Tag: finance

Against a consensus expectation of 215,000, Goldman forecast a 230,000 increase in September nonfarm payroll employment and a one-tenth decline in the unemployment rate to 6.0% (vs. consensus 6.1%). Overall they think the available employment indicators for September point to a solid report, despite slightly weaker data this week. In addition, the reversal of a couple of special factors from August should be a positive. If history is any guide, however, regarding downside risks, there has been some seasonal tendency for September payrolls to disappoint consensus.

Recent Data is more negatively biased… (via Bloomberg)

Via Goldman Sachs,

We forecast a 230,000 increase in September nonfarm payroll employment (vs. consensus 215,000). This would represent a substantial pickup from August’s 142,000 gain, pushing us back towards our view of the underlying trend and placing the payroll numbers back in line with the broader dataflow.

Arguing for a stronger report:

Solid business surveys. The employment components of all business surveys we track remained in expansionary territory in September, with most at fairly strong levels. Relative to August, six of twelve moved up, while the other six moved down. With respect to national (rather than regional) surveys specifically, ISM manufacturing employment moved down in September, but Markit manufacturing employment and Markit services employment advanced.

 

Claims continued to move down. The four-week moving average of initial jobless claims moved down by 6k from the August reference week to 295k.

 

Bounce-back from grocery store work stoppage. Although not technically classified as a “strike” by the Labor Department, work stoppages at Market Basket grocery stores resulted in a drop in food and beverage retail employment in August, which underperformed the twelve-month trend by about 21k. We would expect all of this effect to reverse in September.

 

End of auto shutdown distortions. Last month, durable manufacturing employment fell short of its twelve-month trend by about 10k, as seasonal adjustment volatility associated with smaller-than-normal July auto plant shutdowns distorted the August gain. We expect a more normal contribution from manufacturing in September. Although the ADP report was broadly in line with expectations for September—and has generally been of marginal use in predicting payroll employment more broadly—it did show a strong gain in manufacturing employment.

Arguing for a weaker report:

Seasonal bias. Historically, there has been a tendency for September payrolls to fall short of consensus expectations. This occurred in twelve of the past seventeen years. This could potentially be due to systematic differences between early and late survey responses by industry, which would not be captured by the seasonal adjustment methodology. While the average historical miss has been about 40k to the downside, over the past three years the average miss has been about zero.

 

Labor differential worsens. The Conference Board’s labor differential—the net percent of survey respondents reporting jobs are plentiful vs. hard to get—worsened by 2.6pt in September to -15.0.

 

Casinos run out of luck. The recent closure of three large casinos in Atlantic City (two of which occurred before the September reference week) might be expected to reduce payroll employment by around 5,000 jobs.

On top of the September numbers themselves, we think a positive upward revision to the past two months of data is likely. The September report has had a strong seasonal tendency to include positive back-revisions, with the average revision +42,000 over the past ten years and +65,000 over the past three years. As a result, we would not be surprised to see last month’s 142,000 revised up to something closer to 200,000, which would provide reassurance that the trend in job growth has not deteriorated significantly.

We also update our payrolls forecast “distributions” for September. The median model forecast is slightly above consensus at around 225,000 (vs. about 240,000 in August). The width of the distribution widened somewhat from August, likely as models which place more emphasis on the recent slower payrolls trend increasingly disagreed with models placing more weight on the generally solid September dataflow. However, downside skew moderated slightly. Purely model-based forecasts are also unlikely to capture the full extent of bounce-back from the end of grocery store work stoppages that we would judgmentally expect.

Exhibit 1. Distribution of Payroll Forecasts

With respect to the unemployment rate, we anticipate a decline of one-tenth to 6.0% on a rounded basis (vs. consensus +6.1%). We do see a substantial risk of the unemployment rate remaining unchanged, in light of the “firm 6.1%” starting point for August (6.1497% on an unrounded basis). Nonetheless, the risk on the participation rate is probably still slightly to the downside, and employment growth according to the household survey was somewhat soft in July and August, affording the possibility of a strong gain in September.

On average hourly earnings, we expect a trend-like gain of 0.2%, in line with consensus. This would push the year-on-year rate up slightly, to a still-subdued 2.2%.

*  *  *

Finally we offer this ‘humor’ from CNBC… winning in the new nominal vs real normal…

#winning http://ift.tt/YWCzeu

— Rudolf E. Havenstein (@RudyHavenstein) October 2, 2014

via Zero Hedge http://ift.tt/1tlLVZh Tyler Durden

Via Nick Andrews via Evergreen Gavekal,

The wobble in world markets continues, with stock indices across all time zones down steeply in recent sessions. Investors are not only realigning their exposure in anticipation of tighter liquidity conditions as the US Federal Reserve finally brings its asset purchases to a close later this month. After today’s European Central Bank (ECB) meeting they are also looking nervously at the magnitude of the task facing eurozone policymakers. And they appear to be coming to the conclusion that generating a rebound in growth may be too tough a job for Europe’s leaders to accomplish in the near term.

With France and Italy – the eurozone’s second and third biggest economies – either stagnating or contracting, to achieve a convincing recovery will require policymakers to press home their attack on three fronts: structural reform to increase economic flexibility, fiscal easing to stimulate activity, and monetary expansion to support credit growth. On all three fronts they face determined opposition.

Structural reform: On Sunday President Francois Hollande’s ruling Socialist Party lost control of the Senate to France’s center-right Union for Popular Movement (UMP) party, a development which will only complicate the implementation of reform plans already facing staunch resistance from strikers in the transport, manufacturing and service sectors. Meanwhile Italy’s three most powerful trade unions agreed on Monday to form a united front in opposition to Prime Minster Matteo Renzi’s proposed Jobs Act. Worse, Renzi has failed to win over the left wing of his own party, which accuses him of slavish obedience to Berlin’s policy diktat. Although the party’s senior leadership pledged its support for the bill this week, a possible showdown in the Senate on October 7 could still see key reform proposals significantly watered down.

 

Fiscal policy: In recent days both France and Italy have revised their deficit reduction targets. Yesterday French Finance Minister Michel Sapin rejected austerity, saying Paris will not bring its deficit below 3% of GDP until 2017, two years later than it earlier targeted. The Italian government this week also pushed back the date when it expects to balance its books, postponing its target by a year. The two governments face an uphill struggle in selling their delayed targets in Brussels and Berlin, however. The recent appointment of France’s former finance minister, Pierre Moscovici, as Europe’s economics and financial affairs commissioner with the key role of approving national budgets had raised hopes that France and Italy would be given greater flexibility in meeting fiscal targets. But in a surprise move this week Commission President Jean-Claude Juncker curbed Moscovici’s powers, appointing hawkish Latvian commissioner Valdis Dombrovskis to oversee and sign off Moscovici’s budget approvals. The move was widely seen as aimed at placating opinion in Berlin, where Chancellor Angela Merkel is uneasily watching the rise in popularity of anti-European political part, anti-euro party (AfD). Although AfD is still small, the threat of losing voters to Germany’s Euro-skeptic right will only encourage the chancellor to take a tough line with France and Italy over fiscal policy, especially in the absence of significant progress on structural reform.

 

Monetary policy: Investors are looking to ECB president Mario Draghi to announce details of a major program of asset-backed securities purchases at the central bank’s meeting today. However, given the insistence of the Bundesbank that the ECB should only buy superior quality investment grade securities and the reluctance of the German and French finance ministries to back ECB purchases with government guarantees, there is a clear risk that markets will find Draghi’s program deeply underwhelming. To make things even more difficult, on October 14 the European Court of Justice is set to rule on the legality of the ECB’s proposed Outright Monetary Transactions program of secondary market sovereign bond purchases. A decision against the program would effectively rule out the possibility of full-blown quantitative easing in Europe.

With efforts to procure a European recovery belabored on all three fronts, and prospects for eurozone corporate earnings set to disappoint, it should be no surprise that investors are jittery. The only bright spot for Europe at the moment is the weakness of the euro, which has fallen nearly 10% against the US dollar since May; a decline that will both help to support eurozone exporters and to ease disinflationary pressure.

As the US moves closer to tightening monetary policy and with European policymakers facing an uphill struggle in their efforts to generate a recovery, the decline in the euro looks set to continue.

via Zero Hedge http://ift.tt/1rRkwlu Tyler Durden

Coast to coast, ordinary Americans are growing more fearful of what Ebola in America means. Despite reassurances from officials (President Obama on down) that it’s contained, it appears it is not. By anecdote, as Reuters reports, in the Dallas community of Vickery Meadow (where Richard Duncan was staying), a cultural polyglot where about three dozen languages are spoken, the one word on everyone’s lips is “Ebola.” There is little indication a visitor to the community had been infected with a disease that has killed more than 3,000 people in West Africa, in the worst Ebola outbreak on record. “There’s no notes on the doors. No one came to talk to us. I picked up my kids from school down the street and found out it was this close,” one mother exclaimed, adding “right now, I’m not sure to take my daughter to school tomorrow… I’m getting so nervous.”

As Reuters reports,

On Sunday, a group of blighted apartments in a section of the neighborhood favored by West African immigrants was shaken by screams as one family saw a recently arrived relative being carted away in an ambulance.

 

The man was the first person diagnosed with Ebola in the United States. He was last seen by neighbors in the parking lot vomiting on the street.

 

“I heard about Ebola on the news, but I didn’t know it was right here,” said Juan Pablo Escalante, 43, who is from Mexico.

 

There is little indication a visitor to the community had been infected with a disease that has killed more than 3,000 people in West Africa, in the worst Ebola outbreak on record.

 

“There’s no notes on the doors. No one came to talk to us. I picked up my kids from school down the street and found out it was this close,” Escalante said on Wednesday.

 

Dallas County said it would put “boots on the ground” to monitor those who may have been exposed. In Vickery Meadow, residents worried if that would be enough to prevent an outbreak at what has been dubbed “ground zero” for Ebola in the United States. Vickery Meadow is home to about 25,000 people and more than 30 languages spoken among immigrants who have come to Dallas because it has one of the better job markets in the United States and relatively inexpensive property prices.

 

…

 

The community’s schools have also been touched by Ebola, with five children coming into contact with the patient. The children went to the four different schools they attend after being exposed. They are now home and showing no symptoms, but parents are worried.

 

Dozens of comments from parents posted on the Dallas Independent School District’s Facebook page said more information was needed, including the names of the potentially exposed children.

*  *  *
Stay calm everyone – the government will be here soon with ‘the solution’.

via Zero Hedge http://ift.tt/1xIbpqs Tyler Durden

Via Mark Hanson,

via Zero Hedge http://ift.tt/1oGjNi1 Tyler Durden

Bloomberg’s Consumer Comfort gauge dropped to 4-month lows this week with across the board collapses in personal finance confidence, buying climate, and the state of the economy (78% not-so-good). However, it is under-the-surface data that exposes the sad reality of this so-called ‘recovery’.

For those earning over $100k, “comfort” nears record highs, for those earning below $40k, “comfort” plunged in the last few weeks to near 2-year lows. This has surged the rich-to-middle-class discomfort gap to near 4-year highs… thank you Ben.

Chart: Bloomberg

via Zero Hedge http://ift.tt/1tlx8xM Tyler Durden

Ebola carrier Thomas Eric Duncan – the guy who brought Ebola to Dallas – vomited outside his apartment building.

A WFAA tv news chopper took the following photograph showing how workers are cleaning up the vomit:

That’s a pretty good way to spread Ebola … especially if experts are right that Ebola spreads through aerosols.

Similarly, the Ebola patient’s sweat-stained sheets were left on his bed for days without being removed … even though his family was quarantined in the same room.

As we noted yesterday, arrogance may lead to unnecessary deaths.

via Zero Hedge http://ift.tt/YWi7KQ George Washington

Submitted by Andrew Topf via OilPrice.com,

Next time you get into your car and drive to the supermarket, think about how much energy you consume on an annual basis. It is widely assumed that Westerners are some of the world’s worst energy pigs. While Americans make up just 5 percent of the global population, they use 20 percent of its energy, eat 15 percent of its meat, and produce 40 percent of the earth’s garbage.

Europeans and people in the Middle East, it turns out, aren't winning any awards for energy conservation, either.

Oilprice.com set out to discover which countries use the most energy and why.

While some of the guilty parties are obvious, others may surprise you.

A note about the figures: we used kilograms of oil equivalent (koe) per capita, which refers to the amount of energy that can be extracted from one kilogram of crude oil. “Koe per capita” can be used to compare energy from different sources, including fossil fuels and renewables, and does here. The numbers represent the most recent data available from the World Bank.

(Image Source:  Oilprice.com)

1.    Iceland – 18,774 kg. Yes, that’s right, Iceland. Of all the countries in the world, including the richest and largest oil producers, Iceland consumes the most energy per person. How can that be? The reason is basically overabundance. With most of Iceland’s energy coming from hydroelectric and geothermal power, Icelanders are some of the planet’s least energy-conscious. Click here for a fascinating video of why the Nordic nation uses so much energy.

2.    Qatar – 17,418 kg. Qataris are addicted to oil. According to National Geographic, the population is provided with free electricity and water, which has been described as “liquid electricity” because it is often produced through desalination, a very energy-intensive process. Qatar's per capita emissions are the highest in the world, and three times that of the United States.

3.    Trinidad and Tobago – 15,691 kg. Trinidad and Tobago is one of the richest countries in the Caribbean, and the region's leading producer of oil and gas; it houses one of the largest natural gas processing facilities in the Western Hemisphere. T&T is the largest LNG exporter to the United States. Its electricity sector is entirely fueled by natural gas.

4.    Kuwait – 10,408 kg. Despite holding the sixth-largest oil reserves in the world, and an estimated 63 trillion cubic feet of natural gas reserves, the demand for electricity in Kuwait often outstrips supply. According to the U.S. Energy Information Administration (EIA), Kuwait is perpetually in electricity supply shortage and experiences frequent blackouts each summer. The country has become a net importer of natural gas to address the imbalance.

5.    Brunei – 9,427 kg. The tiny sultanate on the island of Borneo, apart from being a substantial producer and exporter of oil and natural gas to Asia, is also a habitual power hog. The nation of roughly half a million has the region's highest number of cars per capita. Brunei also subsidizes both vehicle fuel and electricity, which is sold to the public at below-market prices.

6.    Luxembourg – 7,684 kg. Landlocked Luxembourg is almost totally dependent on energy imports, mostly oil and gas. Energy consumption has increased 32 percent since 1990, with transportation responsible for 60 percent of the intake, according to an EU fact sheet.

7.    United Arab Emirates – 7,407 kg. Nothing says conspicuous energy consumption like Ski Dubai. The indoor resort featuring an 85-meter-high mountain of man-made snow burns the equivalent of 3,500 barrels of oil a day. The World Resource Institute estimates the UAE uses 481 tonnes of oil equivalent to produce $1 million of GDP, compared to Norway's 172 tonnes.

8.    Canada – 7,333 kg. Oh, Canada. Kind, peace-loving Canadians certainly love their cars, along with space heaters, hot tubs and other energy-sucking toys. But while many equate Canada's energy sector with the oil sands, it is, in fact, other forms of energy that account for the lion's share of consumption. EcoSpark published a pie chart showing over half (57.6 percent) of Canada's electricity comes from hydro, with coal the second most popular choice at 18 percent. Nuclear is third (14.6 percent), with oil and gas comprising just 6.3 percent and 1.5 percent, respectively.

9.    United States – 6,793 kg. As the world's largest economy and richest nation, the U.S. should obviously be included as a top 10 energy glutton. However, one puzzling fact is that despite annual economic growth, per-capita U.S. energy consumption has remained around the same level since the 1970s. According to the EIA, one explanation is that the U.S. has simply shifted the energy required to satisfy greater consumption to manufacturing centers offshore.

10.    Finland – 6,183 kg. With over a third of its territory above the Arctic Circle, a cold climate, sparse population and a highly industrialized economy, it is no wonder that Finland is among the highest per-capita energy users in Europe. However, according to the International Energy Agency, Finland plans to diversify its economy away from carbon-based fuels, through a shift to renewables, including biomass, and has approved construction of two new nuclear plants.

via Zero Hedge http://ift.tt/ZxMF6v Tyler Durden

The plunge in the price of crude oil in the last few months has many global-recovery-truthers questioning their assumptions. Between slowing growth expectations, US (and Libya and Iraqi Kurds and Russia) supply, and Saudi Aramco cutting prices (argued as maintaining market share but has the smell of a quid pro quo over Syria), oil prices have broken below $90 today to 17-month lows. However, for some major suppliers there is concern that more pressure is to come, as Reuters reports, Russia’s central bank is working on measures to support the economy should oil prices fall by as much as a third or more, as First Deputy Governor Ksenia Yudayeva as saying the central bank was working on a “stress scenario” that was likely to envisage an oil price of $60 per barrel. Of course, as we noted previously, there is always the ‘oil-head-fake’ and as one analysts noted, “the main OPEC countries would experience budget difficulties long before that and would have to take action to cut supply.”

There are numerous reasons for the drop in oil prices (as Ransquawk summarizes),

Overnight we saw Saudi Aramco cut official oil prices for Asian customers in November by more than expected despite oil price weakness and oversupply with traders seeing a  price-war for market share. Analysts at Commerzbank suggest that the OSP cuts gives a rise to doubt about OPEC’s long-standing strategy of striving above all for price stability. [ZH: one can’t help but wonder if this is some quid pro quo to the US – heading into elections, post-QE – in return for actions in Syria]

 

Excess supply emerging out of Libya has weighed over September, with the National-Oil-Company targeting 1mln bpd within the coming weeks.

 

Furthermore, OPEC have still held back from intervening either verbally or physically, signalling they are comfortable with the current fall in oil-prices. The next OPEC meeting occurs in November.

 

Elsewhere, Iraqi Kurds are to triple their oil output by the end of next year to 1mln bpd.

 

Of note, Russian supply has increased by 0.9% M/M in September and is thus providing further supply into the market.

*  *  *

Some analysts have also pointed out that the continuation of global growth concerns will continue to weigh on oil prices.

*  *  *

But, as Reuters reports, Russia is preparing for a further sharp drop in oil prices…

Russia’s central bank is working on measures to support the economy should oil prices fall by as much as a third or more, a senior official said on Wednesday, showing growing concern as the rouble slides and Western sanctions take a toll.

 

Interfax news agency quoted First Deputy Governor Ksenia Yudayeva as saying the central bank was working on a “stress scenario” that was likely to envisage an oil price of $60 per barrel.

 

This would be added to three existing scenarios for the central bank’s policy outlook for the next three years, and compares with a $100 assumption in the 2015-17 state budget adopted last week.

 

“The purpose of this scenario is to prepare a shock scenario to work out an action plan which we would implement to limit negative effects,” Interfax quoted Yudayeva as telling a conference.

 

…

 

The central bank’s current base scenario also assumes the oil price will recover above $100 per barrel for the next three years. Even then, it predicts only modest economic growth.

 

Commenting on the bank’s new stress scenario, Finance Minister Anton Siluanov said that his ministry didn’t plan to adjust its own projections used for budget planning, which he said factored in a possible oil price as low as $80 per barrel.

 

“The forecast of the central bank somewhat differs from that of the government. There is nothing terrible about the fact that they consider a wider range of possible changes in price parameters,” he said.

 

…

 

Macro-Advisory analyst Chris Weafer said in a note that talk of emergency measures such as capital controls did not indicate any fundamental shift in policies. Such contingency planning was normal good business practice and “does not indicate that the central bank, or the Kremlin, has changed its position”, he said.

 

Were oil to fall below $75 per barrel, the central bank could be inclined to back-track on its plans to float the rouble next year, he said, but added that this scenario was unlikely. “The main OPEC countries would experience budget difficulties long before that and would have to take action to cut supply,” he said.

*  *  *

Finally, do not forget the oil head-fake…

via Zero Hedge http://ift.tt/1rQZbsz Tyler Durden

via Zero Hedge http://ift.tt/1vfKqhB williambanzai7

On Nov. 15, 2010, a letter signed by academics, economists and money managers warned that the Federal Reserve's strategy of buying bonds and other securities to reduce interest rates risked "currency debasement and inflation" and could "distort financial markets." As Bloomberg reports, they also said it wouldn't achieve the Fed's objective of promoting employment. Four years later, many members of the group, which includes Seth Klarman of Baupost Group LLC and billionaire Paul Singer of Elliott Management Corp., explain why they stand by the letter's content…

Bloomberg News interviewed nine of the 23 signatories, and all of those who commented stood by the letter’s contents. Here’s what they said:

Jim Grant, publisher of Grant’s Interest Rate Observer, in a phone interview:

“People say, you guys are all wrong because you predicted inflation and it hasn’t happened. I think there’s plenty of inflation — not at the checkout counter, necessarily, but on Wall Street.”

 

“The S&P 500 might be covering its fixed charges better, it might be earning more Ebitda, but that’s at the expense of other things, including the people who saved all their lives and are now earning nothing on their savings.”

 

“That to me is the principal distortion, is the distortion of the credit markets. The central bankers have in deeds, if not exactly in words — although I think there have been some words as well — have prodded people into riskier assets than they would have had to purchase in the absence of these great gusts of credit creation from the central banks. It’s the question of suitability.”

John Taylor, professor of economics at Stanford University, in a phone interview:

“The letter mentioned several things — the risk of inflation, employment, it would destroy financial markets, complicate the Fed’s effort to normalize monetary police — and all have happened.”

“This is the slowest recovery we’ve ever had. Working-age employment is lower now than at the end of the recession.”

“Where is the evidence that it worked? It’s just not there.”

Douglas Holtz-Eakin, a former director of the Congressional Budget Office, in a phone interview:

“The clever thing forecasters do is never give a number and a date. They are going to generate an uptick in core inflation. They are going to go above 2 percent. I don’t know when, but they will.”

Niall Ferguson, Harvard University historian and author of “The Ascent of Money: A Financial History of the World,” referred Bloomberg News to a blog post he wrote in December 2013, saying his thoughts haven’t changed:

“Though generally regarded by a cause for celebration (even by those commentators who otherwise lament increasing inequality), this bull market has been accompanied by significant financial market distortions, just as we foresaw.”

 

“Note that word ‘risk.’ And note the absence of a date. There is in fact still a risk of currency debasement and inflation.”

David Malpass, former deputy assistant Treasury secretary, in a phone interview:

“The letter was correct as stated.”

 

“I’ve observed that credit is flowing heavily to well-established borrowers. This has worsened income inequality and asset inequality going on in the economy. You’re looking at the companies that got credit. The problem is the new businesses that didn’t get credit. The facts are that private sector credit growth has been slow. It is a zero sum process where each corporate bond issue was money that otherwise might have gone to a new business or a small business.”

Amity Shlaes, chairman of the Calvin Coolidge Memorial Foundation, wrote in an e-mail:

“Inflation could come, and many of us are concerned that the nation is not prepared.”

 

“The rule with inflation is ‘first do no harm.’ So you always want to be careful.”

Peter Wallison, senior fellow at the American Enterprise Institute, in a phone interview:

“All of us, I think, who signed the letter have never seen anything like what’s happened here.”

 

“This recovery we’ve had since the end of 2009 has been by far the slowest we’ve had in the last 50 years.”

Geoffrey Wood, a professor emeritus at City University London’s Cass School of Business, in a phone interview:

“I think everything has panned out. We should probably be more cautious about the timing. Economists should always be cautious about the timing. Timing is close to totally unpredictable.”

 

“The economy is growing. If the Fed doesn’t ease money growth into it, inflation could arrive.”

Richard Bove, an analyst at Rafferty Capital Markets LLC, in a phone interview:

“If interest rates are low, it means a large portion of the population was made poor because passive income declined.”

 

“If you take a look at the economy, I think that the economy has grown in line with the growth in population and the growth in income. I would argue that the bulk of this QE money never reached the economy.”

 

“Someone’s got to prove to me that inflation did not increase in the areas where the Fed put the money. We know where they put the money. And we know where they put the money prices went up dramatically. And we also know the consumer price index does not pick up either of those price increases. Housing prices are not in the CPI and fixed income prices are not in the CPI. So how do you know that QE benefited the economy?”

Stephen Spruiell, a spokesman for Elliott Management, declined to comment.

Singer said in his firm’s July investor letter that “substantial inflation” is occurring in areas the Fed hasn’t “recognized or captured” in its analysis.

 

We continue watching with amazement the Fed’s magic act as it attempts to use quantitative easing and zero interest rate policy (QE and ZIRP) to create seemingly robust economic growth in the face of very poorly designed political, economic and fiscal policies, while keeping inflation within a narrow band. Substantial inflation is occurring in many asset classes and service sectors of the global economy, but is not presently recognized or captured by the traditional metrics upon which the Fed relies. This inflation is spreading in both scope and intensity. If and when it breaks out in an inescapably broad way, there will be a crowd of seriously confused policymakers making excuses and claiming that inflation does not in fact exist; it is not their fault; it was completely unpredictable; and/or it will actually be good for people.

 

We believe that if and when inflation goes from being something that affects only a particular list of assets (a growing list, presently a combination of things owned by the well-off plus a number of things that are basic necessities) to a widespread “in-your-face” phenomenon affecting the cost of living of almost the entire population, then the normal yardsticks of risk, return and profit may be thrown into the garbage can. These measures may be replaced by a scramble by citizens and investors to preserve value on a foundation of shifting sand, together with societal unrest that may make the current politically-useful “inequality” riffs, blaming the “1%” and attacking those “millionaires and billionaires” who refuse to “pay their fair share,” look like mere warm-ups for real class warfare.

Baupost's Seth Klarman recently noted,

"It’s not hard to reach the conclusion that so many investors feel good not because things are good but because investors have been seduced into feeling good—otherwise known as 'the wealth effect.' We really are far along in re-creating the markets of 2007, which felt great but were deeply unstable when shocks started to pile up."

 

"Even Janet Yellen sees 'pockets of increasing risk-taking' in the markets, yet she has made clear that she won’t raise rates to fight incipient bubbles. For all of our sakes, we really wish she would."

*  *  *

via Zero Hedge http://ift.tt/1vBF6ra Tyler Durden