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The 96 Charts That Have To Be Seen To Believed For 2013

Tyler Durden's picture




 

In many respects, 2012 was a year of waiting: waiting for a path forward on the European debt crisis; waiting for the results of a polarizing U.S. election; waiting for the Chinese leadership transition; waiting for a resolution to the U.S. fiscal cliff issues; waiting for the Middle East to find peace; waiting for a clear path to global growth; and therefore, waiting to invest additional assets in the markets (or not, as the case may be). In this 2013 Outlook, Michael Cembalest, JPMorgan Asset Management's Chairman of Market and Investment Strategy, provides a comprehensive summary of the global factors at play, with a tone of optimism grounded in realism. Perhaps just what we need after the surreality of the last two days.

 

The Odyssey. As we head into 2013, the global economy is treading water...

 

...with better news in the US and China than in Europe, and with leading indicators pointing to more activity in services than in manufacturing.

 

The cover art is meant to convey the conflict between the world’s well-advertised challenges (the Squid), and its offsetting strengths (the Ship). The ship persevered in 2012, as the usual suspects that make up most portfolios (equities, credit and real estate) generated doubledigit returns despite low economic growth. The bar for 2013 is a bit higher since equity and credit valuations have risen. However, equity valuations are by no means stretched, and still demonstrate skepticism about the future. While 2013 may be volatile for political reasons...

Looking ahead to the spring, debt ceiling and continuing budget resolutions may be even more contentious. What will the sticking points be? There’s not much left to fight about on non-defense discretionary spending, scheduled to hit a 50-year low in 2017. As shown below, outlays on things like energy R&D, education, worker retraining and infrastructure are increasingly crowded out by entitlements.

The positions are clear: Democrats either simply do not believe that entitlement math is unsustainable, or search in vain for sufficient tax hikes to pay for them; while Republicans search for the political cover to scale back social programs and still get elected. Of all the advice given by the country’s founders, perhaps none is more forgotten than the admonitions in George Washington’s farewell address: to cherish public credit, preserve it by using it as little as possible, and to “not ungenerously throw upon posterity the burden which we ourselves ought to bear".

...a portfolio of risky assets should generate modestly positive returns by the time the year is over. In all, 2013 looks to be another year of markets outperforming what economic growth conditions alone would imply.

It’s not an overstatement to say that we are living through the largest policy experiments of the last 300 years.

 

In the US, Europe, Japan and the UK, governments account for 75% of all borrowing that is taking place, and central banks account for 60% of all lending, both multiples higher than anything we have seen (or read about) before. As a sign of the times, monetary policy was the primary issue in the recent election in Japan; voters gave a decisive victory to the party that campaigned on forcing its central bank to provide more of it. Central banks appear determined to reflate financial assets, hoping for whatever spillover they can get to economic growth.

On the following pages, Michael walks through a graphical depiction of the issues on the front cover; an economic review of the US, Europe and the emerging economies; and a summary of investment and market views. At the end, a look beyond 2013 at two litmus tests for America: entitlements and energy independence.

 

Cembalest - Outlook 2013 the Odyssey

 

Source: JPMorgan

 

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Wed, 01/02/2013 - 20:26 | 3116959 ReptilianSlaveMaster
ReptilianSlaveMaster's picture

I am glad all these positive highlights reflect our resilient stock market, Bernanke will crush everyone like bugs - bow down to his highness!

Wed, 01/02/2013 - 21:17 | 3117135 ZerOhead
ZerOhead's picture

Typo alert... should read...

 

OUTLOOK 2013

J.P. MORGAN PIRATE BANK

Wed, 01/02/2013 - 23:23 | 3117455 TwoShortPlanks
TwoShortPlanks's picture

I see the cover's geared for children...are they after kiddies Lunch Money now or whatever money Gen-Y have between drinking binges and CC payments?

Anyway, my Black Swan isn't mentioned many places however, I think it's time to give the Ferret a run. I reckon long term ZIRP will create an new artificial normal, by pulling the Laffer Curve so far across to zero that rates will either never be lifted again (within the US economy), or, when they are finally lifted through necessity, capital will flood into places where excess capital already exists, so the Fed will be forced to charge negative rates while monetising at ever increasing values, thus pushing trillions into the US economy, effectively drowning it in inflation. So in the end, I reckon QE will be the better looking horse at the glue factory, and ZIRP the ugliest.

You'll never truly know how far across it has moved until you raise rates and watch those legs buckle.

Then it's back to the Wild West...East, South, and North.

Click! *Lights go out, gunfire commences*

But every cloud has a Silver lining - Gold too - and like the days of old, I'm betting there will be a Gold Rush 2.0 as money comes to the stark realisation that only large negative rates of return exist, and that PMs are once again the only lifeboat.

Wed, 01/02/2013 - 21:17 | 3117144 AldousHuxley
AldousHuxley's picture

only bugs being crushed are shorts.

bernanke is giving money away with double digit returns.

 

short's time will come few years later, but not now.

 

don't fight god of money with stupid americans as your foot soldiers.

Wed, 01/02/2013 - 23:15 | 3117466 ball-and-chain
ball-and-chain's picture

Bernanke's man-tits are amazing.

They squirt milk to all his Ivy League Mafia friends.

The rest of us go thirsty.

http://www.angrysinner.blogspot.kr/2013/01/yesterday-dragon-lady-served-hormel.html

Wed, 01/02/2013 - 20:32 | 3116991 Neethgie
Neethgie's picture

I love the balls of JPM to use the giant squid destroying economic recovery analogy..

Wed, 01/02/2013 - 20:51 | 3117057 DoChenRollingBearing
DoChenRollingBearing's picture

IIRC, it was Goldman Sachs that was called "The Squid" by Matt Taibbi.  Apparently there is enmity between GS and JPM.  The two big scorpions.

Wed, 01/02/2013 - 21:20 | 3117153 ZerOhead
ZerOhead's picture

Even Bloody Morgan knows it's the GS squid that runs the world's CB's...

Wed, 01/02/2013 - 20:55 | 3117073 jcaz
jcaz's picture

The term "Squid" in this biz originated as a reference to Goldman-Sachs back in a 2009 Rolling Stone article-  JPM is actually being pretty sly, using the squid reference in this case....

Wed, 01/02/2013 - 20:57 | 3117078 Neethgie
Neethgie's picture

i know, i just didn't think JPM would "go there" so to speak

Wed, 01/02/2013 - 21:14 | 3117128 devo
devo's picture

It's pretty funny that they did.

Wed, 01/02/2013 - 23:58 | 3117567 TwoShortPlanks
TwoShortPlanks's picture

JPM use blue logos and sometimes Gold [physical] lettering (if background is black or marble) on buildings. The Ship's hull is blue with gold (yellow) trim. That's stretching it to its limit.

Everyone knows GS to be the new-age giant squid (even though their logo is blue also), this is obvious.

It's a very deliberate cover, but perhaps it's signalling a deeper issue, something outside the US but which may affect the US: https://www.google.com.au/search?q=european+union+logo&hl=en&tbo=d&source=lnms&tbm=isch&sa=X&ei=f__kUNT0BsWyiQeepYCgDA&ved=0CAoQ_AUoAA&biw=1249&bih=570

Don't think for a second that the cover wasn't ordered or vetted without deliberation. Is this the start of a game of distancing oneself from a target? Profile lifting?

Wed, 01/02/2013 - 21:14 | 3117126 AldousHuxley
AldousHuxley's picture

Grandson David Rockefeller was a leading New York banker, serving for over 20 years as CEO of Chase Manhattan (now part of JPMorgan Chase

 

The original "squid" applied for standard oil = Rockefeller = now JP Morgan

http://upload.wikimedia.org/wikipedia/commons/a/a0/Standard_oil_octopus_...

Wed, 01/02/2013 - 21:30 | 3117137 devo
devo's picture

I escorted the Rockefellers when I lived in NYC. They were nice, friendly, and donated a large sum to the work (not in the least related to finance or oil) I was doing. Just saying.

Wed, 01/02/2013 - 21:36 | 3117200 wchild
wchild's picture

As in... provided escort service(s)?

Wed, 01/02/2013 - 21:39 | 3117211 devo
devo's picture

Haha.

No, I showed them around. I guess "guide" might have been a better term.

Wed, 01/02/2013 - 21:39 | 3117213 Raymond K Hessel
Raymond K Hessel's picture

You a hooker?!

Wed, 01/02/2013 - 22:55 | 3117417 GMadScientist
GMadScientist's picture

Did you ever go to veterinary school?

Thu, 01/03/2013 - 01:48 | 3117813 niccolo and donkey
niccolo and donkey's picture

Have you ever been to a Turkish prison?

Thu, 01/03/2013 - 08:49 | 3118149 francis_sawyer
francis_sawyer's picture

Do you like movies about Gladiators?

Fri, 01/04/2013 - 04:47 | 3121335 e-recep
e-recep's picture

where do you keep your gold stack?

Wed, 01/02/2013 - 21:38 | 3117209 shuckster
shuckster's picture

Oh yes, I forgot that the Rockefellers also controlled Chase Bank, now JPMorgan. Quite the impressive portfolio they've amassed. XOM and JPM under one roof

Wed, 01/02/2013 - 21:43 | 3117195 shuckster
shuckster's picture

...

Wed, 01/02/2013 - 21:04 | 3117102 ACP
ACP's picture

Let's not forget the Baltic Dry, which never recovered from it high of over 11,700, and is now stuck in a permanently depressed range between 600 and 1600.

http://www.bloomberg.com/quote/BDIY:IND/chart/

Wed, 01/02/2013 - 21:49 | 3117252 Bunga Bunga
Bunga Bunga's picture
The Shipping News The best economic indicator you've never heard of.

By

....

http://www.slate.com/articles/business/moneybox/2003/10/the_shipping_new...

Thu, 01/03/2013 - 19:59 | 3120474 smiler03
smiler03's picture

+1 Great Link, thanks.

Wed, 01/02/2013 - 21:13 | 3117122 DaddyO
DaddyO's picture

 

So what do you think they don't read ZH? We're all dumbasses if we think they don't peruse all the interwebs for every little bit of hate out there!!

DaddyO

Wed, 01/02/2013 - 20:36 | 3117002 SubjectivObject
SubjectivObject's picture

They are trying to rehabilitate the squid allegory and divert the popular association by mis-captioning the arms on the squid. 

We however will correctly identify a TBTF ivestment bank name there instead.

Wed, 01/02/2013 - 20:56 | 3117077 apberusdisvet
apberusdisvet's picture

I didn't know Lloyd Blankfein could swim; nice likeness though

Wed, 01/02/2013 - 21:00 | 3117089 HedgeHammer
HedgeHammer's picture

Looks more like Michael Moore after an 8 ball

 

Wed, 01/02/2013 - 21:17 | 3117146 DoChenRollingBearing
DoChenRollingBearing's picture

Seriously funny, + 1

Wed, 01/02/2013 - 21:03 | 3117097 Roandavid
Roandavid's picture

I'm wondering who it was over at J.P. Morgan that decided to go with the squid thing?

Wed, 01/02/2013 - 21:16 | 3117138 max2205
max2205's picture

TVIX anyone?

Wed, 01/02/2013 - 21:19 | 3117149 zorba THE GREEK
zorba THE GREEK's picture

That squid sure looks a lot like Goldman-Sacks-o-shit

Wed, 01/02/2013 - 21:19 | 3117155 Calm47
Calm47's picture

In 2013, the crisis will only grow protseesy. It is very likely that in a financial bubble burst. It is impossible to mitigate the negative effects of the crisis without systemic reform. ( http://crisismir.com/analiticheskie-materialy/ekonomika/13-mirovoj-ekono... )

Wed, 01/02/2013 - 21:30 | 3117188 balz
balz's picture

The guys at JP Morgan can produce some analysis? I thought they were only able to steal others' work.

Thu, 01/03/2013 - 13:07 | 3117241 Lucius Corneliu...
Lucius Cornelius Sulla's picture

I'd like to know what their chief economist forcast for 2007 on Jan 1 of that year.  I'll bet they were bullish!

Wed, 01/02/2013 - 22:01 | 3117281 Grand Supercycle
Grand Supercycle's picture

Wile E Coyote is not going away...

Recurring short squeezes propelling markets higher just ensures the Wile E. Coyote drop will be brutal ~ we are witnessing a mega crash in the making.

Whether it’s caused by fiscal cliff, debt ceiling, Europe or flesh-eating zombies invading Wall St, it doesn’t matter because another crash is guaranteed.

It’s a no brainer.
Charts don’t lie.

http://trader618.com
@grandsupercycle

Wed, 01/02/2013 - 22:15 | 3117323 RockyRacoon
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I liked your scary glowing pulsating eyes avatar better.

Thu, 01/03/2013 - 02:08 | 3117848 The Joker
The Joker's picture

I missed it, are they bullish silver?

Thu, 01/03/2013 - 05:49 | 3117970 Aurora Ex Machina
Aurora Ex Machina's picture
"When the child of morning, rosy-fingered Dawn, appeared, I took the three men on whose prowess of all kinds I could most rely, and went along by the sea-side, praying heartily to heaven. Meanwhile the goddess fetched me up four seal skins from the bottom of the sea, all of them just skinned, for she meant playing a trick upon her father. Then she dug four pits for us to lie in, and sat down to wait till we should come up. When we were close to her, she made us lie down in the pits one after the other, and threw a seal skin over each of us. Our ambuscade would have been intolerable, for the stench of the fishy seals was most distressing- who would go to bed with a sea monster if he could help it?-but here, too, the goddess helped us, and thought of something that gave us great relief, for she put some ambrosia under each man's nostrils, which was so fragrant that it killed the smell of the seals.

"We waited the whole morning and made the best of it, watching the seals come up in hundreds to bask upon the sea shore, till at noon the old man of the sea came up too, and when he had found his fat seals he went over them and counted them. We were among the first he counted, and he never suspected any guile, but laid himself down to sleep as soon as he had done counting. Then we rushed upon him with a shout and seized him; on which he began at once with his old tricks, and changed himself first into a lion with a great mane; then all of a sudden he became a dragon, a leopard, a wild boar; the next moment he was running water, and then again directly he was a tree, but we stuck to him and never lost hold, till at last the cunning old creature became distressed, and said, Which of the gods was it, Son of Atreus, that hatched this plot with you for snaring me and seizing me against my will? What do you want?' [1]

Odyssey, Book IV

"'You will find the other rocks lie lower, but they are so close together that there is not more than a bowshot between them. [A large fig tree in full leaf grows upon it], and under it lies the sucking whirlpool of Charybdis. Three times in the day does she vomit forth her waters, and three times she sucks them down again; see that you be not there when she is sucking, for if you are, Neptune himself could not save you; you must hug the Scylla side and drive ship by as fast as you can, for you had better lose six men than your whole crew.' "'Is there no way,' said I, 'of escaping Charybdis, and at the same time keeping Scylla off when she is trying to harm my men?' "'You dare-devil,' replied the goddess, you are always wanting to fight somebody or something; you will not let yourself be beaten even by the immortals. For Scylla is not mortal; moreover she is savage, extreme, rude, cruel and invincible. There is no help for it; your best chance will be to get by her as fast as ever you can, for if you dawdle about her rock while you are putting on your armour, she may catch you with a second cast of her six heads, and snap up another half dozen of your men; so drive your ship past her at full speed, and roar out lustily to Crataiis who is Scylla's dam, bad luck to her; she will then stop her from making a second raid upon you.

Odyssey Book XII



Comment: the Kraken is not a Greek monster, it is entirely Nordic based. I have since removed Tennysons, "The Kraken" (1830); I've now noticed it referenced in the boiler-plate.

However, the Kraken has ten arms, not nine; so, by the sins of omission and incorrect sourcing, we are lead to three questions:

What does JP Morgan think the last, undisclosed and most dangerous tentacle threatening their ship is
?

To add to this, who are the six best men (countries?) who must be snatched and chewed before Scylla is passed safely?[2]
Your sail is set as a Barque at best in it's sail-plan; for a fully rigged ship, your aft mast is missing a sail; again, what drives you on that you cannot mention? Be it Bosun Bernanke, or is he the trade-wind providing so much cash?


[1] If JP Morgan is so crass these days to mix their mythology, then so shall we, and hint towards the Icelandic myth of the Selkie.
[2] Greece and so forth cannot count as your great men; if I were tallying that honour, I'd point to the secure five with veto, and one excluded due to historical misbehaviour for your greatest men. Be careful what you invoke, when you call upon the fickle Gods, especially those of the sea.

[Edit] I now see the explanation by Ms Anni Betts (oh, such wit and daring at that pun!), mentioning the split in sources she so sluiced over; after I lambasted her work. So, she is sloppy but not ignorant, a worse vice perhaps. Still, she is a very fair lass, and common to the theme of her financial lover.
Thu, 01/03/2013 - 05:31 | 3117998 The Navigator
The Navigator's picture

I quickly scanned the whole report - didn't find 1 market that was promising to invest in.

Not even a ponzi or pyramid that I could join near the top/begininng.

Do NOT follow this link or you will be banned from the site!