Risk Premium

Tyler Durden's picture

Goldman Expects 3% S&P 500 Upside In Coming Year





From Goldman's David Kostin, who first looks back: "S&P 500 began 2014 with a pullback of 6%, repeating its 2013 trend, but then rallied 8% to reach a new high of 1885. The market has not had a drawdown of 10% since the summer of 2012, rallying nearly 50% during that time. Gold and bonds have outperformed stocks YTD" and then forward: "S&P 500 rises 2% in 1Q to hit new high; we expect 3% appreciation during next 12 months" In other words, by the end of this week the Market should hit Goldman's 12 month forward price target.

 


scriabinop23's picture

Netflix Is Ready To Buy On Underestimated Market Power





Netflix isn't as expensive as it appears.  Be cautious getting caught up in the latest fear frenzy over net neutrality.

 


Tyler Durden's picture

Citi On International Finance As War By Any Other Means





With The White House proclaiming Russian stocks a "sell" today (and in the meantime Russian stocks and the Ruble strengthening), it is clear, as Citi's Steven Englander notes, that the Russia/Ukraine crisis may be the first major political conflict that is played out in international financial markets. The difference, Englander points out, between this and standard imposition of sanctions is that both sides have some options that can inflict damage on the other side; and this has significant implications for investors in the short- and medium-term.

 


Tyler Durden's picture

Futures Unchanged Overnight, Remain At Nosebleed Levels





With the world still on edge over developments in the Ukraine, overnight newsflow was far less dramatic than yesterday, with no "bombshell" uttered at today's Putin press conferences in which he said nothing new and simply reiterated the party line and yet the market saw it as a full abdication, he did have some soundbites saying Russia should keep economic issues separate from politics, and that Russia should cooperate with all partners on Ukraine. Elsewhere Gazprom kept the heat on, or rather off, saying Ukraine recently paid $10 million of its nat gas debt, but that for February alone Ukraine owes $440 million for gas, which Ukraine has informed Gazprom it can't pay in full. Adding the overdue amounts for prior months, means Ukraine's current payable on gas is nearly $2 billion. Which is why almost concurrently Barosso announced that Europe would offer €1.6 billion in loans as part of EU package, which however is condition on striking a deal with the IMF (thank you US taxpayers), and that total aid could be as large as $15 billion, once again offloading the bulk of the obligations to the IMF. And so one more country joins the Troika bailout routine, and this one isn't even in the Eurozone, or the EU.

 


Tyler Durden's picture

Say's Law And The Permanent Recession





Mainstream media discussion of the macro economic picture goes something like this: “When there is a recession, the Fed should stimulate. We know from history the recovery comes about 12-18 months after stimulus. We stimulated, we printed a lot of money, we waited 18 months. So the economy ipso facto has recovered. Or it’s just about to recover, any time now.” But to quote the comedian Richard Pryor, “Who ya gonna believe? Me or your lying eyes?” However, as Hayek said, the more the state centrally plans, the more difficult it becomes for the individual to plan. Economic growth is not something that just happens. It requires saving. It requires investment and capital accumulation. And it requires the real market process. It is not a delicate flower but it requires some degree of legal stability and property rights. And when you get in the way of these things, the capital accumulation stops and the economy stagnates.

 


Marc To Market's picture

Russia and its Dollar Reserves: Going Nowhere Fast





Dispassionate analysis of Russia/Crimea and the threat of Russia dumping its dollar holdings.  Much posturing.  Many point to US bluster have tough time identifying Russia's bluster.  Let me help.  

 


Tyler Durden's picture

GMO: "US Markets Are Not A Little Bit Overvalued — They Are Overvalued By A Hefty Margin"





Valuations are stretched. Profit margins are stretched. And given that these two have been reliable mean-reverting indicators, they are what drive our sobriety. We’re not saying the party’s over. For all we know, 2014 could post another positive year for the risk markets. There’s enough good news out there in terms of cash on the sidelines, declining unemployment numbers, U.S. as a safe haven in the event of an emerging meltdown ... yada, yada, yada. All we’re saying is that, as value investors, we’re nervous about the longer-term prospects for equities, especially in the U.S.  Markets in the U.S. are not a little bit overvalued—they are overvalued by a hefty margin, especially small-cap stocks. And it is this concern, above all else, that will be driving our asset allocation decisions.

 


Tyler Durden's picture

Shock And Awe From Turkey Which Hikes Overnight Rate By 4.25% To 12%, Blows Away Expectations





The much anticipated Turkey Central Bank Decision is out and it is a stunner:

TURKEY'S CENTRAL BANK RAISES OVERNIGHT LENDING RATE TO 12.00% - this is the key rate, which was just hiked by an unprecedented 4.25%
TURKEY'S CENTRAL BANK RAISES BENCHMARK REPO RATE TO 10.00% - from 4.50%
TURKEY'S CENTRAL BANK RAISES OVERNIGHT BORROWING RATE TO 8.00% from 3.50%

 


Tyler Durden's picture

After Seven Lean Years, Part 2: US Commercial Real Estate: The Present Position And Future Prospects





The first installment of our series on U.S. real estate by correspondent Mark G. focused on residential real estate. In Part 2, Mark explains why the commercial real estate (CRE) market is set to implode. The fundamentals of demographics, stagnant household income and an overbuilt retail sector eroded by eCommerce support only one conclusion: commercial real estate in the U.S. will implode as retail sales and profits weaken. 

 


Tyler Durden's picture

What Keeps Goldman Up At Night





If one listens to Goldman's chief economist Jan Hatzius these days, it is all roses for the global economy in 2014... much like it was for Goldman at the end of 2010, a case of optimism which went stupendously wrong. Goldman's Dominic Wilson admits as much in a brand new note in which he says, "Our economic and market views for 2014 are quite upbeat." However, unlike the blind faith Goldman had in a recovery that was promptly dashed, this time it is hedging, and as a result has just released the following not titled "Where we worry: Risks to our outlook", where Wilson notes: "After significant equity gains in 2013 and with more of a consensus that US growth will improve, it is important to think about the risks to that view. There are two main ways in which our market outlook could be wrong. The first is that our economic forecasts could be wrong. The second is that our economic forecasts could be right but our view of the market implications of those forecasts could be wrong. We highlight five key risks on each front here." In short: these are the ten things that keep Goldman up at night: the following five economic risks, and five market view risks.

 


Tyler Durden's picture

Goldman Vs Gazpromia: Russian Sovereign Risk Downgraded By Goldman Sachs





When it comes to key players in a global fungible monetary system, a far more important decision-maker than the US government is the FDIC-insured hedge fund that controls all central banks: Goldman Sachs. Which is why it is certainly notable that moments ago none other than Goldman effectively downgraded Russia's sovereign risk by announcing it is "shifting from constructive to neutral view on Russian sovereign risk." With the legacy rating agencies now largely moot and irrelevant, what the big banks say suddenly has so much more import. But when the biggest - and most connected - bank of them all, outright lobs a very loud shot across the Gazpromia Russian bow, even Putin listens.

 


Tyler Durden's picture

These Are The Main Financial Risks Of 2014 According To The US Treasury





• the risk of runs and asset fire sales in repurchase (repo) markets;
• excessive credit risk-taking and weaker underwriting standards;
• exposure to duration risk in the event of a sudden, unanticipated rise in interest rates;
• exposure to shocks from greater risk-taking when volatility is low;
• the risk of impaired trading liquidity;
• spillovers to and from emerging markets;
• operational risk from automated trading systems, including high-frequency trading; and
• unresolved risks associated with uncertainty about the U.S. fiscal outlook.

 


Tyler Durden's picture

Futures Fail To Levitate Overnight On Repeated Central-Planning Failures Around The Globe





Everywhere you look these days, central planning just can't stop reaping failure after failure. First it was Japan's Q3 GDP rising just 1.1%, well below the 1.9% in the previous quarter and the 1.6% expected, while the Japanese current account posted its first decline since of €128 billion (on expectations of a JPY149 billion increase) since January. What's worse, according to Asahi, Abe's approval rating tumbled to 46% in the current week, down from the low 60s as soon as early 2013, while a former BOJ member and current head of Japan rates and currency research, Tohru Sasaki, said that the high flying days of the USDJPY (and plunging of the JPY respectively) is over, and the USDJPY is likely to slide back to 100 because the BOJ would not be able to expand monetary easing by enough to repeat this year's "success." He definitely uses that last word rather loosely.

 


Tyler Durden's picture

BofAML's Top 10 Emerging Market Risks In 2014





While moderate recovery in growth and inflation is BofAML's rates team's base case, there are numerous risks to that forecast. The risk of tapering is already quite well known and they suspect it may not result in the significant market-moving event many expect when it actually happens; however, the following downside and upside risks threaten BofAML's central scenarios for 2014 as well.

 


Tyler Durden's picture

Goldman Reveals "Top Trade" Recommendation #2 For 2014: Go Long Of 5 Year EONIA In 5 Year Treasury Terms





If yesterday Goldman was pitching going long of the S&P in AUD terms (the world renowned Goldman newsletter may cost $29.95 but is only paid in soft dollars) as its first revealed Top Trade of 2014, today's follow up exposes Top Trade #2: which is to "Go long 5-year EONIA vs. short 5-year US Treasuries." Goldman adds: "The yield differential between these two financial instruments is currently -61bp, and we expect it to reach around -130bp. On the forwards, the differential is priced at around -95bp at the end of 2014 at the time of writing. We have set the stop-loss on the trade at a spread of -35bp. The choice of Treasuries over OIS or LIBOR on the short leg is motivated by the fact that yields on the former could underperform more than they have already in relative space as the Fed scales down its asset purchase program."

 


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