With Friday’s GDP figures coming in below all analyst projections (and yes they still earn seven digit salaries), the QE 3 is slowly approaching. We need the SPX to fall further though, the 50-60 points from the high is not enough for Bernanke to go another all in. Bernanke has taken the whole recession scenario very personally, and we all know, emotions are not good in making rational decisions. Below a refresh of Quantitative Easing by Omid Malekan.
Friday’s GDP figures-How can any of the current data be used to create meaningful Federal monetary or fiscal decisions?
Some reflections on that GDP figure, while the World is waiting for the debt ceiling to be resolved. From Consumer Metrics;
Included in the BEA’s first (“Advance”) estimate of second quarter 2011 GDP were significant downward revisions to previously published data, some of it dating back to 2003. Astonishingly, the BEA even substantially cut their annualized GDP growth rate for the quarter that they “finalized” just 35 days ago — from an already disappointing 1.92% to only 0.36%, lopping over 81% off of the month-old published growth rate before the ink had completely dried on the “final” in their headline number. And as bad as the reduced 0.36% total annualized GDP growth was, the “Real Final Sales of Domestic Product” for the first quarter of 2011 was even lower, at a microscopic 0.04%.
And the revisions to the worst quarters of the “Great Recession” were even more depressing, with 4Q-2008 pushed down an additional 2.12% to an annualized “growth” rate of -8.90%. The first quarter of 2009 was similarly downgraded, dropping another 1.78% to a devilishly low -6.66% “growth” rate. And the cumulative decline from 4Q-2007 “peak” to 2Q-2009 “trough” in real GDP was revised downward nearly 50 basis points to -5.14%, now officially over halfway to the technical definition of a full fledged depression.
One of the consequences of the above revisions to history is that the BEA headline “Advance” estimate of second quarter GDP annualized growth rate (1.29%) is magically some 0.93% higher than the freshly re-minted growth rate for the first quarter. From a headline perspective, that makes for a far better report than the 0.63% drop from the previously published 1Q-2011 number — since otherwise the new 2Q-2011 numbers would be showing an ongoing weakening of the economy.
Unfortunately, meaningful quarter-to-quarter comparisons are nearly impossible in light of the moving target provided by the revisions. But among the notable items are:
We learnt this week, George Soros, is closing his hedge fund and will be managing his own money only. The trends within the hedge fund industry have changed a lot recently. The “speculators” are diminishing, while the industry is getting much more commoditised, with many funds becoming rather main stream, but still charging big fees. FT reports on the World’s Best Money Manager;
When George Soros rented a new office by Manhattan’s Central Park in 1973 for his four-year-old hedge fund, he and his fellow “hedgies” were the lone gunslingers of modern capitalism. Shooting wild bets on little more than a hunch, funds lived – and died – fast. No longer. Over the past four decades Mr Soros’s fund has grown from $4m to $25bn, but he is now the grand old man of a maturing industry in which lone gunmen are no longer welcome.
Hedge funds are reinventing themselves as something much less adventurous – and at first glance it looks as if a new sheriff in town, America’s Securities and Exchange Commission, may be responsible. Investors in Mr Soros’s Quantum funds were told this week that they would be given their money back, so the fund could escape new rules brought in by last year’s Dodd-Frank act. By investing only Mr Soros’s family money – all but $750m or so of the total – his fund would be exempt from the new rules.
Full FT article.