Seeking Alpha


Send Message
View as an RSS Feed
View jhooper's Comments BY TICKER:

Latest  |  Highest rated
  • Median Inflation Vs. Mediocre Growth [View article]
    "we are overdue for a recession "

    The main culprit for this is typically the Fed Res. They often cause this by a long series of DR increases. However, a combination of factors can also duplicate what the Fed can do all by itself. Thus, increasing taxes and regulations (which are disguised taxes) dramatically, and raising the DR slightly can also bring on a recession.

    So, here we are looking at increases in taxes and regulations via Ocare and Dodd Frank, combined with the FR talking about raising the DR. Since Ocare and DF will take some more time to ramp up, along with their risk-off effects, I will watch very carefully Fed actions with regards to raising the DR. They will be most likely the actor to deflate asset prices (like they did by raising the DR from 2004 to 2007 - when the S&P started to fall apart).
    Nov 9, 2015. 10:12 AM | 1 Like Like |Link to Comment
  • Median Inflation Vs. Mediocre Growth [View article]
    "and other economists assumed that meant that it was related to overall inflation."

    Any idea of when this association first started?
    Nov 9, 2015. 10:05 AM | Likes Like |Link to Comment
  • Weighing The Week Ahead: What Do Higher U.S. Interest Rates Mean For Financial Markets? [View article]
    "such that collateral may be insufficient to support the loan value."

    That's really important. When the Fed raises the DR, it is basically removing accommodation, or in other words, printing less money. That will reduce the ratio of notes to assets, thus lowering the price of assets. This is how the collateral value is reduced.
    Nov 9, 2015. 08:46 AM | 2 Likes Like |Link to Comment
  • Weighing The Week Ahead: What Do Higher U.S. Interest Rates Mean For Financial Markets? [View article]
    You need a pragmatic understanding of taxation, rather than a rhetorical one to understand the impact of the subsidy mix from gov on the economy. If a political party raises taxes on people that don't vote for them, and then gives that money to the people that do, in order for the second group to buy overpriced insurance via gov mandates on coverage, then the taxation is explicit. If the same result occurs because the transfer happens via the insurance industry, the taxation is implicit.

    Either way, the affect will be the same. Its a barrier to greater productivity. Lower productivity does not signal greater equity prices and thus higher interest rates.

    Remember, you need to leave your ideologies at the door for investing, and examine what will happen based on the cold hard facts of reality.

    Higher regulations are higher taxes, and higher taxes are risk-off. Its just that simple. The rhetorical details are irrelevant.

    We've got room to run to about 2.50 or 2.60 on the 10 yr and 2100 to 2150 (or so) on the S&P into 2016. Now, again, barring any changes in the subsidy mix between then and now, the know risk-off bias factors are still there to keep us in a low rate environment for a long time.
    Nov 8, 2015. 08:20 PM | 7 Likes Like |Link to Comment
  • What Can Yellen Really Do? [View article]
    Regulators can be loathed and pitied at the same time. They are the product of political cowardice. The politician always wants to create the "Nothing Ever Goes Wrong" regulatory agency. These regulators must write the rules to make sure nothing ever goes wrong. Of course they can't do this, so when something does go wrong, they can be blamed by the politician who says, "you can't blame me, I told them to make sure nothing goes wrong". Then the regulators blame those whom they were regulating saying, "they just didn't listen to us", and Adam blamed Eve, and Eve blamed the serpent, and so on, and so on.
    Nov 8, 2015. 11:10 AM | 3 Likes Like |Link to Comment
  • Weighing The Week Ahead: What Do Higher U.S. Interest Rates Mean For Financial Markets? [View article]
    "•The employment report dramatically changed interest rate expectations. "

    Only for the uninformed, or rather, those informed with misinformation.

    2.50 (ish) on the 10 yr makes sense through mid 2016, but we have increased taxes via Ocare (higher premiums), ECB is planning on ending QE in Sept of 2016, and the Fed is threatening to raise the DR. These are all risk-off factors, thus there are still plenty of indicators for low rates for a long time.
    Nov 8, 2015. 09:44 AM | Likes Like |Link to Comment
  • Going Nuts In Sweden [View article]
    Also, to be fair Sweden used to be a lot worse. They still have a long ways to go to enlightenment, but they used to be far darker.

    Even now, they still show their scars.

    Which is odd, in that they seem to compound their problem.
    Nov 6, 2015. 11:14 AM | 1 Like Like |Link to Comment
  • Going Nuts In Sweden [View article]
    It should also be noted, that had the so-called, yet again defined and redefined Keynesian plan been followed, the result would have been about the same.

    What we are really talking about here, is the only thing that a gov can do with respect to trying to stimulate an economy. All it can do is use its guns to induce a consumption binge. A consumption binge creates a temporary risk-on spike, that is followed by a risk-off correction. Another way to look at it, is as a wealth transfer from the general populace to the ruling elite.

    People get diluted notes to purchase goods. Those goods register as earnings. Earnings prop up equities. People leave bonds to chase equities, and thus, equities up and rates up (just like what we see during QE). This inflates the wealth of the capital markets, which gives them the ability to buy political influence, and then when the bust comes, they use that political influence to have the CB tax the general populace with more note dilution to reinflate their financial assets.

    So you see, either way, the end result is protectionism for the ruling elites that have their interests in the financial markets. This is why, the safest place to be is in the financial markets, and particularly equities. They may drop, but odds are the CB will reinflate them.
    Nov 6, 2015. 10:45 AM | 5 Likes Like |Link to Comment
  • Median Inflation Vs. Mediocre Growth [View article]
    And then there's this.

    This sure seems to add fuel to the Fed's fire of wanting to raise rates.

    Still, though, 25 bps is not much. As has been noted. They may raise rates 25 or 50 bps in the next 6 mos, and then start QE again.
    Nov 6, 2015. 10:09 AM | 1 Like Like |Link to Comment
  • Median Inflation Vs. Mediocre Growth [View article]
    "Therefore, I currently do not expect the Fed to tighten in December."

    "Bottom line: The overriding message from today’s employment report is the soft patch is over and the rate hike is on. After all, the only reason the Fed did not raise rates in September is a laundry list of stuff—overseas economic weakness, oil patch weakness, strong dollar, market volatility—that might weigh on the US economy. A strong October payroll number goes a long way toward undermining that concern. We have to conclude a rate hike is coming December 16 unless remaining data releases undermine the message from today’s employment report." Chris Low - FTN

    I can't help feeling that Yellen wants to hike rates. Its almost as if its a signal that the economy is finally recovering, and a rate hike is evidence that all they have done via "stimulus" is finally growing the economy.
    Nov 6, 2015. 09:59 AM | 2 Likes Like |Link to Comment
  • Going Nuts In Sweden [View article]
    You would also see the "well that's not really what so & so would have advocated" arguments between Eugen Böhm von Bawerk and Marx. Eugen would point out why Marx's ideas wouldn't work, and there was always someone who would say, "well that's not what Marx meant". You see the same with Keynes (as the above points out). What Keynes was really advocating was just another excuse for gov protectionism. Granted, he had a novel repackaging approach to sell it (including to the people aka the middle classes that it would hurt the most), but it was still an excuse for the gov to have power over people. Keynes was just hoping to achieve what Niccolò di Bernardo dei Machiavelli couldn't and become rich via gov rewards for making, yet again, another argument for why the prince should have absolute power.

    Its also reasonable to conclude that Keynes was not the friend of the downtrodden as we are led to believe.
    Nov 5, 2015. 01:56 PM | 4 Likes Like |Link to Comment
  • Will They, Could They, Should They? [View article]
    "It's cheaper to borrow in the Fed Funds market "

    I will also add, that sometimes other banks won't lend to other banks, so sometimes they have to go to the Fed.

    Another subsidy option is the FHLB, though they don't print the money.
    Oct 7, 2015. 04:34 PM | Likes Like |Link to Comment
  • Will They, Could They, Should They? [View article]
    "As far as I know, no one is borrowing directly from the Fed at the Discount Rate. "

    The Fed has an assortment of facilities. The less they charge for them, the more incentive there is to borrow. I also use the DR as a proxy for Fed accommodation.
    Oct 7, 2015. 09:51 AM | Likes Like |Link to Comment
  • Will They, Could They, Should They? [View article]
    "we already have about the highest inflation we have had since the crisis"

    Fair enough, but I was thinking more in terms of 5% + inflation. Until China, Russia, South America, Europe, or the Middle East turn full on free market (how likely is that?), then there won't be a whole lot of alternatives to the US. As such, demand for dollar denominated assets will remain high. Granted, the demand can weaken a bit from time to time, but the general trend will remain the same for a long time, that is of course, until there is a major policy shift somewhere.

    "Economists tend to believe that growth is trend-stationary;"

    Which is my overall point. We haven't had any major policy shifts back towards free markets. Instead, gov contractionary policies only get more entrenched as each year passes. So, indeed, there is no reason to expect more loan growth, which is why I say, if the Fed instituted negative rates, the money won't flow out into new businesses and new jobs. We have basically outlawed them, like France. The middle tier banks might lower the costs of borrowing for their existing clients, but those clients aren't likely to expand and go on a hiring binge, not with increasing minimum wage laws, Ocare, and the like (really, all gov regs are some form of wage law, if you think about it).

    The banks would be more likely to chase sovereign debt, and thus lower yields.

    "So I never expected loan growth to go to +30%. It has never done that after recessions in the past so no reason to expect that this time."

    Again, because the policy shifts are always towards more contractionary gov policies, not expansionary ones, which is why $1 million is the normal, but the goal should be to break the normal if you want true recovery (recovery not just back to what was, but what was also lost). That's the true measure of exceptional management (like Steve jobs coming back to Apple - the old normal was exploded, and a new, more productive paradigm took over).

    We can apply the same analysis to a country that we can apply to a company. After all, they are both corporate associations, and the laws of nature with regards to productivity are the same for both.

    I don't mean to disparage IT's analysis, he is one of the best around. I am simply relating why I don't see rates, or the economy in general taking off anytime soon, at least, not in the way that would cause the 10 yr to jump back to 5%.

    Instead what we will get, because we haven't totally killed the free market elements of our economy, is just what IT pointed out, a slow return to the norm, but yet with more fits and spits, since we have taken yet another step towards Europe after another Fed engineered stock market crash followed by another gov knee jerk reaction to tax and regulate more in the wake of the disaster it created. This same thing happened in 29 and wasn't really relieved until 1946 when gov spending dropped dramatically. So the same will be true for the present. Until there is a major policy shift, like 1946, there is no reason to expect lending or any economic activity to grow by 30%, and hence low rates and lowish inflation for many years to come.
    Oct 7, 2015. 08:57 AM | 2 Likes Like |Link to Comment
  • Will They, Could They, Should They? [View article]
    "I see this as lending for established businesses, but not for new ones coming online."

    Here is another reason I think the current loan growth is too weak to suggest any more lending would take place if the IOER were eliminated.

    Take a look at these charts. It really speaks to why community banks aren't and won't contribute to a robust recovery.

    We are turning into France and Europe.
    Oct 6, 2015. 05:47 PM | 1 Like Like |Link to Comment