Posts Tagged ‘growth’

PIMCO’s Bill Gross’ December Letter – We’re All Living in Allentown, PA

Courtesy of TraderMark of Fund My Mutual Fund

PIMCO’s Bill Gross’ monthly letter for December is out and it speaks to a lot of themes FMMF has been touching on for years – a very nice read for those of you not familiar with his work.  I also embedded a video of an appearance of his yesterday on CNBC.

Full letter below – hit fullscreen to make it easy to read

Some key points:

  • The global economy is suffering from a lack of aggregate demand. With insufficient demand, nations compete furiously for their share of the diminishing growth pie.
  • In the U.S. and Euroland, many policies only temporarily bolster consumption while failing to address the fundamental problem of developed economies: Job growth is moving inexorably to developing economies because they are more competitive.
  • Unless developed economies learn to compete the old-fashioned way – by making more goods and making them better – the smart money will continue to move offshore to Asia, Brazil and their developing economy counterparts, both in asset and in currency space. 

Two ways the U.S. can address this – the hard (but long term healthy) way or the easy (but long term unhealthy) way.  You can guess which way we will ultimately go….

The right way:

  • The constructive way is to stop making paper and start making things. Replace subprimes, and yes, Treasury bonds with American cars, steel, iPads, airplanes, corn – whatever the world wants that


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The Morality of Chinese Growth

The Morality of Chinese Growth

Courtesy of John Mauldin at Investors’ Insights

Oil at $125 a Barrel, Gasoline at $5 
David Rosenberg and Capacity Utilization 
Gary Shilling: Commercial Real Estate and Employment 
The Morality of Chinese Growth 
Another Birthday? What Happened to My Year? 
Athens and the Barefoot Ranch

This week I am at a conference in Houston. I must confess that I don’t attend many of the sessions at most conferences where I speak. But today, the guys at Streettalk Advisors have such a great lineup that I am there for every session. But it’s Friday and I need to write. The solution? This week you get a "best of" letter. The best ideas I’ve heard and the best charts I’ve seen at this conference. Then we close with two short but very thoughtful essays from Charles Gave and Arthur Kroeber of GaveKal on "The Morality of Chinese Growth." Lots of charts and something to make you think. Should be a good letter.

Oil at $125 a Barrel, Gasoline at $5

John Hofmeister is the former president of Shell Oil and now CEO of the public-policy group Citizens for Affordable Energy. He paints a very stark (even bleak, as he gets further into the speech) picture of the future of energy production in the US unless we change our current policies. First, because of the after effects of the moratorium. It is his belief that the drilling moratorium will effectively still be in place until at least the middle of 2012. There won’t even be new rules until the end of 2011, and then the lawsuits start.

Gulf oil production will be down by up to 1 million barrels a day. Imported oil is now 67% of oil usage but will go to 75% by 2012. He thinks crude oil will be up to $125 and gasoline between $4-$5 at the pump. And it will only get worse.

He describes the problem with the electricity from coal production. The average coal plant is 38 years old, with a planned-for life of 50 years. Our energy production capability is rapidly aging, and we are not updating it fast enough.

He argues that the fight between the right and the left has given us 37 years without a realistic energy policy, as policy gets driven by two-year political cycles but good energy planning takes decades. There…
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Meaty With a Chance of Cloud Calls

Meaty With a Chance of Cloud Calls

Courtesy of Joshua M Brown, The Reformed Broker 

And the winner is…Cloud!  The tech industry sub-sector with perhaps this year’s meatiest move is undoubtedly cloud computing.  Names like Riverbed ($RVBD), Akamai ($AKAM) and 3Par ($PAR) have all been putting up insane numbers this year, performance-wise.

My awakening to the group’s potential back in January came courtesy of a kickass cover story in Barron’s (Sky’s The Limit)- ever since then the cloud computing stocks mentioned (and some that were omitted) have been nothing but fire – in a market that is unchanged year-to-date.

Here’s a peek at the majesty that is Cloud Stock-age thus far in the Twentyten:

Regular readers know that I’ve been hammering away at the cloud theme all year, even hoping for the advent of a Cloud Computing ETF at one point this past spring, albeit in a tongue-in-cheek sort of way (we still haven’t gotten one).

What’s next for the group?

* I have a hard time believing that Cisco has much interest in trailing behind Riverbed in market share for very much longer.  Riverbed’s Steelhead product suite speeds up transmission of applications and data from the cloud to the end user, this is a corporate IT Holy Grail as it allows for the efficient decentralization that global entities need.  I could see Cisco or one of its rivals making a move for this name as this would give them the number one offering in this crucial space instantly.

* Akamai’s global "private web" video serving solution will probably continue to be the delivery method of choice as Web TV becomes a reality and online streaming continues to be monetized.  The wake up call for me on Akamai was when I learned that it was their technology that was the backbone for NBC’s serving of Winter Olympics video to everyone’s mobile devices.

* The bidding war over 3Par (between Dell and H-P) kinda gilds Rackspace’s ($RAX) lilly a bit when you think about it.  Rackspace took over an abandoned shopping mall in downtown San Antonio and built an amazingly scaled-up cloud hosting center.  Their fanatical reputation for customer service to their cloud hosted customers is the heart of their story, however – anyone can build a server farm.

* Microsoft’s CEO Ballmer said a few months ago that he was "betting…
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INNOVATION: What made America great is now Killing her!

INNOVATION: What made America great is now Killing her! 

"Creative Destruction is Secular not Cyclical"

Courtesy of Gordon T. Long   

What made America great was her unsurpassed ability to innovate.  Equally important was also her ability to rapidly adapt to the change that this innovation fostered. For decades the combination has been a self reinforcing growth dynamic with innovation offering a continuously improving standard of living and higher corporate productivity levels, which the US quickly embraced and adapted to.

This in turn financed further innovation. No country in the world could match the American culture that flourished on technology advancements in all areas of human endeavor. However, something serious and major has changed across America.  Daily, more and more are becoming acutely aware of this, but few grasp exactly what it is.  It is called Creative Destruction. 

It turns out that what made America great is now killing her!

Our political leaders are presently addressing what they perceive as an intractable cyclical recovery problem when in fact it is a structural problem that is secular in nature. Like generals fighting the last war with outdated perceptions, we face a new and daunting challenge. A challenge that needs to be addressed with the urgency and scope of a Marshall plan that saved Europe from the ravages of a different type of destruction. We need a modern US centric Marshall plan focused on growth, but orders of magnitude larger than the one in the 1940’s. A plan even more brash than Kennedy’s plan in the 60’s to put a man of the moon by the end of the decade. America needs to again think and act boldly. First however, we need to see the enemy. As the great philosopher Pogo said: “I saw the enemy and it was I”.

THE  PROBLEM IS NOT CYCLICAL, IT IS SECULAR.

The dotcom bubble ushered in a change in America that is still reverberating through the nation and around the globe. The Internet unleashed productivity opportunities of unprecedented proportions in addition to new business models, new ways of doing business and completely new and never before realized markets.  Ten years ago there was no such position as a Web Master; having a home PC was primarily for doing word processing and creating spreadsheets; Apple made MACs; and ordering on-line was a quaint experiment for…
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The Future of the UK Economy Looks Really, Really Depressing

The Future of the UK Economy Looks Really, Really Depressing

Courtesy of Jr. Deputy Accountant 

The Independent brings us all the great news from across the pond:

The British economy faces a triple whammy of higher inflation, lower growth and rising unemployment, according to one of the Bank of England’s most senior policy makers. Living standards over the next few years will rise only "minimally".

In an interview with The Independent, the Bank’s chief economist, Spencer Dale, said that he did not expect inflation to return to its 2 per cent official target before the end of next year, about a year later than previously hoped, partly because of the hike in VAT to 20 per cent from January announced in the Budget.

And, although Mr Dale acknowledged that the emergency Budget had done much to avoid the risk of a UK sovereign debt crisis and a rise in interest rates, he also acknowledged that the Budget would mean lower growth. Mr Dale agreed that he would not be surprised if unemployment went higher in the next few months. For the next "three, four, five years, demand in the economy will be "incredibly anaemic" relative to previous recoveries.

I love how depressing the Brits are when it comes to this stuff. 

The IMF got far more depressing when it cut its UK economic outlook just a few weeks ago. 


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Fed Z1: Blah

Fed Z1: Blah

Courtesy of Karl Denninger at The Market Ticker 

Well, there’s nothing here that indicates any sort of real change.  Let’s start with the grand-daddy chart:

The arrow is approximately where the outstanding credit in the system began to decline.  Note that the slope of each sub-component hasn’t done much in terms of change in this last report.

Has there been ANY improvement?  Let’s zoom in:

debt

Well, not really.

Households and non-profits contracted their outstanding credit by $60 billion in non-mortgage instruments and a sizable $99 billion in mortgages.  Non-financial business credit expanded very slightly (about $30 billion in the quarter) as did state and local governments ($25 billion.)  Interestingly enough it appears that farm credit decreased while non-farm increased – I will do some more digging in that area, as it may be a leading indicator of distress in the farm space – particularly family farms.  The Federal Government increased its debt by a net $361.5 billion (!) while financial instrument credit decreased awhopping $638.5 billion.  Rounding out the numbers is the rest of the world (exposure in the US), which was up a modest $28.6 billion, continuing a trend that has run since the end of 2008.

All-in all, nothing to see here.  Anyone who claims that "activity in credit is increasing" has to explain how, when consumers and non-financial businesses continue to de-lever and financial instruments are literally being shunned like a leper colony - the contraction this quarter ran at a seventeen percent annualized rate while the actual annual rate of change over the last 12 months is only 13.5%.  In other words, the deleveraging is accelerating, not stabilizing, among financial instruments.

As for the "de-levering" of the consumer, that’s still to come.  Outstanding credit has contracted a mere 2.7% since this mess began with credit peaking in the second quarter of 2008, or about 1.5% annualized.  Mortgages have delevered only 3.7% from the top in the first quarter of 08 in total, or about 1.9% annualized.

The short form here folks is that all the "prop jobs" have been intended to do one thing and one thing only - protect the banks from having to recognize their bad loans.

To believe that consumers and non-profits could have only de-levered at a rate of less than 2% annualized including all the bad mortgage debt that is out there, and is now "recovering", is not only ludicrous but is utterly unsupported by the data, which is not showing the alleged "growth."

What has…
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Is economic boom around the corner?

Edward presents both sides of argument regarding whether the "technical recovery" will lead to economic expansion, or not.  

Is economic boom around the corner?

bearsCourtesy of Edward Harrison at Credit Writedowns

Back in February, I asked you if we were experiencing a recession or depression.  A plurality said it was a depression with a small ’d.’ I agreed and went on to explain why. Since then, things have changed and we seem to be on the verge of what I call a technical recovery (or a fake recovery – take your pick).  We may even be on the verge of a multi-year economic expansion – something bears like David Rosenberg should not rule out. But vigilance is still required. I will explain why.

Since the recovery talk has gathered steam, a lot of well-respected economists and policy makers have begun to construct what I consider a revisionist history of events. It goes something like this:

We have just experienced a major economic downturn. Coupled with a financial panic of major proportions, the global economy suffered a severe shock.  However, we have learnt how to deal with such crises due to our experiences during the Great Depression. The liquidity crisis was overcome through deft monetary policy. And fiscal expansionary policy aided a return to business as usual much sooner than many would have believed.

As a result, it is quite obvious we have been through a severe contraction, but nothing more than a garden-variety recession complicated – of course – by a financial panic. Back in February, a lot of economists made alarmist predictions of woe, foretelling a global Depression. This was wrong-headed and reckless as we see today. GDP has likely turned up in this third quarter and will continue rising for the foreseeable future. With the worst of things behind us, we can normalize monetary and fiscal policy and return to a more robust economic path.

On the surface, this narrative is compelling.  But, I believe it is based on a flawed analysis.  I would like to present a different narrative here for you to dissect.

GDP is a poor measure of growth

As Joseph Stiglitz recently wrote, GDP is a very poor measure of growth and economic health.  And he is right. There are many questions…
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Fed President Hoenig: Still Need To Address The Debt Issue

Fed President Hoenig: Still Need To Address The Debt Issue

Courtesy of Tom Lindmark at But Then What

Fed President Hoenig, debt

Throughout the recession one of the more outspoken members of the Fed has been Thomas Hoenig, the President of the Kansas City Fed. Refreshingly, he continues to speak his mind and not shy from the harder issues that most in government prefer not to address.

In a speech that was given to the Kansas Association of Bankers a month ago but just released today, he had this to say:

The U.S. economy appears to be reviving from a nasty recession, but too little has been done to resolve the underlying problem of too much debt, a Federal Reserve official says.

In a speech given a month ago, but released to the public on Saturday, Kansas City Fed President Thomas Hoenig said massive amounts of public and private debt are putting tremendous pressure on the Fed to keep interest rates low, potentially sowing the seeds of inflation or further economic imbalances.

Hoenig, considered one of the Fed’s leading advocates for low-inflation policies, said the Fed has tried too hard to boost growth in the past by keeping rates low. But low rates only encouraged more debt, and fueled an increase in the money supply that has eroded purchasing power.

Sustainable growth can’t be achieved that way, he said.

The federal government has taken on much more debt in an effort to stimulate the economy, he said. Consumer debt remains bloated. And the biggest banks are still overleveraged by about $5 trillion, he said.

The way out of the swamp will be tricky, he said.

“As we become more confident that we are at the bottom of the recession and are moving into recovery, we must become more resolute in systematically reducing our balance sheet and raising interest rates,” Hoenig told the annual meeting of the Kansas Bankers Association on Aug. 6.

Well, it remains to be seen if there is any resolve to move away from a debt fueled economy towards one that is more grounded in fundamentals. It all sounds good, however, there is no magic wand that can be waved over the economy to cause that to happen. The adjustments he calls for require years to put into place and it’s problematic at best as to whether the public has the patience and will to…
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China’s Artificial Growth Is Creating An Energy And Industrial Stock Bubble

China’s Artificial Growth Is Creating An Energy And Industrial Stock Bubble

Courtesy of Vitaliy Katsenelson at Contrarian Edge, posted at Clusterstock


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Growth in “Potential GDP” Shows Limited Potential

Introduction to John Hussman’s weekly market comment, courtesy of Tom Burger:

"Very interesting Hussman post this week. He is trying to corroborate his valuation model’s projection of relatively low ten year returns by using the U.S. Department of Commerce estimate of decade-ahead GDP. This estimate, according to Hussman, depends not on current economic conditions but on economic fundamentals  — such as demographics, capital stock measures, and so forth.
 
"He also points out some rather hard to ignore valuation variances with past recession end points — current stock yields and price to revenue ratios." 
 
- Tom Burger at Applying the Lessons of Free Market Economics

Growth in "Potential GDP" Shows Limited Potential

Courtesy of John P. Hussman, Ph.D.
All rights reserved and actively enforced. 
Reprint Policy

Historically, two factors have made important contributions to stock market returns in the years following U.S. recessions. One of these that we review frequently is valuation. Very simply, depressed valuations have historically been predictably followed by above-average total returns over the following 7-10 year period (though not necessarily over very short periods of time), while elevated valuations have been predictably followed by below-average total returns.

Thus, when we look at the dividend yield of the S&P 500 at the end of U.S. recessions since 1940, we find that the average yield has been about 4.25% (the yield at the market’s low was invariably even higher). Presently, the dividend yield on the S&P 500 is about half that, at 2.14%, placing the S&P 500 price/dividend ratio at about double the level that is normally seen at the end of U.S. recessions (even presuming the recession is in fact ending, of which I remain doubtful). At the March low, the yield on the S&P 500 didn’t even crack 3.65%. Similarly, the price-to-revenue ratio on the S&P 500 at the end of recessions has been about 40% lower than it is today, and has been lower still at the actual bear market trough. The same is true of valuations in relation to normalized earnings, even though the market looked reasonably cheap in March based on the ratio of the S&P 500 to 2007 peak earnings (which were driven by profit margins about 50% above the historical norm).

Stocks are currently overvalued, which – if the recession is indeed over – makes…
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Phil's Favorites

A 2019 Earnings Recession?

 

A 2019 Earnings Recession?

Courtesy of 

Shout to Leigh!

On the new Talk Your Book – Josh Brown is joined by Leigh Drogen of Estimize, one of the leading providers of crowdsourced financial and economic data to talk about the trend in corporate profits that could potentially lead to an earnings recession later this year.

What is the thing that Leigh is seeing in the data that Wall Street isn’t yet picking up on? What segment of the stock market is most at risk? Why is the crowd smarter than the narrow consensus of Wall Street analysts?

Check out Estimize ...



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Zero Hedge

How Will The Pound React To Tuesday's Brexit Deal Vote? FX Traders Weigh In

Courtesy of ZeroHedge. View original post here.

Months of extreme volatility have taken their toll on the pound, with traders declaring the G10 currency "untradeable" during the worst of the withdrawal-deal related chaos last year, as daily swings of multiple percentage points became increasingly common, prompting some traders to muse once again about how the pound - one of the world's most liquid, heavily traded currencies, was behaving more like the Turkish lira than a designated global reserve currency (as its membership in the IMF's SDR basket would suggest). 

Now, after months o...



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ValueWalk

D.E. Shaw Investment Calls For Leadership Change At EQT

By ActivistInsight. Originally published at ValueWalk.

Elliott Management has offered to acquire QEP Resources for approximately $2.1 billion, contending the oil and gas explorer’s turnaround efforts have done little to lift the company’s share price. The company responded and said that a thorough review of the proposition is imperative in order to properly act in the best interests of shareholders, “taking into account the company’s other alternatives and current market conditions.” The news came only a month after Travelport Worldwide agreed to sell itself to Siris Capital Group and Elliott’s private equity arm Evergreen Coast Capital for $4.4 billion in cash and two months after Athenahealth was bought by Veritas and Evergreen for $5.7 bi...



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Kimble Charting Solutions

Gold & Silver Testing Important Breakout Levels!

Courtesy of Chris Kimble.

Gold and Silver from a long-term perspective have created a series of lower highs over the past 8-years. Will 2019 bring a change to this trend? A big test is in play!

Gold since the lows in 2016 has created a series of higher lows, while Silver may have created a double bottom.

Gold & Silver are currently facing break attempts a (1) and (2). These falling resistance lines have disappointed metals bulls for the past few years.

The direction of Gold and Silver weeks and months from now should be highly influenced by what each does as they are attempting to break above important resistance levels.

To become a member of Kimbl...



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Insider Scoop

UBS Says Disney's Streaming Ambition Gives It A 'New Hope'

Courtesy of Benzinga.

Related DIS Despite Some Risks, Analysts Still Expecting Double Digit Growth From Communications Services In Q4 ...

http://www.insidercow.com/ more from Insider

Digital Currencies

Russia Prepares To Buy Up To $10 Billion In Bitcoin To Evade US Sanctions

Courtesy of Zero Hedge

While the market has been increasingly focused on the rising headwinds in the global economy in general, and China's economic slowdown in particular, while the media is obsessing over daily revelations that Trump may or may not have colluded with Russia to get elected, a far more critical, if underreported, shift has been taking place over the past year.

As we reported in June, whether due to concerns over draconian western sanctions and asset confiscations following the poisoning of former Russian military officer Sergei Skripal, or simply because it wanted to diversify away from the dollar, Russia liquidated virtually all of its Treasury holdings in the late spri...



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Chart School

Weekly Market Recap Jan 13, 2019

Courtesy of Blain.

In last week’s recap we asked:  “Has the Fed solved all the market’s problems in 1 speech?”

Thus far the market says yes!  As Guns n Roses preached – all we need is a little “patience”.  Four up days followed by a nominal down day Friday had the market following it’s normal pattern the past nearly 30 years – jumping whenever the Federal Reserve hints (or essentially says outright) it is here for the markets.   And in case you missed it the prior Friday, Chairman Powell came back out Thursday to reiterate the news – so…so… so… patient!

Fed Chairman Jerome Powell reinforced that message Thursday during a discussion at the Economic Club of Washington where he said that the central bank will be “fle...



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Members' Corner

Why Trump Can't Learn

 

Bill Eddy (lawyer, therapist, author) predicted Trump's failure based on his personality, which was evident years ago. This article, written in 2017, references a prescient article Bill wrote before Trump became president, in July, 2016, 5 Reasons Trump Can’t Learn. ~ Ilene 

Why Trump Can’t Learn

Donald Trump by Gage Skidmore (...



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Biotech

Opening Pandora's Box: Gene editing and its consequences

Reminder: We are available to chat with Members, comments are found below each post.

 

Opening Pandora's Box: Gene editing and its consequences

Bacteriophage viruses infecting bacterial cells , Bacterial viruses. from www.shutterstock.com

Courtesy of John Bergeron, McGill University

Today, the scientific community is aghast at the prospect of gene editing to create “designer” humans. Gene editing may be of greater consequence than climate change, or even the consequences of unleashing the energy of the atom.

...

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Mapping The Market

Trump: "I Won't Be Here" When It Blows Up

By Jean-Luc

Maybe we should simply try him for treason right now:

Trump on Coming Debt Crisis: ‘I Won’t Be Here’ When It Blows Up

The president thinks the balancing of the nation’s books is going to, ultimately, be a future president’s problem.

By Asawin Suebsaeng and Lachlan Markay, Daily Beast

The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the nationa...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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