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"Macro" Musings

giofranchi

By giofranchi
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JEast Newbie

JEast

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Outside my day job, I find the macro tourism discussion actually interesting.  I somewhat deem it as a game of central banker versus central banker and who blinks first.  No blink yet, but getting closer as the ECB is giving hints.  Noticed that the year-to-date inflation rate of Germany is in negative territory and probably reason for some of the ECB noise.

http://www.tariffnumber.com/news/1867/Producer-prices-in-October-2013-0-7-on-October-2012.html

 

My knuckle dragging view is that the ¥en will be the key causation.  Anything above say ¥115-120 (not there yet) will clearly cause Korea and others in the region to fight back.  If so, start buying Korean preferreds and maybe long bonds as Asia will again be exporting deflationary pressures.

 

Cheers

JEast

giofranchi Newbie

giofranchi

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"A New Kind Of Trigger Point" by Mr. Charles Gave

 

Armed with this information, a money manager should aim to alter the balance of risk in a portfolio in a non-linear fashion as we both move toward or away from such a trigger point. Hence, the recent pronounced move higher in Baa bond yields indicates that we may be about 50bp away from a potentially decisive trigger. Investors in US equities, in particular, should take heed. The problem is that when the metamorphic transition from one state to another takes place, it is usually too late to act.

 

 

Gio

Daily+11.21.13.pdf

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dcollon Enthusiast

dcollon

Posted
Posted

I enjoyed this quote from Gen-re's commentary:

 

Highlighting investing in Twitter, “Following such a crowd is an excellent hedge against ever being financially independent,” he said, citing past plunges in technology stocks. “Gravity wins in time.”

giofranchi Newbie

giofranchi

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Highlighting investing in Twitter, “Following such a crowd is an excellent hedge against ever being financially independent,” he said, citing past plunges in technology stocks. “Gravity wins in time.”

 

LOL!  ;D ;D ;D

 

Gio

TwoCitiesCapital Veteran

TwoCitiesCapital

Posted
Posted

A mostly bullish Merrill Lynch forecast report

 

"we’re seeing a surge in U.S. business and technological innovation that has the potential to revitalize the economy and spark another

long-lived bull market."

 

A Transforming World

 

Long term bull markets are born out of low valuations that lead to multiple expansion - not technological innovation. Technological innovation leads to long-term productivity gains that lead to long-term growth. Growth does not necessarily lead to higher valuations as can be seen in many periods of time throughout the stock market history of the U.S.

ERICOPOLY Mentor

ERICOPOLY

Posted
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Gary Shilling recently expressed an opinion that real GDP growth will return to 3.2 percent a year... beginning five years from now. 

 

Once private sector deleveraging is completed, in about five years, real GDP growth will probably return to its long-run trend of 3.2 percent a year, an improvement on the 2.1 percent growth in the recovery so far.

 

http://www.bloomberg.com/news/2013-08-26/the-strong-case-for-optimism-about-u-s-growth.html

 

It's just a "musing".

meiroy Contributor

meiroy

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- if you didn't accidentally liquidate at $85 you would keep it

- but if you accidentally liquidate at $85 you would not buy it back

 

(assuming no tax consequence and transaction cost is $0)

 

interesting :)

 

i have to be honest, i too behave this way. but if you really think of it logically, its not logical. (but in the real world tax and transaction cost does exist, which makes this even harder)

 

which one of the human faults (or multiple) does this fall under.

 

hy

 

Duration and return.

 

I think what's missing from a lot of these discussions is the hidden assumption that at least in US markets, as long as the valuation was done well, the gap tends to close within 2 to 3 years and sometimes much faster and the decision if to hold or not is a combination of both the "balance" return and the duration to achieve it.

 

THIS assumption is why we are value investors in a way.  If the duration was 12 to 13 years for a  stock to close the gap and double, for example, it would not be all that attractive...

 

Which brings "momentum" and timing into the discussion.

 

If it rose from 50 to 85 after two years, and you think it would take another 3 to get to 100 then it might not be worth it. If on the other hand momentum is going on and you reckon it will get to 100 within 6 months then you might re-buy. This is how I see it anyhow.

 

 

giofranchi Newbie

giofranchi

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The market continues to rise solely on the perception that the Fed’s easy money policy

can hold stock prices up indefinitely. We think that this line of thinking will prove to be

no more durable than the dot-com bubble that peaked in early 2000 or the housing

bubble that topped out in late 2007. In both cases the market gave back a large

proportion of the gains made during the bull market, and we believe that will prove to be

the case this time as well. When the vast majority of investors faithfully believe in a

concept, no matter how faulty it may be, momentum takes over and the market goes up

because it’s going up, ignoring all of the obvious warnings such as high valuations, over

bullishness, decreasing earnings momentum and an underperforming economy. When

reality suddenly sets in, as it inevitably does, most investors are left holding the bag,

hoping that the market doesn’t go any lower.

 

 

Gio

Comstock-Partners-Why-We-Are-Still-Bearish-Dcember052013.pdf

giofranchi Newbie

giofranchi

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Look, my idea is very simple (and maybe very wrong! ;D ;D): it is not that Keynesian policies are ineffective in stimulating growth and the economy… because they most certainly are! The problem, instead, is the discrepancy between their effectiveness in increasing values and their effectiveness in increasing prices. Specifically, of course, I think they are much better tools for increasing prices than values. Therefore, the longer they go on, the larger the overvaluation becomes. And overvaluation always ends the same way: deflation.

 

Gio

 

ERICOPOLY Mentor

ERICOPOLY

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Posted

 

Look, my idea is very simple (and maybe very wrong! ;D ;D): it is not that Keynesian policies are ineffective in stimulating growth and the economy… because they most certainly are! The problem, instead, is the discrepancy between their effectiveness in increasing values and their effectiveness in increasing prices. Specifically, of course, I think they are much better tools for increasing prices than values. Therefore, the longer they go on, the larger the overvaluation becomes. And overvaluation always ends the same way: deflation.

 

Gio

 

I'm more concerned about a recession than an inflated stock market.  I don't own an inflated stock (actually, it's an already deflated one) but the value of the stock would be impacted if the economy were to get significantly worse.  In part because of defaults, in part because of loan growth, and in part because of yield curve.

 

So I might be more interested in the macro picture of the economy (it's feeds back into value of the companies) rather than the price picture of the S&P500 (which I don't own).

 

You could say that undervaluation always ends in the same way -- inflation.  I'm not sure if that's accurate, but it's the flip side of your claim that overvaluation always leads to deflation.

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