The consensus expectation is overwhelming that Fed Chair Yellen will deliver a dovish message at Jackson Hole. Macro investors have largely eliminated their short Treasury position and look to be long risk, particularly via equities and EM. FX positioning is long USD and long EM, the long USD largely because the euro zone economy is slipping again and the ECB is hinting at further ease. Our question is whether Yellen can be more dovish than what is now priced in, not whether she will be dovish on the Richter scale of dovishness. Full dovish, semi-dovish, or contingent dovish.
Even Hellicopter Ben would have balanced remarks. However, Janet Yellen has taken dovishness to an all-time high or low dpending on your perspective.
There is much hope pinned on continuing economic recovery in the United States despite a deterioration of the global economy virtually everywhere else. While it was not surprising to see a bounce back in activity after a contractionary first quarter, there are several economic data points that suggest that sustainability of the bounce is unlikely. Expectations are very likely well ahead of reality at the current time. This increases the risk of disappointment in the months and quarters ahead which could be a negative for the markets.
Sometimes we are convinced it was completely by design, and not a weird little coincidence, that one of Germany’s most sprawling red light districts is just steps away from the European Central Bank. This fact becomes comically obvious right around happy hour... as self-congratulatory ECB economists and their bureaucratic bank underlings crowd the bars and cafes after work which are simultaneously frequented by pimps, thugs, and other assorted low-lifes. One would be forgiven for legitimately asking the question: which of these professions has done more damage to humanity? My [fiat] money’s on the bankers.
In October 2008, the month after Lehman failed and the Great Recession started, industrial bellwether Caterpillar underwent a series of 19 consecutive, record, declines in Global dealer retail sales declines, finally emerging from its unprecedented funk in May of 2010, just in time to celebrate the start of financial and economic Greece's collapse which ended with a sovereign default. Well, as of July 2014, that record is no longer valid, because starting with a -1% drop in Global retail sales in December 2012, CAT has now posted a new record of 20 consecutive global delaer retail sales declines, after a -9% Y/Y print for the month of July.
Good thing the Federal Reserve isn`t worried about inflation, another 2% rise is just noise. But when the Fed does start worrying about inflation, not only is it too late, it is 1970s too late!
While the markets are currently suggesting that the "dip" is over, there are several immediately prevailing risks that could catch unwitting investors.
Is there something particularly notable about a 17x trailing PE multiple on the S&P 500? According to Deustche's David Bianco, there is especially during mid to late cycle expansions, i.e., after three (or much more in this case with the S&P 500 now repoting 5+ years of EPS growth) years of rising earnings. In fact, as DB calculates, the only two periods of a PE over 17 after 3 years from the last EPS decline are 1965-66 and 1996-98 (Figure 2) below. And right now. It should be self-explanatory that both of those historic periods ended with a sharp equity correction.
The current 'boom'in energy production, the hangover from the housing bubble, and the long-term decline in manufacturing employment are combining to shift the employment profile of the US economy. But as Deloitte Unioversity press notes, the national story of slow recovery obscures the more complicated regional picture: As is the case during most business cycles, the pace of recovery has been very uneven among the states. At present, only 16 states plus the District of Columbia have employment rates at least one percent higher than they were prior to the start of the recession. Overall, as the following chart shows, Americans have been struggling to find work, but some states and industries have had an easier time than others.
Why can't, or rather won't, the Fed let the bubble market collapse once again? Simple - as the following chart shows, the illusion of wealth is now most critical when preserving the myth of the welfare state: some 50% of all US pension fund assets are invested in stocks and only 20% in Treasurys.
"Anti-Putin" Alliance Fraying: Germany, Slovakia, Greece, Czech Republic Urge End To Russian SanctionsSubmitted by Tyler Durden on 08/16/2014 11:04 -0400
Greece, Slovakia, Czech Republic, Germany... the chorus of voices demanding an end to Russian sanctions is starting to drown out the neocon warmongering efforts of the west...
There is a standard view of energy and the economy that can briefly be summarized as follows: Economic growth can continue forever; we will learn to use less energy supplies; energy prices will rise; and the world will adapt. The following view of how energy and the economy fit together is very different - it is based on the principle of reaching limits in a finite world.
“It’s a Little Misleading to JUST Call This a Depression. It’s WORSE Than That”
This weekend’s “Things To Ponder” is comprised of a variety of readings that cover a fairly broad spectrum from educational to informative and even a little bit sarcastic.
Canada Releases Atrocious Jobs Data; Then Revises It Above The Highest Estimate Following Public OutcrySubmitted by Tyler Durden on 08/15/2014 09:08 -0400
This morning it was take two for the Canada jobs print, which was as follows: In July, Canada employment increased 41.7K in July according to Statistics Canada, from -9.4K in prior month. This was about 41K higher than the previous "erroneous" print, and double the original estimate: high enough to make everyone happy. In fact, it was so high, it surpassed the highest range of the forecast, which topped out at 41.4K based on 20 economists.