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  • New Signs Gold And Silver Are Returning As Monetary Assets [View article]
    "The U.S. government's role in the economy is on a seemingly interminable upward trajectory."

    Instead of seeing good or bad, see it in terms of function. Why do modern governments grow bigger over time? Can you think of reasons? I can think of some, like the growing importance of a vast machinery of wealth that didn't exist when the wealth didn't. They growed together, so that it's inconceivable that we should turn our back on schools and infrastructure, a modern regulatory apparatus or the income infrastructure of retirement and health care.

    As for size, government will continue to take a bigger part in a growing evolving economy, on the evidence that it has all along, but unlike conservative magicians we liberals don't pretend we know what the proper size is. It's not predetermined by a plan, it's a case of size follows from function. So long as it's useful for government to find new things to do in aid of economic goals it will eventually do it, if we have the imagination to put our tools to use.

    I have no idea if there will some day be an optimal upper limit on the size of the public sector. The sensible thing is to treat it as an empirical question, not one answered by the sort of dogmatism that passes for thought among our goldish brethren. :-)
    Dec 5, 2014. 10:17 AM | Likes Like |Link to Comment
  • Investing And The Intertemporal Conundrum [View article]
    "Buy and hold" is a plan for an idealized future without lumpy events like cycles and emergencies and such. I judge that attempting to remedy the shortcomings of this linear approach would have high costs. If the market goes way down a few years from now my high yield portfolio might be hit even worse than the typical ones. I might have to sell and endure very serious losses.

    But then a high yield (actually a hybrid of high yield stocks and conventional dividend payers) portfolio like mine exists to produce income so you don't have to sell shares in adverse circumstances. The idea is to decouple partly from "temporal nonlinearities". :-)

    It's imperfect, of course, but a perfect solution, if it existed, would be very expensive, so expensive it wouldn't look much like a solution at all.
    Nov 26, 2014. 11:15 AM | Likes Like |Link to Comment
  • What If The Fed Isn't The Wizard Behind The Economic Curtain? [View article]
    I liken Fed ability to affect change as a drunkards walk. It stumbles into a wall on one side (rates lowered to zero), then falls into the street (raises rates as high as it needs to kill the economy). No other explanation is needed for why it only does positive good up to a point while maintaining greater power to do harm.

    "Is this how you would characterize the most interventionist central banking policy in history - an obsession with laissez-faire policy? See Orwell's "doublethink"."

    A little context here would help. Monetary activism is a means, a lousy means as it turns out, to allow laissez-faire fiscal policy. The idea is we hates government spending to regulate the economy so much that we'll believe anything, ANYTHING that permits us to abandon it.

    Well, now we're stuck with the drunkards walk, a necessary but insufficient fix. The most powerful weapon has been sidelined by rotten beliefs that only serve to do the sidelining and, as we see, little else. The problem is doubleplus badthink, not doublethink.
    Nov 26, 2014. 08:59 AM | Likes Like |Link to Comment
  • Update: Kinder Morgan Mega Merger Approval Paves The Way For Company Transformation [View article]
    From the KM website pdf on the deal:

    Q: What consideration will I receive for my KMP units, KMR shares or EPB units?

    A: Holders of KMP, KMR, or EPB will have the right to receive the following consideration for each unit or share owned at the effective time of the mergers:
    KMP – A KMP unitholder may elect one of the following consideration options (subject to proration):

    (i) all stock - 2.4849 shares of KMI common stock,

    (ii) all cash - $91.72 in cash without interest, or

    (iii) mixed - a combination of 2.1931 shares of KMI common stock and $10.77 in cash without interest. Holders who elect to receive the mixed consideration will
    not be subject to proration.

    KMR – 2.4849 shares of KMI common stock.

    EPB – An EPB unitholder may elect one of the following consideration options (subject to proration):
    (i) all stock -1.0711 shares of KMI common stock,

    (ii) all cash - $39.53 in cash without interest, or

    (iii) mixed - a combination of 0.9451 of a share of KMI common stock and $4.65 in cash without interest. Holders who elect to receive the mixed consideration will not be subject to proration.
    Nov 24, 2014. 04:49 PM | Likes Like |Link to Comment
  • Is Managing A Large Dividend Growth Stock Portfolio Time-Consuming? [View article]
    I own 90 stocks, give or take. I devote far more time than I need because it's fun and I can learn from monitoring how they behave. If I decided to take a break from my watchfulness I doubt it would do me any harm. Since I've heroically resisted the temptation to imagine I'm a get rich quick trader no harm is done by watching, but if you have any traderish notions that you can't purge, you can make a rule to limit activity to a small trading ghetto. As it shrinks while the rest grows you'll learn something. :-)

    "But normally I just take the dividends and reinvest. I don't do trading. I don't try to beat the markets. I just diversify my portfolio and profit."

    Owning a diverse group of stocks means you own the market that, you know, beats you. How excellent is that? :-)
    Nov 24, 2014. 10:38 AM | 1 Like Like |Link to Comment
  • Contrarians Can See The Wolf But What Warning Can We Call Out To Those Who Don't Get It? [View article]
    We buy the worlds goods in huge amounts. Everyone who wants a piece accepts dollars. Whether any country finds this arrangement politically irksome or not is something no one should bother about. Will anyone not sell to willing buyers who offer dollars?

    "It is because the fed tries to be transparent in its actions and its value is determined by world wide supply and demand. There are few surprises when one accepts dollars."

    I don't doubt that transparency and stability are factors but I think the big factor is how much we buy. Being a big seller doesn't get your currency out there, it gets you buyers money. Dollars are buyers money beyond any question of politics. It has something behind it vastly superior to any other backing, the economy and government of the U.S.

    History says that over the long run reserve currency status fades with the fortunes of declining empires, but it doesn't just disappear. Japan and the U.K. are still currency empires. Cultural patterns persist even though Tokyo is far from the powerhouse of 30 years ago, and London is a pale reminder of what it was a century ago. I'm not going to get all bent out of shape because New York isn't the center of the universe like it was in the "Mad Men" era.

    Anyway if China tries to go on a buying spree with its money who'll take it? See, it's easier to complain that someone else has an advantage than to create an advantage for yourself. Best thing is to buy a goat, second best is kill your neighbors goat.....if you can. :-)
    Nov 21, 2014. 06:03 PM | Likes Like |Link to Comment
  • Weighing The Week Ahead: Too Late To Join The Stock Rally? [View article]
    You could just take the position that you're not a trader but a long term investor and then it's never too late in the rally because you're not investing in a rally, but in stocks. The difference is one way attempts to time a cycle, the other way takes advantage of through the cycle gains that appear over time. In order to get all the through cycle gains you have to be fully invested.

    Getting out to miss the worst days will almost assuredly miss you the best days, too. Pessimists who get out on scares almost never become "early adopters" of stocks. Bad timers (that is, timers) on the way down compound the error on the way up. They're not the first to see the bottom, they are far more likely to be coming back in at the tail end of a rally. I mean, look at how the pessimists have handled the last few years, and how they're constantly predicting the worst going forward. Pessimism is a killer for investors, while even unrealistic optimism is not. Anything that keeps you in the market all the time, unrealistic or not, will produce a win in the long run.

    It's not the market that kills you, it's you that kills you.
    Nov 10, 2014. 10:51 AM | Likes Like |Link to Comment
  • Focus On Long-Term Fundamentals, Not Fears [View article]
    "China's shift to higher-quality, more sustainable growth as the economy transitions to a more domestically driven growth model could also help the economy sustain its relatively higher growth going forward."

    I think this is true, and it would be true for the U.S. if we tried it. Moving away from the export trap is a big part of Chinese thinking one would imagine, with the example of Japan staring them in the face (Europe as well).

    The puzzling thing from the perspective of what I imagine to be a thoughtful Chinese observer is "Why is the U.S. trying to suppress its own demand like an export slave?". I mean, they know quite well what a trap it is, and know as well how immune the U.S. is to world economic gyrations when it acts for internal growth.

    That's why they're doing what they do, and why they'll succeed. But what are we doing with shrink to grow? Are we so rich and complacent at the top of the U.S. pyramid that we've lost any competitive instinct? Our indulgence of defeatist economic theory should've been seen as an unaffordable luxury in a world that advances at a faster rate.

    Yes, we can do like the Japanese and stay rich for another half century coasting on our glorious past, but one day we'll look up and see that we've made most of our population poor, and we've done far too much of that already. We could have built for a prosperous future but decided we couldn't afford it! What a stupid, stupid waste that's been!
    Oct 30, 2014. 12:39 PM | Likes Like |Link to Comment
  • Suppose - Counterfactual World - That The U.S. Had Avoided Large-Scale QE Since The Start Of 2010... [View article]
    If the difference between the condition of "we must start QE" and "we must end QE" is negligible to the point of indistinguishable, what difference do we 1) detect or 2) hope for?

    Expectations policy suffers from once twice thrice removed faith based outcomes where people get all thinky not only about the success of policy but whether meeting a target does something, as well as more thinkery about what other people will think about it, like:

    "What does everyone think about what everyone else thinks about whether or not hitting an inflation target means unsuccessful policy will continue so people will feel good about that...."

    That's a lot of shot banking to do to avoid spending dollars needed to heal a breach, the normal thing we took off the table to save those dollars for no reason that makes sense in this solar system. You lose more than you save every time, but hey, history doesn't matter, close your eyes and the world disappears.
    Oct 30, 2014. 09:44 AM | Likes Like |Link to Comment
  • QE ends, "considerable time" language stays for now [View news story]
    Why is it sad that $15B is a tiny dot in the economy? How small do you want the economy to be?

    I'd like $15B to be much smaller still so long as growth tracks with inflation like it has in past periods of rapid growth.

    Usually I find arguments against growth to be implicit so it looks like either anti-growth is a bit of an embarrassment to anti-growers, or antis don't actually know that they are. Which is worse....who can say?

    Not that I favor QE, it's a tax (bad) mostly on savings (not so bad), and we need tax cuts and bigger deficits, not taxes and smaller deficits which QE gets us. But net it's small whatever it is, perfect fodder then for obsessives to rave pointlessly on for ever and ever. Are you sad to see it go? Do you rave much to no discernible purpose? I understand, I really really do. :-)
    Oct 29, 2014. 03:03 PM | 1 Like Like |Link to Comment
  • QE, Parallel Universes And The Problem With Economic Growth [View article]
    Austrians are Panglossian, they have no role in this dispute. Belief that what happens is right means no solutions to no problems, government is selfcancelling as a concept. To the degree a government exists it's a tyranny. Democracy is poison to a libertarian/Austrian mindset. For an Austrian there's nowhere to go and no reason to go there. :-)

    The conflict is really between two means of adjustment, one with fiscal in the lead with monetary as supportive, the Keynesian tradition, and the other with monetary policy as the single lever, the position of Friedman. We went with Friedman, and lost.

    The Austrian "option" is for a nonexistent world, even a purist version of the 19th century could not approximate it, as vast public works built the advanced world, particularly in the U.S. Whether it makes sense to deem the olden days as "relatively" Austrian compared to the present depends on your sense of humor, I suppose. :-)
    Oct 29, 2014. 11:45 AM | 2 Likes Like |Link to Comment
  • So Why Not Use Easy Money All The Time? [View article]
    I don't think easy money is as useful to get total spending where it needs to be as acting directly on total spending by spending enough. What am I missing here? Where's the evidence that, nevermind what the world shows, interest rate changes can replace demand too low to support the production/consumption cycle, which we all see as too low but are apparently in disagreement about the shortest route to its correction.

    So, what's so impressive about QE and ZIRP without fiscal support? It look like lost interest income unreplaced by fiscal adjustment, a stupid error of incomprehension, or of ideology, or both, one feeding the other I expect. But since I'm wrong, what should I look at? :-)
    Oct 27, 2014. 11:35 AM | Likes Like |Link to Comment
  • Interest Rates Are Less Important Than Economists Think [View article]

    "I am a supply-centric guy; I believe that, generally, the supply of a good or service is the igniter of economic cycle."

    I'm not a a demand centric guy because I think demands starts anything, that's chicken and egg stuff, nothing useful comes from either chicken or egg first assumptions. I'm demand centric because an economy falls short on the demand side far more often that it overshoots. That's where the weak link is found as a matter of observation. A bad economy, whatever else it is, is low spending from all parties. Insufficient demand is what's found. A good theory is a formal explanation of operations that can generate predictions that are fulfilled, not a collection of logical truths the world had better obey or else you ignore that it doesn't.

    What I notice, what all good noticers see, is that you can do more to help a supply/demand cycle reach its potential by supporting demand than by adding more support where it's usually not needed. It might be true on another planet somewhere that businesses need, say, tax cuts more than sales, but typically it's untrue on Earth. If demand is the optimal avenue of intervention than arguments about the priority of supply or demand settle nothing. It is, they don't. :-)

    Oh, a non-chicken is the correct answer, but it's still a pointless question. :-)
    Oct 25, 2014. 12:56 PM | Likes Like |Link to Comment
  • Interest Rates Are Less Important Than Economists Think [View article]
    "The economy is exactly in depression because companies stopped investing, meaning that they "save" money."

    Don't you think a depression/recession might CAUSE a company to stop investing? From a behavioral standpoint that's the plausible route. As the study Mr. Roche linked to shows, interest rates are a weak indicator, and investment will often rise along with rates, meaning economic improvement leads rather than follows rates.

    Should we be surprised? Since I'm a demand-centric guy I'm obviously not, but the question should be what kind of guy does the world tell you to be? It doesn't say much about what interest rates do except what economic activity does to them.
    Oct 24, 2014. 12:19 PM | 1 Like Like |Link to Comment
  • Interest Rates Are Less Important Than Economists Think [View article]
    "The premise of this article is ridiculous. Interest rates are supremely important."

    If customers keep coming in the door cash in hand will you decline to invest if interest rates are high? If customers don't wave cash in your face will you invest anyway if interest rates are low? What would you do? What I'd do is pay more to borrow to invest if the prospects for business are good than if they are bad. Am I weird? Maybe, but that's not how. :-)
    Oct 24, 2014. 09:52 AM | 1 Like Like |Link to Comment