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Weekly Bull/Bear Recap: Mar. 4-8, 2013

Tyler Durden's picture




 

From Rodrigo Serrano of Rational Capitalist Speculator,

This objective report concisely summarizes important macro events over the past week.  It is not geared to push an agenda.  Impartiality is necessary to avoid costly psychological traps, which all investors are prone to, such as confirmation, conservatism, and endowment biases.

 

Bull

+ The U.S. economy clearly remains on the recovery track:

image

+ Further signs surface that the global economy is stabilizing.  In Europe, region-wide retail sales surprised to the upside in January, climbing 1.2% versus analysts’ forecasts of a 0.3% rise.  This result cancelled out a 0.8% decline in December. Furthermore in China, exports are beginning to increase signaling increased demand from its trading partners.  Meanwhile in Japan, the Nikkei equity index is up roughly 40% over the past 3.5 months.  A weaker Yen is proving the difference as exporters become more competitive in global markets.  

Bear

-  A clear divergence between Germany and the rest of the periphery countries in Europe (see chart below) highlights the risk of the euro chipping away at European unity (French unemployment just hit its highest level since 1999; youth unemployment is at a record high).  The downturn in the region has intensified.  An increasing number of investors believe a strong Euro, due to other central banks easing to high heaven, is an impetus (Eurozone exports plunged at the fastest rate in almost 4 years during Q4).    

image

Meanwhile, Fitch downgrades Italy’s credit rating due to a strong showing from Beppe Grillo’s 5-Star Movement, increasing political risk to the Eurozone. “The inconclusive results of the Italian parliamentary elections on February 24-25 make it unlikely that a stable new government can be formed in the next few weeks,” Fitch said.  While Germany may be showing strength, is it sustainable?: check out both January new factory orders and car sales.  Meanwhile, Brussel’s prescription for record unemployment?: raise taxes (brilliant!)

- China institues its harshest property measures yet, leading to a 9.2% plunge in the Shanghai Property Index.  Uncontrolled advances in real estate prices are a symptom of short-sighted rampant monetary easing by major central banks worldwide.  China’s getting irritated by Japan’s Shinzo’s Abenomics.  Currency wars and beggar-thy-neighbor policies greatly increase the prospect for armed conflict.

- Preliminary negative signs of the increase in payroll taxes are slowly sprouting behind the incessant news of new all-time highs for the DJIA. The International Council of Shopping Centers reported that in February US chain store sales rose 1.7%, below the organization’s guidance of 2 to 2.5%.  Meanwhile, the Beige Book released this week also noted slowing retail sales through late February. Deteriorating sales trends will lead to an excess of inventories (keep an eye on the inventories to sales ratio) and ultimately slowing production.  On the job front, the Challenger job-cut report indicates that layoff announcements for February rose to a level seen only twice over the past 16 months.  Moreover, Friday’s news of a falling unemployment rate is likely transitory; the sequester will result in increased unemployment.  Another warning shot comes from Gallup’s Consumer Confidence survey, which has notably deteriorated since the sequester began.

-  The president of the Dallas Fed states the obvious to those who see the forest for the trees. Monetary policy is clearly not a panacea for economic growth. Despite unprecedented amounts of monetary stimulus, lack of credit demand (an idiosyncrasy of a balance-sheet recession) makes transmission of monetary policy to the general economy very difficult. The only credit demand we’re seeing is that related to student loan debt.

 

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Sat, 03/09/2013 - 13:03 | 3314948 Motorhead
Motorhead's picture

Are Steve Liesman and Paul Krugman dating?  Geesh, two 'tards extraordinaire and definitely made for each other.

Sat, 03/09/2013 - 13:26 | 3314997 Stuck on Zero
Stuck on Zero's picture

According to Mish:

The economy added a whopping 446,000 part-time jobs. Thus, the economy shed 276,000 full-time jobs.

 

 

http://globaleconomicanalysis.blogspot.com/2013/03/jobs-236000-unemployment-rate-77-part.html#lxUed2Z64GH1oOTD.99
Sat, 03/09/2013 - 14:47 | 3315214 Hongcha
Hongcha's picture

We can add jobs paying $9-10 hourly, not enough to buy a new car still less a house.

The consumer 70% of GDP gearing is unquestionably winding down.  It can't be wound back up without creating massive inflation.

This is my story anyway and I am sticking to it; that's why I am short.

Sat, 03/09/2013 - 16:47 | 3315529 Law97
Law97's picture

The consumer 70% of GDP gearing is unquestionably winding down.

Actually, total cosumer spending is staying about the same.  Reserach this, and you'll see that the wealthy are doing great and making up for the rest of us. 
Rather than short the market as a whole, you should short anything associated with the middle class or working Americans, and go long on luxury goods retailers or anything else associated with the top 1%. 

Sun, 03/10/2013 - 00:53 | 3316346 lasvegaspersona
lasvegaspersona's picture

Am I the only person still shopping?

Trips to WMT and HDepot recently were quite lonley. Staff seem to be asking if they can help (and not just as shoplifting prevention strategy). I'm sensing decreased retail activity (probably my theworldsfucked bias.)

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