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EK1949

EK1949
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  • The Federal Reserve Has Painted Themselves Into A Corner [View article]
    It's someone else's box, namely the fiscal authorities. Attributing it to the Fed encourages the obsession with some alternative correct Fed policy. There is none, effective correction must come from the fiscal side. But if that's what you think, too, or even if you don't, thanks for your reply.
    Mar 26, 2015. 01:09 PM | Likes Like |Link to Comment
  • Is This Fed Transparency Or Outright Market Manipulation? [View article]
    "Hi Ek, long time. Interesting comment. How are we gonna see the whites of inflation's eyes? Can a strong dollar actually help?"

    Asbytec, fiscal and monetary policy must team up instead of fighting each other. The Fed can't give much on its own, all it can do is refuse to take with premature rate rises. But what the Fed can't giveth, fiscal policy taketh anyway with deficit reduction and years of refusal to consider demand side measures for jobs, wages and infrastructure.

    Business investment takes its cue from fiscal commitment to build out the public substrate that makes it worthwhile. When expansion is voted down at the level of public finance companies know what to do, hold cash, suppress wages and learn to profit from a weak environment.
    Mar 26, 2015. 11:15 AM | 1 Like Like |Link to Comment
  • DGI Investing: It's Riskier Than You Probably Think [View article]
    From the link:

    "The reason I am doing this at this time is that I am unable to maintain a diversified portfolio of dividend paying stocks at attractive valuations. Investors have bid up the Dividend Aristocrat stocks to much higher levels than the market average. Therefore, I feel to get diversified without paying over-market prices for dividend growth stocks, it is best for me to move back to the S&P 500."

    This fellow is selling his DGI stocks because the market says they're worth too much. He's not merely putting new money elsewhere (not a bad move) he's selling because the market today instructs him.

    I would say this violates not only DGI but practically any long term investment style, all of which are based on the idea that means must be used to decouple from market gyrations to 1) reduce the proliferation of market induced errors, 2) lower costs, 3) capture the benefits of long term compounding, including that increment of compounded returns lost to excess trading. These measures counteract the most serious mistakes investor make. Reducing what kills returns will be far more effective than any effort to "beat the market".
    Mar 26, 2015. 10:15 AM | 1 Like Like |Link to Comment
  • A Little Asset Price Inflation Is A Good Thing [View article]
    The value of existing assets may rise due to lower investment in the production of new goods. This is the phenomenon of good market/poor economy we've grown accustomed to over these last few years. A faster recovery would see initially lower stock prices. The price of assets would be lower relative to new productive investment. Companies would incur higher costs from new hires, higher wages and new equipment, software etc. The market and economy would still move opposite to each other but the positions would be reversed.
    Mar 25, 2015. 09:31 AM | 1 Like Like |Link to Comment
  • Z.1 Dumpage [View article]
    The first chart shows how liabilities balance assets, but also shows the extent to which these are balancing low with deficits too low to restore demand, our chronic problem. So yes, Cullen is exactly right about how the deficit contributes, but that is not in doubt. It's how much, not how.
    Mar 22, 2015. 05:55 PM | 3 Likes Like |Link to Comment
  • The Federal Reserve Has Painted Themselves Into A Corner [View article]
    "Stephen, you've got that right. Unfortunately, the Federal Reserve has been attempting to gloss over the reckless and undisciplined fiscal policies in Washington."

    Unsupportive fiscal policy is reckless in the opposite way from what it appears you mean. That's not the Fed in a box, that's the fiscal authorities wasting good Fed policy with subtractive fiscal policy. They should team up, not fight each other.

    So Lounsbury is correct in the first quoted paragraph:

    "Perhaps the Fed will create a program which should have been instituted back in 2010 or 2011, when it was apparent the financial system had been stabilized. That would be the creation of money for Main Street in the form of infrastructure development and subsistence level social programs. If you want to create inflation, money must be put in places where it will be spent. Once that has been accomplished then the dollar should weaken (or at least not start the current strengthening moonshot) and interest rates can be increased without the domestic and global disruptions that would be the case as things are today."

    Yup, let rates rise with the economy, not first. The positive effect of wider deficits will more than offset the incremental rate rise anticipated on private sector growth, which history suggests will be minimal as long as rate shock is not allowed to occur. The most important factor is the increase in net spending by all parties. Cut taxes and build things while rates rise slowly in the proper sequence is the right plan.

    Here he's wrong:

    "As said at the beginning of the discussion, the Fed has painted itself into a corner. This corner is in one room of the U.S. economic house and the rest of the house needs paint. So get another painter and start what should have been done in the first place."

    Good Fed policy with bad fiscal policy isn't a box for the Fed. It's just bad fiscal policy requiring the Fed to hold the fort until the Klowns wake from their dogmatic slumber. The question is how long will our box be imputed to ZIRP/QE/end of QE, or maybe who came up with this scapegoating formulation and when will we punish them for it instead of raving on and on and on about the Fed?
    Mar 21, 2015. 01:21 PM | 1 Like Like |Link to Comment
  • Is This Fed Transparency Or Outright Market Manipulation? [View article]
    I read the Fed can't tighten because it would make the interest on debt higher and widen the deficit and so they can't. Hmmm....it's usually not a good idea to proclaim that something just about to happen is impossible. I know, people do it, but I think they are better at forgetting what they used to think than I am. If I said the Fed was boxed in (something I have good reason not to say) I'd be afraid I'd look like a fool when the Fed's non-boxed-in-ness became evident.

    I don't know if Evans is right about growth, but he's right about everything else. Recent history suggests noninflationary full employment could go down to 4% or lower like it did in the '90s, and the best course is to move inflation up. Unless we get a labor shortage wages won't rise much faster than now.

    So it should be full speed ahead until we see the whites of inflation's eyes. Good luck, though, on getting a Fed consensus on such a positive policy. With Yellen there's no chance. Say what you will about him, Larry Summers in full autocrat mode would do it.
    Mar 21, 2015. 11:05 AM | Likes Like |Link to Comment
  • 'The U.S. Is Broke' [View article]
    "If 75% of your budget is Social Programs, you've got a big problem on your hands."

    If we were better off we'd spend more, but more to the point if we spent more we'd be better off. Provided, of course, that we didn't reduce spending elsewhere. :-)

    "The government will break the "promises" or change tax policy. At some point, it doesn't matter how badly you want to pay someone a SS check if there's no money to do so."

    As we've established, any promise breaking will be entirely voluntary. That what debt ceilings are for, a bogus hemi-demi bankruptcy only necessary because a real bankruptcy is impossible. There's no such thing as "no money".

    People, the government doesn't "have" or "not have" money. It either spends it into existence or taxes it out of existence. That's all it knows how to do. Trust funds and lockboxes are fictions to avoid scaring neurotics. Trying to base actual economics on such notions as "running out of dollars" is a waste of time. Nothing works like that, the notion describes nothing real. Get used to it.
    Mar 18, 2015. 08:22 PM | 3 Likes Like |Link to Comment
  • 'The U.S. Is Broke' [View article]
    "How can you be broke when you can print your own money , as much as you want ?"

    You can't. But then, there's no reason for a currency issuer to imagine it can go broke if it can't think of a reason it would be worthwhile. I can't bite my own head off, can I? Should I be sad? I don't think so, since it hasn't occurred to me that I'd be in any way advantaged by exercising such a marvelous talent.

    "We have been doing this it seems forever.."

    Yes, we have. We use debt and deficits to expand the economy. We do that because taxing spending away nets to zero and zero isn't enough, so we spend more and accumulate financial assets carried as liabilities on the government books as a record, not something paid by individuals. You'll never pay the debt, neither will I, nor will anyone else, ever. That's the other meaning of the national debt. Meaning No.1 is new money the economy uses to grow and No. 2 is red ink on the government side balancing green ink on the private sector side.

    Wanting the private sector in the green, kind of the point of having an economic policy, means wanting the government side in the red, the level governed largely by GDP and inflation, employment, things we have reason to care about far more than how the game is rigged. Of course it's rigged! Doctors aren't neutral between the patient and the disease. They rig the game, they take sides. Medicine is not the worse for that.
    Mar 18, 2015. 12:41 PM | 8 Likes Like |Link to Comment
  • The War On Savers, Part 2: How Investors Can Protect Themselves From The Current, Deteriorating Investment Landscape [View article]
    The terrible cost is why rates are lower even than administered ones. Don't try to produce an improved economy by raising rates, improve the economy and rates will rise. It's a common mistake to imagine the rear view mirror is the windshield.

    In a war between schools of monetarism everyone loses. Do low rates replace demand? Sorry, you lose. Does crushing the economy now have Karmic benefits for the grandkiddies? Sorry, you lose. The old fashioned way of spending now to build the future is not the best way, it's the only way.

    A trillion dollars of infrastructure neglect may be the greatest malinvestment in history, and certainly the most salient fact about our present slow growth circumstance is the policy that has brought it to fruition. Funny how so few want to take credit for this catastrophe but do want to magnify it with even more disinvestment to tighten our belts. I wonder how it's possible to think that way, but people do, you see it all the time here at SA in articles and comments.
    Mar 12, 2015. 01:07 PM | 2 Likes Like |Link to Comment
  • The War On Savers, Part 2: How Investors Can Protect Themselves From The Current, Deteriorating Investment Landscape [View article]
    Is a low inflation/low growth policy a war on savers? I would say it's a war on their income and therefore their ability to add to their savings. In a high growth/ moderate inflation environment incomes would be generally higher and savings would yield more.

    As we've seen the last few years, lowflation means other prices outpace wages. Caring most about interest on savings accounts is grasping the wrong end of the bat. It doesn't matter how hard you swing. You have to fix what's wrong, see, not what you're predisposed to fix no matter what.

    I've heard every excuse in the world to raise rates ("it's time" "war on savers" "malinvestment" "uncertainty" "hyperinflation"). It's all bogus reasoning to kill off a bull market now now now. Stop making excuses for a preference for a bad (predictable) economy. Just admit that jobs and rising wages and the "uncertainty" it would bring should be prevented and policy should do so. All that other crap is superfluous.

    But if you're in the minority that care about jobs and rising wages and an economy good enough to provide them you want to fix the economy first, not interest rates, which should go where they will in a better economy, probably up.
    Mar 12, 2015. 11:58 AM | 2 Likes Like |Link to Comment
  • DGI Investing: It's Riskier Than You Probably Think [View article]
    I didn't read about DGI and decide to adopt it. I read about it and recognized it explained some of what I'm doing, buying stocks for growing dividends. So I said yeah, I like this, these people have good ideas, I'll use them. I didn't marry DGI. To some extent DGI is a convenience, applying one flawed measure instead of another, how much dividends "will" grow versus how much earnings/price "will". But the point remain that whatever theory you adopt will arrive at the same approximate result.

    The virtues of stock picking have nothing to do with "picking" stocks. Here I'm with buy and hold, another convenience. Buy and holders differ from other investors in not imagining that you'll do better than long term compounding affords. It's error reduction, fee reduction, and the compounding of the difference. It's a strategy for dummies. I decided I didn't want to be too smart to be a good investor, so I'll hold my bad stocks, collect my dividends and wait for my choices to get good.
    Mar 7, 2015. 11:46 AM | 1 Like Like |Link to Comment
  • ModernGraham Quarterly Valuation Of Chevron Corporation [View article]
    Who cares what traders think about the next quarter, investors see CVX selling much closer to its near term low than its high with oil prices in the trough somewhere. Am I supposed to "prove" oil is at the bottom? Do I care about this unobtainable info? I don't, I care about whether CVX is a stock worth buying and holding, and whether it's especially good when its on sale.

    Is it better to buy it when the price is low and everybody is "ohwoeisus, oil will never evah recover!" or wait to be proven wrong then buy with everyone else at $140?
    Mar 3, 2015. 11:24 AM | Likes Like |Link to Comment
  • Talking Points On 'America's Imminent Budget Crisis': Focus [View article]
    "As to the merits of Federal spending, it is like the global warming debate. Only our great grandchildren will know whether the government was right or wrong."

    People have been saying this for centuries, ever since the founding example of massive British borrowing to fight and eventually defeat the French. And what happened next? During the long peace from 1815 to 1914 Britain kind of ruled the world. Only the rise of the U.S., Germany and Japan finally ended their reign.

    Now we know countries don't go broke borrowing their own money from themselves, though it's clear they might if they stupidly refuse to do so, like our current Klownocracy trying to "save" dollars for the future. Uncreated, that is unspent dollars, are not really saved. I went to the grocery store yesterday and saved $5.68! Since I'm a currency user and my dollars are quantity limited the savings are in a feeble sense real. For a currency issuer though it's a sick joke to "save" needed dollars, which can only mean not creating them. Is it sensible to determine that dollars are needed but to decide not to spend (create) them?

    Where are they then "saved"? If they are needed now but uncreated by what process will we decide they are spendable later? Since need is not enough, what is? Me, I think the future wants real wealth we create from our own resources exactly like we want the real wealth our grandparents created. That is we are grateful for the vast resources our national debt helped to build, and therefore grateful our ancestors didn't "save" instead. I want rich grandchildren, too, so I naturally want to continue in like manner.

    I'm not brilliant enough to imagine that public finance can be made to operate exactly the opposite of the way it has since Britain invented the modern version in the late 17th century.

    "Did the debt increase by $2 trillion under Reagan. Yes, but what is left out is that GDP ALSO increased by more than $2 trillion and tax revenues almost doubled. In fact, Total gross debt to GDP under Reagan averaged 44.1% over his 8 year term and it was 64.1% under Bush 43. Over Obama's first term it averaged 97% and is currently over 100%."

    Reagan spent and cut taxes enough to produce the boom that paid the bills. Obama has not spent and cut taxes enough, and while one might blame the Klowns for this (just as the Tipster must share the "blame" for the Reagan years) Obama is definitely blameworthy for his "running out of dollars". He empowered these sociopaths like the deficit phobe he is at heart.
    Mar 1, 2015. 10:22 AM | 1 Like Like |Link to Comment
  • My Retirement Portfolio Generates 8.8% Of Income For This Retiree: Updated [View article]
    Income is turned into savings, savings are turned into investments, investments are turned into income. Getting rich is usually a matter of creating and building a business, outside the scope of this discussion, unless you think you can save your way to riches. Then you're just wrong.
    Feb 28, 2015. 03:33 PM | 2 Likes Like |Link to Comment
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