Well, a depression seems a given now. By definition -10% GDP is a depression and that looks likely to me. As far as timing goes, yes I could be early but I'm not shorting QQQs it so I dont need to time it. I'm simple steeping aside and looking for alternatives. Trends dont last forever, and US stocks had a great run but the massive record profitability has to come to an end eventually. We gonna see the rise of populism, higher taxes, weaker growth, delevering and god knows what else. I'd be crazy to think to continue everything will continue like before and US stocks will compound 10% a year for another 10 years with Naz returning 15% a year
Global Macro Trading Journal
- Thread starter Daal
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Interesting articles about the sheer volume of government bonds to be issued given recent fiscal spending
"An $8 Trillion Spree Sets Clock Ticking for Bonds’ Judgment Day"
https://www.bloomberg.com/news/arti...ree-sets-clock-ticking-for-bonds-judgment-day
"Goldman Spots A Huge Problem For The Fed"
https://www.zerohedge.com/markets/goldman-spots-huge-problem-fed
This sounds very bullish for gold (and Bitcoin?). I am thinking about adding to my long gold position, especially given the positive technicals, just simmering towards the top end of its recent multi-week range.
Suppose I want to be long (USD) risk assets, and suppose the only two choices are stocks or gold. (I recognize both assumptions are quite simplistic).
With stocks, with S&P 500 at about 2860 with a very high PE ratio despite a bleak economic outlook, it appears a large part of the valuation premium comes from (1) existing government / central bank support (2) the Fed put, and implicit promises of more support in the future.
But additional stimulus measures are only likely to come if/when there is another downturn in the stockmarket.
Whereas gold would probably not decline as much as stocks if there was another risk-off period. It would probably also sniff out future govt / central bank support (and go higher) before stocks did the same.
That's a long way of saying I am bullish on the gold:S&P 500 ratio. Stocks could go higher, but their main source of gains is the alphabet soup of government and central bank support.
Given that my current (long) position in stocks is larger than my gold position, increasing my long gold position also provides better diversification.
"An $8 Trillion Spree Sets Clock Ticking for Bonds’ Judgment Day"
https://www.bloomberg.com/news/arti...ree-sets-clock-ticking-for-bonds-judgment-day
"Goldman Spots A Huge Problem For The Fed"
https://www.zerohedge.com/markets/goldman-spots-huge-problem-fed
This sounds very bullish for gold (and Bitcoin?). I am thinking about adding to my long gold position, especially given the positive technicals, just simmering towards the top end of its recent multi-week range.
Suppose I want to be long (USD) risk assets, and suppose the only two choices are stocks or gold. (I recognize both assumptions are quite simplistic).
With stocks, with S&P 500 at about 2860 with a very high PE ratio despite a bleak economic outlook, it appears a large part of the valuation premium comes from (1) existing government / central bank support (2) the Fed put, and implicit promises of more support in the future.
But additional stimulus measures are only likely to come if/when there is another downturn in the stockmarket.
Whereas gold would probably not decline as much as stocks if there was another risk-off period. It would probably also sniff out future govt / central bank support (and go higher) before stocks did the same.
That's a long way of saying I am bullish on the gold:S&P 500 ratio. Stocks could go higher, but their main source of gains is the alphabet soup of government and central bank support.
Given that my current (long) position in stocks is larger than my gold position, increasing my long gold position also provides better diversification.
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So I was doing some data work to find out how the 'beautiful deleveraging' worked out in the US after the 2009 crisis and here are the results:
Households have done a great job deleveraging, so did the banks and state and local governments. The corporate sector didnt do was good as job. So I digged a little deeper to see if there any more to this
Once again households did a terrific job. They only increased their liabilities a little but their networth (which is mostly comprised o real estate) went up a lot. Also, their debt service as % of income has improved a lot due less debts and low interest rates
The corporate sector is a little more complicated because their liabilities as % of networth went up quite a bit. Interest as % of corporate profits declined so that's great but debts are really high.
This current crisis doesnt look like its the Armageddon because the Fed/Treasury will be the lender of last resort to corporations, so they can roll over those debts without a problem. But the Fed simply cannot allow interest rates to rise, it would spell doom for businesses and for the federal government itself since they were the ones leveraging up while other develered
So looking at the numbers maybe things arent as bad as I feared but it does show that the Fed has no choice but to print for a really long-time. Perhaps this corona crisis will do to corporations what 2008 did to households (also banks and to state/local governments). They will realize they need to deleverage.
This will hurt returns on equity (ROEs), decrease buybacks, dividends, etc. So I dont think 2009-2020 returns will be repeated in the next bull run. Certainty not from these levels
Households have done a great job deleveraging, so did the banks and state and local governments. The corporate sector didnt do was good as job. So I digged a little deeper to see if there any more to this
Once again households did a terrific job. They only increased their liabilities a little but their networth (which is mostly comprised o real estate) went up a lot. Also, their debt service as % of income has improved a lot due less debts and low interest rates
The corporate sector is a little more complicated because their liabilities as % of networth went up quite a bit. Interest as % of corporate profits declined so that's great but debts are really high.
This current crisis doesnt look like its the Armageddon because the Fed/Treasury will be the lender of last resort to corporations, so they can roll over those debts without a problem. But the Fed simply cannot allow interest rates to rise, it would spell doom for businesses and for the federal government itself since they were the ones leveraging up while other develered
So looking at the numbers maybe things arent as bad as I feared but it does show that the Fed has no choice but to print for a really long-time. Perhaps this corona crisis will do to corporations what 2008 did to households (also banks and to state/local governments). They will realize they need to deleverage.
This will hurt returns on equity (ROEs), decrease buybacks, dividends, etc. So I dont think 2009-2020 returns will be repeated in the next bull run. Certainty not from these levels
Another reason why interest rates won't be raised for a very very long time: demographics.
I've enjoyed this blog: https://econimica.blogspot.com/
The main idea I've picked up is that in medium income and high income countries, the population is peaking now/this decade. Which means GDP can't rely upon population growth for an increase.
(Yes, population in the US is growing, but in places like Japan and Europe it is declining, and China will peak some time in the next 10 years).
I get it but it just seems ridiculous that he was bearish at the lows, and from my recollection all that he said to CNBC at the lows was that he was 'nibbling' in stocks. He sounded plenty bearish in his tone though so maybe he invested 5% of his assets in stocks. Meanwhile the VIX was at 70-90. That's just stupid. It reminds me of David Rosenberg in 2009, when he said "it would not surprise us to see the S&P 500 gravitate in a 475-650 range for an extended period of time."
https://www.businessinsider.com/hen...w-bull-market-are-you-out-of-your-mind-2009-4
The lesson is, the gurus who 'predict' these crisss are the ones someone should NOT listen to when it comes to when to buy the market
At least El-Erian was fast to hedge his career with counter statements (although, he seems to be talking both sides of the market lately), Rosenberg took years to do so.
https://www.businessinsider.com/hen...w-bull-market-are-you-out-of-your-mind-2009-4
The lesson is, the gurus who 'predict' these crisss are the ones someone should NOT listen to when it comes to when to buy the market
At least El-Erian was fast to hedge his career with counter statements (although, he seems to be talking both sides of the market lately), Rosenberg took years to do so.
That was just an observation for the bottom, as far as right now goes, I remain skeptical of buying here. I much rather be in Chinese equities. QQQs, SPX and INDU are doing great, but so is KWEB FXI and others. Some are even talking about how the China data is starting to look like some kind of V shaped recovery. I'm not sure the US will be so fortunate