jlounsbury59

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344 Comments

    • Wed Dec 3rd 13:17 PM
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      Rating: +1 0
      Commented on:
      The Failed Subprime Clampdown
      g7enn - - -

      Good comment. We have had the perfect storm of misguided social engineering, ineffective regulation, opportunistic greed and an economically illiterate populace (including our elected officials).

      Free market philosophy? It has been too much free wheeling and not enough free will.

      Too much government? Some say too little government. Both positions are wrong. The problem is not the size of government; the problem is the effectiveness (actually, the lack of effectiveness) of government. It is perhaps too idealistic, but, in addition to national security, we desperately need a government that provides an environment for individual and group initiative. We need a government that coordinates social structures needed for societal improvement, not a government that provides all social services. We need a government that does an effective cost/benefit analysis of all tax money expenditures. We need a government with enough intellectual capacity and curiosity to evaluate unintended consequences of all initiatives. You say that would gridlock government? I say not gridlock but well considered actions would result.

      We just voted for hope. Is the ideal I describe too much to hope for?
      View article »
    • Wed Dec 3rd 11:09 AM
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      Rating: +1 -1
      Commented on:
      Listening to the President-Elect
      It took a Republican (Nixon) to open a dialogue with Communist China. Will it take a Democrat to establish fiscal responsibilty?
      View article »
    • Wed Dec 3rd 11:03 AM
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      Rating: 0 0
      Commented on:
      Wednesday Outlook: Commodities, Emerging Markets
      I much enjoy your chart analysis. Please continue to post.
      View article »
    • Wed Dec 3rd 10:56 AM
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      Rating: +1 0
      Commented on:
      Arms Index Climax May Signal Market Bottom
      Bill - - -

      Some of the skepticism other commenters have expressed is related to perspective. The TRIN is a decent short-term indicator for traders, but has little relevance for longer-term investors.
      View article »
    • Wed Dec 3rd 10:46 AM
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      Rating: +1 0
      Commented on:
      Is the Federal Reserve Pushing on a String?
      Edward - - -

      Inflation is the only solution? You may be right, not because inflation is deliberately planned, but because the target of exactly replacing written down assets on financial balance sheets with new money is extremely hard to hit. If you fall short the crisis deepens so the liklihood is overshoot. The immediate result of too much "free" money (money not in reserves on balance sheets) will be inflation.

      Very prescient article with an interesting thesis.
      View article »
    • Wed Dec 3rd 10:27 AM
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      Rating: +1 0
      Commented on:
      U.S. Stock Market Returns: What's In Store?
      Excellent article. However, one thing is not clear to me. (Maybe it is there and I am missing it?) Are the returns tracked index returns (not including dividends) or total returns? If they are index returns, the differentiation would be more extreme for total returns.

      Some might say this work offers no more than the adage: buy low, sell high. My view: that attitude is similar to someone taking a long hike through the wilderness without a map and compass. Things may go well for a time, but when you become disoriented you will regret lack of reference. What is low and what is high? Refer to the map and compass.
      View article »
    • Wed Dec 3rd 01:26 AM
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      Rating: +1 0
      Commented on:
      12 Observations on Current Market Stress
      Great article, Dave.

      As The Hand posits, the idea Bernanke has put forward to increase liquidity by the Fed buying treasuries is a way of retiring market held public debt. It is potentially very inflationary because it is monetizing the national debt in two ways:

      (1) It reduces the national debt by putting new money into circulation (buying up debt).
      (2) It the new money devalues the existing currency reducing the real value of the remaining debt

      It is likely to work in the very short term as the Fed purchase reinforces the flight-to-safety demand for treasuries, driving bond prices even higher. But this has a limited useful life because it simply drives the dollar level higher against the dike and hastens the day that the dike breaks. What I have called The Great Bond Bubble of 2008-2009 will burst with even greater force. And if the Fed uses the sale of treasuries in the future to fight inflation, it will be buying back what it has sold at much lower prices. So yes, Steve, the Fed does get to "keep" the interest, but it will be a pittance in comparison to the loss of principal.
      View article »
    • Wed Dec 3rd 00:55 AM
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      Rating: +1 0
      Commented on:
      NBER Eggheads Finally Proclaim a Recession
      Prof. Frankel - - -

      Thanks for your detailed explaination of the nber process.

      The Hand - - -

      You make some good points backed by excellent data. I would pose one question, based on a simile comparing a recession to a flood:

      If you are to designate the start of a flood, does it begin when the water reaches your ankles or when it goes over your head?

      Obviously, the flood is evident when the water goes over your head. I would maintain, however, that you can not designate the start of the flood until a flood is evident - that point in time you go under (or shortly before you actually go under). It is only then that you can look back and designate the start of the flood at the point the water started to rise. There may be many occurences of water over the ankles when the water recedes and no flood follows. So declaring the start of a flood requires that it be proven a flood is occurring (has occurred).

      Now let's complicate the simile. If the water rises over the ankles and then to the knees and then recedes back to the ankles, and then finally rises above the knees and continues on to over the head, didn't the flood start still start when the water first began to rise?

      The situation you describe, Steve, is like the flood that had water rise and fall back somewhat before really becoming deep. Your argument is analogous to designating the start of the flood when the water is much deeper than is the case with the nber process. The nber process looks back after the deep water is confirmed to define when the first rise in water occurred that was not interupted by a complete reversion to dry land.
      View article »
    • Tue Dec 2nd 12:47 PM
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      Rating: 0 0
      Commented on:
      10 by 10: A New Way to Look at Dividend Yield and Growth
      Hank S. - - -

      David specifically mentions that dividend reinvestment would improve the return. I believe the reason David has not attempted to calculate the effect of dividend reinvestment is purely a practical matter: To do this calculation requires assumptions about the price of the stock during the reinvestment period. There are nearly an infinite number of possible price paths over the time period (40 calender quarters). The only possible study would be to review a number of stocks in retrospect (a ten year history).
      View article »
    • Tue Dec 2nd 12:23 PM
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      Rating: 0 0
      Commented on:
      Sell-Side Sentiment: No Bullish Sectors
      Paul - - -

      I find your article very obtuse. You should supply more explaination of this chart for those who, like me, are not familiar with this First Choice metric.
      View article »
    • Tue Dec 2nd 12:13 PM
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      Rating: +1 0
      Commented on:
      Bond Trading Trends Warn of Deflation
      Frugal - - -

      An alternative view is that the increasingly historic rise in bonds is a flight to quality in a time of economic turmoil. If that is the case, this period will be known as the great bond bubble of 2008-2009.

      The current deflation in real estate, stocks and non-treasury credit instruments is the counterparty to the rise in treasuries. If this deflation is not temporary, low interest rates will last for a long time. This is the scenario that "the Japan 1990 redux to the present U.S." advocates describe.

      What scenario is compatible with a great bond bubble? A bottom in stocks and real estate in the near future (say anytime during the next 6-18 months) with a concommitant end to the current recession. The economic rebound will be inflationary if all the money currently being created is more than what is necessary to replenish reserves in financial institutions. Monetary stimulus overshoot is very likely and therefore inflation is probable.

      It is very likely that you, Bob Hoye and Bill Cara are correct. You may be early and collect some abuse while you wait to be vindicated, but the likelihood that you will still be wrong in 4Q/2010 is very low.
      View article »
    • Tue Dec 2nd 10:29 AM
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      Rating: +1 0
      Commented on:
      Testing the 5-10-20 Trend-Following Strategy
      I much appreciate top technical analysis like this. Some other ideas to investigate:

      1. How would going short change the outcome?

      2, How would using the new ultra ETFs (double long and short) perform?

      3. How would T+3 delays affect a long and short strategy?

      Do you plan to look at these variations? If you are doing this work soon, I'll wait for your results. If you do not have such plans, I'll take a stab at it myself.

      Again, this is outstanding analysis. Thanks.
      View article »
    • Mon Dec 1st 14:24 PM
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      Rating: +1 0
      Commented on:
      The Real Problem? People Are Scared to Spend
      Michael - - -
      Good article. I am surprised you didn't say "the FIRE economy has gone up in smoke".

      Doug Poretz - - -
      According to the National Bureau of Economic Research, we are in a recession. The recession started in December, 2007, twelve months ago. The two consecutive quarters of declining GDP is a common result of recession, not the defining event.
      That specific point aside, the rest of your comment is excellent. There are new societal, technological and economic paradigms, as you point out, and we have yet to appreciate how these will aggravate and mitigate the current crisis. For the intellectually curious, this is a great time to be alive. I just hope I am one of those who can afford the curiosity and hope that our society will survive and prosper.

      Derryl - - -
      I always enjoy the intellectual complexity of your comments. The problem you describe is real, but your solution is Draconian. How can the creation of some sort of "new money" not devalue the "old money" and be extremely inflationary? You argue to the contrary, but I am skeptical.
      Why not repay the debt by evolving to a new national "business plan" that emphasizes production more than consumption and earn the repayments? I would much prefer such a solution to one that is simply more financial instrument manipulation. (I include paper money as a financial instrument.) Can our economy activity change in the following ways?
      1. Produce more things that improve productivity (information technology, communications, machines using less (or cheaper) energy, new energy technologies, etc.)
      2. Produce more things that reduce future costs (preventive health care, more effective education, environmentally cleaner processes, more efficient transportation, lower cost and more efficient energy distribution, etc.
      3. Produce things that increase the circulation of dollars domestically (higher employment) and repatriate dollars held overseas via increased exports. These would include activities suggested in 1. and 2.

      Can we replace Michael's burned out FIRE economy with a PERFECT economy? That would be Productivity and Employment Revival for Future Economic Cost Transformation.

      View article »
    • Mon Dec 1st 13:13 PM
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      Rating: +1 0
      Commented on:
      Wall Street Breakfast: Must-Know News
      Citigroup is putting our taxpayer dollars to work. Who is monitoring this activity? Is this the purpose of TARP?

      This may turn out to be a prescient investment, but how does it help stabilize the economy? It just doesn't look like anybody has a plan, no one is monitoring what is happening to the TARP money, and there is no measure of what else will be needed ($ amount and how to be used).

      Is this symptomatic of "having only one president at a time" and will the vacuum be filled in an effective way after January 20? We can only hope so (we did elect hope), but how much will this period of limbo damage us even if better management arrives later?

      And the biggest question: Exactly what is an effective management plan for this crisis?
      View article »
    • Mon Dec 1st 12:16 PM
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      Rating: +1 0
      Commented on:
      Ignore Jobs Numbers for Market Timing
      There are two labor statistics in in the Index of Leading Economic indicators:
      1. Average weekly hours of production workers (manufacturing)
      2. Average weekly initial claims for unemployment insurance (inverted)

      There are two labor statistics in the Index of Coincident Economic Indicators:
      1. Employees on nonagricultural payrolls
      2. Personal income minus transfer payments

      There are three labor related statistics in the Index of Lagging Economic Indicators:
      1. Average duration of unemployment (inverted)
      2. Change in index of labor cost per unit of output
      3. Ratio of consumer installment credit outstanding to personal income

      These indexes are maintained by the U.S. Department of Commerce:
      www.bea.gov

      I agree with Steve that the structure of the labor force has changed and may still have further change ahead. This brings into question how well labor components in the business cycle indexes will track with historical behavior.

      I understand the point that Roowns is making, but do not see how it conflicts with what Steve has discussed.
      View article »