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Conventional Wisdumb

Conventional Wisdumb
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  • Tuesday Is D-Day for Global Stock Markets [View article]
    Is it really investing when your decisions are based upon what the Fed will be doing with monetary policy?

    Truly this is purely a trading environment and anyone who calls themselves a long-term buy and holder is in serious trouble. The next "flash crash" is just one badly worded Fed statement away.

    One way to play the QE2 is based upon the idea of the Fed trying to drive down the 30 year to 2.5% and if they do this (by buying Treasuries in huge amounts) then buying zero coupon 30 year bonds will have a huge payoff - the PIMCO ETF "ZROZ" is a proxy for this market.
    Aug 9 10:34 AM | 2 Likes Like |Link to Comment
  • 10-30 Treasury Spread Hits Record High [View article]
    Assuming you believe in the deflation scenario (as I do) then according to Rosie and others we could very easily see a 30 year at 2 1/2 which will still represent a very decent 3-4% plus real return with deflation of 1-2%.

    I am not sure how to calculate the expected return but if you bought something like the PIMCO "ZROZ" strip coupon ETF you could see a 30% total return on this move.

    A deflationary world is certainly a weird investing environment.
    Aug 3 08:50 PM | 1 Like Like |Link to Comment
  • June Pending Home Sales: Another Notable Drop [View article]
    Will FASB recommend reinstating "mark to market" accounting for financial institutions assuming residential and commercial real estate remain at their current values?

    "Mark to Market" was hailed as a great boon to investors when it was first implemented due to its ability to create transparency and yet now not a peep.
    Aug 3 02:25 PM | Likes Like |Link to Comment
  • GDPhriday: Low Expectations Could Make for a Good Day [View article]
    Curious as to whether the data is granular enough to isolate pre and post April data as it looks like there was a significant softening after the "handouts for housing" credits expired. Is this available?
    Jul 30 10:39 AM | Likes Like |Link to Comment
  • Federal and state regulators are targeting Life Partners Holdings (LPHI -8.4%) so much that Citron Research says it has "never seen a company so clearly pinned in the crosshairs of a government launched laser-guided smart bomb."  [View news story]
    This will be an interesting test for the hypothesis that financial assets are subject to mean reversion.
    Jul 28 03:49 PM | Likes Like |Link to Comment
  • Slowdown or Double Dip? A Little Clarity on the ECRI WLI [View article]
    Did we read the same article?

    I am no predictor of the markets or their direction and I make no claim to do so. The article does not address the key premise which is that the minus 10 reading on the WLI growth has a near perfect record of predicting recession. That's what I am writing about.

    I have no idea what you are talking about. Having read many of your previous comments, I have reached the conclusion that you seem to respond haphazardly and at times inanely to various people in an effort to boost your number of comments.
    Jul 27 03:06 PM | 3 Likes Like |Link to Comment
  • May 2010 S&P/Case-Shiller: Government-Sponsored Boost Continues [View article]
    The math of losses:

    a 50% decrease requires a 100% increase to reach its prior level.

    House in Miami $1 million in 2006, House now worth approx $500k.

    So for the homeowner to recover their equity will require that the home appreciate 100% in value.

    The tax credits appear to equal at least 3% of the value of the underlying homes sold based upon the median selling price. The median home price in May was about $180k according to NAR.

    I live in South Florida so I am a victim of this decline as well but I have never looked at my home as anything other than a place to live. However many of my neighbors used theirs as ATM's so I am not sure where this future buying power will come from.

    Anyway we either have hit a bottom or the bottom is still ahead - this sounds like a broken record - but until we have a stimulus free (organic!) economy we won't know the truth. I still think the bottom has still to be reached based upon reversion to the mean but heck I wouldn't trade on my advice.
    Jul 27 11:27 AM | 16 Likes Like |Link to Comment
  • Slowdown or Double Dip? A Little Clarity on the ECRI WLI [View article]
    I like his articles but in this case I don't think he clarifies the issue at all.

    The contention made by those who see weakness ahead is that when the WLI growth measure falls to a (-10) reading this has historically been associated with a recession occurring in the next 6 months.

    This is the issue being raised by those who see the potential for a double-dip and this article does not address that.
    Jul 27 11:17 AM | 1 Like Like |Link to Comment
  • June New Home Sales: +23.6% to 330K vs. 311K expected, 267K (revised from 300K) in May. Months' supply 7.6 vs. 8.5 prior. Median price $213,400.  [View news story]
    Tack, you don't think a -16.7% yoy trend is a negative?

    June is historically a very strong month for real estate. This is the worst June on record since 1982 when the population was a lot less.

    Anyway, no point in arguing numbers if you believe that the economy is on sound footing.

    However for everyone else,

    April sales were 422k units
    May sales were 267k units
    June sales were 330k units
    June 06 sales approx 1.4 million units

    calculatedriskimages.b...

    Keep in mind that we are supposed to be already in the strong expansion phase of the economy and historically housing normally leads us out of recession. If that is not a collapse I am not sure what you would consider bad news.
    Jul 26 12:21 PM | 2 Likes Like |Link to Comment
  • Bond ETFs Are Partying Like It’s 2009 [View article]
    Perfectly accurate comments.

    However, the US may head back to being a net saver if we could get the government to encourage saving rather than consuming - short term pain for long-term gain. It appears that people are starting to increase their net saving rate.

    Secondly despite the fact that we have record deficits and a record projected total debt we have seen a DECREASE in long term rates with a more than half point move on our 30 year in the past 2 months which if you believe that deficits lead to higher interest rates is quite the paradox. It would seem that the appetite for our debt is pretty high based upon the bid to cover ratios.

    What does the Treasury market know that the equity market doesn't?
    Jul 25 07:05 PM | Likes Like |Link to Comment
  • Bond ETFs Are Partying Like It’s 2009 [View article]
    I guess this article could be summarized in one sentence: interest rates can't go lower than they are.

    I make no claim to knowing what direction the markets will go but I do know it is never wise to use the words "can't" and "impossible" when it comes to the markets.

    The Japanese have a 30 year bond with a 2.3% yield at a recent auction. The Germans just priced a 30 year at 3.35%. Assuming we face the same type of credit bubble induced deflationary future as Japan there is plenty of room for a further fall in the yield - perhaps a 30 year at 2.5% - and yes this would be "impossible".

    A fall in the yield to this level would lead to a very sizable capital gain based upon duration of the ETF and a decent real yield in a world of 1-2% deflation.

    Something like 80% or more of money managers are bearish on the Treasury market so if you are in fact a contrarian than this is a pretty strong buying signal.
    Jul 25 10:15 AM | 2 Likes Like |Link to Comment
  • ECRI Weekly Leading Indicators at Negative 9.8; Has the ECRI Blown Yet Another Recession Call? [View article]
    What a bizarre notion. I am not sure what point you are making. What were the markets telling you in Oct 07 when the S&P reached its all time high? The current recession began in Dec 07 according to the NBER.

    The markets have failed to predict the last two major recessions so to put your faith in them as a forward indicator is misguided in my opinion.

    There is a connection between earnings the economy and markets - recessions generally result in lower stock prices. If I recall correctly the broad market drops an average of 40% during a recession so it would appear that knowing the direction of the economy as far in advance as possible would be helpful.
    Jul 24 01:37 PM | 2 Likes Like |Link to Comment
  • Permabear David Rosenberg offers 17 reasons to be bullish - seriously! But it's short-term, and the market is still a "meat grinder": "The bulls have the upper hand, but only until the next shoe drops in this modern-day depression..." Whew, that's more like it.  [View news story]
    You may in fact be correct. However, the data looked pretty good for most of 2007 when the S&P went on to make its high of over 1550 in Oct 07.

    The data doesn't have an opinion only the person who interprets it does. This is why the two people can look at the same information and form two diametrically opposed opinons on the FORWARD implications of that data.
    Jul 23 08:43 PM | 11 Likes Like |Link to Comment
  • Permabear David Rosenberg offers 17 reasons to be bullish - seriously! But it's short-term, and the market is still a "meat grinder": "The bulls have the upper hand, but only until the next shoe drops in this modern-day depression..." Whew, that's more like it.  [View news story]
    As usual only someone who hasn't read his material would make such an ill informed comment. This whole stupid concept of labeling is the problem in the first place. You don't have to read him if you don't want to but disparaging him when you don't is just wrong-headed and dangerous.

    If you had followed David's advice in 2007 when the market was at 1550 you would have been way ahead even if you had parked your money in the bank during the last 3 years.

    Anyway whoever wrote the blurb to open this conversation is guilty of the same stereotyping and lazy thinking.
    Jul 23 08:29 PM | 11 Likes Like |Link to Comment
  • Permabear David Rosenberg offers 17 reasons to be bullish - seriously! But it's short-term, and the market is still a "meat grinder": "The bulls have the upper hand, but only until the next shoe drops in this modern-day depression..." Whew, that's more like it.  [View news story]
    On July 23rd, 1998:

    S&P 1139.75

    I am sure the average "perma-bull" thought the market was 30-40% undervalued back then as well.
    Jul 23 07:52 PM | 4 Likes Like |Link to Comment
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