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Mark Humphrey

Mark Humphrey
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  • Signs That Gold May Be Headed Higher... Finally [View article]
    Thank you for your clear explanation of the GOFO rate.

    It wouldn't surprise me to see a rally back to $1350 (just a price guess) on short covering. After that, we'd have to see if gold continued higher, presumably as conventional stocks go down; or if gold resumes its gradual descent into lower territory.

    I was impressed by Jim Roger's observation that commodity bull markets almost always correct by roughly 50%, before moving up again. For US investors to bid gold in a big way, they have to abandon all hope the Fed knows what it's doing and where we're heading. We're not there yet, since investors chatter about the alleged danger of "deflation"--a term with no objective meaning as commonly used these days.

    Because investors still believe the Fed has the power to plan the economy without disastrous consequences, I'm wary about a sustainable bull market. We might have longer to wait.
    Dec 15, 2014. 07:26 PM | Likes Like |Link to Comment
  • Is This The End Of The 'Shale Oil Bubble?' Or The Beginning? [View article]
    This is an odd article, seemingly an exercise in whistling in the dark. The conclusion is shale oil producers will benefit from a lower oil price.

    Oil fell way below analysts' expectations because economic growth is weaker and weakening. Europe and Asia are in the ditch and digging deeper; the US is stagnant, not growing, despite GDP increases that mostly reflect government spending/money printing.

    Since analysts are mostly perma-bulls, they didn't anticipate the economic weakness, and they do not understand why more weakness is in store. Oil prices were geared to rising demand, but demand is flagging.

    As matters stand now, the US is tilting toward a recession, evidenced by commodity prices and the housing market, which is rolling over. After stocks get slammed sometime fairly soon, the Fed will resume pumping money. Commodity prices will jump higher, though from lower levels than today's. Then the question will be, did they flood the economy in time with enough new money to head off a recession? Or is a recession already baked in the cake?

    I wouldn't want to be long shale producers today.
    Dec 13, 2014. 07:54 PM | 1 Like Like |Link to Comment
  • The Present Market Behavior Reminds Me Of The Past [View article]
    Paulo you make a good point about past performance of small caps, blowing off at the apex of the 1997 and 1999 bull market.

    Of course, we all know there is no road map to the future of this bull market. We're not guaranteed the past will perform again. It might be that this bull market will simply fall apart without much warning any day now. That might be happening now, as the oil patch implodes and the junk bond sector goes into convulsions.

    When this happens, the Fed will go crazy again, reverting to standard operating procedure. Then the market will rally. But how high and for how long?

    I think we're in the final stages of this bull. I think gold and miners have very large upside and bonds-generic stocks are at big risk, because people will figure out that the Fed is lost in the wilderness.
    Dec 10, 2014. 08:23 PM | 3 Likes Like |Link to Comment
  • Economy Worse Than Being Reported – Housing Market Crumbling [View instapost]
    They've done everything to prop up the housing market and they're about to fail. They can't push back the sea.
    Dec 10, 2014. 08:05 PM | Likes Like |Link to Comment
  • A Few Quick Observations On Crude [View article]
    The idea of a net gain to the economy overlooks the concentrated losses and downsizing caused by plummeting oil and other commodity prices. The commodity prices decline is a microcosm of the process that is recession. Capital goods industries start losing money and contract, as demand for what they make tips over, even as costs for the entire sector keep rising.

    The boom features rapid growth in demand and output in the capital goods sector, due to tons of new money pouring in. Then historical costs increase with a lag to the increases in sector revenues. An example of historically lagged costs are depreciation and amortization that continue growing the longer the expansion continues.

    Revenue growth slows or goes flat when the burst of rapid money increase flattens or declines. But costs keep rising. So companies buying capital goods--in this instance commodities--have to scale back their demand. When this happens, commodity prices fall, while costs remain about where they were.

    The recession ends the capital waste of the false boom caused by the money printing. What we're seeing in the commodities swoon is an early stage recession event. It's not an anomaly that will just go away after a while, unless the Fed panics and ramps up the money supply again. But even then, we might get slammed by a recession, because money supply growth has been irregularly slowing--albeit from lofty heights--for over 5 years now.

    I suspect the commodities pricing indicates a lot of damage has been inflicted by the global money printing, endless government spending and growing regulations everywhere.
    Nov 29, 2014. 03:03 PM | Likes Like |Link to Comment
  • A Flawed Analysis Of What Ails The Economy [View article]
    Salmo trutta, do you recall the boom that peaked around 2000 that featured tremendous investment in fibre optics buried cable? That was a malinvestment that fell on hard times. Recall the internet start ups, nearly all burning cash at heady rates, with little to no revenues? These companies were closed because they had no prospect of earning income, ever. In the housing boom, extravagant homes were built for buyers who had little income, or who planned on selling existing homes to such buyers. Of course, the new and existing home mania turned out to be another mirage, caused by money printing that temporarily pumped up false demand.

    What reasonable person would want to dispute these observations.

    Thanks to Pater Tenebrarum for this brilliant article explaining wealth consuming booms and the busts that halt the destruction, (but only until the next central bank orchestrated boom).
    Nov 28, 2014. 09:50 PM | 4 Likes Like |Link to Comment
  • A Few Quick Observations On Crude [View article]
    The commodities price crash is a red light signaling economic weakness. US money supply growth--of transactions money not the base--has fallen irregularly for five years. However, the drop in the growth rate of transactions money is not yet as pronounced as the extended steep decline over four years leading into the fall of 2007. Still, from a peak growth rate of about 17% in 2009, it has declined to around 7.5% now. (TMS money supply published by Pollaro in Forbes).

    It's a good bet the US economy has been extensively damaged by the wealth destructive effects of money printing, wild government spending and proliferation of regulations since 2007. So its resilience in the face of slowing money growth has probably been undercut, making us more vulnerable to the onset of recession even at a fairly high money supply growth rate of 7.5%. I would think that growth in money is likely to slow further, as credit tightens in response to the high yield debt problems.

    No one knows when the next recession will occur in the US, although my suspicion is that it could occur anytime, even in the next year. Meanwhile, China is probably falling into a recession, despite official statements-statistics to the contrary. The money supply growth in China has performed a magnificent swan dive, even larger than that of M1 in 2003-2007. Even if they resume rapid monetary inflation now, my guess is it's too late to avoid a shakeout in China.

    Maybe the approaching US stock market problems will inspire the Fed do push pedal to the metal again, just in time to postpone our next recession. Of course, this would guarantee the crisis will be much worse later.
    Nov 28, 2014. 03:28 PM | 2 Likes Like |Link to Comment
  • Right-Wing Keynesianism? [View article]
    Say's law, which explains that production is the source of purchasing power, has been refuted? Wow.

    The collapse in investment prices of 2008 had nothing to do with a "deficiency in demand" that, in the absence of fiat money printing, would have been permanent.

    The collapse was caused by the distortions in relative prices that caused massive mal-investments in real estate and elsewhere, ALL DUE TO Keynesian prescribed credit expansion under the guidance of the Fed. Obviously, Fed engineered credit expansion entails the buildup of unsustainable debts. So when the malinvestments began flowing red ink, firms and households stepped up their demand for cash, inducing a healthy fall in asset prices, thereby ending the wealth destruction caused by the false boom.

    The boom destroyed scarce wealth; the bust revealed the wealth destruction caused by the boom.

    There is no coherent alternative to Say's Law, because in the absence of production, consumption is not possible. Keynesians actually think that 70% of the economy is devoted to churning out consumers goods filling the shelves of Walmart and Target. But the truth is that about 70% of aggregate production is devoted to making producer's goods--goods used to make something to sell. The GDP numbers don't reflect gross economic output, but rather net net output, after stripping away most producer goods production. Keynesians don't want to count production of most producer goods, because of philosophical confusion about the nature of entities, meaning in this case the differences between consumer and producer goods.

    The fact that Keynesian economics totally dominates thinking, thanks to 100 years of government funded schools and universities, makes debunking it a pleasure. In any event, pleasurable or otherwise, the debunking is easy, because it is a stupid incoherent theory of economics.
    Nov 27, 2014. 05:38 PM | 2 Likes Like |Link to Comment
  • Home Sales Reports Miss Wall Street Estimates [View article]
    Thanks for this excellent review of the state of housing now, together with your comments about an impending drop in housing stocks from recent heights.

    Perhaps the big prop holding up the appearance of prosperity in the housing market is demand from wealthy buyers, beneficiaries of monetary inflation. My impression is this is where most demand growth has been concentrated.

    So when the US stock market falls apart in the not distant future, I'd guess that housing demand from this source will contract. Probably when demand from wealthy buyers goes down, there will be a slump in demand in all sectors of the housing market.
    Nov 27, 2014. 03:20 PM | Likes Like |Link to Comment
  • Building A Core Investment Program For The Next 20 Years [View instapost]
    This is an excellent and fascinating history of the fiat money fiasco that was imposed on people from the days of colonial America to times well past the implementation of the Constitution. There is a great deal in this article that is fascinating, including Jefferson's insight that money printing is nothing more than a cruel and hidden tax.
    Nov 27, 2014. 03:11 PM | 1 Like Like |Link to Comment
  • China To Play Catch-Up? [View article]
    Whatever happens in China, the Hong Kong indexes are not falling on news of economic weakness in China. That's interesting.

    I'll buy Hong Kong after the US stock market gets splattered. Russia also.

    The big China risk is the prolonged and severe slowdown in money supply growth over the past 5 years or more. Bubble activities are bound to flow red ink, even if the People's Bank of China inflates enthusiastically soon. So maybe Hong Kong will take off without me, assuming traders buy money printing and ignore red ink.

    I'd rather wait awhile.
    Nov 27, 2014. 12:34 AM | Likes Like |Link to Comment
  • Right-Wing Keynesianism? [View article]
    Sorry, but there is no such thing as "general demand deficiencies".

    This is true, because of Say's Law, which explains that purchasing power is caused by production. In other words, contrary to the beliefs of Keynesians, consumer spending does not beget production, in the broadest sense; production makes consumer spending possible by giving entrepreneurs and their workers something to sell to obtain wealth with which to buy.

    A general deficiency in demand is not possible, because when buyers stop spending, prices fall. Lower prices make buying more attractive, and lower prices are the inevitable consequence of a temporary deficiency of demand.

    People have to eat, drive to work, sleep in shelter, so no one need worry about flagging consumption. If consumption is restrained for the sake of more investment, demand for investment goods replaces consumer demands. More investment yields greater production and purchasing power.

    That's why the lynch pin of progress is capital investment, not consumption.
    Nov 27, 2014. 12:18 AM | 1 Like Like |Link to Comment
  • HP Earnings Imply Bad News For Intel [View article]
    I subscribe to Fred Hickey's high technology investment letter, in which he has several times described how Intel is characteristically behind the curve in anticipating an industry slowdown. This characteristic behavior extends over the past 30 years Hickey has been following technology stocks.

    I'm guessing the cloud services markets have become way over-built in this boom, which spells bad news for Intel's chip sales to this segment in a recession.
    Nov 26, 2014. 11:50 PM | Likes Like |Link to Comment
  • Company Profits And Stock Prices Can Fall Without The Fed Tightening  [View instapost]

    Here is an article by Michael Pollaro in Forbes in which he shows a chart of the True Money Supply, an Austrian School definition of transactions money that is close but not identical to M1.

    The chart of the TMS over several years gives perspective as to the extent of the decline in TMS over the last 4-5 years, versus the extent and duration of the declines preceding the busts in 2007 and 2000.

    A glance at the chart suggests to me that we have another eighteen months, or less. That's pure guesswork, based on the observation that the economy today is more damaged than it was in 2007. The damage has been inflicted by the wealth destruction caused by monetary inflation, ramped up regulations, and rapid growth in government spending. Each of these government depredations must be paid for by private firms and individuals, from funds that would have been saved and invested in productive tools and other capital goods. The size of these wealth destroying intrusions has been sufficient to cause chronic long term joblessness and stagnant to falling real wages--both evidence of capital consumption.

    So I'm guessing the next recession will require a less pronounced slowdown in the growth of money than that which preceded the Great Recession.
    Nov 25, 2014. 08:13 PM | Likes Like |Link to Comment
  • Amazon Trades For 370 Years Of Earnings, Jack Ma Thinks It Might Not Be Here In 20 [View article]
    This is another excellent Santos article, setting forth so clearly the scale and significance of Amazon's problems.

    I added a little to my short at $338, and then read this article a day or so later.

    I think the big run up for Amazon is over and the stock is on defense looking ahead.

    I'm also guessing the end of Q.E. will clock stock averages and hit Amazon hard, in the next few months.

    But the longer it takes for Amazon to perform a nice swan dive, the more the company can continue to expand its stable of unprofitable money burning ventures.

    When we get past the next recession, not that far in the future, Amazon's debt will be much larger. But for the Fed to rev the markets out of the next crisis will take huge quantities of newly created money. The next recovery will feature soaring interest rates, if my guess is correct.

    Best of health and robust recovery to Paulo.
    Nov 25, 2014. 03:35 AM | 2 Likes Like |Link to Comment