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Tom Armistead
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I am a retired accountant, having spent the early years of my career in the insurance industry and the later part in the field of accounting. My insurance experience has given me the willingness to accept investment risk if I feel the return justifies it; also, an interest in applying risk... More
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  • Green River (Continued) 11 comments
    Oct 18, 2013 9:08 AM | about stocks: SPY, DIA, QQQ

    Back in September 2011 I briefly touched on the Greenspan/Bernanke diagnosis and prescription for what ails Mr. Market. The sovereign remedy, which must be applied in increasing quantities, is Green River. Whatever is wrong with Mr. Market, that makes him sometimes unable to provide a bid, must be cured at all costs.

    Greenspan limited his dosage to a couple of quarts every few months, administered orally. However, Bernanke, faced with a patient who was not responding to conventional doses, elected to stick a fire hose up Mr. Market's ass and fill him full of Green River until it gushed from his other orifices. That's where we are today.

    Now back two years ago Congress and the President were faced with a decision, whether John Q. Public should be given the same therapy. The conclusion was, he was dosed with an eyedropper. There was some question as to whether he needed to be bled of the green elixir, that he perhaps had too much of it in his system.

    Now Sequestration is going to escalate, unless some compromises are made. That means, they will continue to bleed the patient until he gets better.

    I still don't know how this ends.

    Disclosure: I am long SPY.

    Stocks: SPY, DIA, QQQ
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Comments (11)
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  • Robin Heiderscheit
    , contributor
    Comments (3320) | Send Message
    Tom, fiscal policy is still very stimulative, along the lines of the Reagan years in terms of GDP share. Monetary policy is still highly stimulative.


    I guess I am not sure what your point is (and that is unusua!)? Are you suggesting fiscal policy should go from the current very stimulative (5% of GDP) back to something more akin to the 2009-10 levels??
    18 Oct 2013, 10:30 AM Reply Like
  • Tom Armistead
    , contributor
    Comments (6296) | Send Message
    Author’s reply » Robin, the point would be, that the government should have been able to increase spending to combat the recession. However, due to wretched excess spending during the Bush years, that was not really an option.


    Debates about fiscal policy ultimately stopped wages to Federal employees who were on furlough. They shut down applications for welfare in one Southern state, just to inflict some pain on those who are already suffering.


    Also, the recession reduced tax collections, which are now recovering. So to talk about fiscal deficits in terms of GDP you have to look at tax collections as affected by the recession. The recession would have been less severe if financial regulations had been enforced. Also, if SIFMA hadn't legalized CDS gambling and opened the door for fraud, abuse and manipulation.


    Sequestration will cut government spending, willy nilly, but will probably miss the pork. We see where Mitch McConnel got his share, the stupid dam.


    Meanwhile I don't hear you questioning Mr. Market's dosage of Green River. If the rich can be given that kind of money, why not the poor?
    18 Oct 2013, 10:42 AM Reply Like
  • Robin Heiderscheit
    , contributor
    Comments (3320) | Send Message
    Tom, I am a libertarian not a big govt Bush conservative, so I think Fed policy has been terrible.


    "the point would be, that the government should have been able to increase spending to combat the recession"


    Not sure what you mean by that comment, spending as % of GDP was 21% in 2007 and spiked up to 25% in 2009 and held at 24% in 2010 and 2011.


    I agree that sequestration was not a great approach!
    18 Oct 2013, 10:52 AM Reply Like
  • Tom Armistead
    , contributor
    Comments (6296) | Send Message
    Author’s reply » Government spending as a % of GDP is one measure, deficit is another. Deficits as you know have been horrible.


    Economic theory holds that government deficits are good for business, see Cullen Roche on the issue. That looks to be true, corporate profits as a % of GDP are huge.


    The American people are going to have to come to an agreement on what they want from government and how that is going to be paid for. And that will include you as a Libertarian and me as someone who is well to the left of center.


    Between now and the next severe recession, the government has to run surpluses in order to reduce national debt to where deficit spending will be possible when needed. That's a tall order, and I'm not sure how we get to there from here.
    18 Oct 2013, 11:01 AM Reply Like
  • Robin Heiderscheit
    , contributor
    Comments (3320) | Send Message
    At least we probably agree on foreign policy and civil liberties!


    Your last paragraph is spot on. Best hope is that growth accelerates the next couple of years, which would keep the deficit in the current 4-5% of GDP range. Totally agree that the next time we need fiscal stimulus it will be tough.


    It is best at this point I think one should view the Fed as nothing more than an arm of the Treasury so when we need to run bigger deficits during the next recession the "green river" will continue and probably expand.


    Have to admit that I have joined the black helicopter crowd that believes the Fed might not ever be able to end QE, and will definitely NEVER end easy money, esp. since every 100 bps in belly of the treasury curve now means another $200bl in deficits.


    Except for a few brief golden ages in the era of universal sufferage world power central banks have always pretty much functioned as arms of their national treasury. Fed policy is no longer full employment and stable money it is ensuring that treasury bills and bonds get sold, period.


    I always enjoy your perspective Tom.
    18 Oct 2013, 11:15 AM Reply Like
  • Tom Armistead
    , contributor
    Comments (6296) | Send Message
    Author’s reply » I too enjoy our discussions.


    From where it lies, the challenge is, how to get close enough to the source of green river.


    For me, that would be owning a broad slice of corporate America. The trick is, not to get shaken out when the next market crash occurs.
    18 Oct 2013, 11:24 AM Reply Like
  • wrocnrob
    , contributor
    Comments (271) | Send Message
    Tom Armistead...I still don't know how this ends.


    I don't think it would work to well if anyone did. My guess is at some point, people stop using fiat money and trade with Joules or Watts. Nearer-term, those most efficient (output/input), in terms of energy, will be the victor.


    Looking forward to reading about your reflections from the wild. Emerson, Thoreau and Armistead?
    18 Oct 2013, 11:44 PM Reply Like
  • Tom Armistead
    , contributor
    Comments (6296) | Send Message
    Author’s reply » wrocnrob,


    Soon I will go to Bear Mountain (in NY) which overlooks NYC. From there I will look down and contemplate the beauty of nature, the vanity of man and his markets, the transitory nature of the existence we lead here on earth, how dumb it is to try and beat the market, etc.


    I did a preliminary exercise in the genre, found here:



    That was Bear Mountain, CT...
    19 Oct 2013, 06:41 AM Reply Like
  • wrocnrob
    , contributor
    Comments (271) | Send Message
    Maybe include some charts of miles walked vs time or epiphany vs elevation. Think what you will of Wall Street, I believe it was America's financial systems that led to so many innovations. Let's hope the good accountants stay ahead of the bad ones.
    19 Oct 2013, 09:09 AM Reply Like
  • easyrob
    , contributor
    Comments (475) | Send Message
    Dear Tom,
    An amusing if not happy view of the current economic situation.
    I'd add refreshing but the visuals clash ;-)
    19 Oct 2013, 07:16 AM Reply Like
  • drcarl
    , contributor
    Comments (359) | Send Message
    I like what you have to say. And I truly enjoy the way you say it. My wife would say you are "cantankerous."
    21 Oct 2013, 09:57 AM Reply Like
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