Matt Blackman

http://www.TradeSystemGuru.com

118 Comments

    • The Looming Valuation Adjustment Process [view article]
      I have never understood the valuation approach that says a stock gets more attractive the cheaper it gets. That's all fine and dandy if we are in a bull market and experiencing a temporary correction but this approach has a number of major pitfalls. The most obvious becomes very painful in a bear market... or just before a company goes bankrupt.

      Take Enron for example. After having been at $80, it seemed like a really good deal when it dropped to $6.00, a better deal at $3.00 and a screaming deal at $0.60, that is just before it disappeared for ever.       Sep 05 02:40 AM
    • John Hussman: Economic Conditions and the Market [view article]
      "This is fine example of double talk wrapped up obfuscation." A great quote if I ever heard one whidbey...

      Hello McFly... We are in a bear market and it's September! We are also in the final innings of an election year that marks the end of the best two years (26 months actually) of the 4 year election cycle to be in the market. The first two years of a new term are hell on stocks. And baby boomers begin to retire on mass in 2009..

      So what exactly does John mean when he says, "these risks should not be expected to translate into immediate or persistent difficulty for the markets"...? That's a whole bunch of risk from where I sit and anyone who discounts that is playing ostrich.       Sep 05 02:33 AM
    • Taking Aim at 'Inflation Nutters' [view article]
      A new bull market in gold? Makes sense considering how useless and manipulated the majority of government economic stats have become which means inflation is worse than anyone at the Fed will admit and GDP growth is substantially weaker.

      So what does that mean? Slowing economic growth amid inflationary pressure with a government in denial is lousy for an economy but can be very good for gold since in usually motivates the mass production of more fiat money or at the very least artificially low interest rates which amounts to essentially the same thing.
      ....I think is what Jim Grant is saying....       Sep 04 10:04 PM
    • Global Property Bubbles: Not Bursting [view article]
      Anyone who thinks the housing market in the US is approaching a sustainable bottom, may be sadly mistaken based on the charts and info in this recent report (see tradesystemguru.com/co.../ ) Sep 04 05:51 PM
    • Global Property Bubbles: Not Bursting [view article]
      The problem with home prices indices is the variety of ways in which they are measured. Compare the S&P Case-Shilller Home Price Index and the National Association of Realtors existing home median prices for example. The first shows year-over-year home price declines north of 15% while the latter index shows prices down around 7% y-o-y. Then there is the Office of Housing Enterprise Oversight (OFHEO) home price index and ...., each index with its own take on what is happening with prices.

      In other words, even in a well tracked market like the US, data varies wildly. I personally have found the NAR and OFHEO numbers to be sadly lagging and way too volatile to offer any real benefit in understanding what is happening with prices but that is the topic of another article.

      Now... take that situation globally and you have a real can of worms. For example, housing prices in Canada have stopped going up at double digits and just begun to experience y-o-y declines. But one report (Douglas Porter of BMO Capital Markets) shows a very convincing chart indicating the Canadian prices perform almost identically to those in the US with a 2-year lag.

      Globally, home prices may be rising but given the fact that median home price data is a poor indicator of real price dynamics and that most market are measured by this lagging indicator, I consider this global number suspect, especially considering how recently some markets (like those in Canada) have begun to correct.       Sep 04 05:47 PM
    • Another Week of No Money Supply Growth [view article]
      According to a third party estimate of M3 thanks to the myopic decision by the Fed to reduce transparency and discontinue the series, it was growing at 16% the last time I checked.

      Inflation may be moderating but it has nothing to do with Fed restrictions. Good to his promise, Bernanke continues to throw money out of helicopters and the macro picture remains a concern (see tradesystemguru.com/co.../ ) Week to week changes are of little consequence. And besides, its an election year. Any government or Fed sponsored report must be considered highly suspect.       Sep 03 12:37 PM
    • Residential Real Estate: How Much More Pain? [view article]
      Dr. H, I'll take that bet! The rate of change (negative) may have declined month to month but it is still accelerating year-over-year. Unless the bubble is done breaking, which would be an historic miracle, the Case-Shiller home price index should see values well below 150 before the declines are finally over. Take a look at the chart.. tradesystemguru.com/co...

      History tells us that bubble aftermaths generally see prices return to well below their historic trendlines. The dashed orange line is a linear regression line so weighted for the later data. The longterm trendline sits around 130 for the 20-city composite...       Sep 02 08:47 PM
    • Residential Real Estate: How Much More Pain? [view article]
      Unless I have missed something, David has neglected to discuss a key component of bear markets: they are littered with bear market rallies in which the asset class (index, future, currency etc) experiences a dramatic rally only to end and subsequently put in a lower low.

      The best example I've seen is the Japanese Nikkei 225 that has put in at least 5 bear market rallies of 50% of more since it peaked in 1990 ( see tradesystemguru.com/co... ).

      The Philadelphia Housing Sector Index is another great example. After peaking in Aug-Sept 2005 near 600, the index has continued to fall and rallied more than 25% from July 2006 through Feb 2007. Since, it has fallen to around 130... www.quotemedia.com/res...=^HGX

      So is it at a bottom? Maybe, maybe not. But they equate bottom picking to trying to catch a falling knife for good reason....       Sep 02 08:39 PM
    • Commodity Price Movements in the Short Run and Long Run [view article]
      Now that was a complete waste of time... Sep 02 08:21 PM
    • Would Trickle-Down Policies Really Help All Americans? [view article]
      I for one, am sick and tired to Thoma's continuous attempts to promote the Obama administration. Just look at his articles and you'll see his highly distorted leftist views liberally (pun intended) spouted for anyone who will read them. He continually bashes McCain quoting data from leftist group claiming to be tax experts, the Tax Policy Center.

      If this guy is not a paid-Democratic promoter he should be.

      What is his political propaganda doing on an investment/market site?       Sep 02 08:16 PM
    • Why Core Inflation? [view article]
      Only a highly-biased liberal economist like Thoma could argue for the merits of a useless stat like core inflation. Both CPI (core and non-core) as well as GDP are highly skewed to give the desired result. They are certainly of no value to investors or traders... (See Perfecting the Art of Mass Deception at tradesystemguru.com/co... )
      Governments throughout history have clearly demonstrated that their motivation in producing (and manipulating) these statistics has little to do with providing any useful information and everything to do with getting re-elected. Rely on them at your peril.       Sep 02 08:05 PM
    • Spreading Oil and Natural Gas: A Post-Labor Day Plan [view article]
      Brad;
      Excellent analysis! I also wrote about the NG/Oil spread this week at
      tradesystemguru.com/co...

      Steve Moore in his excellent reference The Encyclopedia of Commodity and Financial Spreads (Wiley 2006) ( ca.wiley.com/WileyCDA/... ) notes that a strategy to buy Nov natural gas calls and sell Oct NG calls on Aug 29 and exit Sept 14 has a 100% win ratio over the last 15 years... Nothing to sneeze at.       Aug 31 05:02 PM
    • 'The Pie's Getting Larger' - What Warren Buffett Means [view article]
      Any numbers from a partisan government agency (aren't they all?) must be considered suspect. Administration after administration prove one overriding fact of economic life - these statisticians are experts at manipulating the data to give a pre-determined result and that is that the economic looks better than it really is and inflation lower than it really is. This is doubly true leading up to election time.

      In other words, any government GDP growth projections are nothing more than wishful thinking. These tricks include using hedonics, substitutions, imputations etc to produce the desired results. If the resulting numbers aren't rosy enough, they simply go back to the drawing board, make a few more substitutions and then re-run the numbers. For more on this topic including the tricks of the government statisticians trade to achieve this end see tradesystemguru.com/co... I also highly recommend viewing Dr. Chris Martenson's excellent video on this topic entitled Fuzzy Numbers. You won't ever look at a government report in the same way again!       Aug 31 03:06 PM
    • Financials and TED Spread Could Signal a Bottom for Corporate Profit Declines [view article]
      I call BS on improving corporate profits. Don't know what data you are using but according to the Wall Street Journal that tracks earnings for more than 4000 companies on US markets, corporate profits for Q2-08 are down a whopping 37% from Q2-07 (see tradesystemguru.com/co... )

      With regards to comments that the recession has yet to materialize, you are being hoodwinked by distorted GDP and CPI data. Take out the smoke and mirrors in those numbers and we have been in a recession for more than 2 years now (see Gov't Stats: Perfecting the Art of Mass Deception tradesystemguru.com/co... )

      Thirdly, the pattern you highlight in red in Chart 3 is a bullish flag pattern, a good indication that the chart will breakout to the upside and that would be decidedly negative for stocks.

      No point in going on. There are so many holes in your argument that it is a waste time pointing them out to you...       Aug 31 02:49 PM
    • Tuesday's Economic Calendar: Taking the Nation's Pulse [view article]
      The only problem is that if you had been following the Fed (and Bernanke's) lead over the last year, you would have had your head handed to you. Bernanke completely underestimated the impact of falling housing price and in fact was tracking lagging home price data (annual median prices) and confidently declared more than a year ago that home prices were stable. Then when the severity of the problems facing the housing market became evident, publicly dismissed the economic impact of falling mortgage equity withdrawals. He also completely missed the coming credit crunch. We all know now just how flawed those views were and how those who followed the Fed's lead to stay invested or invest more, got hurt.

      Those who took the Fed drop in interest rates when they dropped the Fed funds rate from 5.25% to 2% as a stock buying signal got hammered. (See Are We Being Fed Winked? at tradesystemguru.com/co.../ )

      The moral? The Fed can sometimes provide useful information in their statements but more often than not, they are way behind the eight ball, especially in a declining economy. The reason? Because like many mainstream economists, they rely on flawed fundamental data. (See tradesystemguru.com/co... )       Aug 26 03:05 PM
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