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  • Quick Chat 288  [View instapost]
    Oh boy.

    Feb 12, 2016. 10:24 AM | 2 Likes Like |Link to Comment
  • (98)-Best Ways To Invest -- What's Your Opinion? A Place To Share Ideas! #98  [View instapost]
    "But if they focus on inflation, which is rising, they will hike. Honestly, they face a Hobson's choice where they don't have a good answer - rising inflation and falling growth."

    Feb 12, 2016. 10:22 AM | Likes Like |Link to Comment
  • (98)-Best Ways To Invest -- What's Your Opinion? A Place To Share Ideas! #98  [View instapost]
    "headwinds that have been a drag on earnings abating---- it will rally , "

    The threat here is positive news gives the Fed reason to hike. If the Fed hikes, then its more risk-off, and the S&P will fall and the yield curve will flatten further.

    "iF the headwinds stay entrenched , earnings stagnate and the market will discount stock prices to match. "

    The threat here then is that we just stay lower for longer, or watch the slow grind down as antibusiness fiscal policies erode economic opportunities. The positive will be the chances of a rate hike are reduced.
    Feb 12, 2016. 10:11 AM | 1 Like Like |Link to Comment
  • Quick Chat 288  [View instapost]
    Interesting. I guess the real performers in this environment will be those that can pick the best income providers. One thing to watch out for will the those that are currently providing outstanding income, but income that was enhanced by CB action. In other words, they look good now, but could be real dogs later.

    Mises noted that CB expansion tends to show up in capital assets, like real estate or commodities. Then when the expansion is over, its those asset classes that get hit hardest. The entities that tend to be least phased are those that provide readily consumable items, like clothes, food, entertainment, etc.
    Feb 12, 2016. 09:59 AM | 3 Likes Like |Link to Comment
  • Quick Chat 288  [View instapost]
    Well, it looks like Yellen has been right all along. Retail sales are up, and prior month was revised up as well. Looks like rate hikes are in the go, no go for launch stage. This should be good for a rally today. Of course, if it really did guarantee rate hikes, that would mean April would portend 1600 to 1700 for the S&P and 1.50 to 1.60 for the 10 yr.


    The problem is you would want to go to cash now and then buy back at the bottom, but in this environment (with Fed ready to keep doing rate hikes), that could be still yet to come, and we could stay low for a long, long time. So, in theory, you could sit in cash for years in a long U waiting for the right side of the U to form.

    So, what are the Huron to do? I guess you look for things that provide income, instead of price appreciation, and just suck up the valuation erosion and just be satisfied with your income.
    Feb 12, 2016. 08:51 AM | 3 Likes Like |Link to Comment
  • Weighing The Week Ahead: Time To Buy The Dip?  [View article]
    I saw 1.53 on the 10 yr yesterday.
    Feb 12, 2016. 07:33 AM | Likes Like |Link to Comment
  • Quick Chat 288  [View instapost]
    Retail sales tomorrow. Should be interesting.
    Feb 11, 2016. 04:46 PM | 4 Likes Like |Link to Comment
  • The Banking System Must Lead Economy And Stocks Higher, Here's Why It's Not Happening  [View article]
    QBP is here if anyone is interested.

    Feb 11, 2016. 04:43 PM | Likes Like |Link to Comment
  • Quick Chat 288  [View instapost]
    Its pretty simple. A CB is a consumption subsidy, just like welfare. Whereas welfare is a consumption subsidy that shows up in earnings, and thus produces a risk-on (like if everyone's welfare were doubled - they would spend it) via higher earnings for stocks and thus higher PVs. CBs provide a consumption subsidy for financial assets. So, instead of higher earnings creating higher stock prices, CBs provide the purchasers of stock subsidies to just buy the stocks outright, and thus higher stock prices.

    When the consumption subsidies end, risk-off returns, the flight to safety ensues, and thus lower equities and lower rates. First it was Taper and then the rate hike. It causes a chain reaction. The Fed gobbles up assets from banks, banks lower the deposit rates and increase fees. The result is the deposits the banks would have attracted, seek return (such as equities), that pushes up equities, people leave bonds, and thus LT rates go up, and presto, an upwardly sloped yield curve.

    Of course there are lots of other factors. Fiscal policy also plays a role, hence my example of welfare above. So, now our situation is compounded by all the new taxes and regulations from 2009 forward. I didn't factor those in as much as I should have (ISM and durable goods should have been a clue). So I have been a bit too optimistic, but the basic theory has held.

    Increased taxes and regulations are offsets to consumption subsidies like welfare. Less accommodation via a CB is a reversal of consumption subsidies. The result is two major risk-off factors at work, and here we are. I expected 1700 to 1800 and 1.70 on the 10 yr after the next rate hike, but the underlying economy has been so weakened by the antibusiness environment, that small rate hikes are having amplified affects. This is why future rate hikes are such a worry now.
    Feb 11, 2016. 12:53 PM | 4 Likes Like |Link to Comment
  • Quick Chat 288  [View instapost]
    This has always been the problem with gov regulators. The regulate by statute as opposed to price. That's why they can seem so impossibly stupid at times. Its not that the people are just morons, but they are normal human beings responding to their incentive structure.

    This has always been the problem with central banks. In theory, if they knew the exact demand for money, they would never cause any booms or busts. However, there is no freakin' way they can ever know the exact demand for money, no matter how many economists or charts they use. They would have to have information on every transaction that is happening, and then, the feelings of every person that would use the CB notes with regards to what transactions they are thinking about.

    As such, to get the right amount of money right for a CB would probably be just pure luck. In general, they are always going to get it wrong, and thus generate some sort of boom and bust cycle (fiscal policy can and does do this too).

    So, by accepting reality, we can then incorporate that into our analysis, and then find some ways to protect ourselves. In 2013 when all the Taper talk started and we were told that rates were going to go up, I started buying bonds instead of selling bonds, because it was logical the Fed was making another mistake, and the result would be risk off.

    I have to admit I was sweating at the end of 2013 when I had unrealized losses in all those bonds, but now I am saying, "whew". I don't have to sweat what to do now, because I positioned myself back in 2013. (By the way I deal exclusively in bonds).

    The problem will be in 7 to 10 yrs when those bullets start coming do, and we still haven't learned our lesson by then. What to do with the cash then.

    Remember 2013? SA was full of articles like these.


    My comment from the article.

    "When QE stops, equities will fall and so will interest rates. "
    Feb 11, 2016. 10:08 AM | 3 Likes Like |Link to Comment
  • Quick Chat 288  [View instapost]
    "Filings for unemployment benefits in the U.S. declined to a seven-week low "

    Looks like everything is AOK. We should expect another rate hike in March. Actually, to be serious, Fed could indeed do this as they think wage pressure will lead to inflation, thus they better act now or it will be too late down the road.

    Feb 11, 2016. 09:43 AM | 4 Likes Like |Link to Comment
  • (97)-Best Ways To Invest -- What's Your Opinion? A Place To Share Ideas! #97  [View instapost]

    However, what I saw above was just on the Bloomberg front page. I had some other things to do this morning, so it was just a quick glance.

    What do you use?
    Feb 11, 2016. 09:04 AM | Likes Like |Link to Comment
  • Quick Chat 288  [View instapost]
    I think I just saw the 10 yr at 1.54. The lowest yield we have seen in the last 10 yrs was 1.49 back in June of 2012.
    Feb 11, 2016. 08:51 AM | 3 Likes Like |Link to Comment
  • (97)-Best Ways To Invest -- What's Your Opinion? A Place To Share Ideas! #97  [View instapost]
    Whoa. Am I seeing this right. 1.54 on the 10yr. The lowest yield on the 10 yr in the last 10 yrs was 1.49 in June 2012.
    Feb 11, 2016. 08:35 AM | Likes Like |Link to Comment
  • Nikkei slumps, JGB 10-year yields turn negative  [View news story]
    "why does an over indebted country have such a strong currency + low yields. "

    Uchi-soto. The Japanese will go to the mattresses for Japan.
    Feb 11, 2016. 06:49 AM | 2 Likes Like |Link to Comment