It's An Interconnected World After All

Tyler Durden's picture

"The US recovery must overcome the European divorce and the China slowdown in order for the US to grow more than 2%" is how JPMorgan's Michael Cembalest describes the reality of an un-decoupled world. There is some divergence  as while the US economy if only growing at 2.0% and regional manufacturing surveys have rolled over, other economic indicators (JOLTS, railcar loadings, even select housing markets) are picking up. His point being that these trends will need to coalesce into more household spending (not just on cars) and capital spending in order for the US growth to grow more than 2%.

For that to happen, some clarity may be needed on both the “2013 fiscal cliff’ and the “long term entitlement bomb”, which unfortunately calls for opposing fiscal measures to mitigate them. One question: what policy mix could unleash the mountains of corporate cash? I doubt it would involve more help from the Fed. There’s a debate about whether the Fed should engage in more securities purchases (QE3), but that seems odd when policy rates are already zero and the 10 year Treasury is less than 2%. Instead of looking to the Fed, aiming for a repeat of the 1950’s seems like it might work better. From 1950 to 1960, the US federal debt fell from 80% to 46%. The US did not inflate its way out, and there was no austerity program. The US grew its way out. As a result, following the example of Eisenhower, it’s tempting to think that an aggressive pro-growth agenda signaled from the White House could be more impactful than QE3.

Wrapping up

It will be hard for the world to grow if China depends on Europe which depends on China which depends on the US which depends on China and Europe. It’s an odd market: in the US, 98% of the S&P 500’s cumulative 27% return since January 2010 occurred either during corporate earnings season, or right after QE programs. The rest of the time, the S&P 500 is flat, since the economic news has not been that good. As we have been writing, current circumstances call for modestly less risk than normal, and allocations to distressed residential and commercial real estate, long-term energy projects, private lending and other investments with less exposure to the current macro/business cycle.

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veyron's picture

parabolic, bitchez ...

Chief KnocAHoma's picture

Look nobody worry... because I saw the best dancing dog act ever on you tube... Pudsey will save us all!

TheGardener's picture

The great European divorce has an unspeakable name that can`t possibly be discussed in many a former western nation.

Glad we are in fight club and we don`t talk about things publicly concerning fight club.

Many more taboos in the waiting, though

resurger's picture

Am currently Long:

Nitric acid

Sulfur

gun powder

glycerin

ice cubes

gasoline

Oxygen

Salt

Orange Juice

Mentos

Coke

Beer Bottles

Plastic Bottles

Sawdust

Gold

Silver

Soap

TheGardener's picture

My bad. Punch me, no cover first two attempted hits. :-)

SheepDog-One's picture

JP Morgan guy said something? Oh, how delete-worthy.

Deep79's picture

I hate this line. We need to get back to a Pro Growth Agenda. All these fools say it, makes them sound smart

"We need to get back to a Pro-Growth Agenda"

What the Fuck does that mean. 

The only growth we can get, and has been since the last 30 years is more debt. No one mentions that.

Most annoying line so far in 2012, every idiot is saying we need to get back to a pro growth agenda.

 

slackrabbit's picture

agree, they're in denial........the river in which fools drown.

Temporalist's picture

You clearly haven't seen how well the "Pro Growth Agenda" has been working.  It just takes years, sometimes decades, sometimes centuries, but there will be growth as long as there is an agenda.

CvlDobd's picture

It's operation idiocracy.

Hence the war on gays (doesn't make babies) and shitty sex ed.

They just want a larger populous to rule. They also thInk that the baby boom was great for growth, let's do it again! I see a lot of school based mini issuance. So they are planning (it seems) for growth in shitty american education.

I hope thu fail but they may not. I know lots of single mothers with multiple children. Idiots are playing right into the PTB hands.

CrashisOptimistic's picture

It's not rocket science.

Oil is not coming out of the ground fast enough for 7 billion ppl to grow better than 2%, and it never will again.  

Oil is everything.  The rest is just decoration.

 

SKY85hawk's picture

We're living the politician's worst nightmare, HELPLESSNESS.

Demographics are preventing the production of profitable product sales in the consumer arena. 

Those who promote plans to produce prosperity via public spending are pretending that public policy can prevail over larger forces.

Have you read Harry Dent?  He's been predicting this slowdown since 1999.

http://seekingalpha.com/article/223886-harry-dent-s-outlook-on-demograph...

If you prefer video,  http://youtu.be/xzqsdpgRRgE

JeffB's picture

Didn't Eisenhower build upon the massive drop in military spending after winding down from the end of WWII, and capitalize on rebuilding Europe & Asia whose homes, infrastructure and factories had been largely obliterated by the war?

Sounds simple enough.

Easily said. Now we just need to repeat that.

Oh year, I forgot, we may also need to start a baby boom.

Especially since we now have a top heavy Social Security, Medicare & Prescription Drug system that will soon only have 2 workers per retiree.

 

resurger's picture

lol i thought you are TIS

+ 1 soap

TBT or not TBT's picture

Well, it might beat the anti-growth agenda we have now.   Lots of oil and gas available under our land  and shores.

spastic_colon's picture

i thought the FB IPO was supposed to take care of all this

evolutionx's picture

Have a look at the ECB Fear Indicator: 

banks deposited

+60B overnight

http://www.cds-info.com

Tyler Durden's picture

Always happens after the monthly window dressing day. Until it hits €850 billion it is largely a non-event as Northern European banks are merely recycling maturing Southern paper as explained here previously.

TheGardener's picture

I lived there , don't talk down Brazil : It has always been the land of future opportunities and it always will be !

Monkey business rules, good place for unruly Americans and a
reasonable refuge for people with no real roots. All others, monkeys included, better be back to your roots and ancient lands.

tocointhephrase's picture

Who said anything about China landing? Ground meet Sky!

Cognitive Dissonance's picture

Considering how many retail customers have, and still are, headed to the hills, pretty soon the bankers will be left with nothing to do but to play with themselves.

Wait...............  :)

Chief KnocAHoma's picture

Why not just a global reset? A big fucking force majuer that delcares if you have title to it, it is yours. If you don't hold it, tough shit.

All bets are off, all debts erased.

The money changers in the "Temple" will be pissed, but fuck 'em! 

Sudden Debt's picture

But what about the rothchilds and bilderbergs? They could lose all their hard earned money!
Could you really break their harts and turn them from being quarkillionairs to simple trillionaires?
Just image the suffering they would undergo....

And all that just for the happyness of a few billion people... Do you think that's worth it?

TheGardener's picture

Reset, but they won`t call that name. Temples resurrected
and money changers appointed to chief priest, yes.

orangegeek's picture

"The US recovery must overcome the European divorce and the China slowdown in order for the US to grow more than 2%"...and there's two hopes of that happening.  Bob Hope and No Hope.

 

Primary wave 3 down for all you elliott wavers.

 

http://bullandbearmash.com/chart/dow-jones-daily-11-2012/

Sudden Debt's picture

No simple QE 3 is needed,
Nothing is needed.
Cut down the number of government workers to max. 5% militairy included and keep taxes as where they are.
And pull back and brake down the militairy. Maybe a internal security force to guard the borders.

junkyardjack's picture

No military? But who will save us from the boogey men?  I hear putting your feet under the covers might not work...

Sudden Debt's picture

Dude, Americans are the best armed people in the world.
Any country should be nuts to attack America.
Americans can defend themselves.

WillyGroper's picture

Why? The fence is to keep us in.

TBT or not TBT's picture

Awesome, they finished the fence!    Thought we would have heard about it somewhere other than a ZH thread, but hey, it's great news.

Shizzmoney's picture

"The US recovery must overcome the European divorce and the China slowdown in order for the US to grow more than 2%" is how JPMorgan's Michael Cembalest describes the reality of an un-decoupled world.

He also forgot his employer.

junkyardjack's picture

Looks like Copper is helping to make room for QE3....

francis_sawyer's picture

What will it take to unleash corporate cash?

~~~

When the value of the denominated currency = zero

Tsunami Wave's picture

OT: Why on earth is GRPN up 20% today??

CvlDobd's picture

So the 35% ah plunge hurts less perhaps?

penexpers's picture

Awesome deals on penis enlargement explicitly for bankers.

junkyardjack's picture

They lost less money than people thought they would.  Slow bleed bitchez

Scalaris's picture

I'll pay you, so that you can pay him, so that he can pay me, so that we can all be rich.

TheGardener's picture

Junk me, but this is exactly how it works in family business
associations, not just in Asia , but the developing and recovering world over. You will surely be shortchanged , but at least the money stays in the family...;-)

narnia's picture

A 0% tax rate on dividends for the remainder of 2012 would do the trick

Arnold Ziffel's picture

"in-ter-con-nec-ted"

Who would of thought?

penexpers's picture

I had an argument with a guy this weekend who was still extolling the "greatness" of the "European socialist model."

Nobody knows what the hell is going on.

As C3PO said it,"We're doomed."

no life's picture

We're in a pink collar ghetto..

kralizec's picture

It will be hard for the world to grow if China depends on Europe which depends on China which depends on the US which depends on China and Europe.

LOL!