The Market Is Freaking Out Over The Fed [View article]
I am not sure where the equities market is going (although I lightened up on stocks and shorted the SPY yesterday to partially hedge my few longs). notwithstanding, how much gold and silver (% of your portfolio) do you own, at what price and why do you think they are going up from here?
Weighing The Week Ahead: A New Direction For The Fed? [View article]
Jeff, CI,
what bernanke missed as did many others (myself included) was the extent of the speculation (and unneeded oversupply) in the housing market. Bernanke did not think the problem with subprime would grow to infect the system. It was only 10% of the mortgage market. that conclusion was reasonable if real estate values were reasonable. The problem, I think, was that there were so many housing units being purchased for resale and speculation (due to easy credit and a rising market) and not for use of the buyer that when the credit markets tightened and so many units (and the mortgages on them) quickly stopped performing, it became clear that problem was much more serious than thought in the first instance. values were not in fact reasonable based on actual end user demand. The oversupply in the housing market was actually very large and that oversupply could not be absorbed by the banks or financed by the banks (on their own) until it could be absorbed. Credit default swaps (which shift risk) and other financial instruments merely increased the inability of the market to identify which institutions were in trouble. merely holding mortgage debt itself was not a problem if you had bought CDS and the other party was solvent (think goldman sachs versus AIG). I recall Mark Fisher (the commodity trader) on CNBC saying just that at the time and I think he was right. Then the markets froze as a result. I am not sure you can blame bernanke for missing that data point. it is not something that is regularly focused on or knowable with certainty (namely, the amount of specualtion in the one family house market) . Further, Imagine if bernanke had figured it out beforehand. what should he have done? raise rates? press the banks to increase lending standards? I am not sure that was politically feasible. many partisan politicians would have gone crazy with such "intervention" in the markets. The fed still has to answer to congress.
the reality is that most think that bernanke, overall, did a good job after missing that one. he prevented the total liquidation of so many that would have thrown us into a depression. he forced the fear out of the markets. things are normalized.
Weighing The Week Ahead: A New Direction For The Fed? [View article]
Gunzo,
I think you misperceive several things, namely, but for QE (massive liquidity in the financial system) where would the "weak" be. there would be massive unemployment as banks and businesses would be liquidated just like what happened in the depression when the fed did not insert liquidity into the system during that financial crisis. also, the fed is not the government. The congress cannot agree on doing much of anything and has done almost nothing. The fed is a government sponsored banking organization with a smart academic running it. he is trying to protect the banking system and help as many as he can in the process. And while the financial repression of the fed (hurting savers with artificially low rates) is a problem for some, it has helped business and exporters by lowering rates and the value of the dollar and getting the manufacturing sector back on track. This has in turn kept many from being unemployed.
at the end of the day, QE squeezed risk out of the system and therefore, pushed valuations back into a more normal range which was good to get the economy moving again bc when people fear a liquidity crisis, spending stops. now that the economy is basically normalized (but not necessarily back to the way it was), the fed is looking to remove the liquidity bc it appears that it is no longer necessary.
also, the government no longer perceives its primary mission as protecting the weak. rather it perceives its main function as providing a "level playing field". The morality it looks to is the morality of the market place with some limitations. that is generally the republican position and obama is not fighting it despite all of the criticism against him from the right.
The Case For Investing In Russia (Despite The Risks) [View article]
If it works out, you will be richly rewarded. however, historically when there is a government run by someone who is not respecting the rule of law, the chances that he will change or the next ruler changing are remote. it is a bad value bet.
Weighing The Week Ahead: A Tipping Point For Stocks? [View article]
Interesting times,
If you think Jersey City is not good, you have not been there in a long time. Parking is not cheap, but it is much cheaper than manhattan and without the traffic.
Keeping It Simple: Annaly Capital And Historical Yield Spreads [View article]
I recall that many banks suffered a similar fate in the 1970s and 1980s (borrowing short lending long declining prepayments in a very fast rising interest rate environment). that is a possibility which this author ignored.I am not saying it will happen, but it is the risk of owning this stock.
Weighing The Week Ahead: A Tipping Point For Stocks? [View article]
DD
that is right. very short term. I am not saying the market will break down. but the risk of it is greater. vol is up and the market is looking for reasons to sell off. it was different a few weeks ago.
Weighing The Week Ahead: A Tipping Point For Stocks? [View article]
Jeff,
very nice article.
technically, the SPY is in an downtrend. volatility increased. I agree we are at an inflection point.
I agree with CI's last point from PIMCO except I am not sure it is a purely stark and bifurcated issue, namely we can transition to growth except that in the short term there will headwinds. for example, the Chinese consumer is such a small percentage of the economy there. there is talk and some evidence that they are in the start of a transition to increase the domestic consumer part of the economy as the amount of savings and investment is unsustainable and dangerous for their economy. while this entails lower growth there in the short term and will impact the rest of the world, ultimately, it will be supportive of growth both there and abroad, just as our economy did the same thing for so many years. Meanwhile, except for Illinois, most of the US is restructuring pension obligations and related government obligations to both change the basic government model and put us on a more solid footing. there will be more pain before that it is over. But it will happen and when it is over, governments here will be more sustainable. Europe will take longer and I am not sure how it will end. I don't see much happening there right now.
I agree. the patent laws are a mess. They probably need a new framework to reform what is patentable, and the process of obtaining and enforcing patents. but congress cant agree on what time of day it is, so nothing will get done and many opportunities will be lost.
Turkey - Not An Arab Spring, But A Turkish Summer? [View article]
I have a good friend who is turkish and he tells me people there generally like the government but not the president because now he is perceived as too autocratic (and overbearing about his islamic fundamentalism). this is not new in the world. we will see if the president backs off or tries to enforce his will. it could be bumpy in the market there for a while.
Weighing The Week Ahead: Will The Interest Rate Surge Continue? [View article]
Jeff,
I dont disagree. if the fed "lets" the PCE move up, wont they have to do a lot of QE? might that calm the bond market into thinking that tapering is not happening now? might rates drop again in a big way before resuming an uptrend? I dont know the answers but it is what I was thinking about. the answer is not clear to me.
fannie and freddie underwrite nearly all the mortgages in the country. the banks would never do what fannie and freddie do. fannie and freddie are making a lot money again (all time highs). the republicans who claim they are going to abolish fannie and freddie will never accomplish that because it would collapse the housing market (because 90% of the people would not be able to get a loan) and put the country into a depression. that talk is just that, talk. So ultimately, fannie and freddie will pay back the government and their stock will have real value at that time. its value will be based on its earnings which is at all time highs and is growing. so what is a fair current price for the ownership interest? I am not sure, but the stock is much higher than where it was a few months ago ($0.25) due to the cash flow of the companies and I cant say that the current price is irrational.
The Market Is Freaking Out Over The Fed [View article]
Weighing The Week Ahead: A New Direction For The Fed? [View article]
what bernanke missed as did many others (myself included) was the extent of the speculation (and unneeded oversupply) in the housing market. Bernanke did not think the problem with subprime would grow to infect the system. It was only 10% of the mortgage market. that conclusion was reasonable if real estate values were reasonable. The problem, I think, was that there were so many housing units being purchased for resale and speculation (due to easy credit and a rising market) and not for use of the buyer that when the credit markets tightened and so many units (and the mortgages on them) quickly stopped performing, it became clear that problem was much more serious than thought in the first instance. values were not in fact reasonable based on actual end user demand. The oversupply in the housing market was actually very large and that oversupply could not be absorbed by the banks or financed by the banks (on their own) until it could be absorbed. Credit default swaps (which shift risk) and other financial instruments merely increased the inability of the market to identify which institutions were in trouble. merely holding mortgage debt itself was not a problem if you had bought CDS and the other party was solvent (think goldman sachs versus AIG). I recall Mark Fisher (the commodity trader) on CNBC saying just that at the time and I think he was right. Then the markets froze as a result. I am not sure you can blame bernanke for missing that data point. it is not something that is regularly focused on or knowable with certainty (namely, the amount of specualtion in the one family house market) . Further, Imagine if bernanke had figured it out beforehand. what should he have done? raise rates? press the banks to increase lending standards? I am not sure that was politically feasible. many partisan politicians would have gone crazy with such "intervention" in the markets. The fed still has to answer to congress.
the reality is that most think that bernanke, overall, did a good job after missing that one. he prevented the total liquidation of so many that would have thrown us into a depression. he forced the fear out of the markets. things are normalized.
CI is in the minority view.
Weighing The Week Ahead: A New Direction For The Fed? [View article]
I think you misperceive several things, namely, but for QE (massive liquidity in the financial system) where would the "weak" be. there would be massive unemployment as banks and businesses would be liquidated just like what happened in the depression when the fed did not insert liquidity into the system during that financial crisis.
also, the fed is not the government. The congress cannot agree on doing much of anything and has done almost nothing. The fed is a government sponsored banking organization with a smart academic running it. he is trying to protect the banking system and help as many as he can in the process. And while the financial repression of the fed (hurting savers with artificially low rates) is a problem for some, it has helped business and exporters by lowering rates and the value of the dollar and getting the manufacturing sector back on track. This has in turn kept many from being unemployed.
at the end of the day, QE squeezed risk out of the system and therefore, pushed valuations back into a more normal range which was good to get the economy moving again bc when people fear a liquidity crisis, spending stops.
now that the economy is basically normalized (but not necessarily back to the way it was), the fed is looking to remove the liquidity bc it appears that it is no longer necessary.
also, the government no longer perceives its primary mission as protecting the weak. rather it perceives its main function as providing a "level playing field". The morality it looks to is the morality of the market place with some limitations. that is generally the republican position and obama is not fighting it despite all of the criticism against him from the right.
The Case For Investing In Russia (Despite The Risks) [View article]
The Case For Investing In Russia (Despite The Risks) [View article]
Weighing The Week Ahead: A Tipping Point For Stocks? [View article]
If you think Jersey City is not good, you have not been there in a long time. Parking is not cheap, but it is much cheaper than manhattan and without the traffic.
Weighing The Week Ahead: A Tipping Point For Stocks? [View article]
Keeping It Simple: Annaly Capital And Historical Yield Spreads [View article]
Weighing The Week Ahead: A Tipping Point For Stocks? [View article]
that is right. very short term.
I am not saying the market will break down. but the risk of it is greater. vol is up and the market is looking for reasons to sell off. it was different a few weeks ago.
Weighing The Week Ahead: A Tipping Point For Stocks? [View article]
very nice article.
technically, the SPY is in an downtrend. volatility increased. I agree we are at an inflection point.
I agree with CI's last point from PIMCO except I am not sure it is a purely stark and bifurcated issue, namely we can transition to growth except that in the short term there will headwinds. for example, the Chinese consumer is such a small percentage of the economy there. there is talk and some evidence that they are in the start of a transition to increase the domestic consumer part of the economy as the amount of savings and investment is unsustainable and dangerous for their economy. while this entails lower growth there in the short term and will impact the rest of the world, ultimately, it will be supportive of growth both there and abroad, just as our economy did the same thing for so many years.
Meanwhile, except for Illinois, most of the US is restructuring pension obligations and related government obligations to both change the basic government model and put us on a more solid footing. there will be more pain before that it is over. But it will happen and when it is over, governments here will be more sustainable. Europe will take longer and I am not sure how it will end. I don't see much happening there right now.
Household Net Worth: The 'Real' Story [View article]
Prosecute The Patent Trolls! [View article]
I agree. the patent laws are a mess. They probably need a new framework to reform what is patentable, and the process of obtaining and enforcing patents. but congress cant agree on what time of day it is, so nothing will get done and many opportunities will be lost.
Turkey - Not An Arab Spring, But A Turkish Summer? [View article]
Weighing The Week Ahead: Will The Interest Rate Surge Continue? [View article]
I dont disagree. if the fed "lets" the PCE move up, wont they have to do a lot of QE? might that calm the bond market into thinking that tapering is not happening now? might rates drop again in a big way before resuming an uptrend? I dont know the answers but it is what I was thinking about. the answer is not clear to me.
Daro
The Frannie Gamble [View article]