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When the Bond Market Goes Boo?
Submitted by Leo Kolivakis, publisher of Pension Pulse.
Friday
morning at 8:30 a.m. Eastern, traders around the world will all be
glued to their Bloomberg terminals eagerly awaiting the release of the
first US jobs report of 2010. According to a buddy of mine who trades
currencies, Bloomberg's mean consensus forecast is at zero, with
estimates all over the map.
"Kind of makes you wonder why we pay
these economists big bucks for!", he lamented. He's right, most
economists are fence sitters and can't make a call. I laid it all out
in my Outlook 2010. I expect huge job gains (even higher than the number
posted on Zero Hedge) with substantial upward revisions to the previous
reports. I also expect the greenback and crude to rally but gold will
get hammered on the news.
Barring some shock, tomorrow's job
numbers will likely further jolt the bond market. Matthew Brown and Wes
Goodman of Bloomberg report that Treasuries’ 2-10 Year Yield Spread Nears Highest in 20 Years:
The
difference between two- and 10- year Treasury yields widened to within
4 basis points of the most in at least 20 years as the Federal Reserve
signaled it will hold its target interest rate at a record low.
The so-called yield curve steepened after minutes of the Fed’s last
meeting showed officials believe economic growth will be “rather slow
relative to past recoveries.” The Treasury will announce plans for next
week’s debt sales today.
“Growth
and inflation concerns are pushing up longer yields, while market
participants are betting that the central bank will keep rates on
hold,” said Michael Markovic, a senior fixed-income strategist in
Zurich at Credit Suisse.
The 10-year note
yield was 3.83 percent as of 8:25 a.m. in London, according to BGCantor
Market data. The 3.375 percent security due in November 2019 was little
changed at 96 9/32.
The rate is 2.82 percentage
points more than two-year securities. The spread was 2.84 percentage
points earlier today, within 4 basis points of the biggest gap since at
least 1990. The curve widened to a record 2.88 percentage points on
Dec. 22.
The government will sell $10 billion in
10-year Treasury Inflation Protected Securities on Jan. 11, $40 billion
of three- year notes on Jan. 12, $21 billion of 10-year securities on
Jan. 13 and $13 billion of 30-year debt on Jan. 14, according to
Wrightson ICAP LLC, an economic advisory firm in Jersey City, New
Jersey.
Growth Indicator
The spread indicates
the chance of a U.S. recession by year-end is “very low,” according to
a report Jan. 5 by Joseph Haubrich and Kent Cherny, researchers at the
Fed Bank of Cleveland.
A steep curve indicates
strong growth and a flat one suggests a weak expansion, the report
said. A sloping yield curve gives banks incentive to borrow at
short-term rates and make longer-maturity loans, providing stimulus to
the economy.
The three-year sale amount
estimated by Wrightson ICAP would match the most ever, while the rest
of the auctions would fall short of records.Fed
officials discussed whether the economy is strong enough to allow their
$1.73 trillion of asset purchases to end in March and differed over the
risk of inflation, minutes of their last meeting showed.
Differing Opinions
A few policy makers said it “might become desirable at some point” to
boost or extend securities purchases aimed at lowering mortgage rates,
while one person sought a reduction, according to minutes of the Dec.
15-16 meeting of the Federal Open Market Committee released in
Washington yesterday.
On
inflation, some officials said slack in the economy will damp prices,
and others saw risks from the central bank’s “extraordinary” stimulus.
The Fed is buying $1.25 trillion of mortgage-backed securities issued
by housing-finance companies Fannie Mae, Freddie Mac and federal agency
Ginnie Mae. The central bank began the program in January 2009.
The central bank separately purchased $300 billion of Treasury
securities from March through September 2009 and is buying, through
March, $175 billion of corporate debt issued by government-backed
Fannie and Freddie and the government- chartered Federal Home Loan
Banks.
‘Extended Period’
Fed policy makers
maintained a pledge to keep interest rates low for an “extended period”
following their meeting on Dec. 15-16. The promise is helping anchor
yields on two-year notes, which tend to track the central bank’s target
for overnight lending because of their short maturity.
The Fed is targeting a range of zero to 0.25 percent for overnight loans between banks.
The
likelihood of a raise is rates at the Fed’s June 23 meeting fell to 24
percent yesterday in New York, according to Federal Funds Implied
Futures. The probability was 41 percent a week ago.
The difference between yields on 10-year notes and Treasury Inflation
Protected Securities, or TIPS, a gauge of trader expectations for
consumer prices, widened to 2.41 percentage points, within 2 basis
points of the most since July 2008.
Inflation
will be “fairly low” in the U.S. this year, said Bob Doll, chief
investment officer for global equities at BlackRock Inc. in New York,
the world’s biggest money manager with about $3.2 trillion in assets.
American stocks will outperform cash and Treasuries, he said on
Bloomberg Television yesterday.
Susanne Walker of Bloomberg reports that U.S. Breakeven Rate Reaches 18-Month High on Growth, Inflation:
The
gap between yields on U.S. 10- year notes and inflation-indexed debt
reached the widest since before Lehman Brothers Holdings Inc. collapsed
as investors bet that consumer prices will accelerate as the economy
strengthens.
The breakeven rate on
10-year Treasury Inflation Protected Securities, or TIPS, increased as
much as six basis points to 2.46 percent, the widest since July 2008,
as the U.S. announced it will sell $10 billion of the debt next week.
Yields on other government securities were little changed before a
report tomorrow forecast by economists to show that the U.S. didn’t
lose any jobs for the first time since December 2007.
“There’s
some worry about how we absorb the supply and some are worried about
inflation,” said Lawrence Dyer, an interest-rate strategist in New York
at HSBC Securities USA Inc., one of the 18 primary dealers that trade
with the Federal Reserve. “Even if you are bullish about the long-term
rates outlook, you don’t want to buy cheap bonds that will get cheaper,
so people have limited risk appetite.”
The breakeven
rate, which rose from 0.04 percent in November 2008, shows the
improving economy may change sentiment and spark further losses in
bonds. Yields on the benchmark 10- year Treasury note hit 3.91 percent
last week, the highest level since June.
Move ‘Sooner’
Policy
makers are considering how to exit from unprecedented stimulus and
emergency credit programs amid signs the U.S. economy is rebounding.
Fed
Bank of Kansas City President Thomas Hoenig said the central bank
should move “sooner rather than later” to reduce stimulus, with a goal
of eventually boosting the benchmark interest rate to “probably between
3.5 and 4.5 percent.”
“Maintaining
excessively low interest rates for a lengthy period runs the risk of
creating new kinds of asset misallocations, more volatile and higher
long-run inflation, and more unemployment -- not today, perhaps, but in
the medium- and longer-run,” Hoenig, who votes on monetary policy
decisions this year, said today in a speech in Kansas City.
U.S. regulators including the Fed warned banks to guard against possible losses from an end to low interest rates and reduce exposure or raise capital if needed.
So how long will the Fed stay on the sidelines? There too, economists are all over the map, but the majority see no rate increases before the end of the year:
More
than 80% of economists participating in the Blue Chip survey believe
the Fed will begin to raise the federal funds target rate by the end of
this year, with the first increase not coming until late September or
early November. The target is now at a record-low level of 0% to 0.25%.
The key remains a
healthy labor market, Gertler said. "It is hard to imagine anything
changing until there is positive and robust employment growth," Gertler
said.
The Fed could tighten with the unemployment rate high but not if employment growth is not sustained, he said.
Ideally for the Fed, the bond market would start to gradually push
interest rates higher allowing the central bank to follow behind.
Dean Maki, chief U.S. economist at Barclays Capital Inc., predicts the Fed will tighten in September.
The
"extended period" language will be changed "at one of the next few
meetings," Maki said, maybe even at the bank's next meeting on Jan.
26-27.
Glassman at JPMorgan Chase doesn't
think the Fed will tighten for the next two years. "Nothing in the way
they describe the outlook makes you think they believe it is time to
get moving," Glassman said.
The economy will be too
fragile this year and the Fed will be reluctant to tighten in 2011
because the federal government is likely going to try to get the budget
on a sustainable path, leading to the biggest fiscal adjustment ever,
Glassman said.
My views are mixed. On the one
hand, given the pension crisis and the fragility of the financial system, I believe the Fed would rather err on
the side of inflation instead of risking a deflationary episode. They
will try to keep a steep yield curve for as long as they possibly can,
allowing banks to repair their balance sheets and trade in all sorts of
risk assets.
On the other hand, robust figures in the labor
market will shift market expectations, forcing the Fed to react sooner
rather than later. So the big surprise in 2010 will come if the Fed
starts raising rates in the second half of the year.
On that
note, hold on to your hat, the bond vigilantes will be out full force
on Friday. And when the bond market goes 'boo', its chill will be felt
across all asset classes.
***UPDATE: US sheds 85,000 jobs***
BOO! U.S. employers unexpectedly cut 85,000 jobs in December, government
data showed on Friday, cooling optimism on the labor market's recovery. Need to check revisions to previous reports, but I still expect hiring to pick up significantly in the first quarter.
»
Leo is right but for the wrong reasosns. Stocks will fly just as they have on more money printing and not a fundamental improvement in the economy. Gold will fly higher and gold stocks highest of all. Sinclair and his formula are proving to be so damn right.
Dude, Leo got owned pretty hard up in this thread. Still, keep shouting the good shout. I say you get one more shot at seeing a true "surprising" data point that you are calling for before your credibility is more or less ruined. It could still happen.
Mish has a post up "2010 Census Hiring Employment Scam" that depicts a possible employment jump for early 2010, but a specious one. TPTB will be hiring 1.3M to work on the census--three times the amount hired for the 2000 census--and may use the numbers to champion as recovery data.
Let's see if Kolivakis uses that as his proof later on.
Read my latest comment on ZH. Census hiring will add to jobs but there are other sectors that will be hiring too. Stay tuned.
Leo, I appreciate that you make actual predictions.
Most of Zero Hedge (while i love it) is "this trend seems spooky but you figure out what it means" type of stuff.
At least you put it out there. Keep it up.
Chet,
Thanks, when I was working on the sell-side, I used to dread those 7:30 a.m. meetings where I'd have to listen to analysts tout their stocks (not a morning guy). Out of ten of them, only one was worth listening to and they never told me where they're putting their own money.
Then, I moved over to the buy-side where morning meetings were at 8:30 (lol), but the same thing over there. Most of the portfolio managers would regurgitate the same crap the sell-side analysts were feeding them.
I'd sit there, listen to them and when it came to my turn to speak, I would always say where my hedge fund managers were most heavily concentrated and where they are seeing things going forward.
The portfolio managers at the pension funds didn't seem to care about the hedge fund managers (mostly cause they were stupid and jealous of them), but I still kept hammering away at them.
When I was allocating to top hedgies, I would always prod them and question them, never accepting anything at face value. Some hated me, some loved me, but they all respected me.
I'll never forget one meeting I had with Ray Dalio of Bridgewater in early 2004 or late 2003. I told him straight out that longer-term, I was more concerned about deflation. He listened, looked at me, and asked me "son, what's your track record?". LOL, a polite way of saying STFUP!!! He's one of the greatest hedge fund managers ever. A very intelligent man who hedges carefully and is always well diversified (sometimes too diversified).
Hi Leo - for what is worth, i agree with you on the jobs for the Q1 (as far as statistics go!); however, here are my two cents, be more open minded and do not dismiss as Armaggedon, the talk about the dollar, gold etc. you cannot change the trend or what is suppose to happen, just look at all the facts with an open mind....did you see Bill Gross on CNBC after the jobs report? the tide is changing....
i agree on your take on the jobs coming up....but hey, i guess today after reading some of the comments on your post you must know why the economist never say anything....everybody is pushing some paper somewhere and trying to get paid....thats when things come to collapse because its time for change and thats when gold comes into play...no offense to the dollar it is just the way things have always worked...cannot change human nature by government decree - dimas
Bernanke will have to crash the equity markets to save treasuries. There will be an initial flight to safety followed by hyperinflation. The end game will be a new reserve currency.
Personally as much as I like Leo I hope he won't let his pride allow him to get burnt crispy. With respect to American investments, commercial paper issuance dropped like a rock in the last few weeks and M3* is contracting.
Lets see how Q2 goes, but you damn well better be nimble baby.
"allowing banks to repair their balance sheets and trade in all sorts of risk assets."
Allowing banks to LEVER UP and trade in fantastically risky risk assets and skim the micro % profits x THE LEVERAGE for the bonus pool you mean, the only balance sheet repair these guys are interested in is foisting off worthless MBS to Freddy and Fanny.
Bonus party!
Until it ALL FAILS.............times THE LEVERAGE of course
Fail Cramer!
errrrr I mean Leo
Should we dump now Leo?
Is the pump portion of the program over?
AndyC
Government numbers are all BS. Trying to make "calls" on them is treacherous at best. They must have figured out that a robust employment number at this point would do exactly as you predicted and tank the bond market, so they came in with a safe -85,000 figure which is close to the -84,000 from yesterday. Your analysis was correct but your faith in the government to actually present the "real" numbers was off. Who knows what the "real" figures are. I would forget what comes out of the BLS and go the shadowstats.com for something closer to the truth.
I cannot buy Leo's predictions for job growth at all.
Just one look at [b]Daily Job Cuts[/b] tells me things are still pretty bad. Just look at the last couple of days! How can things be getting better when so many companies are laying off, closing up shop and filing bankruptcy? Click the links for Nov. and Dec. 09, they seem bottomless!
http://www.dailyjobcuts.com/
As long as I keep seeing this kind of stuff on a daily basis, weekends included, I'll not buy into the "things are getting better" story.
I was out-of-work for 11 months, finally got a job. But it is working for the U.S. government at an Air Force base. Not a profit making business, but a profit robbing business. But it was all that was available, there is absolutely nothing else here in Oklahoma, with the exceprion of medical profession jobs.
I took what was available, even though a lot of folks criticize me for doing so. I understand the criticism, but I really had no other choice at this point in time.
Plus it is doing something I really like doing, working on and maintaining aircraft. With all of the civilian contractors laying off, if you want to work on aircraft, you gotta go with the government.
Maybe someday, that will change?
Same here, working with avionics for the Navy at a location on the East coast. I was officially out of work for 8 months thanks to being one of the lucky ones to be kept around for the wind down of a Chap 13 otherwise it would have been about 1 year. I managed one real interview and one phone interview with approximately 30 applications sent off to jobs in my area. These were all jobs I was certainly qualified for, many of them being entry level jobs that someone with 6 years of experience shouldn't have been "priced" out of and I was going to be more than happy to take a pay cut from the 90k range down to 50k just to keep from having to sell (at what ended up being a 13k loss after commissions) and just so I could stay active in the market doing something I was interested in.
I probably could have found one had I broadened my search area but having to move out of state and away from all family and friends wasn't something I was willing to compromise on as the UI + my wifes salary was paying the bills.
Name the industry that's hiring. There are 10 million people looking for a job. The drop in initial claims is SEASONALLY ADJUSTED. Claims RISE in December, they don't fall.
If JOBS are going to rise, there would be somebody hiring. Who's hiring? States are laying off.
Your prediction was just plain stupid.
Leo - In fight club you get to fight one person. If you get your ass kicked then you go to sidelines and realize what you did wrong while relishing the euphoria the fight. Come back to fight another day.
Job Growth???
Dear Colleagues and Friends of the University of Illinois,
The University of Illinois is a 142-year-old institution that has weathered every challenge and ultimately thrived. We will continue to thrive, but we now face a cash crisis triggered by the state's financial situation which is grim and worsening. The state budget is out of balance with a backlog of unpaid bills nearing $5 billion and short-term borrowing covering roughly a comparable amount. The state's credit rating has been recently downgraded and among the 50 states only California is worse.
The consequences for our University and others in this state are unprecedented and worsening. In our case, the University of Illinois has received only 7% of this year's state appropriation since the first of July. The shortfall is more than $400 million and mounting. At some point we will be unable to meet payroll and complete the academic year unless there are significant payments from the state as promised. My hope is that the Governor, leaders and members of the General Assembly will come together immediately to address the state's escalating financial crisis. As they do so they will have our full support and the support of the people of Illinois who understand the tragic consequences of inaction.
Until we see signs of this financial crisis lifting we must implement the following short term measures to conserve cash:
* Earlier in the fiscal year, we set aside $20 million in reserves and in November we directed units to reduce expenditures by 6% to yield an additional $45 million. Unfortunately, we now need to use all of this $65 million to address our immediate cash crisis. While addressing only a fraction of our overall shortfall in state payments, this action is essential to help sustain the University's payroll.
* We have struggled this year to avoid furloughs for faculty and staff, but that is simply no longer possible. Personnel expenses represent the majority of our budget. I am hereby directing the chancellors, deans and other University administrators to join me in taking a total of ten furlough days -- or two days per month beginning in February and through the pay period ending on June 15, 2010. Additionally, I am directing faculty members and academic professional staff to take a total of four furlough days, beginning in February and through the pay period ending on May 15, 2010, or essentially one day per month. A furlough is a temporary leave of absence without pay and this measure will contribute $17 million. Exceptions to furlough day policies are: employees whose annual base salaries are $30,000 or less; graduate assistants and fellows; employees with retirement agreements for retirement no later than August 15, 2010; and individuals paid 100% from grant or contract funds as of December 15, 2009. In the case of Civil Service staff, we will seek comparable cost reductions in accord with Civil Service rules and bargaining obligations.
* The chancellors and I have reinforced an earlier directive to all academic and administrative units to avoid, eliminate and/or delay expenditures so as to conserve cash. Effective immediately, an absolute freeze on all hiring or interim wage increases is declared. Exceptions to the hiring freeze, such as hires to honor offers extended by or before the date of this letter, commitments required to support specific research and contract activities, (e.g. federal stimulus research grant activities), or emergency compensation adjustments must be approved by the appropriate Chancellor and the President.
Beyond the immediate cash crisis we face significant uncertainties in 2011. In anticipation of next year's challenges, academic and administrative support units should consider issuing notifications of non-reappointment for selected individuals in employee classes whose terms and conditions of employment require advance notice of termination.
A work group to recommend administrative reorganization and restructuring was appointed in mid-November 2009. This group has focused on savings in the areas of information technology, purchasing and consolidation of administrative support services. I have asked it to provide a preliminary report to the Board of Trustees and University Community on January 21. Our overall goal must be to preserve the strength of our faculty and academic programs by reducing administrative costs.
These are difficult measures and yet they represent an incomplete list of steps we must take. We need to take innovative measures not just to "cut budgets" but to grow revenues and reduce actual costs. At the same time, deans, department heads, chairs and faculty must strategically reassess the scope of our academic programs and search for opportunities to consolidate or cut offerings that we value but may no longer be able to afford. In the process, we must protect our core Land-Grant missions of teaching, research and service, including clinical care; remain competitive for faculty, staff and students; maintain essential services, but eliminate duplicate and lower priority activities; consolidate and share services and resources; make efficient use of facilities; and take such other steps as are necessary to sustain the University's quality and continuity of operation long term.
All of these steps are being taken to mitigate the negative impact of the state's escalating financial crisis. Unfortunately we cannot anticipate when state leaders will act on a plan that reorders priorities and places education first, makes the painful but essential cuts in state expenditures, and increases state revenues essential to restore the financial integrity of this state and its institutions of higher learning. As acknowledged repeatedly by many state leaders, education at all levels, and especially at the University of Illinois, is the economic engine and future of our state and its people. I urge our leaders to act now.
With your help, we will get through this difficult period, determined to grow stronger and better. But we will only be able to do that if, like the state, we make the painful but essential decisions now. I thank you for your understanding and support and I welcome your counsel as we move forward.
Stanley O. Ikenberry, President (Interim)
What say ye, LK? 'Huge job gains, with massive revisions indeed!!!
I think one could make a cae that equities are now held by the weakest of th weak hands in history. Value guys long gone, shorts obliterated, stockholders completely dependent on Uncle Sam's (incompetent) and continuing largesse at nosebleed valuations. That would make one think that it's
the Fed or it's agents that are still holding and a bunch
of prop desks and hedge funds thinking they can game the
fed are now 99% of the daily trade.
I do love it when finance industry types use hard-man metaphors like "I put my ass on the line", or in Leo's pet homoerotic-dalliance-with-the-handsome-neighborhood-meatcutter fantasy, "Put my balls on the table". Most often that translates to something like "I lost some more of my clients` money today ... time for some bullish 'stay the course' spin". Well, cry me a river, dude.
Sweeping a hostile neighborhood in Iraq, tracking Talib and Al Qaida fighters on their turf in Afghanistan, wrestling a fishing boat through a storm in the Gulf of Alaska or a big rig over the Rockies, or even just getting up early every day and grinding out a real's day's labor ... *that's* putting your ass on the line. I'll wager there's at most a handful of Ponzi-Financial-market types in the entire US of A who have a clue what the f*ck that means. Much easier to spend your days straddling the government-sponsored flows of money and Ponzi credit, taking a cut wherever you can, and adding exactly zero value (in fact, negative value) to the dwindling remnants of the real economy.
Ooh, so "You guessed wrong about the NFP" and all those lovely keystrokes above were wasted. Spare me.
... or in Leo's pet homoerotic-dalliance-with-the-handsome-neighborhood-meatcutter fantasy, "Put my balls on the table" .... LOL!!
I always ask for my meatcutter's "hard italian salami" ...
comments are being pulled off of here.. what's up?
anyway - this prediction was like a farmer's almanac just saying 'it'll rain sometime, so go out there and plant today!!'
I still see brazil and indonesia to outperform most anything else in 2010 but not as great as last year of course..
They are like politicians - finger in the wind, never willing to risk their job over hard analysis and truth-telling.
Leo
Actually many employers have found that their production levels have not changed or are somewhat improved even with fewer employees. That's what worries me. Many jobs that have been lost are never coming back.
That's the good part of a recession/depression; belt-tightening that increases efficiency is a good thing for those particular companies, with the proviso that they do not so burden their employees that job satisfaction plunges.
Job satisfaction surveys do show that is has been degrading for years, and it remains to be seen what ratio of the sort of companies you are describing will downsize and maintain a satisfactory workplace for their employees.
Anecdotally, here in my department, we've been down two positions for quite some time, and while I think we could use one, the other one in retrospect was a basically superfluous position. And, having a bit more happen in each day has actually made the days more interesting.
To your point toward Mr. Kolivakis, I think you make a good one. Unemployed people aren't going to do much to help any burgeoning recovery.
It's amazing what the threat of a loss of income will do to your motivation. I know the 6 months leading into my global companies bankruptcy were some of the hardest I worked at the company. We started challenging old road blocks and things we had always thought were inefficient and took on some new projects we thought would add value to the company that had been envisioned before but just never done because the status quo was comfortable.
We're in for a long slog. Owning the front end of the
yield curve seems much more dangerous than owning the back end.
"I still expect hiring to pick up significantly in the first quarter."
- Not really. I'm out here among the poor folks (not the jetset crowds with mommies and daddies who made sure their little ones got to go to good schools to get overpaid) and things continue to get worse. Of course, Lockheed Martin's firing people still despite winning contracts left and right.
Even Gross agrees
http://www.cnbc.com/id/15840232?video=1380302832&play=1
start at 9:55
"What Government has basically done up to this point is basically to MISUSE the funds and to put them into the Wall Street sector instead of the Main street sector. Now we need to focus on the labour market, it's been a twelve month delay now"
Or right at the end
"We need to focus on people as opposed to rich bankers"
And yeah, I know y'all are haters. But his job is to play the system.... like you aren't trying also?
Leo's not even in the US. the Canadian economy is much better than in the US. You really need to be here to understand how bad things are, and where they are going. Reading the financial news is not enough. Talk to the people, walk the streets, read the local papers, etc. It is bad out there.
Some pharmacists I know were giggling about their Xmas spending last month. They were comparing notes about how they and their friends and some of the families all found delight in spending as few dollars as possible in second-hand gifts, mentioning things like old portraits of strangers and flowers, colorful socks, and assorted kitsch.
When frugality to the point of putting a twenty dollar spending limit on Xmas is cool among the six-figure professional crowd, you can see that a mass attitude change toward demand destruction is not going to help any burgeoning 'recovery'.
Leo - sorry, I'm not taking any more blue pills. Even if stocks keep going up forever, you won't see me "buying the dips". I just can't support a system that is so obviously manipulated. I'll keep fortifying my bunker, and ignoring the CNBC lifestyle. I have the kind of financial security that no one can ever take away. Plus, I stay true to my sense of justice and morality.
Anon keeps his self respect and honor, foregoing any possible Profit. Way to go!
Hehe, point taken, but I do know where anon is coming from. I make money, not as much as others, more than some, but I take considered positions that I can sleep with. OK that didn't come out right.
+1 Principled
Leo's half right. They're selling the long end of the
curve despite the crappy job numbers. Seems idiotic
to me, but what do I know? Given that everything is
fixed these days, da boyz are probably setting up buys
for themselves on the long end of the yield curve
and an immediately profitable handoff from their equity sales. Same PPT forces that handled equities off the
March bottom will flatten the yield curve. Heh, heh...
they know the recovery is bs just as well as everyone
else.
By hiring in January, do you mean, the type of hiring that UPS is going to be doing, the negative kind of hiring?
Leo,
My local retailers had a LOT of NEW FACES around Christmas and they opened early and closed late. NOW its quiet in any of the stores and with half as many sales people. The NEW hires are suddenly goners !! America has wisened up BUT some people (you included) have NOT. Stocks should reflect reality not some twisted logic that is being perpetrated on the folks !!
Leo,
It's NOT going to happen! Huge job growth??? Maybe the 750k to 1 million census bearue hires will again "fool" the fools into thinking we are growing, but its not REAL job growth. Nothing about this foolish burst of irrational exuberance has been REAL.
You can run from debt levels that are to high but you are eventually going to get caught. The consumer, all financial related businesses and the REIT's balance sheets have not been allowed to adjust to reflect the the REAL world asset value and the Worlds Governments are drowning in debt There are only three outcomes for debt:
(1) It can be kicked down the road, but remember it's still there and eventually you have to pay the Piper.
(2) It can be defaulted on. Which is what needs to happen.
(3) It can be paid off. Which is not going to happen.
I see the US meandering around up and down up and down and up and down over the next 5 to 10 years if these markets are not allowed to clear. The average investor is also going to get killed during this period, just like what has happened over the last 10 years.
Simply put, the world powers and people have and continue to grossly defy the laws of productive capital allocation. I simply think that it is so grossly mis-allocated that we won't be able to kick the can much farther. Most of the world and especially the US is a ticking time bomb. We just don't know what the timer has been set at.
Ok, so sell all your assets, buy gold, build a bunker, store up canned food and guns, and hunker down waiting for Armageddon! I put my money where my mouth is. Period.
Some of us HAVE put our money where our mouths are, but with that attitude you're probably not going to get a welcome invitations to any of our bunkers when TSHTF...
Your response makes no sense. So if I think the economy is deteriorating, I should just buy gold and build a bunker?
And if I did so, I would not be putting my money where my mouth is, as you imply?
You seem like a child to me.
+1
If you disagree, you're a fiscal armageddonist who doesn't put your money where your mouth is.
>yawn<
Kolivakis, for me, paints a picture of a cunning character but not a wise or conscientious one.
His advice to buy chinese solar companies might make you money--indeed in the short run might make quite a bit of money--but it will come at the expense of supporting a terribly toxic and heavily subsidized chinese manufacturing industry of inferior solar modules instead of better performing and more environmentally conscious manufacturers in the US, Germany, and elsewhere around the world.
In short, Kolivakis' investment advise strikes me as the very sort of short-sighted SHOW ME THE MONEY NOW sort of shit-thinking that has been stifling innovation and honesty for all too long. The greedhead pathos is so much easier to rationalize than a constructive ethos.
Invest as you wish, Mr. Kolivakis, as I will invest in who and what I wish. Enjoy your shekels.
Thanks for the advice, but I will stick with Soros Fund Managment, Citadel, DE Shaw, Tudor and a few other top funds and completely ignore you since you have no skin in the game.
Like I said, cunning but not wise or conscientious.
I am happy to be contrary to your ways.
That's actually a good point. What is one to do during this period of uncertainty? For me, it's capital preservation. Like many of us I took my ass whoopin during the tech bust. NOT THIS TIME! It's a personal choice Leo. Time will only tell if it will prove to be the right decision. Listen, my wife and I are in the home building business, we pray daily that this mess is actually clearing itself up. I just don't see it right now, nor do I see any other catalyst to correct the situation other than allowing the market to clear itself of the mis-allocated resources, or at least 70% of it and MAINLY for the US Governmentto wake up and reverse course on it's debt level and bail out efforts. I don't see much of a difference now from the 30's in that there is extensive writings on the fact that the Government involvement throughout the 1930's actually kept businesses from making the capital investments that would have led to growth. It's no different today for a US based small business! It's pretty damn hard to commit capital to something when you see the decisions our Government is making and contemplating and especially if you know what the "possible" outcomes could be for our economy.
So I guess what I'm saying is my perspective on the situation goes beyond a short term stock trade. So for now, I'm content in hunkering down.
Leo,
We have a bear market rally of epic proportion, stocks are grossley over valued and overbought by any reasonable or historical measure. Gold has out preformed the stock market by what 500% over the past 10 years?
Its not armageddon, its reality, and its very obvious what is going on.
You are entitled to your opinion as are most of the traders on ZH who can't see further than their 15 minutes charts. I stand by everything I wrote in my Outlook 2010 and focus on what the top funds are buying and selling. The rest is just "noise" and "entertainment". Cheers.
The economy is going to improve near term?? Ha Ha.
Received this from a friend yesterday-
"Dear Colleagues and Friends of the University of Illinois,
The University of Illinois is a 142-year-old institution that has weathered every challenge and ultimately thrived. We will continue to thrive, but we now face a cash crisis triggered by the state's financial situation which is grim and worsening. The state budget is out of balance with a backlog of unpaid bills nearing $5 billion and short-term borrowing covering roughly a comparable amount. The state's credit rating has been recently downgraded and among the 50 states only California is worse.
The consequences for our University and others in this state are unprecedented and worsening. In our case, the University of Illinois has received only 7% of this year's state appropriation since the first of July. The shortfall is more than $400 million and mounting. At some point we will be unable to meet payroll and complete the academic year unless there are significant payments from the state as promised. My hope is that the Governor, leaders and members of the General Assembly will come together immediately to address the state's escalating financial crisis. As they do so they will have our full support and the support of the people of Illinois who understand the tragic consequences of inaction.
Until we see signs of this financial crisis lifting we must implement the following short term measures to conserve cash:
* Earlier in the fiscal year, we set aside $20 million in reserves and in November we directed units to reduce expenditures by 6% to yield an additional $45 million. Unfortunately, we now need to use all of this $65 million to address our immediate cash crisis. While addressing only a fraction of our overall shortfall in state payments, this action is essential to help sustain the University's payroll.
* We have struggled this year to avoid furloughs for faculty and staff, but that is simply no longer possible. Personnel expenses represent the majority of our budget. I am hereby directing the chancellors, deans and other University administrators to join me in taking a total of ten furlough days -- or two days per month beginning in February and through the pay period ending on June 15, 2010. Additionally, I am directing faculty members and academic professional staff to take a total of four furlough days, beginning in February and through the pay period ending on May 15, 2010, or essentially one day per month. A furlough is a temporary leave of absence without pay and this measure will contribute $17 million. Exceptions to furlough day policies are: employees whose annual base salaries are $30,000 or less; graduate assistants and fellows; employees with retirement agreements for retirement no later than August 15, 2010; and individuals paid 100% from grant or contract funds as of December 15, 2009. In the case of Civil Service staff, we will seek comparable cost reductions in accord with Civil Service rules and bargaining obligations.
* The chancellors and I have reinforced an earlier directive to all academic and administrative units to avoid, eliminate and/or delay expenditures so as to conserve cash. Effective immediately, an absolute freeze on all hiring or interim wage increases is declared. Exceptions to the hiring freeze, such as hires to honor offers extended by or before the date of this letter, commitments required to support specific research and contract activities, (e.g. federal stimulus research grant activities), or emergency compensation adjustments must be approved by the appropriate Chancellor and the President.
Beyond the immediate cash crisis we face significant uncertainties in 2011. In anticipation of next year's challenges, academic and administrative support units should consider issuing notifications of non-reappointment for selected individuals in employee classes whose terms and conditions of employment require advance notice of termination.
A work group to recommend administrative reorganization and restructuring was appointed in mid-November 2009. This group has focused on savings in the areas of information technology, purchasing and consolidation of administrative support services. I have asked it to provide a preliminary report to the Board of Trustees and University Community on January 21. Our overall goal must be to preserve the strength of our faculty and academic programs by reducing administrative costs.
These are difficult measures and yet they represent an incomplete list of steps we must take. We need to take innovative measures not just to "cut budgets" but to grow revenues and reduce actual costs. At the same time, deans, department heads, chairs and faculty must strategically reassess the scope of our academic programs and search for opportunities to consolidate or cut offerings that we value but may no longer be able to afford. In the process, we must protect our core Land-Grant missions of teaching, research and service, including clinical care; remain competitive for faculty, staff and students; maintain essential services, but eliminate duplicate and lower priority activities; consolidate and share services and resources; make efficient use of facilities; and take such other steps as are necessary to sustain the University's quality and continuity of operation long term.
All of these steps are being taken to mitigate the negative impact of the state's escalating financial crisis. Unfortunately we cannot anticipate when state leaders will act on a plan that reorders priorities and places education first, makes the painful but essential cuts in state expenditures, and increases state revenues essential to restore the financial integrity of this state and its institutions of higher learning. As acknowledged repeatedly by many state leaders, education at all levels, and especially at the University of Illinois, is the economic engine and future of our state and its people. I urge our leaders to act now.
With your help, we will get through this difficult period, determined to grow stronger and better. But we will only be able to do that if, like the state, we make the painful but essential decisions now. I thank you for your understanding and support and I welcome your counsel as we move forward.
Stanley O. Ikenberry, President (Interim)"
I am talking 10 years Leo, did you even read my post? I am not a ZH trader, you go ahead and focus on the "top funds", thanks anyway.