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The Last Boomer

The Last Boomer
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  • U.S. To Foreign Officials: Stop Buying Treasuries [View article]
    The interest rates on the long end of the yield curve are barely impacted by the Fed purchases and it is unlikely that they will "rise or surge". The reason for this is that aggregate demand is unlikely to grow by more than 3%. The 10-yr and the 30-yr Tsys are following closely the aggregate demand growth. The other reason is that the inflation premium goes down as the excess bank reserves grow at a slower pace. The reduction of the inflation premium puts downward pressure on the long-term interest rates. The most likely move is that holders of short-term treasuries will sell them and replace with long-term Tsys which also will keep the interest rates on the long end low.
    Apr 18 09:17 AM | 1 Like Like |Link to Comment
  • U.S. To Foreign Officials: Stop Buying Treasuries [View article]
    The people who say if not for the Fed buying US treasuries, nobody would buy them, should read this article. The world wants US treasuries in increasing quantities. QE tapering won't do anything to decrease the demand for treasuries.
    Apr 16 11:26 AM | Likes Like |Link to Comment
  • Amazon: Are We There Yet? [View article]
    1 positive comment out of 30. If SA's comments are really predictive, it is not a good time to buy AMZN. But what do I know? I remember buying AMZN at 177 a few years back, selling at 220 a few months later thinking I got out while the going was good, and then watching with disbelief as the stock almost doubled.
    Apr 7 11:54 PM | Likes Like |Link to Comment
  • HFT, QE... Does Anyone Know What's Going On? [View article]
    " The market is simply too complex, too filled with irrational participants, too multi-temporal and too uninformed to respond in any manner which might be deemed "right" most of the time."
    This is mostly how I think about the market, just could not phrase it that well. With one exception: I think the market is always right. If the market thinks today PLUG is worth $10, then this is what PLUG is really worth; and if the market decides two weeks later that $5 is the right price for PLUG, then this is really the right price for PLUG. There is no one objective, REAL, price for any asset. Value is in the eyes of the bipolar beholder.
    Apr 6 05:42 PM | 1 Like Like |Link to Comment
  • Economic Outlook For Rest Of 2014: Acceleration [View article]
    Accelerating investment is the key. Tons of cash on the corporate balance sheets, cheap credit, aging capital stock: all the ingredients are here. If the corporate chieftains finally start spending, the good times may keep rolling.
    James, do you have any advice how to play the accelerating business expenditures from an investment perspective?
    Apr 4 03:46 PM | 1 Like Like |Link to Comment
  • NY Fed Paper Says That Stocks Are Still Cheap [View article]
    I think I used the chart of the equity premium from the Brad DeLong's post.
    Mar 31 10:07 PM | Likes Like |Link to Comment
  • NY Fed Paper Says That Stocks Are Still Cheap [View article]
    Brad DeLong wrote last summer a great post on the scenarios for economic normalization. His most likely scenario was that the economy recovers, the labor market normalizes, but interest rate normalization simply never comes. DeLong believes that the high equity risk premium of mid 2013 is a proof that this scenario is the most likely. Once I read the article, I looked at the period after WWII when the equity premium was similarly high and then declined to almost zero in late 60s. Two things happened in this period: corporate profits doubled and stock market increased five times. DeLong's most likely scenario received support later by Larry Summer's secular stagnation theory that many other top economists find credible.
    If we live in a replay of the 50s, the stocks will remain the most compelling investment for a while.
    Mar 30 10:34 PM | Likes Like |Link to Comment
  • Projected One Month T-Bill Rates Show Peak In 2021 At 3.86% [View article]
    I hold TLT. The 20-year yield is expected to rise very modestly in the next 12 months from 3.25% to 3.48% while the 1-month is expected to skyrocket from current 0.02 to almost 0.3. If anything, this gives me some more confidence that holding the long end is relatively safe. I also wonder what this means for anybody who borrows on the short end and lends at the long end. If I use the numbers in these tables, the margins won't change much.
    Mar 29 09:08 AM | Likes Like |Link to Comment
  • Corporate Profits Continue To Impress [View article]
    I have run similar analysis using NIPA profits for the last two years. The profits hit a low in Q4, 2008 and have been increasing ever since. Profits and SPY have increased at about the same rate and by about the same amount since the bottom. There is no indication that SPY has disconnected from profits.
    Mar 28 12:53 PM | 1 Like Like |Link to Comment
  • No Longer Posting At Seeking Alpha [View instapost]
    Good luck, Tom! I learned from you and I'll miss your thoughtful posts.
    Mar 27 06:31 PM | 1 Like Like |Link to Comment
  • Confidence Slowly Returns [View article]
    Agree completely with the diagnosis: investors are just now changing their behavior from risk-averting to risk-seeking, and markets are still far from their manic phase.
    I don't understand though some of the prescriptions. How lowering the corporate tax rate will improve business investment given that corporations already have huge piles of money and access to cheap credit? Is it not the lack of good opportunities to generate returns that stops the corporations from investing, not the lack of financial resources?
    Mar 25 03:56 PM | 1 Like Like |Link to Comment
  • Detailed Case To Short The S&P 500: This Time Isn't Different [View article]
    The author says that inflation expectations are rising but this is not supported by the data. Inflation expectations as measured with the 10-year breakeven are flat, not rising. The expectations are that the current extremely low inflation is here to stay. See for yourself:
    The statement that Americans don't have disposable income is also at odds with the data. The nominal disposable personal income per capital has risen from about $36K at the end of the recession to almost $40K now. Even after adjusting for inflation, the DPI has risen. See for yourself here:
    Mar 24 03:40 PM | 2 Likes Like |Link to Comment
  • Would Keynes Have Called This A 'Liquidity Trap'? [View article]
    It is an interesting situation. Cullen himself has said many times that the Fed policies (QE) are inefficient. In this sense, the Fed has lost control, or more accurately, the Fed can't affect the economy positively anymore. They've done what they could - avert catastrophe - but they can't grow the economy.
    I think Cullen is splitting hair here by trying to find semantic differences while missing the practical commonalities between Krugman and Keynes.
    Mar 24 02:29 PM | 1 Like Like |Link to Comment
  • How Much Are Yields Going To Rise? [View article]
    Since 1969, the average rate on the 10-year Treasury has been 7%. Projecting that five years from now the rate will be still under 4% says something about how things have changed. Secular stagnation pushes growth and interest rates down. Many people expect that rates will go back to some historical "normal" and quite possibly they will keep getting surprised that this is not happening.
    "If short-term rates don't rise and become more competitive with riskier alternatives, speculative pressures could build." Well, I think that this is the more likely scenario because this how we have been dealing with slow growth and diminishing returns from safe assets for the last 15 or more years: bubble after bubble. Don't fear bubbles, embrace them and make money.
    Mar 23 12:04 PM | 1 Like Like |Link to Comment
  • One Emerging Market To Buy [View article]
    This is somewhat tangential but one thing that has given me an insight into South Korea is working with Koreans here in the US. There are many Korean students in America and they have an organization that places them in internships with American companies for 6 months. I have had three Korean interns so far and I cannot tell you how pleased I am. They are hard-working, very smart, very eager to learn, and unlike what most people think about Asians, they showed a lot of creativity. My best interns by a mile. The other interesting thing is that they don't want to stay here in the US. They all went back to Korea to apply their American education and work experience in their country.
    Mar 23 11:49 AM | 1 Like Like |Link to Comment