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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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Thu, 03/29/2012 - 14:52 | 2301423 Bunga Bunga
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Recovery is flying!

Thu, 03/29/2012 - 15:24 | 2301516 LongSoupLine
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!?! 

Thu, 03/29/2012 - 15:55 | 2301614 walküre
walküre's picture

They're in the driver's seat.

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

Thu, 03/29/2012 - 18:22 | 2302041 4horse
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


Thu, 03/29/2012 - 20:31 | 2302364 RussellChester8
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 ....

Fri, 03/30/2012 - 06:50 | 2302927 BigJim
BigJim's picture

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

Thu, 03/29/2012 - 15:24 | 2301520 mkhs
mkhs's picture

PIIGS have wings?

Thu, 03/29/2012 - 15:32 | 2301543 Bunga Bunga
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?

Thu, 03/29/2012 - 15:37 | 2301561 NotApplicable
NotApplicable's picture

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

Thu, 03/29/2012 - 16:47 | 2301817 Silveramada
Silveramada's picture


Thu, 03/29/2012 - 15:40 | 2301566 krispkritter
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...

Thu, 03/29/2012 - 15:55 | 2301606 HardlyZero
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 ?

Thu, 03/29/2012 - 16:27 | 2301742 Silver Bug
Silver Bug's picture

That picture sums it up quite nicely.

Thu, 03/29/2012 - 14:53 | 2301424 pods
pods's picture

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


Thu, 03/29/2012 - 14:56 | 2301436 walküre
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

Thu, 03/29/2012 - 15:05 | 2301465 brewing
brewing's picture

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

Thu, 03/29/2012 - 15:16 | 2301494 walküre
walküre's picture

Default with a mathematical certainty.

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

Thu, 03/29/2012 - 15:39 | 2301564 Vampyroteuthis ...
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.

Thu, 03/29/2012 - 15:58 | 2301624 walküre
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.

Thu, 03/29/2012 - 17:13 | 2301891 Esso
Esso's picture

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

Thu, 03/29/2012 - 15:18 | 2301496 CrashisOptimistic
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.

Thu, 03/29/2012 - 15:25 | 2301521 Dr. Engali
Dr. Engali's picture

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

Thu, 03/29/2012 - 19:58 | 2302252 UP Forester
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....

Thu, 03/29/2012 - 14:53 | 2301427 tempo
tempo's picture

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

Thu, 03/29/2012 - 14:53 | 2301428 walküre
walküre's picture

... and VIX gets smashed down.

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

Thu, 03/29/2012 - 15:16 | 2301495 Jake88
Jake88's picture

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

Thu, 03/29/2012 - 15:23 | 2301515 walküre
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.

Thu, 03/29/2012 - 15:52 | 2301597 HarryM
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


Thu, 03/29/2012 - 16:01 | 2301637 walküre
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.

Thu, 03/29/2012 - 16:08 | 2301661 HarryM
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.

Thu, 03/29/2012 - 14:53 | 2301429 lolmao500
lolmao500's picture

One certainty : the country is heading toward civil war.

Thu, 03/29/2012 - 15:02 | 2301455 Dr. Engali
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.

Thu, 03/29/2012 - 15:16 | 2301492 skepticCarl
skepticCarl's picture

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

Thu, 03/29/2012 - 15:52 | 2301602 Fedaykinx
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.

Thu, 03/29/2012 - 16:32 | 2301767 q99x2
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.


Thu, 03/29/2012 - 16:40 | 2301796 eddiebe
eddiebe's picture

Nice to read someone is optimistic.

Thu, 03/29/2012 - 16:34 | 2301779 HarryM
HarryM's picture

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

Thu, 03/29/2012 - 14:54 | 2301432 GOSPLAN HERO
GOSPLAN HERO's picture

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

Thu, 03/29/2012 - 15:07 | 2301470 walküre
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

Thu, 03/29/2012 - 15:24 | 2301519 skepticCarl
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.

Thu, 03/29/2012 - 15:42 | 2301571 walküre
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.

Thu, 03/29/2012 - 14:54 | 2301433 lolmao500
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.

Thu, 03/29/2012 - 14:58 | 2301443 walküre
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

Thu, 03/29/2012 - 15:23 | 2301512 HarryM
HarryM's picture

And the Market bounces back yet again today - un f'n believable

Thu, 03/29/2012 - 15:24 | 2301522 walküre
walküre's picture

wash trades

Thu, 03/29/2012 - 15:00 | 2301449 kito
kito's picture

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

Thu, 03/29/2012 - 15:10 | 2301475 espirit
espirit's picture

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

More temps, more part timers, More Jobs?


Thu, 03/29/2012 - 15:00 | 2301451 Gloomy
Gloomy's picture



   Check out the silver adjusted S&P return charts

Thu, 03/29/2012 - 15:24 | 2301518 5880
5880's picture

buying silver or gold is like buying puts

you better be right and now!

the island of Niihau HI was bot in 1864 for 1,000 oz of gold

do the math

Thu, 03/29/2012 - 15:45 | 2301576 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

"selling puts" yes, buying puts, no.

Thu, 03/29/2012 - 15:45 | 2301583 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

"you better be right and now!"

Thu, 03/29/2012 - 16:29 | 2301751 Schmuck Raker
Schmuck Raker's picture


= 2864?

(assuming the gold is still there, of course)

Thu, 03/29/2012 - 16:36 | 2301786 sdmjake
sdmjake's picture

That's a great sale...a fortune compared to what they got for Manhattan. (I think the white boyz stole it for a bottle of Jack and some Mardi Gras beads)


Thu, 03/29/2012 - 15:16 | 2301488 MFL8240
MFL8240's picture

 US growth does indeed face cross-currents, with the labor market improving at a steady pace while aggregate demand slows.


This is all bullshit!  You remove people that are out of work that should be counted and that IS NOT an improvement in labor markets, it is a fucking lie!

Thu, 03/29/2012 - 15:21 | 2301505 the not so migh...
the not so mighty maximiza's picture

Fuck Ya!!!

Thu, 03/29/2012 - 15:22 | 2301508 CrashisOptimistic
CrashisOptimistic's picture

There are lies and bullshit everywhere.

An advertiser pays a media vehicle to advertise product and the REASON he advertises is to improve sales of product.  A gloom and doom media outlet suppresses sales.  People hunker down.

Advertisers have informed the media that if they want advertising there will be no gloom and doom.  Then the editors swagger around and talk about journalistic integrity while displaying 9 upbeat stories and achieve "integrity balance" by adding one mildly negative story.

It's all absurd.

Thu, 03/29/2012 - 15:19 | 2301499 goforgin
goforgin's picture

But the rise in the price for fuel is not an issue of supply and demand, says former Senator Byron Dorgan (D-ND), who helped shape the nation's energy policy as chairman the Senate Indian Affairs Committee and three subcommittees.

"There is no justification for the current gas prices. This is all about speculation by the people who are speculating on the price of oil and gas," he says. "We could shutdown excess speculation in commodity markets. This government should do that."

Senator Bernie Sanders (I-VT) said as much on The Daily Ticker earlier this month. Sanders, along with 70 members of Congress, wrote a letter to regulators at the Commodity Futures Trading Commission (CFTC), urging immediate action on oil speculation by enacting "strong position limits" and to "utilize all authorities available to…make sure that the price of oil and gasoline reflects the fundamentals of supply and demand."

Fadel Gheit, senior energy analyst at Oppenheimer, told us he blames speculators for adding "at a minimum" $20 per barrel to the price of oil. In a study of oil prices over the last five years, the St. Louis Federal Reserve determined speculation drove up oil prices by 15 percent. But those estimates are comparatively conservative. The CEO of ExxonMobil (XOM) believes speculation could be driving up oil prices by as much as 40 percent a barrel.


No surprise, almost all commodities are priced based on speculation rather than demand and supply. Classical economics is a farce.

Thu, 03/29/2012 - 15:25 | 2301525 CrashisOptimistic
CrashisOptimistic's picture

Speculation is the only thing holding the price down.

Refineries placing orders for crude have zero obligation to examine or care what NYMEX quotes for a price.  They pay what they must to get a shipment, rather than have that shipment go to a different refinery.

Besides ALL OF WHICH . . . Brent is the price of oil.  Not WTI.  The North Sea's oil production is cratering and there is nothing that can be done about this.

Fri, 03/30/2012 - 00:35 | 2302742 hedgehog9999
hedgehog9999's picture

wAKE up!!!




Thu, 03/29/2012 - 15:20 | 2301503 walküre
walküre's picture

Some pretty desperate stock pumpers are junking like there's no tomorrow. Vapor volume is lifting the boats into EOD.

Thu, 03/29/2012 - 15:28 | 2301530 HD
HD's picture

Desperation.  Regardless to the fairy tales on CNBC - these hedge fund guys are scared shitless. The entire market is dependent on what Ben does at any given moment. When the market finally goes - it's not coming back for years and they know it.

Thu, 03/29/2012 - 15:33 | 2301550 walküre
walküre's picture

Wow. They're actually openly praying the Fed will inject money to pump the stock market higher. No regard for the consequences when money becomes worth less and less each day. All hail to the Fed and the Zimbabwe stock market.

Thu, 03/29/2012 - 15:38 | 2301562 HD
HD's picture

"Wow" was my thought exactly. For CNBC to put that as their main story on their home page screams - the free market is dead. Nothing matters except easy money.

It will all burn down. Nothing is free.

Thu, 03/29/2012 - 16:44 | 2301808 sdmjake
sdmjake's picture

You can't expect anything less when we are only 24 hours away from the end of Q1 and locking in the 'asset management fees' at close tomorrow. Just sayin...

Thu, 03/29/2012 - 15:41 | 2301553 HarryM
HarryM's picture

from zero to minus 90 and back


I miss the good old days when we had 200 pt drops

Thu, 03/29/2012 - 15:25 | 2301513 casey13
casey13's picture

Another uncertainty. With the US using the SWIFT system as a weapon are the days of the US $ as reserve currency numbered?

New deals of trade not using the US $ are anounced almost daily now.

Thu, 03/29/2012 - 15:23 | 2301514 Westcoastliberal
Westcoastliberal's picture

I've noticed every story in the MSM now is obliged to begin with a statement like "Against the backdrop of an improving economy....".  They've been well-trained.  Sit Ubu, sit.  Good dog.

Yes the big money is dishing out the hopium, but IMHO we're a razor's edge from disaster.  All it will take is one little.....slip.

Thu, 03/29/2012 - 15:30 | 2301534 walküre
walküre's picture

By now it should be crystal clear that the media is merely repeating the lies of their overlords. One thing that's not reported is the truth because it is so fubar ugly that it would put people in a coma.

Remember the narrative they orchestrated right after the meltdown? "green shoots", "better than expected", "shovel ready", "stimulus" and so on and so forth. Those phrases were so commonly used and repeated every fifth grader could recite them.

Thu, 03/29/2012 - 15:30 | 2301540 HD
HD's picture

Makes no difference what spin they put on it. Calling me a millionaire doesn't make me one. Consumers will believe "improving" when they have more cash in their pocket.

Thu, 03/29/2012 - 15:29 | 2301531 Bunga Bunga
Bunga Bunga's picture

BRICS bank - days of the Dollar as world reserve currency are numbered.


Thu, 03/29/2012 - 15:39 | 2301554 SheepDog-One
SheepDog-One's picture

What we're in now is the last dying gasps, the currency is worthless, a Federal Reserve Note's only value due to reserve currency oil trade medium which everyone has just agreed to abandon... while the central bankers run around saying 'Dont worry! We got this shit for reels this time! We'll just print more worthless notes'! 

Get ready for collapse and chaos its coming real soon.

Thu, 03/29/2012 - 15:44 | 2301578 walküre
walküre's picture

"Economy" meet cliff.

Get your garden ready.

Thu, 03/29/2012 - 15:36 | 2301552 BanjoDoug
BanjoDoug's picture

This article is worthless.   Any author who starts out by telling us "the labor market improving at a steady pace " is either lying, or so stupid he believes the government-speak coming out of Washington....   personally I think he's lying and he knows it.....   Thus his opinion is not worth reading....  & BTW, HIS OPINION DOESN'T EVEN BELONG IN THIS WEB SPACE - a better place to express his ideas would be MSNBC or the huffington post....

Thu, 03/29/2012 - 15:37 | 2301560 SheepDog-One
SheepDog-One's picture

Anyone who even says 'labor market' I want to punch in the face in the first place. 

Thu, 03/29/2012 - 16:45 | 2301812 Hubbs
Hubbs's picture

Minimum wage job "growth" really not enough to offset the loss of former hugh paying jobs. The government needs to go beyond just counting numbers and learn the multiplication tables: its #of jobs TIMES the income of each  (as a consequence of productivity) that has more meaning.

Thu, 03/29/2012 - 15:39 | 2301563 _ConanTheLibert...
_ConanTheLibertarian_'s picture

with the labor market improving at a steady pace



Thu, 03/29/2012 - 15:41 | 2301567 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

"real GDP growth"


Thu, 03/29/2012 - 15:41 | 2301568 slewie the pi-rat
slewie the pi-rat's picture

fiscal drag = eat yer peas, BiCheZ!

Thu, 03/29/2012 - 15:42 | 2301570 SheepDog-One
SheepDog-One's picture

OH but stawks are up, we're good again! lol

I guess Ben got back in the office from his manure spreading tour and hit the cntrl+buy all button. Bunch of total shit.

Thu, 03/29/2012 - 15:43 | 2301575 Joe Davola
Joe Davola's picture

Taxes on interest income?  Interest rates are nearly 0, and I dun lernt long ago that anuthin timesed by 0 is 0.

Thu, 03/29/2012 - 15:48 | 2301591 gjp
gjp's picture

And again, commodities (especially oil) down, foreign markets down, bonds up, us dollar up, and us equities barely making a loss.  Central planner nirvana again, every day!  Just once, it would be nice to see the BTFD crowd get a blowback reversal to suck on.  I guess I can always dream ...

Thu, 03/29/2012 - 16:24 | 2301727 beaker
beaker's picture

The president is trying... Don't forget last week he approved the go ahead on part of the Keystone Pipeline that did not need his approval to go ahead.   Aaannnnndd, he pointed out today how the oil companies and speculators are driving up gas prices.  Now if that isn't leadership, I don't know what is.

Fri, 03/30/2012 - 00:44 | 2302750 hedgehog9999
hedgehog9999's picture





Thu, 03/29/2012 - 16:26 | 2301731 eddiebe
eddiebe's picture

'It's hard to make predictions, especially about the future.'   Yogi Berra

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