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Mark Humphrey

Mark Humphrey
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  • 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 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 [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
  • Peabody Is My Favorite Idea That Everyone Knows, But That No One Understands [View article]
    Why do you think met coal prices are near cyclical bottom? I'd be happy if they were: I'm long a small position (I wish I didn't have) in BTU.

    If you're betting on a China resurgence, maybe. But their money supply growth cratered over 5 years from high double digits to about zero recently. Even if they were print a lot of money fast, malinvestments of the last 15 years seem likely to push them into a bad recession. Printing money only generates increased "activity" with a long lag. So my guess is they'll have a recession to cope with, whatever they do.

    Meanwhile, the US economy appears to be gradually weakening. Industrial production dipping a little the past 5 months; capacity use falling slowly. So at some point in the not distant, US stocks will get slapped hard. That will hurt housing and auto demand and, of course, as surely as the sun rises and sets, inspire the Fed to push pedal to the metal. Again.

    So then the dollar will decline, perhaps lifting natural gas prices and lifting thermal coal. But we're more likely to encounter stagnation to decline in the US than a resumption of some kind of false boom. It's been 6 years since the last one.

    So I don't see prospects for a rebound in met coal prices, in my understanding.

    Hillary will likely win; betting sites have her a heavy favorite.

    But Saudi Arabia could fall apart quickly, without much warning, given the big failure of US intervention and spreading warfare in the region.

    Thanks for your good article. I'd like to double up on BTU, but I have to commit to understanding the cash flow issues. You've provided an excellent outline for me.
    May 25, 2015. 06:40 PM | Likes Like |Link to Comment
  • The U.S. Economy Appears To Be In Trouble [View article]
    The economy is weakening and the most interesting of the statistics Dave presents is industrial production. The contraction is slight, but persistent over five months.

    The heart of the economy is the production of capital goods, despite the fact that consumer spending constitutes 70% of GDP. GDP is not a measure of the economy, though it always is interpreted that way. It is an estimate of aggregate consumption, because it excludes most capital goods from it's gross spending total. Capital goods are mostly excluded, because Keynesians conceive of capital goods as unfinished consumer goods. They imagine that counting consumer spending alone accurately tallies total spending, while including capital goods spending "double counts" unfinished and finished consumer goods.

    This is a fallacy, though I won't try to explain that here. It should be sufficient to point out that total spending ought to include all consumer and capital goods, because they are separate and distinct. They are competing alternatives for a given stream of spending, in the same way that consumer products compete for consumer spending.

    To return to the point I want to make, in our industrial economy, the production of capital goods accounts for probably 70% of the total, with consumer goods the remainder. Therefore, consumer spending is the tail on the dog, and the slight recurring slumps of industrial output and falling utilization rates are most important.

    I think things are weaker than most people believe and Dave is on track with his prediction.
    May 22, 2015. 10:06 PM | 6 Likes Like |Link to Comment
  • Peter Schiff Quiets Critics As Weak Data Holds Rate Hikes [View article]
    Schiff may not be good at market timing, but he has the basics down. The Fed's money pumping will eventually produce disastrous results, that most people today don't see coming. The more they print, the more they unintentionally sabotage the economy, because the process always causes capital consumption

    So now the economy is weak, and the Fed is afraid to raise rates as Schiff has explained. If they were to lift rates, even gingerly, damaging repercussions would be felt immediately. Debt laden companies, households and governments would all experience falling cash flow.

    We're headed for another recession in the next year or two. The recession will feature negative rates, enforced by the Fed charging negative interest on excess reserves. People and stocks will get hurt, financial upheaval will ensue and then--in response to Fed whipping--the weary banks will begin lending to poor risks.

    The lending will balloon the supply of transactions money, thereby funding a price spiral in retail and wholesale. The printing to date has all been derived from ballooning the monetary base, which has funded the purchase of products bankers buy: stocks bonds and real estate.

    When the Fed imposes negative rates on excess reserves, the macro picture will change. Stocks will fall as price inflation heats up and interest rates rise.

    Then Gold will shine again. So Schiff in correct in his basic thesis, aside from timing.
    May 21, 2015. 12:18 AM | Likes Like |Link to Comment
  • Repricing Amazon's Secret Sauce With Netflix At $600 [View article]
    AMZN is a big proxy for the stock market, nasdaq in particular. So it is valued at insane levels today, with plenty of company in other nose bleed story stocks.

    Ignore this fact, and relative valuation analysis can make sense. It is a fact that one ought not ignore though. So many macro problems, including suppressed long term interest rates. At some point, in the next two or three years--if we don't get slammed by recession before--long rates will rise with price inflation. Then high flyers with little prospect of earning money will get buried.

    In the next recession--I'm guessing we get serious stagnation by 12 months from today--the fed will act decisively (that's bad news). They'll charge negative interest rates on excess reserves to force banks to make loans. They've already tried pumping the reserve base up 500%, and slashing interest rates to zero. Other central banks are resorting to negative rates on excess reserves, and central bankers all belong to a collegial "gentleman's club", within which ideas and sentiments are widely shared. So the tax on excess reserves in the next downturn is likely--a betting propossition.

    If they impose a tax on excess reserves, banks will loan to avoid paying interest on reserves, and so the transactions money supply will run up quickly. Then recipients of the new loans--ordinary businesses and regular people--will spend, driving up prices of business products AND consumer goods, thereby igniting consumer and wholesale price inflation. So far, monetary inflation has merely boosted bank reserves, which has resulted in increased bidding on investment products banks and financial types like to buy--stocks, bonds and real estate.

    When we get a consumer price spiral due to negative rates on excess reserves, bond rates will rise sharply, and eventually to dizzying heights. The monetary base is 500% larger than in 2009, so the money supply could increase by well over 500% from a wave of bank lending spurred by taxing excess reserves.

    There will be no alternative for the Fed, which is burdened by the need to blow out "growth" to prove its effectiveness and shore up political support. A few years from now, everyone will see they have a tiger by the tail and stocks will be seriously hurting.

    Amazon, Netflix, CRM and many other story stocks will get smacked hard, since high interest rates change basic investment tradeoffs. But again, we've got a recession to get through, probably, before interest rates soar.
    May 15, 2015. 07:45 PM | 2 Likes Like |Link to Comment
  • Signs Of A Stock Market Correction Developing [View article]
    Also, I read on Pater Tenebrarum's, that the odd convergence of stocks and bonds suggests a stock market beset with liquidity problems.

    The idea is most players have bet the same way: long the dollar, bonds, and stocks; short gold, copper and oil. There are problems with the notion of bonds, the dollar and stocks being a one way bet, but that's another topic.

    These days, leverage is the big thing, so popular one way bets are vulnerable to big losses. We've seen oil and copper ramp way up, and the dollar go down despite universal belief it has to rally. The dollar slump and rise in copper-oil have hurt a lot of leveraged gamblers.

    So when stocks fell for a few days, bonds got sold too, because one way bettors had to get money to close out losing leveraged positions. Thus, the odd spectacle of stocks and bonds falling together.

    That's a good indication of liquidity strains in the stock market, and further basis for a hard correction, as you've argued.

    It's also basis for a crash eventually.
    May 9, 2015. 02:27 PM | 2 Likes Like |Link to Comment
  • Signs Of A Stock Market Correction Developing [View article]
    This is a good article. You're not the only smart analyst that has noticed the market looks toppy and tired.

    Incidentally, your comments about technical analysis are good. The pretty geometrical patterns people pour over are expressions of short term supply and demand activity among investors. So price patterns are conceptual derivatives of the reasoning behind support and resistance levels.

    Why do you think we're headed into more bull market activity, followed by a blow off? I'm not saying it won't happen, but I can see lots of possibilities likely to kill the big rally.

    On one hand, there's insanity out there now, and people get tricked into buying rising prices. So there's blow off potential.

    On the other hand, a blow off could happen this year, followed by a crash.

    Basis for a crash include two obvious alternatives. One, we fall into a recession, with weakness suddenly intensifying. This would be consistent with the big slowdown in the money supply growth, (True Money Supply--Pollaro in Forbes) of over 18% several years ago to 7.5% today.

    Or two, past money supply doubling, that so far has only boomed stocks and bonds, forces consumer prices higher. Then bond rates go up, and stocks--not guessing at this possibility--get sold hard.

    My guess is the recession alternative, now that they've paused Q.E. yet remain afraid to lift the fed funds rate. At some point, it will become obvious that the Fed is trapped; they can't make prosperity, only print money. Then Goldilocks will panic.

    It is interesting to watch this play out.
    May 9, 2015. 02:08 PM | Likes Like |Link to Comment
  • Amazon up 2.2% after Bernstein sets $600 target [View news story]
    Let the stock price rise, while Amazon burns cash and adds debt. AMZN really ought to acquire CRM, which would create wonderful cash burning synergy.

    The stock will party 'til the end, when it will crash back to earth, like it did in 2000. It's a big chunk of NASDAQ, so until the bull market implodes, the party for AMZN continues.

    The bull market is threatened by two developments. We're headed for a recession soon. If I'm wrong, then inflation and interest rates will head seriously higher, due to the doubling of the money supply since 2009.

    Meanwhile, the market seems to be acting toppy, with everyone betting on the same trades--long bonds, the dollar, stocks; short gold, copper, oil. But oil and copper have ramped up and bonds have been falling, even when stocks fall.

    When stocks and bonds fall together over a period of weeks, then the reason might be that everyone's bet the same way. When some of the one way bets lose big money, as in rallying copper and oil that traders have been short, and as in the falling dollar that everyone has been long, funds and traders are forced to sell whatever they can to unwind leveraged trades. So they sell bonds and stocks at the same time.

    I got that insight from Pater Tenebrarum on
    May 8, 2015. 01:56 PM | 3 Likes Like |Link to Comment
  • What Would A Acquisition Do To Oracle? [View article]
    Shouldn't Amazon acquire CRM? They're in the same line of business--burning cash--and it's a spectacular fit in terms of company culture. Bezos buys Benioff.
    May 7, 2015. 12:55 PM | 3 Likes Like |Link to Comment
  • 'The U.S. Is Broke' [View article]
    The government is different from the rest of us, because government workers and the political class all use coercion to achieve whatever they think they're supposed to be doing. The rest of us do not resort to force in the process of earning a living or achieving other goals and if we did, we'd probably wind up in court. But for the political class that is the government, such behavior is routine and unremarkable.

    It's good that most people don't resort to force, imitating government agencies and players, because civilization requires peaceful cooperation based on the natural harmony of interests that obtains when reasonable people are free to choose. If the rest of us ran around stealing and worse, society would collapse. Who would pay then for the extravagance and vice that characterizes big government spending?

    With that said, it is true that, in the broadest sense, (most) people get the government they deserve. Ours is predatory in many respects, because people approve of programs that they think enable them to live, or accumulate riches, at the expense of others. And there are plenty of psychopaths who crave the power to impose their vision for humanity by the force of the state. So when people become corrupt, the government they sanction reflects their ethos.
    Apr 16, 2015. 06:38 PM | 5 Likes Like |Link to Comment