Category Archives: Investment outlook

The GFC is Dead, Long Live the GFC!

By David Llewellyn-Smith, founding publisher and former editor-in-chief of The Diplomat magazine, now the Asia Pacific’s leading geo-politics website. Cross posted from MacroBusiness

PIMCO famously coined the phrase to “the new normal” to capture what it saw was a structural change to global markets in the wake of the GFC. It was to be period defined by lower returns on assets owing to a combination of delevering, deglobalization, and reregulation. Today that looks like fantasy.

As Dow Sprints to New High, the Middle Class and Manufacturing Languish

It’s hard to fathom the celebratory mood in the US markets, save that the moneyed classes are benefitting from a wall of liquidity reminiscent of early 2007, when risk spreads across virtually all types of lending shrank to scarily low levels. Then the culprit was not well understood, although Gillian Tett discerned that CDOs were a huge source of leverage, and in April 2007, an analyst, Henry Maxey at Ruffler, LLC, did an impressive job of piecing together how levered structured credit strategies were driving market liquidity.

Now it’s a lot easier to see what is afoot.

The Dog That Isn’t Barking: Why So Little Pundit Attention to the Caliber of Statistics?

Ah, the halcyon days of early 2007, when economics and finance bloggers would study the clouds on the horizon and debate what they foretold. Maybe I’m not hanging out in the right circles these days but now that financial markets seem to be completely in thrall to central bankers, there isn’t much point in doing fundamental analysis. As a result, from what I can tell, the level of bullshitting among market pundits has risen considerably.

Richard Koo Debunks the “Deleveraging is Almost Done, American Consumer Getting Ready for Good Times” Meme

Richard Koo of Nomura published an important piece earlier this week which got some attention in the financial blogosphere (Clusterstock, FT Alphaville). It takes issue with a critical part of the economist optimists’ case, namely, that consumer deleveraging is about done and therefore the economy is likely to perform much better in the next few years.

German Hope, French Despair

By Delusional Economics, who is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.

Eurozone Flash PMI for January came out overnight and the news was relatively good overall, although it must be noted that contraction continues across the zone.

China Economic Paradigm Nearing End Game

GMO, in a compelling analysis, not only confirms the skeptics’ case but provides reasons why the Chinese growth model faces an end game. While it may not be nigh, it seems to be closer than most people think.

Philip Pilkington: The Japanese Stimulus – Will It Work?

By Philip Pilkington, a writer and research assistant at Kingston University in London. You can follow him on Twitter @pilkingtonphil

There’s a lot of talk flying around about the Japanese stimulus. Some appears to be misguided, some appears to be sensible.

The Grey Lady Voices Some Skepticism About IPO of Single Family Rental Player Silver Lake

This site refrains from talking about individual stocks, since we don’t give investment advice. However, a potential sea-change is underway, as a large portion of the inventory of foreclosed homes is being converted to rentals. Private equity firms are pursuing this opportunity eagerly, as the combination of low financing costs and tight rental markets in the US means that, at least on paper, investor believe they can earn attractive income, with potential for appreciation, either by eventually selling the houses to individuals or by taking the company public.

Given all the excitement over this conversion (it was voted the best opportunity over the next 12 months at a real estate conference I attended in the fall), it was interesting to detect a fair bit in the way of reservations in an article in the New York Times on the first IPO in this space, Silver Lake.

Satyajit Das: L’Age d’Or, Part 1 – “A Barbarous Relic”

By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk (2011)

In Germany, gold is now available from vending machines in airports and railway stations – Gold to Go. Shoppers can buy a 1 gram wafer of gold or a larger 10g bar. Seeking safety for their savings, individuals have purchased 150 tonnes of gold, mainly in the form of coins. Investors poured money into special funds (known as exchange traded funds (“ETFs”)) which pool investor monies to buy over 1,000 tones of gold.

Corporate Bond Bubble Inflating?

At least in the US, a series of attention-getting stories, Sandy, then the elections, then the immediate roll right into fiscal cliff gamesmanship, followed by the Patreaus/Allen scandal, have made finance news seem comparatively dull, even though the stock market is in a swoon thanks to the engineered fiscal cliff nailbiter And Europe keeps looking more and more jaundiced by the day.

The Economist has taken note of the fact that the normally staid corporate bond market is looking a bit frothy.

Mr. Market Makes His Displeasure Known, and Wall Street Says it Needs Its Pony

Now even though, as Ben Walsh contends, market moves are often just noise, a downshift of over 2% in the S&P on the day after a Presidential election is being ascribed meaning by market touts, and therefore, by golly, it does mean something.

Pimco’s El-Erian Warns of Central Bank Put Bubble

Earlier today, El-Erian in the Financial Times released a short and apt note on the limits of the central bank put.

Mirabile Dictu! The Media Notices the Sucking Sound of Growth (What Little There Was) Leaving the Economy and Underplays IMF Malpractice

Starting late last week, there’s been a marked shift in the mix of headlines in the major media outlets. While it may simply be post fall equinox moodiness or a confluence of downer reports leading to a rare moment of sobriety, suddenly the big venues are concerned about the economic outlook.

So How’s That QE3 Working?

Obviously, it’s a little early to reach a verdict on QE3, but market pundit love reading the tea leaves early and often, so we figured we’d join the fun and look at early reactions.

Central Banks Versus the People

By Delusional Economics, who is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.

As you are surely aware by now, the US Federal Reserve has announced a new round of quantitative easing which like the ECB’s outright monetary transactions (OMT) is a new program of large scale asset purchases by a central bank. I thought I’d spend a bit of time today talking about these programs because once again I have noticed some large misconceptions in the media about what these operations are, and more importantly, what the likely outcome of them is.