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RS055

RS055
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  • FOMC tapers, but continues to eye soft inflation data [View news story]
    I think you are right. This QE thing has outlived its utility as a psychological prop ( which is mostly what it was). If the market gives up the bulk of last years sugar driven gains - in a month or two, then they may have to come up with some new scheme. The problem is , I dont know how much credibility they have. Of course they could do what Japan, Taiwan and other countries have done in the past - simply instruct their TBTF banks to directly buy stocks - they may need congressional approval for this, but how hard would that be in the midst of a stock market collapse.
    Jan 29 03:18 PM | Likes Like |Link to Comment
  • FOMC tapers, but continues to eye soft inflation data [View news story]
    The Fed is an intellectually bankrupt, politically captured institution. All this social engineering through "communications policy" smells badly like something out of the Soviet era .
    They dont have any models that work, their job is simply to keep the financial sector from imploding. Have they succeeded? Best not to take too many victory laps on this - still too early to tell.
    Jan 29 03:02 PM | 1 Like Like |Link to Comment
  • FOMC tapers, but continues to eye soft inflation data [View news story]
    "The Fed repeated its message that they will likely keep rates at that low level "well past" the unemployment rate reaching 6.5%."
    Brilliant statement - devoid of any information content whatsoever. So they have basically said that 6.5% is a meaningless number - how about the other numbers on the real number line?
    Jan 29 02:55 PM | 1 Like Like |Link to Comment
  • Loving Bonds (Conditionally): Fixed Income Investing Themes For 2014 [View article]
    Since QE has been focused on longer maturity bonds, as the Fed tapers but simultaneously sharpens its message of "no rate increase for a long long time" , a surface analysis would lead one to curve steepening. I suppose you are arguing that this scenario is already priced into the markets and the contrarian trade of flattening may have better odds? Am I reading you right?
    Of course as the market perception of tapering goes from being a single data point to an expectation of a $10 bn/mo tapering process leading to cessation of QE in the fall, we may well get a more serious stock market selloff than consensus. In which case, Ms. Yellen may well have to show her creativity and roll out a new "innovative" program to calm the markets. It is very unclear what excatly the Fed has up its sleeve to counter a market crash at this point. Backing off from tapering may not be enough to jolt the market back - QE has outlived its ability to shock and awe.
    Jan 29 12:49 AM | Likes Like |Link to Comment
  • At the close [View news story]
    Predictable sequence:
    1. healthy pullback - nothing to worry about.
    2. Typical 10% correction , absolutely normal.
    3. Correction in a bull market 20%, buying opportunity.
    4. See , i told ya - market is up 2%!!
    5. 30% down, still up from last January. market is crazy.
    6.. 40% down. Ridiculous market. Fundamentals are still good. Too late to sell anyway.
    7. Hmmm.... earnings are down 20-50% across the board. Stocks are overvalued!!!

    We are not even at stage 1 yet.
    Jan 24 06:32 PM | 8 Likes Like |Link to Comment
  • Can Dividend Growth Investing Be Reconciled With Modern Portfolio Theory? [View article]
    Unfortunately MPT has not done any damage whatsoever to the salaries and bonuses of its practitioners. Its spectacular failures have not caused anyone to lose tenure or bonuses. Therefore it has indeed been valuable -- to them!! Just like religious dogmas are useful to increase the wealth and privileges of the priests.
    Jan 24 01:28 PM | 1 Like Like |Link to Comment
  • Was a company you own at Davos? Then sell. [View news story]
    Davos is an exercise in vanity and poor taste. And at a time in history where it comes across as particularly tone deaf . If the attendees really really have urgent intellectual discoveries to share they could do so in smaller groups at some university without any fanfare. No that is not what this is about at all.
    Jan 24 12:12 PM | 4 Likes Like |Link to Comment
  • Is Your Portfolio Positioned For The 2014 Stock Market Pull-Back Game? [View article]
    You may be right. I am also tempted to do something like that. But .. my experience over the past few decades has been that if there is a big general market selloff, value stocks also get hit, everything goes down. So, I wait. I can be patient, I dont have clients!
    Jan 20 07:37 PM | Likes Like |Link to Comment
  • Is Your Portfolio Positioned For The 2014 Stock Market Pull-Back Game? [View article]
    Exactly! The govt debt has been increasingly short term . The Fed can hold the short end down till the cows come home ( and they will!). Tapering QE will have no effect on the short end, and if it has a large effect on the long end - no doubt the Fed has many many more tricks up its sleeve to control it. its all under control. Or not. Thats what the big macro bet is all about - can the Fed keep it all under control or not?
    Jan 20 06:24 PM | Likes Like |Link to Comment
  • Is Your Portfolio Positioned For The 2014 Stock Market Pull-Back Game? [View article]
    All the signals from the Fed have been pointing to a strong consensus that tapering will proceed and QE will end in 2014. The Fed needs to end this because QE is having a negative effect on credit creation and screwing up the Shadow banking System mechanism.
    If they pull off this tapering without a major dislocation in the markets, I will be surprised. But they are going to try.
    Jan 20 02:17 PM | Likes Like |Link to Comment
  • Is Your Portfolio Positioned For The 2014 Stock Market Pull-Back Game? [View article]
    Also, an ungodly amount of 'QE" over the past 5 years has not resulted in inflation yet - has it? So , thinking minds need to re-consider the mantra of QE="money printing". It is not.
    All QE has done is kept long rates down.
    Jan 20 02:13 PM | Likes Like |Link to Comment
  • Is Your Portfolio Positioned For The 2014 Stock Market Pull-Back Game? [View article]
    sorry - that should read $100 of treasuries supports say, $500 of new credit through the re-hypothecation process.
    Jan 20 02:10 PM | Likes Like |Link to Comment
  • Is Your Portfolio Positioned For The 2014 Stock Market Pull-Back Game? [View article]
    Thanks! One more 'counter-intuitive" thought: As the tapering starts in earnest, potential borrowers see higher bond yields in the future and rush to lock-in these historically low rates. So credit demand spurts up. Simultaneously, as the Fed hogs less of the high quality collateral, more is available to the shadow banking system to hypothecate/re-hypothe... The multiplier works through these collateral chains where 4100 of treasuries can be used as collateral to support , say, $500 of new credit. this is the business in which money market funds play, and the market speculators like hedge funds.
    Jan 20 02:09 PM | Likes Like |Link to Comment
  • Is Your Portfolio Positioned For The 2014 Stock Market Pull-Back Game? [View article]
    Reserves ( excess or not) cannot move anywhere. legally they stay in the banking system - until the Fed decides to either increase or decrease the total reserves.
    I doubt the piddly 25bp IOR will be reduced because then the Fed would possibly create a huge headache for itself as money market funds start getting into distress.
    Jan 20 02:02 PM | 1 Like Like |Link to Comment
  • Is Your Portfolio Positioned For The 2014 Stock Market Pull-Back Game? [View article]
    The total reserves in the banking system can only change if the Fed changes them - by buying/selling assets into the banking system. Banks dont "lend out reserves'. Bank lending is not constrained by reserves and therefore credit creation by the banking system has nothing to do with the reserves.
    These are not controversial statements.
    Jan 20 09:19 AM | Likes Like |Link to Comment
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