Mark Humphrey

Mark Humphrey
Send Message
View as an RSS Feed
  • How (And When) The Bear Market Ends  [View article]
    The fall in stocks will end, temporarily perhaps, when we hear rumblings about the next round of money pumping by the Fed. Then we'll see a big push higher in stock prices, but will that rally go on to new highs, or fail? I'm guessing fail, because I think we're now sliding into a recession. The contraction in manufacturing is a big deal, because manufacturing represents a big portion of output, not 12% as we're told by Keynesians. It's more than that, maybe 35% to 40%, because GDP accounting is shot through with conceptual errors that exaggerate consumer spending and greatly understate spending on production (consumer or producer goods).

    As background to all this, stocks are greatly over priced. Buffets measure of stocks to GDP recently broke through to all time high, though this is a frustrating data point to nail down--many ways of measuring and selecting index series to compare.

    Anyway, I'm short, but nervous. Shorting is dangerous in a world awash in newly printed money.
    Feb 8, 2016. 02:50 PM | 1 Like Like |Link to Comment
  • The Stock Market Decline Is Entering Its Puke Phase  [View article]
    Investment Pancake wrote, "...What I am asking is what if interest rates around the world stay low and drift lower for DECADES? ..."

    The low to negative interest rates situation cannot continue for decades, and not for many years. The reason is that suppressed interest rates and negative yields accomplish two direct results. The first is capital consumption.

    Capital is necessarily consumed, partly because scarce producer goods are misappropriated into white elephant ventures and submarginal deals. When capital is consumed, everyone becomes poorer immediately, because the production we all count on to live falls in concert with capital consumption. Also, saving, including productive expenditure, mostly comes from interest on savings and income from capital investment. With negative to zero rates, no savings are funded from interest returns and misallocation of capital investment wipes out most real profits, eventually. As everyone becomes poorer, as productive expenditure falls, either we all starve or die of disease, or they change course.

    The second direct consequence of zero to negative rates is either out-of-control inflation, or a banking crisis that swamps the Fed and other central banks and forces a large contraction in the supply of money. This happened in the Thirties, when the supply of money fell by one-third. The artificially suppressed interest rates, back then and today, cause rapidly increasing debt burdens that cannot be serviced any time the rate of monetary inflation slows. We're seeing unpayable debt come out of the woodwork these days, after the Fed ended QE. Before long, the Fed will tromp the accelerator again, but probably to little avail, because the slowdown in money growth in the US (and 'round the world, actually) has been large: 17+% in 2010 to under 8% today, and falling, if my suspicions are correct. (MS numbers from TMS-2, Pollaro, Forbes).

    To overcome the recessionary effects of the big slowing in MS, the Fed will have to get serious about inflating money, taking the rate of increase to long sweeping heights well surpassing past accelerations in MS growth. I doubt they'll react with such single minded dedication--these are herd bound bureaucrats, after all--so I think a bad recession is rapidly coming to pass.

    If the recession were allowed to properly run its course, malinvestments would be liquidated, but we'd experience a banking crisis worse than the Thirties. The Fed exists mainly to prop up about 4 or 5 huge banks, so they don't want that to happen.

    To escape a banking crisis that wipes out lots of the money supply and impoverishes most investors, the fed will have to go crazy creating new money, using negative rates to force banks to lend/invest, and QE coming out their ears. Again, to hold the rickety capital structure together for a little while longer, one that is distorted from crazy misallocation and highly leveraged, the Fed people must form consensus to surpass old heights in money printing. I don't know if they can, or will, or can/will not.

    If they do, we'll have wild price inflation sooner or later. It's simple: more money bidding for a falling supply of goods yields rising prices.

    If they don't, sooner or later we'll all get swamped by a grandfather banking crisis, as investment prices actually crash in a hurry.

    People mostly resent this sort of analysis, because it's gloomy. But matters will play out this way, I'm sure; though I don't know the schedule.
    Feb 5, 2016. 06:56 PM | 8 Likes Like |Link to Comment
  • Another Huge Reason To Short AMZN – The Perfect Contra-Bill Miller Trade  [View instapost]
    It's a relief to see AMZN start to fall, after all these years of bull craziness. I'm pretty short lots of stocks now, on edge looking for another stock market drop. (But I'll have to cover fast if they start beating the Tom Toms for another blast of new money.)

    I figure AMZN, CRM and other dream stocks might lead on the downside--not a big leap given recent behavior. Home builders have a couple missing teeth and some black eyes. They've been falling slowly and without drama for quite a while. I like it.
    Feb 4, 2016. 10:37 PM | Likes Like |Link to Comment
  • You Can't Expect An Acquisition To Save Your Distressed Company Or Its Shares  [View article]
    Thanks for this great tutorial
    Feb 2, 2016. 08:34 PM | 2 Likes Like |Link to Comment
  • Qualcomm: Growth Is Dead  [View article]
    "This is the kind of nonsense published by those who believe the present administration can't possibly do anything good. If you really believe this stuff, please give us the data that predicts a recession."

    "What is known is that China has the largest dollar surplus of any nation, and is using those dollars to buy technology it believes it needs. Thus, a Chinese group (Tsinghua) is providing $4 billion to Western Digital so that WDC can buy SanDisk and all its flash memory technology."

    The "dollar surplus" to which you refer is foreign exchange held by the Chinese central bank, not money available for use by Chinese Investment Groups.

    Read David Stockman's blog that has posted a recent article about China's approaching (now unfolding) depression. If you think my comments were about politics, that's wrong. I don't like Obama and I especially did not like Bush. They both did plenty to make the recession on their watch worse--Obamacare in the case of the current resident of government housing. Neither caused their recessions directly. Capitalism doesn't generate mysterious booms and busts that wreck people financially; bastardized capitalism does, wracked and distorted by the intrusions into the capital market by central banks.

    If you're curious about this subject, read George Reisman or von Mises. Seriously, if you care at all about understanding what's happening, make the effort to understand the process set in motion by money printing through the instrument of fractional reserve banking. My comment's not intended as an insult. No one is born with knowledge.

    If you think I'm full of it, I don't mind. Hyperbole's not my suit. I just write what I think.
    Feb 2, 2016. 07:48 PM | 1 Like Like |Link to Comment
  • Fed's George: Market plunge no big deal  [View news story]
    You folks want the Fed to print a ton of new money? Again? So your stocks will climb as the economy is further damaged by capital consumption?

    Looks like your priorities are off base.
    Feb 2, 2016. 03:53 PM | 2 Likes Like |Link to Comment
  • Qualcomm: Growth Is Dead  [View article]
    No one likes to contemplate the tsunami of malinvestment and unpayable debt in China; it's too frightening. It's bad in the US, but China is way off the chart.

    Is ignoring all this smart or stupid? Qcom's management bought into the Chinese Growth Forever theme, like most other people. It's too late now to do anything, except avoid tossing good money after bad.

    Don't take my word on China; read David Stockman's blog, where he posted a recent article on China's looming depression. And by the way, IBM's gonna hurt too.
    Feb 1, 2016. 01:12 AM | Likes Like |Link to Comment
  • Qualcomm: Growth Is Dead  [View article]
    Shock's getting rude treatment because bulls don't like his conclusions. But I thknk his reasoning is pretty good.

    Since Qcom has large exposure to China, that's a festering problem guaranteed to get much worse in the next couple years. China's growth is not merely slowing down, it has stagnated, as in "no growth". Electricity consumption for the past year has been exactly flat. And the recession there is just getting underway. China's "red capitalism" is communist cronyism run amuck: they've squandered hundreds and hundreds of billions of yuan--all other people's money--on schemes so stupid it dazzles the mind. $55 billion on a huge island replica of Manhattan--complete with twin towers and empire state building, but no people or tenants or shoppers or residents. Another multi-billion project in a bizarre shopping mall--a replica of the Pentagon (!) with miles of walkways lined with empty shop space. No stores, no customers, nothing! You've all seen photos of huge new cities built in the last few years--many of them. Empty and abandoned, like old West ghost towns. The steel industry in China expanded from output of 70 million tons around 1990's to 825 million tons in 2014 with total productive capacity today of 1.1 billion tons--65% of which was built in the last 10 years. China optimists believe steel output will fall to 750 million tons in a year, but a central planning bureaucracy announced approaching cutbacks of 100 to 150 million tons annually. That's more than Japan's annual output. Cement production the last 10 years has shot into the atmosphere. In 3 recent years, China poured more concrete than the US used in its entire history.

    China is headed for a depression that will last for years. This spells trouble for companies heavily dependent on Chinese demand, like qcom.

    Back home, Apple--the biggest domestic customer for qcom's chips, has sailed into swelling seas. Sales of tablets are falling and the iphone is slowing and slowing. I don't know what qcom's exposure to the ballyhooed data center market is, but if it's chunky, there's more trouble approaching. Data centers have been way overbuilt--remember the miracle of fiber optics?--and prices commanded by cloud service centers are falling and due to fall hard, later.

    Meanwhile, we're tilted toward a recession and the stock market's due for a hard fall--probably in a hurry, whenever it gets underway.

    I've had a modest sized short since $64, and I'll hang in there until the market hits the skids. No question the company has a great balance sheet--20 billions in net cash and beautiful receptionists, etc. But it's no growth situation, it's probably going to lose a lot more business going forward, so I feel fairly safe, for the present, with my small short in this stock.
    Jan 30, 2016. 07:58 PM | 1 Like Like |Link to Comment
  • Amazon misses estimates, issues in-line guidance; shares drop  [View news story]
    The big score for amazon is supposed to be AWS, which people believe is going to rule world. AMZN can't make actual money, but AWS will be a big earner before long, at the rate its growing, or so bulls seem to think.

    But cloud services demand growth is slowing down, while infrastructure for that business has been way overbuilt. Now cloud service fees are falling: Oracle promises big price cuts ahead after pumping its cloud investment by 9,000%. Meanwhile, a big telecom is trying to sell its big cloud business. All the cloud providers, CRM etc, were down several percent today.

    So the bulls' enthusiasm re AWS is getting frothy, just as the cloud business is about to disappoint. We're sailing into a recession too. That's not sweet for AMZN.

    Go easy on Gary, who probably did make a lot on the way up.
    Jan 28, 2016. 11:04 PM | 2 Likes Like |Link to Comment
  • FB/AMZN: Idiotic Retail Daytraders And Hedge Fund HFT Algos  [View instapost]
    Good call on AMZN's gourmet book cooking. Wow...up $50 and they haven't even yet reported revenue-earnings miracle!

    Behavior of amzn and FB illustrates in a concrete way that sentiment is lopsidedly bullish. Meanwhile, the economy keeps getting weaker, setting us up for a rough ride ahead.

    Thanks for your articles.
    Jan 28, 2016. 03:26 PM | 1 Like Like |Link to Comment
  • Fed waves white flag  [View news story]
    Stocks might be falling because the market wants-needs to fall to reflect facts the bulls ignored. Meaning, the economy is poor and sliding into recession now.

    So the Fed has one option: pump more money into bank reserves. Will that move rally stocks? Probably, but how far?

    I sense the balance is shifting away from the bull market. When the Fed tromps the gas pedal again, investors who've trusted in the idea that pumping money is an economic panacea might begin to really worry about the future. If the Fed has everything under control, why the need for more insane money pumping?

    By the way: QE4 coupled with growing economic weakness will hit the over bought dollar hard. That's bullish for gold, which stock bulls have been hoping would fall to $200. Gold shorts might be in danger now.
    Jan 27, 2016. 04:14 PM | 2 Likes Like |Link to Comment
  • IBM Stock: Today, It's Interesting  [View article]
    The dollar will fall at some not too distant time, in response to some dollar depreciating act of the Fed coupled with our decline into recession. Obviously, I'm not clairvoyant and I might be wrong about timing of the recession. But that's what I think.

    Certainly Dana doesn't maintain that the onset of recession plus QE whatever would be bullish for the dollar. It's much more likely to drop if events so transpire, as in 2008, especially after its big rise since 2011.

    There is also purchasing power parity to consider.

    I am short some chip stocks and various others, because whatever the near term action, the market's topping and ripe for a sizable drop. That's what will cause the Fed to panic.
    Jan 25, 2016. 08:02 PM | Likes Like |Link to Comment
  • Frontier Markets, With A Focus On Mongolia  [View article]
    It's depressing to read about how the Mongolian government and central bank ought to promote building of MORE apartments, as a "solution" to the glut from the boom. Now dead. But at least the author of the article considerately explained that the Mongolian Bank's creation of money to buy bonds from construction companies (en route to Keynesian Utopia) is called "quantitative easing". So good news, he's an expert.

    The challenge facing MNGGF is to stay solvent through the bust in China and the world wide recession now getting underway. China has big problems to work through, but at least they've so far mustered the common sense to reject trying to print their way out of their depression. They've got a few years ahead of bankruptcies and unemployment. Let's hope the mandarins "in charge" get drunk for the next 3 years instead of "fixing" things.

    The recession ahead for the US and abroad won't make it easy for mnggf. I'm thinking Harris Kupperman has the brains and integrity to pull through and believe he's on the right track in pursuing operating profits in non-investment venues, such as property management and brokerage.

    I'm hanging in there, but I wish I'd been more prudent in timing my purchase of the stock and in respecting my sense several years ago that China had big troubles ahead.
    Jan 25, 2016. 06:00 PM | 1 Like Like |Link to Comment
  • IBM Stock: Today, It's Interesting  [View article]
    Wow, did I hit a nerve with Dana.

    All I wrote was the "dollar will turn south". That means it will fall against most other currencies, not "going to crash". Of course, the dollar has climbed against other currencies for several years now, and currencies do fluctuate in price, meaning they go up and then they go down. But my simply stating that I think the dollar will fall is "tiresome" and consistent with the thesis we're headed for a "sea shell economy"?

    I think what really bugs Dana is my comment about a recession taking stocks generally lower. My views on this matter are not faith-based, but I suspect Dana's are. It is possible that he is about to learn more about the "underlying strength of the US economy" soon, which if true, might inspire him to adjust his faith about all this later.

    But probably not.
    Jan 25, 2016. 04:06 PM | 2 Likes Like |Link to Comment
  • IBM Stock: Today, It's Interesting  [View article]
    Thanks for this article. I was short IBM from north of 190 to just over 140, having covered in hopes of a rally to $150 or $160--I forget--where I would short again. But I lost my position.

    Now it's too low to short again and I'm guessing that when the Fed institutes QE4 in response to frightened stock market investors (and frightened central bankers), stocks will rally for a little while but not to new highs. IBM will rally also, especially because--here's the second half of my big guess--the dollar will turn south in response to money printing and growing evidence of a weakening economy.

    My hope is IBM will gain nicely, since if the dollar falls, IBM does better. If this happens, I'll reinstate a short position, since I'm looking for a recession to take stocks generally lower. But, of course, this is guesswork and I don't have a crystal ball.

    My gain in IBM was mostly luck, I think.
    Jan 24, 2016. 08:36 PM | Likes Like |Link to Comment