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Dallas Fed Plunges Most In Over 7 Years To 10 Month Low; With Biggest Miss In 14 Months With expectations for a muddle-through slight positive print, the headline Dallas Fed index just printed at -13.2 (exp. 1.9). This is its lowest level since September of last year and the biggest miss of expectations since May of last year. The headline index is teetering on the edge of its worst levels since 2009 as [...] From The Big Picture: … The data continue to come in showing the global economy is slowing. The key question is whether this slowdown is to full on recession or merely a sloppy-muddle-through-barely-above-stall-speed economy. With all of the cross currents out of Europe and the U.S., it’s easy to get distracted with less important nonsense. We watch all of the usual macro signs, but to find clarity, watch this earnings season. I want [...] Wholesales inventories were revised lower for the previous month but met current expectations with a modest 0.3% rise. However, under the surface (as ever) things are not quite as muddle-through-like. Wholesale ‘sales’ plunged by their most since March 2009 with Lumber (but but what about the housing recovery) dropping the most MoM in durables and Farm Products dropping the most YoY among non-durables. This plunge in sales pushed the relatively stable Inventory-to-Sales indicator [...] While in ‘normal’ times the commonly held view is that P/E ratios tend to fall as real interest rates rise, as we recently pointed out here, the relationship is highly non-linear and nowhere is this regime-dependence more evident than in the following chart from Morgan Stanley. Empirically, the current interest-rate regime (the 2-3% 10Y) is as good as it gets and whether rates rise or fall from here, equity valuations are likely [...] From Pimco: “To assess the vulnerability of profit margins, let’s review several possible catalysts for profit mean reversion and consider how likely they are to occur: 1. Increase in Cost of Labor Labor costs are about 70% of the total cost of production for corporations, according to Federal Reserve research. There is no question that if competition for a finite labor pool increased, this could put immediate pressure on corporate margins. However, in the U.S. unemployment remains [...] It has only been a week since we discussed the San Francisco Fed’s research group admitted thatwater was wet Fed policy will be unable to impact unemployment since the cyclical changes are more structural leading to jobless recoveries as fat is removed from the system. The powerless Fed now has another well-researched problem. As Daniel Wilson of the FRBSF sheepishly admits (having spent several thousands in taxpayer cash to fund the latest Fed ‘white paper’) with regard [...] This will hardly be a surprise to anyone with 3 neurons to rub across their frontal lobe, but at least it is now official. WORLD BANK CUTS GLOBAL GROWTH OUTLOOK, SEES EURO-AREA RECESSION Bloomberg, which just released an embargoed summary of the World Bank action, summarizes it all. World Bank cuts global growth forecast by most in 3 yrs as euro area recession threatens to exacerbate slowdown in emerging markets, World Bank says [...] From Peter Tchir of TF Market Advisors ECB: Expect Nothing And You Won’t Be Disappointed Auctions From Peter Tchir of TF Market Advisors A Couple Of Questions To Start The Day… On Sunday we had Occupy MetLife Stadium where the 99% happily watched the 1% on the field and in the stands. Last night we had a decent college football championship and are sure to see several of the players play on Sunday, which leads to the first question. What is higher, the percentage of NFL starting quarterbacks that [...] by ZH Just over a month ago we wrote in depth that while many of the supposed smartest men in the room believe we are set for a muddle-through economy that will ‘maintain’ asset values with no tail-risk expectation, we believed there are only ‘painful’ ways out of this crisis. Furthermore, we noted (and BCG agreed) that a tax-the-wealthy (and the wealth explicitly) haircut is coming. Today, the venerable Howard Marks of Oaktree, [...] Published: Sunday, 13 Nov 2011 | 1:09 PM ET The window of opportunity to save the euro is rapidly closing, as the sovereign debt crisis erodes the solvency of Europe’s banks and drives up borrowing rates for even once rock-solid countries like France. On Saturday, the crisis swept away another leader, when Prime Minister Silvio Berlusconi resigned after 17 years of dominance in Italian politics to the jeers and [...] by ZH Denial. Denial is safe. Comforting. Religiously and relentlessly abused by politicians who don’t want nor can face reality. A word synonymous with “muddle through.” Ah yes, that “muddle through” which so many C-grade economists and pundits believe is the long-term status quo for the US and the world just because it worked for Japan for the past three decades, or, said otherwise, “just because.” [...] I suffer from Tea Party envy. There is little about the actual party I like, and there are some members I abhor, but I am jealous of its sense of purpose, its determination and its bracing conviction that it is absolutely right. In its own way, it waves a crimson battle flag while President Obama’s is a sickly taupe — the limp banner of an ideological [...] By Nouriel Roubini The current “muddle through” approach to the eurozone (EZ) crisis is not a stable disequilibrium; rather, it is an unstable disequilibrium. Either the member states move from this disequilibrium toward a broader fiscal, economic and political union that resolves the fundamental problems of divergence (both economic, fiscal and in terms of competitiveness) within the union… …or the system will move first toward disorderly debt workouts [...] |
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