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Rosenberg Presents The Latest And Greatest Wall Of Worry
... to which the market has just one response: Brian Sack's POMO. Yet as reality and Fed perception are disconnected to record degrees, at some point even infinite money printing will have to be fully discounted. In the meantime, an $8 billion POMO prepares to lead off the latest QE2 AAPL, AMZN, NFLX pump in 20 minutes.
From David Rosenberg
At a time when sentiment is wildly bullish and economists are taking up their numbers, it is time to remind investors that the best time to have put on the risk-on trade was three months ago when everybody was wringing their hands and knuckles were turning white. At the summertime lows in the S&P 500, Market Vane sentiment was closer to 40% versus 54% today, and the VIX index (a measure of volatility in the equity market) was closer to 30x than 20x. It does not take much to turn fear into greed — just a few comments at a Jackson Hole symposium. The mid-term elections in the U.S., the unveiling of QE2 and the apparent end to double-dip risks are all in the market now. But concerns linger and here they are:
- Post-election political gridlock is not good. There is no guarantee that a lame-duck Congress will move to extend either the Bush era tax cuts or extended jobless benefits. And, the clock is ticking on the debt-ceiling file.
- China’s inflation rate has accelerated to 4½% and there is risk of more rate hikes coming as a result — see Inflation Leap Sparks China Overheating Fears on page 3 of the FT.
- Economists are placing bets on a Q4 pickup in U.S. GDP growth based on faulty seasonals with oil import data — we are not sure this effect will be as large as some believe.
- Widespread discounting and promotional activity suggests that the holiday shopping season will disappoint and the retailers have loaded up on inventory and staffing this year.
- There is tremendous dissention on the Fed regarding QE2, which may mean that this is Bernanke’s last kick at the can.
- Municipal bonds have been getting clobbered as default and liquidity concerns come to the fore.
- Sovereign default risks in Europe are clearly back on the table — Angela Merkel has made it clear that the EU’s pocketbook isn’t going to be there and that investors are going to have to take a haircut in the next bailout go-around. See Bailout Fund Stands By For First Big Test on page 4 of the FT and Irish Debt Woes Feed Eurozone Contagion Fears (Spanish-German bond yield spreads have widened out to new highs this week). Risk premia is clearly on the rise; the fact that Spanish GDP stagnated in Q3 has only made matters worse in this respect.
- The wink-wink weak U.S. dollar policy is being met with resistance abroad and it looks as though Brazil is set to again take action to reverse the Real’s gains.
- A negative Cisco surprise in both 2000 and 2007 proved to be leading indicators of the equity market.
- The view that the U.S. economy is out of the woods has not been confirmed by the Household employment data, chain store sales or home prices, all of which have come in soft lately.
- Oil prices have approached the $90/bbl mark and the latest surge has more to do with speculative investor demand than any acceleration in global economic activity. Moreover, when oil was first at this level in October 2007, the recession was only two months away and the bull market in equities ran its course.
- A 1%-plus yield on the 5-year Treasury note reveals a U.S. economic backdrop that is fraught with structural headwinds.
- Didn’t the Fed just use the words “slow”, “weak”, “depressed” and “constrained” to describe various aspects of the U.S. economic environment? You can look this up in the opening salvo of the November 3 post-FOMC meeting press release.
- The rally in gold to new all-time highs in virtually every currency is testament to the lingering concerns over the integrity of the global monetary system.
- Currency wars typically lead to trade wars and protectionism is coming our way soon (see Leaders Warn on Doha Deadlock and Failure on US-Korea Accord Hits Trade Hopes on page 2 of the FT). This is bullish for hard assets like commodities and precious metals.
- Fiscal support for the economy is soon to subside and in a major way — see Top Earners May Face Big Hit on page A4 of the WSJ as well as Liberals Press Obama Not to Extend All Bush Tax Cuts on page A5.
from Gluskin Sheff
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Chart: ES and ZB
Fuck POMO.
http://www.zerohedge.com/forum/99er-charts
But....but....David Tepper said....
quick...page Tepper to the CNBC studios immediately. This things on life support and failing fast...we need a mega-pump STAT!!!!!
Off topic...what happened to Mish's blog?
Blogger is posted a "this blog has been removed" notification.
No idea...
http://globaleconomicanalysis.blogspot.com
"There is no guarantee that a lame-duck Congress will move to extend either the Bush era tax cuts"
I'm guaranteeing the Bush tax cuts will be extended and of course the mkt will like that.
People don't actually pay for his research do they???
T minus 14 minutes and ALREADY stocks going up! Wait... I see "green shoots!" LMAO!
How is Heating oil doing? That is a wall of worry.
How is gasoline at the pump? SPR's?
Got milk?
This manipulated crap is worthy of all the dismissive commentary here, but that is about it. Long cycles have momentum. Our reality has Mementum.
Momentum+Mementum = Extend and Pretend.
Make sense?
ORI
http://aadivaahan.wordpress.com
You said it very well. The 'west' should learn to speak Chinese... just sayin'
There is no concern about dogs and cats living together, so we must be ok!
OT: I made another cartoon.
Benron Signals President Hoo After Traditional Communication Fails
got natural gas? junior miners due to explode!
Can I have some more Ketchup on my fries?
Chart: AUDJPY
Fuck POMO.
http://99ercharts.blogspot.com/2010/11/audjpy_12.html
http://www.zerohedge.com/forum/99er-charts
it's just normal price discovery process, nothing to see here
Why am I always unable to see the top of the charts you post? Is it a browser problem? Or some other? or do you post them that way? I would love to be able to see the whole.
It's always so amusing to me to hear how oil price moves are due to increased consumption or decreased consumption.
It's always worded as "demand". In the world of Old Normal economics, "demand" derives from stronger economic activity or weaker economic activity.
Well, that's true. Economic activity does define demand, but it doesn't define oil consumption. You see, demand and consumption don't have to be the same thing.
Oil's production decline is not going to allow any economic growth. Demand for oil will exceed it's availability.
In a world of oil production inadequacy, supply (phantom reserves) and production are not the same thing, and demand and consumption are not the same thing.
Demand will become higher than consumption -- and wars will start.
+1. Awesome.
Will someone pickup a gun already? You go first...
Brilliant.
I have always heard, don't bet against the Fed. And painfully sometimes I have learned, this seems to be the case.
Is now different? Why?
sschu
I, too, have learned this the hard way. but I found myself seriously considering the other day, whether this might be the time. the long end will not respond this time. the destruction will be incredible (and potentially very profitable). Game on.
With Obama closing out his trip assailing the Chinese for their currency policy, one has to wonder how long they will tolerate our wayward actions... What message does it send to other holders of our debt?
Most important was the remainder of the Gee20 did not support a U.S. resolution calling for China to let its currency float. Not so good, Barry. So our debt holders are sending the U.S. a clear message.
It's not. They are hell-bent on destroying the dollar, that can manifest itself in more than one way.
Act accordingly.
Don't forget CMG - gotta eat
Gold is getting freakin stomped today...what ISN'T down?
Where the hell are the inflation expectations?
rosenberg fails to understand one word "inflation" and "structural breakdown". Sorry that's 3 words. These 3 = massive devaluation (forced) of the USD and a collapse in the USD and Treasury market. Rosenberg is a bond bull. Good luck at losing a fortune on your bond trades David.
Inflation expectations were always too forward thinking and the crowded trade created a speculative bubble.
Ominous daily/weekly candles forming.
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