Seeking Alpha

JHHAlpha

JHHAlpha
Send Message
View as an RSS Feed
View JHHAlpha's Comments BY TICKER:
Latest  |  Highest rated
  • What Accounts For The Decrease In The Labor Force Participation Rate? [View article]
    This observation is a description (which is useful), but apparently offered as an explanation, which it is not:
    " Of the 12.6 million increase in individuals not in the labor force, about 2.3 million come from people ages 16 to 24, and of that subset, about 1.9 million can be attributed to an increase in school attendance (see the chart below). "
    Instead, it is easy to understand that the lack of "suitable" or "desirable" jobs turns this demographic class back to school, in part to wait out the poor job market, and in part to raise prospects for higher level entry positions. On balance, it's likely that the poor job market is driving the increase in schooling, and not simply a preference to stay in school. After all, extended schooling is costly, and for many boring or stressful -- my observation as a former prof at the undergrad and graduate level.
    Jan 19 12:10 PM | 7 Likes Like |Link to Comment
  • Another Reason To Suspect The Economy Is Improving [View article]
    How can we ignore the disruption of consumers now facing uncertainties over the cost of medical insurance premiums and high out of pocket costs as the ACA is being implemented? There are estimates of 5 million policies thus far cancelled for individuals, with estimates of small businesses next in line for even more cancellations; and while large employers were exempted for next year, there will be bad noise coming as they plan to adjust with some cancelling themselves and others paying more for policies and ACA tax increases. Our poor recovery is now under assault, and it figures to get worse in January.
    Nov 17 10:31 AM | 3 Likes Like |Link to Comment
  • The Wrong Reading Of The Money Multiplier [View article]
    Antonio, your points are well made, but having read Hunt's work, I think you are simply clarifying his writing. I think we can also add to this picture in which banks are creating little credit expansion (flat M2), that demand from business is low, and the empowerment of Dodd Franks for regulators to sieze banks and other financial instituions is keeping their risk profile low.

    We might guess that interest rates would be trending lower even w/o QE, because of the aging demographics of the BB cohort here reducing economic demand, and the fact that aging is worse in Europe, and far worse in Japan.

    Consumers and banks have yet to deleverage, with Gary Shilling estimating another seven year before an up cycle can procede.
    Oct 22 10:20 AM | 1 Like Like |Link to Comment
  • Low Rates For A Long Time: No Fed Funds 2-Handle Until 2017 [View article]
    Good clarification on short vs. long rate perspective.

    Consider that inflation world wide is in part due to Supply having built higher than Demand with the aging demographcs and reduced consumer availability of cash and credit. Further consider that M2 is flat despite the QE forever monitizartion pump--because the banks yet have low equity given the number of mortgages owened that are yet under water, and in the USA, the Dodds-Franks regulations that virtually prod regulators to take over poorly capitalized banks and other finanial firms-- so they are not creating the credit expansion that would show up as money inflation.

    These are long-term structural issues. Gary Shilling's estimate of about another 7 years for consumer and bank deleveraging provides a good time mark on when to expect an economic revival, but if our entitlement society's take of taxes has grown too large by then, QE forever becomes practically forever.
    Oct 19 04:24 PM | Likes Like |Link to Comment
  • Low Rates For A Long Time: No Fed Funds 2-Handle Until 2017 [View article]
    Good clarification on short vs. long rate perspective.

    Consider that inflation world wide is in part due to Supply having built higher than Demand with the aging demographcs and reduced consumer availability of cash and credit after the 2008 bust. Further consider that M2 is flat despite the QE forever monitizartion pump--because the banks yet have low equity given the number of mortgages owened that are yet under water, and in the USA, the Dodds-Franks regulations that virtually prod regulators to take over poorly capitalized banks and other finanial firms-- so they are not creating the credit expansion that would show up as money inflation.

    These are long-term structural issues. Gary Shilling's estimate of about another 7 years for consumer and bank deleveraging provides a good time mark on when to expect an economic revival, but if our entitlement society's take of capital by taxation has grown too large by then, QE forever becomes practically forever.
    Oct 19 04:21 PM | Likes Like |Link to Comment
  • Low Rates For A Long Time: No Fed Funds 2-Handle Until 2017 [View article]
    Sensible analysis--except for its cloistered focus on interest rates, and that led to a wildly optimistic presumption on a time scale for tapering QE forever.

    The USA is undergoing a bout of aging as the BB cohort retires, and with its retirement reduces Demand, except for health care, which is largely subsidized at the cost of more Gov deficit spending and higher taxes eating into capital that would otherwise be available to consumers and investors. This is a multi-year structural issue here-- but it's even worse in Europe, and worse yet in Japan. We are not alone in the Developed world with Supply exceeding Demand.

    However, the picture turns even darker when considering that consumers, banks, and governments are overleveraged. The USA debt, that just flashed by $17 T, is currently decelerating, but yet growing higher. Consumers are strapped, and this is a multi-year problem (Gary Schilling estimates another 7 years for deleveraging of consumers and banks).

    The lynch pin for the Fed to continue QE forever well past the next Presidential election is the Treasury debt. Higher interest rates would threaten serviceability of the debt. The Fed's reaction to the serviceability issue, that's generally being ignored, would be an increase in monetization that would raise the specter of hyper-inflation, so the Fed cannot risk letting rates go up substantially.

    The episode about tapering also demonstrated the hyper sensitivity of the market to Fed plans, apart from actual deeds. We can infer that the Fed just learned that even the hint of easing QE powered market psychology to drive bonds and mortgages down too far too fast.

    We are stuck now with QE until the structural problems resolve over time-- a long time. Re investment implications, as others have noted, the earnings climate for the MREITs is now fabulous. My own favorites are WMC and MTGE, both well managed. THe yield on WMC is irrationally high as well, so strond capital gains are likely, as well as the high yield.
    Oct 19 12:25 PM | Likes Like |Link to Comment
  • Why No Taper? One Man's View [View article]
    The truth about job creation is much worse than the Government reports. As shown by the payroll revisions graphic, initial reports offer a favorable reporting bias (and analysis by Ben Hunt going back in this and the prior Bush Administration show the positive bias of initial reporting have been getting worse). Even more importantly, not reported with any clarity is that upwards of 90% of the new jobs this year are only part time w/o benefits.

    Part timers will not generally seek to buy a house, and would not qualify anyway for a mortgage, so the pattern of job creation is negative for housing and economic growth.

    Money supply growth (M2) has become flat to negative despite QE forever, because the banking system with many underwater mortgages and new Dodd-Franks regulatory concerns are not creating the additional credit necessary to expand money supply and monetary inflation. The reisk is more from deflation thn inflation.

    Complaints about QE and lack of tapering are logical, but only academic, because QE is not creating inflation and the market foolishly greeted its withdrawal with a harmful increase in longer term interest rates. A rationally functioning financial market (as will develop over time) would recognize that economies world wide are too poor, with inflation too low, to demand higher interest rates.
    The use of QE now operates at the margin to promote lower rates, and that is helpful to the economy.

    The problems with our economy and also in the developed world have long term structural sources:
    1) Aging demographics which naturally generate a reduced demand for goods and services (except for subsidized medical care);
    2) consumers who yet have debt to work down (and underwater mortgages are still a large problem); mid size and smaller banks that have marginal equity from bad loans and mortgages and so are not lending; governments that are borrowing capital to service debt and sustain welfare and entitlement programs;
    3) Business uncertainty about tax liabilities, as for example being created here by the Affordable Health Care Act implementation.

    The QE program here and similar programs by the other central banks have morphed into a counterbalancing remedy for social welfare deficit financing in the developed economies. It will be years and years (seven might be too optimistic), before QE can be tapered.
    Oct 5 10:17 AM | 2 Likes Like |Link to Comment
  • Monetary Policy Report Through September 2013 [View article]
    Thanks for an excellent review. Your third explanation is on target.

    There is also a 4th reason that adds to the Fed's intent to keep interest rates low. Higher rates would not only work to retard the economically important housing recovery, but also would raise concerns in the financial community over servicing the nearly $17 T debt that is sure to keep increasing under an Administration policy imperative of wealth redistribution. At the unknown inflection point where servicing capability appears to be approaching a strain, the Fed would lose its ability to act at the margin to suppress longer term rates. A Fed effort to expand QE size to constrain rates could boomerang with a hyperinflation scare as well.

    So, it prudent for the Fed to sustain QE while fiscal policy continues to expand government debt.
    Oct 2 08:46 AM | 1 Like Like |Link to Comment
  • Government Shutdown: Time To Sell? [View article]
    Given that the government "shut down" is mainly a noisy distraction from the economy, attention needs to refocus on how the economy may be expected to perform at this juncture.

    The market has been expecting inflation for most of the year, but the real threat was, and continues to be deflation, despite QE infinity (M2 is basically flat). :

    a) aging demographics reducing Demand (except for medical care) and thus creating potential oversupply with competition driving pricing down

    b) over indebtedness of consumers (thus reduced buying power and Demand), thin equity in banks (yet holding many under water mortgages with mark to market accounting deficits intentionally ignored by regulators, for now), and deficit spending by governments

    c) Governments continuing to increase debt, and drain capital with higher taxes, thus also discouraging investment

    d) negative effects on business investing from USA share-the-wealth policy, with the Affordable Care Act specifically driving hiring away from full time to part time (almost 90% of hiring this year was for part time without benefits) and conversions of full time to part time-- which is a killer for housing recovery, and for tax income from newly hired workers.

    Unfortunately for economies, it looks good now for long term bonds, Mortgage Based Securities, and MREITs (threat being interest rate spread compression next year).
    Oct 1 06:07 AM | 1 Like Like |Link to Comment
  • So Why Did The Fed Do A Non-Taper? [View article]
    retired investor
    Sep 22 09:21 AM | Likes Like |Link to Comment
  • So Why Did The Fed Do A Non-Taper? [View article]
    fishfryer is exactly right-- the economy is poor, with the risk of deflation now greater than inflation. Interest rates would have come down regardless of the Fed not tapering.

    Job creation is poor, and the majority (70-80%) are part time w/o benefits, and these folks cannot increase consumption or buy houses; as ff points out, housing was up mainly on speculative buying, not buying to reflect folks moving for new jobs.

    The economy here and in the other Western economies and Japan are saddled with the long term structural problems of aging demographics (i.e., reduced consumer demand, except for medical care); overleveraged consumers, banks, and governments, and rising taxes draining money from capital investing.

    The world is years away from any sustained major economic recovery.
    Sep 22 09:21 AM | 5 Likes Like |Link to Comment
  • Mortgage REITs Dividend Cuts Scorecard [View article]
    Retired investor
    Sep 22 09:10 AM | 1 Like Like |Link to Comment
  • Mortgage REITs Dividend Cuts Scorecard [View article]
    Strange that the best performing hybrid MREIT was overlooked or excluded. WMC has been maintaining its dividend well, and last week declared with not cut. Its BV was lowered as of the end of Aug, but that simply increased the leverage ration, with the company well able to borrow more if need be, and with tapering avoided over the poor economy, mortgage rates are coming back down and BV will be trending higher.

    The Fed decision to avoid tapering was no blip, but reflects a long term structural set of problems here and in the other developed economies:
    1) aging demographics with high retirement reducing consumer demand, except for subsidized health care;
    2) overleveraged consumers, governments, and banks;
    3) the banks are not lending to preserve capital, so money inflation is constrained despite QE here and similar programs by other central banks (notably Japan)-- inflation is not the problem, but deflation is yet the greater risk;
    4) job creation is bad, with 70-80% of new jobs here categorized as part time w/o benefits, and these folks are not house buyers.

    All of the MREITs are good buys for at least the next four years. With WMC tapping the corporate resources of Legg Mason, and given its superior performance, it appears to be the best buy at an extremely high yield, because, I guess, it's relatively new and thus has not developed a following, as illustrated by its being overlooked by your review.
    Sep 22 09:10 AM | Likes Like |Link to Comment
  • No Matter What The Unemployment Rate, The Fed Will Have To Taper [View article]
    The Fed under B is more concerned with avoiding deflation than creating inflation, and as you are surely aware, the Fed has set an inflation goal that it has failed to meet. Monetary inflation is the Fed's primary strategy for avoiding deflation, so it will continue QE, even if it states that it will start reducing bond purchasing--and it will quickly reverse that tapering decision as deflation appears to be the greater threat.

    QE has failed to promote inflation the way the Fed measures it, because the banks continue to prefer to recapitalize by working arbitrage with treasury notes instead of making commercial and housing loans.

    There continues to be a minor threat of inflation, not only from a lack of bank lending, but from the demographics of an aging population reducing demand (except for increasing demand for healthcare correlated to aging).
    Sep 8 01:00 PM | 1 Like Like |Link to Comment
  • Down Month For The Markets And Oil Up On Geopolitical Concerns: Get Used To It. [View article]
    Congratulations on an excellent analysis of important megatrends analysis and logical conclusions. It seems to me that the political powar of Iowa and Illinois corn growers reducing edible corn production for subsidized ethanol feedstock was a catalyst for the Arab Spring. So in this interest, selfish politics hurt the USA and the Arab worls-- a lose lose. But our current Green Administration appears clueless about harming the USA and the Arab world with its Green energy advocacy.

    I encourage you to send your analysis your Congressional reps. Further, it might be helpful to have your House rep bring this analysis to the House leadership. There is a Win-Win possible by our industry working in Arab lands to improve their agricultural production. Because its in their own self interest for stabilizing their region, the large Arab oil producers could help by subsidizing a "Marshall Plan" type effort. The journey does start with one step.
    Aug 31 12:56 PM | Likes Like |Link to Comment
COMMENTS STATS
55 Comments
76 Likes