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Mark Humphrey

Mark Humphrey
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  • Have We Seen The Emotional Low In EM Stocks? [View article]
    Not to be snarky, but sentiment indicators are a pretty crude means of estimating anything. Gold miners have experienced extreme sentiment lows for a years now, and no one knows when sentiment will improve. This is because, obviously, no one knows when gold will resume its bull market.

    As you no doubt realize, sentiment for EM stocks will improve when demand and pricing for EM output increases. But that's not likely to happen until the far side of the next recession, that we're (I'm guessing) on the cusp of these days.

    Gold could be forced lower in the next recession, although it doesn't have to. But EM stocks are guaranteed to fall in that event.
    Aug 28, 2015. 10:20 PM | 2 Likes Like |Link to Comment
  • Stick with "market darlings," RBC analysts say [View news story]
    The mo-mo stocks like AMZN and CRM, etc. make no money and probably never will, at least in a way that matches their hyped prices. They're story stocks in a market that has been intoxicated by 7 years of rampant money printing, most of which has bid financial assets higher. Meanwhile, prosperity is shrinking slowly, for understandable reasons, until the next recession, when conditions will worsen. So there's a large gap between stock prices, and of mo-mo stocks especially, versus economic reality.

    There's nothing wrong with making lots of money betting on story stocks. But their dangerous, because the prices they command reflect mass psychology. As the economy deteriorates, as it has and will, at some point psychology will change. Maybe this shift awaits the next recession, not far off in my opinion; or maybe people will realize trouble's afoot when the Fed has to resume QE4 in the wake of the next sickening drop in stock prices.

    Whatever causes the shift, it will happen quickly. Story stocks will fall a lot, something like in 2001. I'm short some stuff.
    Aug 28, 2015. 09:40 PM | Likes Like |Link to Comment
  • Salesforce overhauls core CRM software, launches financial services product [View news story]
    It's another instance of uncanny timing...the wrong way. CRM brings forth a financial application, just as the bear market in financial assets begins.
    Aug 28, 2015. 09:22 PM | Likes Like |Link to Comment
  • New Home Sales Miss Expectations - Data Is Questionable [View article]
    Thanks for this interesting breakdown and explanation of census bureau compilations.
    Aug 26, 2015. 04:47 PM | 1 Like Like |Link to Comment
  • Safety Last: The State Of The Economy Is Pretty Good [View article]
    When you assume that nothing has changed with respect to the economy, you assume it is not sliding into recession. But there's good reason to suspect we're on the cusp.

    The "recovery" is almost all "economic activity" inspired by bargain basement interest rates (that boom long term assets, such as cloud infrastructure). Funding for rising revenues in boom sectors comes from money printing. The "recovery" continues as long as money supply growth accelerates; but when it decelerates for a long time, the boom rolls over into a bust, as costs rise stubbornly while revenues stagnate and then decline.

    The stagnation and decline of revenues, particularly in business to business sales, results from narrowing profit margins, as delayed costs rise in response to past money printing. Margins narrow, and firms begin to pull in their horns, buying fewer products from other firms. This revenue stagnation reduces profits or imposes losses on against rising costs, causing business people to strive to reduce spending. So revenues actually fall--as for instance among many chip makers today--even as money supply continues to expand. As revenues fall, losses set in.

    This process is caused by a long term deceleration in money supply growth. The malinvested capital carried on the back of accelerating money supply is revealed as a losing proposition, once firms adjust to rising costs that were caused, after an accounting lag, by the same money printing that made revenues of capital intensive products boom before. In the US, money supply growth peaked at about 17%+ in 2010 and has since gradually declined, until for the last year it has been expanding at roughly 7.5% to 8% rate of growth. This long slowdown presages a recession.

    It has been six years since the last recession, so the "boom" is ageing. Meanwhile, a Fed measure of business to business sales is starting to contract. Most economic activity is sales to other businesses, not consumers, despite endlessly repeated claims by Keynesians that consumer spending makes the mare run. That's a subject for some other day, though.

    Anyway, the world wide stock market declines, featuring panicked selling all around, are heralding a recession, first in China and then in the US. That's what I think, so I'm short some stocks and have been; and long gold.
    Aug 26, 2015. 01:18 AM | 2 Likes Like |Link to Comment
  • In The Midst Of The Mayhem, A Small Positive Sign For Semiconductors [View article]
    High Tech Strategist written by Fred Hickey.
    Aug 26, 2015. 12:03 AM | Likes Like |Link to Comment
  • In The Midst Of The Mayhem, A Small Positive Sign For Semiconductors [View article]
    I subscribe to an investment letter that pours over earnings reports and conference calls among chip companies and other techs. The most recent letter reported widespread revenue shortfalls among a wide assortment of companies, which shortfalls were attributed by managements to sudden macro weakness, rather than company specific events.

    We might be on the cusp of a slowly developing recession that later this year or early in 2016 deteriorates much faster.

    I've also read that INTC is heavily invested in churning out chips for the cloud, which I feel certain is way way overbuilt. The cloud infrastructure has been a big beneficiary of bargain basement interest rates that encourage investment in long lived assets.

    So INTC might be like IBM--a big disappointment and perhaps even a company in some trouble later.

    My information is all second hand; I haven't taken time to pour over company specific data related to INTC myself. But I'm pretty sure INTC's connection to Cloud build-out is a big deal.
    Aug 25, 2015. 01:22 AM | Likes Like |Link to Comment
  • Drop In Mortgage Purchase Applications And Pending Home Sales: Renewed Downturn In Housing [View article]
    I've been short about 200 shares total of 3 builders for quite a while. My short is under water, of course. But it's a small position, so I'm complacent.

    The home builders will roll over in concert with the US economy, I think. That is, when the next recession arrives, housing demand will contract and builders will have to cope with debt, expensive land costs and disappearing profit margins.

    I'm too bearish, but I still believe there is reason to expect we're nearing the time of the next recession. First, the recovery period has been 6 years to date. Second, an investment letter I subscribe to, written by Fred Hickey who reviews earnings reports and conference calls of technology companies, most recently revealed widespread evidence of sudden macro weakness among virtually all technology companies. The managers attribute the weakness to macro factors, not to company specific problems. This is a sound conclusion, because revenue and demand short falls are nearly universal in this sector today.

    Most of these technology companies make stuff that they sell to other companies, rather than to consumers, as does, for example, Apple. This is an important fact, because most spending in the economy is business to business, not consumer spending. Conventional economists, Keynesians every one, believe consumer spending is about 70% of the economy and everyone believes them. But they reach this odd conclusion by defining most capital goods--products purchased by businesses--out of existence. In other words, GDP is not gross product, it is net net product, of which consumer spending comprises 70%. But gross product properly defined is about 70% business sales to businesses.

    I'm harping on this point, because evidence is growing that business spending is starting to contract. In addition to weakness in the technology sector, a measure at the fed of aggregate business spending is contracting now. I believe it is the early warning of an approaching recession.

    If I'm guessing right about this, the stock market is risky today. If it gets spanked hard, new home demand from affluent types will decline, entirely aside from the effects of the recession I believe is now just starting to get underway.

    Maybe I'm too early in expecting a recession in 16. It wouldn't be the first time. But this is why I think home builders are vulnerable.
    Aug 19, 2015. 02:59 PM | 1 Like Like |Link to Comment
  • Peabody Energy Is Challenged But Not Dead [View article]
    The US health care system has been the most heavily regulated and centralized business sector in our history. It functions as a politically sanctioned cartel propped up by grants of privilege to practitioners and drug companies that enable them to suppress their competition. The result has been a cost-plus bureaucratic system, mostly funded with tax dollars via Medicare and Medicaid, various state programs, and federal, state and local health plans for bureaucrats. This system isn't free enterprise in health care; it is an example of Mussolini style fascism.

    Muddled thinkers of all political stripes, from Limbaugh and Hannity on the right to Hillary and Obama on the left, equate this regimented monster with free enterprise. The right defends it on this basis, proclaiming "we have the finest health care system in the world"; while the left attacks it as exploitation characteristic of economic freedom. To characterize such thinking as simply "muddled" is wrong; it is dishonest.

    Now we encounter another muddled thinker convinced that Obamacare has good provisions that will somehow improve medical care and reduce costs in the USA. People who think this don't understand why free enterprise works and why regulations warp incentives and remuneration. Such understanding requires sustained effort, including reading books that explain how free markets naturally function to provide better service at lower prices, characteristically without exploitation or shady dealings.

    Supporters of piecemeal socialism and fascism are usually impossible to persuade. They seem to want to "know" things without bothering to achieve understanding.
    Aug 14, 2015. 08:05 PM | 1 Like Like |Link to Comment
  • Peabody Energy Is Challenged But Not Dead [View article]
    China's recession will get a lot worse over the next 12 months, but at some point after, maybe by mid-seventeen, I'd guess China will begin to recover. Then coal demand from that region will begin to climb.

    The US is maybe one year behind China in falling into recession. If this turns out to be so, then oil will fall lower, and production will be forced lower, which will reduce natural gas supplies and shore up coal prices. Meaning, prevent them from falling in sympathy with the recession that I believe will choke back the US. If all this prognosticating turns out to be partly true, then coal won't fall much from here, while input costs of capital expenditures will decline.

    If the US is headed for recession beginning in 2016, then the fed will do the only thing they know how to do--print like crazy. The dollar will fall a lot, since the love-myth among investors of recovery in the US and looming interest rate hikes by the Fed, will evaporate. As the dollar falls hard, and if coal prices are supported by Chinese recovery in coal demand and falling oil prices, BTU's prospects would improve somewhat and the stock might rally.

    Of course, if events shake out in this seemingly unlikely way, investor psychology will shift dramatically. I'm picturing gold prices rebounding, miners going way up from today's prices, and commodity producers in general getting more interesting.
    Jul 27, 2015. 10:19 PM | 1 Like Like |Link to Comment
  • Why Krzanich's Intel Has Become Interesting [View article]
    I 'm modestly short INTC--100 shares at $33--and bought an October 15 put a couple days ago.

    My main idea--it's vague, I admit--is the company will get hurt because the cloud chip business is overbuilt. This isn't obvious now, but the next recession or slump-with-inflation will reveal that a good share of the investment being plowed into "the cloud" was a mistake. It's a case of mal-investment fostered by money printing, as per von Mises and the Austrian School of economics.

    Are we nearing recession? It appears so, since not only is there trouble in the oil producing states like Texas-Oklahoma, but Chicago's manufacturing is slumping too. Industrial production nationwide slightly down for 5 months running.

    This isn't a theme that will make clear sense to people on this thread, who know everything about Intel's business challenges and direction. I don't, except I'm pretty sure they've got big cloud exposure, which may turn out like all the fiber optic cable that was put down in the late Nineties.

    If the cloud turns out to be a big investment error due to misdirection that's entailed in money printing, IBM will be hurt further too. I'm modestly short IBM.
    May 31, 2015. 03:39 PM | 1 Like Like |Link to Comment
  • April New Home Sales, Homebuilder Sentiment And Overvalued Homebuilder Stocks [View article]
    If Dave's articles on the echo boom in over priced home builders is absurd and, judging from the tenor of your repeated comments, morally outrageous, why do you continue to come back? Because his arguments make you angry? But if you really think his arguments lack merit, why the anger?

    He is basically correct, as we'll see before too long. Of course builders will have big problems; they're geared for trouble via high debt/inventories in a flimsey real estate market.

    When stocks get slammed, as they will, the builders will take it on the chin financially. They're riding on air with high valuations, and they're supplying demand from affluent types lifted by the money printing boom in stocks and bonds. But the money printing has largely stopped, so the boom's days are numbered.

    It's not that hard to figure out.
    May 30, 2015. 05:01 PM | Likes Like |Link to Comment
  • What Would A Salesforce.com Acquisition Do To Oracle? [View article]
    So the news is Microsoft was willing to pay $55 billion for CRM. That's a big price for a company that regularly loses money. Is there some catch that the news writers might have missed that lowered the cost to Microsoft?

    If the deal were transacted in MS stock only, it would still be really expensive, since MS isn't wildly overvalued like CRM. I'd think the effects of dilution would clock Microsoft. I'm ignorant about most of this stuff, but still, I can't imagine synergy turning the acquired into a profitable business. But maybe they could sell CRM's services to many MS business users, giving them new ground to plow.

    Does someone have insight into this apparent mystery?
    May 26, 2015. 11:59 PM | 2 Likes Like |Link to Comment
  • Big Tech Is Telling Investors What To Think Of Salesforce.com [View article]
    "Frankly, Salesforce looks to me like everything Siebel CRM was in its heyday."

    Siebel Systems was profitable.
    May 26, 2015. 05:09 PM | Likes Like |Link to Comment
  • Peabody Is My Favorite Idea That Everyone Knows, But That No One Understands [View article]
    Man, I hope you're right. But I fear not, because betting sites are impressively accurate forecasters of election outcomes.

    If she's elected, though, look on the bright side. She'd be restrained--other than executive orders and judicial appointments--by a republican congress. Meanwhile, the economy would be worsening, a prediction that's not far fetched if one understands why money printing and government spending erode and destroy capital accumulation.

    So in 2020, a republican would almost certainly be elected, which would be somewhat encouraging (from my perspective), since they'll have no money to prosecute foreign non-defensive wars in the Middle East and elsewhere; and because they are more friendly--though certainly not with any degree of consistency--to (semi-) free enterprise than democrats.

    All this is far afield from the issue of BTU and its future. I like the idea of BTU short term bonds, as proposed by Biological, except the next financial crisis will probably center around the bond market, bereft as it is these days of liquidity, yield and prudent covenants. So there will be opportunities in corporate bonds, which if true, obviates the rationale for my buying BTU bonds to gear up for any rebound in coal (and recoup losses on my 160 shares of BTU :)
    May 26, 2015. 04:36 PM | Likes Like |Link to Comment
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