Happy New Year Everyone. Any Guesses On 2017 Markets And/Or Global Activities?

[jk]

Re: Happy New Year Everyone. Any Guesses On 2017 Markets And/Or Global Activities?

unfortunately, dcarrigg, almost all the people you enumerate are already democratic voters. and sticking it to professionals, to graduate students, to prius buyers and to universities is likely red meat to trump's base.

those aren't bugs; they're features.

[dcarrigg]

Re: Happy New Year Everyone. Any Guesses On 2017 Markets And/Or Global Activities?

unfortunately, dcarrigg, almost all the people you enumerate are already democratic voters. and sticking it to professionals, to graduate students, to prius buyers and to universities is likely red meat to trump's base.

those aren't bugs; they're features.

Unlike most US elections, this isn't a first-past-the-post, winner-take-all scenario. Even if most of those populations are 80/20 or 70/30 or 60/40 Democrat/Republican, they're not uniform. And I doubt majorities of realtors and small business owners that will get hurt are majority Democrat. But either way, people are loss averse. And polls largely bear it out:

American voters disapprove 52 - 25 percent of the Republican tax plan. Republican voters approve 60 - 15 percent, with 26 percent undecided. All other party, gender, education, age and racial groups disapprove.

The wealthy would mainly benefit from this tax plan, 61 percent of American voters say, while 24 percent say the middle class will mainly benefit and 6 percent say low-income people would mainly benefit.

American voters say 59 - 33 percent that the Republican tax plan favors the rich at the expense of the middle class.

Only 16 percent of American voters say the Republican tax plan will reduce their taxes, while 35 percent of voters say it will increase their taxes and 36 percent say it won't have much impact on their taxes.

Only 36 percent of voters believe the GOP tax plan will lead to an increase in jobs and economic growth, while 52 percent do not believe it.

The key take-away is that most people think this 'tax cut' will be a 'tax hike' for themselves personally and only a 'tax cut' for someone else, or otherwise be a pointless wash.

Americans disapprove of this tax plan 52% to 25%. Compare that to the numbers before the W. Bush tax cuts back in 2003 when Americans approved 52% to 41%. It's a pretty drastic shift.

[thriftyandboringinohio]

Re: Happy New Year Everyone. Any Guesses On 2017 Markets And/Or Global Activities?

Looking at the traditional financial writers I see this.
From Forbes magazine

GOP Tax Bill Is The End Of All Economic Sanity In Washington


https://www.forbes.com/sites/stancol.../#61f2f78677ef

...the GOP tax cut now working its way through Congress will be the start of a decade- long economic policy disaster unlike any other that has occurred in American history..

[Chris Coles]

Re: Happy New Year Everyone. Any Guesses On 2017 Markets And/Or Global Activities?

And of even greater importance, they have made their decision based upon what is, as I understand it, totally false employment figures. If the true state of the unemployment in the US is as bad as some believe, then all they are doing is digging their own economic grave.

[jk]

Re: Happy New Year Everyone. Any Guesses On 2017 Markets And/Or Global Activities?

Looking at the traditional financial writers I see this.
From Forbes magazine

GOP Tax Bill Is The End Of All Economic Sanity In Washington


https://www.forbes.com/sites/stancol.../#61f2f78677ef

key quote:

• Without massive cuts in Social Security, Medicare and the Pentagon, it won't be possible to reduce federal spending enough to do more than tweak the deficit.

we can be sure the pentagon will be spared. the real setup is for cutting/means testing/further taxing/reducing/privatizing social security and medicare- a longtime gop goal.

[thriftyandboringinohio]

Re: Happy New Year Everyone. Any Guesses On 2017 Markets And/Or Global Activities?

And of even greater importance, they have made their decision based upon what is, as I understand it, totally false employment figures. If the true state of the unemployment in the US is as bad as some believe, then all they are doing is digging their own economic grave.

Great point Chris.
The Forbes article makes just the opposite argument to reach your same conclusion that the plan is bad.
They accept the orthodox doctrine that tax cuts always stimulate the economy, and they point out it's the exactly wrong point in the cycle to light that fire.
They feel it will trigger inflation which will increase interest rates while they create another $1.5 trillion in debt that will need to be serviced at higher interest.

So even the purists in the supply-side, trickle-down camp see it as a calamity.

[Chris Coles]

Re: Happy New Year Everyone. Any Guesses On 2017 Markets And/Or Global Activities?

What tickles me about this whole debate is that no one seems to want to discuss the very aspect that would focus the minds of a private company; a clear lack of sufficient income. Anyone can pile up debt till the cows come home; but it always comes down to the need to generate sufficient income to cover the debt.

In one sense Forbes are correct. However, they, as you say TBO, are centred upon timing rather than a lack of income and are assuming, (wonderful word that), that good old fashioned tax cuts will stimulate the economy. But what part of the economy?

The entire Western economy is suffering from the same symptoms; millions of citizens not earning enough to pay their way; ergo, not earning enough to create sufficient tax income to pay for the normal functions of government. It's not tax cuts, but real new investment into the wider economy that they need, yet no one wants to talk about it.

Here we have created Universal Credit to, guess what, pay welfare to people already in work. Moreover, the system is designed to force people into work, so they have to endure weeks without any payment....... yet, no one wants to talk about how we used to create prosperous jobs. Everyone wants to talk about what is wrong; no one wants to discuss real, old fashioned solutions; based upon more than a thousand years of experience. Why not? My view is that today, the economy is under the complete control of government and the state does not want to release it's grip on the levers of power. So, again and again, they keep coming up with unworkable solutions. The very last thing they will do is admit that anyone outside of their control has a worthwhile idea.

[thriftyandboringinohio]

Re: Happy New Year Everyone. Any Guesses On 2017 Markets And/Or Global Activities?

...no one wants to discuss real, old fashioned solutions; based upon more than a thousand years of experience. Why not? My view is that today, the economy is under the complete control of government and the state does not want to release it's grip on the levers of power...

The economy is controlled by the government.
But the government is under the complete control of large corporations and billionaires, who tell the politicians what to do in exchange for keeping their office.
In the immortal words of Upton Sinclair:

“It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

[Chris Coles]

Re: Happy New Year Everyone. Any Guesses On 2017 Markets And/Or Global Activities?

In the immortal words of Upton Sinclair:

“It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

Perfect description. Thank you.

[GRG55]

Re: Happy New Year Everyone. Any Guesses On 2017 Markets And/Or Global Activities?

Looking at the traditional financial writers I see this.
From Forbes magazine

GOP Tax Bill Is The End Of All Economic Sanity In Washington


https://www.forbes.com/sites/stancol.../#61f2f78677ef

"start of a decade long economic policy disaster unlike any other...". Seriously?

After all we have witnessed in the past 3 1/2 decades of financialization? S&L? LTCM? Tech/Telecom/Naz bubble & bust? Deliberate, visible goosing of a housing bubble while denying there was any danger in the building global credit risk? ZIRP? NIRP? Central Banks buying ETFs and equities?

Going to to be a real struggle to top all of that.

Personally I am starting to wonder if it's not actually Poom-Ka. A short lived inflationary spike, followed by recession and a secular deflationary scenario such as Gary Shilling and some others describe. Where the last hold-out Central Banks, such as the Fed, are ultimately forced into negative interest territory. Maybe that's what it will take to finally wake up gold?

[jk]

Re: Happy New Year Everyone. Any Guesses On 2017 Markets And/Or Global Activities?

"start of a decade long economic policy disaster unlike any other...". Seriously?

After all we have witnessed in the past 3 1/2 decades of financialization? S&L? LTCM? Tech/Telecom/Naz bubble & bust? Deliberate, visible goosing of a housing bubble while denying there was any danger in the building global credit risk? ZIRP? NIRP? Central Banks buying ETFs and equities?

Going to to be a real struggle to top all of that.

it doesn't say "worse than any other," just "unlike any other." i would say the major difference is that while those other disasters ultimately redistributed money upward on the wealth ladder, none did it with such directness from their very starts.

Personally I am starting to wonder if it's not actually Poom-Ka. A short lived inflationary spike, followed by recession and a secular deflationary scenario such as Gary Shilling and some others describe. Where the last hold-out Central Banks, such as the Fed, are ultimately forced into negative interest territory.

i've been thinking more and more about kapoom over the past year. i guess in your model the "short lived inflationary spike" is RIGHT NOW- a few glimmers of rising prices. this provides cover for the fed continuing both tightening rates and increasing quantitative tightening. if i'm not mistaken the treasury has said it won't try to lengthen maturities at the same time the fed is doing qt, so qt will exert its major pressure on the short end, likely contributing to a rate inversion in 2018H1. so, as often has been the case in the past, the fed tightens until it breaks something, then we get the sudden stop, long rates crashing to new lows and then qe-aleph-one [since the title of "qe-infinity" has already been used].

maybe that's what it will take to finally wake up gold?

gold is awake in the physical market, which is strongly streaming toward asia, while the futures market it used to keep the price down. the new btc futures market will likely mark the top for that creation.

[thriftyandboringinohio]

Re: Happy New Year Everyone. Any Guesses On 2017 Markets And/Or Global Activities?

A long term gold chart

[GRG55]

Re: Happy New Year Everyone. Any Guesses On 2017 Markets And/Or Global Activities?

...i've been thinking more and more about kapoom over the past year. i guess in your model the "short lived inflationary spike" is RIGHT NOW- a few glimmers of rising prices. this provides cover for the fed continuing both tightening rates and increasing quantitative tightening. if i'm not mistaken the treasury has said it won't try to lengthen maturities at the same time the fed is doing qt, so qt will exert its major pressure on the short end, likely contributing to a rate inversion in 2018H1. so, as often has been the case in the past, the fed tightens until it breaks something, then we get the sudden stop, long rates crashing to new lows and then qe-aleph-one [since the title of "qe-infinity" has already been used].


gold is awake in the physical market, which is strongly streaming toward asia, while the futures market it used to keep the price down. the new btc futures market will likely mark the top for that creation.

Some clarification:
- By short lived I meant inflation wouldn't be a decade long affair as in the 1970s. I do think it could be more than a quarter or two, perhaps even a year or more.

- We may not see the rate inversion nearly as quickly as some expect. I think there is a valid argument the Fed is in control of most of the yield curve. Unlike past cycles, where the main (sole?) Fed tool was manipulation of short term rates, this time the Fed has a huge balance sheet of assets it can use to influence rates much further out the curve, by reducing what it holds. Some commentators, such as John Mauldin, think it is ill advised of the Fed to simultaneously raise short rates and reduce its balance sheet. I don't agree. I believe the Fed can, and will maintain a positive slope on the yield curve to ensure the profitability of the banks. And it will raise short rates with great care and discrimination this time, as it pushes up longer rates, because it can.

I posted early on this thread a forecast there would not be a US recession in 2017. I am going to renew that for 2018.
I believe a serious policy mistake would have to occur for that to happen...not out of the question I will admit. But also not forecastable either.

[jk]

Re: Happy New Year Everyone. Any Guesses On 2017 Markets And/Or Global Activities?

do you think the yield curve retains any predictive value when the whole curve can be "managed"??

i've been following the 30s5s instead of the 10s2s on the theory that the further out the instruments the less distorted they will be by fed intervention at the short end. but, as you say, the whole curve is subject to manipulation at this time.

also, since a positive and steepening yield curve is supposedly a sign of health, why would the treasury renounce extending maturities while the fed is engaged in qt? it seems to me the treasury can guarantee a positive yield curve by extending the maturities of its offerings.

[GRG55]

Re: Happy New Year Everyone. Any Guesses On 2017 Markets And/Or Global Activities?

do you think the yield curve retains any predictive value when the whole curve can be "managed"??

i've been following the 30s5s instead of the 10s2s on the theory that the further out the instruments the less distorted they will be by fed intervention at the short end. but, as you say, the whole curve is subject to manipulation at this time.

also, since a positive and steepening yield curve is supposedly a sign of health, why would the treasury renounce extending maturities while the fed is engaged in qt? it seems to me the treasury can guarantee a positive yield curve by extending the maturities of its offerings.

I think the answer to your first, excellent!, question is probably not nearly as much as it did historically.

The whole curve is subject to influence, but one might reasonably expect that influence diminishes with duration. I don't know the makeup of the Feds current balance sheet holdings, but would expect durations to be concentrated sub-10 year, so your following the longer duration makes very good sense.

Finally, maybe the US Treasury is restraining itself because it expects an opportunity to issue negative interest rate 50 year bonds into roaring demand after the next recession hits? I'm being facetious, of course. But these days truth often seems stranger than fiction.