Are we entering the final stage of the bull market?

[ERICOPOLY]

I think that sounds right in the lab but if the earnings are being goosed by the Federal deficit then it may be a long wait.  I sort of see them continuing deficits until the consumer is done deleveraging, then as the consumer picks up they can begin to cut back on the deficit

 

http://thehill.com/blogs/on-the-money/budget/316015-budget-deficit-reaches-606-billion-cbo

 

The federal deficit seems to be shrinking by 368B$ this year and 100B$ of it seems to be unrelated to tax revenue increases.

 

I wonder if the 26% decline (from 52 week high) in the only true money is related directly to that.

[ERICOPOLY]

Agree with all of that - that's why I'd be interested to hear Moore's side... I just don't see why BAC would get crushed in a rising rate environment.

 

I remember that he was worried perhaps about all the interest rate derivatives out there.

 

Here is my take... there are people on both side of these derivatives, so a move up could be just as devastating as a move down, in theory.  Everyone, all parties, expect that rates could go back to 4%.  Just pull up a chart of last few decades history.  But very few would have realistically expected rates to go as low as they did over the past few years.  Now, if the 10 year falling to 1.5% wasn't expected, and yet everything held together nicely, then I'm not worried about the reverse happening... going back to 4% which nobody thinks is unreasonable.

 

[moore_capital54]

Hi Gents, I wasn't worried about BAC being unprofitable in a rising interest rate environment. In fact BAC and other banks should be more profitable as the cost of funds increase so does the delta on their loan books. What worries me about rising interest rates is how they will impact the valuations of various asset classes on a market to market basis. The artificially low rate environment means that everything we are currently investing in has an artificial bid. If that bid disappears there will be a rerating of risk and sometype of a multiple contraction.

 

I highly recommend reading about Stock vs. Flow. and how people within the fed (Keynesians) are beginning to worry that they have discovered the flaw in the money printing theory.

 

Best.

[Guest Dazel]

 

 

Moorecapital,

 

 

We are under the impression that the commodity cycle has turned up...It has been quiet and unnoticed...however, we have seen some crazy upturns in some stocks....not all of course. Do you have any thoughts on this anymore?

 

Dazel

[bmichaud]

Hi Gents, I wasn't worried about BAC being unprofitable in a rising interest rate environment. In fact BAC and other banks should be more profitable as the cost of funds increase so does the delta on their loan books. What worries me about rising interest rates is how they will impact the valuations of various asset classes on a market to market basis. The artificially low rate environment means that everything we are currently investing in has an artificial bid. If that bid disappears there will be a rerating of risk and sometype of a multiple contraction.

 

I highly recommend reading about Stock vs. Flow. and how people within the fed (Keynesians) are beginning to worry that they have discovered the flaw in the money printing theory.

 

Best.

 

Makes sense!

[moore_capital54]

 

 

Moorecapital,

 

 

We are under the impression that the commodity cycle has turned up...It has been quiet and unnoticed...however, we have seen some crazy upturns in some stocks....not all of course. Do you have any thoughts on this anymore?

 

Dazel

 

100%. This feels like the bottom.

[moore_capital54]

BTW one of our new favourite blogs is www.cliffkule.com - it is maintained by an employee at Al Friedberg (something most people don't know).

[mcliu]

My impression is that higher rates will cause the asset side of the bank's balance sheet to shrink since it's likely to be invested in longer duration products vs. shorter-term funding on the liability side. Has anyone thought about how this impacts capital requirements?

[glider3834]

It impossible to make market predictions but on the question - are there fewer opportunities to buy now than in the last 3 years? The answer has to definitely be yes. And that should make all of us cautious.

[jay21]

My impression is that higher rates will cause the asset side of the bank's balance sheet to shrink since it's likely to be invested in longer duration products vs. shorter-term funding on the liability side. Has anyone thought about how this impacts capital requirements?

 

Loans aren't MTM.  This should only affect securities and it appears that most banks are trying to keep short duration.  I am only worried about the impacts of very high rate vol.  I think banks should do fine in a steady increasing rate environment.

[finetrader]

I'm thinking that with EM currencies devaluation, from which S&P500 companies derived a portion of their profits from , and with rising long term rates which will eventually lower corporate profit because of higher interest payment, that this does not bode well for record profit margin that US corporation has enjoyed lately.

[fareastwarriors]

http://www.bloomberg.com/news/2013-08-25/multiples-expanding-fastest-since-dot-com-bubble-as-rally-ages.html

 

Multiples Growing Fastest Since Dot-Com Bubble as Rally Ages

 

[DCG]

I'm in the highest % of cash I've been in since I think 2008.