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  • Interesting Times For All Commodities And Investments !! Chapter 120 [View instapost]
    Several strong opinionators on SA with China connections go out of their way to boast "they" don't need the USD. Not that I agree with the view, but the corollary if true which its not is that we don't need their help either which we surely don't. Bottom line assessment : No worry. Forget the Alamo, remember Alfred E. Neuman. Your truly, EA
    May 29, 2015. 11:53 AM | 2 Likes Like |Link to Comment
  • Interesting Times For All Commodities And Investments !! Chapter 120 [View instapost]
    I don't claim to understand it all, only that the wheels turn very slowly and the generally recognized tendency to try everything that doesn't work before figuring out what actually does. I think maybe that's what OAG refers to as Conservatism, but I'm not sure about that part, lol.

    But to the point about rates, here is an anecdotal report that illustrates the fact that macro policy does not generally scale when you get toward the low end due to fixed overhead, especially when you try and run even social services through profit centers.

    Human nature tells us we need to collect used clothes and furniture for the needy and volunteer at the soup kitchen but at the risk of being labeled anti-conservative the reality is they can get newer better stuff for the same price at Old Navy and eat better at Del Taco or Waffle House if only we knew how to get more Benjamin's into their blue jeans.

    Good luck trying to raise investment capital for less that $10M, the big dealers don't want to talk to you if its less than $30M. Cant say I blame them, there are more $300B deals now that there were $300M deals 30 years ago..
    May 22, 2015. 12:45 AM | 3 Likes Like |Link to Comment
  • Interesting Times For All Commodities And Investments !! Chapter 120 [View instapost]

    While what you stated makes perfect sense, I am sorry to disappoint you but based on the latest experimental test results there is a low probability that you are in fact clairvoyant as that was not what I meant at all even if you are right in your observation.

    I am glad though as it seems to me you have arrived at an understanding that the market rate is exactly what the market will bear which is an opinion I agree with.

    I'm also glad you are not a mind reader as there is little more scary than a woman who not only thinks they knows what you are thinking, they actually know..

    But back to Cullen's musing, he was really just batting around some of the reasons that muddled monetarist thinking that assumes QE will automatically lead to robust growth or inflation absent the strong consumer demand necessary to move the needle forward, or as he stated it fiscal which most I think would assume is driven on the government side.

    So the rates are low, the fiscal purse strings are tight and consumer demand is less than what would be necessary to propel the yields to the levels to which many have come to expect based on times where there was more competition for limited resources.

    Like I hear a lot around my house, big business isn't gonna run out of stuff, just let them store it for us until we really need it.

    But yeah, if we had a stimulus program that incentivized cash rebates and 10-20-30% off coupons on mortgages like Kohl's does for shoes and jackets I'm sure they could move more houses if that's what is really needed.

    Actually the credit card companies already do this with cash rebates etc as they can make a handy profit on the transaction fees and still pay you to take a loan.
    But we still can't do it because of the no free lunch doctrine has apparently superseded the free will doctrine following the "Austerity : It's no fun but its all we deserve" movement started by those poor Puritan outcasts that were so discriminated against and given one way tickets to paradise for exercising their right to free speech and ended up in places like Salem Mass circa 1630.

    But don't worry, as long as you understand the dynamics of US politics you will understand that rates will remain low enough that the banks don't really want to lend and at the same time high enough that its still not really worth it to really go big on Main Street.

    So we will muddle along like we have been and the stock market will continue to float up as the stored surplus capital continues to be transferred from one giant storage tank to the next until the next big leak with nothing much new with any serious octane actually flowing through the carburetor to the economic engine what with that low energy ethanol and such added to the mix.

    The student government only know how to operate the brakes, they don't even know what a thrust lever is for only how much a gallon and how many mile per gallon.
    May 21, 2015. 10:40 PM | 3 Likes Like |Link to Comment
  • Interesting Times For All Commodities And Investments !! Chapter 120 [View instapost]

    Before you can answer that you gotta read the rest of the article to get the authors point that "there is no actual evidence showing that there's a "natural" rate at which the economy will actually achieve some magical equilibrium.."

    Still, the policy discussion is driven almost entirely by this theoretical narrative which is that the Central Bank needs to reduce the real interest rate by adjusting market expectations via QE or something else that will get the real rate that much lower.

    Only when all else fails, then maybe we try some fiscal policy.

    But the problem with this model is that the natural rate idea is purely theoretical supply side logic runamuck.

    So the implication is that somewhere somehow there has to be demand at the prices offered and until such time as there are policies to create demand there is no need for increased investment in production capability; the buzz word is fiscal policy which of course is a loaded term.

    Now, what is the question again?
    May 21, 2015. 05:25 PM | 1 Like Like |Link to Comment
  • Interesting Times For All Commodities And Investments !! Chapter 120 [View instapost]
    Ever wonder how companies still survive while at the same time offering loss leaders?

    Have you ever purchased day old bread at a discount?

    Are you familiar with the worldwide shortage of wheat and the impending flour crisis?

    Still puzzled about negative interest rates?

    If you're not familiar with this debate, then it's really quite simple. In essence, economists argue that there's a "natural" rate of interest, or the price of money, at which the market will always clear. If nominal interest rates are at 0% and there's still substantial slack in the economy, then we've hit a nominal lower bound which means that REAL interest rates must be much lower in order for the market to clear.
    May 21, 2015. 12:28 PM | 1 Like Like |Link to Comment
  • Interesting Times For All Commodities And Investments !! Chapter 120 [View instapost]
    In case anyone wonders..
    May 20, 2015. 03:44 PM | 2 Likes Like |Link to Comment
  • Interesting Times For All Commodities And Investments !! Chapter 120 [View instapost]
    That's a good question IT. there is so much contradictory information out there right now that statistically speaking there is a greater likelihood that the opposing forces of canceling each other out when the big macroprocessor in the sky generates the final compilation of that big triple integral is downloaded and the summation of all the significant factors contribution to confusion is microeconomic confusion is complete.

    Allow me to clarify.

    Energy prices are a huge driver of dollar strength which is if not by definition by inferition a damper on any temptation to read a rapid rise in inflation into seasonal effects on thermal driven activity.

    Then there is demographic trends, did anyone else notice the bulge in the python known as the baby boomers just passed into official eligible for retirement territory.
    OK, lets try housing for Housing for 30, turns out the question is why is there more demand at 60?

    Information technology has increased the size of the market and increased the economy of scale and lowered prices while increasing production, more and more stuff at lower and lower costs ala Walmart 101, stack em high and sell 'em cheap.

    Cullen Roche is a pretty thoughtful guy, he seems to think we are in a new normal not to be confused with the old worn out normal that actually only existed until it no longer did which was before and now its gone for good, and that's been estimated to be a very long time!
    May 19, 2015. 11:33 PM | 1 Like Like |Link to Comment
  • Interesting Times For All Commodities And Investments !! Chapter 120 [View instapost]
    I like reading Demuth's ideas, its nice to know what a guy with $50M+ under management thinks.

    I'm not sure it all scales, but there is likely a lot to be said for playing it as safe as possible with 90% so that you can afford to be aggressive and concentrate on winning with a good 10% or so.

    I hope after a couple more years practice trading I'll have both the skill and confidence necessary to actually puts something closer to 10% of my RLP at work where it can make the 200-300% returns necessary to make the effort worthwhile.

    In the meantime, I enjoy the sport of it. I'll like it better though when we have the platform in place where we can really make it a live team sport.

    Like he says, we have unprecedented access to tools only available to a lucky few until recently and new ones unheard of until now being developed everyday. So much opportunity so little time!
    May 19, 2015. 04:26 PM | 1 Like Like |Link to Comment
  • Interesting Times For All Commodities And Investments !! Chapter 120 [View instapost]
    And then like after the last little taper tantrum and then the pulse drops and the blood pressure they will get tired and take a nap and when they wake up they will have forgotten all about it.

    Just like the primal creatures they are they will all wake up hungry and then after breakfast at McDonalds they will start worrying again about whether or not they will have enough money for lunch in the year 2035 because they heard some guy on AM radio describe how they are going to run out of ink over at the federal printing office because some guy wearing a turban bought up all the supply and shipped it back to India, lol.
    May 19, 2015. 08:45 AM | 2 Likes Like |Link to Comment
  • Wall Street Breakfast: ECB Pledges To Boost Bond Buying [View article]
    "...the euro tumbled the most in two months against the dollar today after ECB Executive Board member Benoit Coeure declared that the central bank would increase purchases under its QE program...the euro is -1% to $1.1209."

    And the 30 Year pulls back below 3%...and to think I was scared when it rocketed to 3.10. Not! Oh what a relief it is..

    Disclosure : Long TMF in the SA IT Virtual Challenge*.

    *The Challenge is not only the world's best all time Investment Game but the one with the world best players. Plus its fun and educational and potentially profitable. YMMV. Oh yeah, don't forget the prizes!!.
    May 19, 2015. 08:13 AM | 3 Likes Like |Link to Comment
  • Interesting Times For All Commodities And Investments !! Chapter 120 [View instapost]
    Here is something to look at if you follow the bond market and interest rates.

    Lots of hype out there regarding direction and speed. Seems recent upward moves are fairly benign considering the season, European turbulence and surges in energy supply.

    Several major vectors competing for dominance with the same result: a strong dollar off 5% since recent highs.

    I would anticipate some summer storms ahead with some serious short term downdrafts but cooler heads and smoother sailing conditions will prevail after the summer doldrums and into the fall.
    May 18, 2015. 09:42 PM | 2 Likes Like |Link to Comment
  • Interesting Times For All Commodities And Investments !! Chapter 120 [View instapost]
    Don’t be surprised if you see a huge chunk of cash simply evaporate one day from your exchange-traded bond fund. There’s a good chance it’s just a hedge fund cashing in on a bet.

    An example of this can be found in BlackRock Inc.’s $5.1 billion long-term U.S. Treasuries ETF, which saw the greatest volume of withdrawals this year among similar funds. Among investors yanking cash was Passport Capital, the $4 billion hedge-fund firm run by John Burbank.

    The firm sold its entire $217 million stake in the ETF in the period ended March 31, about three months after purchasing the shares, according to data compiled by Bloomberg.

    On one hand, this is a remarkable amount of money, equal to about 4 percent of the fund at its current size. It’s also notable because ETFs have traditionally been marketed to individuals as a quick, easy way to invest in debt.

    But that’s changing. These funds are increasingly being used by and advertised to big institutions, which are looking for the same efficiency as smaller investors at a time when it’s getting more difficult to execute big trades.

    Larger bond buyers are finding it easier to dash in and out of positions electronically with ETFs, rather than bonds that are traded over-the-counter in telephone calls and e-mails.

    Greenwich Study

    Since 2008, trading volumes of the five-largest credit ETFs have grown 75-fold, according to a Greenwich Associates study released Monday. About 12 percent of institutions surveyed by the Connecticut-based research firm reported having traded ETFs in increments of more than $100 million, according to the report.

    The study, which included 128 U.S.-based institutional investors interviewed between January and March, also found that many of these firms plan to increase their use of ETFs in coming years.

    Some of the bigger hedge-fund firms, including Hutchin Hill Capital and Pine River Capital Management, have already been quite active in buying and selling large blocks of debt ETF shares. So have funds managed by BlackRock and Wells Fargo & Co., data compiled by Bloomberg show.

    Debt-focused investment managers have been struggling to efficiently switch around their holdings as the global bond market balloons on the heels of unprecedented central bank stimulus.

    Trading in general has gotten more difficult as big banks reduce their market-making role in the face of new regulations. Also, investors are finding themselves all piled into the same trades as a result of monetary stimulus, pushed to buy riskier assets at historically high prices for any yield at all.

    So don’t assume that some behemoth ETF trade is signaling the end of the world. Yes, it could mean the market’s completely falling apart, but it also may just be a big hedge fund changing around its wagers.

    "Yup, I feel so much better now that I understand the way it really works"

    -Alfred E. Neuman
    May 18, 2015. 04:33 PM | 3 Likes Like |Link to Comment
  • Interesting Times For All Commodities And Investments !! Chapter 119 [View instapost]
    You could always fly into Quad City, tour the John Deere Museum and see the Velie Monocoup while your on the way to visit the Capital in Iowa City.

    The VM had a modifed JD tractor engine.

    They later moved the operation down to Wichita where most of their equipment was being sold.

    Clyde Cessna and a bunch of other farm kids there picked up the ball and ran with it..
    May 16, 2015. 02:45 PM | 3 Likes Like |Link to Comment
  • Interesting Times For All Commodities And Investments !! Chapter 119 [View instapost]
    Going back to our earlier discussions here is a random link I ran across about one of my favorite least appreciated Presidents.
    May 16, 2015. 12:42 PM | 1 Like Like |Link to Comment
  • Interesting Times For All Commodities And Investments !! Chapter 119 [View instapost]
    I think that reality of nature validates at least in part the seasonality factor that underlies the old "Go Away In May" axiom.

    That is perhaps why the farmer driven DNA in the back of my mind keeps telling me to keep some powder dry for the predictable "buy on the dip" opportunities during the upcoming "Summer Doldrums" knowing full well that there will be another shift of focus back due to the "See you in September" phenomenon.
    May 16, 2015. 12:13 PM | 2 Likes Like |Link to Comment