Monday, January 5, 2009
Eric Lewis 2009 Comic
This really says it all doesnt it? From the Calculated Risk blog - this is a comic by Eric G Lewis (who's website will be up soon at http://www.ericglewis.com/)
Sunday, January 4, 2009
Schilling forecasts S&P to reach 600 this year
Gary Schilling - one of the best forecasters of 2008 - all of his 2008 predictions (13 of them came true). Here's a preview of what he is thinking.
http://finance.yahoo.com/tech-ticker/article/149147/S&P-600:-Thats-Gary-Shillings-Forecast-for-2009,-Not-an-Index&comment_start=21
S&P 600: That's Gary Shilling's Forecast for 2009, Not an Index
Posted Dec 19, 2008 12:33pm EST by Aaron Task in Investing, Commodities, Recession
Related: ^dji, ^gspc, FXI, TLT, EEM, UDN, SPY
The S&P 500 could fall to as low as 600 in 2009 and "alternative assets" like commodities and currencies will provide no shelter for investors, says Gary Shilling, president of A. Gary Shilling & Co.
Having been appropriately bearish heading into this year, Shilling sees "few good places to hide" in 2009. Currently, Shilling is long Treasuries and the dollar, but notes the bond market's rally is getting long in the tooth.
Other than defensive plays like utilities and consumer staples, Shilling is short stocks. His "S&P 600" prediction, a 33% drop from current levels, is based on a view that S&P earnings will be $40 per share next year (vs. the consensus of $83) and the index will trade with a P/E multiple of 15. (Here's the math: $40 EPS x 15 P/E = 600.)
Shilling is also short commodities and remains bearish on emerging markets, most notably China. The theory China, most notably, could "decouple" from the U.S. doesn't hold up to scrutiny, Shilling says, as evinced by the slowdown of China's economy and the fact their middle class isn't large enough to sustain growth internally.
Against that backdrop, Shilling isn't only bearish on China as an investment, he sees the potential for major social upheaval in the world's most populous nation.
Yeah... this is definitely THE bear case. I happen to be in the bear camp along with Schilling and Roubini. Be careful out there.
http://finance.yahoo.com/tech-ticker/article/149147/S&P-600:-Thats-Gary-Shillings-Forecast-for-2009,-Not-an-Index&comment_start=21
S&P 600: That's Gary Shilling's Forecast for 2009, Not an Index
Posted Dec 19, 2008 12:33pm EST by Aaron Task in Investing, Commodities, Recession
Related: ^dji, ^gspc, FXI, TLT, EEM, UDN, SPY
The S&P 500 could fall to as low as 600 in 2009 and "alternative assets" like commodities and currencies will provide no shelter for investors, says Gary Shilling, president of A. Gary Shilling & Co.
Having been appropriately bearish heading into this year, Shilling sees "few good places to hide" in 2009. Currently, Shilling is long Treasuries and the dollar, but notes the bond market's rally is getting long in the tooth.
Other than defensive plays like utilities and consumer staples, Shilling is short stocks. His "S&P 600" prediction, a 33% drop from current levels, is based on a view that S&P earnings will be $40 per share next year (vs. the consensus of $83) and the index will trade with a P/E multiple of 15. (Here's the math: $40 EPS x 15 P/E = 600.)
Shilling is also short commodities and remains bearish on emerging markets, most notably China. The theory China, most notably, could "decouple" from the U.S. doesn't hold up to scrutiny, Shilling says, as evinced by the slowdown of China's economy and the fact their middle class isn't large enough to sustain growth internally.
Against that backdrop, Shilling isn't only bearish on China as an investment, he sees the potential for major social upheaval in the world's most populous nation.
Yeah... this is definitely THE bear case. I happen to be in the bear camp along with Schilling and Roubini. Be careful out there.
Saturday, January 3, 2009
Wheeeee..... YEAH BABY, YEAH
Wing Suit Base Jumping.... This is a BLAST to even just watch - holy macarena!!!!!
wingsuit base jumping from Ali on Vimeo.
Would you love to do this? WINGSUIT JUMPING! Lets go.
wingsuit base jumping from Ali on Vimeo.
Would you love to do this? WINGSUIT JUMPING! Lets go.
ECB Papademos: Don't see recovery in 2009
Papademos Says ECB to ‘Act Appropriately’ in Slowdown (Update2)
Email | Print | A A A
By Simon Kennedy
Jan. 3 (Bloomberg) -- European Central Bank Vice President Lucas Papademos said an economic recovery may not begin until next year and that policy makers have the scope to cut interest rates if inflation slows further.
“The economic outlook is unusually uncertain,” Papademos said in an interview with Germany’s WirtschaftsWoche magazine published today. “It is quite possible that the recovery will not start until the beginning of 2010.”
Having reduced their key interest rate by 175 basis points since early October to 2.5 percent, ECB policy makers enter the new year under pressure to cut more deeply amid Europe’s first recession in 15 years. Retail sales fell for a seventh month in December, manufacturing shrank at a record pace and lending to the private sector stagnated, reports showed this past week.
The economy may be even weaker in 2009 than the ECB’s prediction of last month for a contraction of about 0.5 percent, Papademos said. The Frankfurt-based central bank will “act appropriately” and has room to do so if the slowdown threatens price stability, which the ECB defines as inflation just below 2 percent in the medium term, he said.
“If, in our assessment, the risks to price stability change further in the coming months, monetary policy could be eased further and we will act appropriately,” Papademos said.
Inflation to Fall
The ECB’s current view is that the 16-nation economy will remain weak and contract for two to three more quarters with a “gradual recovery” in the second half of the year at the earliest, he said. While it is premature for the bank to revise its projections it “cannot rule out that economic activity in 2009 may turn out to be weaker than suggested,” he said.
Although deflation, a sustained period of falling prices, isn’t likely in the euro-area, inflation may “fall considerably” in the middle of 2009 before accelerating toward levels consistent with price stability by the end of the year, Papademos said.
The inflation rate fell to 1.8 percent last month, beneath the ECB’s target for the first time since July 2007, according to the median of 20 forecasts given by economists before a report scheduled for release in the coming week.
The fall in the price of oil from its peak of $147 a barrel last July as well as lower interest rates and taxes should support expansion, Papademos said.
Rate Expectations
Economists at Bank of America Corp. are among those anticipating the economy will be weaker than the ECB projects this year with a forecast for a 2.5 percent contraction. They expect the ECB to cut its benchmark to 1.5 percent this quarter even as officials such as President Jean-Claude Trichet signal a reluctance to pursue aggressive rate cuts.
The ECB’s governing council next meets Jan. 15 with investors indicating they expect a cut of at least 25 basis points, according to Eonia forward contracts.
Papademos said the ECB had “absolutely not” lagged behind counterparts such as the Federal Reserve in combating the economic fallout from the financial crisis. The Fed last month cut its main interest rate to as low as zero for the first time.
The economies and mandates of central banks differ and interest rates were higher elsewhere than in Europe when the turmoil began, Papademos said. “The fact that some central banks have lowered their key rates more quickly than us does not mean they are ahead of us,” he said.
‘More Time’
The difficulty facing the ECB is that the crisis means markets are not passing on interest rate cuts to the ECB as fast as they would traditionally, Papademos said. “In the current environment, it will take more time for interest rate cuts to affect economic activity and their impact may be weaker than is usually the case,” he said.
The ECB official urged banks to take advantage of government funding and better disclose the losses and risk they face. A proposal for a clearing house to guarantee loans between banks is a “concept worth exploring,” he said.
The ECB provided a transcript of Papademos interview to news media.
To contact the reporters on this story: Simon Kennedy in Paris at skennedy4@bloomberg.net.
Last Updated: January 3, 2009 08:01 EST
Email | Print | A A A
By Simon Kennedy
Jan. 3 (Bloomberg) -- European Central Bank Vice President Lucas Papademos said an economic recovery may not begin until next year and that policy makers have the scope to cut interest rates if inflation slows further.
“The economic outlook is unusually uncertain,” Papademos said in an interview with Germany’s WirtschaftsWoche magazine published today. “It is quite possible that the recovery will not start until the beginning of 2010.”
Having reduced their key interest rate by 175 basis points since early October to 2.5 percent, ECB policy makers enter the new year under pressure to cut more deeply amid Europe’s first recession in 15 years. Retail sales fell for a seventh month in December, manufacturing shrank at a record pace and lending to the private sector stagnated, reports showed this past week.
The economy may be even weaker in 2009 than the ECB’s prediction of last month for a contraction of about 0.5 percent, Papademos said. The Frankfurt-based central bank will “act appropriately” and has room to do so if the slowdown threatens price stability, which the ECB defines as inflation just below 2 percent in the medium term, he said.
“If, in our assessment, the risks to price stability change further in the coming months, monetary policy could be eased further and we will act appropriately,” Papademos said.
Inflation to Fall
The ECB’s current view is that the 16-nation economy will remain weak and contract for two to three more quarters with a “gradual recovery” in the second half of the year at the earliest, he said. While it is premature for the bank to revise its projections it “cannot rule out that economic activity in 2009 may turn out to be weaker than suggested,” he said.
Although deflation, a sustained period of falling prices, isn’t likely in the euro-area, inflation may “fall considerably” in the middle of 2009 before accelerating toward levels consistent with price stability by the end of the year, Papademos said.
The inflation rate fell to 1.8 percent last month, beneath the ECB’s target for the first time since July 2007, according to the median of 20 forecasts given by economists before a report scheduled for release in the coming week.
The fall in the price of oil from its peak of $147 a barrel last July as well as lower interest rates and taxes should support expansion, Papademos said.
Rate Expectations
Economists at Bank of America Corp. are among those anticipating the economy will be weaker than the ECB projects this year with a forecast for a 2.5 percent contraction. They expect the ECB to cut its benchmark to 1.5 percent this quarter even as officials such as President Jean-Claude Trichet signal a reluctance to pursue aggressive rate cuts.
The ECB’s governing council next meets Jan. 15 with investors indicating they expect a cut of at least 25 basis points, according to Eonia forward contracts.
Papademos said the ECB had “absolutely not” lagged behind counterparts such as the Federal Reserve in combating the economic fallout from the financial crisis. The Fed last month cut its main interest rate to as low as zero for the first time.
The economies and mandates of central banks differ and interest rates were higher elsewhere than in Europe when the turmoil began, Papademos said. “The fact that some central banks have lowered their key rates more quickly than us does not mean they are ahead of us,” he said.
‘More Time’
The difficulty facing the ECB is that the crisis means markets are not passing on interest rate cuts to the ECB as fast as they would traditionally, Papademos said. “In the current environment, it will take more time for interest rate cuts to affect economic activity and their impact may be weaker than is usually the case,” he said.
The ECB official urged banks to take advantage of government funding and better disclose the losses and risk they face. A proposal for a clearing house to guarantee loans between banks is a “concept worth exploring,” he said.
The ECB provided a transcript of Papademos interview to news media.
To contact the reporters on this story: Simon Kennedy in Paris at skennedy4@bloomberg.net.
Last Updated: January 3, 2009 08:01 EST
A central banker will never come right out and say that there wont be a recovery in 2009. But we have to interpret that Papademos is essentially saying that there wont be a recovery in 2009. The ECB is signaling a change of their optimisitic forecast and will cut interest rates this quarter.
Friday, January 2, 2009
Stimulus: Buy American
Obama Team Reviewing ‘Buy American’ Plank in Stimulus (Update1)
Email | Print | A A A
By Edwin Chen
Jan. 2 (Bloomberg) -- President-elect Barack Obama’s advisers are looking at including a “buy American” provision in the economic-stimulus legislation that the incoming administration has made its first priority.
“We are reviewing the buy American proposal and we are committed to a plan that will save or create 3 million jobs, including jobs in manufacturing,” said Jen Psaki, a spokeswoman for Obama’s transition team.
With the U.S. amid its worst economic slump since World War II, Obama is working on a package combining tax cuts and spending on infrastructure, such as roads, bridges and transit systems, to boost growth.
The stimulus package must pass Congress, and Representative Chris Van Hollen, the Maryland Democrat who is a liaison between Congress and Obama’s transition team, said “we obviously want to focus our investments in areas where American industry will benefit.”
Still, Van Hollen, speaking in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” said the aim of the legislation wasn’t to “set up walls” and that the stimulus would be aimed at “generating American jobs,” not triggering a “trade war.”
Obama will meet privately with Democratic congressional leaders on Jan. 5 in the Capitol and will hold discussions later with leaders in both parties, said Brendan Daly, a spokesman for House Speaker Nancy Pelosi. The president-elect and lawmakers will discuss the stimulus measure and other legislation slated to move in the first weeks of the congressional session, Daly said.
Manufacturing Council
Nucor Corp. Chief Executive Officer Dan DiMicco said he will use his position as a member of the U.S. Department of Commerce’s manufacturing council to push for the use of domestically produced steel in such projects. Current requirements that American-made material be used in government projects are unevenly enforced, he said.
The New York Times reported yesterday that U.S. steelmakers are counting on government spending to make up for sagging demand from automakers and other industries.
U.S. steel demand fell to an estimated 104 million metric tons last year from 120.5 million in 2007, said Purchasing magazine, an industry publication.
Democrats are seeking to have legislation ready soon after Obama’s Jan. 20 inauguration, though Senate Republican leader Mitch McConnell has threatened to slow that timetable.
Obama advisers and congressional Democrats estimate the stimulus plan may total $850 billion. Some economists are recommending as much as $1 trillion to spur the economy.
To contact the reporter on this story: Edwin Chen in Washington at Echen32@bloomberg.net.
Last Updated: January 2, 2009 18:42 EST
Email | Print | A A A
By Edwin Chen
Jan. 2 (Bloomberg) -- President-elect Barack Obama’s advisers are looking at including a “buy American” provision in the economic-stimulus legislation that the incoming administration has made its first priority.
“We are reviewing the buy American proposal and we are committed to a plan that will save or create 3 million jobs, including jobs in manufacturing,” said Jen Psaki, a spokeswoman for Obama’s transition team.
With the U.S. amid its worst economic slump since World War II, Obama is working on a package combining tax cuts and spending on infrastructure, such as roads, bridges and transit systems, to boost growth.
The stimulus package must pass Congress, and Representative Chris Van Hollen, the Maryland Democrat who is a liaison between Congress and Obama’s transition team, said “we obviously want to focus our investments in areas where American industry will benefit.”
Still, Van Hollen, speaking in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” said the aim of the legislation wasn’t to “set up walls” and that the stimulus would be aimed at “generating American jobs,” not triggering a “trade war.”
Obama will meet privately with Democratic congressional leaders on Jan. 5 in the Capitol and will hold discussions later with leaders in both parties, said Brendan Daly, a spokesman for House Speaker Nancy Pelosi. The president-elect and lawmakers will discuss the stimulus measure and other legislation slated to move in the first weeks of the congressional session, Daly said.
Manufacturing Council
Nucor Corp. Chief Executive Officer Dan DiMicco said he will use his position as a member of the U.S. Department of Commerce’s manufacturing council to push for the use of domestically produced steel in such projects. Current requirements that American-made material be used in government projects are unevenly enforced, he said.
The New York Times reported yesterday that U.S. steelmakers are counting on government spending to make up for sagging demand from automakers and other industries.
U.S. steel demand fell to an estimated 104 million metric tons last year from 120.5 million in 2007, said Purchasing magazine, an industry publication.
Democrats are seeking to have legislation ready soon after Obama’s Jan. 20 inauguration, though Senate Republican leader Mitch McConnell has threatened to slow that timetable.
Obama advisers and congressional Democrats estimate the stimulus plan may total $850 billion. Some economists are recommending as much as $1 trillion to spur the economy.
To contact the reporter on this story: Edwin Chen in Washington at Echen32@bloomberg.net.
Last Updated: January 2, 2009 18:42 EST
I had commented previously on Will Rahal's blog about how the stimulus needed to have such a Buy American provision. This is absolutely the right thinking. America's manufacturing base needs a big lift and this is the smartest way to do it. Why would you outsource your stimulus?
Thursday, January 1, 2009
So its 2009....
My thoughts:
And so it begins. Quietly. Like a thief. It has all the makings of being a year that most people would like to forget when it does end. The financial crisis is getting close to the mid point mark. The gangrene though has spread into the real economy. Large masses of people are starting to get laid off - not just the bottom 10% as sales slow. Consumers and Business are deleveraging simultaneously and as they do - they are feeding what is a classic deflationary downward spiral with demand destruction in all economic activities. In such a scenario the velocity of money slows dramatically and one of the ways to combat this is to create more money and hope that the additional money will compensate for the reduced velocity. The second and surer way to combat this is by Keynsian government spending. We've now heard of a proposed 800B Stimulus package from Obama's financial team. By the time this makes it way into Congress and Senate this should be close to 900B if not 1T. This spending if done wisely (giving it to the 50 States, green infrastructure etc) will help create demand (which is being destroyed in the private sectors). Robert Shiller (of Case Shiller) has called for Obama to create full employment (or what full employment would be in a typical recession). Obama is 100% right when he pinpoints the fact that it will be JOB CREATION that will renew confidence. Right now that is the most vital commodity that we're in a sore lack of. CONFIDENCE. Without it - nothing much matters.
Speaking of confidence, restoring that in the financial markets is another ballgame completely. Ofcourse one of the first things on Tim Geithner's agenda will be Insolvency at the heart of the US Banking system. If we were to assume 2T of total losses (I have even heard 3T worldwide if you factor in credit cards, student loans, CRE etc) - then only 550B or so has been recognized. Even if I were to believe some other estimates and say 800B has been recognized - that still means there is 1.2 to 1.4 T dollars of looses that have not been recognized. Even cutting this estimate into half - we're still left with 600B - 700B of looses that need to be recognized before the end of 2009.
Folks - this means that the Fed is going to print money. It also means that the Treasury will likely have to come up to the Congress one more time for another 700B or so and this money will be solely to re-capitalize the banks (dare I say nationalize the banks?). But assuming that this happens in the early part of 2009 - and the stimulus passes - and we start creating jobs again - we should see the end to this immediate nightmare by end 2009 or early 2010. But then we will have a ton of printed money worldwide sloshing around. At that point, inflation will make a huge comeback. I wouldn't be surprised to see oil take off to the races once again along with the other commodities in 2010. The Fed as usual is likely to be behind the curve and will tighten only when it is sure that inflation has taken hold and the economy will not die. So expect some tightening of interest rates in mid 2010 (and expect inflation to run rampant here...). Eventually Volcker will be able to talk some sense into the responsible people and liquidity will be drained severely in 2011. But don't be surprised if ice-cream ends up costing you five dollars a cone before this is done and things return to "normal."
Expect to be robbed and take steps to protect yourself.
Good luck to all.
Subscribe to:
Posts (Atom)