Gundlach Live Webcast: "Something For Nothing"

At 4:15 pm Eastern, DoubleLine’s Jeff Gundlach will be discussing the economy, the markets and his outlook for the future and the best investment strategies in a time when not even the Fed knows what they will do. We wish him good luck. Readers can register for the webcast at the following link, while for those stuck with phones can dial-in at (877) 407-6050 or (201) 689-8022 international.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/JXhuEMLAlHA/story01.htm Tyler Durden

2nd Hindenburg Omen In 3 Days Stumbles Stocks; Bonds And Bullion Bid

Between new lows, new highs, advancers, decliners, lagging volumes, and stalling momentum, technicals have signaled another Hindenburg Omen (following Friday's) as the cluster builds once again. While it may not have lived up to its ominous name in the last year of liquidity, it highlights market anxiety and internals are growing more concerned… still believe the taper is priced in? Strength in Treasuries and gold (and silver) suggest safe-havens are being sought after. VIX is on the rise once again (and its most inverted in over 2 months); and even JPY carry traders (which dragged stock lower tick fgor tick with EURJPY once again) reduced exposure.

 

2nd Hindenburg in 3 days…

 

as carry traders sent stocks lower…. fun-durr-mentals…

 

Gold and silver surged…

 

As did bonds amid a seeming safety bid…

 

And VIX is its most inverted in 2 months…

 

and some context over the last 3 days…

 

Charts: Bloomberg


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/J5MR5mLpaMg/story01.htm Tyler Durden

Deutsche Bank: “We Think Something Structurally Changed Since The Great Financial Crisis”

The topic of whether central banks have destroyed the global business cycle to the point where all we have is phase jumps from one bubble to another (with an intervening depression in the interim) where central banks inject record amounts of new debt-created liquidity to cover up the credit excesses of the most recent bubble, has gained prominence following the recent comments by none other than the almost-Fed head Larry Summers who advocated the creation of an even bigger asset bubble to push the economy onward and upward. Below we present some much more sober and rational thoughts on this topic by Deutsche Bank’s Jim Reid.

Do we need bubbles for growth?

The worrying feature of the DM economy over the last decade or so (and perhaps longer) is that it seems that we’ve needed to pursue ever looser policy to enable us to hang on to what has actually been lower and lower trend growth. However the consequence appears to be that markets have moved from bubble to bubble. On the slowing growth front, Figure 7 tracks real GDP growth by decade for the G7. It’s quite clear that growth has been on a declining trend now for several decades with this century’s growth being very disappointing across the board in spite of very accommodative monetary and fiscal policies and the inflating of at least two major asset bubbles around the globe.

Since 2000, the US has outperformed all but Canada across its G7 peers but has averaged only 1.9% real growth. As for the rest of the G7, the average growth rate over the same period has been 2.2%, 1.7%, 1.3%, 1.2%, 1.0% and 0.3% for Canada, UK, Germany, France, Japan and Italy respectively.

Even though the US is the relative star performer in this cohort (ex Canada) this remains one of the weakest US recoveries on record and one that continues to disappoint to the downside. As regular readers know we like to monitor nominal GDP in this cycle due to the requirement to erode the still substantial debt burden. On this measure this is the second-weakest US recovery since our data begins in the early 1920s (Figure 8). The weakest was the rebound after the 1929 crash that turned into the Great Depression. Figure 9 then shows that this slowdown is a global problem. The 5-year rolling nominal GDP growth number is now at its lowest level for 80 years.

Are we now finally going to revert back to pre-crisis levels of growth or are we going to appreciate that a) the trend rate of growth for DM economies has slowed markedly (perhaps due to demographics and other structural issues), b) that current inflation is becoming dangerously low but financial market liquidity dangerously high and that c) current policies are not having as big an impact on growth as hoped or expected (i.e. we’re possibly in a liquidity trap).

We think that something structurally has changed since the GFC, a change that seems destined to continue to hold back growth in the near-term and more worryingly has lowered the longer-term trend rate of growth. In the absence of structural reforms, a lack of appetite for debt restructuring and no ability to pursue more aggressive fiscal policy, the temptation will be strong globally to continue to throw liquidity at the problem which is likely to continue to have more impact on asset prices than the actual economy. Bubbles could easily form which could ultimately be the catalyst for the imbalances that will likely lead to the next recession or crisis. So to avoid bubbles we possibly need the US and global economy to have a stronger year and for activity to withstand the impact of tapering and the inevitable higher yields that this combination would bring. The jury is still out as to whether this can happen though and it might be that the US needs very low yields by historic standards to maintain a recovery. It might also be the case that the rest of the world needs low US yields too. 2014 will be a test of this.

Our base case is that the world needs low yields and high liquidity given the huge amount of outstanding debt that we’re still left with post the leverage bubble and the GFC. There’s still too much leverage for us to believe that accidents won’t happen with the removal of too much stimulus. If we’re correct, we may see a reaction somewhere to tapering and this in turn may force the Fed into a much slower tapering path than it wants.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/jZJPeljHCfc/story01.htm Tyler Durden

Deutsche Bank: "We Think Something Structurally Changed Since The Great Financial Crisis"

The topic of whether central banks have destroyed the global business cycle to the point where all we have is phase jumps from one bubble to another (with an intervening depression in the interim) where central banks inject record amounts of new debt-created liquidity to cover up the credit excesses of the most recent bubble, has gained prominence following the recent comments by none other than the almost-Fed head Larry Summers who advocated the creation of an even bigger asset bubble to push the economy onward and upward. Below we present some much more sober and rational thoughts on this topic by Deutsche Bank’s Jim Reid.

Do we need bubbles for growth?

The worrying feature of the DM economy over the last decade or so (and perhaps longer) is that it seems that we’ve needed to pursue ever looser policy to enable us to hang on to what has actually been lower and lower trend growth. However the consequence appears to be that markets have moved from bubble to bubble. On the slowing growth front, Figure 7 tracks real GDP growth by decade for the G7. It’s quite clear that growth has been on a declining trend now for several decades with this century’s growth being very disappointing across the board in spite of very accommodative monetary and fiscal policies and the inflating of at least two major asset bubbles around the globe.

Since 2000, the US has outperformed all but Canada across its G7 peers but has averaged only 1.9% real growth. As for the rest of the G7, the average growth rate over the same period has been 2.2%, 1.7%, 1.3%, 1.2%, 1.0% and 0.3% for Canada, UK, Germany, France, Japan and Italy respectively.

Even though the US is the relative star performer in this cohort (ex Canada) this remains one of the weakest US recoveries on record and one that continues to disappoint to the downside. As regular readers know we like to monitor nominal GDP in this cycle due to the requirement to erode the still substantial debt burden. On this measure this is the second-weakest US recovery since our data begins in the early 1920s (Figure 8). The weakest was the rebound after the 1929 crash that turned into the Great Depression. Figure 9 then shows that this slowdown is a global problem. The 5-year rolling nominal GDP growth number is now at its lowest level for 80 years.

Are we now finally going to revert back to pre-crisis levels of growth or are we going to appreciate that a) the trend rate of growth for DM economies has slowed markedly (perhaps due to demographics and other structural issues), b) that current inflation is becoming dangerously low but financial market liquidity dangerously high and that c) current policies are not having as big an impact on growth as hoped or expected (i.e. we’re possibly in a liquidity trap).

We think that something structurally has changed since the GFC, a change that seems destined to continue to hold back growth in the near-term and more worryingly has lowered the longer-term trend rate of growth. In the absence of structural reforms, a lack of appetite for debt restructuring and no ability to pursue more aggressive fiscal policy, the temptation will be strong globally to continue to throw liquidity at the problem which is likely to continue to have more impact on asset prices than the actual economy. Bubbles could easily form which could ultimately be the catalyst for the imbalances that will likely lead to the next recession or crisis. So to avoid bubbles we possibly need the US and global economy to have a stronger year and for activity to withstand the impact of tapering and the inevitable higher yields that this combination would bring. The jury is still out as to whether this can happen though and it might be that the US needs very low yields by historic standards to maintain a recovery. It might also be the case that the rest of the world needs low US yields too. 2014 will be a test of this.

Our base case is that the world needs low yields and high liquidity given the huge amount of outstanding debt that we’re still left with post the leverage bubble and the GFC. There’s still too much leverage for us to believe that accidents won’t happen with the removal of too much stimulus. If we’re correct, we may see a reaction somewhere to tapering and this in turn may force the Fed into a much slower tapering path than it wants.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/jZJPeljHCfc/story01.htm Tyler Durden

Things to do-Dec.12-Jan.7

December

December 12

NYTimes best-selling author, Mary Kay Andrews, will be signing copies of “Christmas Bliss” from 5:30 p.m.-7 p.m. at Omega Books in Peachtree City.
Contact us at 770-487-3977 to reserve your copy of the book.
Refreshments will be served.

December 13

The “Grand Opening” for the new office of the Fayette County Republican Party starts at 6:30 pm.  This new office is located at 174 Glynn St, Fayetteville, located off Ga. Hwy 85 behind Captain D’s and Arby’s.

read more

via The Citizen http://www.thecitizen.com/articles/12-10-2013/things-do-dec12-jan7

The Voice of Ireland to perform at The Fred

The Fred Amphitheater and Lisa Kelly Voice Academy are joining forces to bring a special concert to Peachtree City May 10, 2014 . The concert will feature former Celtic Woman, Lisa Kelly, along with special guests, as they bring a bit of Ireland to Peachtree City’s 2,500 seat outdoor Amphitheater.

read more

via The Citizen http://www.thecitizen.com/articles/12-10-2013/voice-ireland-perform-fred

On Pearl Harbor Day, a part of Fayette’s history is laid to rest

By Sherri Smith Brown

This story originally appeared in the October, 2005 Fayette Woman,

The room was small–about 10 x 10–with one long, black curtained window drawn to keep any light from filtering out to the bomb plagued streets. In front of the window sat a long table, used by various officers—two Americans, a Canadian, a Brit, an Australian. A door was on one wall; a fireplace on another, usually lit during those late winter English months.

read more

via The Citizen http://www.thecitizen.com/articles/12-10-2013/pearl-harbor-day-part-fayette%E2%80%99s-history-laid-rest

What? Me Worry?

This column originally appeared in the Jan. 8, 1996 Citizen.
Any other time, we’d watch news accounts of horrific weather like that in the Pacific Northwest last week, and shake our heads. “Why would people want to live in that kind of climate?” we’d ask each other, reveling in balmy Georgia.
Any other time, we’d see pictures of cars stalled along a far-off Interstate and wonder why these fools had got themselves into a situation where they had to abandon their most expensive possession to struggle on foot to shelter.

read more

via The Citizen http://www.thecitizen.com/blogs/sallie-satterthwaite/12-10-2013/what-me-worry

Foreman to race in San Diego

Kathryn Foreman of Landmark Christian School has qualified for compete in the Foot Locker Cross-Country Championships national meet Saturday in San Diego.
She qualified at the South Region championships Nov. 30 in Charlotte with an eighth-place finish. The top 10 from each of four regions qualify for the national race and receive all-expenses-paid trips to San Diego to compete.

Foreman, a sophomore, recently won her second straight Georgia High School Association state championship in cross-country.

read more

via The Citizen http://www.thecitizen.com/articles/12-10-2013/foreman-race-san-diego

How Isaac Newton Went Flat Broke Chasing A Stock Bubble

Submitted by Tim Price of Sovereign Man blog,

For practitioners of Schadenfreude, seeing high-profile investors losing their shirts is always amusing.

But for the true connoisseur, the finest expression of the art comes when a high-profile investor identifies a bubble, perhaps even makes money out of it, exits in time – and then gets sucked back in only to lose everything in the resultant bust.

An early example is the case of Sir Isaac Newton and the South Sea Company, which was established in the early 18th Century and granted a monopoly on trade in the South Seas in exchange for assuming England’s war debt.

Investors warmed to the appeal of this monopoly and the company’s shares began their rise.

Britain’s most celebrated scientist was not immune to the monetary charms of the South Sea Company, and in early 1720 he profited handsomely from his stake. Having cashed in his chips, he then watched with some perturbation as stock in the company continued to rise.

In the words of Lord Overstone, no warning on earth can save people determined to grow suddenly rich.

Newton went on to repurchase a good deal more South Sea Company shares at more than three times the price of his original stake, and then proceeded to lose £20,000 (which, in 1720, amounted to almost all his life savings).

This prompted him to add, allegedly, that “I can calculate the movement of stars, but not the madness of men.”

20131210 image How Isaac Newton went flat broke chasing a stock bubble

The chart of the South Sea Company’s stock price, and effectively of Newton’s emotional journey from greed to satisfaction and then from envy and more greed, ending in despair, is shown above.

A more recent example would be that of the highly successful fund manager Stanley Druckenmiller who, whilst working for George Soros in 1999, maintained a significant short position in Internet stocks that he (rightly) considered massively overvalued.

But as Nasdaq continued to soar into the wide blue yonder (not altogether dissimilar to South Sea Company shares), he proceeded to cover those shorts and subsequently went long the technology market.

Although this trade ended quickly, it did not end well. Three quarters of the Internet stocks that Druckenmiller bought eventually went to zero. The remainder fell between 90% and 99%.

And now we have another convert to the bull cause.

Fund manager Hugh Hendry has hardly nurtured the image of a shy retiring violet during the course of his career to date, so his recent volte-face on markets garnered a fair degree of attention. In his December letter to investors he wrote the following:

“This is what I fear most today: being bearish and so continuing to not make any money even as the monetary authorities shower us with the ill thought-out generosity of their stance and markets melt up. Our resistance of Fed generosity has been pretty costly for all of us so far. To keep resisting could end up being unforgivably costly.”

Hendry sums up his new acceptance of risk in six words: “Just be long. Pretty much anything.”

Will Hendry’s surrender to monetary forces equate to Newton’s re-entry into South Sea shares or Druckenmiller’s dotcom capitulation in the face of crowd hysteria ? Time will tell.

Call us old-fashioned, but rather than submit to buying “pretty much anything”, we’re able to invest rationally in a QE-manic world by sailing close to the Ben Graham shoreline.

Firstly, we’re investors and not speculators. (As Shakespeare’s Polonius counselled: “To thine own self be true”.)

Secondly, our portfolio returns aren’t exclusively linked to the last available price on some stock exchange; we invest across credit instruments; equity instruments; uncorrelated funds, and real assets, so we have no great dependence on equity markets alone.

Where we do choose to invest in stocks (as opposed to feel compelled to chase them higher), we only see advantage in favouring the ownership of businesses that offer compelling valuations to prospective investors.

In Buffett’s words, we spend a lot of time second-guessing what we hope is a sound intellectual framework. Examples:

  • In a world drowning in debt, if you must own bonds, own bonds issued by entities that can afford to pay you back;
  • In a deleveraging world, favour the currencies of creditor countries over debtors;
  • In a world beset by QE, if you must own equities, own equities supported by vast secular tailwinds and compelling valuations;
  • Given the enormous macro uncertainties and entirely justifiable concerns about potential bubbles, diversify more broadly at an asset class level than simply across equity and bond investments;
  • Given the danger of central bank money-printing seemingly without limit, currency / inflation insurance should be a component of any balanced portfolio
  • Forget conventional benchmarks. Bond indices encourage investors to over-own the most heavily indebted (and therefore objectively least creditworthy) borrowers. Equity benchmarks tend to push investors into owning yesterday’s winners.

In the words of Sir John Templeton,

“To buy when others are despondently selling and sell when others are greedily buying requires the greatest fortitude and pays the greatest reward.”

So be long “pretty much everything”, or be long a considered array of carefully assessed and diverse instruments of value. It’s a fairly straightforward choice.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/mUtNgD9OI1M/story01.htm Tyler Durden