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Europe was back in focus this week, even as U.S. markets logged their worst trading period since the start of 2012.Meanwhile, Q1 earnings season has kicked off.
So investors and traders have a lot to think about.
Wall Street’s sharpest economists, strategists, and analysts sounded off on these matters this week.
Most offered the same trite analysis we’ve read repeatedly.
But some thought outside the box.
'A chart in Richard Koo's latest monster presentation shows what happened in Japan when they tried fiscal consolidation during their long balance sheet recession.
Both times the economy got dramatically worse, and the deficit EXPANDED. Not only did things get bad, but the theoretical benefit didn't happen either.
Figuring out a way to defuse the 2013 fiscal bomb is critical.'
'The key to his argument is that consumers are getting by on mediocre income growth, and that retrenchment is inevitable, though he acknowledges we haven't seen it so far, and that even high gasoline prices haven't been a problem.'
'GDP could in reality only be growing by 4-4.5%, well below official targets of over 7%.
-- There's a big disconnect between official data and other data.
-- Real estate numbers that are vibrant officially do not much what's happening on the ground.
-- When I talk to companies throughout China, there isn't a single one that's seeing an increase in profits or revenues.
-- Most of the people I talk to see a flat year, and they're struggling to see a flat year.'
'Third, in the current post-bust setting, even modest slowing in growth feels more dangerous than normal. Fiscal policy is consolidating and conventional monetary policy has been exhausted in many places. And with plenty of leverage in parts of the global economy, slowing growth quickly also raises questions about debt sustainability in places.'
'You have to ask yourself what asset prices will be relatively secure. I happen to think real estate, because of its wide ownership, it will be relatively safe compared to financial assets, which will remain volatile.'
'From his new op-ed piece for the Financial Times: But thanks to the LTRO and the countries distaste for international bonds, Soros think that within 'a few more years, a eurozone break-up would become possible without a meltdown -- but would leave creditor countries' central banks holding big claims that would be hard to enforce against debtor countries' central banks.''
'In each of the last two years, the labour market weakened in early Q2 and did not recover until around Q4. Investors are worried a similar profile may emerge again this year. However, as we enter the current quarter, there is one substantial difference between this year and the last two years, and that is initial jobless claims are much lower at present than where they were at similar points in both 2010 and 2011.'
'Over the longer-term, we continue to believe that markets will be headed higher, but would caution that gains will be harder to come by than they were late last year and early in 2012. It is hard to deny the improvements we have seen in the global macro backdrop over the last several months.'
Zervos writes: 'One day, the truth will be revealed and there will be some very unhappy pensioners in Rotterdam, Vienna and Dusseldorf. Sadly, after all their hard work, these folks still won't be able to afford that beautiful Tuscan villa! And of course, living in that villa will be a happy Italian couple who could turn it into a well priced B&B once the Lira is reintroduced or once Mario turns the Euro into a Lira! Either way it works just fine for the happy Italians and the rest of the south!'
'Citigroup recently surveyed 115 fund manager clients. 'Fascinatingly, despite the gains thus far this year and the very modest upside to the aggregated target overall, more than 80% want to allocate additional money towards equities, with US equities leading the charge,' said Citigroup's Tobias Levkovich.'
'The trouble is that the eurozone has an austerity strategy but no growth strategy. And, without that, all it has is a recession strategy that makes austerity and reform self-defeating, because, if output continues to contract, deficit and debt ratios will continue to rise to unsustainable levels. Moreover, the social and political backlash eventually will become overwhelming.'
'But there's no solid reason it should do so well. Things can go for 200 years and then change. I even worry about the 10-year P/E -- even that relationship could break down. But I believe I'm on better ground thinking that the P/E forecasts returns than thinking one asset just always outperforms.'
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