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Monday, September 22, 2014

Some useful news reading today


New Deal Demoncrat - weekly indicators show signs of deceleration. Though everything is still okay.

Bespoke - subsectors are dropping like flies. This story of participation-narrowing has now become a thing.

New Deal Demoncrat - blah blah commie Keynesianism. All ribbing aside, he outlines what he thinks will be the possible origins of upside and downside risk in the US over the next year. I'll quote the entire thing because you need to pay attention:
4. What would make the economy come closer to "escape velocity?" Is there anything that is reasonably likely to happen that could give the economy a second wind? I see two candidates:
• Even lower long term interest rates (refinancing, home purchasing). Long term treasuries bottomed at 1.74% in mid 2012. Mortgage rates made a bottom just over 3% shortly thereafter. Corporate bonds yields also made lows in 2012. Recently corporate bonds in particular have come near those lows. A new low in bond yields would send a powerful signal that the expansion is going to continue for awhile, especially with the inevitable new round of refinancing of consumer debt at lower rates.
• Gas prices declining under $3/gallon. Gas prices are like a tax on consumption. The less consumers spend on gas, the more they can both save and spend on other stuff.
• A significant rise in median real wages. This would be nice. I just don't see it in the near future (except as a byproduct of a further fall in gas prices). Hence, not a third candidate.

5. On the other hand, what are the most likely trends that would cause an economic downturn?
• Well, first of all, the reverse of the two items I listed above. Higher interest rates would bite into consumption, as would higher gas prices.
• "Conundrum 2." If the Fed actually starts raising short term rates while long term rates are declining, that would create one of the classic signs of a recession coming - i.e., a flat to inverted yield curve. If it happens in a deflationary environment, that would be even worse. Such a yield curve has only happened twice in the last 90 years -- in 1928 and 2006. That's why I call it the "Death Star."
• The combination of no increase in wages, no new lows in long term interest rates so no refinancing, together with a significant downturn in stock prices lasting several quarters. This is the most likely scenario. By next summer, we will have gone 3 years without consumers having been able to refinance debt at lower interest rates. Since 1981, this has been the sine qua non for a downturn. When the inability to refinance is accompanied by no wage increase, and no increase to new highs in widely held assets, in each case a recession has followed.
So there's your cheat sheet for the next year.

Ritholtz - why hedge with a hedge fund? He asks why someone like Calpers, with a multi-decade investment horizon, should hedge short-term fluctuations. Hey Barry? You missed your own point: if there was any hedge fund in the world that did successfully hedge short-term fluctuations, it would outperform SPY. No hedge funds do because they're all run by idiots, thus there is no incentive for Calpers to choose a hedge fund over buying SPY.

Ritholtz - is money flowing out of Europe? Yes it is. Wonder when the plutocratic German elite will realize they just killed their continent? Probably never, considering they've always been happy with a deflating economy.

FT beyond brics - EMs will never be DMs. Not what the title suggests. But this part here was interesting:
EMs will go on growing and their citizens will go on getting richer. As with some of the Gulf states today, they may reach levels of GDP per capita that are higher than in many developed markets. But they will still be EMs because they will not be the stable, liberal democracies Titherington describes.
It's interesting because rich people in unstable illiberal nondemocracies have a strong incentive to put some of their wealth into a certain yellow metal. I'm only sayin'.

Reuters - China home prices fall for fourth straight month. I wonder what other China-loved wealth products have done badly over the past few months? Any yellow metals following this trend?

Mineweb - India's coal import rush leads to port congestion. If India's port system can't even handle an increase in coal demand, then how the heck is India supposed to do all this capital investment growth crap that Modi is expected to accomplish?

Reformed Borker (Bork Bork Bork!) - buttcoin now losing major support. Quote:
The question for longer-term Bitcoin bulls is whether or not Apple Pay makes it so easy to buy stuff electronically that the idea of mining / storing digital coins and breaking them up for transactions becomes totally ridiculous, other than for narco-traffickers or international arms dealers.
Oh you di'n't!

Vice - Atlas mugged. Everyone loves the story of how Galt's Gulch Chile turned out to be a disaster. Personally, I want to remind you all that I was mocking Galt's Gulch Chile before it was popular.

1 comment:

  1. Josh Brown bearish Bitcoin? That sounds like a buy signal to me. Lessee now...i have U$403 painted at this moment. Not bad.