Our favourite scene in “This Is Spinal Tap” is, of course, when Nigel is showing Marty his “custom” Marshal amps that go to… yes, 11.
We can imagine a scene where Bernake is showing Steve Liesman his monetary policy kit that has its own “11” in the form of QE3 or QE2.5.
And of course, the Chairman saying – but these go to 11 and Steve nodding his head knowingly…And such is the nonsense that has crippled the global investor from recognising the interminable stalemates in the developed economies which signal a wholesale denial that the world has, in fact, changed irreparably.
With GDP revisions –we call them realities – from the Federal Reserve mid week and a signal that Bernanke may not yet be wheeling out the amps that go to 11, investors continue to tread lightly as they face new circumstances that portend new price and multiple levels that will be with us for years to come.
Here is a list of weekend thoughts to digest:
Debt ceiling negotiations – cuts without some tax increase will not do the job. This means that the economy will have to grow at a slower pace. Austerity must be coupled with collective responsibility from the top end of the US tax paying bracket.
The sacred cows must be on the table. Sorry everyone over 55, you’ve got to pay for all of the things you spent on for the last 25 years. Maybe your penalty is zero interest rates for the next 10 years AND super volatile markets which mean you can’t play and can’t retire…. Conundrums abound.
Greece is not fixable. There will be a default and they will leave the EMU (but not the EU). At 360B Euro in debt there is no way Greece can regain competitiveness in any of their domestic or export based economies without devaluing their currency (and labour). The sooner the ECB gets people around the table to orchestrate an exit and a fix for Ireland and Portugal, the less susceptible Spain is to a run… although that seems to be happening now.
Final thoughts on the GDP and Durable Good numbers… DGs first
One very simple conclusion; take out aeroplanes and this number was pathetic. 0.6%? The internals were moderately better than headlines but they point more to the end of the inventory cycle than they do to any pick up in CapEx. At any rate, the truth is that manufacturing accounts for 1 in 10 jobs in the US. In the 1970s it was 1 in 4. So, the impact in terms of its flow through to the crucial jobs market is inconsequential.
GDP – well it was as we thought a sub 2% number. We revised our number to the 2.4 – 2.7% number in December of last year. Final sales and purchases were revised lower and we don’t see this number doing anything but getting worse due to the Japanese disruptions in Q2.
We are now 4 out of 7 in our 7-4-11 predictions (again Jay Pelosky shout out).
• 10 year with 2 handle
• Commodity Up & Down
• Emerging Markets down
• GDP in the 2s NOT 3s
-Strategic Financial Group
Investment Advice offered through Strategic Financial Group LLC, A Registered
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