Creando ingredientes para el crecimiento
Miércoles, 25 de Marzo del 2015 - 13:14:00
Resumen de la conferencia de la Directora Gerente del FMI en China (Universidad de Fundan) el viernes pasado. http://www.imf.org/external/np/speeches/2015/032015.htm
* El pérfil de crecimiento mundial sigue siendo de bajo crecimiento, alta deuda y alto desempleo
* ¿Cuáles son los ingredientes para el crecimiento mundial?
- La elevada deuda y el alto desempleo, consecuencia en parte de la Crisis, siguen pesando de forma negativa en la demanda
- La recuperación es frágil por la acumulación de riesgos
* Subida de tipos desde la Fed
* La fortaleza del USD
* Un periodo prolongado de baja inflación y bajo crecimiento en Japón y la zona EUR (pero Lagarde reconoce mejora en las cifras de crecimiento europeas)
- Es importante que se aplique una política mixta, que incluya un ambicioso paquete de reformas estructurales (incluida China)
* Planes públicos de infraestructuras
* Apertura de mercados y flexibilidad en la producción
* Reformas en educación y sanidad
* Todas estas reformas podrían generar hasta 2 tr.$ en crecimiento dentro del G20
* ¿Qué debe hacer China para seguir liderando el crecimiento mundial?
- Reformas estructurales que lleven a una nueva "normal" de un crecimiento más bajo, pero estable, seguro y sostenible
* Equilibrio entre inversión y consumo; entre manufacturas y servicios; entre crecimiento intensivo en capital a otro dominado por la innovación, cualificación y tecnología
* Priorizando a corto plazo la estabilidad financiera y económica
* Abriendo mercados, como el de servicios....incluido los financieros
* ¿A qué retos se enfrenta China?
- Medio ambiente o
- Desigualdad social
- Y desigualdad de genero
José Luis Martínez Campuzano
Estratega de Citi en España
Miercoles 25/03/15 ordenes de bienes duraderos
Re: Miercoles 25/03/15 ordenes de bienes duraderos
por Fenix » Mié Mar 25, 2015 7:50 pm
- Fenix
- Mensajes: 16334
- Registrado: Vie Abr 23, 2010 2:36 am
Re: Miercoles 25/03/15 ordenes de bienes duraderos
por Fenix » Mié Mar 25, 2015 7:53 pm
13:30 IBM se estabiliza en la directriz alcista de largo plazo:
El precio estabiliza las caídas desde octubre en el interior de un rango lateral, el cual tiene intenciones de despedir al alza.
La estabilización se produce en el paso de la directriz alcista que une los mínimos de 1993 con los de 2008. La superación de la zona de 166,5$ es un indicio más de las intenciones del precio de ir en busca del hueco bajista dejado entre 169 y 181$.
Recomendación: COMPRAR
Eduardo Faus
Original de Renta 4 Banco
14:31 La burbuja punto-com vs el rally actual de las Biotecnológicas
Las acciones de biotecnología están disparadas. Eso ha dado pie a que algunos analistas vuelvan a 2000, cuando las valoraciones de las Tecnológicas estuvieron al rojo vivo y finalizó con un crash de mercado.
Michael Batnick de The Irrelevant Investor ha publicado este gráfico en el que compara el rally de las acciones tecnológicas con las subidas actuales de las empresas de biotecnología.
"En las 168 semanas desde el comienzo de 2012, el Índice Nasdaq Biotech ha avanzado un 250%. En las 168 semanas anteriores al techo de la burbuja de las puntocom, el Nasdaq Composite ganó un 290%. Si bien las acciones de biotecnología han tenido una subida extraordinaria y se acerca a las ganancias de las punto-com, la velocidad a la que se aceleraron las subidas es mucho menor en comparación con las acciones de tecnología".
Esto no quiere decir que el la subida termine como en 2000, señala, y algunos analistas están pidiendo un respiro.
El precio estabiliza las caídas desde octubre en el interior de un rango lateral, el cual tiene intenciones de despedir al alza.
La estabilización se produce en el paso de la directriz alcista que une los mínimos de 1993 con los de 2008. La superación de la zona de 166,5$ es un indicio más de las intenciones del precio de ir en busca del hueco bajista dejado entre 169 y 181$.
Recomendación: COMPRAR
Eduardo Faus
Original de Renta 4 Banco
14:31 La burbuja punto-com vs el rally actual de las Biotecnológicas
Las acciones de biotecnología están disparadas. Eso ha dado pie a que algunos analistas vuelvan a 2000, cuando las valoraciones de las Tecnológicas estuvieron al rojo vivo y finalizó con un crash de mercado.
Michael Batnick de The Irrelevant Investor ha publicado este gráfico en el que compara el rally de las acciones tecnológicas con las subidas actuales de las empresas de biotecnología.
"En las 168 semanas desde el comienzo de 2012, el Índice Nasdaq Biotech ha avanzado un 250%. En las 168 semanas anteriores al techo de la burbuja de las puntocom, el Nasdaq Composite ganó un 290%. Si bien las acciones de biotecnología han tenido una subida extraordinaria y se acerca a las ganancias de las punto-com, la velocidad a la que se aceleraron las subidas es mucho menor en comparación con las acciones de tecnología".
Esto no quiere decir que el la subida termine como en 2000, señala, y algunos analistas están pidiendo un respiro.
- Fenix
- Mensajes: 16334
- Registrado: Vie Abr 23, 2010 2:36 am
Re: Miercoles 25/03/15 ordenes de bienes duraderos
por Fenix » Mié Mar 25, 2015 7:54 pm
¿Subir para volver a caer?
Miércoles, 25 de Marzo del 2015 - 14:57:00
El FOMC ha servido fundamentalmente para depreciar el USD…¿no lo ven así? Tanto discutir sobre si habría o no una referencia en el Comunicado al USD, sin que finalmente haya ocurrido, para que la moneda norteamericana se vea perjudicada (o beneficiada, depende a quién preguntemos) por la ambigüedad generada de nuevo sobre el momento para iniciar la subida de tipos.
Pero, ¿no erá el EUR el que bajaba? Al final, es muy difícilm determinar quién es quién en un movimiento de este tipo. Con todo, sí es importante resaltar la apreciación del USD de forma generalizada con la depreciación del EUR también frente a la mayoría de las divisas. Desarrolladas y emergentes. La corrección a la baja del USD también coincide con una subida general de la moneda europea, lo que hace el movimiento al alza para el cambio bilateral EURUSD mucho más intenso.
Pero, ¿tiene sentido una caída del EUR? Ya hemos hablado de esta cuestión. Las respuestas fueron de tres tipos: 1. Técnica; 2. Cíclica; 3. Corto plazo. Para argumentar el aspecto técnico, mejor ver su evolución desde el año pasado. Miren de nuevo el gráfico anterior. Naturalmente, podríamos ver como recupera niveles de 1.17 USD sin cuestionar su tendencia a la baja.
Por lo que respecta a la cuestión cíclica, seguimos defendiendo la lenta recuperación europea frente al producto más asentado en USA. Naturalmente, partiendo de la continuidad en el diferencial entre los tipos de interés a plazo de ambas monedas. Más tarde o más temprano se producirá el inicio de la subida de tipos desde la Fed, cuando el ECB sigue repitiendo que el QE viene para quedarse hasta finales del próximo año.
¿Y las incertidumbre? Ayer el Presidente Draghi defendió la estabilidad financiera conseguida en el área, a través de las medidas límite de la política monetaria. Pero lo cierto es que la incertidumbre inversora, clave para hacer más sostenible la recuperación cíclica actual, se mantendrá mientras se prolongue la incertidumbre política. Y el paso del tiempo en este caso no es positivo, considerando que 2016 será un año electoral en la mayoría de los países del área.
¿Fundamentos? Claro, compradores de EUR.
Algo de esto es lo que vemos con la continua entrada de dinero hacia las bolsas del área, apenas compensado por los indicios de salida de dinero exterior desde el mercado de deuda.
Dicen mis estrategas de divisa que detrás del fuerte desplome del EUR en los últimos meses estuvo la creación de importantes posiciones cortas que ahora podrían tener la tentación de cerrarse, precipitando precisamente la recuperación de la moneda. No lo sé. Pero, sí parece fácil pensar que la inestabilidad puede asentarse en el mercado de divisas a corto plazo. Ayer mismo tuvimos un buen ejemplo cuando el EUR corrigió casi una figura ante la publicación de unos datos de coyuntura mejor de lo esperado en la economía norteamericana. Sí, depende de los datos. Esto mismo nos dijo la Fed la semana pasada.
José Luis Martínez Campuzano
Estratega de Citi en España
Miércoles, 25 de Marzo del 2015 - 14:57:00
El FOMC ha servido fundamentalmente para depreciar el USD…¿no lo ven así? Tanto discutir sobre si habría o no una referencia en el Comunicado al USD, sin que finalmente haya ocurrido, para que la moneda norteamericana se vea perjudicada (o beneficiada, depende a quién preguntemos) por la ambigüedad generada de nuevo sobre el momento para iniciar la subida de tipos.
Pero, ¿no erá el EUR el que bajaba? Al final, es muy difícilm determinar quién es quién en un movimiento de este tipo. Con todo, sí es importante resaltar la apreciación del USD de forma generalizada con la depreciación del EUR también frente a la mayoría de las divisas. Desarrolladas y emergentes. La corrección a la baja del USD también coincide con una subida general de la moneda europea, lo que hace el movimiento al alza para el cambio bilateral EURUSD mucho más intenso.
Pero, ¿tiene sentido una caída del EUR? Ya hemos hablado de esta cuestión. Las respuestas fueron de tres tipos: 1. Técnica; 2. Cíclica; 3. Corto plazo. Para argumentar el aspecto técnico, mejor ver su evolución desde el año pasado. Miren de nuevo el gráfico anterior. Naturalmente, podríamos ver como recupera niveles de 1.17 USD sin cuestionar su tendencia a la baja.
Por lo que respecta a la cuestión cíclica, seguimos defendiendo la lenta recuperación europea frente al producto más asentado en USA. Naturalmente, partiendo de la continuidad en el diferencial entre los tipos de interés a plazo de ambas monedas. Más tarde o más temprano se producirá el inicio de la subida de tipos desde la Fed, cuando el ECB sigue repitiendo que el QE viene para quedarse hasta finales del próximo año.
¿Y las incertidumbre? Ayer el Presidente Draghi defendió la estabilidad financiera conseguida en el área, a través de las medidas límite de la política monetaria. Pero lo cierto es que la incertidumbre inversora, clave para hacer más sostenible la recuperación cíclica actual, se mantendrá mientras se prolongue la incertidumbre política. Y el paso del tiempo en este caso no es positivo, considerando que 2016 será un año electoral en la mayoría de los países del área.
¿Fundamentos? Claro, compradores de EUR.
Algo de esto es lo que vemos con la continua entrada de dinero hacia las bolsas del área, apenas compensado por los indicios de salida de dinero exterior desde el mercado de deuda.
Dicen mis estrategas de divisa que detrás del fuerte desplome del EUR en los últimos meses estuvo la creación de importantes posiciones cortas que ahora podrían tener la tentación de cerrarse, precipitando precisamente la recuperación de la moneda. No lo sé. Pero, sí parece fácil pensar que la inestabilidad puede asentarse en el mercado de divisas a corto plazo. Ayer mismo tuvimos un buen ejemplo cuando el EUR corrigió casi una figura ante la publicación de unos datos de coyuntura mejor de lo esperado en la economía norteamericana. Sí, depende de los datos. Esto mismo nos dijo la Fed la semana pasada.
José Luis Martínez Campuzano
Estratega de Citi en España
- Fenix
- Mensajes: 16334
- Registrado: Vie Abr 23, 2010 2:36 am
Re: Miercoles 25/03/15 ordenes de bienes duraderos
por Fenix » Mié Mar 25, 2015 7:57 pm
15:55 Los inversores salen de los fondos de bonos por el miedo a la subida de tipos
Morningstar dice casi 1.200 millones de dólares salieron de los fondos de bonos en febrero. Esto representa un aumento del 67,3% por encima de los 717 millones de dólares que salieron en enero.
En medio de crecientes temores de que la Reserva Federal de Estados Unidos aumentará las tasas de interés a mediados de año, algunos gestores y asesores están comenzando a vender bonos tradicionales, incluyendo fondos de bonos, bonos basura y acciones que pagan altos dividendos.
La peor parte se la ha llevado las inversiones de renta fija y activos tácticos, mientras que los asesores de inversión registrados (RIAs) han movido más dinero hacia inversiones de renta fija de gestión pasiva, como los bonos municipales.
Morningstar dice casi 1.200 millones de dólares salieron de los fondos de bonos en febrero. Esto representa un aumento del 67,3% por encima de los 717 millones de dólares que salieron en enero.
En medio de crecientes temores de que la Reserva Federal de Estados Unidos aumentará las tasas de interés a mediados de año, algunos gestores y asesores están comenzando a vender bonos tradicionales, incluyendo fondos de bonos, bonos basura y acciones que pagan altos dividendos.
La peor parte se la ha llevado las inversiones de renta fija y activos tácticos, mientras que los asesores de inversión registrados (RIAs) han movido más dinero hacia inversiones de renta fija de gestión pasiva, como los bonos municipales.
- Fenix
- Mensajes: 16334
- Registrado: Vie Abr 23, 2010 2:36 am
Re: Miercoles 25/03/15 ordenes de bienes duraderos
por Fenix » Mié Mar 25, 2015 8:00 pm
A Reminder Of The Fed's Interest Rate Conundrum
03/18/2015
From Michael Lebowitz
The Fed's Interest Rate Policy Conundrum
With the Federal Reserve (Fed) conducting their regularly scheduled FOMC meeting this Wednesday, we point out an interesting contrast between the current posture of the Fed which suggests they are leaning toward Fed Funds rate hikes versus prior post-crisis policy.
When the Fed lowered Federal Funds rate to zero percent in December 2008, various forms of Quantitative Easing (QE) were used to further ease monetary policy, decrease longer-term interest rates and stimulate the economy. Since 2008 there have been three separate instances of QE. Additionally, an action termed “Operation Twist” allowed the Fed to sell shorter term bonds they recently bought and use the proceeds to purchase longer term bonds. Economic activity reversed course with these actions.
The first round of QE started in 2008 concurrent with the move to a zero interest rate policy to combat deep economic contraction and a severe banking crisis. The following two doses of QE and Operation Twist were done in efforts to reverse slowing economic data. Except for on-going asset purchases aimed at maintaining the current level of the Fed’s balance sheet, QE3, the latest occurrence of QE, ended last October and was quickly followed by Fed discussions of potential interest rate increases. Based on various speeches by Federal Reserve Chairwoman Janet Yellen and her colleagues, many market participants believe the Fed could raise the Federal Funds rate as early as the June 17th meeting.
Talk of raising interest rates introduces a new Fed conundrum. Over the last few months, Federal Reserve Board members have maintained a less dovish tone which implies the eventuality of rate hikes despite economic data which has been slowing rapidly. The singular exception to weaker data has been the employment figures which have continued to improve. Based upon a composite of economic data readings, the prior policy stance would have called for more QE (or rate decreases if not zero bound) given the weak levels of economic data as well as the trends.
As we illustrate below, a case can be made that, excluding 2008, the economy is weaker now than prior to the announcement of the previous QE actions and Operation Twist. Further confounding the Fed stance is inflation, which as measured by CPI is running lower than at any time since 2009. Additionally the strong dollar and global deflationary trends point to lower inflation and possibly deflation in the coming months.
Graph 1, below aggregates eight key economic statistics and compares the most recent three month period to the average of the prior six months. This gauges the relative strength of data trends over the last nine months. Graph 2, the Bloomberg Economic Surprise Index, measures current economic data releases, like our trend model, but instead compares them to Wall Street economists’ expectations and not prior data. The combination of graphs 1 and 2 confirm that economic data has slowed both sharply and unexpectedly. Finally, graph 3 charts CPI as compared to the Fed’s self-mandated 2% inflation target.
The Fed’s current language and posture are significant departures from monetary policy since the financial crisis. The soaring dollar and declining bond yields seem to be pricing in this new dynamic. Equities and other risk markets on the other hand do not reflect any noticeable concern. If Fed policy continues to shift toward rate hikes we expect market volatility to dramatically increase and equity markets and other risk assets to experience meaningful corrections. Current equity market valuations are at or near record extremes by several measures and well above fair value by most. Over the last 6 years, equity prices have been driven not by fundamental economic data but on an explicit promise and variety of actions from the Fed to support asset prices. To the extent this promise truly is coming to an end in its current form, it likely implies radical changes for asset prices and market behavior and warrants caution.
03/18/2015
From Michael Lebowitz
The Fed's Interest Rate Policy Conundrum
With the Federal Reserve (Fed) conducting their regularly scheduled FOMC meeting this Wednesday, we point out an interesting contrast between the current posture of the Fed which suggests they are leaning toward Fed Funds rate hikes versus prior post-crisis policy.
When the Fed lowered Federal Funds rate to zero percent in December 2008, various forms of Quantitative Easing (QE) were used to further ease monetary policy, decrease longer-term interest rates and stimulate the economy. Since 2008 there have been three separate instances of QE. Additionally, an action termed “Operation Twist” allowed the Fed to sell shorter term bonds they recently bought and use the proceeds to purchase longer term bonds. Economic activity reversed course with these actions.
The first round of QE started in 2008 concurrent with the move to a zero interest rate policy to combat deep economic contraction and a severe banking crisis. The following two doses of QE and Operation Twist were done in efforts to reverse slowing economic data. Except for on-going asset purchases aimed at maintaining the current level of the Fed’s balance sheet, QE3, the latest occurrence of QE, ended last October and was quickly followed by Fed discussions of potential interest rate increases. Based on various speeches by Federal Reserve Chairwoman Janet Yellen and her colleagues, many market participants believe the Fed could raise the Federal Funds rate as early as the June 17th meeting.
Talk of raising interest rates introduces a new Fed conundrum. Over the last few months, Federal Reserve Board members have maintained a less dovish tone which implies the eventuality of rate hikes despite economic data which has been slowing rapidly. The singular exception to weaker data has been the employment figures which have continued to improve. Based upon a composite of economic data readings, the prior policy stance would have called for more QE (or rate decreases if not zero bound) given the weak levels of economic data as well as the trends.
As we illustrate below, a case can be made that, excluding 2008, the economy is weaker now than prior to the announcement of the previous QE actions and Operation Twist. Further confounding the Fed stance is inflation, which as measured by CPI is running lower than at any time since 2009. Additionally the strong dollar and global deflationary trends point to lower inflation and possibly deflation in the coming months.
Graph 1, below aggregates eight key economic statistics and compares the most recent three month period to the average of the prior six months. This gauges the relative strength of data trends over the last nine months. Graph 2, the Bloomberg Economic Surprise Index, measures current economic data releases, like our trend model, but instead compares them to Wall Street economists’ expectations and not prior data. The combination of graphs 1 and 2 confirm that economic data has slowed both sharply and unexpectedly. Finally, graph 3 charts CPI as compared to the Fed’s self-mandated 2% inflation target.
The Fed’s current language and posture are significant departures from monetary policy since the financial crisis. The soaring dollar and declining bond yields seem to be pricing in this new dynamic. Equities and other risk markets on the other hand do not reflect any noticeable concern. If Fed policy continues to shift toward rate hikes we expect market volatility to dramatically increase and equity markets and other risk assets to experience meaningful corrections. Current equity market valuations are at or near record extremes by several measures and well above fair value by most. Over the last 6 years, equity prices have been driven not by fundamental economic data but on an explicit promise and variety of actions from the Fed to support asset prices. To the extent this promise truly is coming to an end in its current form, it likely implies radical changes for asset prices and market behavior and warrants caution.
- Fenix
- Mensajes: 16334
- Registrado: Vie Abr 23, 2010 2:36 am
Re: Miercoles 25/03/15 ordenes de bienes duraderos
por Fenix » Mié Mar 25, 2015 8:12 pm
10 Investment Quotes To Live By
03/18/2015
Submitted by Lance Roberts
As markets hover near all-time highs, investors have become quite complacent that the current bull market trend will continue indefinitely. But why shouldn't they? After all, the Central Banks of the world have made it a primary mission to ensure that asset prices don't fall in order to keep extremely weak economies limping along. Interest rates hover near historic lows, and inflationary pressures are non-existent. Of course, these arguments are used to justify the second highest levels of valuation in history and a market that has set records for the longest stretch without a 10% correction. This time is truly different...right?
Of course, a quick look at history tells us that this time is not different. In March of 2008, I was giving a seminar discussing why we had already likely entered into a recession and that a market swoon of mass proportions was approaching. While that advice fell on deaf ears as we were in a "Goldilocks" economy, and "subprime" was contained, the bubble ended just a few short months later. Why? Because that "bubble" was no "different" than any other time in history. The slide below was from the presentation:
001-thistimeisdifferent
Of course, the next time I make this presentation I will have to add "Central Bank Interventions" to the list.
The reality is that markets cycle from peaks to troughs as excesses built up during the previous bull market cycle are liquidated. The chart below shows the secular cycles of the market going back to 1871 adjusted for inflation. What is important is that historically, bull markets are launched from ver low valuations (buy low) and have historically ended with valuations around 23x earnings (sell high).
SP500-PE-Recessions-031815
This time is not different. The excesses being built up in the markets today will eventually revert just as they have been at every other peak in market history. The only question, of which no one has the answer to, is exactly when this occurs.
With this in mind, there are 10-basic investment rules that have historically kept investors out of trouble over the long term. These are not unique by any means but rather a list of investment rules that in some shape, or form, has been uttered by every great investor in history.
1) You are a "saver" - not an investor
Saving
Unlike Warren Buffet who takes control of a company and can affect its financial direction - you are speculating that a purchase of a share of stock today can be sold at a higher price in the future. Furthermore, you are doing this with your hard earned savings. If you ask most people if they would bet their retirement savings on a hand of poker in Vegas they would tell you "no." When asked why, they will say they don't have the skill to be successful at winning at poker. However, on a daily basis these same individuals will buy shares of a company in which they have no knowledge of operations, revenue, profitability, or future viability simply because someone on television told them to do so.
Keeping the right frame of mind about the "risk" that is undertaken in a portfolio can help stem the tide of loss when things inevitably go wrong. Like any professional gambler - the secret to long term success was best sung by Kenny Rogers; "You gotta know when to hold'em...know when to fold'em."
2) Don't forget the income.
Investment
As stated by the "Investment Brothers," an investment is an asset or item that will generate appreciation OR income in the future. In today's highly correlated world, there is little diversification left between equity classes. Markets rise and fall in unison as high-frequency trading and monetary flows push related asset classes in a singular direction. This is why including other asset classes, like fixed income which provides a return of capital function with an income stream, can reduce portfolio volatility. Lower volatility portfolios will consistently outperform over the long term by reducing the emotional mistakes caused by large portfolio swings.
3) You can't "buy low" if you don't "sell high"
Buy-Low-Sell-High-Rogers
Most investors do fairly well at "buying" but stink at "selling." The reason is purely emotional driven primarily by "greed" and "fear." Like pruning and weeding a garden; a solid discipline of regularly taking profits, selling laggards and rebalancing the allocation leads to a healthier portfolio over time.
Most importantly, while you may "beat the market" with "paper profits" in the short term, it is only the realization of those gains that generate "spendable wealth."
4) Patience And Discipline Are What Wins
Patience-and-Dicipline
Most individuals will tell you that they are "long-term investors." However, as Dalbar studies have repeatedly shown investors are driven more by emotions than not. The problem is that while individuals have the best of intentions of investing long-term, they ultimately allow "greed" to force them to chasing last year's hot performers. However, this has generally resulted in severe underperformance in the subsequent year as individuals sell at a loss and then repeat the process.
This is why the truly great investors stick to their discipline in good times and bad. Over the long term - sticking to what you know, and understand, will perform better than continually jumping from the "frying pan into the fire."
5) Don't Forget Rule No. 1
2-rules-Warren-Buffett
As any good poker player knows - once you run out of chips you are out of the gam e. This is why knowing both "when" and "how much" to bet is critical to winning the gam e. The problem for most investors is that they are consistently betting "all in, all of the time."
The "fear" of missing out in a rising market leads to excessive risk buildup in portfolios over time. It also leads to a violation of the simple rule of "sell high."
As discussed recently, the reality is that opportunities to invest in the market come along as often as taxi cabs in New York City. However, trying to make up lost capital by not paying attention to the risk is a much more difficult thing to do.
6) You most valuable, and irreplaceable commodity, is "time."
Time-vs-Money
Since the turn of the century, investors have recovered, theoretically, from two massive bear market corrections. After 15 years, investors are now back to where they were in 2000 after adjusting for inflation. The problem is that there has been an irreplaceable loss; the "time" that was available to "save" for retirement is gone, forever.
For investors getting back to even is not an investment strategy. We are all "savers" that have a limited amount of time within which to save money for our retirement. If we were 15 years from retirement in 2000 - we are now staring it in the face with no more to show for it than what we had over a decade ago. Do not discount the value of "time" in your investment strategy.
7) Don't mistake a "cyclical trend" as an "infinite direction."
The-trend-is-your-friend
There is an old Wall Street axiom that says the "trend is your friend." Unfortunately, investors repeatedly extrapolate the current trend into infinity. In 2007, the markets were expected to continue to grow as investors piled into the market top. In late 2008, individuals were convinced that the market was going to zero. Extremes are never the case.
It is important to remember that the "trend is your friend." That is as long as you are paying attention to it and respecting its direction. Get on the wrong side of the trend, and it can become your worst enemy.
Success breeds over-confidence
Overconfidence
Individuals go to college to become doctors, lawyers, and even circus clowns. Yet, every day, individuals pile into one of the most complicated gam es on the planet with their hard earned savings with little, or no, education at all.
For most individuals, when the markets are rising, their success breeds confidence. The longer the market rises; the more individuals attribute their success to their own skill. The reality is that a rising market covers up the multitude of investment mistakes that individuals make by taking on excessive risk, poor asset selection or weak management skills. These errors are revealed by the forthcoming correction.
9) Being a contrarian is tough, lonely and generally right.
Buy-Fear-Sell-Greed
Howard Marks once wrote that:
""Resisting – and thereby achieving success as a contrarian – isn't easy. Things combine to make it difficult; including natural herd tendencies and the pain imposed by being out of step, since momentum invariably makes pro-cyclical actions look correct for a while. (That's why it's essential to remember that 'being too far ahead of your time is indistinguishable from being wrong.')
Given the uncertain nature of the future, and thus the difficulty of being confident your position is the right one – especially as price moves against you – it's challenging to be a lonely contrarian."
The best investments are generally made when going against the herd. Selling to the "greedy" and buying from the "fearful" are extremely difficult things to do without a very strong investment discipline, management protocol, and intestinal fortitude. For most investors the reality is that they are inundated by "media chatter" which keeps them from making logical and intelligent investment decisions regarding their money which, unfortunately, leads to bad outcomes.
10) Comparison is your worst investment enemy
paint-dry
The best thing you can do for your portfolio is to quit benchmarking against a random market index that has absolutely nothing to do with your goals, risk tolerance or time horizon.
Comparison in the financial arena is the main reason clients have trouble patiently sitting on their hands, letting whatever process they are comfortable with work for them. They get waylaid by some comparison along the way and lose their focus. If you tell a client that they made 12% on their account, they are very pleased. If you subsequently inform them that 'everyone else' made 14%, you have made them upset. The whole financial services industry, as it is constructed now, is predicated on making people upset so they will move their money around in a frenzy. Money in motion creates fees and commissions. The creation of more and more benchmarks and style boxes is nothing more than the creation of more things to COMPARE to, allowing clients to stay in a perpetual state of outrage."
The only benchmark that matters to you is the annual return that is specifically required to obtain your retirement goal in the future. If that rate is 4%, then trying to obtain 6% more than doubles the risk you have to take to achieve that return. The end result of taking on more risk than necessary will be the deviation away from your goals when something inevitably goes wrong.
It's all in the risk
Robert Rubin, former Secretary of the Treasury, changed the way I thought about risk when he wrote:
"As I think back over the years, I have been guided by four principles for decision making. First, the only certainty is that there is no certainty. Second, every decision, as a consequence, is a matter of weighing probabilities. Third, despite uncertainty we must decide and we must act. And lastly, we need to judge decisions not only on the results, but on how they were made.
Most people are in denial about uncertainty. They assume they're lucky, and that the unpredictable can be reliably forecast. This keeps business brisk for palm readers, psychics, and stockbrokers, but it's a terrible way to deal with uncertainty. If there are no absolutes, then all decisions become matters of judging the probability of different outcomes, and the costs and benefits of each. Then, on that basis, you can make a good decision."
It should be obvious that an honest assessment of uncertainty leads to better decisions, but the benefits of Rubin's approach goes beyond that. For starters, although it may seem contradictory, embracing uncertainty reduces risk while denial increases it. Another benefit of "acknowledged uncertainty" is it keeps you honest. A healthy respect for uncertainty, and a focus on probability, drives you never to be satisfied with your conclusions. It keeps you moving forward to seek out more information, to question conventional thinking and to continually refine your judgments and understanding that difference between certainty and likelihood can make all the difference.
The reality is that we can't control outcomes; the most we can do is influence the probability of certain outcomes which is why the day to day management of risks and investing based on probabilities, rather than possibilities, is important not only to capital preservation but to investment success over time.
03/18/2015
Submitted by Lance Roberts
As markets hover near all-time highs, investors have become quite complacent that the current bull market trend will continue indefinitely. But why shouldn't they? After all, the Central Banks of the world have made it a primary mission to ensure that asset prices don't fall in order to keep extremely weak economies limping along. Interest rates hover near historic lows, and inflationary pressures are non-existent. Of course, these arguments are used to justify the second highest levels of valuation in history and a market that has set records for the longest stretch without a 10% correction. This time is truly different...right?
Of course, a quick look at history tells us that this time is not different. In March of 2008, I was giving a seminar discussing why we had already likely entered into a recession and that a market swoon of mass proportions was approaching. While that advice fell on deaf ears as we were in a "Goldilocks" economy, and "subprime" was contained, the bubble ended just a few short months later. Why? Because that "bubble" was no "different" than any other time in history. The slide below was from the presentation:
001-thistimeisdifferent
Of course, the next time I make this presentation I will have to add "Central Bank Interventions" to the list.
The reality is that markets cycle from peaks to troughs as excesses built up during the previous bull market cycle are liquidated. The chart below shows the secular cycles of the market going back to 1871 adjusted for inflation. What is important is that historically, bull markets are launched from ver low valuations (buy low) and have historically ended with valuations around 23x earnings (sell high).
SP500-PE-Recessions-031815
This time is not different. The excesses being built up in the markets today will eventually revert just as they have been at every other peak in market history. The only question, of which no one has the answer to, is exactly when this occurs.
With this in mind, there are 10-basic investment rules that have historically kept investors out of trouble over the long term. These are not unique by any means but rather a list of investment rules that in some shape, or form, has been uttered by every great investor in history.
1) You are a "saver" - not an investor
Saving
Unlike Warren Buffet who takes control of a company and can affect its financial direction - you are speculating that a purchase of a share of stock today can be sold at a higher price in the future. Furthermore, you are doing this with your hard earned savings. If you ask most people if they would bet their retirement savings on a hand of poker in Vegas they would tell you "no." When asked why, they will say they don't have the skill to be successful at winning at poker. However, on a daily basis these same individuals will buy shares of a company in which they have no knowledge of operations, revenue, profitability, or future viability simply because someone on television told them to do so.
Keeping the right frame of mind about the "risk" that is undertaken in a portfolio can help stem the tide of loss when things inevitably go wrong. Like any professional gambler - the secret to long term success was best sung by Kenny Rogers; "You gotta know when to hold'em...know when to fold'em."
2) Don't forget the income.
Investment
As stated by the "Investment Brothers," an investment is an asset or item that will generate appreciation OR income in the future. In today's highly correlated world, there is little diversification left between equity classes. Markets rise and fall in unison as high-frequency trading and monetary flows push related asset classes in a singular direction. This is why including other asset classes, like fixed income which provides a return of capital function with an income stream, can reduce portfolio volatility. Lower volatility portfolios will consistently outperform over the long term by reducing the emotional mistakes caused by large portfolio swings.
3) You can't "buy low" if you don't "sell high"
Buy-Low-Sell-High-Rogers
Most investors do fairly well at "buying" but stink at "selling." The reason is purely emotional driven primarily by "greed" and "fear." Like pruning and weeding a garden; a solid discipline of regularly taking profits, selling laggards and rebalancing the allocation leads to a healthier portfolio over time.
Most importantly, while you may "beat the market" with "paper profits" in the short term, it is only the realization of those gains that generate "spendable wealth."
4) Patience And Discipline Are What Wins
Patience-and-Dicipline
Most individuals will tell you that they are "long-term investors." However, as Dalbar studies have repeatedly shown investors are driven more by emotions than not. The problem is that while individuals have the best of intentions of investing long-term, they ultimately allow "greed" to force them to chasing last year's hot performers. However, this has generally resulted in severe underperformance in the subsequent year as individuals sell at a loss and then repeat the process.
This is why the truly great investors stick to their discipline in good times and bad. Over the long term - sticking to what you know, and understand, will perform better than continually jumping from the "frying pan into the fire."
5) Don't Forget Rule No. 1
2-rules-Warren-Buffett
As any good poker player knows - once you run out of chips you are out of the gam e. This is why knowing both "when" and "how much" to bet is critical to winning the gam e. The problem for most investors is that they are consistently betting "all in, all of the time."
The "fear" of missing out in a rising market leads to excessive risk buildup in portfolios over time. It also leads to a violation of the simple rule of "sell high."
As discussed recently, the reality is that opportunities to invest in the market come along as often as taxi cabs in New York City. However, trying to make up lost capital by not paying attention to the risk is a much more difficult thing to do.
6) You most valuable, and irreplaceable commodity, is "time."
Time-vs-Money
Since the turn of the century, investors have recovered, theoretically, from two massive bear market corrections. After 15 years, investors are now back to where they were in 2000 after adjusting for inflation. The problem is that there has been an irreplaceable loss; the "time" that was available to "save" for retirement is gone, forever.
For investors getting back to even is not an investment strategy. We are all "savers" that have a limited amount of time within which to save money for our retirement. If we were 15 years from retirement in 2000 - we are now staring it in the face with no more to show for it than what we had over a decade ago. Do not discount the value of "time" in your investment strategy.
7) Don't mistake a "cyclical trend" as an "infinite direction."
The-trend-is-your-friend
There is an old Wall Street axiom that says the "trend is your friend." Unfortunately, investors repeatedly extrapolate the current trend into infinity. In 2007, the markets were expected to continue to grow as investors piled into the market top. In late 2008, individuals were convinced that the market was going to zero. Extremes are never the case.
It is important to remember that the "trend is your friend." That is as long as you are paying attention to it and respecting its direction. Get on the wrong side of the trend, and it can become your worst enemy.
Success breeds over-confidenceOverconfidence
Individuals go to college to become doctors, lawyers, and even circus clowns. Yet, every day, individuals pile into one of the most complicated gam es on the planet with their hard earned savings with little, or no, education at all.
For most individuals, when the markets are rising, their success breeds confidence. The longer the market rises; the more individuals attribute their success to their own skill. The reality is that a rising market covers up the multitude of investment mistakes that individuals make by taking on excessive risk, poor asset selection or weak management skills. These errors are revealed by the forthcoming correction.
9) Being a contrarian is tough, lonely and generally right.
Buy-Fear-Sell-Greed
Howard Marks once wrote that:
""Resisting – and thereby achieving success as a contrarian – isn't easy. Things combine to make it difficult; including natural herd tendencies and the pain imposed by being out of step, since momentum invariably makes pro-cyclical actions look correct for a while. (That's why it's essential to remember that 'being too far ahead of your time is indistinguishable from being wrong.')
Given the uncertain nature of the future, and thus the difficulty of being confident your position is the right one – especially as price moves against you – it's challenging to be a lonely contrarian."
The best investments are generally made when going against the herd. Selling to the "greedy" and buying from the "fearful" are extremely difficult things to do without a very strong investment discipline, management protocol, and intestinal fortitude. For most investors the reality is that they are inundated by "media chatter" which keeps them from making logical and intelligent investment decisions regarding their money which, unfortunately, leads to bad outcomes.
10) Comparison is your worst investment enemy
paint-dry
The best thing you can do for your portfolio is to quit benchmarking against a random market index that has absolutely nothing to do with your goals, risk tolerance or time horizon.
Comparison in the financial arena is the main reason clients have trouble patiently sitting on their hands, letting whatever process they are comfortable with work for them. They get waylaid by some comparison along the way and lose their focus. If you tell a client that they made 12% on their account, they are very pleased. If you subsequently inform them that 'everyone else' made 14%, you have made them upset. The whole financial services industry, as it is constructed now, is predicated on making people upset so they will move their money around in a frenzy. Money in motion creates fees and commissions. The creation of more and more benchmarks and style boxes is nothing more than the creation of more things to COMPARE to, allowing clients to stay in a perpetual state of outrage."
The only benchmark that matters to you is the annual return that is specifically required to obtain your retirement goal in the future. If that rate is 4%, then trying to obtain 6% more than doubles the risk you have to take to achieve that return. The end result of taking on more risk than necessary will be the deviation away from your goals when something inevitably goes wrong.
It's all in the risk
Robert Rubin, former Secretary of the Treasury, changed the way I thought about risk when he wrote:
"As I think back over the years, I have been guided by four principles for decision making. First, the only certainty is that there is no certainty. Second, every decision, as a consequence, is a matter of weighing probabilities. Third, despite uncertainty we must decide and we must act. And lastly, we need to judge decisions not only on the results, but on how they were made.
Most people are in denial about uncertainty. They assume they're lucky, and that the unpredictable can be reliably forecast. This keeps business brisk for palm readers, psychics, and stockbrokers, but it's a terrible way to deal with uncertainty. If there are no absolutes, then all decisions become matters of judging the probability of different outcomes, and the costs and benefits of each. Then, on that basis, you can make a good decision."
It should be obvious that an honest assessment of uncertainty leads to better decisions, but the benefits of Rubin's approach goes beyond that. For starters, although it may seem contradictory, embracing uncertainty reduces risk while denial increases it. Another benefit of "acknowledged uncertainty" is it keeps you honest. A healthy respect for uncertainty, and a focus on probability, drives you never to be satisfied with your conclusions. It keeps you moving forward to seek out more information, to question conventional thinking and to continually refine your judgments and understanding that difference between certainty and likelihood can make all the difference.
The reality is that we can't control outcomes; the most we can do is influence the probability of certain outcomes which is why the day to day management of risks and investing based on probabilities, rather than possibilities, is important not only to capital preservation but to investment success over time.
- Fenix
- Mensajes: 16334
- Registrado: Vie Abr 23, 2010 2:36 am
Re: Miercoles 25/03/15 ordenes de bienes duraderos
por Fenix » Mié Mar 25, 2015 8:14 pm
Meet "The Wohl Of Wall Street": The Inland Empire's Own 17-Year-Old Hedge Fund Manager
03/18/2015
A decade ago the Inland Empire was known for having more real estate agents than any other profession, because "making money in real estate was so easy, anyone could do it." Now it's the rise of the "hedge fund managers."
Turns out E-trade knew precisely who their target audience was with all those baby ads. Because when we learn that a 17-year-old football and basketball playing highschooler out of California's Inland Empire is running his own "hedge fund", all we can say is "thank you Fed" for eliminating all the risk in "markets", and allowing such young entrepreneurs as Jacob Johl, who already has 20 investors and is better known as the "Wohl of Wall Street" to thrive and propser, even as all those who were still alive when markets were actually, well, markets can only sit back and laugh.
And laugh some more when seeing performance charts such as this one, pulled from the aspiring hedge funder's website.
About Wohl Capital Investment Group:
Wohl Capital was started by its current CEO and Senior Manager Jacob Wohl. Many hedge funds take only acredited investors with $1 million of capital or more to invest. We believe that we've created a hedge fund for the rest of us.
Jacob started Wohl Capital Investment Group to create a hedge fund for the average middle class investor. Without million dollar minimum investment requirements Wohl Capital's hedge fund has provided a way for middle class investors to make real returns. With a guerrilla warfare mentality towards investing, Wohl Capital is able to outperform the institutional giants again and again.
Good luck Jacob, and don't forget the only two things that matter in this "market" - BTFD and BTFATH.
03/18/2015
A decade ago the Inland Empire was known for having more real estate agents than any other profession, because "making money in real estate was so easy, anyone could do it." Now it's the rise of the "hedge fund managers."
Turns out E-trade knew precisely who their target audience was with all those baby ads. Because when we learn that a 17-year-old football and basketball playing highschooler out of California's Inland Empire is running his own "hedge fund", all we can say is "thank you Fed" for eliminating all the risk in "markets", and allowing such young entrepreneurs as Jacob Johl, who already has 20 investors and is better known as the "Wohl of Wall Street" to thrive and propser, even as all those who were still alive when markets were actually, well, markets can only sit back and laugh.
And laugh some more when seeing performance charts such as this one, pulled from the aspiring hedge funder's website.
About Wohl Capital Investment Group:
Wohl Capital was started by its current CEO and Senior Manager Jacob Wohl. Many hedge funds take only acredited investors with $1 million of capital or more to invest. We believe that we've created a hedge fund for the rest of us.
Jacob started Wohl Capital Investment Group to create a hedge fund for the average middle class investor. Without million dollar minimum investment requirements Wohl Capital's hedge fund has provided a way for middle class investors to make real returns. With a guerrilla warfare mentality towards investing, Wohl Capital is able to outperform the institutional giants again and again.
Good luck Jacob, and don't forget the only two things that matter in this "market" - BTFD and BTFATH.
- Fenix
- Mensajes: 16334
- Registrado: Vie Abr 23, 2010 2:36 am
Re: Miercoles 25/03/15 ordenes de bienes duraderos
por Fenix » Mié Mar 25, 2015 8:22 pm
Here Is The Reason Why Stocks Are Soaring, Or Farewell "Recovery"... Again
Tyler D.
03/18/2015
Why are stock soaring in response to the Fed statement and latest set of projections? Because, as Bloomberg promptly calculated, the FOMC revised down all forecasts for 2015 since the previous SEP was released on Dec. 17.
The median dot for year end 2015 falls to 0.625% from 1.125% in Dec: a whopping 0.50% cut.
And there goes not only the "recovery" but any imminent rate hike.
The details:
* The central tendency for GDP this year is 2.3%-2.7% vs 2.6%-3%. But the real hammer was 2016 and 2017: these were just slashed from 2.5%-3.0% and 2.3%-2.5% as of December, to 2.3-2.7% and 2.0-2.4%.
* Unemployment rate 5.0-5.2% vs 5.2%-5.3%
* The Fed now sees PCE inflation at 0.6%-0.8%. This was supposed to be 1%-1.6% just three months ago.
* Core PCE 1.3%-1.4% vs 1.5%-1.8%
* And the one that matters most, the "dot plot", saw the median dot for 2016 fall to 1.875% vs 2.5%, and decline to 3.125% from 3.625% for 2017.
And here is a comparison of the dots since September 2014 courtesy of @Not_Jim_Cramer. The Fed: wrong as ever.
In other words, what the Fed just said is the following: "it wasn't the snow, it was the economy."
End Result: Goodbye recovery, hello stock surge.
Pushing On A String: The Fed's Spectacular Failure To Stimulate Housing
03/18/2015
Submitted by David Stockman
The “incoming data” was disappointing again yesterday - this time the culprit was housing starts which were off by 17% from January. But please don’t blame the “weather” again.
The data below is for single family starts which are less volatile than apartment construction. At an annual rate of 593k units in February they were almost exactly flat with last February at 589k. If memory serves, the second month of 2014 was the epicenter of last year’s famous Polar Vortex—–meaning that winters happen but this year’s tepid results cannot be blamed on a winter that was not as bad as the real bad one.
Besides that, the seasonal adjustments are supposed to factor in weather—especially the possibility of snow and cold in the Northeast. On the considerable chance that the seasonals are screwed up, however, just consider the raw unadjusted, unannualized numbers for the month of February. During the coldest winter in recent times last year, the actual number of single family starts during the month was 40,600. This year it was 40,700. You need a microscope to tell the difference!
Fortunately, it is not the hairline gain from last year that’s the real story in today’s downbeat housing numbers. What we have here is another powerful case of the Great Immoderation. That is, the havoc that the Fed’s bubble finance policies have visited upon the main street economy.
So sticking with the raw unannualized numbers for single family starts, go back to the turn of the century and you will find the monthly number for February 2000 was 88k or more than double the current rate. Then, by the top of the Greenspan housing bubble in 2005—which he had ignited to dig his reputation out of the dotcom bust and tech wreck—-the February number had soared to 124k. After that it rolled-over sharply and then finally imploded to a low of 25k in February 2009.
In short, in the name of improving upon the alleged instability of the private economy——absent the Fed’s expert ministrations—– the geniuses in the Eccles building have actually caused the rate of housing starts to gyrate wildly. To wit, by a factor of 5X from top to bottom—so far this century.
Maybe its time to take our chances with the good old unseen hand of the free market. Surely, it could not do worse than the gyrations shown below.
The above graph not only puts a stake in the Fed’s pretensions about its prowess as an plenary economic manager from its perch in the Eccles Building; it also obliterates the case for QE. The obvious starting fact is that when SF housing starts were booming prior to the financial crisis there was plenty of Fed stimulus, but not massive QE. By contrast, during the period between 2009 and 2014, the Fed purchased nearly $1.8 trillion of mortgage backed securities and debt issued by Fannie, Freddie and Ginnie.
That is not only a huge number, but in a relative sense it was ginormous. It amounts to more than 30% of the $6 trillion of GSE obligations outstanding. And it goes without saying that if you buy 30% of anything and are willing to pay the highest price the market requires——which is exactly what the Fed’s massive “bid” for GSE’s amounted to—-you will drive the price substantially above free market levels; and in the case of mortgages, yields will plummet inversely into sub-economic territory.
As shown below, that is exactly the result of the Fed massive bond buying program after March 2009. During that period it bought $2 trillion treasury notes and bonds, driving down the benchmark rate for all other debt including mortgages. And then it piled on top of that massive intervention in the government debt markets another layer of intervention. Namely, the $1.8 trillion of GSE’s in an effort to squeeze down mortgage rates even further by reducing the historic spread between treasury’s and government guaranteed housing securities.
Sure enough, the average yield on 30-year fixed rate mortgages was nearly cut in half before the “taper tantrum” blip upward in the spring of 2013.
So why are SF housing starts still churning in the sub-basement of the historical range after all of this direct intervention in the mortgage market and heavy-handed interest rate repression? After all, the mortgage rates shown above represent bargain prices if there ever was such a thing. At the low point in early 2013, the after-tax-and-inflation yield to an mortgage investor would have been a mere 80 bps.
The reason that all of this financial repression—-and its corollary punishment of investors and savers—-did not spur a housing boom is, in a word, that the US economy is not a giant bathtub. The Keynesian model says pour “demand” into the housing market through what amounts to cheap, subsidized interest rates (from the hides of savers) and, presto, activity rates will soar.
Moreover, this is an all seasons formula. It doesn’t matter, apparently, where you stand in terms of prior history and borrower and lender balance sheet conditions; or what constraints might arise from structural factors such as household formation rates and the condition of the housing stock and its current utilization and occupancy rates. Just pour in the demand stimulus until the housing bathtub is full to the brim.
In fact, the Greenspan boom negated the Bernanke bond-buying binge. There was too much idle housing stock from the Greenspan bubble—–nearly 20 million unoccupied units including seasonal and vacation homes. There were too many households with impaired credit or underwater mortgages which couldn’t trade-up into demand for new construction of high value units. And unlike the past, there were millions of young families that could not provide demand for lower-priced “starter” construction units because they were burdened with student debt or ineligible for mortgage financing owing to unstable job and income circumstances.
So despite what amounts to a tidal wave of mortgage finance stimulus, new construction has remained in the sub-basement of history. Keynesian policy is all about the GDP accounts—–that is, about stimulating new spending for anything—-yet nominal spending for new housing construction is still at anemic levels.
So where did all the stimulus go? In a word, it went into the refi market where it drove up the price of the existing housing stock, not into the financing of new construction and GDP. Like everything else the Fed does, this was a redistribution game, not a growth stimulant.
But even within the wholly inappropriate realm of central bank induced redistribution the results were capricious at best and deeply unfair in fact. Thus, the “refi” benefits did not go to the 35 million households who own their homes free and clear. If anything, they ended up with the tab as savers earning next to nothing on their deposits. And it obviously didn’t go to the nation’s 40 million renters, nor the 25 million or so houeholds who are still underwater on their mortgages or so close to breakeven that they can’t generate the brokers fees and down payments to access the refi market.
No, the whole misbegotten enterprise of financial repression in the home mortgage market delivered a wholly unearned windfall to 10-15 million of housing equity-rich and more affluent households which were able to ride the great Bernanke “refi” train during the last six years.
That’s random redistribution with a vengeance—a level of social caprice that even the most vacuous Capitol Hill politicians could not have dreamed up. Good job pushing on a string, Fed.
Tyler D.
03/18/2015
Why are stock soaring in response to the Fed statement and latest set of projections? Because, as Bloomberg promptly calculated, the FOMC revised down all forecasts for 2015 since the previous SEP was released on Dec. 17.
The median dot for year end 2015 falls to 0.625% from 1.125% in Dec: a whopping 0.50% cut.
And there goes not only the "recovery" but any imminent rate hike.
The details:
* The central tendency for GDP this year is 2.3%-2.7% vs 2.6%-3%. But the real hammer was 2016 and 2017: these were just slashed from 2.5%-3.0% and 2.3%-2.5% as of December, to 2.3-2.7% and 2.0-2.4%.
* Unemployment rate 5.0-5.2% vs 5.2%-5.3%
* The Fed now sees PCE inflation at 0.6%-0.8%. This was supposed to be 1%-1.6% just three months ago.
* Core PCE 1.3%-1.4% vs 1.5%-1.8%
* And the one that matters most, the "dot plot", saw the median dot for 2016 fall to 1.875% vs 2.5%, and decline to 3.125% from 3.625% for 2017.
And here is a comparison of the dots since September 2014 courtesy of @Not_Jim_Cramer. The Fed: wrong as ever.
In other words, what the Fed just said is the following: "it wasn't the snow, it was the economy."
End Result: Goodbye recovery, hello stock surge.
Pushing On A String: The Fed's Spectacular Failure To Stimulate Housing
03/18/2015
Submitted by David Stockman
The “incoming data” was disappointing again yesterday - this time the culprit was housing starts which were off by 17% from January. But please don’t blame the “weather” again.
The data below is for single family starts which are less volatile than apartment construction. At an annual rate of 593k units in February they were almost exactly flat with last February at 589k. If memory serves, the second month of 2014 was the epicenter of last year’s famous Polar Vortex—–meaning that winters happen but this year’s tepid results cannot be blamed on a winter that was not as bad as the real bad one.
Besides that, the seasonal adjustments are supposed to factor in weather—especially the possibility of snow and cold in the Northeast. On the considerable chance that the seasonals are screwed up, however, just consider the raw unadjusted, unannualized numbers for the month of February. During the coldest winter in recent times last year, the actual number of single family starts during the month was 40,600. This year it was 40,700. You need a microscope to tell the difference!
Fortunately, it is not the hairline gain from last year that’s the real story in today’s downbeat housing numbers. What we have here is another powerful case of the Great Immoderation. That is, the havoc that the Fed’s bubble finance policies have visited upon the main street economy.
So sticking with the raw unannualized numbers for single family starts, go back to the turn of the century and you will find the monthly number for February 2000 was 88k or more than double the current rate. Then, by the top of the Greenspan housing bubble in 2005—which he had ignited to dig his reputation out of the dotcom bust and tech wreck—-the February number had soared to 124k. After that it rolled-over sharply and then finally imploded to a low of 25k in February 2009.
In short, in the name of improving upon the alleged instability of the private economy——absent the Fed’s expert ministrations—– the geniuses in the Eccles building have actually caused the rate of housing starts to gyrate wildly. To wit, by a factor of 5X from top to bottom—so far this century.
Maybe its time to take our chances with the good old unseen hand of the free market. Surely, it could not do worse than the gyrations shown below.
The above graph not only puts a stake in the Fed’s pretensions about its prowess as an plenary economic manager from its perch in the Eccles Building; it also obliterates the case for QE. The obvious starting fact is that when SF housing starts were booming prior to the financial crisis there was plenty of Fed stimulus, but not massive QE. By contrast, during the period between 2009 and 2014, the Fed purchased nearly $1.8 trillion of mortgage backed securities and debt issued by Fannie, Freddie and Ginnie.
That is not only a huge number, but in a relative sense it was ginormous. It amounts to more than 30% of the $6 trillion of GSE obligations outstanding. And it goes without saying that if you buy 30% of anything and are willing to pay the highest price the market requires——which is exactly what the Fed’s massive “bid” for GSE’s amounted to—-you will drive the price substantially above free market levels; and in the case of mortgages, yields will plummet inversely into sub-economic territory.
As shown below, that is exactly the result of the Fed massive bond buying program after March 2009. During that period it bought $2 trillion treasury notes and bonds, driving down the benchmark rate for all other debt including mortgages. And then it piled on top of that massive intervention in the government debt markets another layer of intervention. Namely, the $1.8 trillion of GSE’s in an effort to squeeze down mortgage rates even further by reducing the historic spread between treasury’s and government guaranteed housing securities.
Sure enough, the average yield on 30-year fixed rate mortgages was nearly cut in half before the “taper tantrum” blip upward in the spring of 2013.
So why are SF housing starts still churning in the sub-basement of the historical range after all of this direct intervention in the mortgage market and heavy-handed interest rate repression? After all, the mortgage rates shown above represent bargain prices if there ever was such a thing. At the low point in early 2013, the after-tax-and-inflation yield to an mortgage investor would have been a mere 80 bps.
The reason that all of this financial repression—-and its corollary punishment of investors and savers—-did not spur a housing boom is, in a word, that the US economy is not a giant bathtub. The Keynesian model says pour “demand” into the housing market through what amounts to cheap, subsidized interest rates (from the hides of savers) and, presto, activity rates will soar.
Moreover, this is an all seasons formula. It doesn’t matter, apparently, where you stand in terms of prior history and borrower and lender balance sheet conditions; or what constraints might arise from structural factors such as household formation rates and the condition of the housing stock and its current utilization and occupancy rates. Just pour in the demand stimulus until the housing bathtub is full to the brim.
In fact, the Greenspan boom negated the Bernanke bond-buying binge. There was too much idle housing stock from the Greenspan bubble—–nearly 20 million unoccupied units including seasonal and vacation homes. There were too many households with impaired credit or underwater mortgages which couldn’t trade-up into demand for new construction of high value units. And unlike the past, there were millions of young families that could not provide demand for lower-priced “starter” construction units because they were burdened with student debt or ineligible for mortgage financing owing to unstable job and income circumstances.
So despite what amounts to a tidal wave of mortgage finance stimulus, new construction has remained in the sub-basement of history. Keynesian policy is all about the GDP accounts—–that is, about stimulating new spending for anything—-yet nominal spending for new housing construction is still at anemic levels.
So where did all the stimulus go? In a word, it went into the refi market where it drove up the price of the existing housing stock, not into the financing of new construction and GDP. Like everything else the Fed does, this was a redistribution game, not a growth stimulant.
But even within the wholly inappropriate realm of central bank induced redistribution the results were capricious at best and deeply unfair in fact. Thus, the “refi” benefits did not go to the 35 million households who own their homes free and clear. If anything, they ended up with the tab as savers earning next to nothing on their deposits. And it obviously didn’t go to the nation’s 40 million renters, nor the 25 million or so houeholds who are still underwater on their mortgages or so close to breakeven that they can’t generate the brokers fees and down payments to access the refi market.
No, the whole misbegotten enterprise of financial repression in the home mortgage market delivered a wholly unearned windfall to 10-15 million of housing equity-rich and more affluent households which were able to ride the great Bernanke “refi” train during the last six years.
That’s random redistribution with a vengeance—a level of social caprice that even the most vacuous Capitol Hill politicians could not have dreamed up. Good job pushing on a string, Fed.
- Fenix
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