Cautious optimism
tokyogai
3/29/2012 10:09:33 AM
I agree that there are many soft spots in the current economy and recovery. These are indeed troubling, but not yet a reason to throw in the towel and become a full fledged bear. I would, however, be very cautious right now and would consider pullig back a little to watch and wait. Thanks for the thorough analysis.
Deutsche Banks thinks the Economy has turned decisively lower.
back2basicz
3/29/2012 12:17:40 PM
Lenore,
This just in from Deutsche Bank.
"
As can be seen in the chart above, using this basket the beat:miss ratio for January was a fairly solid 55%:42% (3% in line) before improving to a strong 65%:35% in February. March, however, is seeing a rise in misses with the ratio now running at 37%:56% (7% in line) with 27 out of 31 releases now in. Regional manufacturing surveys and some housing related data are leading the misses in March. Indeed in February we saw all regional surveys (NY, Philly, Richmond, Chicago Fed, Kansas, Dallas, Chicago PMI) better relative to market consensus. We will get the Kansas Fed data today and Chicago PMI tomorrow, but we have so far seen misses in Richmond, Chicago and Dallas Fed surveys this month. In terms of the housing market, existing home sales, the house price index, pending home sales, and new home sales all disappointed in March while all of these (except for new home sales) were better than expected in February...
"
With the better than expected weather in January-February pushing demand forward there ,the numbers for the rest of the year are sure to dissapoint.
Is it time to book profits and head back for cash?
Quite possibly,Yes.
Ashish.
Maybe it's too soon to become a bear, but it may be prudent to get close enough to hear what the rumbling is all about, don't you think?
Re: Cautious optimism
tokyogai
3/29/2012 12:36:56 PM
I have loaded my bear gun-- just in case.
Re: Deutsche Banks thinks the Economy has turned decisively lower.
Scott Raynovich
3/29/2012 12:41:29 PM
Economic numbers do appear to be weakening a bit.
My sources say many expect further weakness in April to be met with more accomodative action by the Fed in the April meeting.
Interestingly enough, the market pattern of 2012 so far is almost identicaly to 2011. We made a new high but it was a marginal new high. The market topped last year in April.
But the Fed is so vigilant any real downside I'm sure will be met with more money printing.
Scott,
I don't know what I am more worried about-That the Fed is so "Vigilant" about protecting the Stock market(from correcting) or the fact that Inflation is almost certain to spike like crazy once QE3 is announced.
And the PHD Clowns who inhabit The Federal Reserve will again claim to be "surprised" and "Shocked" when Gasoline Prices cross $6/Gallon....
Good thing is that the end-game is coming in any case.
We are going to see people in the street taking down the Federal Reserve very soon.
Either they do it or the rest of the world will do it for them.
This just in from the BRICS [Brazil+Russia+India+China+South Africa] Summit in New Delhi,India.
We are looking at ways to eliminate the US Dollar entirely as the medium of exchange between us.
http://www.bbc.co.uk/news/world-asia-17545347
But until we see concrete action from these nations,which together account for 33% of Total World Trade;there will be no change in the current behavior of the Federal Reserve.
After all,it was John Connally who said the US Dollar is our Currency but Your problem...This time around, I won't be surprised if we see some real action from the BRICS if QE3 happens in April.
http://en.wikipedia.org/wiki/John_Connally
Regards
Ashish.
I am more confident after reading what Ray Dalio has to say about it. He is much smarter than I am, and he is one of the greatest fund managers of all time.
http://www.economist.com/node/21549968
I have come to the conclusion that many have: With the size of the debt and the deleveraging, they've decided to deal with it through managed currency devaluation. Obviously it has its risks but those in the deleveraging camp (Dalio and Gundlach) have been spot on on how this will play out.
As I wrote in the market report the way to play this as an investor is to slowly buy high-quality stocks at opportune time and hedge inflation with precious metals and select commodities. I think this is the only way forward.
Scott,
Undoubtedly Ray Dalio is one of the smartest men in the Financial Space.
He and Jeff Gundlach have got more calls right than most over the last 5 years or so especially regarding the Deleveraging sceanarios going ahead.
I also agree wholeheartedly with what you say here ,when you recommend buying High Quality Stocks(at the right Dividend Yields) and hedge it with Gold.Oil and Plain Vanilla Cash .
This is the best way to combat the managed currency devaluation which America is forcing upon the world.
The only thing is-What happens if these devaluation gets out of hand?
Since Crude Oil and most commodities are priced in US Dollars today-The spillover from QE always enters these markets.
And this is where things get most dangerous.
Its one thing to say the Price of Gold will rise by 20% because of QE3,but if you say the Price of necessities like Rice,Bread or Vegetables will rise by 20% because of QE3.Thats when things become most dangerous.
Global Instability and Wars are returning back on the horizon Soon-Thanks to Ben Bernanke and the Federal Reserve.
Ashish.
Of course inflation is the price we pay to avoid depression.
They are two evils, and the leaders and politicians have decided the former is better than the latter.
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