It's official: Deal reached on "fiscal cliff"

[Polish_Silver]

Re: It's official: Deal reached on "fiscal cliff"

[ATTACH=CONFIG]4567[/ATTACH]

Can someone enlighten me - If I look at PCE % change YoY (the same data in the one EJ has in $ change) - there is a clear reversal of a megatrend in ~1980. A deceleration is PCE growth rate is happening. Why? I would have expected an acceleration as FIRE economy started fueling debt spending. Puzzling to me.

I think the PCE is measuring "nominal dollars spent". The inflation was getting worse 1970-1980, so the annual change is larger each year. After 1980, the inflation is decreasing each year, so the annual change is smaller. The curve would look quite different if adjusted for CPI, or "purchasing power".

[verdo]

Re: It's official: Deal reached on "fiscal cliff"

Here's the forecasting challenge. We have not had a recession during about output gap since 1937 - 1938.

The 1937 - 1938 recession lasted only a year and cut GDP by only 6.6% of GDP but the stock market reacted violently.

After peaking at 194.40 on March 10, 1937 the DJIA proceeded to fall 49% over the following year finally bottoming at 98.95 on March 31, 1938.

A similar over-reaction to a mid-gap recession in 2013 is possible. The reason is that confidence is still shaky and perception that the U.S. economy may be "down for the count" after years of tepid recovery from the American Financial Crisis.

It will allow deflationists such as Keen and Mish to once again come out of hiding where they went as fuel and food prices soared since Q2 2009. They will again declare the debt-financed economic growth game over and tell us that a final deflation spiral is upon us.

But the U.S. won't be down for the count. For my part I will note it as a phenomenon that we have come to call a mini-Ka as in the deflationary precursor to a currency depreciation induced reflation, the final cycle of which will some day produce a panic out of U.S. debt, the infamous Ka-Poom of the Janszen Scenario. But I do not see that happening in this round in 2013.

Now back to trying to figure out when. The stock market always -- always -- rallies into a recession. That signal is certainly there. As for others, no two recessions are alike so there is no universal indicator. The work continues.

Does this mean we can expect gold to dive as it did in 2008? I was planning to buy more on the current weakness in price, but if a market correction is likely, then I may as well wait. My guess was that we would see the markets go down in May - August period where stocks are seasonally at their weakest

oh, and sorry for the bump

[bart]

Re: It's official: Deal reached on "fiscal cliff"

Another view of personal income, without transfer payments










Transfer payments alone, note the drop

[bart]

Re: It's official: Deal reached on "fiscal cliff"

Ominous trend in claims:

[bart]

Re: It's official: Deal reached on "fiscal cliff"

Deleveraging is virtually dead

[verdo]

Re: It's official: Deal reached on "fiscal cliff"

Well, i just converted some cash into USD today. Not sure if its a wise move, but I'm really smelling a 2008 repeat.

[charliebrown]

Re: It's official: Deal reached on "fiscal cliff"

With the storm in Europe, how much contagion will spread to U.S. banks? with the new template of bail-ins, which mega bank in the EU is going to blow next, and which U.S. bank is going
to blow with it when the CDS pop?

[Polish_Silver]

Re: It's official: Deal reached on "fiscal cliff"

Well, i just converted some cash into USD today. Not sure if its a wise move, but I'm really smelling a 2008 repeat.

On the basis that Europe and Japan are such a mess? (or rather thier currencies and debt outlook)

[verdo]

Re: It's official: Deal reached on "fiscal cliff"

On the basis that Europe and Japan are such a mess? (or rather thier currencies and debt outlook)

That, and my view of there being a strong likelihood of a severe market correction this year in the U.S. (which will cause a crash in the major indexes worldwide) and another short term "flight to quality" as some would put it. I don't consider US dollars quality, but if everyone else does, then that's where the market will probably run to. I'm not selling any gold mind you, but I'm selling out of other investments so I can buy them back when they're cheaper. Even gold may take a little dip, which I would welcome because I got into this bull run a tad late in the game, so another 2008-style correction in gold would be a nice opportunity. EJ says that there's a good chance of a "mini-ka" happening, where deflationists will come out of the woodwork for a short while. I'm kind of banking on EJ being right on that, on top of the mess going on in Europe and Japan

I mean, take a look at one of the recent front pages of MacCleans (its a popular magazine here)


^One of the biggest bull runs in history? Really now? If this isn't late 2007/early 2008 all over again, i dont know what is. xD

[GRG55]

Re: It's official: Deal reached on "fiscal cliff"

The market has a way of frustrating the majority.

The more I hear talk of a correction the less likely I think it is to happen.

For now :-)

Having said that, hard not to notice that pretty well every other equity market worldwide has rolled over except for the major US indices...

[verdo]

Re: It's official: Deal reached on "fiscal cliff"

Well for me, im waiting to see the argument which shows how and why U.S. stocks should blast through above and beyond their inflation adjusted highs, despite consumer spending being lower, not higher than it should be, and with potential budget cuts on the way while still in an output gap. Until I see that argument, I would rather not take the chance. If nothing occurs, then the worst thing that happens is that I miss out on some of the upside gains...but worse things have happened to people, so I could live with that

[Polish_Silver]

Re: It's official: Deal reached on "fiscal cliff"

GRG,

I think you are confusing the majority of the world with the majority of I-tulip.

[verdo]

Re: It's official: Deal reached on "fiscal cliff"

Does anyone know when the Q1 numbers come out for this year (unless they are already out)?

[GRG55]

Re: It's official: Deal reached on "fiscal cliff"

Does anyone know when the Q1 numbers come out for this year (unless they are already out)?

The Advance Estimate for Q1 2013 will be issued by the Dept of Commerce (BEA) on April 26.

I don't own a television, but I am sure the anchors on Bubblevision will display their usual breathless anticipation...

[jk]

Re: It's official: Deal reached on "fiscal cliff"

Well for me, im waiting to see the argument which shows how and why U.S. stocks should blast through above and beyond their inflation adjusted highs, despite consumer spending being lower, not higher than it should be, and with potential budget cuts on the way while still in an output gap. Until I see that argument, I would rather not take the chance.

here's the argument, fwiw: the banks are replete with free cash and looking for things to do with it. thus, risk assets will be bought. that's it.