DougM

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86 Comments

    • Sat Aug 23rd 20:35 PM | Rating: 0 0
      Commented on:
      Stocks vs. Bonds: The Next Decade
      bearfund you are one sharp thinker, you're right, the conclusion (short treasuries) is seemingly obvious. Problem is, the premise (that bonds are overvalued) could be wrong - a lot of credible bears (Shedlock in particular) make a convincing argument for deflation as a result of the credit contraction, and hence interest rates that are lower and lower still a la Japan.
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    • Fri Aug 22nd 15:27 PM | Rating: 0 0
      Commented on:
      The Strange Case of Dr. GLD & Mr. Bullion
      If there was a sudden outflow, it would be hard for the fund's managers to actually move that much bullion on the spot market. I'm not sure how it would work if put under extreme pressure. I suppose they, or one of numerous actors authorized to create and destroy share units, could take ownership of the gold and simultaneously hedge it by selling futures, then take their time selling off the physical while closing out the short futures contracts (or simply delivering against those contracts).
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    • Fri Aug 22nd 11:34 AM | Rating: 0 0
      Commented on:
      Natural Gas Fund Is Flaming Out
      Why not try the futures market? You could buy a gas contract for years out into the future for 10% down, then park the rest of the collateral in treasuries. Minimal transaction costs, and (versus the target year) no tracking error.
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    • Sun Aug 17th 13:29 PM | Rating: 0 0
      Commented on:
      America's Fiscal Crisis: Tough Decisions Needed Now
      Cutting military spending would only provide a short-term fix to the budget problem. Take another look at that pie chart. The health-care and income-security wedges are set to expand significantly over the next few decades. Even cutting the rest of the budget to zero won't be enough. Nor can we tax our way out of the problem, as the level of taxation would be so high that the overall economic pie would shrink as younger workers would refuse to work for what's left and either go onto relief themselves or start an underground economy. Someone needs to defuse the ticking budget bombs created by politicians buying votes in decades long past.
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    • Sun Aug 17th 13:17 PM | Rating: 0 0
      Commented on:
      How Apple Stock Should Be Valued: P/FCF
      "Most everyone who owns a Windows machine really wishes they had a Mac..."

      This is the elephant in the room for AAPL. Everyone I know under the age of 30 uses a Mac. MSFT stumbled badly with Vista, and has left AAPL an opening to take a lot of market share from Windows, especially in a demographic where a lot of the growth will come from. And while MSFT's software-only business model leaves them open to rampant piracy, AAPL's hardware/software combo is harder to get round. IMO the lofty valuation on AAPL anticipates a considerable amount of share increase at the expense of Windows.
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    • Wed Aug 13th 00:58 AM | Rating: 0 0
      Commented on:
      Market Outlook: It's Still All About Housing
      bearfund, you are soooo right with your comment. Do you think the commodity bubble is done? What about the renewable energy bubble, we're well into it but is it done yet or still have legs? Another thought: biotech, which has perked up lately, and you can spin a big story about aging boomers and limitless profit potential.
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    • Mon Aug 11th 11:14 AM | Rating: 0 0
      Commented on:
      Is the Commodities Bull Market Over?
      FWIW I think you're right, but as we've seen this year, there are limits to how far prices can rise before they choke off the very economic expansion that fuels the boom in the first place. The market needs to find a balance between continued world-wide GDP growth and rising commodity prices. Ultimately, it will have to find substitutes for the most constrained resources or the growth simply can't continue.
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    • Sun Aug 10th 20:35 PM | Rating: 0 0
      Commented on:
      Auction Rate Securities: Who's To Blame?
      I echo MichaelNYC's comments - this was my experience as well. As to how the product differed from short CDs, I understood that I was buying muni bonds and that the interest income was tax-free. The interest was actually lower than what I might have gotten on CDs, but it was higher after-tax given my tax bracket. I accepted that there might be a somewhat higher credit risk in the bonds in exchange for the tax-free return. I did not realize that there might be interest-rate risk associated with being stuck in the bonds - I was never given a prospectus and the products were never described to me as "auction-rate securities", they were described as "7-day paper". The instruments showed up on my statements as bonds, in the muni section - I did see the long maturity dates, and this troubled me somewhat. I was only given more details when I began to ask questions last October. I did this only because the insurance wrappers on the bonds appeared to be falling apart as MBIA and Ambac were teetering on the edge of AAA downgrades. This was the first time I was sent a brochure explaining how an auction-rate security worked. Unable to find out what the penalty rate was on my bonds, I sold them, and dodged a bullet.
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    • Fri Aug 8th 10:59 AM | Rating: 0 0
      Commented on:
      Will the Futures Market Kill the Options Golden Goose?
      That's a classic option strategy called a "strangle".
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    • Thu Aug 7th 10:53 AM | Rating: 0 0
      Commented on:
      Wind's Our Future, but Natural Gas Is Now
      I agree with CLH. The elephant in the room for wind is that it's intermittent and operates at low capacity factors. The "contental grid" won't mitigate this much - power companies will be forced to have stand-by capacity, and will have to somehow smooth out the intermittent flow. Solutions to that problem are expensive and still in development - who knows how long it will be before they're commercialized? (I'm still waiting for nuclear fusion - it was 30 years away 40 years ago, and it still is!)

      I think in the end it will be mainly solar and nuclear. Solar is much more predictable than wind, and there are simpler methods for banking the power thermally in utility-scale projects. Solar-NG hybrid plants could have a common power-generating infrastructure fueled by the sun during the day, and by NG at night or on cloudy days. Nuclear can replace coal for baseload. As Paris says, "Energy problem solved!".
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    • Wed Aug 6th 09:58 AM | Rating: 0 0
      Commented on:
      The Obama/McCain Energy Charade: Nothing But Empty Ideas
      Don't forget Obama also opposes expansion of nuclear power. Where's the power for all those electric cars going to come from, coal? Obama's selling the same old energy fantasy regarding wind and solar. Germany's been down that road, and now they're looking at turning back to - wait for it - coal, because their green groups just can't stand nuclear. How's that for new ideas?
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    • Tue Aug 5th 10:40 AM | Rating: 0 0
      Commented on:
      A Tale of Two Industries
      Oil companies are going to see falling production because their reserves are falling. They're locked out of the best places to find oil world-wide, having been shoved out of Venezuela most recently. The most likely spots here in the US are closed to them by government policy. Just having money isn't enough - they also need opportunities. If this continues, expect more and more share buybacks to return money to shareholders.

      As for the blame game, no one from a major oil company put a gun to the heads of millions of idiots and told them to buy a gas-guzzler. GM and Ford were apparently too short-sighted to understand that oil's a finite resource and that betting their businesses on producing gas-guzzling SUVs was a losing gamble. Are we going to extend the new socialism to business now, punshing success and rewarding failure? I hope not.
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    • Tue Jul 29th 10:57 AM | Rating: 0 0
      Commented on:
      Another American Money Pit: Infrastructure
      I wouldn't call it a boondoggle. At least we'll get something for the expenditure. Unlike, say, sending $150 billion in checks to the lower half of the income spectrum. It's the difference between investment and consumption. What really steams me is how much money we spend now on pork-barrel infrastructure projects, then the pols turn around and moan about how they need to raise taxes cause we can't afford to fix the essential stuff.
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    • Wed Jul 16th 12:46 PM | Rating: 0 0
      Commented on:
      A Long-Term, Structural Solution to the Banking Crisis
      "Mortgages are long term in nature, while deposits (other than CDs) can be pulled at a moment's notice. Why would we allow a system where short-term liabilities are systematically allowed to fund long-term holdings of investment assets?"

      Some sort of mechanism for doing this is necessary to couple savers with borrowers. Savers need some sort of return to offset inflation, but typically can't take the interest-rate risk of buying 30-year instruments. Many savers use CDs, but these too are typically no longer than 5-year instruments. Banks bear this risk in exchange for capturing the spread between the long and short end of the curve. Credit risk is admittedly an extra level of risk, however it's hard to see how a corporate bond is that much less risky than a portfolio of high-quality mortgages. Indeed, the credit quality of most corporations is so poor now that banks might have trouble finding enough AAA-rated corporates to implement the scheme you've proposed, and the yields are so poor on AAA-rated governments that it's hard to see how the banks could offer any kind of return to savers after taking their spread. The current system works well provided people holding the short end (the savers) don't lose confidence in it. It works because it averages the inflows and outflows from a large number of people against the long-term loans. In the end, it's all about confidence. FDR figured this out back in the 30s, and put in place most of the structure we have now. Financial institutions have gotten increasingly creative about circumventing this structure, and regulators who are supposed to ensure that banks don't behave recklessly have been asleep at the switch. This is nothing that we can't fix with better and more diligent regulation IMO.
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    • Wed Jul 9th 11:23 AM | Rating: 0 0
      Commented on:
      Nuclear Power's Second Coming Will Lead to a Uranium Boom
      While I generally agree with your position, I would quibble about coal plants being public enemy number one for enviro activists. They oppose nuclear plants with equal fervor. It's just that they've all come to think they won that battle for good back in the late 70s, and are now dismayed to see their own arguments about depletion and emissions coming back to bite them. Indeed, from what I can see they're pretty much opposed to everything, even nat gas (they oppose LNG projects and more domestic production in off-limits areas). Eventually the "unwashed masses" will see through their position when it becomes evident that conservation can't take us to zero, and intermittent renewables can't provide baseload or dispatchable power to the grid (not to mention needing huge amounts of land and long transmission lines through sensitive areas). Germans are already coming to grips with this reality.
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