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The Last Boomer

The Last Boomer
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  • 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:
    http://bit.ly/1nUKBzv
    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:
    http://bit.ly/N5uYk4
    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 | 2 Likes 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
  • Kocherlaktoa wants UE rate threshold lowered to 5.5% [View news story]
    Wow, Kocherlakota is so surprisingly dovish but I tend to agree with everything he says. What worries me the most is the low and decreasing PCE inflation index growth. It is down to 1% while unemployment is uncomfortably high. Why would you raise the federal funds rates in these circumstances is unclear. It looks to me the Fed is fighting the ghosts of potential high inflation and financial instability when none of these is real and is abandoning the fight with the real threats of low economic growth and high unemployment. Of course, I would not fight the Fed: if they want to tighten, they will tighten and this has investment implications. Just saying that as economic policy their hawkish stance strikes me as unfounded.
    Mar 21 10:06 AM | 2 Likes Like |Link to Comment
  • Turning Bullish On Bonds [View article]
    Pompano,
    I am bullish on financial markets in general. I am heavily invested in stocks directly or through CEFs. I am not so bullish on the economy and I am not afraid of rapidly rising interest rates. Larry Summers' secular stagnation thesis makes a lot of sense to me. Many other smart people share similar views. This essentially limits the interest rate growth. Currently I am willing to buy TLT every time the rates on the 10-year hit 3%. It has worked now for almost a year.
    On the other hand, yes, people are willing to hold financial assets which increases the demand for money as reflected in the growth of M1.
    I am still trying to clarify this for myself but I think that in the current economic situation booming stock market can coexist with low interest rates and slow economic growth. At least for a while; for as long as the corporate profits keep growing.
    Mar 18 11:46 AM | Likes Like |Link to Comment
  • Turning Bullish On Bonds [View article]
    Pompano, I am not sure what to think about the Governors' forecasting abilities when it comes to PCE inflation. In 2012, for example, they forecast that the PCE in 2013 will be higher than in 2012. In reality, the opposite happened. Below is the actual PCE index percent change by quarter in 2011, 2012 and 2013; quite different from the governors' forecasts as documented in the FOMC minutes from Sep 2012, for example.
    2011
    3.0 3.7 2.3 1.3
    2012
    2.3 1.1 1.7 1.6
    2013
    1.1 -0.1 1.9 1.0
    I am not saying that deflation is upon us. Just questioning the ability of the governors to forecast inflation. Actually, what you see is that the percent change in the PCE index has been decreasing (PCE index growing slower) each year in the last three years.
    Mar 17 10:59 PM | 2 Likes Like |Link to Comment
  • Dancing With The Stars And Confirmation Bias [View article]
    Between the prediction of hyperinflation and crippling deflationary event, the most likely scenario is the muddle-through. And this is what is happening to us. Larry Summers' thesis that we are in a secular stagnation is for me the best explanatory framework that fits all the facts. Soros thinks Europe is in even worse shape and will stay there for 25 years. Pettis thinks that emerging markets are just starting their own downturn which he defines as the third phase of the global depression: first, the US subprime-driven recession, then the European crisis, and now the China slowdown. We live in a world of slow and no growth. This view has consequences for how I invest. For example, I am not afraid that interest rates will skyrocket. Neither am I afraid of imminent high inflation. Moreover, I think Cullen Roche is right that QE is here to stay with us. Given how slowly the economy is recovering and that the Fed is constrained by the zero bound, QE is one policy tool that they need. Tapering will be a very long process that will never really end. The world economy is growing very slowly if at all but it is not going to hell either: the League of Extraordinary Central Bankers is taking care of this. We live in the Groundhog Day: what we see today is most likely what we'll be seeing for many years to come.
    Mar 15 08:29 AM | Likes Like |Link to Comment
  • Continued Momentum In Residential Construction Employment Doesn't Stop Slide In Home Builder Shares [View article]
    I take technical analysis with a big grain of salt. Having said this, ITB looks like a cup-with-handle formation with the handle in the process of formation. If we are to take O'Neil's advice at face value, the formation of the handle should take more than one or two weeks (it is about two weeks now). The handle may drop just below a prior low point made a few weeks earlier (in this case it's around $24.80 from Feb 19-20). Volume may dry up noticeably near the low of the handle. The handle though should stay above the 10-week moving average (50 DMA). A price drop in a proper handle should be contained within 8% to 12% of its peak (currently at 6% if you use intraday highs and lows). Again, take all this with a big grain of salt and use your best judgment.
    Mar 11 09:06 PM | Likes Like |Link to Comment
  • Plug Power: Is This Time Different? [View article]
    Plug Power got unplugged today.
    Sorry, just couldn't help it.
    Mar 11 04:38 PM | 2 Likes Like |Link to Comment
  • You Call Yourself A Contrarian? Then Buy Russia [View article]
    Great point. Thanks.
    Mar 9 01:00 PM | Likes Like |Link to Comment
  • Consumer Is Income Constrained [View article]
    I went to the San Francisco fed website and it looks like the transfer payments are included in the calculations of the personal disposable income. See here for yourself:
    http://bit.ly/1oBB8YP
    Mar 8 10:36 PM | 2 Likes Like |Link to Comment
  • Why I Am Buying AK Steel [View article]
    "China’s Baoshan Dumping GOES; AK Steel, ATI Deal Imports Death Blow".
    These are some of the headlines yesterday and today. So, the trade complaint filed last summer worked. The AKS stock is up today.
    Mar 6 08:41 PM | 1 Like Like |Link to Comment
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