The Big Picture - Macro Perspective on the Capital Markets, Economy, Technology, and Digital Media

With sovereign credit risk, particularly Greece, being a main backdrop to=
today’s $ rally and equity weakness, here is a midday scorecard on sovere=
ign 5 yr CDS. Greek CDS is widening out by 32 bps to 268 and is up about=
100 bps in just the past two weeks. Spain is wider by 8 bps to 102 and vs=
87 two weeks ago. Mexico is wider by 11 bps to 146 up from 139 two weeks=
ago. US is wider by 4 bps to 39 to the highest since July and up 6 bps ov=
er the past two weeks. The UK CDS is up by 2.5 bps to 82 and up from 70 tw=
o weeks ago. To compare the 39 level for the US government, here are some=
US corporates that the market says has better credit, KO, PEP, SYY, COST,=
PG, KMB, CL, AVP, UTX, LMT, GD, LLY, MRK and JNJ.

David A. Rosenberg is Chief Economist & Strategist at Gluskin Sheff, with a focus on providing a top-down perspective to the Firm’s investment process. Mr. Rosenberg has earned both Bachelor of Arts and Master of Arts degrees in Economics from the University of Toronto. Prior to joining Gluskin Sheff, David was Chief North American Economist at Bank of America-Merrill Lynch in New York and prior thereto, he was a Senior Economist at BMO Nesbitt Burns and Bank of Nova Scotia. Mr. Rosenberg has ranked first in economics in the Brendan Wood International Survey for Canada for the past seven years and was on the U.S. Institutional Investor All American All Star Team for the last four years.

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It’s that time of the year when ‘sell-side’ research departments publish their Year-Ahead Reports (as I once did in the not-too-distant past); as do all the financial magazines.

I realized after countless emails and phone conversations (in that order) that there is a very high expectation that I publish one too. I honestly have no intention of publishing a specific set of forecasts in my current role as the Chief Economist and Strategist for Gluskin Sheff for public consumption — the granularity of my recommendations is reserved for our Investment team and our client base. Be that as it may, I am more than happy to comment on what I see as an emerging consensus and my general view on the direction of the economy and the markets in the coming year without getting into too much detail or numerical forecasts, which are the domain of the ‘sell-side’ macro teams globally.

At the outset, let it be known that when I read everyone else’s year-ahead prognostications, all I can think of is, “where do I store this stuff for a year so I can look back and say ‘That was so wrong!’.” It’s not that the reports are always bullish every year; it is that they seem so contrived. And, as I mentioned in the December 10th edition of Breakfast with Dave, this year, probably like most years, there seems to be a remarkable level of agreement. Based on my reading, here is what I conclude the consensus views are as we head into 2010:

• Muted recovery, but positive growth, for sure! No risk of a ‘double dip’.
• Equity markets up!
• A barbell strategy of domestic multinational blue chips and emerging market equities.
• The U.S. dollar is…neutral, but we did locate more bulls than bears (so much for the ‘carry trade’ thesis).
• Positive on commodities for the most part.
• Concerned about government balance sheets, and therefore…
• …Bearish on long term government bonds because they are the ‘competition’ and, after all, who would tie their money up for 10 years at 3.5% when you can lose 22% in stocks? And, therefore…
• …Bullish on spread product (as long as it’s not long-term). And, therefore…
• …Really comfortable with high yield (just for the coupon and the view that default rates will come down).
• Certain that volatility will not be an impediment.
• The Fed will begin to raise rates in the second half of the year, but that this will have no impact since they will still be low.

So here we are with a glorious opportunity to reintroduce Bob Farrell’s Rule 8: “When all forecasts and experts agree, something else is going to happen.”

That being said, these economists and strategists, many of whom I know, are smart guys (and gals) and they are human. To ‘talk your book’ is human; to have the courage to ‘buck the consensus’ is divine. I too am human; I also like to feel that I have courage of my convictions; and I too have a “book” (of sorts — it’s called reputation). But I have decided to take the opportunity of the “Year-Ahead Moment” to transition from sell-side to buy-side and more importantly, to reflect on the past year and really try to prognosticate from the gut. You would be surprised how a blend of intuition and experience can make a difference in a cycle like the one we are in that has absolutely nothing in common with the other recessions of the post-WWII era.

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Another nice annotation from David Singer:

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chart by David L. Singer at SINGER$MARKET

Visit msnbc.com for breaking news, world news, and news about the economy

Source:
Looking for alien Earths? Here they come
Space probes pick up exoplanets galore, beginning with the weirder ones
Alan Boyle
msnbc.com Dec . 11, 2009

http://www.today.msnbc.msn.com/id/34350505/ns/technology_and_science-space/

The political buzz today is all about the President’s falling approval ratings. He has now fallen faster than President Bush did (prior to 09/11).

The simple solution for the White House: Stop jerking around with Financial Reform. When there is high unemployment, people don’t want to see bailed out bankers making a killing. Fix what was wrong with the system, what led us down the path to disaster.

As noted in these pages back in September, the brain trust around Obama made a terrible tactical error by tackling Health Care before they fixed Wall Street. (See: Tactical Error: Health Care vs Finance Regulatory Reform). The record low approval ratings during his presidency reflect that.

Unless Obama wants to lose one or both Houses in 2010, he best shake things up.

My advice?

Put Paul Volcker in charge of Financial Reform.

IT WILL SAVE YOUR PRESIDENCY.

’nuff said . . .

Detailing T-Bill Purchases

Thurs. Dec. 17 2009 | 8:50 AM ET

Art Cashin, head of floor operations at UBS, has the buzz from the NYSE.

OK, folks, listen up: we are getting closer to the holidays, and some of you are starting to panic. Less than 10 Shopping days to go, and more than a few of you are on the verge of buying a gift card.

Don’t do it!

Uncle Barry will tell you what no one else will: Gift cards blow. The straight dope your nephews and nieces and grand kids are too nice to tell you: They hate getting them.

Why? Because they suck.

Nothing says “I am both thoughtless and inconveniencing” like a gift card. They let the recipient know that you couldn’t be bothered actually picking out a present, so here is a cash equivalent — only so much less convenient than the crisp paper kind of cash. And, you can only spend it in one place.

How much do gift cards suck? Each year, $5 billion in gift cards go unclaimed, forgotten about or lost. That’s how much people value them — they throw away $5 effen billion dollars worth every year!

They are an expensive and inefficient way to say “I feel obligated to get you something, but don’t know what.”

There is even a cottage industry to buy unwanted Gift Cards from their unhappy owners. The only reason sites like Gift Card Rescue or Swap A Gift or Plastic Jungle or Gift Card Buy Back even exist at all is because so many people want a way to get the damned cards out of their hands.  That these firms even exists is a testament to the gift cards’ crapulence.

Ahh, but there are alternatives. Sure, you could actually select a thoughtful gift tailored to the recipient, but if you were that type of shopper, we wouldn’t be discussing gift cards, now would we?

My advice to those of you who are haven’t figured this out yet yourselves, consider four superior options to the random gift card:

1) If you must get a gift card, then get them a Gift card they will actually use. Maybe they have a favorite clothing store or gadget shop. Not a random retailer, but a place you KNOW they really like. (as opposed to being near where you live). If your daughter is a Starbucks junkie, then at least you know the gift will be used — and appreciated.

2) Better yet: Get them an Online gift card (aka eGift Cards) But only to an account you are sure they already have. (This is the key). If your nephews shop at Amazon, if your nieces are regular eBay bidders, if your grandkids frequently buy songs at the Apple iTunes Music Store, then that is a far better option.  eGift cards are far less likely to be lost or go unclaimed. They can be recovered if accidentally deleted. And, they reflect some thought on your part.

3) Even better still: Get them a prepaid credit card. All the major credit card firms (Amex, Visa, Master Card) let you buy prepaid CC as a gift card. These can be used anywhere credit cards are accepted. Its practically cash, and far more flexible than a Abercrombie or a Sears gift card.

4) Best of all: Just give them the damned cash. Hey, its gonna be worthless in a few years anyway — you might as well start giving it away now, while it still has some value!

There you have it — my holiday present to all the lousy gift givers out there.

Seasons Greetings!

I hereby invoke Bob Farrell’s Rule #9: When all the experts and forecasts agree — something else is going to happen.

Let’s look at the forecasted year-end 2010 levels for the S&P500 and S&P500 earnings: