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"Macro" Musings


giofranchi

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To those that follow macro indicators, what indicators that you track can foretell a recession?

 

I find yield curve inversion, employees in residential construction, negative growth in employees working in trucking/transportation  etc to be good indicators.

 

 

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http://www.bloomberg.com/news/2014-02-25/rajoy-to-cut-income-tax-saying-spain-s-sacrifices-bearing-fruit.html

http://www.nytimes.com/2014/06/21/business/international/spain-stepping-back-from-austerity-plans-to-cut-taxes.html?_r=0

 

Looks like an end to austerity in europe is coming. My brain says the € is on a declining path with positive long term implications for europes businesses.

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http://www.acting-man.com/?p=31417

 

Note the chart showing how the change in the risk factor for sovereign debts and the actions of ECB accepting risky debts as good collateral caused the drop in EU sovereign debts while reducing loans to the private sector.

 

Has the diversion improved allocation of capital? Has the incentives for EU governments to adopt sensible policies increased? Is the problem of too many and too big EU banks being solved?

 

 

 

 

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Two key takeaways from the latest piece by Mr. David Hay:

1) Bridgewater thinks expected real returns for stocks have almost never been lower than today

2) Bridgewater thinks expected real returns for stocks and bonds have never been lower than today

A curiosity (I would say an appalling curiosity!):

Yields on 10-years government bonds in Spain have never been this low since… 1789!!! ::)

 

Gio

EVA+6.27.2014_NA.pdf

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Guest hellsten

Yields on 10-years government bonds in Spain have never been this low since… 1789!!! ::)

 

Interesting statistics. Thanks for posting. If history repeats itself, France will soon invade Spain ;D

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"Poverty Matters for Capitalists" by Mr. Charles Gave

 

Every US recession that I can recall was preceded by a fall in long rates and I doubt the next will be much different. As such, do not expect the next US downturn to arise from the Federal Reserve pushing rates higher, an overvalued dollar or even mal-investments. Expect it to result from a decline in the income of the working poor. Early warning signs are likely to show up in the shopping isles of stores such as Walmart, average driving miles, and the price of houses at the cheaper end of the market. I suspect the lesson that will eventually be learnt is that in a modern industrialized economy there are few worse things a central bank can do than deliberately attack the spending power of the poor.

 

Given the Fed’s asinine policy stance, at least since 2002, it seems likely that the prices of discretionary items bought by the least well off are likely to slip into a protracted decline. Hence, the deflationary tendencies that have been visible for some years are likely to explode during the process of a deflationary contraction. The fact that the price of oil, gas and rents has continued to rise only hardens my conviction in this view.

 

I make no claim on the timing of this outcome. But the end game for this cycle is surely for US long rates to decline and quality spreads to open massively. My advice would be to maintain a deflation hedge in all portfolios, improve liquidity and boost the quality of both bond and equity holdings.

 

 

Gio

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I wonder if. at some point in the not too distant future, we'll look back at this video and say "he was right".

 

http://www.valuewalk.com/2014/07/rick-santelli-epic-meltdown-cnbc-video/

 

If nothing else, the video is entertaining. :P

 

Haha I saw that as well.

 

To the guy of UBS: "Oooh patience! It's been 5 and a half years. Japan got patience. Woopedidoo!"

 

It sure would be funny to see him proven right, if only to get more of those videos. :D

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