Tuesday, January 27, 2015

Morning news

Dow is off strongly because people are taking Oberhelman's cautious, highly conservative outlook as a reason to sell, I guess. Guys, his frickin' job is to keep Caterpillar in business: that's why he's being so conservative in his outlook.

Meanwhile CNBC is still putting that ignorant clueless idiot Santelli on in the mornings to shout and scream about how the US is going to hell in a handbasket.

Anyway, here's news, for what it's worth:

Brett Steenbarger - SPY redemptions. He flagged a large wad of SPY share creation a couple weeks ago, and noted forward performance after such an event is negative, so chalk one up for him. Now, he's flagged a large number of SPY redemptions since then, and notes forward performance after this sort of event is positive. 

BI - CAT Q4 earnings. Um... none of this should have been a surprise.

FT Alphaville - the US will soon have a budget surplus. Apparently, the CBO has been infected with Republican idiots, because their entire US deficit case is based on completely unrealistic interest rate numbers. Matt Klein:
More than all of the projected increase in the US federal budget deficit between now and 2025 is expected to come from higher interest payments on the existing debt.

Now, it’s entirely possible that interest rates will rise and that the debt service burden will increase commensurately. In fact, one would hope that borrowing costs eventually go up given that low rates are being driven by weak demand for credit and low expectations for real growth and inflation as far as the eye can see.

That said, we have several reasons to suspect the CBO’s forecasts.

First, it isn’t clear why interest rates would jump so much given their economic projections. Nominal GDP growth is only expected to be about 4.2 per cent per year from 2018 through 2025. The jobless rate, which is currently 5.6 per cent, is expected to float around 5.4 per cent for the next decade. Inflation is expected to be quiescent and employment growth is expected to slow to a crawl.

Those projections fit with the notion of a static tax take and persistently high levels of government spending despite cuts in discretionary programmes, but not with sharply higher interest rates.
Seems like the simplest explanation is that Obama's black and the CBO has a problem with that.

FT Alphaville - a reminder about disinflation. Again, sensible commentary from Matt Klein:
Falling prices in the euro area are one reason why the European Central Bank announced last week’s bond-buying programme. Deflation is dangerous when it leads to falling incomes and higher debt burdens. But it can also be benign if it boosts real incomes and increases purchasing power. Maybe Draghi was right the first time.

After all, the government of the world’s marginal consumer of industrial commodities recently decided that it requires much less coal, iron ore, copper, and oil than producers had been expecting. The resulting imbalance between supply and demand is currently being reconciled by a collapse in prices. At the same time, buyside investors are coming to the realization that commodities are not an asset class with a positive long-term real return, which is making the price swings even bigger than you might expect using purely fundamental analysis.
The deflation hysteria is overblown, basically. Or rather, they're not looking at the real source of bad disinflation - government austerity policy.

BBC - Greece debt repayment in full is impossible, says Syriza. Frankly, they shouldn't even want to: the Troika assured them that the structural reforms would make their debt-to-GDP better, and instead the reforms destroyed Greece's GDP to the point where debt-to-GDP is just as bad as it was before - but now with the added benefit of a crippling economic depression. More on this later, it really pisses me off.

BBC - Saudi men call for no girls on twitter. Hey, guys? The stone age called, they'd like to know when you're coming back home.

Mining.com - money still pouring into gold ETFs. It's good for the supply-demand balance, as long as the gold doesn't get sold back out a week later....

Mining.com - hedge funds raise bullish gold bets to 2-year high. Eesh! These are not the people I want to be long with. I am now getting out of gold.

Tumblr - penis shaped clouds. Yes, a whole tumblr page with nothing but clouds shaped like penises. It's the most competent commentary on the market that you'll find anywhere today.

1 comment:

  1. Priapic pics of water vapour. That's why the internet, doubters. That's why.