2013 Review and 2014 Forecast - Part I: The Last Bubble - Eric Janszen

[Slimprofits]

Re: 2013 Review and 2014 Forecast - Part I: The Last Bubble - Eric Janszen

Does anyone at Moody's have even the smallest flake of skin in the game?

Fewer corporations will default on their debt this year, as economic growth strengthens in the U.S., the U.K. and Europe, predicted Moody’s Investors Service.

Moody’s projects the default rate to hit 2.2% this year, or about 61 defaults globally. That would be down from 2.9% last year, when 66 companies reneged on $54.6 billion of loan and bond obligations.

http://blogs.wsj.com/cfo/2014/03/03/...-default-rate/

[Polish_Silver]

Re: 2013 Review and 2014 Forecast - Part I: The Last Bubble - Eric Janszen

Does anyone at Moody's have even the smallest flake of skin in the game? http://blogs.wsj.com/cfo/2014/03/03/...-default-rate/

My understanding is that they lose only reputation if they are totally wrong. Regarding the sub prime bonds, they
should have been reputed off the planet. That did not happen, which makes me think the system is totally broken.

I have heard the government licenses the bond raters. So the gov only give licenses to those who give T-bills high ratings, and in return, they can give SP bonds any rating they want.

Markets are SO irrational.

[Slimprofits]

Re: 2013 Review and 2014 Forecast - Part I: The Last Bubble - Eric Janszen

What could possibly go wrong with these forecasts?

Interest-rate swaps show the U.S. federal funds rate will crest at 3.1 percent in five years, below the average of 4.8 percent in the 20 years ending 2007, while the key BOE rate tops out at 2.8 percent, about half its long-run average of 5 percent.

http://www.bloomberg.com/news/2014-0...s-removed.html

[Slimprofits]

Re: What is a "debt deflation"

Can anyone name a specific example of an event that could force the Fed to act ahead of schedule?

The nation’s central bank said Wednesday it will look at a broad swath of indicators – including job market data, inflation expectations and financial developments – as it determines when to raise rates for the first time since the recession hit. The deliberately vague wording is a retreat from the Fed’s concrete promise to leave rates untouched. Though they disagree on when to act – targets range from this year to 2016 – the statement signals the moment has finally come within striking distance.

http://www.washingtonpost.com/blogs/...nterest-rates/

[aaron]

Re: What is a "debt deflation"

Can anyone name a specific example of an event that could force the Fed to act ahead of schedule?



http://www.washingtonpost.com/blogs/...nterest-rates/

That is an interesting article.

On Wednesday, it slightly lowered its forecast for economic growth to 2.8 to 3 percent this year and 3 to 3.2 percent next year. However, it predicted the unemployment rate will fall more quickly, reaching 6.1 to 6.3 percent this year and 5.6 to 5.9 percent in 2015. There was little change in its inflation forecast.

It is exactly a lost decade then. 2006 - 2016. Perhaps there is a formula to choose to see how many decades youotta love them bubbles!

It will be just in time for the mass exodus from the work force of the boomer generation. IRAs start being spent. Government deficit spending will increase to compensate for SSN and medicare (obamacare?).

If we can hold it all together, I do not see why the U.S. does not enjoy a very low unemployment rate, just like Japan has during their "terrible lost decades". It will be a painful transition, but we are experienced in pain, no?

[BadJuju]

Re: What is a "debt deflation"

It will be a painful transition, but we are experienced in pain, no?

[Chris Coles]

Re: What is a "debt deflation"

Can anyone name a specific example of an event that could force the Fed to act ahead of schedule?

An arrogant disregard for the truth regarding distortion of unemployment figures.

[vinoveri]

Re: What is a "debt deflation"

SPX at 1890 today. So are we going to 2200 or 2600 before the fall? Hey if we can make it to 3000 then a 40% fall would put as right back here.

[jpetr48]

Re: What is a "debt deflation"

SPX at 1890 today. So are we going to 2200 or 2600 before the fall? Hey if we can make it to 3000 then a 40% fall would put as right back here.

First, thanks for your post.


Finster does provide a pretty good forecast at http://users.zoominternet.net/~fwuth...MarketsOutlook
How many 40% falls in the stock market have we had in the past century?
What events were tied to these falls and how were other asset classes performing at the time(e.g. bonds in a secular bull)
The answer is 2 crashes as the crash of 87 did not lead to a bear market.


I do agree with Finster forecast that we will see a correction and most of us on his threads agree this presents a buying opportunity. The best targets i hear for 2014 are the SPX at 2000-2100 or high single digit growth after the sell in may to september period.

what could make the probabilities increase for a crash? EJ detailed well in his last commentary
fed taper is the pressure plus china crisis is the trigger

[charliebrown]

Re: What is a "debt deflation"

We are reaching the point now where the inverse of the s&P p/e (1/19) is beginning to match an yield on an aggregated bond index. (mixture of long term corporate yields 4.5%) So will investors in large think about shifting some of their equity to bond holdings? y-o-y interest rates are rising. How much of corporate profits are based upon low cost financing? Profit margins are at historic levels can these profit levels be maintained? Normally I would say no, but with the oligarchy in place, I'm not sure it is so easy to start a new business to compete with one intrenched.
If not ready for a pullback, at least a topping out is near in this range.

How many crashes in the last century? Isn't more like 4? 30's, 70's, 2000, 2008. Also note that all of these events occurred after long term metrics
like shiller PE, capitalization / gdp, were at high levels just like now.

[vinoveri]

Re: What is a "debt deflation"

the last 2 crashes occurred only after the Fed had been incrementally raising rates for some time. I don't why this time would be any different especially with QE.
If they wind down QE by EOY and beginning raising rates in 2015 slowly, maybe a crash by 2016 at earliest?

jpetr, the link you posted does not work for me.

[ProdigyofZen]

Re: What is a "debt deflation"

Yes, this is true vino but the Fed was easily able to raise rates in those times, now not so much. So instead of raising rates from 1% to 5.25% over 4 years and getting a crash, the Fed will raise rates from 0% to 0.50% over a year a get a crash.

[vinoveri]

Re: What is a "debt deflation"

you are probably right POZ; so even if the Fed starts raising rates in 2015 (and it is likely to delay past that) we still avoid crash for at least another ~18-24 months

[jpetr48]

Re: What is a "debt deflation"

jpetr, the link you posted does not work for me.

I recall someone else having this problem and POZ mentioned a fix.
POZ was that fix browser type, or something to do with firewall security?

I am using mac with safari so sorry for any complication to my window colleagues. This is a link provided by Finster.

Joe

[ProdigyofZen]

Re: What is a "debt deflation"

Joe, usually if you are running IE it becomes difficult to display images like charts posted in the forum. Switching to Mozilla or Chrome usually fixes it. But I believe the link wasn't working for Vino not an image (unless the chart on the link didn't work for him) which may be fixed by switching browsers.