E.D.Hart
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Latest Comments24 Comments
Consumers Buy Into Disinflation
See the 1970's.
Also, it is possible to have rising wages and falling prices, or relatively low inflation. With rising productivity faster than the money supply increasing.
Wage growth can be greater than or lesser than the rate of the increase in prices.
First Fuel, Now Metals - Forecasts Lowered
Here in Alaska, the GOP is the predominant party. Something like 70% voted Bush lin 2004. Also heavy libertarian base. You'd think that those ideals would manifest themselves in being against "redistribution of wealth". Well we are and we are not. We are in theory, and in ideology, and whenever our taxes go to someone elses project. Such as when we resent the poor, the unemployed, the uneducated....these people should not get our wealth, that much is clear. Why should they? They didnt work for it, and it encourages them to be lazy. So, we are aghast at our taxes used to reditribute wealth to the undeserving.
But, our new rock star govenor, Sarah "Marerick" Palin has sucessfully stood up to oil companies (translation: she raised taxes on them) and she successfully increased this years dividend to include a supplemental $1200 dividend, in addition to the regular $2000 dividend (amounts are rounded).
Its not just hypocrisy, its pandering, buying votes, dishonesty, and utter nonsense to say that the GOP is against the redistribtution of wealth. (at least in Alaska).
True story, I am not making this up as Dave Barry says: My family received $9600 from the state of Alaska this year just for being a resident. Money was redistributed from the oil compnaies to the residents, no matter what the need.
Palin is a fine socialist.
What they should say in the Lower 48, if they were honest is that: "we are agaisnt the redistribution of wealth to those we decide are not politically to our advantage to reward." Or, we are against the redistribution of wealth to those we decide don't vote heavily for our canidates" or "we are against redistribution of wealth for those we decide are undeserving, and for redistirbution of wealth to those we believe are deserving."
Oh, and by the way, those who are deserving are those who need a bailout--those job creating and upstanding bankers who currently are a little short. We can redistribute some wealth to them, thats ok, because they are deserving.
See?
And please dont respond that it isn't a bailout of taxpyers dollars because the governement will be paid back, and probably make a profit to boot. (as a Barrons editorial has recently claimed ). After all is said and done the best economists are predicting a 1.5 trillion price tag--for all costs from the current crisis. Some of that costs will be recouped, but not all...
and thats redistribution baby.
What the Hedge Funds' Bad September Could Mean for Markets
I sense a reality check <wink back at ya>
Post-Bailout Investing: The Big Picture
Gold May Not Be Just Another Commodity Anymore
Gold outperformed the US dollar.
Thats not religious thinking, thats two types of money--with gold performing better than the fiat currency.
Risk Management in Trending Markets
The Dead Cat Returns to Earth
News Flash: Major Market Turns Aren't Announced In Advance
Or, if you prefer, look at a chart of the NIKKEI from 1988 to present.
A twenty year bear market that has not recovered.
True, dividends added some, but the 50% decline of the dollar puts the GE and Intel investor in the red, after subtracting for inflation, after a decade.
The point, you say? No one predicted that, back in 1998, two premier, world class companies would fail to produce positive returns in ten years.
No one predicted in 1988 that the Nikkei would lose more than 2/3 of its value and not recover in two decades.
Many, many, many predicted that the recovery of the NIKKEI was imminent, or that the recovery of Intel and GE was imminent. These stories were written weekly, for years.
Bear markets descend a wall of hope.
Furthermore, a lot of what I see passed of as financial analysis is hopeful thinking, and nothing more.
Question: If inflation is rising, and interest rate will be much higher in a year, and global wealth funds are gradually de-dollarizing their assets--what effect will this have on the earnings power of banks as capital becomes more expensive, and ARMS reset at higher rates?
We are looking at 10 to 15 years of global credit contraction.
I should add that I am an optimist, by nature.
A Fed Rate Hike Won't Solve the Current Crisis
There are benefits to everything, including cancer and war. But that doesn't make them desirable or something we would hope for.
If This Comes True, You'll Be Glad You Own Gold & Silver
Hence the saying, "the Sun never sets on the British Empire".
It was common knowledge of all, and nearly universally believed that the British Pound Sterling would reign supreme over the new millennium of the 20th Century, as it had in the 19th Century.
It was simply inconceivable to the Brits and their trading partners that the Sterling wouldn't be the reserve currency of the world for at least another 1000 years.
Until, the dollar came along and replaced it.
Oops, never mind.
Those who hold their wealth in dollars are at risk of repeating this awful history.
Why not diversify your currency exposure?
Confirmatory Bias and Oil Investing
His only job was to predict oil prices.
His confirmation bias was obvious in retrospect, but not at the time.
Peak oil is a theory that has proven true in the US, as well as lesser oil producing countries-- a plateau was reached, and then decline.
People now are applying the theory to the world as a whole, which is not outlandish.
The most emotional arguments that I hear are not from the peak oil theorists, but from everyday folks, and everyday news channels that oil is cheap and abundant, but oil companies are reaping obscene profits, and greedy manipulators are stealing Americas wealth.
Guess which side appears to have the higher level of confirmation bias?
The Ongoing Challenge of Inflation Momentum
It seems to me that if inflation is accelerating, which is the main premise of this article, that you could do a lot worse than letting your winners run in commodities, and cutting your losses in financials and bonds.
It seems to me that we can only see interest rates go up from here, after the election. Who wants to cut exposure to the only asset class that is outperforming in a rising inflationary environment?
Rebalancing asset class exposure should not be done blindly, or as automatic process of so called "risk reduction", but only in response to ecess valuation, and changing economic fundamentals.
Housing: Barron's Calls a Bottom
Real estate falls...
You can believe the Barrons piece if you beleive that inflation is coming down and interests rates are not headed appreciably higher.
But we are in a huge housing bear market, and we are at a very low point in the rate rising cycle.
The capitulation ( low point) will come when interest rates are 10-15%.
Say in 5-10 years.
Even the Legends Are Losing in Today's Markets
Heuristics are informal rules of thumb that may overgeneralize and work for a long time, until they don't work, because the initial conditions have changed.
Clearly stated (I hope) There is a difference between a heuristic and an algorithm.
The former, thanks to Wikipedia: "A heuristic is a method to help solve a problem, commonly informal. It is particularly used for a method that often rapidly leads to a solution that is usually reasonably close to the best possible answer. Heuristics are "rules of thumb", educated guesses, intuitive judgments or simply common sense."
In more precise terms, heuristics stand for strategies using readily accessible, though loosely applicable, information to control problem-solving in human beings and machines.[1]"
Algorithms are different:
"In mathematics, computing, linguistics and related disciplines, an algorithm is a sequence of instructions, often used for calculation and data processing.
It is formally a type of effective method in which a list of well-defined instructions for completing a task will, when given an initial state, proceed through a well-defined series of successive states, eventually terminating in an end-state.
The transition from one state to the next is not necessarily deterministic; some algorithms, known as probabilistic algorithms, incorporate randomness."
Markets are semi-random, dynamic, and adaptive aggregations of data that reflect real world phenomenon. (e.g.--peak oil, moeny supply growth, company earnings, interests rates).
An investor must use models that take into account the facts on the ground, so to speak, or the economic environment, to put it another way.
Ok, so what. Everyone knows this...
Bill Miller says that Peak Oil is hooey, and that oil and commodities are a bad bet going forward.
I say hes wrong.
Soros says were in a new macro environment, with huge implications going forward.
Presumably we've all read the same (or sufficiently similar) set of data, and looked at the same reports (or similar).
One of us will be right.
The judgment required to make the decision about whether this is a valid theory (peak oil) , or bogus one is largely algorithmic. As is the investment policy that follows such an assessment.
My question: Why would Mr. Miller "bet the ranch" that the theory is wrong? Is he not assuming that he is 100% correct?
What if you said: "I don't know the future, and I know I can be wrong. My readings suggest to me that peak oil is probably a real phenomenon that will drastically alter the investment landscape in my lifetime. I, put the probability at 75% that this is the new macro-environment going forward, and 25% that it won't be proven correct, at least in my lifetime, and that 25% that oil prices will be lower in the next ten years. "
How would such and investor invest?
Is is random and luck? Is it all rear view mirror watching?
If you beat the market with concentrated bets in the oil sector is that random, thus requiring no skill?
If you lose big in the financial stocks because you erroneously believe that the turnaround is around the corner, is that bad luck? Or poor performance?
What is performance?
Even the Legends Are Losing in Today's Markets
We no longer know this. The landscape has suddenly changed and a strategy that embraces low price/book will put names like Washington Mutual, LEH, C, BAC, and FNM in your portfolio.
The problem with applying rule-of-thumb investing is that they work in some economic environment, and not in other environments.
We are in a completely new landscape. The asteroid has hit. The dinosaurs are dying. Small mammals are coming on the scene.
The winners in the future will be those animals that adapt (er, companies) to the totally changed environment--but not the same as the winners of the past.
Think about this: Treausuries are a great investment, risk free, until they are not.
Real estate is a great investment, until its not.
Gold is a proven horrible investment, until its a great investment....
Commodities are too risky and volatile for the average investor, until they are they are not.
Technology stocks are great growth vehicles to invest for the long haul and retirement...until they are not.
In each case: a rule of thumb that is true in one economic environment becomes not true in the next environment.
Markets are evolutionary. Rather than applying rules of thumb to investing, like Bill Miller who puts no credence in the markets when it comes to oil or commodities, and has his thinking tied to 80's and 90's examples of what should work, it is better to ask the question:
What is the economic environment we are in and what asset classes will do best therein?