Larry MacDonald1's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/21779/comments http://seekingalpha.com/article/80718-online-recession-betting-not-quite-what-it-seems?source=feed#comment-182566 182566 Tue, 10 Jun 2008 11:35:38 -0400 http://seekingalpha.com/article/76949-ben-is-no-helicopter?source=feed#comment-168613 168613
I too believe the U.S. economy has long been over-stimulated by the Fed and U.S. government -- as highlighted by the chronic deficit in the trade balance, low savings rates, rising debt, etc. Negative real interest rates, of course, have contributed to all the foregoing. I wonder, though, if they are something to worry about in the midst of a financial crisis. Maybe it would be better to ensure the system is stabilized before re-focusing on what has to be done to end easy money policies.

As for what the Fed is doing now …. as I understand it, the Fed is actually trying to keep interest rates from falling as much as the market wants. As you say, there has been a flight to the safety of treasuries -- which has bid their yields way down. But the Fed's discount rate has not followed them all the way down. It is keeping its discount rate higher by selling treasuries -- which also drains cash from the financial system. My guess is the Fed wants to avoid an even bigger run on the U.S. dollar and keep inflationary expectations at bay by sterilizing much of the liquidity generated from actions taken to stabilize the financial system.

Assuming the system stabilizes, the Fed should begin to address its bias toward over-stimulation. The agency is now conducting an internal review of its past “hands-off” policy toward asset bubbles. Hopefully some changes will come of that. One possibility is greater use of regulatory tools. Another, which I have posted on before, is formal or informal inclusion of asset prices in the price target.
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I too believe the U.S. economy has long been over-stimulated by the Fed and U.S. government -- as highlighted by the chronic deficit in the trade balance, low savings rates, rising debt, etc. Negative real interest rates, of course, have contributed to all the foregoing. I wonder, though, if they are something to worry about in the midst of a financial crisis. Maybe it would be better to ensure the system is stabilized before re-focusing on what has to be done to end easy money policies.

As for what the Fed is doing now …. as I understand it, the Fed is actually trying to keep interest rates from falling as much as the market wants. As you say, there has been a flight to the safety of treasuries -- which has bid their yields way down. But the Fed's discount rate has not followed them all the way down. It is keeping its discount rate higher by selling treasuries -- which also drains cash from the financial system. My guess is the Fed wants to avoid an even bigger run on the U.S. dollar and keep inflationary expectations at bay by sterilizing much of the liquidity generated from actions taken to stabilize the financial system.

Assuming the system stabilizes, the Fed should begin to address its bias toward over-stimulation. The agency is now conducting an internal review of its past “hands-off” policy toward asset bubbles. Hopefully some changes will come of that. One possibility is greater use of regulatory tools. Another, which I have posted on before, is formal or informal inclusion of asset prices in the price target.
]]> http://seekingalpha.com/article/64940-bullish-on-natural-gas-sector?source=feed#comment-125203 125203 First, I didn't say MCF. The pension fund manager used the term in a quote I provided. Second, if you google MCF and LNG together, you will see that it is common for LNG prices to be quoted in MCFs.
LM]]> Tue, 11 Mar 2008 14:16:40 -0400 First, I didn't say MCF. The pension fund manager used the term in a quote I provided. Second, if you google MCF and LNG together, you will see that it is common for LNG prices to be quoted in MCFs.
LM]]> http://seekingalpha.com/article/64940-bullish-on-natural-gas-sector?source=feed#comment-117440 117440 Liquefied Natural Gas in generic form not as name of a company as appears here. And there was not reference to UNG. Can't help the editing. Sorry.]]> Wed, 20 Feb 2008 14:34:18 -0500 Liquefied Natural Gas in generic form not as name of a company as appears here. And there was not reference to UNG. Can't help the editing. Sorry.]]> http://seekingalpha.com/article/60888-canadian-reits-are-bargains-now-too?source=feed#comment-112291 112291 Tue, 22 Jan 2008 18:31:25 -0500 http://seekingalpha.com/article/58312-tactical-as-opposed-to-calendar-rebalancing?source=feed#comment-107254 107254 Thanks. I posted today on "oportunistic rebalancing" in my Canadian Business blog. It's another interesing perspective on rebalancing (from the Journal of Financial PLanning). If you don't see it in Seeking Alpha, check out my ste at:
blogs.canadianbusiness...
Larry M.]]> Fri, 28 Dec 2007 16:05:52 -0500 Thanks. I posted today on "oportunistic rebalancing" in my Canadian Business blog. It's another interesing perspective on rebalancing (from the Journal of Financial PLanning). If you don't see it in Seeking Alpha, check out my ste at:
blogs.canadianbusiness...
Larry M.]]> http://seekingalpha.com/article/44382-vix-call-options-as-put-options?source=feed#comment-93655 93655 The title is not mine. You're right: I'm not talking about hedging here. The forecast method? When the VIX shoots up quickly from a low number to 30 (near my entry point) or beyond, it doesn't usually stay there long (as far as I see from the historical pattern). The tactical error, as mentioned in the post, was buying too far out of the money. When VIX flirted with 30 on Friday, the Sept 27.5 puts might have been the better bet.]]> Tue, 14 Aug 2007 15:58:06 -0400 The title is not mine. You're right: I'm not talking about hedging here. The forecast method? When the VIX shoots up quickly from a low number to 30 (near my entry point) or beyond, it doesn't usually stay there long (as far as I see from the historical pattern). The tactical error, as mentioned in the post, was buying too far out of the money. When VIX flirted with 30 on Friday, the Sept 27.5 puts might have been the better bet.]]> http://seekingalpha.com/article/43781-taking-a-300-gain-on-volatility-index-options?source=feed#comment-93410 93410 Fri, 10 Aug 2007 16:19:35 -0400 http://seekingalpha.com/article/43781-taking-a-300-gain-on-volatility-index-options?source=feed#comment-93409 93409 Fri, 10 Aug 2007 16:14:56 -0400 http://seekingalpha.com/article/44045-how-to-tell-whether-subprime-will-cause-a-crisis?source=feed#comment-93407 93407 For signs of a financial crisis, government and corporate bond spreads are the main thing to watch according to Ken Fisher (see his July 16 article in the Financial Times of London). LBO war chests are more than mere credits according to BCA Research (a leading provider of independent research to institutional investors since 1941). Financial markets can lose confidence in monetary policy (e.g. in 2002), so the Fed’s actions are not always a reliable signal. Consumer behavior is a coincident or lagging indicator, I believe.]]> Fri, 10 Aug 2007 16:02:59 -0400 For signs of a financial crisis, government and corporate bond spreads are the main thing to watch according to Ken Fisher (see his July 16 article in the Financial Times of London). LBO war chests are more than mere credits according to BCA Research (a leading provider of independent research to institutional investors since 1941). Financial markets can lose confidence in monetary policy (e.g. in 2002), so the Fed’s actions are not always a reliable signal. Consumer behavior is a coincident or lagging indicator, I believe.]]> http://seekingalpha.com/article/44045-how-to-tell-whether-subprime-will-cause-a-crisis?source=feed#comment-93405 93405 True, just about everything will be selling off including corporate bonds. But not government bonds: they will be very much in demand as a sanctuary. Hence the widening of the spread between government and corporate bond yields. Anyway, let's see what market events have to say in weeks ahead about our credibility.]]> Fri, 10 Aug 2007 15:49:19 -0400 True, just about everything will be selling off including corporate bonds. But not government bonds: they will be very much in demand as a sanctuary. Hence the widening of the spread between government and corporate bond yields. Anyway, let's see what market events have to say in weeks ahead about our credibility.]]> http://seekingalpha.com/article/41994-using-the-vix-to-hedge-against-subprime-fallout?source=feed#comment-92036 92036 I hestitate to offer specific advice to individual investors, but can offer the general observation that you would need to buy the VIX call options (or futures) to hedge your portfolio. More could be added but the subject is on the complicated side, so I hestitate to dash off a quick reply here. I may post to my blog on this.]]> Tue, 24 Jul 2007 19:22:59 -0400 I hestitate to offer specific advice to individual investors, but can offer the general observation that you would need to buy the VIX call options (or futures) to hedge your portfolio. More could be added but the subject is on the complicated side, so I hestitate to dash off a quick reply here. I may post to my blog on this.]]> http://seekingalpha.com/article/38937-natural-gas-stocks-still-have-steam?source=feed#comment-89425 89425 Fri, 22 Jun 2007 15:57:13 -0400 http://seekingalpha.com/article/38168-to-stay-invested-or-not?source=feed#comment-88962 88962 Mon, 18 Jun 2007 18:45:59 -0400 http://seekingalpha.com/article/36715-short-sellers-maybe-wait-with-chinese-etfs?source=feed#comment-87352 87352 Thu, 31 May 2007 07:23:53 -0400 http://seekingalpha.com/article/27324-ishares-msci-taiwan-etf-is-seriously-undervalued?source=feed#comment-86217 86217 What false claim? The 4% refers to the yield in the market. Holders of the ETF will get this less the MER on their ETF. Given the size of the MER on the Taiwan ETF, the yield will be closer to what you experienced.]]> Tue, 15 May 2007 15:08:11 -0400 What false claim? The 4% refers to the yield in the market. Holders of the ETF will get this less the MER on their ETF. Given the size of the MER on the Taiwan ETF, the yield will be closer to what you experienced.]]> http://seekingalpha.com/article/34941-caution-light-on-markets-vix-rising?source=feed#comment-86011 86011 Actually, my day job for the past 10 years or so has been writing about the stock market. Maybe the VIX point will make more sense if more detail is supplied. The VIX is edging up from an historic low while the market is rising – i.e. a negative divergence is occurring. The market is on a tear but fear is creeping in – suggestive of an unsustainable situation, especially considering other divergences involving insider trading, bond spreads, and technical indicators. An analogy is a car engine powering ahead with squealing noises. Things are a little more subtle than the VIX 101 stuff about corrections at VIX lows and dramatic VIX spikes during market corrections.]]> Sat, 12 May 2007 14:26:39 -0400 Actually, my day job for the past 10 years or so has been writing about the stock market. Maybe the VIX point will make more sense if more detail is supplied. The VIX is edging up from an historic low while the market is rising – i.e. a negative divergence is occurring. The market is on a tear but fear is creeping in – suggestive of an unsustainable situation, especially considering other divergences involving insider trading, bond spreads, and technical indicators. An analogy is a car engine powering ahead with squealing noises. Things are a little more subtle than the VIX 101 stuff about corrections at VIX lows and dramatic VIX spikes during market corrections.]]> http://seekingalpha.com/article/19947-selloff-in-canada-s-bce-may-provide-opportunity?source=feed#comment-73390 73390 Mon, 06 Nov 2006 08:55:00 -0500 http://seekingalpha.com/article/18616-spark-networks-other-dating-sites-to-be-buried-by-myspace?source=feed#comment-70933 70933 It would seem Yahoo Personals is in trouble, which could could more evident in 2007. Recent sales of Yahoo’s international dating sites is one sign. Also according to Markus Frind, useage data shows growth in signups is trending away from paid sites like Yahoo Personals to MySpace and Plentyoffish.com. Lastly, the latter site currently has about the same number of pageviews as Yahoo Personals but is produced by one person at a cost of $20k month. Frind is making a nice living just from the Google Adsense revenues. Yahoo might fight back by switching from paid to free service but it has a much larger overhead of many staff and servers to support.
Larry M.]]> Thu, 19 Oct 2006 11:20:11 -0400 It would seem Yahoo Personals is in trouble, which could could more evident in 2007. Recent sales of Yahoo’s international dating sites is one sign. Also according to Markus Frind, useage data shows growth in signups is trending away from paid sites like Yahoo Personals to MySpace and Plentyoffish.com. Lastly, the latter site currently has about the same number of pageviews as Yahoo Personals but is produced by one person at a cost of $20k month. Frind is making a nice living just from the Google Adsense revenues. Yahoo might fight back by switching from paid to free service but it has a much larger overhead of many staff and servers to support.
Larry M.]]>