A few links via El Pais.
Jim Bianco of Bianco Research LLC chats with TrimTabs’ Charles Biderman about the financial impact of the Presidential Election and our economic future.
Biderman on Obama.
Unless Barack Obama dramatically changes, I predict by the end of his second four year term he will have earned the legacy of being the worst fiscal president ever. Why? The US will be bankrupt after another four years of the same Obama we had for the past four.
Here’s my evidence, before Obama was elected in 2008 after tax take home for everyone who pays taxes was just under $7 trillion annualized. That $7 trillion number included capital gains, an income source the US Bureau of Economic Analysis does not include in national income. Why is capital gains not included? Is there a prejudice against income on capital? Who knows. It’s the government.
A few reflections on the market by Hussman of Hussman Funds.
Is the economy at an inflection point, or are we simply in the calm before the storm? Though economic reports have been relatively muted on balance, they have also come in somewhat above expectations in recent weeks – particularly the advance estimate of third quarter GDP at 2%, and October non-farm payrolls at 171,000. The lack of clear deterioration in recent reports begs the question of whether this is enough to dispose of any concern about recession, and instead look forward to continued positive – if slow – economic progress.
The answer to that question largely depends on how one draws inferences from economic data. The consensus of Wall Street economists, as well as the broader economic consensus, has never successfully identified a U.S. recession until well after it has begun. I believe that much of the reason is that economists tend to interpret reports one-by-one as what I’ve called a “stream of anecdotes.” From that perspective, a series of positive anecdotes, such as the reports we’ve recently seen on GDP and non-farm payrolls, encourages views that the economic landscape is all clear.
The problem is that the stream of anecdotes approach places no structure on the data – there is no analysis of leading/lagging or upstream/downstream relationships, no examination of the frequency and size of revisions to the data – particularly around economic turning points – and no attempt to place the data points into a larger “gestalt” that captures relationships between dozens of other economic reports. Moreover, it’s natural for analysts to gauge “trends” by comparing recent reports to past data, with a look-back horizon somewhere in the range of 13-26 weeks. If analysts then form expectations by extrapolating recent surprises, it then becomes very easy to produce regular “cycles” of economic surprises. We’ve been able to generate that phenomenon even using randomly generated data. In practice, the cycle of economic “surprises” tends to run about 44-weeks in U.S. data (see The Data Generating Process). As it happens, much to the chagrin of conspiracy theorists, we would expect the present cycle to peak out roughly the week of the election.
Guest post by Vix and more.
Four months ago, in The Economic Data Cliff, I discussed the rapidly deteriorating economic data relative to expectations and noted the sudden strong divergence between economic data and the stock market
At the time I offered two potential explanations:
“Perhaps stocks are decoupled from reality and are merely postponing the inevitable decline, but there also exists the possibility that stock prices are beginning to reflect the possibility an economic turnaround at the end of the year or in early 2013.”
With the benefit of four months of hindsight, the relationship between economic data and the stock market is no less murky. After being tightly correlated for 2 ½ years, stocks and economic data have been moving in almost the exact opposite direction since the beginning of June, no doubt partly due to the intervention of central banks across the globe.
What I find particularly interesting in the graphic below, however, is that just as the trend in economic data relative to expectations began diverging from stocks in June, the two began converging again when economic data began to show signs of improvement about a month ago.
Of course none of this will come as a surprise to those investors who saw today’s promising nonfarm payrolls report as an excuse to buy some stocks this morning. For now at least, stocks and the economy continue to move in opposite directions – whether that means up or down for stocks.
From Barron’s Art of Succesful Investing.
If you missed the last, fear not, as the pages ahead are crammed with the best of AOSI — namely, the wit, wisdom, and investment insights of our nine savvy speakers. At last week’s eighth annual get-together, they generously shared with the public their wide-ranging views on the economy and financial markets; their best investment ideas; and, arguably most important, their time-tested strategies for finding value in a volatile market and troubled world.
You likely will recognize five of the crew — Felix Zulauf, Scott Black, Meryl Witmer, Fred Hickey, and Marc Faber — as members in good standing of our annual Roundtable, and a sixth, options expert Patrick Neal, fom last year’s conference report. Joining them in 2012 were Dan Fuss, vice chairman of Loomis, Sayles, whom my colleague Randall Forsyth calls “the Buffett of bonds”; David Herro, chief investment officer of Harris Associates and a much-lauded international investor; and Bill Priest, CEO and co-chief investment officer of Epoch Investment Partners, who is enjoying a long and distinguished career on the Street.
The interviews that follow are adapted from video interviews conducted at AOSI byBarron’s Senior Editor Kopin Tan and available online at www.barrons.com. So grab a latte, and read on or listen in.
Guest post by Jessie.
Economics and the corporate media did exemplary service in promoting ‘the Big Lies’ of the financialisation crisis, most notably efficient markets theory and the trickle down theory of stuffing the rich with even greater power and wealth in the thought that some of the excess would fall on the path for the little people.
“Mr. David Stockman has said that supply-side economics was merely a cover for the trickle-down approach to economic policy—what an older and less elegant generation called the horse-and-sparrow theory: If you feed the horse enough oats, some will pass through to the road for the sparrows.”
John Kenneth Galbraith, New York Review of Books, 1982
They have tied these old canards so carefully to emotional arguments that even after the crisis and collapse, many people will still respond reflexively to anything that shakes their faith in a failed, fallen system.
One only has to verbally put a certain color shirt on a group of people’s backs, and paint a different color shirt on some others, and given some prompting and rationalization, they will descend on the others with all the reckless passion and unfeeling of the school yard, even doing unspeakable things to others that they know is wrong, in the name of the expediency of winning. Such people are easily led as they surrender their will to expediency, and a more powerful force of will.
Some years ago I remarked on a sad gathering of a knot of old school Communists in Red Square that I saw, lamenting the passing of the Soviet Union and Stalinism. There were those who had benefited from it, leading those who could not accept that the system had failed and change was coming. They huddled in the winter winds that blew across the square, their old banners fluttering, looking for someone to tell them what to do.
I see the same thing growing in the US and the UK today. But the lament is not for Communism but for the saving of crony capitalism, the heartless abuses of the oligarchy and the robber barons that have been cross branded with freedom and liberty. Their campaign is well funded and staffed with willing minds who will say or do almost anything for money. They have not yet destroyed themselves, but they are well on their way.
We have been told there is no inflation in Europe, only an imploding economy. Back in the Econ 101 class, we learnt that falling economy with inflation, creates stagflation. With inflation “suddenly” on the rise, let’s see if we need reviewing those Econ 101 books. From Bloomberg.
Euro-area inflation unexpectedly accelerated in September as energy prices rose, even as the single-currency bloc’s economy edged toward a recession. Consumer prices in the 17-nationeuro region increased 2.7 percent from a year earlier after a 2.6 percent gain in August, the European Union’s statistics office in Luxembourg said in a flash estimate today. The median forecast of 40 economists in a Bloomberg News survey was for the rate to fall to 2.4 percent.
Inflation has stayed above the European Central Bank’s target of slightly less than 2 percent for almost two years even as the economy has faltered. Surveys last week showed services and manufacturing output fell to a 39-month low in September. ECB Governing Council member Ewald Nowotny and Executive Board member Benoit Coeure have suggested the Frankfurt-based central bank probably won’t lower interest rates at its next meeting on Oct. 4. (full article here.)
For most of the last century, cheap oil powered global economic growth. But in the last decade, the price of oil has quadrupled, and that shift will permanently shackle the growth potential of the world’s economies.
The countries guzzling the most oil are taking the biggest hits to potential economic growth. That’s sobering news for the U.S., which consumes almost a fifth of the oil used in the world every day. Not long ago, when oil was $20 a barrel, the U.S. was the locomotive of global economic growth; the federal government was running budget surpluses; the jobless rate at the beginning of the last decade was at a 40-year low. Now, growth is stalled, the deficit is more than $1 trillion and almost 13 million Americans are unemployed.
Lewis meets Obama. Simply must read weekend material. From Vanity Fair.
To understand how air-force navigator Tyler Stark ended up in a thornbush in the Libyan desert in March 2011, one must understand what it’s like to be president of the United States—and this president in particular. Hanging around Barack Obama for six months, in the White House, aboard Air Force One, and on the basketball court, Michael Lewis learns the reality of the Nobel Peace Prize winner who sent Stark into combat.
Even after his parachute opened, Tyler Stark sensed he was coming down too fast. The last thing he’d heard was the pilot saying, “Bailout! Bailout! Bail—” Before the third call was finished, there’d come the violent kick in the rear from the ejector seat, then a rush of cool air. They called it “opening shock” for a reason. He was disoriented. A minute earlier, when the plane had started to spin—it felt like a car hitting a patch of ice—his first thought had been that everything was going to be fine: My first mission, I had my first close call. He’d since changed his mind. He could see the red light of his jet’s rocket fading away and also, falling more slowly, the pilot’s parachute. He went immediately to his checklist: he untangled himself from his life raft, then checked the canopy of his chute and saw the gash. That’s why he was coming down too fast. How fast he couldn’t say, but he told himself he’d have to execute a perfect landing. It was the middle of the night. The sky was black. Below his feet he could see a few lights and houses, but mainly it was just desert.
Full article here.