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  • QE To Propel Market Treacherously Higher After Taper Ends [View article]
    Where is all this liquidity? Hasn't most of it propped up the balance sheets of banks and funded the massive deficits of the federal government? I don't see any data that the average American has seen his liquidity increase since the majority own meager equities and their net worth is primarily in their homes which haven't returned to 2007 levels except for a few regions.

    Corporations have been deploying cash primarily for share buybacks and some acquisitions but not in gearing up for growth expectations. They have little confidence in the economy in my view and I suspect that they realize that 1st quarter GDP was clearly not a result of the weather.

    Walmart has been recently very pessimistic about the consumer. It reflects the fact that despite the decrease in unemployment, the workforce participation rate remains at highs and the new jobs formed are lower pay service jobs. Wealth has increased only for the top 5-10% in the country and that is primarily on paper.

    Therefore, I can't see where all the cash will come to fuel spending or further speculative asset purchases. We all know that market psychology is a major factor in asset prices hence the bubbles and bursts. As soon as the false narrative that the global economy will pick up as central banks stop easing is apparent then the market crumbles in my view. Nothing has structurally changed in the US, Europe or Asia since the crisis except that governments have much greater debt and less ability to deal with the next crisis.
    Jul 11 03:09 PM | 2 Likes Like |Link to Comment
  • Are We In A Housing Bubble? [View article]
    People that have capital gains in the market can afford a house. The majority of Americans cannot in many places in the country. I believe it will pop when the economy is in shambles-- like now but the media and pundits keep telling us the opposite. Isn't a 2.9% contraction in the first quarter with ZIRP and a massive increase in the money supply a clue that we are in a house of smoke and mirrors. I guess that sooner than later we will all see that our structural problems will not be corrected by liquidity. If food and gas prices keep increasing there will either be a massive outcry from the public or the Fed will painfully acknowledge that rates need to rise despite the housing market. Finally there are no 24-35 yo that can or willing to buy houses at these prices. It is investors and foreign buyers moving capital out of their country eg China, Russia that is causing the rise in many places like NYC.
    Jun 25 12:50 PM | 8 Likes Like |Link to Comment
  • Bubble Watch: Imagine What Would Happen If Optimism Reigned [View article]
    Most of my colleagues are fully invested and my guess is that reflects the majority of the typical 401K investor. The retail investor is a fragment of the market anymore. Who needs to get optimistic? The institutional investors? They have been forced to buy stocks because of the Fed given their need to make a target return.
    Nothing has improved in the global economy since 2007. Global debt has risen 30% since then and here in the US we have record numbers on government assistance. The problem is their isn't enough demand for global supply, the global workforce doesn't have the skill,talent or training to fill the "jobs of the future", the US has added substantially more regulatory burdens and most developed countries have populations that are aging that live off of entitlements. Finally housing looks headed for another big slump here and Europe has not done any meaningful structural change and they are a demographic disaster.
    The card to fall is when market participants lose faith in the almighty central banks. Then it all unravels. We are 5 years out from a recession with little growth despite unprecedented monetary stimulus. Why will 2014 be the year when we lift off particularly when the fed is tapering? We have been sustained here in the US by artificially low interest rates and debt for the better part of 20 years. Unless we have dramatic structural changes and allocate capital to productive purposes--not stock buybacks, legal and regulatory rat holes, government welfare and malinvestment schemes, etc then there is no foundation for growth. Finally we are serving up the next generation with our debt, worthless college degrees that cost them extortionary prices who likely choose to have few or no children like the Japanese given the costs. They won't buy all of those McMansions out there.
    May 9 10:11 AM | 20 Likes Like |Link to Comment
  • Economic Outlook For Rest Of 2014: Acceleration [View article]
    It would take 450,000 jobs per month to get back to 5% unemployment and a 66% labor participation rate.
    Apr 4 10:38 AM | 8 Likes Like |Link to Comment
  • Economic Outlook For Rest Of 2014: Acceleration [View article]
    According to Atlanta Fed calculator it would take 2 years of approx. 200K job growth to get to 5% unemployment. The caveat is that is maintaining the 63% labor participation rate not the 66% that we were at in 2008. The quality of jobs remains very poor and many of the jobs are temp. Not sure how you think that suggests above trend growth rates. Furthermore the real estate market continues to weaken. Hot areas getting overpriced and the remainder of the country still in the doldrums and getting worse. Haven't seen the real pain from Obama care as the taxes and job implications impact the economy. You also didn't consider significant global risk of conflict. I doubt eastern Europe simply quiets down, china and japan continue to raise the rhetoric and things aren't rosy in Korea not to mention Iran will likely move back in focus over the next 6-12 months. Love to be as optimistic.
    Apr 4 10:37 AM | 6 Likes Like |Link to Comment
  • The Winter Of Our Discontent [View article]
    Thanks Eric. As well stated as I have read anywhere. With all major economies facing a demographic cliff and unfunded liabilities along with incomprehensible levels of public and private debt, growth is a pipe dream. The most likely consequences are sadly war both militarily and currency. Unless the major economies can come together and somehow do a debt write-downs. However it wouldn't be long before we are in the same place due to government over commitments and no growth. Black Swans seem to be flashing shadows so we may not see much more of this lunacy. What follows though?????
    Mar 2 09:17 PM | 1 Like Like |Link to Comment
  • U.S. Stocks Not In A Bubble; I'll Tell You What Is, Though [View article]
    I believe you have to look at the economic context and market sentiment in your assessment of the market valuation. But first the market is ex[pensive when you look at P/E10. We have made a new high following the extreme high in the 2000 tech bubble. We are 44% above average and 26% above trend when evaluating a regression trend line.(see Doug Short--http://bit.ly/JNT7Io)
    I agree with Doug that the market is expensive. Furthermore lets look at the economic backdrop to consider future earning growth. The major economies of the world are far more indebted and are growing more slowly despite the greatest injection of liquidity in the history. Unfunded liabilities in these countries are even part of the equation in projecting future growth. The demographic trajectory of these countries also needs to be part of future earning expectations.
    The earnings of S&P companies have largely been driven by cost containment, access to cheap capital, and selling to an increasingly indebted global consumer. Stock buybacks are another factor.
    China, Europe, Japan, US, etc have significant structural problems that have not been addressed by monetary stimulus. It has seemly added to the underlying problems of debt and speculation.
    The better question is the global economy a bubble and I would say absolutely, filled with the hot air of debt. It will burst for sure. Before or after the market will burst.

    The junk bond market has correlated well with the market and most consider that a bubble with yields averaging about 5.69%. If rates get away from the central banks of the world what will happen to junk bonds will happen to equities IMHO

    Lastly we are near bubble levels of market sentiment. I know that many comment about the lack of the retail investor in the market and they need to be there for a top but fool me once sham on you, fool me twice, shame on me and most don't want a third.
    Nov 8 11:12 AM | 7 Likes Like |Link to Comment
  • The Stock Market Bubble's Achilles' Heel [View article]
    No doubt you have been correct and richer for it. You have harvested gains but what have you done with them? Are you fully invested? If the market declines 10% will you be stopped out? Will you put cash to work and buy the dip? You are undoubtedly an experienced and successful investor but you make it sound too easy and obvious. Bull markets make investors look smart.
    Do you really believe the Eurozone is pulling out of recession? Have you looked at the fundamentals of France, Spain, Italy, etc. It is a disaster. I guess you think the market will go up until there are no bears left. I wish I could be so optimistic.
    Oct 28 12:12 PM | 1 Like Like |Link to Comment
  • The Stock Market Bubble's Achilles' Heel [View article]
    You can only be wrong so long before you are separated from your money if you truly believe there is no link between accurate market analysis and making money. I suspect the vast majority that have enjoyed this ride will be parted from their money because very few will be smart enough to know this market "breather" is really the beginning of a crash. I hope you are that smart. I am not!
    Oct 27 01:27 PM | 5 Likes Like |Link to Comment
  • The Stock Market Bubble's Achilles' Heel [View article]
    Volume is all high frequency trading. True investors are a drop in the ocean. The real question is what is the state of high frequency trading?
    Oct 27 01:23 PM | 4 Likes Like |Link to Comment
  • The Stock Market Bubble's Achilles' Heel [View article]
    Why will the market be higher in "14? Because we are in a secular bull market? Why are we in a secular bull market? Under your premise, the stock market will never go down again. If it will go down, what will reason be? As far as I can see, you have been simply fortunate to ignore traditional market metrics and basic economics. The global economy is over leveraged to the extreme and has only been sustained by unprecedented money printing. What takes the global economy to true fundamentally driven growth from its current state of drowning in a sea of liquidity? All the developed economies of the world are moribund. Emerging economies are not self sustaining and certainly will not be the drivers of global growth as the developed economies either slowly wither or more likely crash under the weight of their public and private debt.
    Oct 27 01:21 PM | 10 Likes Like |Link to Comment
  • Debt Ceiling And Stocks: Why The Media Is Deceiving You [View article]
    Oops. Sorry, used to billions when it comes to the feds. Keep up the good work.
    Oct 20 01:43 PM | Likes Like |Link to Comment
  • Debt Ceiling And Stocks: Why The Media Is Deceiving You [View article]
    Would disagree that Obama isn't the primary reason for debt. Debt has gone from 9 trillion to 17 trillion under him. He gets the lion share of the blame because:

    1. He fully supported the policies that led to the housing/banking crisis over many republican concerns.
    2.He spent 800 billion plus on useless stimulus programs
    3.His policies and governance have raised uncertainty and diminished economic growth.
    4.Obamacare alone is a major reason for uncertainty and unemployment as companies decrease full time workers.
    5.Obama never embraced recommendations of his own commission to reign in spending and completely rebuffed sincere thoughtful efforts such as Paul Ryan's plan.
    6.He sought to do even greater harm to the economy with his Cap and Trade plan adding to uncertainty.

    Why are deficits still so large 5 years after a recession with little improvement since they will likely be well over a trillion again?
    Oct 19 04:09 PM | 3 Likes Like |Link to Comment
  • Debt Ceiling And Stocks: Why The Media Is Deceiving You [View article]
    Hi James,
    It continues to amaze me that the dominant media continues to act as a propaganda tool of the left. I can understand that they like to gin up issues to increase fear and therefore ratings but what remains at the heart of their bias. It really is hard to believe that folks in the media are so simple-minded as to believe that conservatives are heartless greedy capitalists that will even destroy the environment because of their greed while liberals are tender hearted souls that simply want to help others and make the world fair and clean. Maybe they are that simple-minded.
    I have felt all along that the republicans have placed a potentially wise bet that the public will forget the shutdown because life went on fine but they will remember the republicans fought to the last to defund or at least delay obamacare and attempt to accomplish some fiscal sanity. If all goes poorly with both these issues as economics and obamacare evidence suggests then it will be easy to remember republicans valiant effort and Obama/Reid/Pelosi saying no compromising!. We all know public opinion is fickle but I think it was a good wager. Time will tell.
    You are probably aware that the government has spent up to $600 billion to set up the IT infrastructure for the healthcare exchanges and there are major problems. It cost Apple $150 billion to develop the iphone. I suspect this will not go well.
    Last note, I recently cared for a woman who is disabled and on Medicare for depression. She delivered her 7th child. The latest with her new partner. She appeared intelligent and had grown up with several of the nurses. I see this all the time. Is it her right for society to pay for her children? Is this sound policy for a crumbling republic? Just an illustration of our insanity.
    Oct 19 03:51 PM | 1 Like Like |Link to Comment
  • How Will The No Taper Surprise Affect Stocks? [View article]
    According to another SA author Jake Hunycutt, the SP 500 PE is 19.2 which is significantly higher than the average of a little over 15. If that data is true then the SP is valued higher than average. Maybe it should be because of low fixed income rates but as you say the market expects them to normalize so should it value it that much higher than the average? I would suggest no for reasons that are well known. The massive and potentially exponentially growing global public debt, baby boomers leaving peak earnings and decreasing purchases, no favorable solution to public debt problem, the eventual collapse of the European union because demographically its population is in decline, increasing global wealth disparity potentially increasing unrest here and abroad, and growing global conflict that likely will increase with America's diminished status abroad.
    I am a bit surprised because you were far more bearish on equities a year ago for many of these reasons. Many observers believe that apart from QE1, further easing has not helped the economy but may have hurt it because of capital misallocation. The only way I see equities continuing to significantly increase if the fed continues or increases this misallocation. How long can they do that while recognizing that it provides cover for politicians to avoid the necessary hard choices. Interest on the debt this fiscal year has already hit over 395 billion. What happens when rates normalize? We are headed for IOD over 1 trillion. How will that be paid with current entitlement obligations--e.g. 66 trillion in unfunded medicare liability. This scenario may be only a few years away.
    All stock market valuations do not factor in the debt inflated nature of our economy over the past 30-40 years. Our country has primarily grown by massive expansion of public and private balance sheets. In my view those days are numbered and SP PE ratios will reflect the slow growth environment that will like be with us for the next 20 years. I forget the author, but he demonstrated that baby boomers entering the workforce added about 1% to GDP and their exit will subtract 1%. Tailwinds to head winds. Another author pointed out that we are at the end of the massive growth of the industrial revolution and their has been no significant innovation for 60 years that added to its productivity growth. I believe he said that we don't need another company e.g. facebook that sells advertising as a business model. Some may look at robotics and similar innovation but they just take away low skilled jobs. Maybe biotech but then we will have more medicare recipients. Wish I could be more optimistic!!
    Sep 20 03:29 PM | 5 Likes Like |Link to Comment
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