ralph00, what is your current market positioning and how you see the major asset classes perfoming in the next year?
Dow to finish the year where it started. Gov't bonds to outperform equities. Have owned NLY for over 10 years Have owned BBEP, MOS, UTS.TO since early summer Have owned SONA, FNF, RWT, GLRE since around Thanksgiving Have owned Dec, Mar, Jun 99.00 GE calls since the summer/fall - adding and cutting position from time to time (also own some 99.25 calls) The stocks really aren't trades since I plan to own them for a long time. If I could, I would be buying similar calls on Aussie rates in serious size. The leverage in their economy and housing bubble is greater than ours ever was. They're also very tied to China, which will be slowing this year. The RBA not hiking rates yesterday is the financial news of the year, thus far.
Nice piece from Michael Pettis rebutting several of Thomas Friedman's idiotic assertions about China ... http://mpettis.com/2010/02/never-short-a-country-with-2-trillion-in-reserves/ Here's a video of Jim Chanos, in a long lecture, explaining why China is about to go boom ... http://www.ritholtz.com/blog/2010/02/chanos-sees-overheating-and-overindulgence-in-china/
Morgan Stanley US macro team is on drugs. They think that inflation(core) will fall in 2010(to 1%) and yet the Fed will both change their outlook for inflation(to the upside by mid-year) and hike the FF rate(3Q). This goes very much against the typical 'wait and see' approach of the Fed, specially in situations where they face japanese tail risks. I believe the fed waits a few months(6 sounds accurate) of rising inflation before they are confident in some kind of inflationary forecast they might or might not develop
Some good lines in Rosie's piece this morning. He's still bearish on the economy and bullish on bonds. That's not news. I like the way he contrasted conditions now with conditions one year ago. These are the things successful macro traders must keep in mind ... Good stuff. WHAT A DIFFERENCE A YEAR MAKES ⢠A year ago, China was embarking on a massive fiscal and credit stimulus plan that would send commodity prices and global exports surging. Today, the Peopleâs Bank of China (PBoC), along with other Asian central banks, is now withdrawing the stimulus (India as well). Is the near 10% correction in the Chinese stock market telling us something about the Chinese economic outlook? Something tells us the Reserve Bank of Australia was on to something when it didnât hike rates yesterday when the market was fully priced for another move â after all, China is Australiaâs most important customer. ⢠A year ago, it was all about saving the insolvent banking sector. Now it is popular to bash the banks and de-risk them. Notice how the financials havenât done a thing in five months? ⢠A year ago, it was all about fiscal reflation. While there is now tepid support for job creation and small business incentives, the emphasis is also on ending the Bush goodies and taxing the rich (defined as anyone making more than $250k). ⢠A year ago, it was all about quantitative easing and the need for the Fed to add more than $1 trillion of mortgages to its balance sheet. Today, it is all about the exit strategy. ⢠A year ago, the U.S. dollarâs bear market rally was about to give way to a 6%-plus decline in support of global carry trades. Today, the dollar has broken out on a trade-weighted basis and has broken above the 50, 100 and 200-day moving averages. In 2009, what would growth be in the U.S. without the massive stimulus? We ran the numbers and real GDP would have declined close 4.0% as opposed to the reported -2.4% tally ⢠A year ago, the VIX index was at 40. Today, it is barely above 20. ⢠A year ago, Baa corporate bond spreads were in excess of 550 basis points. Today, they are 260 basis points. ⢠A year ago, the S&P 500 was undervalued by 18%, on a Shiller normalized P/E basis. Now, it is overvalued by 25%. ⢠A year ago, we were coming off a -6.4% real GDP print in the U.S. and a 35 ISM reading and only âgreen shootsâ lay in our path. Today, we are coming off a +5.7% GDP headline and a 58.4 ISM index and the days of âsequential improvementâ are clearly over. ⢠A year ago, 10-year Treasury note yields were 2.7% and rising. Today, they are 3.7% and falling.
This seems quite dovish data http://www.marketwatch.com/story/us-q4-productivity-up-62-2010-02-04 "Unit labor costs - a key inflationary signal - fell at an annual rate of 4.4% in the fourth quarter. Real hourly compensation fell 1.9%" Jobless claims up. I'm not sure the Fomc will take out 'extended period' given this, we will see tomorrow's NFP
GS Hatzius on NFP and future fed funds rate http://www.zerohedge.com/article/go...hanged-25000-and-101-says-u-not-v-shaped-rece
LOL at the BLS. At this rate, there will be no net jobs created in 2010, but the UE will drop to 4%. Orwell would say I told you so.
The revised NFP loss for Dec 2009 was -150K, had they released that back then, markets would have imploded. Expectations were for a gain of 10K. Interesting how since the market bottomed most of the massive surprises have been to the upside and the bad ones were slowly released