10 Good And Bad Things About The Economy And Rosenberg On Whether This Isn't Still Just A Modern Day Depression
Two things of note in today's Rosie piece. On one hand he breaks out the 10 good and bad things that investors are factoring, and while focusing on the positive, and completely ignoring the negative, are pushing the market to its best start since 1997. As Rosie says: "The equity market has gotten off to its best start in a good 15 years and being led by the deep cyclicals (materials, homebuilders, semiconductors) and financials — last year's woeful laggards (the 50 worst performing stocks in 2011 are up over 10% so far this year; the 50 best are up a mere 2%). Bonds are off to their worst start since 2003 with the 10-year note yield back up to 2%. The S&P 500 is now up 20% from the early October low and just 3.5% away from the April 2011 recovery high (in fact, in euro terms, it has rallied 30% and at its best level since 2007)." Is there anything more to this than precisely the same short-covering spree we saw both in 2010 and 2011? Not really: "This still smacks of a classic short-covering rally as opposed to a broad asset- allocation shift, but there is no doubt that there is plenty of cash on the sidelines and if it gets put to use, this rally could be extended. This by no means suggests a shift in my fundamental views, and keep in mind that we went into 2011 with a similar level of euphoria and hope in place and the uptrend lasted through April before the trap door opened. Remember too that the acute problems in the housing and mortgage market began in early 2007 and yet the equity market did not really appreciate or understand the severity of the situation until we were into October of that year and even then the consensus was one of a 'soft landing'." Finally, Rosie steps back from the noise and focuses on the forest, asking the rhetorical question: "Isn't this still a "modern day depression?" - his answer, and ours - "sure it is."
From Gluskin Sheff
What has investors in a better mood? A few things:
1. The survey data so far for January suggests the U.S. economy is still chugging along, especially in the industrial sector. The latest jobless claims data must be taken with a grain of salt (as is usually the case in December and January), but they are trending down nonetheless and that is encouraging for the bull case. Meanwhile, the weekly ECRI leading economic index just tested its best level in five months.
2. The latest GDP and manufacturing data out of China suggest the 'soft landing' crowd has the upper hand.
3. The move by Draghi last month to provide massive ($634 billion!) low-cost three-year funding for the Eurozone banks is widely seen as a very shrewd move to buy time, help the banks delever, and provide back-door funding for the government sector. We are hearing that another major cash infusion from the ECB is coming in February, and likely to be even larger.
4. The ECB has managed to build enormous credibility with the crowd that craves bailouts — to the point where at 2.68 trillion euros its balance sheet is now bigger than the Fed's, having expanded by more than 40% since the mid-part of 2011. Markets work on probabilities and Lehman-like tail-risks have been dramatically reduced by the ECB's incursion.
5. The European bond auctions are going very smoothly this year and most cases, even in the case of Spain and Italy, have been oversubscribed. The worries two months ago over a failed German bund auction are now a distant memory.
6. It looks like Greece is going to reach an agreement with its creditors after the recent impasse.
7. Italy's Mario Monti is proving to be someone that the ECB and Germany can work with the latest accommodations would not have occurred otherwise. Monti is very well respected and is going ahead with major fiscal belt-tightening and tough competitiveness initiatives despite the spectre of massive public sector strike action.
8. There is a growing chorus of calls for a new QE3 out of the Fed, which would primarily include mortgage paper. The Fed's new mode of communicating by providing the median FOMC forecast of where the funds rate is heading is widely expected to show a sustained near-zero level through 2014.
9. Signs of not just a thaw, but a real recovery in housing sales and starts, have created quite a bit of enthusiasm lately— and this is a view espoused by the legendary housing guru, Ivy Zelman.
10. While this has been quite a challenging earnings reporting season, both IBM and Microsoft served up better-than-expected results while Intel's guidance was pretty good — and this has resonated through much of the tech space.
At the same time, there are some nagging issues that could derail this market recovery at any time:
1. That the ECB and Angela Merkel (who now does not want private sector entities to bear losses) have done an about-face to such an extent that it suggests that the insolvency problems in Europe are very deep-seated. Without the ECB-financed LTRO (Long Term Refinancing Operation), it seems as though at least one or probably two major Euro area banks would have gone down for the count. The resolution to the Eurozone crisis remains incremental in nature. Political risks in Greece and France should not be underestimated.
2. Has anyone thought through the implications of the Euro area banks becoming totally reliant on funding from the central bank? All this back-door effort to support government bond markets via private financial institutions may make the bank balance sheets completely toxic.
3. Italy has a total 350 billion euro debt maturity Calendar in 2012 — in other words it will be coming to market to auction off its debt in large chunks every week this year. The country's bond market is hardly out of the woods.
4. Don't take your eye off Portugal — it seems to be following in Greece's footsteps and bond yields and CDS spreads have been surging there of late, to very little fanfare.
5. China's property market is deflating and this deflation is spreading regionally. That doesn't sound too stable.
6. The U.S. housing market is still beset with a flood of foreclosure-related supply, though it is absorbing it without major disruption. Levels of activity are still extremely depressed and pricing remains weak.
7. It is tough to square a vibrant global growth view with the latest chart action as it pertains to the Baltic Dry Index (which tracks the cost of shipping major raw materials like iron ore, coal, grain, cement, copper, fertilizer, sand and gravel). It is down a whopping 50% in just the past month! Moreover, it is equally difficult to square this renewed confidence in the economic outlook with the downward revision to global oil demand growth by the 'EA to 1.1 mbd for 2012 from 1.3 mbd (oil consumption actually contracted 309,000 bpd in 2011 Q4 from a year ago).
8. Political risks in the Middle East remain a key wild card for the oil price backdrop.
9. Ongoing lack of progress in dealing with structural debt imbalances in the U.S. and Japan — demographics in both cases are time bombs.
10.Bad economic policies — it will be interesting to see how the markets react to another four years of Obama as the GOP continues to shoot itself in the foot via what is turning out to be a long and fractious primary season. If you didn't read Peggy Noonan's op-ed piece from the weekend WSJ, I suggest that you do (The No-Obama Drama). To wit:
The bleak thought: Mr. Obama this week blocked Keystone pipeline, a decision that means tens of thousands of jobs lost, new energy possibilities rejected. It is a decision so bad, so political, that it amounts to a scandal. But it just sort of eased through the news, blurrily. All the cameras were focused on the Republicans, who were distracted by their own dramas. They did not, together, in one voice, protest, as they should have. Keystone happened while they were busy looking like the Keystone Kops".
Another column worth reading today on this topic can be found on page A17 of today's WSJ, appropriately title Obama's Keystone Delay Flouts the Law.
Isn't this still a "modern-day depression?"
Sure it is. And just as we saw in 1933, 1934 and 1935, the economy and the stock market can experience a brief cyclical recovery, especially given all the massive monetary intervention by the central banks, but the fragility and vulnerability never go away, and neither does the hardship for many. Yes, yes, the stock market has doubled off the March 2009 lows. Yet, since that time, more than 11 million Americans have joined the food stamp program, including 4.4 million in 2011 alone. That may not fit into your definition of depression, but it does for these folks, I am sure.
The labour force has contracted by over 800,000 since the recession ended — this too is unprecedented. Assuming that the 200,000 payroll gain in December was the real deal, it would take 30 more of these to get employment back to where it was when the recession began four years ago. Real per capita personal disposable income in the U.S. has not grown for six years — despite trillions of dollars of government stimulus. If that's not a 'depression' outcome, then please come forward with your definition.
If you exclude the mountain of government social benefits, real income on a per person basis has rolled all its way back to where it was in 2001! Interest rates have been 0% for over three years and governments around the world have blown their fiscal finances out of the water in order to save insolvent banks and save economic activity from implosion. In fact, as a result, there has been such a radical decline in creditworthiness coming out of the Great Recession, that the pool of sovereign bonds that have unblemished AAA ratings has plunged to $4.5 trillion from $16.9 trillion (see page C12 of last Thursday's WSJ). That is a 73% nosedive and a reminder for investors that in the name of owning "scarcity", high-quality paper is noteworthy for its dwindling supply.
(12 votes)
»
- Login or register to post comments
- 12553 reads
- Printer-friendly version
- Send to friend
going long gubbermint cheez
One of the major barriers to global economic prosperity has been the lack initiative by central banks and primary dealers to encourage credit expansion and promote aggregate demand. This is partly due to what I quite frankly see as blatant discrimination by our Federal Reserve against primary dealership for many global financial institutions. Did you know that Bank of America, despite its reputation as a banking titan, is not even a primary dealer? The same is true for many other top investment banks around the world, who are perfectly capable of promoting credit expansion. This is 2012, and there is no place in our society for this blatant discrimination and inequality. It’s time to promote equal opportunity for primary dealership among top tier investment banks.
Why yes, my organization would be happy to serve as a primary dealer and accept money at essentially zero percent interest. Especially if we can lend it back to the government for a few percentage points and massive fees courtousy of the taxpayers. Oh the sarcasm is thick today.
How about we start by prosecuting the fucking fraud and ending the fucking mis-allocation of capital into more paper three-card-monty horseshit.
I think it's a modern day repression. Which is causing depression. Economic and mental.
i cant get past the word "investor"....how deep must ones dellusion go to consider the term investor valid today. it would be the equivalent of me "investing" in a winner of a wrasslin match with vince mcmahon as the counterparty....
crazy that only the primary dealers can do it - all responsibe citizens should be able to increase the money supply and stimulate the economy
I fervently disagree. Primary dealership is a job for professionals in the financial field. You can’t just hand over monetary policy to the general public – that is pure madness.
Nice one. OK, you've convinced me, professionals and "genius" experts have done such a banner job in guiding this economy, I think I will stick with physical gold and silver and leave them to it.
Green vote for genius.
you forgot to add "with ivy league educations"... you're slipping...
LOL cut the crap MDB
You do realize that MDB is the Hedge's own version of Colbert and his schtick??
The democratic path is to make the entire world a primary dealer.
or a QE junkie.
Thats funny MDB--Thats what indirect is for------
Customers placing competitive bids through a direct submitter, including
Foreign and International Monetary Authorities placing bids through the. Federal Reserve Bank of New York
http://www.treasurydirect.gov/instit/annceresult/press/preanre/2012/R_20120118_1.pdf
This is the latest 28 day---------------indirect takedown was over 11 billion.
You are spewing trash jack.
Well speaking of gubmint cheez, let's compare Jan 2012 to Jan 2011.
In Jan 2011, we had a brand new payroll tax cut. It was $260 billion of new stimulus.
In Jan 2011, we had QE2 fully underway.
In Jan 2011, we had $85 WTI.
The Japan earthquake did not occur until mid March, Q1 was essentially complete, and that Q1 GDP came in at 0.4%, even with all that stimulus.
In Jan 2012 we have a payroll tax cut expiring (or if it's extended, it will be paid for in some way) Feb 29. Expiring it OR paying for it withdraws the stimulus. Extending it is not new $260B. All that can happen with that is stimulus extraction or stimulus neutral.
In Jan 2012, we have $100 WTI.
In Jan 2012 we have no QE underway.
Granville: We’re Heading to March 2009 Lows
Summary of his earlier today Bloomberg TV interview:
*Market has topped last Friday
*Time to get short
*Cash is another option
*Dow will be dropping ~1000 points each quarter until it reaches March 2009 lows.
________________________________________________________________________________
Just in case you do not know who Joseph Granville is.
http://en.wikipedia.org/wiki/Joseph_Granville
He was also named as #1 Market Timer in 2011
DJIA to Fall 4,000 Points in 2012, Granville Says
http://www.bloomberg.com/video/84758540/
"The Dow drops 4 grand in an election year"?? You're funny.
Impossible for me to believe Heli-Ben and co. will allow the DOW to go down like that. They will print a few large, backdoor it to the primary dealers or foreign CBs, and they will buy the indexes. I think that kind of shit is already going on in the bond markets. Why not stocks? The Fed doesn't give a fuck what you or I or anyone else thinks (aside from its monied masters).
Still waiting for the thirty-second bonds to come out. The current system requires exponential growth in debt, by God let's get it going.
Try the 1 minute rice while your waiting, sure its from China, but you can trust them, they're communists.
Baby Boomer demographic mid-life crisis. Going long violins.
There is already too much violins on tv and in video games.
Uh, that's violence Emily. Not violins.
Channeling Martin Mull, are we?
http://www.hulu.com/watch/2364/saturday-night-live-weekend-update-emily-litella-on-violins-on-tv
Nevermind.
LOL
Granville Says Dow Industrial May Drop Toward 8,000 This Year
It very well may immediately prior to a devaluation to shake out shares for the insiders to pick up. All things being equal, if they devalue the currency by 50%, shares have to double in price just to tread water.
A lot of the items in the bullish list involve trusting government numbers that have proven untrustworty in the past, and blind faith in rhetoric and further deficit spending.
On the other hand, the problems that face us are inescapable and accelerating.
Government debt: Accelerating
Global derivatives: Up 15% in just 6 months to $707 trillion in a world where global GDP is @$65 trillion. Yeah, that works.
Budget cuts: Too late, any fiscal austerity just inhibits growth at this point and scares away the bond purchasers.
US dollar reserve currency: Living on borrowed time. ASEAN agreements, along with Chinese agreements with Russia, Iran, and India and Indian agreements with Iran, ARE CUTTING THE DOLLAR OUT OF THE TRADE.
It is over. Face it. So what's next? Global devaluation of fiat by pegging to the SDR and pegging the SDR to gold. Then you ramp gold prices and print like mad. Devaluation is their only remaining tool, and it is coming this year, everywhere.
I want my unwarranted optimism back!
Sorry, it was comingled when we equitized it and sold the bonds. Your title is clouded and we cannot affirm you were the original owner, please step to the back of the line with the other disillusioned.
please see robotrader immediately...
If you believe anything you see on TV, you are an idiot: Unfortunately, most Americans believe what they see on TV...
Go long canned goods and shotguns.
TV? What is that? Commercials, lots of them, interrupted every once in awhile by some inane show that no one in their right mind would want to watch.
There is not a single realistic scenario that points a way out of the problems we are faced to resolve. Whatever our leaders plan to do its only going to be worse. The world is overindebdted and the economy is running out of fuel.
I see three scenarios
None of them will bring the economy back on track (forget about 4, thats unrealistic). The first one seems to be the most promising one, however, it is very likely that all the other currencies are trying to do that as well. So foreign debt will not decline.
Inflate would mean: wages stuck while cost of living increases, real estate will deline further, financed and luxury goods will cheapen. Many companies will suffer from declining consumption and go bankrupt eventually, unemployment will rise.
We are doomed - either way you look at it.
I have a few novell ideas.
1) prosecute the fraudsters.
2) break up the too big to fails
3)go back to sound money
4)go back to a constitutional government where congress actually has to declare war on a nation for us to go to war. Othewise break up the war machine.
That's crazy talk!
Engali 2012!
1) prosecute the fraudsters.
Yeah If we're only waiting here for the floor of the shitter to give out, I want some decent entertainment.
Civil Wars are too messy. Let's have some fair trials, followed by first-class hangings.
Advocating responsibility is RACIST!
*sarc*
Indeed-doomed. The LSE started their program for growth shindig today, amid moderate media spin. First speaker, Larry Fucking Summers, if that's the best they can do-god help us.
Sure there is. It's in Bernanke's 11/21/2002 helicopter speech. In the case of incurable deflation, he listed five tools. He's done all of them (for example, Operation Twist) except for number five: Devalue the dollar. Bernanke said if rates were pinned at zero, and everything else failed, you could follow FDR and peg to gold, engage in gold purchases to devalue your currency vis a vis gold, and print like crazy. Of course that bankrupts most of the commoners, but you can't make a cake without breaking a few eggs.
The difference this time is they had to kick the can so all of the trading partners that were large enough to matter had enough gold to engage in international trade. I THINK they will peg the SDR to gold, and everybody will peg to the SDR, but we know from the horse's mouth what the game plan is. Even Greenspan has blabbed about the need to return to a gold standard in a pathetic attempt to appear relevant. When you think about it, you either have a PM referrenced system or you have an unbacked paper system. They are going to try for a hybrid system backed by gold, and central bankers are the one's who are holding most of the gold.
There's nowhere else to go. Another paper system won't flush, so it's either another gold standard, or a hybrid system based on gold where they control the measuring stick. I don't for a second believe we will go to a true gold standard or that they will willingly give up power, so I think the SDR is where we are going.
Ha,Ha..."high-quality paper is noteworthy for its dwindling supply."...
I read between the lines...See you later, time to stock-up on the "charmin-ultra soft"!
Quality paper = cotton paper vs. Toilet paper. You only need 1 layer of cotton paper to whipe you ass with compaired to 3 layered comon toilet paper.
My prediction is that GDP will stay the same and inflation will knock 15% out of our money sock.
The economy will look superficialy the same but the costs will kill the market in 2013.
STAGFLATION BITCHEZ!!
Keystone XL
The more I read the more that I don;t like this pipeline....
It won't change the price of gas.... if anything, current buyers that are getting a small discount because of the WTI-Brent mismatch will pay more
Net-Net it will cost jobs, despite a small bump during construction..(think of the rail related jobs from hauling Bakken crude... this pipeline will be tied into that)
The proposed path through Nebraska was simple fucking arrogance, hell, even the Nebraska State Republicans did not care for it...
It all boils down to who makes the money, Big oil and the Koch's on one side via tax free export zones on Gulf Coast or Warren and his BNSF Choo-Choos....
The whole thing smells from all angles....
Looks like we're back to the good ole Rockafella dad days, when thingies were simple and government-big business were hand in glove before Anti trust. Early days, as nowadays, are one and same as full circle attained.
Bubble trouble; one day it'll have to burst as not enuff assets and growth to cover its unhealthy excroissance, now uncontrollable; reserve currency now a sham, surrogate reserve even shammer, wait for the hammer to fall on sham and shammer... its written on the wall of lamentations, where Abraham's sons sang their sad, sad song to begin with; as they continue to do today.
Rosenberg and Rosebud are all about songs of silence. Hush little baby, don't cry, as your mother sings you a lullaby. It'll soothe you all the time that we sing...
Grândola, vila morena, Terra da Fraternidade,...then song of hope, now as silent obituary to suffering Lisbon.
I was there, one day in April 74...when they sang the springtime of Portugal, when Revolução dos Cravos or the Carnation revolution occurred in Lisbon and Porto, and the Salazar bridge became Bridge of 25 April...
Being a farmer I have ordered my seeds.
Seed prices are up, in fact all my costs are up.
But I can't raise my prices unless I sell my food to the 1%. They have money.
Keep your well armed friends fed, enjoy life, and don't sweat the 1%. They have paper, I know lots of folks with physical assets of value. Nature makes no promises regarding your survival, why in the hell would you think any man-made market or institution would be able to.
Time for a global reset on precisely what has value in this world.
We are being ruled by Satanists, Luciferians, Sun-Worshippers, etc...
The Illuminati don't just want your children, your spouse, your property, and your freedom.
Your birthright isn't sufficient for these Satanists. They want the ultimate prize. They want your soul.
They tell us about the conspiracy because they want us to be compromised. Just as lower-ranked Freemasons or ordinary Jews or Americans or Europeans are compromised by their support for war. They want us all to become demons.
They are deliberately clumsy because they want our complicity. They don't want us to say, "Gee, we didn't know."
They have a wager with God. They can win us over to Lucifer. But they have to give us free will, the ability to make a choice.
That's the reason they reveal the conspiracy to us. For example, the Rockefellers sponsored the John Birch Society. Their publication, The New American is still one of the best sources of information about the elite conspiracy. This controlled opposition has other functions. They are able to steer the blame and make sure no real resistance ever develops.
I wonder when the switch will go off for the rest of you - those of you that think votes still count/matter orrrrr if they even did at all?
Wow, you do it way better than Dana Carvey.
The situation is a bit worse than a modern day depression..it's the collapse of the worldwide fiat ponzi. Never before has the entire world gone through hyperinflation at the same time.
TheSilverJournal.com
Anyone heard from Hugh lately?
the script says that ECB/Merkel have done an "about turn concerning private sector debt hair cuts". This is true except, for Greece, where they want private participation. COrrect me if I'm wrong on this...which means Portugal being now front line the HFs will test ECB/GErman resolve on it...what a fire sale and poker game, beggar thy neighbour, suicidal.
The difference between all those other depressions and our modern day one is that today ours can be treated with modern day miracle drugs such as prozac.
And call it a recovery.
Oh, I don't think there's anything to worry about where Portugal is concerned...
Rosenberg clearly is intelligent, knowledgeable, articulate, and most importantly, wrong. He ignored or failed to anticipate his list of the ten good economic things that have happened, or are unfolding. (So did I, to my bearish displeasure.) So why is Rosenberg still treated as a guru?
He's treated as a guru because he stated that the NYSE rally was a short covering rally; which is the official party line here on Zero Profit; It is certainly not a short covering rally; that can be demonstrated easily by the market statistics. He's just another wing-nut.
The Granville Market Letter "is at the bottom of the Hulbert Financial Digest's rankings for performance over the past 25 years - having produced average losses of more than 20 percent per year on an annualized basis." [3]
Keep stackin'
Rosenberg, ah, so smug calling a "balance sheet recession cum depression" with "99% certainty" on Bloomberg just a few months ago. Add him to the bear graveyard along with Janjuah, Granville, and Morgan Stanley.
Where are the jobs dude? What segment(s) of the economy are they going to come from to replace all the ones that were lost?
NEVER underestimate the power of the TBTP to keep it going for longer than you think... They will print and spend and print and spend and print and spend for as long as they possibly can. When is that date? Not today. Not tomorrow.
Just like a security that can stay oversold for longer and get even more oversold than you believed when you bought it (how many of us have exeprienced this educational scenario?--talk about tuition!) and, too, on the upside. Overbought? Hell yes. every security at every level in every market... Price occurs at the margin and trend is a form of equilibrium. Until equilibrium is disturbed. Do not fight this tape. It can and will ruin you. And the next day will be the beginning of the end.
Cherish your PMs and KEEP STACKING!
I may be just your typical low level economically knowledgable ghost, but while attending college I was informed that the definition of a Depression was 4 contiguous quarters of GDP decline. Stated rates of GDP growth have varied over the last three years from 1-3%.
Problem is, when the US Federal government DEFICIT spends 9-10% of GDP and dumps that into the economy, it skews the numbers. So we have to take the Effective GDP growth rate as (stated GDP growth)-(deficit spending in relation to GDP) to get that number.
Hence, our newly defined Effective GDP growth has been an actual NEGATIVE GDP Growth Rate of 6-9%.
Only in Ameruka!
That's what I was wondering. Can you hide a decline in GDP by inflating the money supply even though the effects of the decline continue as personal and corporate debt continue to contract.
I have a plan, everyone gets to fractional reserve bank.
With my paycheck, I can loan out (to myself or whomever) 10 times what the stated value is.
That would help the credit crunch and it would help Bernanke really helicoptor.
Let's implement this immediately!
Make a few deals with people in which you perform a service (i.e., fix their computer, to use a very simple example) and write up some Promissory Notes to put their debt to you in writing. You can then use them to trade/barter with your neighbors for tangible goods. It's not quite on the same par as classic FRB that the banks use, of course, but it's similar. You just "created" new money (units of exchange) via a credit creation in which they owe you future payments of money.
You know, Fractional Reserve Banking in and of itself isn't purely evil...but the banking industry has certainly abused it beyond all recognition. The Reserve Requirement was between 40% - 50% for the first 150 years of our country's history, and the banking industry (while not perfect) pretty much remained stable as a whole. But now that we've devolved to the point where we operate on an FRR of between 3% - 10% (for different types of financial accounts, per the Fed Gov's guidelines), this game has gotten way out of control. I bet most bankers nowadays couldn't even visualize a world in which the FRR was back up at a more healthy 50%.
QE and bailouts are considered positive?
What about retail going down the crapper?
Thousands of homes under foreclosure and we're building more? Reminds me of channel stuffing by the auto industry.
war, bitchez!
http://www.youtube.com/watch?v=01-2pNCZiNk
Once the broke nations see there's FREE money to be had, they'll ALL want their turn at the trough.
They should let Greece fail, then ask....."who's next?"