Posts filed under “Think Tank”

Words from the (investment) wise August 30, 2009

Words from the (investment) wise for the week that was (August 24 – 30, 2009)

Stock markets, in general, again logged gains last week as pundits perceived economic data to be better than expected. But the recovery path is not home and dry yet, as shown by declines in crude oil, a number of emerging stock market indices, small cap indices and high-yield corporate bonds. All said, risky assets displayed some fatigue despite positive economic reports.

Caution remained over the robustness of any economic upswing, as reflected by the solid performance of government bonds, with safe-haven currencies such as the US greenback and the Japanese yen also edging up.

As expected, Federal Reserve Chairman Ben Bernanke was appointed by President Barack Obama on Tuesday to serve a second term. “Mr Obama is said to credit Mr Bernanke with a leading role in helping to avert economic catastrophe. By reappointing Mr Bernanke – who worked in the Bush White House – Mr Obama can also emphasize his bipartisan credentials at a time when he is embroiled in a fiercely partisan battle over healthcare reform,” commented the Financial Times.

30-08-09-01

Source: LOLFed.com

However, critics of Obama’s decision were plentiful and Morgan Stanley’s Stephen Roach, blaming Bernanke for his pre-crisis actions, said (via the Financial Times): “It is as if a doctor guilty of malpractice is being given credit for inventing a miracle cure. Maybe the patient needs a new doctor.” Bill King (The King Report) ascribed the stock market rising subsequent to Obama’s announcement to a “thank God it’s not Larry Summers” rally.

The past week’s performance of the major asset classes is summarized by the chart below – a set of numbers showing both the S&P 500 Index and government bonds rising, indicating an expectation of a subdued economic recovery and that the Fed’s monetary policy will stay easy for an extended period of time.

30-08-09-02

Source: StockCharts.com

A summary of the movements of major global stock markets for the past week, as well as various other measurement periods, is given in the table below.

The MSCI World Index (+1.3%) and MSCI Emerging Markets Index (-0.2%) again followed separate paths last week as China, Hong Kong and Brazil underperformed. Mature stock markets have recorded gains for a straight seven weeks, whereas emerging markets have seen two back-to-back weeks of declines. The end result is that emerging markets have now underperformed developed markets for four weeks running. Could this be a sign of a retrenchment in risk appetite?

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Category: Think Tank

An Uncomfortable Choice

An Uncomfortable Choice

August 28, 2009
By John Mauldin

An Uncomfortable Choice

What Were We Thinking?

Frugality is the New Normal

And Then We Face the Real Problem

Argentina, Brazil, Uruguay, New Orleans, Detroit, and More

We have arrived at this particular economic moment in time by the choices we have  made, which now leave us with choices in our future that will be neither easy, convenient, nor comfortable. Sometimes there are just no good choices, only less-bad ones. In this week’s letter we look at what some of those choices might be, and ponder their possible consequences. Are we headed for a double-dip  recession? Read on.

An Uncomfortable Choice

As our family grew, we limited the choices our seven kids could make; but as they  grew into teenagers, they were given more leeway. Not all of their choices were good. How many times did Dad say, “What were you thinking?” and get a mute reply or a mumbled “I don’t know.”

Yet how else do you teach them that bad choices have bad consequences? You can  lecture, you can be a role model; but in the end you have to let them make their own choices. And a lot of them make a lot of bad choices. After having raised six, with one more teenage son at home, I have come to the conclusion that you just breathe a sigh of relief if they grow up and have avoided fatal, life-altering choices. I am lucky. So far. Knock on a lot of wood.

I have watched good kids from good families make bad choices, and kids with no seeming chance make good choices. But one thing I have observed. Very few teenagers make the hard choice without some outside encouragement or help in understanding the known consequences, from some source. They nearly always opt for the choice that involves the most fun and/or the least immediate pain, and then learn later that they now have to make yet another choice as a consequence of the original one. And thus they grow up. So quickly.

But it’s not just teenagers. I am completely capable of making very bad choices as I approach the end of my sixth decade of human experiences and observations. In fact, I have made some rather distressing choices over time. Even in areas where I think I have some expertise I can make appallingly bad choices. Or maybe particularly in those areas, because I have delusions of actually knowing something. In my experience, it takes an expert with a powerful computer to truly foul things up.

Of course, sometimes I get it right. Even I learn, with enough pain. And sometimes I just get lucky. (Although, as my less-than-sainted Dad repeatedly intoned, “The harder I work the luckier I get.”)

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Category: Think Tank

Income/spending/savings rate

July Income was flat vs expectations of a gain of .1% but June was revised higher by .2% to a decline of 1.1%. Spending rose .2%, in line with forecasts and June was revised up by .2%. Because the headline PCE was flat, REAL spending rose by .2% (vs .1% gain in June) and with…Read More

Category: MacroNotes

UoM Final Consumer Confidence

The Final August U of Michigan confidence figure was 65.7, above the preliminary reading of 63.2, higher than the consensus estimate of 64 but is a touch below the 66 seen in July. Both Current Conditions and the Future Outlook rose from the Aug preliminary number. However, from July, Current Conditions fell almost 4 points…Read More

Category: MacroNotes

Income/Spending/Savings

July Income was flat vs expectations of a gain of .1% but June was revised higher by .2% to a decline of 1.1%. Spending rose .2%, in line with forecasts and June was revised up by .2%. Because the headline PCE was flat, REAL spending rose by .2% (vs .1% gain in June) and with…Read More

Category: MacroNotes

Bernanke’s Identity Theft a Shame on Many Levels

Good Evening: Like a self-sealing tire, U.S. stocks were punctured this morning but managed to reflate this afternoon. Some grim news about the health of non-TARP banks was behind the decline, while speculation in financial firms that DID receive bailouts helped launch the comeback. If you think it is bizarre to see taxpayers actively chase…Read More

Category: Markets, Think Tank

AAII vs II

In contrast to the weekly Investors Intelligence data out yesterday which revealed that newsletter writers are the most bullish since Dec ’07 and the least bearish since Oct ’07 with the balance expecting a correction, the AAII sentiment measurement of individual investors reflects a different opinion. Bulls were little changed on the week at 34…Read More

Category: MacroNotes

King Report:

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Let’s say that an aging baseball slugger who had abused performance-enhancing drugs for over a decade had a horrendous collapse in his hitting statistics. So the team put him on even stronger doses of steroids, HGH, testosterone, dianabol, insulin, protein shakes, creatine, glutamine and unknown powerful designer pharmaceuticals.

The team had him do Olympic and ballistic [weight] lifts, plyometrics and intense ‘core’ training. Though the slugger’s home runs and RBIs had fallen over 30% from the previous year, he started to hit one more HR per month and a few more RBIs.

This is the US economy and financial system. Trillions of dollars have been poured into the system and economy and trillions more have been pledged to buttress troubled entities. There have been nationalizations, record stimulus and various inducements for consumer to spend more money. And all this is producing is modest m/m gains or smaller losses!

At some point the US, like the slugger, must come off the juice, or the artificial boosts will blow them up.

Even though MLB has a shoddy enforcement and drug testing record at least it isn’t the entity injecting the massive amount of unnatural stimulants.

Upon further review yesterday’s economic data was not as jiggy as initially thought.

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Category: Think Tank

Commercial paper outstanding jumps

On a seasonally adjusted basis, commercial paper outstanding rose $43.7b, the largest gain since April and was mostly led by the asset backed category that saw a gain of $41.5b, the most since January and maybe is beginning to respond to some thawing out in that sector due to the Fed’s TALF program. Financial unsecured…Read More

Category: MacroNotes

Economic data

Q2 GDP was left unchanged at -1% vs expectations of a fall to -1.5%. Personal Consumption was revised to a drop of 1% from -1.2% and vs an expected fall of 1.3%. Government spending was revised higher to a rise of 6.4% from 5.6%. Also helping was an upward revision to Exports. Offsetting this was…Read More

Category: MacroNotes