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  • Perspectives On Friday's Sell Off [View article]
    Hi Eric-always enjoy your perspective. First, I think this little slide was telegraphed. In watching the vix, it just seemed to easy to keep shorting volatility. I stated a few days ago that I was clearing out of SVXY. I've never seen a trade so consistently easy. I went the other way, and immeditaely got hammered, but I doubled down. The market was just too predictable. Never before has so much liquidity been dumped on the system.
    This move could have been choreographed by some big shakers. If you think about it, novice traders were shorting the vix. Part of the evolution of the market rests with the quick dissemination of new ideas. If someone has a good idea, it's out there in short order. The most profitable move is for sufficient capital to layer in some long volatility trades, and hit the public panic button. The second day was simply a cascading impact where the standard retail trader began to second guess their positions.
    But, there's still a ton of cash that wants an extended 'no panic' zone. This is, I suspect, little more than a 'reshuffling of the deck.' At this juncture, I just don't see that the real issues are front and center.
    Jan 24 05:59 PM | 21 Likes Like |Link to Comment
  • Why A Stock Market Bubble Is Forming Right Now [View article]
    I think we're in the midst of a great socio-economic 'experiment.' I use the term 'experiment' in a pseudo-scientific sense, in that central planning institutions have a working hypothesis based on a set of assumptions. These assumptions reflect historical observation, refined by models.
    Of course, part of the analysis suggests that operating mistakes were made by allowing the previous morphine drip to become addictive. But more of the same-indeed much higher doses were needed- to sustain the patient.
    But, is this not an ephemeral and elusive discussion? Witness the daily and incessant preoccupation with the Fed, ECB, BOJ, etc. And, how many words are devoted to the utter ineffectiveness of elected officials to 'do something.' The central banks proclaim that they can't do all the lifting. Why is there no fiscal counter-balance to the equation?
    But I suppose the real point of substance is the utter abdication of elected officials to a vast array of regulatory agencies. We proudly laud the Bill of Rights, while we simultaneously surrender it's heart and soul to the most extraordinary and extensive regulation in the history of the human race. And we shackle our future with a debt burden that is unimaginable. Note that since 1960, the federal budget has been either balanced or in surplus a mere five times. (And, yes some of the early years were small deficits).
    The only inference to be derived from this statistic is simply that the correlation between economic or business cycles and fiscal integrity i.e.. rational balances, is lacking. A big part of the problem is simple: the immediate need is to deal with today's known misery, and the future is an imagined, ambiguous point where prosperity rules and happiness is assured. But, an increasing amount of liquidity and debt are shifted to the future. Thus, we don't 'invest for' the future, we "borrow from' the future.
    But to add to the author's point about the management of liquidity, we want to sharpen our focus just a bit. If we accept that government regulation has proliferated, and importantly, now forms a web (perhaps tangled) such that financial decisions are manifestly impacted, our next observation is to note the rather rapid integration of said regulation with debt-financed consumption. The evidence is clear that federal regulators insisted that FNMA support the mortgage securitization debacle. Most folks would stop at that observation, as if the riddle had been solved. No-it's more insidious in that private markets were diluted, and, as usual, clarity and basic accounting didn't apply.
    There has to be a point where managing liquidity is held hostage to more than an economic cycle. That point in time will be determined by a stubborn economic suppression, which defies the liquidity antidote. That suppression will be revealed by continued high unemployment and stagnant opportunity.
    May 3 09:45 AM | 13 Likes Like |Link to Comment
  • Just How Sick Is This Market? [View article]
    Rookie, in a way the divergence state by state is somewhat similar. Corporations seek right to work states, e.g BA. Most Asian auto-makers have selected Alabama, Georgia and South Carolina. Each state, or perhaps region, seems to have economic distinctions that are more pronouned than in the past. What does this portend for the future? How does the central planning agency deal with the enhanced distinctions?
    The problem with an academic analysis that encompasses only econometric models, is that the sociological and demographic issues are given scant weight. Economics is called the "dismal science" but its handful of "laws" are insufficient to allow any meaningful prediction.
    In a conversation with my 84 year-old mother the other day, she said "I don't know how a couple with children can stay above water." That tells me more than any of the fools that appear on CNBC,etc.
    I was in West Palm last March for a couple of days, and then drove across the state to Ft. Myers. In talking to people, they echo your comments. This will go down as a unique period of American history, and will likely defy the type of analysis that gets promulgated every hour.
    Jun 18 10:10 AM | 13 Likes Like |Link to Comment
  • 4 More Years Of What? The Past As Prologue [View article]
    Despite one's political preference, it's worthwhile to think about underlying causes versus prima facie observations. I have yet to read any account that truly specifies some unique and specific act, or set of acts, within any significant historical context, that reflect and explain this moment in time.
    Yes, the cited authorities, as well as many others, have offered a post hoc perspective. But where is the voice of the armchair quaterback a priori? Greenspan, in Congressional testimony, raved about the trillions of dollars of home equity. Yet, the monolithic bastions of free enterprise were laying off thousands pursuant to "re-engineering."
    Instead of using 2000 as a defining point in time, why not 1988. At the moment the Berlin Wall came down, millions of new job-seekers cropped up overnight. It would take too long to review all the implications arising therefrom. At that same time, trade balances began to change (unfavorably for the US), as business schools sought to understand and teach Japanese management techniques.
    The role of the Fed became reactionary, and arrogant, by assuming a wisdom that remained elusive. The art of re-arranging the deck chairs became all the rage, as the chaos underneath remained a shadowy phantom. Superficial analysis passed for logic and rigor. The culture, and the resulting economy, were being transformed. Governmental policies dealt with the superficial, while natural forces operated with impunity.
    But it always happens that way. We want the illusion. And we will pursue that illusion, and we will insist that others share our illusion. Politicians will oblige the dominant illusion so that the people will praise their adroit leaders-and nod gently into a peaceful sleep.
    Nov 12 11:45 PM | 11 Likes Like |Link to Comment
  • BP Is Having A Panic Attack Over Business Economic Loss Claims [View article]
    Entering into an uncapped settlement with a pack of trial lawyers is equivalent to standing at the gates of hell, pleading with Lucifer for leniency.
    Jun 28 06:43 AM | 10 Likes Like |Link to Comment
  • Taking Care Of Grandma's Money [View article]
    The first thing I would do is protect her assets from potential nursing home liens. If she owns real estate, as indicated, I see a tragedy waiting to happen. Rather than put a few dollars in the stock market, I suggest you visit a lawyer that specializes in trusts and protecting assets from creditors. Otherwise, the odds are that your efforts will benefit the Medicare/Medicaid system. OUCH!
    Jun 13 09:31 AM | 10 Likes Like |Link to Comment
  • Monday Market Momentum - Prices Go Parabolic [View article]
    There comes a time to short Rome and go long the barbarians. But, while in Rome....
    Feb 14 12:03 PM | 10 Likes Like |Link to Comment
  • The Major Bubble That Nobody Is Talking About [View article]
    With many pundits screaming that gold will fall to $500, it creates a self-fulfilling prophecy. I'm anything but a gold expert, but I do have a nose for panic. Panic presents extraordinary opportunities. It's like a surfer, waiting to catch just the right wave.
    Another apt analogy is herd behavior on the African plains. People are like wildebeests, stampeding first in one direction until exhaustion, then, after a rest, they are just as likely to turn around and run in the opposite direction. The crocodile and the lion wait pateiently for the right moment.
    May 21 07:53 AM | 9 Likes Like |Link to Comment
  • Just How Sick Is This Market? [View article]
    It's not just the economists-it's the analysts as well. I have a thick notebook from 2007, full of analysts reports/reviews/price targets, etc. Just to share a couple of them: NUE $88/ACI $82. NUE hovers around $40. ACI is an unmitigated disaster. These are just two examples.
    Often, people will say that earnings are the only thing that matter, and that "eventually" a share price must reflect fundamental value. "Eventually" the planet will be consumed by the sun. "Eventually" the universe will be ripped apart. I often wonder how these people go about constructing the "reality" in which they live. Of course, the answer is that they sing from the choir book of self-interest. The evidence is so overwhelming and so pervasive against these morons that any respectable weather prognosticator would be embarrassed to admit of such a record. They can only owe their sustainability to the short-term memories of their audience, and the general tendency of most folks to forgive and forget.
    Jun 18 08:48 AM | 9 Likes Like |Link to Comment
  • Why We're Nowhere Near a Bottom in Housing [View article]
    Note that the conversation has shifted from incentive/rebound to how low will it go. We see all the classical components of denial and anchoring, combined with a continuous display of inarticulate bafflement. Time will reveal a fundamental shift in the demand curve, caused by a confluence of powerful forces-not a mere movement along price points. So, to "call a bottom" is nothing more than a fools errand. The tidy neighborhood of Ward and June Cleaver, and all that it came to represent, doesn't exist anymore-except in the memories of those that can't separate nostalgic memory from the harsh light of current reality. A new equilibrium is, of course, inevitable. But it won't be something the Beaver would recognize.
    May 18 07:20 AM | 9 Likes Like |Link to Comment
  • Inflationary Thursday - Dow 15,000, Plus $5 Will Get You a Happy Meal [View article]
    I've consulted with the Anti-nabob of NegativityGroup (that's the group that tends to focus on the top 10 reasons to buy and hold thru thick and thin), and seems that you guys aren't drinking enough tea. Look, there's absolutely no reason to worry about the bottom 99% getting out of control-here's why: (1) 63.2% of the bottom 99% are obese, and simply don't have the mobility or energy level to protest-riots are out of the question; (2) The Scooter Store, it turns out, can remotely disable those little scooters, therby causing a massive traffic jam at critical points ; (3)Soccer moms don't have time to participate-hell they can't even keep up with their book-club assignments; (4) teenagers would only riot if ATT cut their bandwidth, or if one of those Twilight characters cast a spell; (5)If pushed, Waylon, Willie and the boys would give concerts to feed the hungry; and,(6)the whole thing would turn into a tail-gate party, and a few officials would be sacrificed for making bad calls. Let them eat cake, indeed! Give 'em a happy meal!
    Back to business. Did someone say that NFLX is a buy at these levels?
    Jan 27 02:35 PM | 9 Likes Like |Link to Comment
  • Hollow Men, Hollow Markets, Hollow World [View article]
    Eliot noted the 'sterility' of the modern world, yet he crafted his message in such a manner that the obtuse could never fathom. Since it's April, here's the opening from 'The Wasteland' (don't have time to double-check so cut me some slack):
    "April is the cruelest month,
    Mixing memory and desire,
    Stirring dull roots with spring rain..."

    This is a contra expression to the hope and excitement of previous generations and specifically invokes Chaucer's Canterbury Tales (see prologue).
    Of course, existential alienation isn't entirely new-but modern man is up against Big Blue, and is playing a game mostly ignorant of the new rules.

    "I've looked at life from both sides now,
    from win and lose, and still somehow
    it's life's illusions I recall.
    I really don't know life at all. "

    I always thought these lyrics revealing, and perhaps Popper would likewise find them apt. For me, the standard set of biases we employ many times a day are enhanced and magnified by a constant dose of collective media dribble every bit as potent as arsenic. Once again I would argue 'drink deep or taste not'- yet millions will pass another day locked in the 'chamber of maiden thought.'
    The terms 'rigged' or 'manipulated' fall woefully short.
    Apr 2 10:39 AM | 8 Likes Like |Link to Comment
  • The Housing Rebound And Why The Fed Should Begin Tightening [View article]
    Historically low mortgage rates have, in a de facto sense, extended the first time home buyer credit. Also, the billions allocated to residential properties via extraordinary and unprecedented actions of large funds, distorts comparisons.
    Also, there is an increased use of HAMP/HARP, etc programs, as well as seniors using reverse mortgages to buy both primary residences, as well as investment properties. So, apples to apples is a bit more complicated.
    But, it is a given that median income has recently declined for the first time in the post-war era. The low mortgage rates probably mask a 'normal' real estate mortgage/purchase/qual... scenario-but it's anyone's guess as to how higher mortgage rates can be absorbed in a world confronted with higher property taxes, higher utility costs, insurance, etc. (given, as indicated, the inescapable issue of declining median income).
    Certainly a reasonable bounce was anticipated. But what run rate is sustainable, and under what set of interest rate assumptions?
    Could it be that the folks having the means to buy a new house are taking advantage of low rates? There is pent-up demand in that group. But, as that set is played out-what next?
    I don't have a clue. I own self-storage facilities throughout the southeast and Midwest, and my managers all have different perspectives on the client base.
    The only thing I know for sure is that the game has changed in a major way. If you've owned real estate from the late 1960's forward-you have to know that the world shifted in 2007. It's not the same anymore-not even close.
    May 23 09:52 PM | 8 Likes Like |Link to Comment
  • The Real Experiment That Is Being Carried Out In Japan [View article]
    Excellent article. In reading same, I was reminded, yet again, not so much of Japan's issues, but of the intellectual frailty which so characterizes the world's political leadership.
    As Keynes noted, of all the elusive variables that can be extrapolated with any degree of certainty, population dynamics stands near the top of the list. The pig and lipstick analogy comes to mind-but that's a pollyanna metaphor. More appropriate is something that delivers a kick to the gut and a slap across the face. Thus, our politicians content themselves with performing cosmetic surgery on a corpse-and announce their success with great jubilation. And, in the process, denounce one of the most gifted minds of the 20th century as something akin to Lex Luther.
    May 14 08:51 AM | 8 Likes Like |Link to Comment
  • This Is The Most Critical Time For The Market Since 2007 [View article]
    Well, I'm bullish, except when I'm bearish-and I'm bearish except when I'm bullish. But, all in all, I'm neither bullish nor bearish. I just enjoy the lowly job of selling tickets to the patrons filling the seats in the coliseum. I just want everyone to have a good time, bet on their favorite gladiator, and leave with contentment in their hearts. Some will win, many will lose-but it's all in the game. For the game will continue, and the crowds will roar. A secular bull up against a cyclical bear-or do I have it backwards? Fools on the left, jokers on the right-do we have rooms for you tonight? Yes, of course. Check out? Well, any time you want (but you can never leave).
    Mar 28 10:07 PM | 8 Likes Like |Link to Comment