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  • Car Sales Shift Into High Gear, 4-Year High In February [View article]
    Is there data for sales at the dealers then?
    Mar 2 12:32 PM | 1 Like Like |Link to Comment
  • Time To Think Twice About Purchasing Long-Term Bonds? [View article]
    Do you see option 1 or 2 as very likely in the next few years?
    Mar 2 12:14 PM | Likes Like |Link to Comment
  • Spain's Fiscal Deficit Deepens: Attempt To Close Gap Through Austerity Would Cause Economic Collapse [View article]
    "The whole modern monetary system is backed, not by nothing, but by debt."

    And debt is a claim on labor, thus the system is ultimately backed by the value of the labor of the respective populaces. At the end of the day, its never been about aggregate demand and consumption but about aggregate supply and productivity. You can't eat won't you don't grow, no matter how many pieces of paper or electronic bits you create. The cost to produce must be lower than the benefits that will be derived from that production, or their is no sense for the production to occur. So if a gov is attempting to get people to consume at the same time it is driving up the costs of production with regulations that are blind to pricing, eventually, no matter how much you print, will be austerity. Nature causes this, not policy prescriptions. Unless they can increase their income by finding some way to lower the production costs, and thus become more competitive, they will have to cut back on their consumption. These are natures rules, not mine.
    Mar 2 11:43 AM | 3 Likes Like |Link to Comment
  • Time To Think Twice About Purchasing Long-Term Bonds? [View article]
    There are two reasons overall interest rates rise, neither of which seems likely in the near future.

    1. A vibrant growing economy, wherein the demand for capital outstrips the supply due to a preponderance of profitable economic opportunities. Does anyone see this right now?

    2. Credit Risk - wherein people perceive the threat to their capital. Credit risk is also relative. The US might be part of a sinking ship, but the US is probably the highest deck of that sinking ship. Until there is a larger economy with a freer market than the US, the choices faced by large holders of capital are going to be limited, and mostly limited to the US.

    So, low rates may be around for 3 to 5 more years if this environment continues. As such, you could sit in cash with 10 bps, or you could get a 1 yr callable say at 300 bps, and if rates are the same or lower in 12 mos, again in theory, the bond gets called you made an additional 290 bps over the year period. Again, though, this is the risk everyone is weighing, and actually part of the plan BB has instituted of pushing everyone into riskier assets. Those that can play this game, will have wealth transferred their way.
    Mar 2 09:42 AM | Likes Like |Link to Comment
  • ECRI Reaffirms Recession Call [View article]
    1929: speculation.
    rampant speculation.

    Yes, but why? With low rates for financing purchases (easy money) in the early 20s the Fed did what it always does. It subsidized the purchase of risk assets, because the Fed confuses high equity prices with a health economy. Thus, when it pulled its subsidies in the late 20s, the buyers become sellers and the prices crashed.

    This same thing happend with silver not long ago. When silver was getting close to $50/oz, the margin rules were changed, and suddenly there were less buyers for silver. When margins were easy, there were lots of buyers and the price was high. When margins were made harder the buyers disappeared, and the price dropped. The Fed does the same thing. It uses gov force subsidize the purchase of risk or nonrisk assets. The trick going forward is to learn to let go of ideology, accept reality, recognize the patterns, and try and protect yourself.
    Mar 2 09:14 AM | 1 Like Like |Link to Comment
  • LTRO: Savior Or Distraction? [View article]
    "Central Banks operate "outside" Sovereign control. Checks & balances"

    Only if they have been written into a constitution by the people as a separate branch. When a legislative body sets them up, especially when a constitution doesn't give the legislative body that power, the "outside" part is really a fraud. The legislature created the CB, and the legislature can end the CB. If your very life depends on those you are supposed to be separate from, then you are not separate and there is no check and balance. Thus CB policy decisions are made with this possibility in mind, thus influencing the decisions.
    Mar 2 08:34 AM | 4 Likes Like |Link to Comment
  • Time To Think Twice About Purchasing Long-Term Bonds? [View article]
    With the amount of debt the US gov is pumping out, do you think they can really afford to stop buying treas?
    Mar 1 09:03 PM | 1 Like Like |Link to Comment
  • Storm Clouds Building On The Stock Market Horizon [View article]
    The job of the central bank is to subsidize the purchase of equities or rather riskier assets. Whatever you subsidize you get more of, thus we get more purchases of equities and were supposed to expect equities to go down and stay down? As long as any nation has wealth, a CB can create more purchases of equities, thus keeping the prices up. Good news for equities will be good news, and bad news for equities will be good news.
    Mar 1 06:10 PM | Likes Like |Link to Comment
  • Time To Think Twice About Purchasing Long-Term Bonds? [View article]
    BB's push for risk on is apparently not just in equities but in pricing volatility from longer maturities as well.
    Mar 1 03:47 PM | Likes Like |Link to Comment
  • Will Money Printing Produce Growth And Inflation? [View article]
    "A bank can certainly pledge collateral at the discount window"

    If they are allowed to. If they are cutoff, then the bank needs to find depositors to fund itself, which is why the ECB is making it easier to pledge. It eases deposit pricing by making the taxpayers subsidize the bank, since the bank doesn't need to pay higher deposit rates.

    Of course, even if they have access to the discount window, the regulators may place a limit on how much of their funding mix can be advances. For example, the pledge $100 million and take an advance of $100 million. Then $50 million runs off in deposits. Now $50 million in assets is being funded by the $100 million advance. The regulators would want that $50 million replaced by more "local" deposits - funding from branches. So the bank would have to go out and attract more deposits. If the regulators didn't care about this, then in fact a bank could create its own deposits. The could just go the Fed for everything they needed.
    Mar 1 02:42 PM | Likes Like |Link to Comment
  • Will Money Printing Produce Growth And Inflation? [View article]

    I was thinking funding mix. Sure a bank doesn't have to have $1 million laying around to make a loan, but if its borrowings or advances grow to large (regulators might look at it as some % of total funding), they start to apply pressure. They would want overnights or advances (Fed, FHLB, etc) to be replaced by DDAs, MM, or CDs. Thus, a bank still has to pay attention to funding. So, in a way they do need to have deposits sitting in the vault ready to lend or at least be ready to get the funding from depositors. This also assumes banks that can still pledge for advances or that they still have overnights available to them. If they could all pledge at the Fed, and the advances could be a large part of their funding mix and could be long term advances, then they could literally create their own deposits, the same way a theoretical, fully private bank could.

    A fully private bank of course wouldn't be constrained either. That is, they wouldn't need deposits of notes, just pledged collateral. They could just issue their own notes based on pledged collateral, and the only limit would be collateral that is pledged and their underwriting standards.
    Mar 1 12:18 PM | Likes Like |Link to Comment
  • Will Money Printing Produce Growth And Inflation? [View article]
    "since any bank can create a loan deposit from thin air"

    It doesn't seem the regulators understand this. Banks are capital constrained and funding constrained. Liquidity ratios and sources of liquidity are extremely important to regulators, thus they don't want reliance on sources of funding too far outside of "local deposits".
    Mar 1 11:23 AM | Likes Like |Link to Comment
  • Is Housing Ready To Lead The U.S. Economic Recovery? [View article]
    "which will likely be around 20% lower than today"

    20%. Interesting. This is only anectdotal, but of the $15 million or so in deals that I have seen, it took an additional 15% to 20% price reduction from the holders estimated "fair value" to move the property. I have also seen other estimates in other analysis that suggests this same 20% number as a possible further fall in real estate.
    Mar 1 09:25 AM | Likes Like |Link to Comment
  • Why Home Prices Have Much Further To Fall [View article]
    The job of a central bank is to tax wealth from the general populace and transfer that wealth to financial markets. That transfer can continue as long as the rate of transfer does not too greatly exceed the amount of wealth creation currently in the populace or too greatly damage the accumulated capital of the populace. Where that limit lies does not seem to be something anyone studies. But pierce that limit, where ever it is, and you will know you did, because the populace will get violent.

    Perhaps a secret lies in interest expense on accumulated sovereign debt? The saving grace for a CB engaged in this time buying action, is for some new technological or natural resource discovery to be made that brings some new productivity to the populace that accelerates wealth creation and brings sustainable value to financial markets. Then the CB can back off the forced purchase of financial instruments as natural buyers will replace the gov forced buyers.

    The US and even Europe have large amounts of capital and capital creation abilities, so for the near future, what is typically good news for equities will be good news for equities, and what is typically bad news for equities will be good news for equities, because the bad news will ramp up the taxing mechanisms of central banks to create forced buyers of assets that probably would not have had those buyers otherwise.
    Feb 29 05:30 PM | 1 Like Like |Link to Comment
  • ECRI Reaffirms Recession Call [View article]
    "which same mistakes did hoover & FDR make?"

    The both intervened with gov force to drive up the costs of production. FDR did so with the TVA and social security and Hoover did so with tariffs and the Hoover Dam. Don't forget, Hoover was Woodrow Wilson's Food Administrator during the WWI. Hoover is Bush, and Obama is FDR. They all intervened with gov force and refused to let supply and demand settle to its new equilibrium. The solution would have been for all of them to back off with gov (no taxes, relaxation of trade barriers, etc), thereby allowing production costs to drop to offset the losses from the asset bubble in equities created by the Fed in the early 1920s, which the Fed then burst with rising rates in the late 20s.
    Feb 29 10:30 AM | 1 Like Like |Link to Comment