mcbockalds

I did not miss the humor. I am not angry with anything you said. I did not expect you to critically analyze any of my posts, because you have made it clear in the past that macroeconomics/finance is not one of your areas of interest. If I have any anger, and I probably do, it is toward what I perceive as bad analysis. "Bad" analysis is not defined as analysis that I disagree with! Here are just a few examples of errors in thinking that lead to bad analysis: rationalization, oversimplification, unwarranted assumptions, faulty common sense, stereotyping, hasty conclusions.... I look for these and in "trash" analysis they are glowing and flashing to someone who is looking for them. Finally, the reason I said that I welcome critical comment on my posts is not that I think I am never wrong, or that I think I can win out against anyone's criticisms of me, but because I don't want to be peddling bad analysis. Simple as that. Cheers John

My posts and links are all sitting there for anyone to point out any errors of analysis. I welcome it. I can tell you however the job of finding errors in my posts and links won't be as simple as it was for me to find them in Peter Cohan's article. There are honest errors and then there is trash and the difference between the two is usually pretty easy to distinguish. I would also welcome seeing a defense of Cohan's article in light of the criticisms I pointed out about it. Cheers John

No RV, the guy who is out to lunch is the author, Peter Cohan. His "analysis" is inept and plainly wrong at a number of points. It is a very good example of the truth of the advice, don't believe everything you read. I do marvel at some of the trash masquerading as economic analysis. Cheers John

Oh my. Did you notice a few things wrong with the article? Did Gross actually say to sell all stocks like the author implies with his numbers? Did Gross continue to say sell all stocks over the last 4 years? Did you know that Pimco is not just a bond fund, but manages all types of assets? Did Pimco sell all its stocks back in Feb. 2009? Do you know how well bond funds have done over the last 4 years? This article reminds me of another one you referenced in the past and it too had some serious logical flaws. That said, Bill Gross way underestimated the boldness of Ben Bernanke to inflate the money supply in order to re-inflate the stock market. And so we sure do have a re-inflated stock market. Cheers John Edit I thought I would read some of Gross's Investment Outlooks later in 2009, for example August 2009 where he says, "There is no investment potion for this new environment other than steady income-producing bond and equity investments in companies with strong balance sheets and high dividend yields, as well as selectively chosen emerging market commitments where nominal GDP growth prospects are tilted upward as opposed to gravitating to new lower norms." So much for selling all your stocks.

Yesterday, in the mail, I got my copy of Bill Gross's June 2012 Investment Outlook and read it before going to bed. As the Sha Na Na song goes, "I couldn't sleep at all last night...." Bill Gross is not your typical ranting, hairshirt fanatic crying, "The world is ending!" He is too smart, too educated, too responsible, too experienced, too controlled... to say that. But he certainly said the next Sha Na Na line, "Baby things weren't right..." Well, of course the Sha Na Na couldn't be expected to include such unhip, uncool lines like Bill's: "the 1% feed primarily off of money, not invention. They would have you believe that stocks, bonds and real estate move higher because of their wisdom, when in fact, prices float on an ocean of credit, a sea in which all fish and mammals are now increasingly at risk because of high debt and its delevering consequences." "The global monetary system which has evolved and morphed over the past century but always in the direction of easier, cheaper and more abundant credit, may have reached a point at which it can no longer operate efficiently and equitably to promote economic growth and the fair distribution of its benefits." "Euroland is just a localized tumor however. The developing credit cancer may be metastasized, and the global monetary system fatally flawed by increasingly risky and unacceptably low yields, produced by the debt crisis and policy responses to it." With lyrics like that swimming around in your sleepy head, how could anyone sleep? Except perhaps for Federal Reserve economists who swim not in the real world (it is much too complicated and messy) but in their computer models of a much simpler world, where by mathematical design, crises and catastrophes never happen because they can't happen. Now that sounds like "Sha Na Na" land to me. Cheers John

Just too much important information in this week's economic analysis by John Hussman to not post it. I also like his comment, "It's important to understand that I have no intent of encouraging investors - even buy-and-hold investors - to deviate from their investment disciplines, or from thoughtfully structured portfolios. Many investors are comfortable maintaining their exposure to market fluctuations through the complete bull-bear cycle. As long as these investors are committed to that discipline - recognizing the size and regularity of periodic losses we've observed particularly over the past 12 years - my views should not affect their investment strategy. My main objective is always the same - that shareholders see the things that I am looking at so they understand what we are doing and why." If you start to get bogged down in some of the more technical stuff in the article then just skim through that section, because more important and easier to understand analysis is "just around the next paragraph." If you get tired reading this article, maybe you would like to watch this video that I would title, "didn't we see this movie a few years ago?" Cheers John

Remember, "you don't ever count your money when sittin' at the table. There'll be time enough for countin' when the dealin' done." So how are things at the Oasis. Is Ben B. still pumping? Hussman has probably never been more negative. Some interesting quotes from his report: I have no desire to persuade investors to abandon their discipline or make major changes to their portfolio allocations if they have considered the potential risks carefully. I'm quite aware that the investing world has ruled out any possibility of extended market losses thanks to the confident certainty that the Fed is capable of preventing both market declines and economic downturns indefinitely. our estimate of potential market losses over a 6-month window is now in the worst 0.5% of historical observations. Cheers John

Could be you will be right. Could also be that it will be Espana. Cheers John

Fun analogy RV and yet I, of course, see your analogy a bit differently. I am not saying the spring is dry. I can see y'all are drinking some very cool, wet, tasty water, while I refuse to drink and am practically dying of thirst. Why? Because I believe the water is not safe. You see, I'm a light sleeper and each night I see Ben B. pumping tainted water into the spring. I have told you this, but I have no real proof (only theory and a bit of history) that it will harm you. So I don't drink as long as Ben keeps it up, or until someone or something comes along to flush out all the "trillions of gallons" of tainted water. In the mean time, I admit, I am getting pretty thirsty! Cheers and Salud John

Investing or trading? Our entire portfolio is invested with a 403b retirement fund company and two IRA fund companies. All three companies heavily penalize trading of retirement and IRA funds. Balancing is OK, but not trading. Each one penalizes a bit differently, but all make it costly. I don't mind this because I have no interest in trading and their policies discourage other people in the funds from trading and that helps keep the fees down. I have NO interest in trying to persuade people here from trading. None, nada. Only one of my posts, that was poorly worded, sounded like I was bashing traders, but I wasn't and I got that cleared up, I think. My posts are all about whether or not stocks and bonds are in a bubble due to the actions of the FED. Whether or not I am right, has no affect on traders. Smart/lucky/unlucky traders can make/lose money whether or not the markets are in a bubble or not. I have all the education and time I would need to become a trader, but I lack the interest. Simple as that. Good luck to all traders and investors on this site. Your good or bad luck does not affect the value of my portfolio. So again, I wish you buena suerte. (Didn't take high school Spanish - lived in Tucson for 3 years.) Salud John

Just to give the other side its say, I love this one. It is usually trotted out after the DOW has slid a thousand points or so. It came out really early this time. Do they know something - I doubt it! The FED is so in control of markets at this point in time,...hmmmm, but then again who knows when a balloon will pop or what will cause it to pop? Now that would be a 'smart investor!' Cheers John

Rick has never been known to be shy! But I WONDER, doesn't he know there is, "No reason to just sit and complain about the Fed, Europe, debt, etc." Cheers John

I wonder? Just wondering. Cheers John

Not at all. If I were say 50 and younger and in my earning/saving/investing years and looking to retire at say 67, I would love to see financial markets stay low until I was maybe early to mid 60's and then they can go higher. During my retirement years while I am spending my retirement funds is when I want markets going higher. The ultimate 'buy low, sell high' scenario. If only! Cheers john

Yeah right. Ha. The problem with cheering this market (or counting returns) - either up or down - is that this market is manic, abnormal, subject to sudden violent mood swings. Why? Many reasons of course. Not the least of which is that the US and world economies have never gone through what we are going through. (The Great Depression was not that similar to today.) The 'super debt cycle' (private and public) that began building perhaps 3 decades ago is a whole new game. It is like a 'game' with two periods: the first period was great fun with everyone getting rich with stocks and ever rising home values. So we consumed like crazy and borrowed like crazy - heck, we were rich and getting richer. Whoops, the first period ended and now the second period is upon us. It is debt pay back time and we are not nearly as rich as we thought, we are not rich at all (well, 1% of us are)! We have many years of debt to pay off and while we try to do that we have less money to spend on stuff and thus fewer jobs are needed to produce less stuff. Depression? Recession? Not if the FED can help it. What can the FED do? Not much except continue what it was doing...expand credit, lower interest rates, print money. Ouch. So the FED and most world wide Central Banks have been flooding financial markets with money (QE1, QE2, Operation Twist, QE3?) to try to delay and soften the pain of foreclosures, bankruptcies, reduced consumption and thus high unemployment. Of course easy money is mostly what caused the super debt cycle 'game' in the first place. Easy FED money can keep financial markets puffed up for some unknown period of time, just like in the past, but not forever - just like in the past. In the first period of the 'game' inflated assets (stocks, houses, etc.) caused us to feel rich and buy lots of stuff and thus generate lots of jobs making stuff. But we are slowly learning that the first period is over. The FED knows it is over, but it is trying desperately to restart the first period, without having to go through the second period of extended debt repayment, reduced consumption, and high unemployment. I don't think they will be successful. I do, however, think they can temporarily soften the second period for a limited period of time. Unfortunately, that will likely extend the second period and may, in the end, simply make it much worse. Just saying. Cheers John

Just to add a little 'alcohol' to the punch bowl. Cheers John

Thanks for the page on Gary North, I really mean that. I have said in the past that I do not share much philosophically with GN, but I am willing to read his articles because he brings an Austrian-economic perspective to the discussion as does Peter Schiff. I wish the page on GN were more up to date (1998) in order to get some critical insight on GN's more current views on the financial crisis. If GN is out-to-lunch I would like to know. On the negative side, I don't know why people sitting on the sidelines are thought to be whining. What is the reason for the ridicule? Isn't it enough to point out that "sideliners" are missing out on the current bull run in stocks (even if some "sideliners" did not miss the bull run in bonds!) and therefore their investing opinions are suspect? Just asking? Cheers John

Anyone of us non-experts on this forum can write a negative or positive post on why we think the stock market will do 'thus-n-so.' We can also provide links to writers who do have some degree of expertise who write negative or positive articles on the stock market. Since I think the financial crisis which began in 2007 is not over, I tend (always?) to come up with the negative articles (some might say 'the-world-is-ending articles.) Well, here is another one by economist, Gary North. You have to get through the first part which is a bit of history of the crisis in 2007 and 2008. Then he applies this analysis/history (modern day bank run) to what he expects will be another modern day bank run. But this time it will be a run on the US Treasury. Could he be wrong? Of course. If you don't like to read scary, speculative stuff then don't read this one. Cheers John

RV, really good explanation of PTSD. I have no problem with the theory of PTSD, although my comment about the author’s “condescending, psychological fluff” makes it sound like I do - I don't. My problem is with the author’s “fluffy” use of the theory and his “doffing his hat” at behavioral finance/economics and with his first premise, where he says, “So why are Americans still too scared to get back in the stock market?” To support this premise he goes on to say, “everyday investors refuse to jump in. They pulled $19 billion from funds that invest in U.S. stocks in December, according to the Investment Company Institute, and $2 billion more in January....Investors seem more than happy to miss the party.” Read that quote again and think about it, do you see the flaw? It simply makes no sense. If people are pulling money OUT of stock funds in December and January, that means they already were IN stock funds. His obvious nonsensical statement is rather telling, but his “fluff” does not end there. After he points out the tremendous gains in the S & P 500 since March 2009 (and since this past Oct. too), he quotes a wealth manager, who says, "Now, people call and ask, 'When is it going back down?' DeMatteo says. "There's a sense of doom." And then the author asks, “What are they thinking? It's a question fit for a shrink.” But wait a minute! Excuse me, but after this tremendous 2 1/2 year bull run is it not a reasonable question? Is it not a reasonable possibility that sane people might be wondering when the market might see a correction or even the next bear market? Of course it is. But, no, not for our author, because he is apparently too caught up in his own story with his questionable premises. So I ask, might PTSD apply to those people who never got back in the stock market? It sounds like a good possibility to me too. BUT so does another possibility…the possibility that this stock market recovery is another bubble, thanks to the FED’s continued easy money policies that in fact lead to the 2007 bubble. The economists that I quoted in my earlier post (Bill Gross, etc.) seem to think so. And be they right or wrong I don't think they need a shrink to point out the error of their ways. Finally, I wish I could ask the author, "with the benefit of hindsight, would you prefer to have bought into this stock market back in 2009 when the DOW was at 7,000 or today at 13,000+?" Perhaps the question will help him see why some people are calling DeMatteo and asking, “When is it going back down?” And maybe some of those people calling DeMatteo are actually shrinks...experts in PTSD...and even smart enough to remember, "buy low and sell high." Cheers John

Nicely sung. And you previously said ... "John, Why don't you tell us what you really think? I believe that come December 22 the sun will rise and so will I. "...Yes, as the Brits might say, that article did "get up my nose!" Cheers John

The quote is from Paul Farrell , someone I have read about 2 or 3 times. So, no, it is not someone "I like." I have made a similar calculation in a post somewhere on this forum, but haven't tried to find it so I don't remember what annual inflation rate I used. Farrell's comment is based on using a 3% annual inflation rate which is at the high end (not including Shadow Statistics which claims 5%+). If you use 2.5% for the average annual inflation rate you get a 15% inflation adjusted loss instead of 20% This does not mean that everyone who stayed fully invested in stocks from 2000 until now has lost 15% in real terms. (Note also that this calculation completely leaves out dividends.) Some have, some have lost more and some have lost less and the really great stock pickers have made money. What the numbers really say is that if you start with the DOW at 11,700 in the year 2000 and calculate its growth just due to inflation at an average annual rate of inflation (2.5% or 3% or ?) until 2012, you get 15,350 - when using 2.5% - and you get 16,195 - when using 3%. The DOW at 13,000 has not even kept up with inflation, simple as that. The purpose of the quote was to highlight the economists mentioned, not to highlight the part about real losses on the DOW. But since you have commented on that, it is a good lesson for all of us about real and nominal values. It is also a good lesson about our - including mine - tendency to always calculate our percentage gains, but seldom our percentage losses and we seldom do those calculations in real, inflation adjusted values. Nominal returns look so much better than real returns. In other words, talking about "behavioral, psychological" economics, we are most inclined to do the numbers in a way that makes us feel good. I have no answers for your other questions ... I assume you did not really expect any. PS Farrell mentioned Wall Street addicts and here is a telling letter about Goldman Sachs. Cheers John

A very humorous article. He says, "But everyday investors refuse to jump in. They pulled $19 billion from funds that invest in U.S. stocks in December, according to the Investment Company Institute, and $2 billion more in January." He fails to say what the ICI goes on to say - that these unfortunate Americans were putting those funds into the bond market. Talk about bad timing, chasing returns. In other words they were not afraid of investing out of fear or bad psychology, but were just bad market timers. I still have to wonder about these articles that start with the premise that hordes of Americans are sitting on the sidelines with cash in their sweaty little palms - how do these authors think the DOW got to 13000+ with investors sitting out? Makes little sense to me. Do you suppose the author would accuse the guys mentioned in the quote below of fear and bad psychology? "Since the dot-com crash of 2000, when the Dow peaked at 11,722, to today with the market hovering around 13,000, Wall Street’s lost an inflation-adjusted return of about 20% of your retirement money. And economist Gary Shilling sees no growth through the next decade ... Nouriel Roubini warns of a decade of dark days ... Pimco’s Bill Gross sees a long “new normal” of lower returns … GMO’s Jeremy Grantham predicts “Seven Lean Years” … Martin Weiss warns that a “historic world-changing event is about to crush the U.S. economy and stock market.” Still, Wall Street lives in a fantasy land, ignores warning signs, pushing mega-IPOs, risky junk." Perhaps a few behavioral economists might be inclined to agree with the outspoken, Paul Farrell when he asserts that "Wall Street addicts" are the problem. Perhaps the few average American investors who are sitting on the sidelines because they happen to agree with the economists mentioned above deserve more credit than condescending, psychological fluff masquerading as behavioral economic analysis. Cheers John

I am reminded of a few past incredible (meaning "not credible") market peaks. I feel like the unfortunate (short term) designated driver at a rocking and rolling party. It is no fun sitting idly by while the "bubbly" (pun intended) is being consumed and praised and good cheer abounds. Oh well, it is good to see when someone has a good time and heads home in a cheery mood before the bubbly runs out and the regretting begins with "tomorrow's" retching hangover. Cheers! John

Even a degree in economics does not guarantee an understanding of what is going on in Europe and how it will affect the U.S. But for your entertaining pleasure here is a fun explanation of the ongoing Eurozone crisis ... and some thought this was going to be solved in a year or two ... that is pretty funny too. Cheers John

Of course you are perfectly right! I use the phrase "buy low sell high" mostly as a joke. It actually gives you NO information about when to buy or sell stocks, but only about what you should have done after the fact. A phrase that is only a tiny bit better is "buy as prices are falling and sell as they are rising." I like this because it is counter to our usual fear/greed emotions. We (I) tend to feel good (greed) and think we should buy when prices are rising and feel bad (fear) when they are falling and think we should sell. I like this quote from John Hussman, "One of the great challenges of investing is the distinction between hindsight and foresight. Hindsight treats each major advance, each market crash, each recession and each expansion as if their turning points were obvious, and extrapolates prevailing trends as if their continuation is equally obvious. Foresight is much messier, because it deals with unknowns and unobservables. It recognizes that major financial and economic events are often hidden from view when they are actually already in motion. Foresight requires the willingness to rely on data that tends to precede important outcomes (recessions, market crashes, durable long-term returns), even when those outcomes can't be observed in recent economic and market behavior that we can see and touch. Most importantly, hindsight creates the illusion that uncertainty is never very great, and risk management is never very challenging. Foresight demands a much greater appreciation for randomness, noise, uncertainty, risk management, and stress-testing." Cheers John