tag:blogger.com,1999:blog-34323687.post1845075109024760819..comments2024-03-29T03:19:56.674+00:00Comments on Macro Man: Macro Stocktaking Unearths 10 QuestionsMacro Manhttp://www.blogger.com/profile/12324967552369915949noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-34323687.post-83373043650961612132012-07-14T16:08:27.238+01:002012-07-14T16:08:27.238+01:00Very rare buy signal. Only 4 times in the last 15 ...Very rare buy signal. Only 4 times in the last 15 years...<br /><br /><br />http://tinyurl.com/rarebuysignalAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-30744550084557251552012-07-13T21:06:21.504+01:002012-07-13T21:06:21.504+01:00With negative/zero rates, even a sideways market w...With negative/zero rates, even a sideways market with no volume or volatility delivers a dividend yield that is ahead of inflation. <br /><br />So there isn't really much question that you have to be in dividend paying equities (I prefer Europe), preferreds or better quality junk bonds. Yields would have to rise quite sharply from here to change this equation significantly. This is one reason why the US equity market may rise a lot farther than most people think, and farther than perhaps it merits. <br /><br />As for Qe3, you can make a decent argument that Euro aversion has already provided QE3 by forcing punters into Treasuries, so even a small recovery in confidence in Europe would promote rotation out of USTs and into risk assets.Leftbacknoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-75975326178321628532012-07-13T20:16:21.042+01:002012-07-13T20:16:21.042+01:00interesting thoughts TMM. It seems like every summ...interesting thoughts TMM. It seems like every summer we are pondering the same questions and then every winter trying to chase or wait for a pullback..argggh<br /><br />Personally I think we are headed for a global slowdown. US growth trajectory has stalled (but will not go down much more since it wasnt that high to begin with) but more importantly EM demand I think has been overestimated. The slowdown in basic materials/infrastucture/industry sector will lead to a slowdown in consumers there (though the rate of growth in EM consumer demand will still be much higher than in the US) <br /><br />As for QE, even if the fed buys a trillion of treasuries, what is that going to do..sure S&P will rip but for how long? rates are already so low. I think the kicker would be nominal GDP targeting like the squid is talking about or exotic asset purchases like BoJ of ETFs<br /><br />SPX who knows. Not shorting it yet..if we hold above 1400 for more than a few days I will probably re evaluate. Still invested regardless of the outlook as conviction is not that highabee crombiehttps://www.blogger.com/profile/13320039155613443039noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-25581104444662708432012-07-13T17:13:56.432+01:002012-07-13T17:13:56.432+01:001) Are we headed for global recession?
It seems t...1) Are we headed for global recession?<br /><br />It seems to me that we may already be in one, or that we are about to enter one. However, b/c growth has been slow, and monetary policies are not excessively tight, it is likely that any such recession will be rather shallow. In fact it may not meet textbook definitions, outside of Southern Europe. US this Fall/Winter might be 0 and -0.2%, for example.<br /><br />2) Have growth & earnings expectations been lowered enough yet?<br /><br />It depends. The businesses that are exposed to Europe have probably already warned. Some of US retail has been bid up based on a US 3% growth story which is obviously not going to arrive. SPX 1365, trading at about P/E 13 based on $105 probably is not wildly off base.<br /><br />3) What is going on with the consumer?<br /><br />Patchy. Someone said pause in deleveraging, pause in spending is also true. US lower income folk are putting stuff on the credit card until things improve. US higher income folk are battening down the hatches ahead of higher taxes. Geographically there are some pockets of healthy recovery, the cost of living in North Dakota is up!<br /><br />4) When will the inventory cycle turn?<br /><br />As soon as the fiscal cliff issues resolve? US fiscal and monetary policy very cloudy here, so nobody spending, ordering, hiring or investing.<br /><br />5) Have European rates markets moved onto the complex plane?<br /><br />If Lewis Carroll had written about fixed income markets this is what it would look like. Clearly some people's returns will be imaginary, while others have decided to just get long peripheral debt. After all, if it all goes up in flames we will all be out of a job anyway...... IBG, YBG.<br /><br />6) Is Asian growth about to tank? What about monetary policy? Does it matter?<br /><br />[Insert requisite joke regarding Japanese machinery orders, which are already "Tankan"]. Chinese fiscal stimulus and domestic consumption more important to Asia than BoJ chess games?<br /><br />7) Has Europe done enough to get through the summer?<br /><br />Let's see... "Jacques? bonjour...." Hmm, no answer. "Guten Tag, Fritz..?" Out to lunch.... well, perhaps they have, since they are all about to go away for August. Nobody trading means nobody selling? STFU policy in effect among EU pols? Hope so!<br /><br />8) Is QE3 coming and if so, when?<br /><br />In view of the ineptitude of Congressional tossers, and their ability to stall and create a mini crisis, I would say QE3 is already overdue. September at the latest. But recall that BB can flag it ahead of time, in a Jackson Hole type speech, or at H/H testimony and then it will be risk on, Charlie.<br /><br />9) Will the Euro-funded carry trade continue or is the Dollar about to get smoked?<br /><br />Both currencies suck for good reasons, so how about a range trade of several months within a 4-5% range (EURUSD 1,21-1,28)? In the event of a global reflationary CB intervention, a resumption of Risk On will see JPY smoked, especially against USD and EUR, not so much against commodity currencies.<br /><br />10) When will the Debt Ceiling debacle kick off again?<br /><br />Congress are fully capable of causing a little debacle again but it will be an echo of last time. BB can cut it short with a QE3 announcement at any time. (Maybe this is why he has waited?)Leftbacknoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-85784790914619941512012-07-13T09:52:53.183+01:002012-07-13T09:52:53.183+01:00Robert Brusca coined a useful term for any new QE ...Robert Brusca coined a useful term for any new QE from Bernanke:<br /><br />Marginal futilityDonlasthttps://www.blogger.com/profile/06016550764999112587noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-82861442988449810622012-07-13T09:12:28.946+01:002012-07-13T09:12:28.946+01:001) Are we headed for global recession?
You betcha...1) Are we headed for global recession?<br /><br /><b>You betcha.</b><br /><br />2) Have growth & earnings expectations been lowered enough yet?<br /><br /><b>Not even close.</b><br /><br />3) What is going on with the consumer?<br /><br /><b>A pause in deleveraging. The consumer still has an unsustainable level of debt.</b><br /><br />4) When will the inventory cycle turn?<br /><br /><b>Middle of next year.</b><br /><br />5) Have European rates markets moved onto the complex plane?<br /><br /><b>Yes, but only for the half-life of some of the man-made elements.</b><br /><br />6) Is Asian growth about to tank? What about monetary policy? Does it matter?<br /><br /><b>a. Yes<br /><br />b. The world has recoupled. The most relevant monetary policies are being set by non-Asian entities.<br /><br />c. No</b><br /><br />7) Has Europe done enough to get through the summer?<br /><br /><b>Just enough to let all of the bureaucrats and politicians START their vacations - then it will all hit the fan. :)</b><br /><br />8) Is QE3 coming and if so, when?<br /><br /><b>Might get hinted at soon, but I really doubt (barring a crisis) that they do much before the election.</b><br /><br />9) Will the Euro-funded carry trade continue or is the Dollar about to get smoked?<br /><br /><b>The European periphery can not survive a stronger euro. Period.</b><br /><br />10) When will the Debt Ceiling debacle kick off again?<br /><br /><b>Right after the Labor day recess ends. Normally, I would say that the desire to campaign for re-election trumps all other issues, but this is just too big of a political football to ignore.</b>Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-86792258003469974072012-07-12T16:10:31.800+01:002012-07-12T16:10:31.800+01:00Re QE3 - well, the question is whether Bernanke &a...Re QE3 - well, the question is whether Bernanke & co believe that anything but a truly massive QE3 would work, given the diminishing returns we saw. When I say massive, I don't mean a couple of hundred bns. Given that QE1+2 were about 1.5trn, I'd say that if BB goes for anything but 1trn+ it's not going to do much. Look at UK - BoE now holds about 40% of the gilts. If Fed wanted to reach similar levels, they would have to buy about another 2trn if I remember right. <br /><br />While that could give a good kick to asset prices, I doubt that this would get past the rabid Republicans who might lynch BB for "printing money". I might play "guess the author" here with "In the United States it is almost inconcievable what rubbish a public man has to utter to-day if he is to keep respectable" (albeit replacing US by Brussels would be more appropriate).Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-66137553972874880562012-07-12T15:35:31.993+01:002012-07-12T15:35:31.993+01:00Thanks for posting.
In the same spirit, I though...Thanks for posting. <br /><br />In the same spirit, I thought I'd share some off the cuff thoughts. <br /><br />I see 2 catalysts for a rebound in economic momentum. A resolution of the tax issue and the inventory cycle. Regarding the latter, I'd just note that the ISM inventory index, at 44, is only a couple points below the long term average of 46, so it's not clear if the inventory drawdown is enough for a bounce yet. <br /><br />The labor market deterioration may be the result of employment growth returning to 'trend' rather than a sign of an upcoming recession. Maybe we average 100k payroll growth for the rest of the year? <br /><br />The libor fixing issue may more likely be an overhang over equities that is more likely to drive a small compression in p/e rather than impact earnings.<br /><br />Re: ISM and the Fed, I suppose the main argument against it is that policy is constrained, and the uncertainly around the effects/costs of unconventional policy is higher than ever. So perhaps they need a stronger signal to do more. Hawks could also argue that since the drop was driven by Europe, which is outside the Fed's control, there is not much to be gained by additional easing. <br /><br />Question: how much of the recent risk rally was driven by QE expectations? Is is possible that the recent sell off was driven by the fact that the minutes did not show a substantial bias towards more QE? <br /><br />IMO, the upside for earnings growth is very constrained by the wide profit margins. Expectations could certainly go higher, but it's hard to see them in the double digit range without a strong pickup in employment. <br /><br />IMO, Debt Ceiling debacle may hit markets in August, given that the Treasury runs out of money in early Sept.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-89186267479553625982012-07-12T14:56:25.172+01:002012-07-12T14:56:25.172+01:00As the master shit-sandwich eater would say...it&#...As the master shit-sandwich eater would say...it's just it's time - the current cycle is over....Amplitudeinthehousenoreply@blogger.com