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  • Chicago Bridge & Iron: Why You Should Grasp This Rare Opportunity [View article]
    Nothing freaks out Mr Market more than uncertainty. Uncertainty is much worse than plain bad but certain news.
    Jul 30, 2014. 02:05 PM | Likes Like |Link to Comment
  • Bulgaria's Strange Bank Run [View article]
    You do not understand money.

    Yes, in the past people used some commodities that served as money (i.e. means of exchange and store of value). But that can only work in a very primitive economy. If the only means of exchange is a certain commodity that will make some desirable transactions and exchanges impossible because there will not be enough of that money to serve the purpose of exchange.

    The reason why the gold standard worked for so long is precisely because of the fractional reserve system. This allowed banks to create and manage a huge body of credit money that was necessary for the commercial transactions.

    You can imagine money this way. In an economy in which there is only me and you, we can use pure credit money in the form of a blackboard where we write who owes whom what. We could devise a certain abstract measure of value and use that to show our balances.

    Although commercial banks create money out of nothing, it is fully backed by the promises of debtors to whom this money is issued. Bankers' job is to assess which promisers are reliable. Bankers trade with and discount promises.

    So imagine I am a producer of apples and you know me and you trust me. I can issue to you a promise written on a note to deliver to you in a year from now 100 tonnes of apples in exchange for goods (or even for another promise, that you build a house for me). So once you have that piece of paper you might further trade it with other people who also trust me. But if they don't trust me (because they don't know that I am a trustworthy apple producer that has delivered for the last 30 years)? Then you go to a third party, a dealer of promises, that is trusted universally.

    Are you following me? Have you figured out how money works? Or I need to continue the apple story so you can see what money is and how it comes to be? And do you still think that it comes out of the thin air with no link to the reality?
    Jul 29, 2014. 03:39 PM | 1 Like Like |Link to Comment
  • The Day I Sold Everything [View article]
    Yeah, sell everything guys!

    Then watch nervously the market going up for another year or two.

    Then, when things begin to really look good, get in again in 2016... and then when finally a recession hits, freak out and sell low, making zero profit in 8 years...

    Yeah, go ahead, try to time the market!
    Jul 28, 2014. 04:31 PM | 1 Like Like |Link to Comment
  • The Day I Sold Everything [View article]
    Like it! On top of that the only winning long term strategy is investing long term. Selling all stocks after holding for just three years is an imprudent attempt to time the market.

    It's particularly dangerous to try to time the market based on flimsy observation about the macroeconomic picture and misunderstanding of monetary economics.
    Jul 27, 2014. 04:37 PM | 4 Likes Like |Link to Comment
  • The Day I Sold Everything [View article]
    > What will replace your capital when the market tanks?

    He bought three years ago... And why would the market tank if the S&P 500 companies are having record profits even if the economy has only started to recover.

    (Please don't give that bullshit about QE.)
    Jul 27, 2014. 04:30 PM | 1 Like Like |Link to Comment
  • Bulgaria's Strange Bank Run [View article]
    So if I understand correctly you dislike public power, i.e. central banks, interfering with the self-correcting and all powerful efficient market that, if left to itself, will cure all ills?

    And another question: where do you think money comes from? Or should come from? Clearly, you don't believe it comes from 'proverbial mattresses', right? In your world, would money be created by the private sector (commercial banks) or by the public sector (central banks)?

    And let me clarify this: if you dislike central bank's power to create money then you should love private money creation and hence the fractional reserve system.
    Jul 27, 2014. 08:02 AM | 1 Like Like |Link to Comment
  • Chicago Bridge & Iron: Why You Should Grasp This Rare Opportunity [View article]
    The absurd things is that apparently nobody knows for sure...
    Jul 25, 2014. 05:53 PM | Likes Like |Link to Comment
  • Bulgaria's Strange Bank Run [View article]
    User 424270, I don't agree.

    You somehow think that fractional reserves is the source of all evil. While in fact factional reserves is just a way of making the monetary system simple. Without fractional reserves banks will not be able to create money. But that role will be taken over by the Central Banks and believe it or not that would make finance hugely more complicated without reducing the risk...

    One thing that people consistently and stubbornly fail to understand is that we live in an inherently risky world, speaking in economics terms (but this is also true more broadly). What I am saying is this: the risk is not generated by the financial system, it is inherent. The financial system just tries to measure and predict the risk and to give it a price.

    It would take me too long to explain my point in more detailed and understandable way. I will try to do that in my blog and post a link.
    Jul 25, 2014. 03:51 PM | Likes Like |Link to Comment
  • 21st Century Fox Has Challenges [View article]
    Voting and non-voting shares in 21st Century Fox.
    Jul 23, 2014. 06:45 PM | Likes Like |Link to Comment
  • Bulgaria's Strange Bank Run [View article]
    People don't like risk. That's why they like to have demand deposits. Without demand deposits there will be a much bigger need for paper money that will be sitting in safes. Hence capital allocation will go down the drain.

    In other words, without fractional reserves the system will indeed be badly screwed up.
    Jul 23, 2014. 06:44 PM | Likes Like |Link to Comment
  • I Have No Fear Of A Market Crash Or A Significant Correction, Here's Why: Part 1 [View article]
    Yes, exactly, it's not all or nothing. And if you have $1 million you wish to invest in stocks, it is not like buy now for the entire amount.

    Sensible investing is diversified and happens incrementally.
    Jul 6, 2014. 04:33 AM | 2 Likes Like |Link to Comment
  • Bulgaria's Strange Bank Run [View article]

    You are missing entirely the point that fractional reserves allows banks to create a huge edifice of 'credit money'. If tomorrow depositors of local currency in Bulgaria asked the banking system to convert that money into euros or dollars peg will break.
    Jul 5, 2014. 10:55 AM | Likes Like |Link to Comment
  • Bulgaria's Strange Bank Run [View article]
    To say that the currency board is a disaster in the making is quite an exaggeration. The Bulgarian National Bank has around EUR 13.5 billion of FX reserves (including gold and SDRs) as compared to EUR 29 billion worth of demand deposits in the local currency held by the depository institutions. Under normal conditions this should be sufficient to backstop any external drain on the system.

    But the peg to the euro certainly creates some stress in the FX market.
    Jul 5, 2014. 10:46 AM | Likes Like |Link to Comment
  • Bulgaria's Strange Bank Run [View article]
    This debate about the property over 'money' is very misguided. One can only have property rights over physical currency printed on paper. All other 'money' is a balance sheet operation of the banks and signifies promises and credit.
    Jul 5, 2014. 10:24 AM | 1 Like Like |Link to Comment
  • Chicago Bridge And Iron - Speculative Buy [View article]
    Thanks, George.

    I agree CBI could have issued a more detailed reply.

    As for CBI's valuation, it has a current p/e 17 and a forward p/e 14. And still another 16% profit increase is expected in 2015. To me that makes CBI a buy at $70. Okay, perhaps not the most dreaming buy ever but it looks a reasonable thing to do.
    Jun 23, 2014. 04:09 PM | 1 Like Like |Link to Comment