Checking The Math On Global Equity Prices, China Growth, The French Economy And Gold [View article]
The central banks are not the ones subverting the laws of mathematics.
Bull markets start from 5-7x earnings? I guess that was true in 1820 to 1935. Most of the U.S. population was still on the farm.
What was the p/e ratio in 1975 and in 2009?
P/E ratio is a terrible methodology for calling bottoms as earnings are suppressed due to the recession.
Shiller P/E does not work. Just look at your major tops and bottoms and see what it was telling you. It's junk.
Your a CFA and you don't know that economic growth and equity prices have only a loose correlation over any 5-10 year period?
The average unemployment rate over the last 45 years has been 6.1%. (UNRATE)
A 6.5% target is modest and means you are not wasting the societies resources based on a 1930's economic theology that pain and suffering are a positive.
To read more see my comments. They go back to 2009 and deal with most of the critical factors effecting future equity prices.
'Sell In May': A Data Analytics Perspective [View article]
As I have written before on this issue the May through Oct weakness exists because of the way Central Banks operate normally during this period versus the demand for funds.
My comments go back to 2009 and make for interesting reading.
Companies world wide place their orders for the holiday season in March and April. These goods are not paid for until 90 days after delivery.
This considerable time delay needs to be financed on a global basis.
Recent articles on the Pakistani garment industry point out that these companies are paying 18% for financing. This creates a global scramble for funds.
In years where the Federal Reserve is fighting a recession with monetary policy there will be no May to Oct.
And thank you Seeking Alpha, again, for informing me of this inefficiency in market analysis as I was able to again make a substantial profit.
Remember the credo from poker, "If you don't know who the sucker is at the table it is you."
Don't Panic: Survival Guide To Prospering With Mortgage REIT 12% Yields [View article]
CorvetteKid..
I had a '67, '69 and '70. It was a great time to be young and smart in America.
The REIT's got hammered in 2008 and early 2009. Their subsequent rebound shows that the whole thing was certainly not over the factual economic background.
Listen, I occasionally get it wrong. I have seen the same game played so many times I don't know what else to say. To outperform the market and to just stay alive you have to think a year or two in the future and imagine.
Buffet had a great quote this week and think what he would say about under 3% mortgages.
"We're not buying corporate bonds of any kind now, not at those yields."
Don't Panic: Survival Guide To Prospering With Mortgage REIT 12% Yields [View article]
This is the best article I have seen on the MREIT's.
But, stock prices move as industry groups and themes. This theme is selling for a 50 year high in valuation.
The Federal Reserve has ordered large banks to stress test their balance sheets for a large rate move. Oh, they are just joking.
The lenders are going to want more collateral once this sector starts moving. Using the option markets to hedge will be impossible because the premiums will rise.
One company goes under and there will be panic.
This industry is a fraud. The organizers of these investments, I assure you, are amazed at the longevity of the run. They have been sucking huge fees out for doing nothing.
Look at what happened to the REIT's, the real REIT's, once the panic set in.
Investors are not rational. They herd and play momentum.
The SEC could care less about protecting the public.
Go into the metallurigcal coal and steel stocks and pay yourself your 12% dividend. My comments go back to 2009.
Are Streaks And Current Yields The Best Metrics For Dividend Growth Investors? [View article]
DIVIDEND EQUITY STRATEGIES ARE A DISASTER WAITING TO HAPPEN.
The superior performance of these strategies over long periods of time is due to the long term drop in corporate bond interest rates.
The moody's BAA corporate bond rate is 4.68%. That is near a 50 year record.
This is no different than arguing over what sector to buy in the Japanese market in 1988. If you don't know what I am referring too you need to find out.
The definition of risk in financial markets is not historical volatility it is valuation. Any investment product in the top decile of historical valuation needs to be treated as a time bomb.
You can download interest rate data to an excel spreadsheet with a touch of a button from the federal reserve bank of St. Louis.
I just see no one pointing out the risks. I have looked at pools of these stocks and they are consistently overpriced on almost every metric versus the market averages.
Company managements are using the dividend rate because their bonus is tied to share price.
If you want more information and a different point of view see my historical comments. They go back to 2009.
The steel stocks and the metallurgical coal stocks are so cheap and they are getting ready to boom. Sorry no dividends.
The Myth Of Liquidity And Bubbles In Financial Markets [View article]
You should tell your students "this is why hedge funds don't hire Phd's in economics."
Do you really believe that the turn in the stock market in March, 2009 was because of some hidden fundamental force that was perceived by the market?
Or was it the enormous force of monetary policy that shifted short term yields, the yield curve, the real yield and the earnings yield corporate bond spread?
All of these items could have been checked by spreadsheet over the last 50 years to determine their historical relationship to future moves in equity prices. And of course that was what some investors did.
Those who interpreted financial market prices as a result of the real economy lost money again as they have over the last 50 years.
Mean reversion works because drawing an upward sloping (7%) line through market prices at 15x earnings is a reflection of when our economy is in the area of the mean.
For investors and corporate planners they need to understand the business cycle where the fluctuations around that mean can be 100-200% from bottom to top.
If you have a high savings rate why are stocks not at 30x earnings?
Is the savings rate not high enough in Japan to generate anything but 10x earnings prior to the recent move?
Investors are not rational..
Investors herd..They follow the trends, short term and long term.
Much of the investing dollar is controlled by managers who know that attempts to make the right decision would be costly to them from a marketing and/or cost perspective.
The client lacks the skill or knowledge to purchase investment advisory services, medical care or legal advice and that is why these areas are all lucrative for the providers.
I literally was reading the Economist today and I was wondering why I subscribe. The quality of advice is at the illiterate level. If anyone has ever seen an article in the Economist that predicted an economic outcome correctly I would like to know. It's beautifully written.
What I was suggesting is that dividend strategies are tied to corporate bond rates and when the BAA moves from 4.5% to 7% the dividend rate required of the dividend portfolios is also going to move.
An enormous amount of preferred stock and dividend strategies are being bought on margin which is going to create a lot of additional selling. Think March, 2009. When a trend has been in motion for a long period of time the reversal is swift.
While this may effect the stock average near term I would think that the Central Bank will increase liquidity during any panic and that will stabilize the situation. Since all of this will not happen unless a recovery is in place I would expect the S&P 500 Index (SPY etf) to outperform a dividend strategy over the next 24 months.
I suspect Berkshire might give you an extra point or two.
I sat in many a meeting where I was the specialist in structuring the investment and can tell you that dividends are an artificiality.
They are only used by the issuer if it is to his advantage. He only issues bonds, if in his judgement, bonds are a less expensive way of raising capital than by issuing equity. Paying yourself a monthly dividend from a land portfolio is a lot cheaper than paying someone to send you a check every month. Believe me.
The Bernanke Agenda - It Isn't What You Think It Is [View article]
Thank you for a very nice reply.
I don't understand how you are defining a bubble.
It can't be based on monetary expansion since you can easily create a spreadsheet that shows monetary expansion leads to expanding equity prices in a future time frame.
It cant be based on p/e ratio since at 15x we are at the historical average and that can be quantitatively shown to correlate with reasonable equity returns in a future period.
It can't be based on the yield curve. It can't be based on the real interest rate. It can't be based on global monetary behavior.
Thus, the only conclusion I can come to is it is based on the fact the world is going to hell in a hand basket. Did I get that quote right?
I have been entering month end interest rate data by hand into a spreadsheet so I may be a little on edge.
As Freud said "you might not want to hear what I have to say." That is not an exact quote.
You are focusing on a few small points of investing. Investing success is in getting the big picture right.
If you create a spreadsheet with a download from the statistical service of the Federal Reserve Bank of St. Louis of the BAA moody's corporate bond monthly history and compare that to a price series such as any closed end preferred bond fund that has a long history in Yahoo finance I think you will find a very..very high R2.
In excel the formula would be =RSQ(B20:B660,C20:C660)
That is 1960.01 to 2013.05. A little overkill.
The next thing you can do is just lag the preferred or the utility stock by one month and then do the reverse. I think you will see that all interest rate instruments are highly correlated.
You can run your preferred numbers next to the S&P and see if you get a higher correlation. I can assure you will not. If you want to get fancy you can use logs.
The Federal Reserve Board has ordered all large banks to perform stress tests for a large move in rates. Corporate bond interest rates are near 45 year lows. Never buy an asset class at the top. This is no different than buying stocks at 33x earnings. No difference.
Buy the S&P index or buy Berkshire Hathaway and pay yourself a monthly dividend from the account equal to the preferred rate minus the historical default rate for the particular portfolio.
The Small, But Important, Flaw In The Tepper Analysis [View article]
Jeff..
I am not anonymous..I lived my whole life in Chicago. I owned a stock brokerage firm in the city many years ago. I am retired in Fl. If I had known how beautiful the weather and lifestyle is here I would have come sooner.
My comments go back to 2009. And I sincerely could not figure out what you were saying. And my writing skills are not what they should be. But, my investment performance, that is another thing. It's probably been luck.
The Bernanke Agenda - It Isn't What You Think It Is [View article]
Joseph Stuber..
I apologize for my lack of detail in the "lazy" remark. And I am well aware of how much work you put in which is why I don't contribute to SA. And I feel guilty. Since I read SA and I think SA is responsible for my performance in the last 4 years.
But, that said, if you were a student and had put in 200 hours of work and had written a well researched paper and I gave you an "A", I still would not be investing based on that paper.
And my complaint is that when I recommend something I can document a historical quantitative relationship with that variable and the future changes in the price of a financial asset.
18 months ago these pages were filled with articles predicting a double dip recession and a further drop in housing prices. Investments based on the exact opposite viewpoint have made investors incredible returns.
Well, I have put off work long enough. I am working on what happened when long term interest rates climbed rapidly in the past. My preliminary guesses are usually wrong. It always amazes me. I let the historical numbers guide me rather than my opinions. If I play two queens in a poker hand I will sometimes loose. I am willing to accept that. All I ask is to have the odds on my side.
Checking The Math On Global Equity Prices, China Growth, The French Economy And Gold [View article]
Bull markets start from 5-7x earnings? I guess that was true in 1820 to 1935. Most of the U.S. population was still on the farm.
What was the p/e ratio in 1975 and in 2009?
P/E ratio is a terrible methodology for calling bottoms as earnings are suppressed due to the recession.
Shiller P/E does not work. Just look at your major tops and bottoms and see what it was telling you. It's junk.
Your a CFA and you don't know that economic growth and equity prices have only a loose correlation over any 5-10 year period?
The average unemployment rate over the last 45 years has been 6.1%. (UNRATE)
A 6.5% target is modest and means you are not wasting the societies resources based on a 1930's economic theology that pain and suffering are a positive.
To read more see my comments. They go back to 2009 and deal with most of the critical factors effecting future equity prices.
Expanding Economy? Consider Adding Copper To Your Portfolio [View article]
The U.S. Geological Survey seems to be the best source for my needs.
Expanding Economy? Consider Adding Copper To Your Portfolio [View article]
Can anyone suggest a source for historical monthly copper prices going back to 1964 or as far as possible.
Thanks..
'Sell In May': A Data Analytics Perspective [View article]
My comments go back to 2009 and make for interesting reading.
Companies world wide place their orders for the holiday season in March and April. These goods are not paid for until 90 days after delivery.
This considerable time delay needs to be financed on a global basis.
Recent articles on the Pakistani garment industry point out that these companies are paying 18% for financing. This creates a global scramble for funds.
In years where the Federal Reserve is fighting a recession with monetary policy there will be no May to Oct.
And thank you Seeking Alpha, again, for informing me of this inefficiency in market analysis as I was able to again make a substantial profit.
Remember the credo from poker, "If you don't know who the sucker is at the table it is you."
Don't Panic: Survival Guide To Prospering With Mortgage REIT 12% Yields [View article]
I had a '67, '69 and '70. It was a great time to be young and smart in America.
The REIT's got hammered in 2008 and early 2009. Their subsequent rebound shows that the whole thing was certainly not over the factual economic background.
Listen, I occasionally get it wrong. I have seen the same game played so many times I don't know what else to say. To outperform the market and to just stay alive you have to think a year or two in the future and imagine.
Buffet had a great quote this week and think what he would say about under 3% mortgages.
"We're not buying corporate bonds of any kind now, not at those yields."
Don't Panic: Survival Guide To Prospering With Mortgage REIT 12% Yields [View article]
But, stock prices move as industry groups and themes. This theme is selling for a 50 year high in valuation.
The Federal Reserve has ordered large banks to stress test their balance sheets for a large rate move. Oh, they are just joking.
The lenders are going to want more collateral once this sector starts moving. Using the option markets to hedge will be impossible because the premiums will rise.
One company goes under and there will be panic.
This industry is a fraud. The organizers of these investments, I assure you, are amazed at the longevity of the run. They have been sucking huge fees out for doing nothing.
Look at what happened to the REIT's, the real REIT's, once the panic set in.
Investors are not rational. They herd and play momentum.
The SEC could care less about protecting the public.
Go into the metallurigcal coal and steel stocks and pay yourself your 12% dividend. My comments go back to 2009.
The Myth Of Liquidity And Bubbles In Financial Markets [View article]
Your explanation of the Shiller CAPE is the best I have seen and it is totally correct.
What a disaster Shiller has been for investors. It is a disgrace.
Thanks for the contribution. I copied it to "one note." I will try to remember to give you credit.
Are Streaks And Current Yields The Best Metrics For Dividend Growth Investors? [View article]
The superior performance of these strategies over long periods of time is due to the long term drop in corporate bond interest rates.
The moody's BAA corporate bond rate is 4.68%. That is near a 50 year record.
This is no different than arguing over what sector to buy in the Japanese market in 1988. If you don't know what I am referring too you need to find out.
The definition of risk in financial markets is not historical volatility it is valuation. Any investment product in the top decile of historical valuation needs to be treated as a time bomb.
You can download interest rate data to an excel spreadsheet with a touch of a button from the federal reserve bank of St. Louis.
I just see no one pointing out the risks. I have looked at pools of these stocks and they are consistently overpriced on almost every metric versus the market averages.
Company managements are using the dividend rate because their bonus is tied to share price.
If you want more information and a different point of view see my historical comments. They go back to 2009.
The steel stocks and the metallurgical coal stocks are so cheap and they are getting ready to boom. Sorry no dividends.
The Myth Of Liquidity And Bubbles In Financial Markets [View article]
Do you really believe that the turn in the stock market in March, 2009 was because of some hidden fundamental force that was perceived by the market?
Or was it the enormous force of monetary policy that shifted short term yields, the yield curve, the real yield and the earnings yield corporate bond spread?
All of these items could have been checked by spreadsheet over the last 50 years to determine their historical relationship to future moves in equity prices. And of course that was what some investors did.
Those who interpreted financial market prices as a result of the real economy lost money again as they have over the last 50 years.
Mean reversion works because drawing an upward sloping (7%) line through market prices at 15x earnings is a reflection of when our economy is in the area of the mean.
For investors and corporate planners they need to understand the business cycle where the fluctuations around that mean can be 100-200% from bottom to top.
If you have a high savings rate why are stocks not at 30x earnings?
Is the savings rate not high enough in Japan to generate anything but 10x earnings prior to the recent move?
Investors are not rational..
Investors herd..They follow the trends, short term and long term.
Much of the investing dollar is controlled by managers who know that attempts to make the right decision would be costly to them from a marketing and/or cost perspective.
The client lacks the skill or knowledge to purchase investment advisory services, medical care or legal advice and that is why these areas are all lucrative for the providers.
I literally was reading the Economist today and I was wondering why I subscribe. The quality of advice is at the illiterate level. If anyone has ever seen an article in the Economist that predicted an economic outcome correctly I would like to know. It's beautifully written.
Go Away In May And Then What? [View article]
What I was suggesting is that dividend strategies are tied to corporate bond rates and when the BAA moves from 4.5% to 7% the dividend rate required of the dividend portfolios is also going to move.
An enormous amount of preferred stock and dividend strategies are being bought on margin which is going to create a lot of additional selling. Think March, 2009. When a trend has been in motion for a long period of time the reversal is swift.
While this may effect the stock average near term I would think that the Central Bank will increase liquidity during any panic and that will stabilize the situation. Since all of this will not happen unless a recovery is in place I would expect the S&P 500 Index (SPY etf) to outperform a dividend strategy over the next 24 months.
I suspect Berkshire might give you an extra point or two.
I sat in many a meeting where I was the specialist in structuring the investment and can tell you that dividends are an artificiality.
They are only used by the issuer if it is to his advantage. He only issues bonds, if in his judgement, bonds are a less expensive way of raising capital than by issuing equity. Paying yourself a monthly dividend from a land portfolio is a lot cheaper than paying someone to send you a check every month. Believe me.
The Bernanke Agenda - It Isn't What You Think It Is [View article]
I don't understand how you are defining a bubble.
It can't be based on monetary expansion since you can easily create a spreadsheet that shows monetary expansion leads to expanding equity prices in a future time frame.
It cant be based on p/e ratio since at 15x we are at the historical average and that can be quantitatively shown to correlate with reasonable equity returns in a future period.
It can't be based on the yield curve. It can't be based on the real interest rate. It can't be based on global monetary behavior.
Thus, the only conclusion I can come to is it is based on the fact the world is going to hell in a hand basket. Did I get that quote right?
I have been entering month end interest rate data by hand into a spreadsheet so I may be a little on edge.
Go Away In May And Then What? [View article]
Nice article..What do I want to say here..
As Freud said "you might not want to hear what I have to say." That is not an exact quote.
You are focusing on a few small points of investing. Investing success is in getting the big picture right.
If you create a spreadsheet with a download from the statistical service of the Federal Reserve Bank of St. Louis of the BAA moody's corporate bond monthly history and compare that to a price series such as any closed end preferred bond fund that has a long history in Yahoo finance I think you will find a very..very high R2.
In excel the formula would be =RSQ(B20:B660,C20:C660)
That is 1960.01 to 2013.05. A little overkill.
The next thing you can do is just lag the preferred or the utility stock by one month and then do the reverse. I think you will see that all interest rate instruments are highly correlated.
You can run your preferred numbers next to the S&P and see if you get a higher correlation. I can assure you will not. If you want to get fancy you can use logs.
The Federal Reserve Board has ordered all large banks to perform stress tests for a large move in rates. Corporate bond interest rates are near 45 year lows. Never buy an asset class at the top. This is no different than buying stocks at 33x earnings. No difference.
Buy the S&P index or buy Berkshire Hathaway and pay yourself a monthly dividend from the account equal to the preferred rate minus the historical default rate for the particular portfolio.
Good luck.
Japanese Bond Yields: From Wild Turkey To Cold Turkey? [View article]
The Small, But Important, Flaw In The Tepper Analysis [View article]
I am not anonymous..I lived my whole life in Chicago. I owned a stock brokerage firm in the city many years ago. I am retired in Fl. If I had known how beautiful the weather and lifestyle is here I would have come sooner.
My comments go back to 2009. And I sincerely could not figure out what you were saying. And my writing skills are not what they should be. But, my investment performance, that is another thing. It's probably been luck.
The Bernanke Agenda - It Isn't What You Think It Is [View article]
I apologize for my lack of detail in the "lazy" remark. And I am well aware of how much work you put in which is why I don't contribute to SA. And I feel guilty. Since I read SA and I think SA is responsible for my performance in the last 4 years.
But, that said, if you were a student and had put in 200 hours of work and had written a well researched paper and I gave you an "A", I still would not be investing based on that paper.
And my complaint is that when I recommend something I can document a historical quantitative relationship with that variable and the future changes in the price of a financial asset.
18 months ago these pages were filled with articles predicting a double dip recession and a further drop in housing prices. Investments based on the exact opposite viewpoint have made investors incredible returns.
Well, I have put off work long enough. I am working on what happened when long term interest rates climbed rapidly in the past. My preliminary guesses are usually wrong. It always amazes me. I let the historical numbers guide me rather than my opinions. If I play two queens in a poker hand I will sometimes loose. I am willing to accept that. All I ask is to have the odds on my side.