ally f/k/a GMAC, etc, etc.
The US government's contribution was a lack of prudential regulation of the banks, a stance that was driven by right wing Republican ideology as implemented by GW Bush.
Not enough has been done to re-regulate the financial services industry, and in due course they will create another crisis.
Rather than worry too much about old adages, the best strategy here is to watch the quality of the credit provided by banks, and the degree to which they have found means to offload the risk onto others, and to exit the market when it doesn't pass the smell test.
New Fed Data: Economy Drowning In Federal Debt [View article]
dnorm,
Federal government's biggest asset is taxpayers, future taxes is a prodigious income stream. The net present value of all future taxes is huge.
Nobody wants to think about that. There are so many of them out there, they would like to keep their earnings for themselves, they just can't picture their own earning capacity as a Federal Government asset. I must admit, the thought is not all that attractive.
I took my discretionary portfolio to 100% cash on 2/14, and have since been watching the train pull out of the station.
This could develop along the lines of the 2003-2007 period, failure to tighten in a timely manner after the shock of 9/11 set the market up for the housing bubble, and the associated bond quality issues.
After studying STLFSI and its relationship to market level I think we could have 3 to 5 years of this false prosperity. From there it's a question, how long the individual investor is willing to skate on progressively thinner ice.
New Fed Data: Economy Drowning In Federal Debt [View article]
Here's Warren Buffett's answer to the question of whether he is a Democrat:
I have what I call the minus 24 hour genie test. Imagine a genie poofed up 24 hours before you were born and asked you what kind of world you would want to live in. And you being the smart minus 24 hour baby would ask, “what’s the catch?” And the genie would respond that you would have to participate in the “ovarian lottery” and draw one of 6 billion tickets. Things such as born United States or Bangladesh; white, brown, or black; male or female; smart or dumb; these would all be completely up to chance. Well then, what kind of world would you create? And my [Buffett's] world would be a society with equality that treated everyone fairly. And the Democrats seem to be better at doing that.
New Fed Data: Economy Drowning In Federal Debt [View article]
Business reluctance to invest can be explained by the fact that management has lost the entrepreneurial instinct. They are afraid to stick their neck out and take the risk of failure.
Warren Buffet covers the issue of capex in his most recent shareholder letter. It's a classic, and well worth reading. He invites the timid souls who are afraid to invest in their business to come see him, because he is eager to do so.
Republican businessmen have long used "uncertainty" as a code word: essentially they claim that unless they are catered to by more tax breaks and looser regulation, they will not dispense this great prosperity that they have at their command for the benefit of the ignorant and unwashed.
Two things in life are certain: death and taxes. If these dimwits want certainty, it is easily provided.
Some money managers are getting excited by the latest holy grail for investors - using gross profitability as a basis for picking stocks. Research from University of Rochester's Robert Novy-Marx shows that cheap "quality" plays outperformed the overall market by over four percentage points a year from 1963-2011. "You get much more informative signals about the health of firms" this way, says Novy-Marx. [View news story]
As others have pointed out, it's pretty easy to develop something that will backtest to the point of beating the market by 4%. Going forward, not so easy.
Focus on gross profit is a starting point: from there it's important to look at what is being done with the resulting cash flows. Capex sometimes pressures stock prices because investors prefer free cash flow. But take for example Verizon (VZ), they did a lot of capex on FiOS and 4G wireless, eventually it drove the stock higher. R&D is similar, but very hard to quantify, it should result in higher gross margins if innovative products are being developed on a regular basis.
Some companies seem to report lower profits as a percentage of cash flow, or of gross profits. Aggressive deprecitaion and amortization can reduce reported earnings, but the cash can be put to good use.
Another thing with backtesting, the models usually include rebalancing at regular intervals. The equal weight S&P 500 outperforms the regular version, partly because of the rebalancing.
4-Year Stock Optimist Turns Negative - 4 Signs Market Is On Thin Ice [View article]
John, I made the move to all cash shortly before you did, after 4 years being consistently bullish.
I regard the market as fairly valued and certainly some stocks are undervalued.
It's difficult to articulate exactly why I did it, it's a first for me. I was up 17.5% year to date and figured that was good enough for now.
I think you did a good job explaining your move. At some point you have to trust your instincts, even if reason is telling you the market is likely to go higher.
Several years ago Honeywell (HON) was in a position where they had a lot of unfunded pension liability hiding out in AOCI, and had been increasing debt to buy back shares. I took profits and avoided the company based on those concerns.
Taking a look at them today, they have done the right thing, bit the bullet on the pension accounting and paid down some debt. A change from FASB on this subject would be a long term positive for the markets, as it would bring pension expense out into the open.
Verizon (VZ) reported weak 4th quarter earnings because of the discount rate, but the market accepted it with equanamity. As mentioned in the article, it's a two edged sword, an increase in the discount rate will make the company look good, some year in the future.
'Sell In May And Go Away' Might Come Early This Year [View article]
CRA did not mandate that interest only loans be 70% of the total in CA.
As for being long banks, here you have an industry that controls the government, the financial system and the economy, has a license to steal, and is accordingly not punished when caught.
A lawyer can steal more money with his briefcase that ten crooks with guns. A bankster, supported by hundreds of lawyers to fill his contracts with weasel words and delay justice in the courts with interminable dilatory tactics, can steal more than 10 lawyers with briefcases. So you have an exponential factor of 100, in favor of banksters.
Indeed, why not invest?
'Sell In May And Go Away' Might Come Early This Year [View article]
You are falling for your own right wing ideology, you will blame CRA until your dying day, meanwhile the banks have destroyed millions of jobs and created the GFC which in turn created the federal budget and deficit problems.
The devil made me do it defense is great, both left and right blame their own version of the devil, meanwhile the banks get away with it.
'Sell In May And Go Away' Might Come Early This Year [View article]
Fannie Mae and Freddy Mac were not the government. They were Government Sponsored Entities. You could own their shares, if you wanted to, at the time, they were expensive, compared to where they wound up after the GFC hit.
The Fed is now buying MBS. Again, the Fed is not the government. The Fed is big banks.
So you have to watch the banks, and when their act gets too sleazy, you have to head for the sidelines.
'Sell In May And Go Away' Might Come Early This Year [View article]
Nobody forces banks to do anything. They're too big, and too sly, and they employ too many lobbyists.
They develop their excuses before they are caught, and well before the shit hits the fan. "The Devil made me do it" is a good one, as old as the hills, and it still works, you can get an argument going on who is the devil here, some say GW, others say Barney.
It's very similar to when the government "made" the oil companies use MTBE, actually the oil companies pushed for the legislation, since the substance was harmful enough that they needed the devil made me do it defense before they could get away with it.
'Sell In May And Go Away' Might Come Early This Year [View article]
I remember it differently, GW going on about the "ownership" society, which meant loans were made to those who could not repay, and the banks were permitted to make the loans and then dump them on Fanny, Freddy, or sell them as private label.
Here's a link:
http://bit.ly/ZGv08l
Regulators such as OTS were the ideal, under GW's reign, they did nothing.
'Sell In May And Go Away' Might Come Early This Year [View article]
The US government's contribution was a lack of prudential regulation of the banks, a stance that was driven by right wing Republican ideology as implemented by GW Bush.
Not enough has been done to re-regulate the financial services industry, and in due course they will create another crisis.
Rather than worry too much about old adages, the best strategy here is to watch the quality of the credit provided by banks, and the degree to which they have found means to offload the risk onto others, and to exit the market when it doesn't pass the smell test.
New Fed Data: Economy Drowning In Federal Debt [View article]
Federal government's biggest asset is taxpayers, future taxes is a prodigious income stream. The net present value of all future taxes is huge.
Nobody wants to think about that. There are so many of them out there, they would like to keep their earnings for themselves, they just can't picture their own earning capacity as a Federal Government asset. I must admit, the thought is not all that attractive.
Correction Risks Fade? [View article]
I took my discretionary portfolio to 100% cash on 2/14, and have since been watching the train pull out of the station.
This could develop along the lines of the 2003-2007 period, failure to tighten in a timely manner after the shock of 9/11 set the market up for the housing bubble, and the associated bond quality issues.
After studying STLFSI and its relationship to market level I think we could have 3 to 5 years of this false prosperity. From there it's a question, how long the individual investor is willing to skate on progressively thinner ice.
New Fed Data: Economy Drowning In Federal Debt [View article]
I have what I call the minus 24 hour genie test. Imagine a genie poofed up 24 hours before you were born and asked you what kind of world you would want to live in. And you being the smart minus 24 hour baby would ask, “what’s the catch?” And the genie would respond that you would have to participate in the “ovarian lottery” and draw one of 6 billion tickets. Things such as born United States or Bangladesh; white, brown, or black; male or female; smart or dumb; these would all be completely up to chance. Well then, what kind of world would you create? And my [Buffett's] world would be a society with equality that treated everyone fairly. And the Democrats seem to be better at doing that.
Here's a link to my source:
http://oreil.ly/YcBXN1
New Fed Data: Economy Drowning In Federal Debt [View article]
New Fed Data: Economy Drowning In Federal Debt [View article]
Warren Buffet covers the issue of capex in his most recent shareholder letter. It's a classic, and well worth reading. He invites the timid souls who are afraid to invest in their business to come see him, because he is eager to do so.
Republican businessmen have long used "uncertainty" as a code word: essentially they claim that unless they are catered to by more tax breaks and looser regulation, they will not dispense this great prosperity that they have at their command for the benefit of the ignorant and unwashed.
Two things in life are certain: death and taxes. If these dimwits want certainty, it is easily provided.
Correction Risks Fade? [View article]
Some money managers are getting excited by the latest holy grail for investors - using gross profitability as a basis for picking stocks. Research from University of Rochester's Robert Novy-Marx shows that cheap "quality" plays outperformed the overall market by over four percentage points a year from 1963-2011. "You get much more informative signals about the health of firms" this way, says Novy-Marx. [View news story]
Focus on gross profit is a starting point: from there it's important to look at what is being done with the resulting cash flows. Capex sometimes pressures stock prices because investors prefer free cash flow. But take for example Verizon (VZ), they did a lot of capex on FiOS and 4G wireless, eventually it drove the stock higher. R&D is similar, but very hard to quantify, it should result in higher gross margins if innovative products are being developed on a regular basis.
Some companies seem to report lower profits as a percentage of cash flow, or of gross profits. Aggressive deprecitaion and amortization can reduce reported earnings, but the cash can be put to good use.
Another thing with backtesting, the models usually include rebalancing at regular intervals. The equal weight S&P 500 outperforms the regular version, partly because of the rebalancing.
4-Year Stock Optimist Turns Negative - 4 Signs Market Is On Thin Ice [View article]
I regard the market as fairly valued and certainly some stocks are undervalued.
It's difficult to articulate exactly why I did it, it's a first for me. I was up 17.5% year to date and figured that was good enough for now.
I think you did a good job explaining your move. At some point you have to trust your instincts, even if reason is telling you the market is likely to go higher.
Will The Real EPS Please Stand Up [View article]
Several years ago Honeywell (HON) was in a position where they had a lot of unfunded pension liability hiding out in AOCI, and had been increasing debt to buy back shares. I took profits and avoided the company based on those concerns.
Taking a look at them today, they have done the right thing, bit the bullet on the pension accounting and paid down some debt. A change from FASB on this subject would be a long term positive for the markets, as it would bring pension expense out into the open.
Verizon (VZ) reported weak 4th quarter earnings because of the discount rate, but the market accepted it with equanamity. As mentioned in the article, it's a two edged sword, an increase in the discount rate will make the company look good, some year in the future.