Seeking Alpha


Send Message
View as an RSS Feed
View jhooper's Comments BY TICKER:
Latest  |  Highest rated
  • Don't End The Fed - Just Ignore It [View article]
    Your the one arguing for the state to control peoples lives ,not me.
    May 3, 2012. 05:53 AM | 1 Like Like |Link to Comment
  • U.S. Economy: The Rhythm Is Gonna Get You [View article]
    Here's the basic idea...
    May 2, 2012. 05:07 PM | Likes Like |Link to Comment
  • More on ADP report: Private service-providing sector gains 123K jobs. Manufacturing employment loses 5K jobs, the first decline since September and not jibing with positive PMI surveys. Construction employment off 5K jobs, the first decline in 7 months; perhaps payback for gains seen during the mild winter.  [View news story]
    "Once again, the supposition that economic activity must be directly tied to employment is proven in error"

    This is true, but what is also true is that employment can be the result of economic activity. So one alternative that is also possible, is that while your portfolio may do well even with high unemployment, given enlightened fiscal and monetary policies that would keep gov price blind interventions out of price sensitive matters, your portfolio would do even better. In that scenario, growing employment would be a sign of growing economic activity, not because the current players are hiring more people, but because there are new players with brand new products that are hiring those people.

    Its like competing with China. I don't want the US to win and thus have China lose. What I want is for both to find economic opportunity, because then those people become sustainable trading partners, the result will be both groups having more and working less (employed but fewer hours needed to work because of improved productivity or self employment). The same is true here. I want those net 6 million jobs back because of growing economic opportunity. I want those people as customers.

    So, though you may be doing well now, and it is always good to recognize opportunities in environment given the data, the alternative isn't just doing worse, but rather how much better you could be doing. Just something to keep in mind.
    May 2, 2012. 04:00 PM | Likes Like |Link to Comment
  • QE3: The Morning After [View article]
    "He's always got some tough arguments"

    You mean like the time I said there was no way in the world that Bewitched was going to fool us by switching Darrens?

    Hang on, Dick Sergeant, Dick York. Sergeant York.

    How 'bout that?
    May 2, 2012. 12:50 PM | Likes Like |Link to Comment
  • QE3: The Morning After [View article]
    "tries to regulate"

    Markets regulate too. They regulate based on what makes people's lives better and what does not. That which does not, goes away. If you have guns, you don't go away until other guns are brought to bear. Inflation and interest rates are all part of the pricing mechanism for the supply and demand of capital. Without gov guns this is discovered through voluntary transactions. People have to judge how much their time is worth compared to someone elses. Then they come to an agreement. A gun makes all the difference, and the Federal Reserve has access to gov guns because its existence is not voluntary. Refuse to have the Federal Reserve regulate your holding company and see what happens. Print your own competing bank notes and see what happens (when the secret service is done with their prostitutes, you will be next).

    You simply have private banking. Money mediums are a product just like anything else. Private markets produce hotel rooms, computers, buildings, satellites, food, and all sorts of other things. Banks issue (produce) notes, and there is a market system that allows for the easy exchange of the notes, the same way markets standardize CDs, DVDs, or anything else. Banks that have good underwriting skills have valuable notes that are very tradeable. Banks that do bad underwriting, fail and go away. Probably banks as we know them would not really exist anymore, but whatever they were they would have come into existence via voluntary transactions, not guns (an engine block in the middle of a mattress).

    What happens when the Fed gets note creation wrong? Do they go away, and get replaced by better note creators? This is why even the so called experts get mad at each other. They don't have a signaling mechanism that is as good as prices based on voluntary transactions to tell them if they are making everyone's life better or not. What they do have is a signaling mechanism from people that are politically connected that shows them when the politically connected lives get better. The danger here is if that is all you are really paying attention to, you never know if their lives are getting better at the expense of someone else (wealth transfer).

    Assuming gov should force the standardization, assumes that people in the gov knows what those standards should be. This assumes that people in gov somehow have better market knowledge than the people in the markets. Really? Think about how much superior market knowledge would be worth. BB would not work for $189k a year if this was the case.

    We have a market for stocks that allows for stocks to be traded. Stocks are just notes. There is no reason we wouldn't have markets for bank notes to be traded that would allow for the exchange of capital (goods and services). Granted we are too corrupted for this to happen now, so odds are what we are going to get is wealth transfer (taxation via the CB). My goal is to figure out how those flows are going to occur, and try and take advantage of them. I will not position myself on the flawed assumption that a CB is a critical part of a growing economy.

    If I did, I would have been sitting in cash all this time waiting for interest rates to go up because the roaring economy would have made the demand for capital outstrip the supply. Instead I load up on bonds during the wealth transfer peaks, and unload them for gains when the wealth transfers wanes So far so good. As long as the wealth transfers don't get crazy (I'm not sure where that is yet), equities should be a good bet. I'm just now trying to figure out where the breaking point will be.

    Fed Res is not the only issue here, but under the current misunderstanding of what drives an economy amongst the so called experts, the CB will be a big part of the continued malaise that we are going to experience.
    May 2, 2012. 12:03 PM | 2 Likes Like |Link to Comment
  • More on ADP report: Private service-providing sector gains 123K jobs. Manufacturing employment loses 5K jobs, the first decline since September and not jibing with positive PMI surveys. Construction employment off 5K jobs, the first decline in 7 months; perhaps payback for gains seen during the mild winter.  [View news story]
    "not jibing with positive PMI surveys"

    Maybe not. They could just be doing more with less people. Nonfarms on Friday could punch 10yr through 1.90.
    May 2, 2012. 11:11 AM | 1 Like Like |Link to Comment
  • QE3: The Morning After [View article]
    Spread a bunch of marbles out on a mattress, and then put an engine block in the middle of the mattress. What will happen to the marbles?

    The problem with gov interferring with its guns, is not that it creates malinvestment, but that it gets everyone to invest in that same malinvestment.

    Its the price blind trying to manage something that requires price sensitivity.
    May 2, 2012. 10:25 AM | 2 Likes Like |Link to Comment
  • Stocks pop higher following the strong ISM print. S&P 500 +0.5%, Nasdaq +0.5%. The 10-year note climbs 3 bps to 1.93%.  [View news story]
    ADP just came out at 119K vs. 170K expected.

    Friday could be interesting. 10yr back down towards resistance at 1.91.
    May 2, 2012. 08:44 AM | Likes Like |Link to Comment
  • QE3: The Morning After [View article]
    "Artificially increase stock prices, particularly in the financial sector"

    The trick will be where is the breaking point for this? With high unemployment (a result of price blind fiscal and monetary policies), pressure on wages is muted, and with really low interest rates (a subsidy from monetary policy) making debt cheaper than equity, at some point the benefit of these starts to peter out. Sort of like the banks. Could they get so much accomodation from the Fed, that they actually start charging people to make deposits? Would material shifts in the financing structure of companies begin to be mostly debt and very little equity? What happens when sales are flat, and earnings stay flat? Will the companies actually begin to push wages down as they learn about the advantage they have with high unemployment as a way to make the multiples make sense?

    Maybe BB is afraid to target gdp because he is thinking about this too? This is why the QEs have been relatively small compared to what they could be (think a 10 trillion QE). So if there is more QE, it could be that it is small too, say 700 billion. So in that case, maybe we are looking at S&P 1600, 10yr at 2.75, and gold at 2000/oz.
    May 2, 2012. 08:28 AM | 3 Likes Like |Link to Comment
  • Don't End The Fed - Just Ignore It [View article]
    To make healthcare a right would also require the right to make your neighbor a slave. Rights coexist. Rights do not create obligations on others. You need to leave the darkness of tyranny, and embrace the principles of enlightenment.
    May 2, 2012. 05:46 AM | Likes Like |Link to Comment
  • U.S. Economy: The Rhythm Is Gonna Get You [View article]
    I'm hoping to find a way to store my labor by freezing myself. Like in the movie Idiocracy. If you haven't seen, you have to. I'm sure the writers intended a different message, but they stumbled into some profound truth anyways.
    May 1, 2012. 05:57 PM | 4 Likes Like |Link to Comment
  • John Hussman: Release The Kraken [View article]
    I would like to see something like an "iCar". A screen in my car, that like my Apple TV box, would mirror what's on my phone the minute I get in with some modifications for safety when the car is in motion. But otherwise my nav stuff, contacts, Siri, etc is all the same, and no longer will I be stuck with just the offerings from the manufacturer and a web of wires from aftermarket devices.
    May 1, 2012. 05:55 PM | 2 Likes Like |Link to Comment
  • U.S. Economy: The Rhythm Is Gonna Get You [View article]
    What's interesting is that capital is just stored labor. In fact the goal of labor is to store itself. Its a buffer against nonsurvival. In other words, if you are living day to day on that day's labor, all it takes is for one thing to go wrong, and that's the end. The idea that labor should compete with capital is the wrong approach. Lots of capital means lots of capital creation and thus a high standard of living, because then consumption can increase with fear of threats to survival.

    Rules should be written to favor capital creation, which would be rules that favored labor, because labor wants to store itself. If we confuse labor with just consumption, and favor consumption over capital creation, then people without capital are vulnerable and thus more likely to be dependent.

    A while back N Korea reset their currency because the black markets were allowing people to accumulate savings. Savings leads to self-reliance. If your power structure depends on people being vulnerable you don't want them to have savings and thus self-reliance. So what do you do? You reset the currency. Its like one day massive inflation that totally wipes out your savings because the notes you now have are basically worthless.

    The sign of tyranny are policies that favor consumption over capital. Aggregate demand, a consumer based economy, social security, income taxes vs consumption taxes, estate taxes. Think about how much the US system is based on favoring consumption and discouraging capital. You get people dependent by getting them living day to day (labor) vs storing their labor (capital), and you have them at your mercy. Presto a peasant class that will now labor in a perpetually vulnerable state to support the ruling class.
    May 1, 2012. 03:32 PM | 3 Likes Like |Link to Comment
  • The Probability Of QE3 Is Increasing Again [View article]
    Interesting. This is just anecdotal, but I am hearing more and more bond portfolio managers tell me that they are moving out the maturities of what they buy. So instead of a 7 yr bullet, they buy a 10yr bullet, and get maybe 2.50. They figure 2 of those years will be shaved off by ZIRP, and if they are funding this with 30bps money, their worry would be when they think their funding costs would equal their yield. If they figure it would take another 5 to 7 years for that to happen, add that to the 2 years from ZIRP, then you would probably win on 90% of that scenario. Granted its not an exciting spread, but it is better than sitting in 25 bps money funded with 30bps money.

    They figure the risk is offset by the fact that the income means more now than latter, and what it winds up doing is providing more and more buyers for longer dated instruments, and when you have more buyers, you don't need as much yield to attract any more. People who then might have bought those longer dated vehicles shy away because the yields are going down, but they still need yield, so they look to equities.
    May 1, 2012. 02:19 PM | Likes Like |Link to Comment
  • The Fed Will Come To The Rescue But Deliberately Late [View article]
    OK. I see what you are saying. Thanks for responding.

    Overall, I see a CB as a subsidy. In theory it could replace private money medium creation, but in order to do that it has to have a pricing mechanism that creates the allows it to do that. When I read Flow's comments, I see that as an expression of the difficulty that is encountered when you try to replace natural pricing mechanisms with synthetic ones. Endless debate ensues, because the CB has come about by force of law rather than as a price discovery process.

    This is why you see BB pleading with those that set fiscal policy to do this and that. Its akin to having a treasury/finance department for a company issuing stock and debt without any responsibility to the board or shareholders. The note creation is separated from the capital creation.

    So I don't see the Fed so much controlling interest rates, but rather affecting the intersection of supply and demand for capital via the supply and demand for the "risk free" standard setter - treasuries. The only real way to affect interest rates would be to supply more capital, which of course a CB can't do because the only thing that affects the supply of capital is knowledge about production. The creation of money mediums doesn't come at 0 cost because the Fed isn't creating new wealth, it is only working with the wealth that currently exists in the environment.

    This is how the equity prices are being affected. One alternative to equities would be interest bearing treas notes, but since the Fed is taking those up and giving noninterest bearing notes in exchange via the banks, the result is more bidders for equities which bids up the price. As long as fiscal policy doesn't regulate earnings down, even at higher multiples the price can be supported.

    This is why I say, that OT is about inducing risk. The Fed may see it as controlling rates, but since the can't supply new capital to really affect that, all they can do is punish or reward demand for certain asset classes.

    This I think damages the overall economy because it damages price discovery for advances in production knowledge. So, ultimately I see it as a consumption subsidy, just like fiscal "stimulus" (I like to replace the word stimulus with wealth transfer), since price discovery has been altered via force, overconsumption of something (equities, real estate, etc) will occur, and the only nature deals with overconsumption that doesn't create more productivity is with austerity (reduced consumption).

    So, generally I think equities up and yields up during the period of wealth transfer because it looks just like wealth creation from the consumption side, but I know a period of retrenchment is probably coming. So if I can buy $20 million of bullets when the 10 yr gets between 2.35 and 2.40 (like in March), then I can sell them for a gain, when it goes back to 1.90 (like now) when recessionaryish pressures take hold again, and people go back to safety.

    Thanks for your response. You are about the only one on hear on the other side of this thing that is really willing to discuss differences. Its very useful.
    May 1, 2012. 02:06 PM | 1 Like Like |Link to Comment