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Mark Humphrey

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  • 8.8% And 9.8% Yields With Oasis Petroleum Bonds, Maturing February 2019, March 2022 [View article] a stuck pig...:)
    Nov 28, 2015. 10:42 PM | Likes Like |Link to Comment
  • The Economy May Already Be In A Recession: Short Retailers [View article]
    Dave, do you think Oracle's stated objective of cutting prices on cloud products is a big deal for Amazon?
    Nov 23, 2015. 01:52 PM | Likes Like |Link to Comment
  • The Economy May Already Be In A Recession: Short Retailers [View article]
    Small growth in GDP doesn't refute the recession idea, since GDP doesn't faithfully portray the economy. GDP excludes nearly all production of capital/producer goods from its "gross production" tally. That's due to Keynesian confusion about the nature of entities, and the fact that capital goods are distinct from, rather than an unfinished facet of, consumer goods.

    Being heavily weighted toward consumer spending, GDP numbers ignore the contraction in capital goods outlays that constitute about 70% of total output. Contracting-stagnating manufacturing is a big deal, rather than a minor bump in the road, as Keynesians believe.
    Nov 23, 2015. 01:48 PM | Likes Like |Link to Comment
  • Gold: On The Edge Of A Steep Cliff [View article]
    I like this article, because it doesn't dispense gold propaganda that tends to dominate commentary--both bulls and bears. The idea that gold could drop substantially from here isn't implausible, although I don't believe it will fall below $900.

    My reasoning is basically that gold gets bid when pro-Fed and pro-stock psychology withers. I think we're near the juncture when stocks get slapped hard and the Fed, as usual, conjures more base money or, more likely now, imposes negative interest rates. I doubt a rate hike of 25 basis points in the interest rate the Fed pays on excess reserves will have big impact on gold, because it's mostly discounted in the price.

    We're on the cusp of recession with industrial production starting to slump for several months running, railroad and trucking shipments starting to fall and money supply growth falling for over 5 years, from 17% in 2010 to about 8% today. Assuming these trends continue, stocks are vulnerable to big decline; falling stock prices will radically change investor psychology.

    So at that point, gold either gets bid or gets pulled lower by the scramble for liquidity in leveraged stocks and bonds. It's a balance beam, with recession trends on one end and the need for safe haven in recession on the other.

    The outcome in the short term isn't knowable, to me anyway. But I'd be astonished if gold dropped well below $900. I'm long gold and miners.
    Nov 16, 2015. 07:23 PM | 2 Likes Like |Link to Comment
  • Annaly Capital Proves It Deserves Its 'Blue Chip' Moniker In Q3 2015 [View article]
    We're getting near a recession, even if the folks who manipulate numbers for the government don't decide to call it one. The economy is stagnating and slipping: look at slowing falling industrial production (a large portion of economic output, despite contrary claims of Keynesian doctrine).

    My point is simple: if a recession is looming, then interest sensitive bonds with minimal credit risk will do well, while discounting credit risk will go way up. My impression is that NLY has recently positioned itself so it will be hurt by enhanced credit risk and not helped by falling interest rates (which is the direction of trend in a recession).

    The Fed's mini-drama about whether or not they'll lift the interest rate paid on excess reserves, from 25 to 40 or 50 basis points, isn't that important. If they lift the rate paid on excess reserves, lending will slow, the volume of new money churned out will fall and we'll see a recession sooner. If they keep the rate paid on excess reserves where it is, money growth will still slow gradually, because revenue growth in the economy is modestly negative, forcing firms to pull in their horns, thereby increasing credit risk and decreasing lending/borrowing. Either way, unless they impose negative interest rates or feature another burst of QE, we'll headed for recession due to the huge buildup in debt and malinvestment, against a backdrop of 5 years of slowing money supply growth.

    I don't know how NLY will fare in the next slump, but I have questions in light of its portfolio shift. It isn't like buying a treasury bond and as leveraged as it is, there is risk aplenty.
    Nov 13, 2015. 08:16 PM | Likes Like |Link to Comment
  • Why No One Should Support The Gold Standard [View article]
    "Because everyone is better off if they spend than if they save"...?

    This statement is an example of Keynesian misconception, repeated endlessly by people who are know-nothings. These medieval theorists actually believe that 70% of the economy is engaged in the direct production of consumer goods. That would leave the remainder, or 30% of production, to magically conjure partly out of nothing the 70% we're to believe the 30% produced.

    The fact is roughly 70% of total productive activity is of "producer goods, stuff businesses make and sell to other businesses to make other stuff to sell, either to other businesses (producer goods) or to consumers (consumer goods.)

    If everyone were to consume instead of save-invest in production, then in short order we'd all be starving, living literally hand to mouth.

    Here's just a single example of the philosophical absurdities of Keynesianism that never gets questioned or defended by "conventional economists". These people are so mesmerized by the alleged "power" of group think" that they rarely engage in actual thinking for themselves. Their job is to go along, get Fed and University appointments and tax dollar salaries and funding, all for the purpose of defending big intrusive government that is wrecking our economy and taking over our lives.
    Nov 13, 2015. 04:24 PM | 3 Likes Like |Link to Comment
  • Is Cisco About To Break Out? [View article]
    I don't have cojones; I have a thick skull. Shorting Amazon and was stupid and reckless in the environment. But I'm only short 35 of amzn and 100 of crm. I'll manage. I am hoping the market is forming a top that at some point will send stocks down fast.
    Nov 12, 2015. 09:52 PM | Likes Like |Link to Comment
  • Is Cisco About To Break Out? [View article]
    Whether or not its cheap depends on its earnings going forward. We probably have different ideas about what lies ahead for the economy and earnings of cyclical companies. Next quarter will be interesting.
    Nov 12, 2015. 09:49 PM | Likes Like |Link to Comment
  • Why No One Should Support The Gold Standard [View article]
    "History shows this is totally wrong. A gold standard does not restrict the government from devaluing the currency."

    Cullen has confused a gold exchange standard with a market based gold coin standard. In the case of a gold coin standard, the government is out of the money business: no central bank to inflate, no treasury issuance of fiat currency, and no monetary inflation. The purpose of adopting a free market monetary system is to prevent fervent ideologues and bureaucrats from destroying our money. This purpose is achieved by freeing market participants to use as money commodities they expect others will accept in trade, until the most widely marketable commodity takes over the role of money. Gold is likely to be adopted as money in the marketplace, due to its long history as money.

    "The Gold Standard is inherently deflationary." Cullen doesn't understand the meaning of the term he tosses around as an indictment against economic freedom. Deflation refers to a contraction in the supply of money, not to falling prices or economic depression. The definition centers around the supply of money, because when the money supply contracts, falling prices are merely one, and not the most important effect. The gold coin standard prior to the twentieth century in the United States and Britain--and indeed, most of the world--featured the longest period of rapid economic progress in history, a time of gently falling prices and increasing real incomes and wages.

    "A gold standard is disastrous for foreign trade." This is false, because the terms of trade always reflect the comparative values of monetary units used for exchange. If Americans adopted a free market monetary system, probably a gold coin standard but possibly some other unforeseen alternative, then in trading with Fiat Money France, the French would experience falling francs against the gold dollar (defined as a weight in gold). If this effect temporarily lifted exports from France to the US, Americans would enjoy the benefits of a strong currency in low import prices. The fact that some US businesses might have to adjust to competition from abroad is beneficial to the formation of wealth. Doing so always enhances comparative advantage and thereby lifts real incomes for consumers, who in this example would be Americans. Cullen doesn't understand the ultimate purpose of free trade--free enterprise across borders--which he imagines hurts us when import prices fall!

    "There's a reason why almost no mainstream economist supports a return to the gold standard - it is an economic disaster." Here Cullen reveals his animus toward economic freedom, that he's probably not reflective enough to own. Mainstream economists, to a man and woman, are neo-Keynesians. These people subscribe to philosophical absurdities that they NEVER question, that have been refuted many times throughout the history of economic thought, and that have been gradually impoverishing Americans and Europeans. Conventional economists have all been indoctrinated in government schools and universities as to what they should believe and teach, doctrine strictly enforced by filtering out of university appointments any independent thinkers who value economic freedom. These are the experts Cullen admires. To return to the point of this paragraph, the history of the gold coin standard in the United States was an era of economic freedom and unprecedented economic improvement for regular folks.

    I'd rather not reference this article as "silly". It is ignorant, and to the extent people might be misled by Cullen, destructive.
    Nov 12, 2015. 09:28 PM | 3 Likes Like |Link to Comment
  • Can Amazon Grow Into Its Valuation? [View article]
    There's another risk to AWS associated with the business cycle. The cloud build out is an example of higher order capital investment, meaning capital investment far removed from consumer products. To illustrate: Engineering services devoted to designing mining equipment is a higher order capital expenditure, far removed from the production of silver jewelry or automobile keys.

    There has been a tremendous expansion of hardware and software used to build cloud data centers, that people assume is the "next" big thing, that is substantially a response to super low interest rates. Low rates increase the returns to higher order capital goods by increasing their present value. Higher present valuation equals more profitable production of goods used to build the cloud.

    People these days think AWS will justify AMZN's stock price, as AWS is supposed to be the wave of the future. The trouble with this prediction is that it rests on permanently low interest rates and no recession.

    But we're headed for a recession, in which low yielding mal-investments such as AWS, that were big beneficiaries of the false money printing boom, transform into money losing ventures. Remember fibre optics and real estate, the previous waves of the future?

    The next recession will be hard on AWS and Amazon, to be followed by, I think, a trend toward rising interest rates. Most investors seem detached from this risk and hang their hopes on AWS about the time it's headed for macro economic difficulties.
    Nov 11, 2015. 09:38 PM | 8 Likes Like |Link to Comment
  • 3 Things You Need To Know About Qualcomm [View article]
    Thanks for this insightful article. I like your comments about snapdragon 820 being a winner that could boost sentiment for the stock. I especially appreciated your insights into coming difficulties with the royalty business.

    I'm modestly short QCOM from 63. I know this sounds tedious, but we're nearing a recession, I think. If it turns out to be true, then chip stocks like QCOM will face bigger problems than those apparent today.
    Nov 8, 2015. 10:40 PM | 1 Like Like |Link to Comment
  • Even With Higher Margins, Amazon Wouldn't Be Cheap [View article]
    These days the Big Idea people use to justify AMZN's nosebleed price is Amazon Web Services. But there's a good chance this subsidiary will turn out to be a disappointment.

    The easy money boom of the last 6 years has featured a 110% increase in transactions money supply and nearly zero interest rates. The artificial boom has favored higher order capital goods investment, since low interest rates yield much higher capital goods prices. "Higher order" capital goods are those furthest removed from the production of consumer goods, such as, for example, mining machinery and cloud building.

    The easy money boom will end when the slowdown in money supply growth alters relative prices. As money growth slows, historically lagged costs keep climbing, which pinches profit margins, which in turn inspires firms to slow spending thereby causing revenues generally to stagnate and then fall. Today, revenue growth across the economy is modestly negative as capital goods prices are falling.

    The money supply (True Money Supply 2, as per Michael Pollaro in Forbes) peaked at 17%+ growth in 2010 and has gradually fallen to 8.4% today, still quite high but trending lower. With the end of QE3, lending to corporations by banks is the factor holding up money supply growth. But manufacturing is slowing in the US, first for the oil and mining sectors, but also for other areas. As growth stagnates and margins sink, lending to corporations will stop and the money supply will stop growing. This will probably happen about the time investors become aware of the developing recession.

    Bringing this back to Amazon, since the cloud has been a huge beneficiary of the artificial boom, pumped up by monetary inflation and low rates, AWS will suffer slowing revenue growth, rising costs and vanishing profit margins in a commodity business. Everyone is betting the future on this slice of Amazon, at just the time when it's most vulnerable.

    I'm modestly short Amazon. I was way early, but that doesn't obviate the recession risk for this company.
    Nov 8, 2015. 09:30 PM | 2 Likes Like |Link to Comment
  • Is Cisco About To Break Out? [View article]
    I'm short 100 shares, together with some chip stocks, mainly because everything's overpriced these days and we're getting close to a recession. CSCO has a big dependency on selling products for the cloud buildout. I suspect that the cloud business has been way overbuilt during the zero interest rate boom that I think is headed for rough sailing soon.

    The company has a great balance sheet with it's big pile of cash. But the tide may be about to flow out, revealing problems throughout tech land.

    I was short IBM for a long time and did pretty well; short San Disc, but didn't pay attention while traveling and had to give up most my profits in covering recently; and short Qualcom from 63. I've been blasted with my shorts of Amazon and, but I think good luck will gallop to my rescue as the stock market takes a big hit in the next few months, while our economy slowly disintegrates.

    Obviously, this is macro-stock market guesswork and I could be wrong.
    Nov 8, 2015. 08:43 PM | Likes Like |Link to Comment
  • Pending Home Sales: More Evidence The Housing Bear May Be Back [View article]
    Hey Inky, clock back in. Dave's point is that the drop in numbers, before arbitrary adjustments for seasonality, from August to September 1914 was a lot smaller than the recent drop from August to September 2015.

    As he explained, the larger drop occurred despite lower costs for home buyers due to lower interest rates, lax lending and lower down payment requirements.

    So your comment misses the point of his article, which is a good one.
    Nov 5, 2015. 10:17 AM | 1 Like Like |Link to Comment
  • Housing Market Horror: Home Equity Loans Making A Big Comeback [View instapost]
    Thanks for the insight into current conditions. Why the cut in bonus compensation? Stock market that's topping instead of roaring skyward? Why the worry about job losses when everyone's a bull?

    Wondering also what you think about Amazon: will the crazy stocks be last to crack and then take down the market with dramatic and fast declines?
    Oct 31, 2015. 11:08 PM | Likes Like |Link to Comment