"Macro" Musings

[gary17]

Hello

I am wondering if anyone here by chance knows how banks in Japan performed during the country's deflationary period.  I looked at the charts on google but don't believe I am getting reliable information.  Other than Japan, is there any other nations on the planet that had a very long deflation?

Thanks Gary

[Guest JoelS]

Hi Gary,

 

in a word, badly. A brooklyn investor post here goes into some detail: http://brooklyninvestor.blogspot.co.nz/2012/06/banks-real-nightmare.html

 

I believe Gillian Tett's book on Japan also offers some insight. Hope this helps. Cheers

 

Joel

[beerbaron]

Hello

I am wondering if anyone here by chance knows how banks in Japan performed during the country's deflationary period.  I looked at the charts on google but don't believe I am getting reliable information.  Other than Japan, is there any other nations on the planet that had a very long deflation?

Thanks Gary

 

The US post 1929 had very strong deflation pressures.

 

BeerBaron

[Liberty]

Good read on profit margins:

 

http://philosophicaleconomics.wordpress.com/2014/05/21/profit-margins-accounting-for-the-impact-of-a-changing-financial-share/

 

It's a follow up to this one, which was also very good:

 

http://philosophicaleconomics.wordpress.com/2014/03/30/foreignpm/

[stahleyp]

I'm not sure if this is total IPOs or not but I was looking up data and found this:

 

http://www.renaissancecapital.com/ipohome/press/ipopricings.aspx

 

We had more IPOs last year than in 2007. Well on our way to besting it again this year.

[giofranchi]

A Return To Old Faithful by Mr. Charles Gave

 

 

Gio

Daily+5.21.14.pdf

[Liberty]

Interesting piece on profit margins mean reverting or not:

 

http://philosophicaleconomics.wordpress.com/2014/05/25/profit-margins-dont-matter/

 

Mean-reversion in a system doesn’t happen simply for the sake of happening.  It happens because forces in the system cause it to happen.  With respect to profit margins, the following questions emerge: What are the forces that cause profit margins to mean-revert? Why do those forces pull profit margins towards any one specific mean value–11%, 9%, 7%, 5%, 3%, 1%–rather than any other?  And why can’t secular economic changes–for example, changes in interest rates, corporate taxes, and labor costs–affect those forces in ways that sustainably shift the mean up or down?

 

In what follows, I’m going to explore these questions.  I’m going to argue that profit margins are simply the wrong metric to focus on.  The right metric to focus on, the metric that actually mean-reverts in theory and in practice, is return on equity (ROE).  Right now, the return on equity of the U.S. corporate sector is not as elevated as the profit margin, a fact that has significant implications for debates about the appropriateness of the U.S. stock market’s current valuation.

 

[stahleyp]

Liberty,

 

do you ever read hussman's columns?

[Liberty]

Liberty,

 

do you ever read hussman's columns?

 

Not regularly, no. When someone points something out specifically as being interesting, I'll read it.

[Lance]

Did anyone read the Stephanie Pomboy interview in Saturday's Barron's?  Interesting read.

 

Thanks,

Lance

[PatientCheetah]

Did anyone read the Stephanie Pomboy interview in Saturday's Barron's?  Interesting read.

 

Thanks,

Lance

 

Everyone has his/her opinion. I found it much more simpler and profitable by looking at the long term market moving averages. I remember her last few market calls on Barron's, pretty useless IMO. These perma bears somehow can justify their years of wrongs by getting one crush right.

 

We are not seeing an acceleration in consumer spending because QEs disproportionately benefit the wealthy and they spend lower share of their increased wealth. On an aggregate levels, macro data will look fine and I don't see why this can't continue for a few more years until stock buyback becomes less accretive relative to capital spending due to high valuations.

[giofranchi]

http://www.marketwatch.com/story/europe-bubble-grows-as-markets-ignore-vote-against-euro-2014-05-28?link=MW_popular

 

As I am repeating for some time now, Europe is still a mess... ::)

 

Gio

[frommi]

http://www.marketwatch.com/story/europe-bubble-grows-as-markets-ignore-vote-against-euro-2014-05-28?link=MW_popular

 

As I am repeating for some time now, Europe is still a mess... ::)

 

Gio

 

The whole world is a mess with the right glasses :). Since i am now fully hedged i am a lot more pessimistic and believe that Mr. Watsa is right in doing what he does. Chinas growth slowing, europe near deflation, the us is in trouble because the dollar will rise and cause deflation there. The FED and ECB are nearly out of bullets and debt levels are still growing and not shrinking. I doubt that the FED is really aware of what is coming, they are still in their tapering plan. When they act it will be too late and then they have to press the pedal to the metal and cause hyperinflation. And the ECB can do nothing, does it really make a difference if interest rates are 0.25 or 0? As long as the banks don`t lend money because of the Basel rules nothing will change, and now the ECB can`t even buy bonds anymore. (Look at what Mr. Schäuble said last week.)

 

I am really afraid at the moment, and i don`t see a lot of people that share my view. Colleges talk about the stock market like there is no easier place to make money, we have a record year for IPOs, margins are at the upper limit and now even the VIX made new 5 or 6 year lows. It smells like 1999/2000 even if it looks a bit different.

 

But who knows, it rarely pays to be pessimistic but since i have put my rosy glasses off i am full of fear and can`t put them on again.

[bmichaud]

Maybe I missed it, but why can't the ECB buy bonds?

 

The Basel restriction is interesting, but I think a new targeted LTRO program will get around this as long as the collateral haircut is low enough to mitigate whatever risk weighting on the retained portion.

[frommi]

Maybe I missed it, but why can't the ECB buy bonds?

 

The Basel restriction is interesting, but I think a new targeted LTRO program will get around this as long as the collateral haircut is low enough to mitigate whatever risk weighting on the retained portion.

 

Perhaps you can translate this with Google: http://www.faz.net/aktuell/wirtschaft/eurokrise/omt-schaeuble-kassiert-die-wunderwaffe-der-ezb-12955803.html

 

In essence, because germany will not allow the OMT program and can veto against it.

[dcollon]

Epsilon Theory (Ben Hunt)

 

"When Does the Story Break?"

http://www.salientpartners.com/epsilontheory/notes/When%20Does%20The%20Story%20Break.html

[JEast]

Kyle Bass is also wondering when the story breaks.  Japan continues to print and print, and more printing but the currency does not seem to want to break 120 and the yields continue to inch downward.  The macro drama continues to play on.

[frommi]

Q1 US GDP revised to -1%.

 

http://hotair.com/archives/2014/05/29/boom-q1-gdp-revised-downward-to-1-0/

 

Oh, don´t worry it was just the weather  ???.

[Liberty]

More on profit margins:

 

http://philosophicaleconomics.wordpress.com/2014/05/31/profit-margins-accounting-for-the-effects-of-wealth-redistribution/

[giofranchi]

I thought I’d conclude this week’s EVA with a quote from one of the most hallowed economists of all-time, Friedrich Hayek, co-winner of the 1974 Nobel Prize in Economics (courtesy of John Hussman): “To combat depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection or production, we want to create further misdirection—a procedure which can only lead to a much more severe crisis as soon as the credit expansion comes to an end.”

--Mr. David Hay

 

Gio

EVA+5.30.2014_NA.pdf

[JEast]

Gray Swans seem to appearing every other month now.

German prices fell 0.3 percent in May, today’s report showed. All economists in the survey predicted they would rise or remain unchanged.

 

http://www.bloomberg.com/news/2014-06-02/german-inflation-missing-estimates-adds-to-case-for-ecb-action.html

[beerbaron]

So how can the ECB enforce negative interest rates without a bank run by depositors?

 

BeerBaron

[PatientCheetah]

So how can the ECB enforce negative interest rates without a bank run by depositors?

 

BeerBaron

 

The negative rates are for the bank deposits at the various central banks. The aim is to force more bank lending which contradicts with shoring up capital ratios. This is what happens when you have a decision body with members representing vastly different interests.

[fareastwarriors]

Markets Are Restacking the Building Blocks of a Financial Crisis

 

 

 

 

http://dealbook.nytimes.com/2014/06/12/markets-are-restacking-the-building-blocks-of-a-financial-crisis/?module=BlogPost-Title&version=Blog Main&contentCollection=Street Scene&action=Click&pgtype=Blogs&region=Body

[Liberty]

Markets Are Restacking the Building Blocks of a Financial Crisis

 

http://dealbook.nytimes.com/2014/06/12/markets-are-restacking-the-building-blocks-of-a-financial-crisis/?module=BlogPost-Title&version=Blog Main&contentCollection=Street Scene&action=Click&pgtype=Blogs&region=Body

 

Tepper's so frugal, LCD screens are a luxury he doesn't need!