We love it when The Street comes out with the typical “don’t’ worry, be happy” research report of the day.
This time our friends at the old Morgan & Stanley have us look at Oil Intensity as viewed as a slice of global GDP.
While it is true that the Developed Economies have continued to lower their Barrel Per Day (BPD) and efficiencies in usage throughout the on boarding of the emerging economies has reduced dependency; the rate at which energy is used on a global basis will continue a pace over the next decade (at least) and may very well find an up-tick.
We’ve known that things were getting better on the employment front and that was reflected today in an unexpected move higher in the Non-Man ISM figures.
That said,we can’t help but think much of the year’s good news is now priced into capital markets. We wonder what it looks like if, in fact, the world has the dreaded 3-2-1-0 GDP count for the year.
Are there more bullets left? The last time we saw the employment index in services this high was 2005 – rates were approaching 5%. This time around it takes two years of ZIRP to get the same effect. This lesson here could be illustrative as both capital markets and commodities partied on for another 18-24 months before realising that there was a leak in the boat.
Investors now must ask: How hard are we partying?
We suspect it’s pretty hard.
“What We Are Noticing”
• Small cap v large cap blew back out to within 50bps of historical highs
• Swiss Franc is OFF its high of 108.50 v USD$
• UST and BUNDS are getting crushed
• All of this is MAJOR risk on
• All of this is liquidity driven
All of this presumes 300K in job growth on a sustained basis for at least the next year.
The high road is being taken by Europe in talking about normalizing rates (notice how this is couched v. “rate hike” BS that stock market junkie need to feed the media.)
Bernanke either 1) doesn’t understand asset inflation’s downside or 2) he knows that USbanks remain insolvent.
Either way this doesn’t end well.
Investment Advice offered through Strategic Financial Group LLC, A RegisteredInvestment Advisor.