CM in MA

Any talk of a V-shaped recovery is poppycock, Bob Rodriguez of First Pacific Advisors says, warning the bulk of U.S. credit problems are still to come. By the close of 2011, Treasury debt outstanding will be $14.6-16.6T, and debt-to-GDP ratio will rise to between 97-110%, which leads him to wonder: "How do we finance all this debt?"

I wish I could give your comment more than one thumbs up! Priceless!


On Jun 03 06:18 PM Missing_Link wrote:

> We could have a bake sale.

All You Need to Know about the First-Time Homebuyer Tax Credit

I have one more question. I met the definition of a first time buyer in 2003. After 20 years on active duty in the U.S. military, I put down more than 20% on my home purchase, took out a conventional fixed-rate mortgage, and now pre-pay my principal. My question is: where's my tax credit or loan modification? Oh, and who is paying to provide the $8000 credit? Sorry, that makes two questions.

Market Timing Buries 'Buy and Hold' in Asset Allocation

Dr. K,

Thank you for the replies to my questions. I appreciate the time you took to provide the extensive answers.

CM


On May 14 07:31 PM Dr. Kris wrote:

> To CM in MA:
>
> Thanks for your insightful comments. Here's a response to the points
> you brought up:
>
> - Were transaction costs and taxes taken into account when calculating
> the returns?
>
> No. These are, of course, different for everyone. Within a mutual
> fund family the occasional movement in and out of an asset class
> can be done without charge. As to taxes, if you are holding your
> investments in an IRA there are none. Outside of an IRA you will
> be paying taxes on realized gains at a rate that depends on many
> things but that is still preferable to loss of principal. Taxes must
> be paid sometime. It's one of the two things you can be certain about.
>
>
> BTW, the SMC Analyzer does have the capability of adding these parameters
> along with others such as margin costs and account interest. <br/>
>
> - What is meant by the "averaging period is re-optimized every month?"
>
>
> This refers to the portfolio growth graph which is essentially a
> backtest of following the market timing versus the buy and hold strategies
> each month and then reaping the results of following the recommendations.
> Every month with the addition of new data the averaging period of
> the CCI for each asset class is re-optimized to maximize the effectiveness
> of its use in terms of portfolio growth.
>
> - Does it worry you that two assets with the following monthly Hi-Low-Close
> data (55, 45, 50; 100, 20, 30) yield the same "typical price" input
> into the CCI calculation? If these assets then had following months
> of (50, 40, 45; 70, 25, 40), the "typical prices" would again be
> the same for that month. Carry this on long enough and the deviations
> from the moving averages also become the same. Likely, perhaps not.
> But it raises the possibility that a very volatile asset can masquerade
> as a far less volatile asset. Would this affect your strategy?<br/>
>
> First of all, we are using asset classes here composed of many individual
> components hence the volatility intra-month should theoretically
> be dampened. Nevertheless, the analyzer uses only closing prices
> as a substitute for typical price. You do bring up an important point
> however. That sampling the performance of an asset class only at
> periodic intervals has a nonzero probability of misunderstanding
> its true characteristics. With 80+ years of monthly data available
> however there is a high confidence that the volatility of the asset
> classes used in the analysis is properly represented.
>

Following in Goldman Sachs's (GS) footsteps, Merrill Lynch muzzles a blogger - our very own Tyler Durden. Here's the take-down letter.

Tyler, those who have fought for freedom, and the many who've died doing so, would hold you in high esteem. Thank you for not wasting your right to freedom of speech.

FDA slaps General Mills (GIS) with a warning, saying heart benefit claims in use on Cheerios boxes for over 2 years represent 'serious violations' of federal law. The FDA suggests filing a new-drug application for Cheerios to keep the box label as is.

lmfao. Ufb. Snafu. Ayfkmow?

After sinking to $1.00, buyers step in to snap up shares of GM (GM), now +16% to $1.33. Reminder: Citigroup (C) bounced off $1 back in March and never looked back.

In March, Citi insiders were buying ahead of Pandit's comments about the Jan-Feb period. Yesterday, GM insiders were selling. Zero on the stock seems like a done deal no matter what. I guess some daytraders can have fun with GM for a few weeks.

Market Timing Buries 'Buy and Hold' in Asset Allocation

Dr. Kris, thanks for the interesting article. I do have a few questions, though.

- Were transaction costs and taxes taken into account when calculating the returns?

- What is meant by the "averaging period is re-optimized every month?"

- Does it worry you that two assets with the following monthly Hi-Low-Close data (55, 45, 50; 100, 20, 30) yield the same "typical price" input into the CCI calculation? If these assets then had following months of (50, 40, 45; 70, 25, 40), the "typical prices" would again be the same for that month. Carry this on long enough and the deviations from the moving averages also become the same. Likely, perhaps not. But it raises the possibility that a very volatile asset can masquerade as a far less volatile asset. Would this affect your strategy?

Thanks!

The proposed clamp-down on the credit-card industry's most unsavory practices, being taken up in Senate this week, fails to adequately address perhaps the biggest problem of all: the systemic exploitation of the human psyche.

Whippett, amen! My card company forces me to take cash back. Like you, I've always carried a zero balance. Discounted prices and deferred payment. All I have to bring to the table is personal responsibility and discipline. It's a terrible deal! Thank goodness the government is here to save us all!

The proposed clamp-down on the credit-card industry's most unsavory practices, being taken up in Senate this week, fails to adequately address perhaps the biggest problem of all: the systemic exploitation of the human psyche.

The program to turn Americans into wards of the state continues, aided and abetted by ourselves.

Buried in Chrysler's bankruptcy filing is news that the company won't repay more than $7B of taxpayer-funded bailout money.

It's not as if the government was going to send me, and every other person in the U.S., our approximately $23 (per person) back. For me, it was already gone before they gave it to Nardelli & Co.

But anyone who votes for either a Republican or Democrat can't complain about these events. And please don't tell me that voting for a third party is a wasted vote. The wasted votes are those cast for the two major parties who don't give a damn about anything but their own interests. I encourage one and all to speak loudly in the voting booth where it can make a difference. All the wailing and gnashing of teeth on comment boards makes no difference whatsoever.

Be a patriot. Be patriotic. Vote for a third party.

The SEC Decides to Figure Out How Scams Work

If the old saying is true, then there are 60 suckers born every hour and 525,600 suckers born every year. Given that many suckers, there is likely no shortage of con artists to sheer them. The number of permutations to those cons will easily overwhelm any efforts, best or otherwise, by a government bureaucracy. Those looking to the government to protect them from themselves will be disappointed.

How libertarian dogma led the Fed astray: "The Fed's increasingly libertarian philosophy underpinned its view that it could not know how to recognise a credit bubble but knew what to do once a bubble burst."

Mr. Kaufman has created quite a strawman. Libertarianism is not practiced by either of the major political parties in the U.S. Libertarianism was not practiced, nor likely understood, by those operating the banks and other financial institutions. Libertarianism is not a concept that drives the individual actions of marginal borrowers and the lenders who service them. To whatever extent the Fed espoused and acted on libertarian principles (and that point is highly debatable), the Fed cannot be held responsible for the outcomes caused by the selfish actions of others. Mr. Kaufman would do well to understand libertarianism before he blames today's economic woes on a philosophy that, unfortunately, has few adherents and, sadly, fewer still practitioners.

Three great reads for lunchtime: 1) The IMF and the panic of 2008 2) The trouble with the 'millionaire tax' 3) Led astray by libertarianism

Mr. Kaufman has created quite the strawman to destroy. Libertarianism is not practiced by either of the major political parties in the U.S. Libertarianism was not practiced, nor likely understood, by those operating the banks and other financial institutions. Libertarianism is not a concept that drives the individual actions of marginal borrowers and the lenders who service them. To whatever extent the Fed espoused and acted on libertarian principles (and that point is highly debatable), the Fed cannot be held responsible for the outcomes caused by the selfish actions of others. Mr. Kaufman would do well to understand libertarianism before he blames today's economic woes on a philosophy that, unfortunately, has few adherents and, sadly, fewer still practitioners.

Tim Geithner Pulls an Amy Poehler

Except that Amy Poehler is funny.

Nucor Forges a Different Path

I, too, am long NUE. I've owned shares for more than a decade. As you outlined NUE is a great company, with terrific employees and outstanding management. They are leaders in new steel technology. They use cash wisely. When I listen to their conference calls, I come away believing that the folks running the firm know what they are doing and that they are being straightforward with shareholders and analysts. Compare all this with the financial companies. The difference is stark. Thanks for the article, it's refreshing to see the good in American business get some pixels.