recovery

Party Like Its 1914

Forget the last two day's decline.  The consensus opinion for 2014 is pretty uniform: stocks will go up modestly, bond will decline in similar fashion.  Job growth will grind higher, as will inflation.  The Fed will taper its bond-buying program, slowly.  And so it may all come to pass...  But ConvergEx's Nick Colas ponders what could go wrong, or at least different.  Top of his list: fixed income volatility, in conjunction with stock market valuations that are, at best, average. Colas reflects ominously on 1914, where if you read the papers of the day you would have seen much of the same "Yeah, we got this" tone that prevails today.  As the great market sage Yogi Berra once opined, “It’s tough to make predictions, especially about the future.” Either way, a cautious outlook is the better part of valor so early in the year.

Why Taper-Driven EM Turmoil Is A Big Problem (In One Chart)

Emerging Market equities have tumbled over 4% in the last 2 days on heavy volume. The last time the world experienced a major Emerging Market meltdown, the US was still by far the world's major 'consumer'. However, as the following chart from JPMorgan shows, that is very much not the case anymore and the last few days ugly echoes of the mid-Summer Taper Tantrum in Emerging Markets (most notably Asia), while being shrugged off by most, may be much more important to any sustained global recovery than your friendly local asset-gatherer would ever care to admit.

The "Record Recovery", At Least For Porsche

While the non-luxury auto-manufacturers suffered from a case of cannel-stuffed constipation in December, Luxury brands appeared to do very well thank you Mr. Bernanke:

  • *PORSCHE REPORTS RECORD SALES IN '13 21% RISE OVER '12
  • *PORSCHE CARS NORTH AMERICA DEC. SALES UP 10%

As the company notes, it "exceeded 40,000 sales for the first time in the history of Porsche in the US," as the 911 sold 10,442 units and Cayenne 18,507 units.

75% Of Spaniards Don't Believe Rajoy's "Economic Recovery" Meme

With unemployment stuck at record highs and loan delinquencies surging (as we discussed here, here and here), it is hardly surprising that El Economista reports that more than two-thirds of Spaniards do not believe the "recovery" promised by Prime Minister Rajoy has been created. While Cramer ignorantly confidently espoused this morning that Spain is recovering (and with Spanish stocks and bonds back near pre-crisis levels), a massive 75% of the Spanish people believe their personal situation will be the same or worse in 2014.

No Waking From Draghi's Monetary Nightmare: Eurozone Credit Creation Tumbles To New All Time Low

Today the ECB just announced the latest set of undead monetary statistics for November. To nobody's surprise, even though M3 posted the tiniest of possible annual increases, rising from 1.4% to 1.5% (3% below the ECB's 4.5% reference value which it considers consistent with its price stability mandate), loan creation to the private sector declined once again, this time dumping to -2.3% from a revised -2.2%. As the WSJ reports what we have said for the past year, "The deepening decline increases pressure on the central bank to embark on further measures to stimulate lending, analysts said."

Frontrunning: January 3

  • Heavy snowstorm hammers northeastern U.S. (Reuters)
  • Coins Remain a Bright Spot for Gold (WSJ)
  • Gross’s Mistake on Fed Taper Echoes Across Pimco Funds (BBG)
  • China December services PMI falls to four-month low (Reuters)
  • General Mills Starts Making Some Cheerios Without GMOs (WSJ)
  • U.S. considers flammability risk of Bakken crude after accidents (Reuters)
  • China Mobile’s Costly iPhone Deal with Apple (WSJ)
  • Hezbollah Upgrades Missile Threat to Israel (WSJ)
  • UK House Prices Cap Best Year Since 2006 as Mortgages Surge (BBG)
  • China tells police to be loyal to party amid graft crackdown (Reuters)

The Ivy League's New Dream Job: Not Wall Street, But Waiting Tables

As recently as October, we joked that the "best-performing" job category in the US was also the most miserable one - i.e., "bartenders and waiters", also known as jobs which often times get paid below minimum wages and rely on the goodwill of their customers for tips to survive. And indeed, as of November, there were a record 10.4 million waiters in the US, representing a record 45 consecutive monthly increases in this job category - hardly the stuff robust recoveries are made of. However, it turns out the joke may be on us after all because as the WSJ explains, "Waiting Tables at Top-Tier Restaurants Is New Career Path for Ivy League and Culinary School Grads." It appears that gone are the days when every Ivy graduate's fast-track to stardom dream was to become a banker (or in the worst case, a corporate lawyer). And with Wall Street's increasing conversion into a utility, the aspirations of the best and the brightest will progressively shift elsewhere. But waiting tables? Well, as it turns out that's where the money is because "head waiters at top-tier restaurants can earn from $80,000 to as much as $150,000 a year including tips, according to industry executives."

Four Key Lessons From 2013

2013 already saw violent unrest in some of the most stable countries in the world like Singapore and Sweden, all underpinned by absolute disgust for the status quo. Whether today or tomorrow, this year or next, there will be a reckoning. The system is far too broken to repair, it must be reset. It’s simply absurd to look at the situation objectively and presume this status quo can continue indefinitely... that this time is different… that we’re somehow special and immune to universal principles.

Alan Greenspan's Modest Proposal: Fix Broken Economic Models By... Modeling Irrational "Animal Spirits"

We leave it to everyone's supreme amusement to enjoy the Maestro's full non-mea culpa essay, but we will highlight Greenspan's two most amusing incosistencies contained in the span of a few hundred words. On one hand the former Chairman admits that "The financial crisis [...] represented an existential crisis for economic forecasting. The conventional method of predicting macroeconomic developments -- econometric modeling, the roots of which lie in the work of John Maynard Keynes -- had failed when it was needed most, much to the chagrin of economists." On the other, his solution is to do... more of the same: "if economists better integrate animal spirits into our models, we can improve our forecasting accuracy. Economic models should, when possible, measure and forecast systematic human behavior and the tendencies of corporate culture.... Forecasters may never approach the fantasy success of the Oracle of Delphi or Nostradamus, but we can surely improve on the discouraging performance of the past." So, Greenspan's solution to the failure of linear models is to... model animal spirits, or said otherwise human irrationality. Brilliant.

"Rich Will Keep Getting Richer In 2014" - In 2013, Top 300 Billionaires Added Half A Trillion In Net Worth

All the pundits who preach an economic recovery in the US always fall strangely silent when asked to share their thoughts on the following chart (taken from the St. Louis Fed), showing the annual change in real disposable income per capita in the US. What seems to stump them most is that aside from the 2012 year end aberration (due to accelerated distribution of dividends ahead of the 2013 tax hikes) is that in November the series finally posted its first Y/Y decline (-0.1%) since the Lehman collapse. But as the chart notes, the data is "per capita" and as everyone knows, under the New Normal, some "per capitas" are more equal than other "per capitas." Enter the billionaires. As Bloomberg summarizes, "The richest people on the planet got even richer in 2013, adding $524 billion to their collective net worth, according to the Bloomberg Billionaires Index, a daily ranking of the world’s 300 wealthiest individuals. The aggregate net worth of the world’s top billionaires stood at $3.7 trillion at the market close on Dec. 31, according to the ranking. "The rich will keep getting richer in 2014," John Catsimatidis, the billionaire founder of real estate and energy conglomerate Red Apple Group Inc., said in a telephone interview from his New York office.

Frontrunning: January 2

  • Threatening snowstorm may be early test for N.Y. Mayor de Blasio (Reuters), U.S. Northeast Threatened With Blizzard, Travel Delays (BBG)
  • Scarred U.S. consumers a hard sell for traditional retail (Reuters)
  • Edward Snowden, Whistle-Blower (NYT)
  • A Few Brave Investors Scored Huge, Market-Beating Wins (WSJ)
  • Fiat gets full control of Chrysler for $4.35 billion (Reuters)
  • Billions Vanish in Kazakh Banking Scandal (WSJ)
  • SAC’s Cohen Focus of Trial as Martoma Rebuffs U.S. (BBG)
  • World's first state-licensed marijuana retailers open doors in Colorado (Reuters)
  • Hyundai, Kia face fading growth as currency tides buoy Japan rivals (Reuters)
  • Bond investors braced for new year shock (FT)
  • Putin vows total destruction of 'terrorists' after bombings (AFP)

Futures Unhappy On The First Trading Day Of 2014

The first trading session of previous years has always been a whopper for those betting on central planning and capital flows. In fact, if one adds up the S&P performance on the first trading day of each year going back to 2009 (i.e., 1/2/13: + 2.54%, 1/3/12: + 1.55%, 1/3/11: + 1.13%, 1/4/10: + 1.60%, and 1/2/09: + 3.16%), one gets a whopping 10% return just on that one trading session. Which is why the fact that futures are glowing read, if only for the moment, may be disturbing for index investors and all those others who put all their faith, not to mention money, in St. Janet. Today's red open is hardly being helped by the 10 Year which continues to drift lower with the yield now at 3.04%, even as the Spanish 10 Year yield just got a 3 handle as well. At this rate the two streams should cross some time in the next two months. Just what a higher yield in the US vs Spain would imply for fair and efficient markets, we leave up to readers to decide.

But the Progressives Told Us Abenomics Would Be Great for Japan

When newly elected Japanese Prime Minister Shinzo Abe promised new deficit spending and pedal-to-the-metal monetary inflation, the progressive Keynesians were excited. And indeed, debasing the yen seemed to work for a few months, with analysts saying US policymakers should follow Japan’s lead. Yet now Japan’s recovery seems to be collapsing, leading its Cabinet to approve yet another “stimulus” package. Does anyone else have a sense of deja vu?

The Trends To Watch For In 2014

The following 8 key dynamics (from government over-reach and economic stagnation to civil discontent and beyond) will play out over the next two to three years...