This Summer Slowdown Will Be Different Than The Previous 3 [View article]
There has been a huge improvement in the balance sheets of consumers and the private sector. Households are much wealthier than they were several years ago due to higher equity and real estate values. In fact, it more than offsets the increase in the Federal government liabilities. The US economy's net worth is up substantially.
For the author to claim that the fundamentals of the US economy are deteriorating and are in worse shape than the last several years me makes me shake my head in wonder.
It is easy to slap. It is a meaningless exercise. The reality is that the IMF will participate only if the debt burden is sustainable. That places an upper limit on how much the EU can lend to Cyprus. The Cypriot economy cannot finance a loan any bigger than the current proposed EU loan. Since the Cypriot don't have enough income, their assets are the obvious alternative.
The Treasury sells $13B in 30-year bonds at 3.25%, the third straight month the government is paying more than 3% to borrow money for 3 decades. Bid-to-cover ratio of 2.43, vs. a recent 2.74; indirect bidders take 42%, vs. a recent 36.4%. Direct bidders take just 4.9%, vs. a recent 14.5%. [View news story]
No, guys, Treasuries will continue falling. The pace of economic activity has clearly picked. The recession prophets look like idiots. Real GDP will be 3%. And that is a good year by any measure.
Treasury yields climb back to near the year's highs as jobless claims continue to improve. The 10-year gains 4 bps to 2.06%. TLT -0.4% premarket, -4.6% YTD. A favorite vehicle of bond bears, TBT +7.9% YTD. [View news story]
There has to be lot of embarrassed fear mongers out there. Predicting recession year after year, which never materializes. Anyone who looks at the data can see that the US economy accelerating, probably 3% in real terms.
The Shiller index, which I studied in graduate school, makes no sense. There is no economic theory to justify weighting the last ten years of earnings equally. Given that the Shiller index is ad hoc, it is likely that is the product of data mining. Hence it will probably break down.
Secondly, I think you are confused. It is irrelevant that forward looking P/E ratios fluctuate wildly. Forward looking P/E mean revert and thereby give investors signals to buy and sell. Buy when the P/E ratio is substantially below its historical average and sell when it is way above the same average.
To the contrary, the stock markets reflects the amazing growth in earnings since the depth of the Great Recession. Earnings growth does a fine job of explaining the gyrations of the US stock market over the last several years.
Stock investors who bought broadly defined stock index funds have doubled their money over the last 5 years. Show me a Las Vegas casino where a customer could effortlessly double their money over a five year period. It doesn't exist.
And I, trained in economics, don't see the Economic Apocalypse coming. Even without more fiscal discipline, the Federal budget deficit is on a declining trajectory for the next five years. But I do see strength in durable goods, services, and construction in all the economic statistics. Housing starts are up over 30% year over year. The PMI releases themselves suggest economic growtth of 3%. Of course, the Republicans can wreck the economy with budget tightening, but I don't Obama and the Senate will allow them.
GDP Q4 Advance Estimate At -0.1%: A Shocking Slip Into Contraction [View article]
Hammer,
What Doug Short failed to mention is the reason for the GDP contraction - a massive decline in defense orders. That decline took 2% off the number. See Bloomberg.
Consumer and business spending were solid.
The markets did not respond because they are intelligent enough to realize that the plunge in defense is one off.
Volatility On The Horizon? Take Advantage Of The Fear [View article]
No, the bull case is easier. Housing is recovering. Employment growth is strong. We just finished a year with 2.2% real GDP growth despite a plunge in fourth quarter defense orders. In fact, both consumption and investment is healthy in the 4th quarter.
Households have deleveraged. Corporations have great balances. And the US government pays virtually nothing to finance its debt.
A Better, Low Risk Strategy To Beat The Market [View article]
Rob,
Have you ever heard of data mining?
The author's results are obviously data mining. He took a big list of variables and did a search until he found a subset that gave spectacular results.
As a statistician I can spot data mining a mile a away.
Retail Sales: An Unexpectedly Strong December [View article]
Doug, The retail sales report suggests the economy is gaining strength. Not a surprising conclusion given all the other data suggesting the same. Your population adjustment is both irrelevant and opaque. Without knowing how the population has evolved you can't draw any conclusions about economic welfare.
Physical Delivery Needed In Agriculture And Energy Markets [View article]
Levin,
Eliminating cash settlement would destroy the liquidity in the market.
The market would collapse.
Oil prices began rising dramatically when global oil production went flat in 2003. I can post the EIA data on global crude oil production. It completely undermines your argument.
This Summer Slowdown Will Be Different Than The Previous 3 [View article]
For the author to claim that the fundamentals of the US economy are deteriorating and are in worse shape than the last several years me makes me shake my head in wonder.
Corporate Profits Remain Strong [View article]
Cyprus's Bad Haircut Day [View article]
The Treasury sells $13B in 30-year bonds at 3.25%, the third straight month the government is paying more than 3% to borrow money for 3 decades. Bid-to-cover ratio of 2.43, vs. a recent 2.74; indirect bidders take 42%, vs. a recent 36.4%. Direct bidders take just 4.9%, vs. a recent 14.5%. [View news story]
Treasury yields climb back to near the year's highs as jobless claims continue to improve. The 10-year gains 4 bps to 2.06%. TLT -0.4% premarket, -4.6% YTD. A favorite vehicle of bond bears, TBT +7.9% YTD. [View news story]
Is The Stock Market Cheap? [View article]
The Shiller index, which I studied in graduate school, makes no sense. There is no economic theory to justify weighting the last ten years of earnings equally. Given that the Shiller index is ad hoc, it is likely that is the product of data mining. Hence it will probably break down.
Secondly, I think you are confused. It is irrelevant that forward looking P/E ratios fluctuate wildly. Forward looking P/E mean revert and thereby give investors signals to buy and sell. Buy when the P/E ratio is substantially below its historical average and sell when it is way above the same average.
The Pullback Is Not Over Yet [View article]
Stock investors who bought broadly defined stock index funds have doubled their money over the last 5 years. Show me a Las Vegas casino where a customer could effortlessly double their money over a five year period. It doesn't exist.
And I, trained in economics, don't see the Economic Apocalypse coming. Even without more fiscal discipline, the Federal budget deficit is on a declining trajectory for the next five years. But I do see strength in durable goods, services, and construction in all the economic statistics. Housing starts are up over 30% year over year. The PMI releases themselves suggest economic growtth of 3%. Of course, the Republicans can wreck the economy with budget tightening, but I don't Obama and the Senate will allow them.
Developments In China Explain The End Of Gold's Rise [View article]
Populist rhetoric does not make an argument.
Why The S&P 500 Will Likely Fall By 40% [View article]
Those who don't understand the markets are almost always political conservatives who call white black and keep ignoring the strengthening US economy.
GDP Q4 Advance Estimate At -0.1%: A Shocking Slip Into Contraction [View article]
What Doug Short failed to mention is the reason for the GDP contraction - a massive decline in defense orders. That decline took 2% off the number. See Bloomberg.
Consumer and business spending were solid.
The markets did not respond because they are intelligent enough to realize that the plunge in defense is one off.
Volatility On The Horizon? Take Advantage Of The Fear [View article]
Households have deleveraged. Corporations have great balances. And the US government pays virtually nothing to finance its debt.
A Better, Low Risk Strategy To Beat The Market [View article]
Have you ever heard of data mining?
The author's results are obviously data mining. He took a big list of variables and did a search until he found a subset that gave spectacular results.
As a statistician I can spot data mining a mile a away.
Retail Sales: An Unexpectedly Strong December [View article]
Doug, The retail sales report suggests the economy is gaining strength. Not a surprising conclusion given all the other data suggesting the same. Your population adjustment is both irrelevant and opaque. Without knowing how the population has evolved you can't draw any conclusions about economic welfare.
Physical Delivery Needed In Agriculture And Energy Markets [View article]
Eliminating cash settlement would destroy the liquidity in the market.
The market would collapse.
Oil prices began rising dramatically when global oil production went flat in 2003. I can post the EIA data on global crude oil production. It completely undermines your argument.
The Relationship Between Open Interest In VIX Futures And The S&P 500 [View article]