14 Fascinating Insights From Wall Street's Sharpest Minds

talking heads analysts

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Oil prices are high and interest rates are rebounding. Meanwhile, gold prices have been volatile, Iran is unstable, and China is slowing.

And amid all of these concerns, stocks are sitting at 4-year highs.

Wall Street’s sharpest economists, strategists, and analysts all sounded off on these matters this week. 

Most offered the same trite analysis we’ve read repeatedly.

But some thought outside the box or went against the grain (to use two overused cliches).

Morgan Stanley Explains Why The Next Jobs Report Is Very Likely To Turn South

'In fact, the four-week average of initial jobless claims has now been very little changed for a month and the big improving trend from mid-September to mid-February has thus now stalled. Our initial forecast for March non-farm payrolls, due on April 6, is that job growth will moderate to +175k, down from the average +245k gains in the three prior months, with a bigger weather-related payback likely ahead in the spring.'

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Another Big Inflation Conspiracy Theory Just Got Debunked

'The current annualized inflation rate of about 2.2% through early March is the lowest rate in at least two years. That's almost a full per cent below the 3% annual rate of inflation from the CPI (NSA), providing support to the notion that the BLS measure of consumer prices overstates inflation by a full percentage point.'

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RICHARD KOO IS BACK, And He Has Some Bad News For Hedge Funder Kyle Bass

'Because Japan has gone into trade deficit in some recent months, the calls for an imminent Greece-like collapse in the Japanese bond market have intensified. Hedge fund managers like Kyle Bass are hoping to make a monster return when this happens.

But it's not going to happen, as Koo explains...'

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Jeremy Siegel Explains Why Even DOW 15,000 Would Be Cheap

BofA: Retiring Boomers Are Bad News For US Productivity

'By 1969, Baby Boomers made up the entire youth labour force and the entrance of these new workers into the labour market was at least partly responsible for the decline in productivity witnessed during the 1970s, in our view. Now that these workers have built up a lifetime of skills and are planning to exit, albeit with some delay, they will be replaced with younger, less productive workers.'

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Jeff Saut Is Getting Nervous, And There's Only One Investment He Likes Right Now

'For those wishing to be more aggressive, it looks to me as if the U.S. dollar is in the process of breaking down. If true, and only for a trade, the Market Vector Gold Miners' (GDX/$49.76) 16.3% mini-crash since February 29th should be over.'

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PAUL MCCULLEY: We Need To Rethink The Doctrine Of Central Bank Independence Because The World Has Changed

'Prior to the financial crisis, central banks had the capacity to fine tune the economy every six weeks or so by adjusting interest rates, said McCulley. Central bank independence works 'as long as the private sector is elastic to changes in short-term interest rates.' Lately, however, the private sector hasn't been as responsive to monetary policy.

'A liquidity trap is when the private sector doesn't want credit at any price. And the evidence of that is we've taken the price to zero and we still have a massive amount of debt problems in the household sector. So once you've reached the liquidity trap, the world changes.'

There are certain circumstance where you should have more cooperation between fiscal and monetary authorities. Now is one of those times, argues McCulley.'

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JPMorgan's Tom Lee Explains What Will Happen With The $3.6 Trillion In Cash On Corporate Balance Sheets

'The cash here when it gets used is not going to help bonds, it's going to help equity holders. Year to date, dividends are up $20 billion ... Buybacks are going to take a step up this year. It's a reason why the stock market is still going up despite resale inflows being negative and hedge funds not buying stocks and pension funds not owning equities. It's because corporates over the last 20 years have accounted for 87% of all inflows in the stock market.'

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CITI's Levkovich: This Demographic Trend Is Going To Be Wildly Bullish For Stocks

'A new wave of baby boom echo children can help fund this new economic growth as they begin to save for retirement just as their parents did back in the early 1980s. Moreover, they have little memory of the past 12 years of equity market challenges. They were not big investors when markets peaked in 2000 since the first wave of new 35-year old savers (beginning in 2013) were 22 years old in 2000 and had college debt, not new funds to invest. They do not recall the tech bubble bursting in terms of stock markets like their parents do and the same could be said of the baby boomers in 1982 when their parents suffered weak stock market returns in the 1970s.'

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MORGAN STANLEY: China Is Growing A Lot Faster Than We Thought

'In China, where our previous above-consensus forecast of 8.4% 2012 GDP growth had become (published) consensus in recent months, we raise our forecast to 9.0%, one of the highest in the Street. As Helen Qiao and her China team explain in more detail in a companion note, this is essentially a call on additional macro stimulus being implemented in the very near term in response to somewhat disappointing results during the first few months of the year. In addition to further RRR cuts, OMO and window guidance intensification, we expect the government to support loan demand by lowering the benchmark interest rate by 25bp at least once, resuming infrastructure investment projects, as well as promoting first-time home purchase and developers' 'regular commodity housing' construction to smooth the cycle.'

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CITI's Wieting: We Can All Look Forward To Another Debt Ceiling Battle In Early 2013

'By the end of the fiscal year 2012 (September 30), the administration expects debt subject to the limit to be $60 billion below the ceiling. The monthly budget deficit is likely to be near $80 billion in October 2012 by our estimates. But our own estimate for revenues and expenditures over the course of 2012 (prior to fiscal year end) is slightly more optimistic than administration projections. As figure 7 shows, running out of debt capacity under the debt limit prior to the November election is quite unlikely under our baseline projections.'

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S&P: We Know The Case-Shiller Home Price Index Has Problems But There's Nothing We Can Do About It

'The infrastructure for buying a house -- real estate brokers, mortgages, title insurance, lawyers, recording deeds etc. -- is largely a paper-based system involving numerous parts and many different people and steps. Sometimes buying a house seems to mean stepping back into the early 20th century if not the 19th century. As a result, you can't get data quickly and if you want an accurate picture of what is happening, it takes time. So, unlike stock prices which are available in real time, house prices come with a lag.'

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Barry Knapp: S&P Earnings Growth Without Apple: 0%

'As we head into 1Q12 earnings season, much like last quarter, AAPL is expected to have another sizable effect on index earnings and margins, masking otherwise less-than-stellar trends. Earnings growth is estimated at just 1.4% y/y, and about zero excluding AAPL.'

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Morgan Stanley's David Greenlaw: We Could Soon See A 'Significant Deterioration In Corporate Profitability'

'The recent divergence between the GDP arithmetic and labour demand is unusual -- but not unheard of. Most importantly, this combination implies a significant slowdown in productivity, which is somewhat troublesome given the subpar productivity performance that was already evident in 2011 (see Exhibit 2). A continuation of these trends would imply a significant deterioration in corporate profitability at some point in the not too distant future.'

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