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Dead Rabbits

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  • The Resurgence Of The REITs [View article]
    Agree. Little here to justify the time spent clicking through.
    Feb 11, 2014. 05:18 AM | Likes Like |Link to Comment
  • 5 Asset Bubbles Ready to Burst (Part 1) [View article]
    Clearly you are not a single malt man.
    Nov 20, 2013. 06:41 AM | Likes Like |Link to Comment
  • The Bubble In Blue Chips - Part 1 [View article]
    I got the message. I am just not sure that in this case the snow is in fact yellow.
    Oct 19, 2013. 02:57 AM | Likes Like |Link to Comment
  • The Bubble In Blue Chips - Part 1 [View article]

    I enjoyed the contrary tone of this piece. However, you focus on valuations (P/E especially) without considering the interest rate/inflation outlook. Do you agree that continuation of relatively low interest rates for several years would justify relatively higher valuations for blue chips (and other assets)?

    Oct 19, 2013. 02:52 AM | Likes Like |Link to Comment
  • Now Is The Time To Be Fearful [View article]
    But health care, especially the system currently in place in the US does not function as a typical market. Why?

    First, inelastic demand. You break your leg, you gotta get it fixed right now. There are no substitute products. You cannot just say no its too expensive. You are no position to bargain (even if you knew how the industry worked) or travel all over town getting quotes. You need the care right away.

    Second: rational people buy insurance to avoid the potentially catastrophic costs of an unexpected illness so they buy insurance. But insurance stands in the way of the kind of price signals that might otherwise drive competition and lower costs/better service/more efficiency. Once you have insurance you just go to the provider that has a good rep or is convenient. You have no real reason to bargain or comparison shop. Along with inelastic demand, this problem explains why providers can get away with charging $100 for a catheter that costs $2 to make. You aren't going to switch hospitals while recovering from surgery to save a few bucks, are you? and why would you, after all you're insurance is paying!

    third: all players in the system are paid based on the number of procedures performed, drugs prescribed, visits to the doctor, which results in overuse. And if you are insured, why not? why not have an expensive procedure that only delivers a marginal benefit? No one has an incentive to rationally measure real costs and benefits or to invest in low cost treatments or preventative measures.

    Fourth: Laws in the US make it impossible for the government to bargain with pharmaceutical companies and device manufacturers. Americans pay rack rate for drugs and machines that can be had for a fraction the cost in Canada or Mexico or anyplace else. Why? ask you congressman how much money he got from the AMA. Or pharmaceutical companies.

    fifth: the us government subsidizes this crazy scheme by making health insurance premiums tax deductible, which further weakens the role of price signals. If people and businesses had to pay the full cost of their insurance, they might start to look for cheaper options, which might drive some small change in the system. But no, the gov didn't have the stones to follow through on a proposal to eliminate this foolish tax expenditure.

    So it pretty far from a free market. Really it resembles a kind of socialist system, except that individual insurers compete against each other for customers. Given that the service on offer is almost identical, what is the most effective way for insurers to compete? By excluding high risk patients so that you can lower costs for your other policy holders. And by pushing administrative costs on to your policy holders. And finding ways to deny coverage to policy holders. Every time I deal with the american system (I am Canadian) I am astonished by the paperwork and bureaucracy. And the general irritation at having to jump through hoops for a bunch of paper pushers. And the worst part in all of this, is that Obamacare doesn't really tackle any of those problems. It just seeks to optimize what you have and ensure that fewer people are excluded.

    I am a Canadian and a Conservative, but having dealt with both health care systems, I can say without any doubt that the Canadian system is better. The care is as good. But the whole experience is just better. No fucking around with bills, no wasting your time filling out forms or trying to convince some bean counter on the internet to allow your costs. Yes we pay taxes for it, but we pay LESS in taxes than Americans have to pay for insurance. You pay MORE than us, it just goes to a different faceless inhuman bureaucracy.
    Sep 20, 2013. 07:05 AM | 41 Likes Like |Link to Comment
  • Dissecting The Irrational Enthusiasm For Stocks [View article]
    Where is the dissection you mentioned?
    Aug 8, 2013. 08:30 AM | 5 Likes Like |Link to Comment
  • What Happens When Liquidity Disappears? [View article]
    "The only thing the Fed can do is implement policy designed to alter sentiment". Surely monetary policy, including QE, is intended to do more than change sentiment? What about, as your article makes clear, the impact of monetary policy on the price of financial assets? I would also mention the impact of low interest rates on mortgage rates, availability and cost of credit for corporate borrowers, marginal propensity to borrow among consumers, low return on savings of the elderly, etc.
    Apr 25, 2013. 08:34 AM | 1 Like Like |Link to Comment
  • Just How Risky Are REITs? [View article]
    Interesting Article. Do you have an opinion on REIT ETF's like VNQ? Do you think diversification is as important for REIT investors as it is for equity investors?
    Mar 15, 2013. 08:08 AM | Likes Like |Link to Comment
  • The Fed Prints $60 Billion In 7 Days, Gold Will Follow [View article]
    Dear Mr. Rabie,

    You say that "The Fed's sensitivity to interest rates is such that they cannot sustain even a 2% decline in their portfolios' bond prices without becoming technically insolvent."

    How does a central bank, which can create new money at will and does not have liabilities in the conventional sense become insolvent? To put it another way, if the value of the securities on the fed's balance sheet were to decline by 20%, why would that be a problem?
    Feb 16, 2013. 05:23 AM | Likes Like |Link to Comment
  • Is The Current Market Overvalued? [View article]
    American businesses are deriving an increasingly large share of their profits from operations overseas: (

    Given that fact, corporate profitability as a share of GDP may be a less useful metric than it was in the past. For the same reason, slow GDP growth in the US in the coming decade will not necessarily mean slow growth in the profitability of US businesses.
    Feb 15, 2013. 07:19 AM | 2 Likes Like |Link to Comment
  • How To Properly Think About Stock Prices In Today's Volatile Markets [View article]
    Paul makes a good point. Any calculation of fair value must take account of changes in expected earnings growth. However, the charts above seem to use static PEG ratios to calculate fair value (the orange lines in the graphs) for the stocks analyzed.

    Consider the case of Walmart. The author states that the "market was not efficiently valuing Wal-Mart shares from 1999 to mid 2007" because the price exceeded an estimate of fair value based on GDF-PEG x 15. However, investors at that time were willing to pay a higher multiple in part because they expected earnings to grow relatively quickly. Investors today see less potential for earnings growth and so the stock is trading at a lower multiple. Given the above, can it really be said that WMT price action over the past 15 years has been irrational?
    Feb 10, 2013. 03:39 AM | 2 Likes Like |Link to Comment
  • The first group (9) of large banks have submitted their so-called living wills to the Fed and they've been made available to the public. Required by Dodd-Frank, the documents are supposed to lay out how the giants could be wound down in bankruptcy in event of material financial distress or company failure.  [View news story]
    So I had a quick look at the Goldman Summary RP. It consists of 30 odd pages of explanation of what a resolution plan is, affirmation of the importance of having a plan, and description of the process GS used in developing its plan. The only thing even vaguely resembling an actual resolution plan so far as I can see is the following, which was burried away on the last two pages:

    "Our Material Entities will be subject to various bankruptcy proceedings in the jurisdictions in which they are domiciled.
    These proceedings will include: FDIC receivership for our U.S. bank; SIPA liquidation for our U.S. broker-dealers; relevant
    broker-dealer resolution regimes in the U.K. and Japan; and various other bankruptcy proceedings for our other Material

    Our Material Entities will be subject to various bankruptcy proceedings in the jurisdictions in which they are domiciled.
    These proceedings will include: FDIC receivership for our U.S. bank; SIPA liquidation for our U.S. broker-dealers; relevant
    broker-dealer resolution regimes in the U.K. and Japan; and various other bankruptcy proceedings for our other Material

    If it proves impossible to sell GS Group businesses and assets then it would be possible to liquidate a substantial majority of
    GS Group’s assets. This strategy would likely take more time than sales of the businesses and assets of the Material Entities
    and would likely not achieve maximum recovery for stakeholders as franchise value would likely erode quickly

    We believe the potential purchasers for the businesses or assets of our Material Entities and for other non-Resolution
    Business Core Lines of Goldman Sachs could include global financial institutions, private equity funds, insurance companies
    or sovereign wealth funds"

    Whew! Glad we got that done. Now Regulators will know exactly what to do in the event of a "material financial distress or failure" at GS. They'll have our backs next time!
    Jul 4, 2012. 02:01 PM | Likes Like |Link to Comment
  • Krugman, Lack Of Demand, Lack Of Jobs And The Future Of America [View article]
    I have no opinion on your analysis, but SPXU is not useful as a hedge for more than a few days given its rapid decay.
    May 11, 2012. 03:58 PM | 3 Likes Like |Link to Comment
  • Investment Strategy: Be Prepared to Take Advantage of Tomorrow's Sunshine [View article]
    "Stockbrokers are not the average man of women, they may not even be human if you must know"

    tell us, whidbey. I am dying to know.
    Aug 7, 2008. 03:03 AM | Likes Like |Link to Comment