Fin/Inv

I expect fot the next couple of months a period of a recovering dollar and a correction time in asset markets." Marc Faber, CNBC, August 12

Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world. Dr. Doom also trades currencies and commodity futures like Gold and Oil.

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Latest Marc Faber video interview, CNBC, August 12.

Marc Faber was interviewed alongside Nouriel Roubini.

"The big crisis is ahead of us", Marc Faber

Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world. Dr. Doom also trades currencies and commodity futures like Gold and Oil.

Das heutige Monthly Treasury Statement, der Bericht zum US-Bundeshaushalt, zeigt auch für den Monat Juli 2009 ein explodierendes Staatshaushaltsdefizit an. Das Defizit aus Einnahmen und Ausgaben betrug im Juli -180,680 Mrd. Dollar, nach einem Defizit von -102,767 Mrd. Dollar im Vorjahresmonat. Seit Beginn des Fiskaljahres am 1. Oktober 2008 haben sich in den ersten 10 Monaten -1,266958 Billionen Dollar Staatshaushaltsdefizit kumuliert. Die Steuereinahmen sinken und die Ausgaben steigen rasant, daraus folgen immer neue Staatsschulden um die Auswirkungen der Wirtschafts- und Finanzkrise abzumildern.

> Das monatliche Federal Budget seit Januar 2000. Seit Oktober 2008 schlägt Monat für Monat ein Defizit im US-Bundeshaushalt zu Buche. Das Federal Budget ist Hauptteil der öffentlichen gesamten Staatsverschuldung <

> Die ganze Dramatik wird sichtbar, wenn man die monatlichen Defizite kumuliert. Unfassbare -1,266958 Billionen Dollar Defizit haben sich in den ersten 10 Monaten des Fiskaljahres 2008/2009 angesammelt, nach einem Defizit von "nur" -454,798 Mrd. Dollar im Gesamtfiskaljahr 2007/2008! <

Während die Ausgaben in den ersten 10 Monaten des Fiskaljahres 2008/2009 um +21,1%, auf 3,007132 Billionen Dollar stiegen, nach 2,483016 Bio. Dollar im Vorjahreszeitraum, fielen die Steuereinnahmen um -16,9% auf 1,740174 Billionen Dollar, nach 2,094397 Billionen Dollar in den ersten 10 Monaten im Fiskaljahr 2007/2008!

Die Unternehmenssteuereinnahmen brachen von 246,799 Mrd. Dollar in den ersten 10 Monaten 2007/2008 um gewaltige -57,66% weg, auf nur noch 104,483 Mrd. Dollar in den ersten 10 Monaten des Fiskaljahres 2008/2009. Dies wirft ein doch dramatisches Bild auf die Wirtschaftslage und die Unternehmensgewinne in den USA. Aber auch die Einnahmen aus der Einkommenssteuer brachen um beachtliche -20,5% weg, von 943,887 Mrd. Dollar im Vorjahreszeitraum auf 750,381 Mrd. Dollar! Dies wiederum zeigt deutlich, wie schlecht es um die Jobs und die Einkommen steht. Die sinkenden Steuereinnahmen sind wohl ein ungefilterter Beleg für die Krise!

Trotz dramatisch sinkender Steuereinnahmen wird auch unter Obama der militärisch industrielle Komplex großzügig mit Geld versorgt. In den ersten 10 Monaten verschlangen die Ausgaben für das US-Verteidigungsministerium 532,605 Mrd. Dollar, nach 492,484 Mrd. Dollar im Vorjahreszeitraum, ein Anstieg von 8,1% im Vergleichszeitraum!

> Die gesamtstaatliche explizite (heute zahlungswirksame) Staatsverschuldung markiert per 11.08.2009 mit 11,666 Billionen Dollar einen neuen Rekord! Ein brachialer Anstieg in den letzten 10 Monaten, seit Beginn des Fiskaljahres von +1,641 Billionen Dollar! 1975 lag die explizite Staatsverschuldung bei 533 Mrd. Dollar. Eine unhaltbare Exponentialfunktion bei der US-Staatsverschuldung. <

Die Wirtschafts- und Finanzkrise ist eine klassische Verschuldungskrise und sie ist durch den Einsatz von noch mehr Schulden nicht nachhaltig zu lösen. Denn die hohe Rate der Neuverschuldung durch den Staat ist nicht lange durchzuhalten. Sobald sie nachlässt bzw. gar auch nur im Ansatz die Schulden zurückgeführt werden, wird es konjunkturelle Bremsspuren vom Feinsten geben.

Die US-Ökonomie ist ein Kredit-Junkie - ohne Kredit kein Wachstum und selbst mit Kredit wird es immer ineffizienter. Gemäß den Daten der FED ist von 2000 bis Q1 2009 die Gesamtverschuldung von Staat (explizit), privaten Haushalten, Unternehmen inkl. Finanzsektor in den USA, im Durchschnitt um 6,03 Dollar gestiegen um 1 Dollar Wirtschaftswachstum zu generieren! Von Q1 2007 bis Q1 2009 hat sich das Verhältnis noch weiter verschlechtert. Es waren 10,96 Dollar neue Schulden nötig um 1 Dollar Wirtschaftswachstum zu erzeugen. Eine ökonomisch betrachtet - lächerliche Veranstaltung.

Quelle Daten: Fms.treas.gov, Federalreserve.gov, Treasurydirect.gov

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Kontakt: info.querschuss@yahoo.de

The battle of the Dr. Doom's on CNBC (CNBC Video), between Marc Faber and Nouriel Roubini, was uneventful, but did provide some interesting comments. While Dr. Roubini views are pretty well known, even if he is currently a little less pessimistic, Dr. Faber's views may not be as well known, and are worth mentioning. Some observations from the Faber portion of the interview include the following:

• There was a bull market in assets from 2002-2007, along with a weak dollar. In 2008, we had the opposite - a strong dollar, with all assets going down except for bonds. Now, in 2009, assets have rallied, especially in emerging markets as the dollar has weakened.
• For the next couple of months we should see the dollar recover as assets correct downward.
• The dollar will strengthen not because the U.S. economy is the best, but because it is the least cyclical. As the dollar strengthens, global liquidity will tighten.
• As liquidity tightens, growth will begin to disappoint, and emerging markets will become vulnerable, especially after being a favorite of momentum investors who may flee the trade.
• Nonetheless, even with slower economic growth, markets may still go up given that there are a number of worldwide central bankers who are nothing more than money printers and continue to feel the need to intervene when prices go down (except for crude oil).
• To exit this cycle, we may still need a crisis to cause us to fully change behavior and clean the system. Therefore, a total breakdown of the system is likely ahead of us (even if 1, 5, or 10 years away) since we have not let those who caused the problems fail. We cannot continue to provide bailouts that do not help the average person.
• Nonetheless, the Fed and other central bankers will most likely leave rates too low for too long, as household deficits continue to increase.
  
• Finally, when asked what would have happen if central banks would not have stepped in to stop the credit and market collapse, Faber believes that the market would have dropped more, but the system would be healthier, in part because the debt load on taxpayers would be less.
  

Das Statistisches Amt der Europäischen Gemeinschaften (Eurostat) gab heute die Daten zur europäischen Industrieproduktion für den Monat Juni bekannt. Diese Daten sind "unerwartet" schwach ausgefallen, von einer V-förmigen Erholung der Wirtschaft zu mindestens bei diesen Daten keine Spur. Die Industrieproduktion sank in den Mitgliedsstaaten der Eurozone um -0,6% zum Vormonat und in der EU-27 um -0,2% zum Vormonat. Im Vergleich zum Vorjahresmonat ging es in der Eurozone um -17% abwärts und in der EU-27 um -15,6%!

Die Produktion von Investitionsgütern nahm um -21,9% in der Eurozone und um -20,5% in der EU27 ab. Die Produktion von Gebrauchsgütern sank um -24,9% bzw. um -21,8%. Die Produktion von Vorleistungsgütern verringerte sich um -22,2% in der Eurozone und um -21,3% in der EU27, jeweils im Vergleich zum Vorjahresmonat.

> Die Industrieproduktion in der Eurozone mit -17% im Vergleich zum Vorjahresmonat ist im prozentualen Vergleich auf leichtem Erholungskurs, dieser resultiert aber aus dem niedrigeren statistischen Basiseffekt des Vorjahres. <

> Der saisonbereinigte Index der Industrieproduktion in der Eurozone fällt im Juni wieder auf 88,7 Punkte und fällt damit auf das tiefste Niveau seit Ausbruch der Finanz- und Wirtschaftkrise aus dem April 2009. Die 88,7 Punkte markieren den tiefsten Stand seit Dezember 1997, damals mit 89,6 Punkten! <

> Der Einbruch der Industrieproduktion im Juni bei den einzelnen Mitgliedsstaaten der EU-27 in Prozent, im Vergleich zum Vorjahresmonat. <

Die Daten der Industrieproduktion sind ein wichtiger Bestandteil der Wirtschaftsleistung der jeweiligen Länder, so das es durchaus möglich ist, dass auf Grund der schwachen Industriedaten im Juni auch die Bruttoinlandsproduktdaten im 2. Quartal 2009 schlechter ausfallen als bisher erwartet.

Eine überzeugende wirtschaftliche Erholung sieht anders aus. Eine Erholung der Industrieproduktion in Europa hat de facto noch nicht einmal stattgefunden. Eine harte Ernüchterung für die Positiv-Junkies von Stimmungs- und Frühindikatoren.

Nassim Taleb was interviewed on CNBC's Squaw Box Wednesday morning (CNBC Video), along with Nouriel Roubini. Some observations from Taleb include the following (the first one still worth repeating, especially given the recent market moves and short covering, the remaining ideas being essentially repeats from other interviews/columns):

• Short-term markets mean nothing. They are driven by the marginal buyer/seller.
• The risk and problems that we had before - debt, poor leadership - are still there.
• Converting private debt to public debt is just causing more problems.
• Structural problems have not been addressed.
• Too much reliance / susceptibility to forecast errors for the recovery, budget, and debt forecast.
• Policy makers are still not working on the main problems and there cures, just the symptoms.
• We are continuing to reward those who got us into our current problems.
  
• Nouriel Roubini is usually correct, except for wanting to reappoint Federal Reserve Chairman Bernanke (comment after some praise - to easy, just cannot help himself).
  

In a challenge to iShares, Vanguard has filed a registration statement with the SEC to offer seven bond index ETFs (Investment News). Three of the ETFs will invest in U.S. Treasuries (1-3 year, 3-10 year, and longer dated), three in corporate bonds (1-5 years, 5-10 years, and long dated), and one in MBS. Each of the ETFs comes with an expense ratio of 0.15%. The company is trying to take advantage of current investment trends, one of which has investors moving into corporate bonds (Forbes). Bonds funds in general have received $58 billion in May and June, up from $19 billion over the same two months last year. The junk-bond market itself has climbed 40% this year. While some investors are simply chasing returns, others are looking for new ways to diversify away from equities after the market sell-offs in the second half of 2008 and first quarter of 2009.

“When you spend a lot of money on bullets, you don’t get much return. If governments can spend money on infrastructure and developing productive assets, then Sri Lanka’s strengths will become even stronger given that the war is over.” Bloomberg, August 11

Latest Jim Rogers video, August 2009.

I'm short on time this morning so I am unable to provide an update on this reaearch from last year. I thought readers may find it helpful to note that the study did trigger.

http://quantifiableedges.blogspot.com/2008/08/when-s-is-oversold-going-into-fed-day.html

“What was a V-shaped recovery now seems to be experiencing a little gravitational pull.” -Stephen Green, Standard Charted Bank in Shanghai

FN: The sneaking suspicion out there is that China has pretty much completed their commodity re-stocking. The Baltic Dry Index (BDI) has been down nine of the last ten trading days and has now breached the rising trendline from the December 2008 low of 663. The price is now also below the 20, 50 and 200 day EMAs (blue, red and green lines).

In the post Baltic Dry, Chinese Hoarding, Commodities and the Fake Recovery I highlighted:

"As the global economy continues to falter and Chinese exports plummet, there is growing concern that the stockpiling may soon come to a halt, leading to further, painful drops in commodity prices."

Asian Stocks Drop as Weaker Earnings Fuel Valuation Concerns: "Asian stocks fell for the first time in three days and Chinese shares entered a so-called correction, amid concern a rally in equities had outpaced earnings prospects.

China May Delay Tightening as Exports, New Loans Drop (Update1): "The People’s Bank of China may delay tightening monetary policy until the fourth quarter after exports dropped in July, lending declined and investment growth slowed, economists said.

Exports fell 23 percent from a year earlier, the government said yesterday. Urban fixed-asset investment rose a less-than- estimated 32.9 percent in the first seven months from a year earlier. New loans plunged to 355.9 billion yuan ($52 billion), less than a quarter of advances in June.

China’s economy, which avoided following the U.S. and Europe into recession, is yet to cement a recovery as factories have too much capacity and shipments abroad are weakening, officials said this month. The nation’s $4 trillion yuan ($585 billion) stimulus package can’t completely offset slumping export demand, the commerce ministry said in Beijing today."

Related Posts:
World Trade, Baltic Dry and "Green Shoots"

Below are some links of interest for 8/12/09, just in case you missed them. Some have already been posted to Twitter.

• According to Boston Consulting Group, institutional investors will demand "innovations" such as alternative investments, i.e., hedge funds, private equity, infrastructure, commodities, absolute return, and quantitative products, among others (All About Alpha). The group also mentions that "Perhaps the foremost trend in actively managed products is the continuing shift out of long-only equity allocations."
• Why have hedge funds underperformed the markets? Apparently, some managers are taking money off the table and proceeding with caution after several months of gains (Investment News). Even with good performance this year, hedge fund fees continue to slide (Wealth Bulletin).
• The Fed exit strategy will amount to paying interest on balances held by banks at the Fed (Bearish News). Essentially, when it comes time to tighten policy, the Fed can raise the rate paid on reserve balances as they increase their target for the federal funds rate. Of course, this will in a sense continue to reward the banks for past failures.
• After two years, some believe that we have failed to learn the three lessons taught by the economic downturn: imbalances in global trade and finance have real consequences, debt brings risk, and globalization does not manage itself, but needs guidance (Telegraph UK).
• China's economy slowed a little in July as large banks rein in lending, with volume of new lending in China dropping 77% from a month earlier, as fears of bubbles persist (Financial Times). Chinese exports fell 23% from a year earlier (Bloomberg). Singapore is not slowing down, with GDP spiking 20.7% (The Straits Times).
  
• General Motor's Volt could be a game changer if it gets the 230 miles per gallon that is being advertised - as long as you stay close to home (WSJ).
  
• The KBW bank index hit an 8 month high, up 144% from the March lows (Carpe Diem).
  
• The Congressional Oversight Panel is warning that smaller banks, which hold a greater concentration in commercial real estate, have the potential for much higher defaults going forward (Calculated Risk). Some small banks will need to raise significant capital (Zero Hedge).
  
• Can the PPIP be used to explain the strong rally in AA-rated CMBS (Clusterstock)? Is a new toxic asset bubble around the corner?
• From Comstock (by way of The Pragmatic Capitalist), deleveraging will continue to take a major toll on the U.S. economy and could wind up producing a couple lost decades, not unlike what Japan has experienced over the last 20 years.
• Brazil's coming rebound (Fund My Mutual Fund).
  
• What about the technology sector? Jim Farrish believes that while short-term there is the reason to tighten stocks, long-term (6-18 months) the sector is still in a bullish uptrend (greenfaucet). Any current correction may be an opportunity to add.
  
• Crude oil and gold both bounce of Fibonacci retracements (market folly), for those of you that care about crude, gold, or trading patterns/sequences.
  
• The housing mess is not yet over (The Big Picture). Zillow.com mentions that almost one-quarter of mortgage holders are underwater, with the figure rising to 30% by mid-2010 (Bloomberg). Ginnie Mae and FHA are becoming $1 trillion subprime guarantors, not unlike taxpayer owned Fannie Mae (WSJ).
• More details on Goldman Sach's amazing winning streak (Here Is The City News). Apparently, Goldman lost money on only two trading days during April, May and June. They also made more than $50m on 58 of the 65 trading days in the period, and at least $100m on 46 days. Amazing.
• The Baltic Dry Index has fallen for its 9th straight day (The Big Picture).
• We are all traders now (Trader's Narrative). The average holding period for a stock on the NYSE continues to fall.
  
• NYSE Bullish Percent Index and NYSE Percent of Stocks Above 200 Day MA Index are near 3 year highs (ES and EC Futures Analysis).
• A look at the importance of normalizing put/call ratios, whether they are going up or down (Quantifiable Edges).
  
• Short are decreasing as the average stock in the S&P 500 had 4.97% of its float sold short by the end of July (Bespoke Investment Group), the lowest level since January 30th. The reduction in shorts represents a decline of 17% from the peak levels in July 2008.
• September can be a cruel month for stocks (WSJ).
• Is the money supply (M1) a good indicator for short- and medium-term stock market behavior (CXO Blog)? Maybe not.
• Obama's derivative plan (WSJ).
• Greg Mankiw provides some wonky talk about carbon taxes (Greg Mankiw's Blog).
• Gamma decay and smiles for levered options (Quantivity).
• VIX calls attract some attention (VIX and More).
• Finally, an interesting link (at least to me) of the changes in WSJ dot portraits (Reuters - Felix Salmon).

I've written about macro headwinds for the stock market before. Recently David Rosenberg, former chief economist at Merrill Lynch, now chief economist at Gluskin Sheff, indicated that the stock market is pricing 4.25% GDP growth:

Based on past linkages between earnings trends and the pace of economic activity, believe it or not, the S&P 500 is now de facto discounting a 4¼% real GDP growth rate for the coming year. That is what we would call a V-shaped recovery.

Raising the GDP growth stakes
Over at Hussman Funds, William Hester wrote an article entitled Earnings Growth Forecasts May Require a Robust Economic Recovery, which may have raised the stakes on Rosenberg's analysis.

Hester analyzed the relationship between implied earnings growth and nominal GDP growth, shown in his chart below. (Note: I have annotated the chart to interpolate a nominal GDP growth of about 10% and the 10% interpretation is strictly my own.) If we assume an inflation rate of around 2% and look at the interpolated nominal GDP growth of 10%, it suggests that the market is discounting real GDP growth of about 8%.




Is 4-8% real GDP growth realistic? It would be quite a V-shaped recovery.


Deteriorating technical conditions
Meanwhile, Barry Ritholz at The Big Picture wrote that the market is rallying on lower volume and deteriorating breadth:

Ron Griess of The Chart Store points to the rally continuing on decreasing volume. I would also note that breadth is softening as well.

An exuberant and over-the-top-giddy equity market derived macro outlook and deteriorating market technicals isn't exactly encouraging for bulls.

Don’t say that you weren’t warned.

Just a quick note tonight.

I have a busy day tomorrow. I will have full coverage of the FOMC meeting tomorrow evening. There are rumors floating on Wall St that another QE may be announced by the Fed. I expect stocks and bonds to be extremely volatile tomorrow.

Town Halls

I will have a few comments below around the anger that's being expressed by Americans all over the country at various town hall meetings regarding health care. Here is an example of a town hall meeting in Lebanon today that was conducted by Sen. Arlen Specter:




Quick Take:

I gotta admit folks. My first thought is the anger seen here is not really about health care. In a perfect world, free health care sounds great! Right?

I think Americans have had it, and they are using these town halls as a way to release their anger and frustration over their rapidly deteriorating standard of living.

The economy is rapidly collapsing in America despite what the media is telling you. Unemployment is in the upper teens when you include all of the Americans that have lost unemployment benefits or have simply given up looking for a job.

There is no economic recovery. We are just seeing less worse numbers following an economic collapse in GDP. "Less worse" should be expected after such a sharp contraction in the economy.

Losing ONLY 250,000 jobs is a not a green shoot despite what CNBC tells you. What makes me laugh is unemployment supposedly dropped when the economy lost 250,000 jobs. Ummmm....Sounds like the math skills of a 2nd grader if you ask me.

I am sure there is some mumbo jumbo green shoot spinning reason why the unemployment rate dropped during a month in which we lost a quarter of a million jobs. I just don't wanna hear it, and apparantly after seeing these town hall meetings, America doesn't either!

The Bottom Line

CONgress better start listening to their constituents or these town halls will start to get increasingly more violent.

The citizens of this country have had enough of the lying in Washington. They realize that this country is being destroyed by the politicians. Health care is simply a symptom of the disease. The disease is debt and out inability to pay it back.

I detect a serious underground movement that's about to turn Washington upside down.

The politicians better start listening because the torches and pitchforks are right around the corner.