Brevan Howard's Three Uncertainties And One Certainty To Worry About In The US

Tyler Durden's picture

We discussed earlier about the Fed's ZIRP policy and the transmission mechanism through which its free-money ends up in the real-economy (or not as the case in point). Brevan Howard agrees that the outlook for the US is not plain-sailing and that US growth does indeed face cross-currents, with the labor market improving at a steady pace while aggregate demand slows. While the firm remains more stoic, seeing a generally favorable macro backdrop, they note three uncertainties and one certainty that keeps them up at night. The pace of the drop in unemployment against only trend growth leaves its sustainability uncertain; the potentially temporary easing of the European financial crisis seems increasingly uncertain; and the growing tensions in the Middle East and the uncertainty over gas prices derailing the fragile economy. However, it is the one certainty that worries us most (and them, it seems), and that is the enormous fiscal drag the US faces in 2013 which unchecked could reduce real GDP growth by more than 3 percentage points. Even if the President and the new Congress cut this by half it would still be a noticeable drag on growth.


Brevan Howard

Looking forward, we believe that the US economy faces three uncertainties and one certainty. In terms of the uncertainties, the unemployment rate has dropped rapidly despite growth being around trend, calling into question the sustainability of this drop. Second, the European financial crisis has eased somewhat but the respite may again prove to be temporary. Third, geopolitical tensions in the Middle East could push up gasoline prices by enough to derail the expansion.


One certainty in our view is that the US faces an enormous fiscal drag in 2013.


Personal taxes on income, dividends, and capital gains are scheduled to rise sharply; across-the-board cuts to discretionary and defence spending will automatically kick in; and the payroll tax holiday and extended unemployment insurance are due to expire. This combination is likely to subtract more than 3 percentage points from real GDP growth. The question is whether the President and the new Congress will postpone some of these measures, however even if the fiscal drag is cut by half, it would still have a noticeable impact on growth.

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Bunga Bunga's picture

Recovery is flying!

LongSoupLine's picture

"One thing's for certain, SPX 1400 will not be broken" - Bernank


This ramp job is complete bullshit!  Where's the f'ing SEC!?! 

walküre's picture

They're in the driver's seat.

No soup for you! To the back of the line!

4horse's picture



The Owners of the 12 Central Banks:
- Rothschild Bank of London
- Rothschild Bank of Berlin
- Lazard Brothers of Paris
- Israel Moses Seif Banks of Italy
- Warburg Bank of Amsterdam
- Warburg Bank of Hamburg
- Lehman Brothers of New York
- Kuhn Loeb Bank of New York
- Goldman, Schs of New York
- Chase Manhattan Bank of New York



whether there are about 300 3000 or 3000000 VERY POWERFUL__ individuals who Own The FED


RussellChester8's picture

my friend's sister makes $74/hr on the computer. She has been out of a job for seven months but last month her check was $17871 just working on the computer for a few hours. Read more on this site ....

BigJim's picture

$17871, huh? Are all her months' earnings palindromic?

Bunga Bunga's picture

Actually I was referring to that car in the picture. Is nobody able to detect sarcasm unless tagged heavily as such?

NotApplicable's picture

Ummm... I think you failed to detect some humor/sarcasm in the above post.

Silveramada's picture


krispkritter's picture

I'm looking forward to a soft landing to the economic boom we've experienced the last 4 years. Just enough to cushion the blow of returning to single digit growth. As you can see in the first 5 seconds of this video, the charge will be led by a huge ramp-up in GM product sales...

HardlyZero's picture

Inception -- when does the "kick" kick-in ?  Are Ben and Tim on-board this inception ?  This looks and feels like the 2010 DiCaprio movie.


Is anybody convinced we are healthy going forward ?

pods's picture

We haven't had "real GDP growth" for most of my life.


walküre's picture

the battle will be public service sector vs. private sector

government is the largest consumer, employer and DEBTOR

their armies will fight tooth and nail to protect their status quo even when GDP and growth are going negative

that is why printing is commonly accepted

animal farm redux

brewing's picture

election year, lame duck gov't and outgoing president = new, incoming president with a disaster on his hands...

walküre's picture

Default with a mathematical certainty.

Does it matter who is President of the US or who is Chairman of the Fed?

Vampyroteuthis infernalis's picture

What would even be more sinister. ObaMao gets the boot and lets the US gov't default dumping it on to the Repugnicans. Machiavellian in nature.

walküre's picture

I think you're overestimating how much power he has. The debt buildup started after 9/11. We never recovered from the dot com wipeout. Then the false flag attacks, the wars and almost 11 years later we're officially broke.

The kid had fallen into the well a while ago. Now it's finally drowning.

Esso's picture

I think the kid was pushed into the well circa 1913.

CrashisOptimistic's picture

The GDP price index is heavily oil dependent and look how they are taking $5 off oil with the SPR release hype.  They timed it to close the quarter and tweak the Q1 number. 

It's little less than outrageous, the bullshit that is going on.

Dr. Engali's picture

We haven't had real GDP growth since Nixon cut the dollar link to gold.

UP Forester's picture

Although a lot of "GDP growth" since 1913 has been for the Department of War, then the '20s bubble, then Department of War, then Department of Defense (Stratcom), Department of Defense (NORAD, nukes), Great Society, Department of Defense (MACV), up to the point Nixon dumped gold....

tempo's picture

Growing Radiation levels in Japan is a looming disaster ( central bankers can't solve with more debt.

walküre's picture

... and VIX gets smashed down.

fool me 1x, shame on me.. try and fool me 2x ... fuck you

Jake88's picture

Wow an emotionally balanced trader. How's that working.

walküre's picture

The raid is on. Eventually the dumbest will have figured this out. FTD is reporting that private investors have lost millions in the past few days with their purchase of TVIX. It's reported that the Credit Suisse product TVIX was not behaving as it should have, and as advertised with their own prospectus. CS will have some explaining to do.

HarryM's picture

LOL - they can't even nail Corzine and they practically have a video of him stealing the fucking money

Here's how it goes down

Yakity yakity yak , and 3 years later no one remembers - lawyers get rich and the case gets closed


walküre's picture

Probably true. But confidence is being chipped at one piece at a time. Eventually there's nothing left.

The newborn suckers are broke. FYI.

HarryM's picture

True - but they don't give a crap - you think they actually have a conscience?


It's grab with two fists while you can baby - screw tomorrow.

lolmao500's picture

One certainty : the country is heading toward civil war.

Dr. Engali's picture

It's much easier for the government if we kill each other off than it is to keep all those promises. That's the systematic reset solution to them.

skepticCarl's picture

Who's going to be fighting who? The ZHer's against the Motley Fools?

Fedaykinx's picture

the rural people who cling to guns and religion vs the urban consumer blob of secularism


it won't be much of a fight.

q99x2's picture

1.000,000 citizens for each Rockefeller, Rotheschilde, Bush, Harriman, crooked politician and various other misfit FED and GS banksters. I guess the total to begin with is 300 that need to be handcuffed shackeled and locked up. But since it is global now I guess it will be a global revolution against the elite worldwide. That is what appears to be happening. The laws that the morons are passing don't mean crap because the ones that are supposed to enforce them are going to arrest the ones that are passing them. They are screwed.


eddiebe's picture

Nice to read someone is optimistic.

HarryM's picture

And if the O-Ring gets re-elected with the class warfare routine , we'll be one step closer.

GOSPLAN HERO's picture

Another certainty: Uncle Ben will print, print and print more paper funny money.

walküre's picture

If he doesn't print, millions of government employees go without a paycheque.

If he prints the value of the paper will become worth less and less.

He's between a rock and a hard place and so is every other government and central bank.

Time to abandon Ctrl+P and push Ctrl+Alt+Del

skepticCarl's picture

If he prints the value of the paper will become worth less and less.

Walkie, You  say that like it is an unacceptable choice that he would have to make.

This is his job, for God's sakes.  It's exactly what our overspending government wants: cheaper dollars to cover today's debt. It has been our government's policy, and every foreign government's policy, once thier soveriegn debt outrows revenues. I learned and understood this in Junior High School.

walküre's picture

Carl, we're at a point of no return. The course is irreversible. If Congress got serious about spending cuts and implement deep cuts into the system, far reaching austerity and so on .. the country would automatically cease to operate and you'd have stand still. Government is the largest consumer, the largest employer and the largest DEBTOR. Yes, technically a reduction in government would equate into savings but at the same time, the biggest consumer in the US and probably in the world would have to reduce its economic footprint!

They know that it is not sustainable and that the private sector is not capable of financing the spending habits of this giant consumer. Therefore they have no choice but to print into oblivion and pray and hope that by tomorrow, the US Dollar will still have some value left.

lolmao500's picture

Remember what the CBO said... collapse by late 2013, at most.

Simpson said commission members differed on when they thought the tipping point might come, but no one thought it would be more than two years away.

walküre's picture

the gig is up .. the propagandists are running out of narrative

no growth, declining revenues and increased spending a.k.a. debt issuance

not sustainable, not computable, irreversible

kito's picture

Labor market improving?....really?.....more part time walmart jobs is an improvement???.....

espirit's picture

Surely the writer has never been recently reaquainted with the current job market.

More temps, more part timers, More Jobs?


Gloomy's picture



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