Herding, Risk Appetite & Complacency Somewhat "Elevated".......

Just in time after the fastest 100 percent run of the S&P 500 ever....From a risk/reward standpoint this should at least raise some eyebrows......Especially when you add things like "Rally Intensity", margin pressure, geopolitical "instability", "poor" balance sheet quality, Korean bank runs, "Covenant Lite Flashback 2007, "surreal" trading records, a not so pleasant "Misery Index" ( Unemployment & CPI ), persistant "Buy The Dip" Mentality & an überbullish Biriny into the mix....The term "razor-thin margin of error" is probably not an overstatement..... And i havn´t even mentioned the "almost forgotten" ( sovereign ) debt crises.... I assume the markets will at the latest be "tested" when there are hints that "QE 3.0" will be temporarily off the table......Just as a reminder...QE 2.0 "Run Rate " right now : $3.3 billion per day ($2.3 million every minute) & movements in the Fed’s balance sheet in the last 14 months have had an 86% correlation with the S&P 500 ( David Rosenberg ).... The "Run Rate" number is taken from the latest must read Kyle Bass / Hayman Capital Management investor letter

All das fast auf den Tag genau nach einer Verdopplung des S&P 500....Nebenbei bemerkt im kürzesten jemals gemessenen Zeitraum.....Unter Chance/Risikogesichtspunkten haben die Ergebnisse historisch gesehen eher selten eine "stressfreie" Zeit signalisiert....Wenn man weitere Eckpunkte wie z.B. "Rally Intensität", Margendruck, geopolitische Instabilität, Koreanische "Bank Runs", ultralockere Finanzierungsbedingungen, euphorische Analysten, "surreal" anmutende Handelsergebnisse, einen wenig erfreulichen "Misery Index" ( Arbeitslosigkeit & Konsumentenpreisinflation ), extrem hartnäckige "Buy The Dip" Mentalität & "fragwürdige" Bilanzierungsmethoden zum Gesamtbild hinzufügt, dürfte klar sein, das "das Eis nicht gerade dicker geworden ist"......Das "fast vergessene" Thema (Staats)Schuldenkrise will ich nur am Rande erwähnen...... Die "Widerstandsfähigkeit" dürfte allerspätestens ( dann aber "ernsthaft" ) getestet werden, wenn es erste Signale gibt, das "QE 3.0" zumindest für ein kurzes Zeitfenster nicht auf der Tagesordnung steht.....Man muss sich immer wieder aufs Neue vergegenwärtigen das alleine die FED/Bernanke seit Monaten (und noch bis Juni) im Schnitt umgerechnet tagtäglich $3.3 Mrd ($2.3 Millionen jede Minute ) in die Märkte pumpt & lt. David Rosenberg sich der S&P 500 in den letzten 14 Monaten mit einer Korrelation von satten 86% analog zur Bilanzsumme der US Notenbank entwickelt hat....In diesem Zusammenhang komme ich nicht darum hin auf den wirklich lesenswerten Kyle Bass / Haymann Capital Management Investorenbrief zu verweisen.....Danach dürfte selbst die rosaroteste Brille zumindest einen kleinen Spliss davon getragen haben.....

Net Overweight Equities via FAZ

Raging bulls FT Alphaville

And the overwhelming theme of the latest BofA Merrill Lynch fund managers survey is…

Complacency.

From record equity and commodity overweights…

Asset allocation is straightforward and extreme: equity surges to a record O/W of 67%; commodities also at record O/W of 28%; bond allocation tumbles to -66%, lowest since April’06 and close to a record low.

The February FMS is one of the most bullish in years. Institutions have record equity and commodity overweights, very low cash levels and the strongest risk appetite since Jan‘06.

The FMS Risk Appetite Index rose to its highest level (47) since Jan‘06. Hedge fund net exposure rose to 39%, highest since July’07. Cash balances fell from 3.7% to 3.5%, triggering our FMS cash trading rule equity sell signal

Net Overweight Cash via FAZ

Fondsmanager sind rekordoptimistisch FAZ

Fondsmanager sind äußerst optimistisch. Noch nie hatten so viele von ihnen Aktien in ihren Depots übergewichtet, seit die Frage bei der Umfrage von BofA Merrill Lynch im April des Jahres 2001 zum ersten Mal gestellt wurde.

67 Prozent von ihnen haben Aktien in ihren Depots, so das Ergebnis der Februarausgabe der einmal monatlich stattfindenden Umfrage von BofA Merrill Lynch unter 188 Fondsmanagern weltweit. Das ist der höchste Stand, seit die Frage im April des Jahres 2001 in dieser Form zum ersten Mal gestellt wurde.

Noch im Januar hatte dieser Anteil lediglich 55 Prozent betragen und im Dezember des vergangenen Jahres sogar nur 40 Prozent.

Währen der „Aktienoptimismus“ immer extremer wird, werden die Anleihen immer unbeliebter. 66 Prozent der Fondsmanager haben sie untergewichtet, nach 54 Prozent im Januar und 47 Prozent im Dezember. Die Differenz zwischen jenen, die Aktien über- und Anleihen untergewichtet haben, ist so groß wie noch nie zuvor im Rahmen der Befragung.

Merrill Finds That Money Manager Confidence In Stocks At All Time Record High ZH

Couldn´t resist ( Page 17 )....... ;-)

Kann mir diesen Hinweis ( Seite 17 ) einfach nicht verkneifen..... ;-)

GOLD VALUATION :

FMS respondents remain firmly outside of the GOLD fan club with panellists seeing the metal as overvalued for much of the past 3 years.

February’s reading of net 31% overvalued is little changed from a record reading of a net 33% last month.

Not quite the definition of "ALL IN"..... Reassuring to see that at least since 2008 it seems almost nobody of the so called "Smart Money" has read the Special Gold Report "In Gold We Trust"....

Nicht gerade die Definition von "ALL IN"....... Beruhigend zu sehen das seit 2008 anscheinend immer noch sehr wenige der Fondsmanager einen Blick in den Special Gold Report "In Gold We Trust" geworfen haben....

Sentiment & Herding UPDATE via David Rosenberg ( see Blogroll )

The latest investment surveys show 52% bulls and a mere 13% bears. We heard anecdotally that at the ISI conference, the widespread majority believed new highs were coming for equity valuations, bonds were the most detested asset class, and that inflation was going to rip.

One person who attended told us that he had never before been to an event when the consensus was so one-sided, and that says a lot when you consider all the tech conferences being held in 1999 and 2000.

Reading a Bloomberg news story this morning, we were reminded that you have to go back 40 years to see the last time the U.S. stock market surged as much as it has in the past six months with such little volatility and opportunities to buy on dips along the way. In other words, this is not a normal market by any means,having been a virtual straight line up ever since Mr. Bernanke announced QE2 in late August.

And the same institution that conducted the survey above also just published a report concluding that the Shiller cyclically-adjusted P/E ratio is a relic and not to be relied upon as a valuation tool — perhaps because it is now suggesting that the market is 30% more expensive relative to historical norms.

Tony Dwyer Is Not Alone..........Of Course It Is Still A Good Time To Buy, Buy, Buy.....

What a "surprise"......Keep the following stats in mind when the daily spin "stocks are cheap on forward pe´s" is hitting the MSM... If you want to hear the "rationale" for a 2000 S&P target in 2013 visit Tony Dwyer & his "brilliant playbook" UPDATE: A guy named Altucher is almost as good It's Not a 'V', It's Even Better, Look for New Highs by 2012 .... There maybe are legitimate reasons to buy stocks, but a favourable opinion from "Wall Street Finest" should definitely not play any role among your screening process .... Except you use them as a "contrary indicator".... ;-)

Welch "Überraschung"......Behaltet die nachfolgenden Daten im Hinterkopf wenn es wie tagtäglich in den Medien und auch der Fachpresse gebehtsmühlenartig wieder heißt "das Aktien auf Bewertung der 2011er Gewinne günstig sind"..... Ein eindrucksvolles "Schauspiel" in dieser Disziplin bietet Tony Dwyer mitsamt seinem "brillianten Playbook" für sein 2000 S&P Ziel im Jahr 2013 UPDATE: Dieser Typ ist mindestens ebenbürtig It's Not a 'V', It's Even Better, Look for New Highs by 2012..... Grundsätzlich mag es ja durchaus gute Gründe die für Aktien sprechen geben, man sollte aber sicherstellen das die Einschätzungen der "Experten" beim Auswahlprozess keinerlei Rolle spielen....Es sei denn man nutzt sie als Kontraindikator.... ;-)



Bespoke

Bloomberg surveys sell-side Wall Street strategists on a weekly basis for their year-end S&P 500 price targets. At the start of 2010, the average year-end S&P 500 price target was 1,225, which would have been a gain of just about 10%. As markets moved higher in the first quarter, strategists upped their year-end targets, and the current average target stands at 1,268. (In the table below, green shaded price targets are ones that have been increased so far this year. No strategists have lowered their targets since the start of the year.) A target of 1,268 translates into a gain of 13.68% for the year and 16.48% from current S&P 500 levels.

There are no strategists with year-end targets that are lower than the index's current levels.

Analysts Projecting 27% Gain in S&P 500 Defy El-Erian Bloomberg

Combined price estimates from more than 2,000 forecasters tracked by Bloomberg show the S&P 500 will rise 27 percent in the next year, the fastest projected rate since February 2009, data compiled by Bloomberg show.

The rally above 1,350 will be led by industries most tied to the economy, according to analysts who boosted individual share projections by an average of 0.9 percent in May, the 14th straight monthly increase.

Should analysts’ forecasts for a 27 percent gain in the S&P 500 come true, the gauge would climb to 1,360 by next May, the highest level since June 2008.

The real story here are not the S&P 500 targets from the "strategist" but that they have managed to increase the target since the beginning of the year.... Despite events like the Flash Crash ( "Cancel All Orders, Cancel All Orders....." ), "minor headwinds" when it comes to Sovereign Debt,China , for US companies an unfavourable strong $ , impact from the "Oil Spill" on drillers & still insolvent Banks it´s fair to say that ROSE COLORED GLASSES are still a must have item among way too many among "Wall Street Finest"... ;-)

Die eigentliche Botschaft sind nicht die angegebenen Kursziele, sondern vielmehr die Tatsache das diese trotz einiger unschöner Ereignisse die vermehrt seit Jahresbeginn aufgetaucht sind wie dem sog. Flash Crash ( "Cancel All Orders, Cancel All Orders....." ), "minimalen" Problemen wenn es um Sovereign Debt,China den für US Firmen ungünstigen "starken $" , seit dem BP GAU die Probleme der Ölförderer & die immer noch bemerkenswert schwachen Banken geht, munter fleissig angehoben worden sind..... Denke es ist keine Übertreibung zu sagen das eine ROSAROTE BRILLE unter etlichen von "Wall Street Finest" noch immer zur "Standartausrüstung" gehört.... ;-)

I´ll let "Mr. Anti Spin" David Rosenberg du some further "bashing"..... Do yourself a favour & subscribe to his free DAILY REALITY CHECK... SUPERB!

Überlasse es "Mr. Anti Spin" David Rosenberg noch mehr Wasser in den Wein zu gießen....Empfehle allen sich frei Haus die tägliche Dosis Rosenberg zu genehmigen....

"It’s also fascinating to read the “Ahead of the Tape” column in the WSJ today and to read about the fabulous earnings performance of U.S. companies — a revival built on a weak U.S. dollar, accelerating global growth, fiscal stimulus and a steep yield curve.

Meanwhile, the consensus has just now gone ahead and projected peak earnings for 2011 just as each of these main crutches are reversing course."

AMEN....

McKinsey: Equity Analysts Are Still Too Bullish via Barry

Moreover, analysts have been persistently overoptimistic for the past 25 years, with estimates ranging from 10 to 12 percent a year, compared with actual earnings growth of 6 percent.

Over this time frame, actual earnings growth surpassed forecasts in only two instances, both during the earnings recovery following a recession. On average, analysts’ forecasts have been almost 100 percent too high.”

This chart completes the not so glory picture when is comes to the credibility & reputation from "Wall Street Finest".... If you have the "guts" to read the "rationale" behind Goldmans bullsih call you should read Goldman: "We Raised S&P 500 EPS Estimates Despite Worst May Performance In Almost 50 Years"

Dieser Chart paßt hervorragend ins Bild unm das das wenig glorreiche Bild abrunden....Für alle die die Nerven haben und wissen möchten auf welchen "Modellen" die Schätzungen von Goldman basieren Goldman sollte Goldman: "We Raised S&P 500 EPS Estimates Despite Worst May Performance In Almost 50 Years" lesen....

UPDATE:

Profit-Margin Outlook for U.S. Is ‘Extremely Bad’: Chart of Day Bloomberg

Best Stocks Liked Least by Analysts Missing U.S. Gain Bloomberg

Complacency Is Over....... "Cancel All Orders, Cancel All Orders....."

I hope he has "survived" the trading day.... If you want a good explanation how the "surprising" market action could happen at you should read NO FAT FINGER! & "Rise ( & Fall ) Of The Machines" ... ... If my market view is correct i think we can enjoy similar clips in the future.........

Bleibt zu hoffen das er den Handelstag gesund überstanden hat....Mehr Hintergründe für das nicht wirklich überraschende Marktverhalten gibt es in NO FAT FINGER! & "Rise ( & Fall ) Of The Machines" ... Sollte ich mit meiner Marktbeurteilung recht behalten dürften uns noch einige solcher unterhaltsamen Videos ins Hause stehen....



H/T The Reformed Broker

Did he really cancel his orders near the bottom..... ;-)

Hört sich für mich so an als wenn er nahe dem Tief alle Orders gecancelt hat...... ;-)

UPDATE:

Ben Lichtenstein’s Breathless SPX Order-Taking



H/T Barry Ritholtz

INSTANT CLASSIC!

Profit Margins, Margin Debt & Margin Of Error.......

Combine the data points with the excellent When Risk-Return Makes No Sense: How To Deal With An Overvalued Market and it should be clear that Mr. Market is walking on very thin ice now... I must admit that this is my view since September/October......Cannot help but it at least smells a little bit like "Flucht In Sachwerte"... I still think that the risk / reward is far more favourable in GOLD... ;-)

Wenn man die folgenden Daten mit dem extrem lesenswerten When Risk-Return Makes No Sense: How To Deal With An Overvalued Market kombiniert wird klar das man sich momentan auf sehr dünnem Eis bewegt.... Muß gestehen das ich diese Ansicht seit dem September/Oktober vertrete.... So langsam kann man zumindest unterschwellig das Gefühl haben das zumindest in Teilen eine "Flucht In Sachwerte" eingesetzt hat.....Bin mehr denn je überzeugt das in Sachen Chance/Risiko die Aussichten für GOLD weitaus vielversprechender sind.... ;-)

William Hester / Hussman Funds

While earnings growth expectations are steep, sales growth expectations are more modest. Sales-per-share for S&P 500 companies is expected to grow about 5.5 percent this year and about 7 percent next year, according to forecasts. The difference between the growth rates of the top and bottom lines is implies a forecast for sharply rising operating profit margins. The graph below is updated from an earlier piece, and includes forecasts through the end of 2012. It plots the long-term level of S&P operating margins in blue. In red, I've plotted the operating margins currently being forecasted by analysts based on their projections for sales and earnings. Last October, analysts were about half way to pricing in profit margins that matched the record levels of 2007. Now, they are just about there.

David Rosenberg / Gluskin Sheff

As for 2011, the consensus is looking for $97 on S&P 500 operating EPS — we did $95 at the peak of the last cycle when the unemployment rate was at 4.5%, the industry CAPU rate was 81%, private sector credit xpanding at a 16.2% annual rate and nominal GDP at a 4.9% YoY pace.

So the consensus believes that barely two years into the second weakest post-recession recovery in the past six decades that we will actually get back to peak profit levels seems to be a tad outlandish.

Stock Market Rally Explained The Mess That Greenspan Made

Ad in the the Money & Investing section of today’s Wall Street Journal

Factoring in the tight junk spreads right now one must assume that looking at the next chart the "Margin Of Error" is probably "slim"......

Da momentan selbst historisch gesehen recht enge Junk Spreads vorherrschen muß man beim Anblick des nächsten Charts wohl unterstellen das in Sachen "Margin Of Error" wenig "Spielraum" bleibt.....

Investors really ♥ junk. We mean really. FT Alphaville

In most discussions of the high-yield bond market, historical spreads play a major role. But comparing spreads today to those of the past assumes that junk bonds are a constant entity over time. Unfortunately, junk is junkier today, as illustrated by this chart [at left] from last October’s Global Financial Stability Report.

The fraction of CCC or lower-rated bonds approximately doubled from early 2007 to early 2009. And according to a recent report from Fitch, the fraction at the end of 2009 was still 27%.

Debt ranked in the BB category gained 39.1 percent in the past 12 months, underperforming the CCC tier by 66 percentage points, according to Bank of America Merrill Lynch index data.

H/T EconomPicData

The "risk trade" is currently clearly not in the early innings....... Looks like the Mantra Bullish. No Matter What & the "Moon Trade" ( brilliant!) is still alive & kicking.... ;-)

Der sog. "Risikotrade" befindet sich sicher nicht mehr im "Anfangsstadium"..... Sieht so aus als wenn das Motto Bullish. No Matter What sowie Ladies and Gentlemen, We Are Trading On The Moon ( brilliant!) momentan noch immer zu greifen scheint...... ;-)+

UPDATE:

PARTS OF THIS MARKET ARE LOOKING IRRATIONAL PragCap

Why Young People Should Buy Stocks on Margin Time H/T Denninger

We just survived the worst debt-fueled binge since the Roaring '20s. Now two professors at Yale University are suggesting we introduce leverage into a new realm of our lives —our retirement portfolios. TIME's Barbara Kiviat asked economists Ian Ayres and Barry Nalebuff to explain themselves.

You are advocating that people in their 20s and early 30s take all of their retirement savings and buy stocks on margin. Can you explain why that's not as crazy as it sounds?

"It's not as crazy as it sounds because it helps people better diversify risk across time"

Read this twice....

UBS: EQUITY MARKET RISKS APPROACHING EXTREMES PragCap

Irrational Exuberance Is Here: VIX Lowest Since July 2007 As Options Speculation Highest Since Dot Com Days

The VIX has just hit the lowest level since July of 2007 as Sentiment Trader reports that "speculation in the options market has spiked to its highest levels since the spring of 2000."

As i´ve said, not in the early innings.....

Wie gesagt, nicht mehr im Anfangsstadium......

Cramer´s Bull Case For Banks..... I Can Smell A Top... ;-)

Oh boy..... After the ( even by his standarts.... ) famous "Housing & Bank Stock Shortage" call from January 2008 ( NO KIDDING > see "Ten Trillion $ Worth Of Good Calls" ) was a little bit "premature" he is predicting a bank stock shortage version 2.0.... Would at least be honest if he mentioned the "ultimate moral hazard trade" & the "Enron-esque characteristics" when it comes to accounting as the two main reasons behind the motives to own banks.. ;-)

Die Euphorie ist zurück........ Nachdem derselbe Typ Januar 2008 leicht "verfrüht" bereits einmal eine "Housing & Bank Stock Shortage" ( siehe "Ten Trillion $ Worth Of Good Calls") proklamiert hat ist es höchtse Zeit für eine Version 2.0.....Wäre zumindest ehrlich gewesen wenn er in seinen 10 Gründen die unbedingt dafür sprechen sofort massiv Bankaktien zu kaufen den "ultimativen Moral Hazard Trade" sowie die kreative Bilanzierung die stark "Enron-esque characteristics" aufweist als die Topgründe aufführen würde.... ;-)



Just for the record here are the two main ETF´s tracking the financial sector.....

Nur um die Daten festzuhalten nachfolgend die beiden relevanten Bank/Finanz EFT´s....

Financial Select Sector ETF) $ 15,47 & KBW Regional Banking (ETF) $ 25,47

Needless to say that both ( along with almost every asset class worldwide ) are trading at 52 week highs & had the longest winning streaks since 1995.....Especially Citigroup seems to be a "real bargain"... ;-)

Überflüssig zu erwähnen das die EFT´s ( wie fast alle anderen Anlageklassen weltweit ) auf Jahreshochs stehen & gerade die längste Gewinnserie seit 1995 hinter sich haben....Besonders Citigroup scheint ein "echtes Schnäppchen" zu sein... ;-)

John Hussman Rips Apart CNBC ZH

In reflecting on why the past 15 years have been so riddled by irresponsible speculation, it is impossible to ignore the rise over that same period of widely-viewed financial programming that is equally riddled with cartoonish content that encourages short-term thinking and speculation (buy-buy-buy! sell-sell-sell! boo-yah!)

"Anti Spin" from Chris Whalen via NC ( MUST READ!!!!)

In fact, the banking system is continuing to sink under bad loans and even worse securities losses. Telling the public that the banks are “fixed” is irresponsible. Unfortunately this false perception is widespread, including among major media such as CNBC and also with a number of my clients in the hedge fund world.

But at least Bubblevision is a very good tool to spot sentiment......

Immerhin muß man Bubblevision lassen das es kaum ein besseres Barometer gibt wenn es darum geht die Stimmungen "einzufangen".....

UPDATE: Unrelated....... Ohne Bezug.... ;-)

Citi: Bove Raises to “Buy”; Citicorp Is New Model for U.S. Banks

He figures Citi is worth about $8.50 in that outlook.

"Wall Street Finest & Lehman June 2008 ZH

Hoenig Says Big Banks Must Either Add $210 Billion In New Capital Or Reduce Total Assets By $3 Trillion; Bank Capital Raises Imminent ZH

Be Very Afraid Of Tony Dwyer......

Listen to the clip ( his performance starts at the 2 Minute mark ) and you know why.......Make sure you don´t have coffee in your mouth when you hear his conservative S&P 500 target ...... Complacency seems to be still running high among some "experts"......

Warum man sich vor Dwyer in Acht nehmen sollte..... Der Clip ( sein Auftritt startet in Minute 2 ) verdeutlicht das mehr als eindrucksvoll.....Vorsichthalber weise ich darauf hin nach Möglichkeit keinen Kaffee zu trinken wenn er sein konservatives S&P 500 Ziel verkündet ...... Die "Sorglosigkeit" scheint unter einigen von Wall Street Finest" noch immer weit verbreitet zu sein.....



H/T Peter

Collins Stewart Picks U.S. Equity Strategist

Collins Stewart has appointed Anthony Dwyer as managing director and chief equity strategist in the U.S., IM Weekly reports. In the newly-created position in the financial advisory firm, Dwyer will use macro-economic and fundamental, technical and historical analysis to advise the institutional clients.

I assume this footage will haunt him in the future...... ;-)

Kann mir gut vorstellen das Ihn dieser Clip von einige Jahre verfolgen wird.. ;-)

UPDATE:

Spinning The Consumer Confidence Number Collins Stewart via ZH

As A Contrarian........

the following story is great.....Clearly a sign of a bubble when the most successful hedge fund manger is unable to collect more than $ 100 million inflows into his funds solely related to GOLD..;-)

Especially when the fundamentals against GOLD are now dramatically improving even outside the "rock solid" US on a daily basis.. Must be the reason why the "Sovereign Misery Index" is looking just fine.....;-)

Wenn der erfolgreichste Fondsmanager der letzten Jahre es nicht schafft mehr als 100 Mio $ für seinen GOLDFOND einzusammeln muß man klar zum Schluß kommen das sich GOLD in einer Blase befindet...;-)

Gilt umso mehr, da die Fundamentaldaten ( u.a. gesunde Banken & Staatsfinanzen.. )die gegen GOLD sprechen ja, wie gerade momentan recht anschaulich selbst in der gängigen Presse präsentiert, tagtäglich nicht nur in den gewohnt ""soliden" USA, sondern besonders für € Anleger besser werden....Ebenfalls wunderbar am "Sovereign Misery Index" zu erkennen....;-)

H/T Todd Harrison / Minyanville via Pragmatic Capitalist

Midas Touch Lost? Paulson Hits Hurdles in Gold Fund WSJ

It took John Paulson months to convince investors that housing would crumble.

Now it's taking him awhile to get them excited about gold, his latest passion

When Mr. Paulson's Paulson & Co. late last year announced it was starting a hedge fund to make a big gold bet, many on Wall Street expected investors to line up. Paulson & Co. scored about $20 billion in profits in 2007 and 2008 wagering against subprime mortgages and financial companies. It then bought financial shares last year to add more gains.

Some gold traders expected Mr. Paulson's new fund, launched Jan. 1, to raise billions of dollars and even help push gold higher when it started buying this year.

That hasn't happened. Despite months of investor meetings, Mr. Paulson has raised $90million or so for his new gold fund, according to people close to the matter. Even the $250 million that Mr. Paulson himself placed in the fund hasn't persuaded many investors to get on board.

Maybe he should do a roadshow among European investors....... ;-)

Empfehle zur Not mal ne Road Show durch Europa........ ;-)

Mr. Paulson has told investors that his gold strategy is a long-term one that will reap rewards over the next few years as the value of leading currencies drop

UPDATE:

A STERN REALITY CHECK FOR GOLD NAYSAYERS PC

Furthermore, the US dollar doesn’t have to decline for Gold to do well. Did you know that since the very end of 2004, the US$ is flat but Gold is up 143%? Since July 20, 2007, Gold is up 56% while the dollar is flat. Since early September 2008, Gold is up 35%, while the dollar is up 1%.

CLSA’s Christopher Wood FT Alphaville

A sovereign debt crisis in the West is coming sooner or later though it is probably not right now. This is why the recent correction in gold is an opportunity to buy more bullion and more gold mining shares.

As a German / European investor ( not speculator ) i´ve to repeat myself that it is always important to follow GOLD priced in €..... Unfortunately none of the so called German "business" papers / media takes care of this not insignificant fact.....See this Handelsblatt example in which several German "experts" discussing & charting the recent "correction" in GOLD denominated in $...

Auch auf die Gefahr hin das ich mich wiederhole gerade als Deutscher / Europäischer Investor ( nicht Spekulant ) ist einzig und allein der GOLDpreis in € relevant.... Mit etwas Glück findet man diesen auf den hinteren Seiten im Kleingedruckten der deutschen Fachpresse.....Verweise mal exemplarisch auf Taumelnder Euro zieht Goldpreis mit nach unten vom Handelblatt....

The fundamentals support our view as the financial crisis is entering the most bullish phase for Gold. The sovereign debt crisis, which really began in Iceland, will plague Europe this year and eventually spread to the UK and US by early 2011. Nations have no other choice but to monetize their growing obligations while trying to stimulate their economies with deficit spending and near 0% interest rates. It is a perfect storm for Gold

Chart Net Speculative Gold Long Positions When Gold Was Above $ 1.200

Yesterday / Gestern 222,282 net long gold contracts

To be honest i´m a little surprised that the long positions have only declined 50.000.....Hot money will lead to lots of volatility & great buying opportunities ( wouldn´t rule out something south of $ 1.000 ).... But according to Peter Boockvar this still elevated number means that "net longs in gold and silver both fell to its lowest level since Aug ‘09"

Muß gestehen das ich überrascht bin das die Longpositionen vom Hoch trotz der auf $ Basis heftiger Korrektur nur um 50.000 geschrumpft sind....Dürfte also gewohnt volatil bleiben und hoffentlich die ein oder andere Einstiegsgelegenheit ermöglichen.... Peter Boockvar weist darauf hin das die immer noch hohe Anzahl die Netto long position auf dem niedrigsten Stand seit August 2009 zurückgefallen sind.....

Does Anyone Detect A Hint Of Complacency?

What a fascinating market and via FT Alphaville comes another good indicator of how "extreme" investor sentiment has become. Joshua Brown in Ladies and Gentlemen, We Are Trading On The Moon (!) has so far the best & funniest transcription of the latest market behavior....

As i have written in the past few days in Don´t Call It A Bubble.... & "Anti Spin" i´m a very sceptical ( more bearish than ever ) that this kind of market level is sustainable.... Especially in the face of a "spiking" Sovereign Misery Index .....To be honest i´m thinking this since October.... Make sure you watch the following clip.... Nice to see that Saluzzi still isn´t drinking the kool aid....

Bin jeden Tag aufs neue fasziniert wie der Markt auf die Nachrichtenlage reagiert. Meiner Meinung nach Joshua Brown in Ladies and Gentlemen, We Are Trading On The Moon (!) die bisher beste und lustigste Analyse zu Papier gebracht.

Ich bin wie in Don´t Call It A Bubble.... & "Anti Spin" geschrieben "skeptisch" ( höflich umschrieben ) was die Nachhaltigkeit der Kursanstiege angeht. Und all das im Angesicht eines täglich steigenden Sovereign Misery Index .....Meiner Meinung nach ist das Chance/Risikoprofil so unvorteilhaft wie selten....Die Skepsis steigt momentan tagtäglich und erreicht geradezu schwindelerregende Höhen.... ;-) Der nachfolgende Clip von Saluzzi liefert eine weitere gute Bestandsaufnahme in Sachen aktuelle Marktstimmung.....

Chilled markets FT Alphaville

Markets move on the interaction of news with flows of greed and fear among investors. When fear is lowest, the danger of a fall is greatest.

Especially when other sentiment indicators are considered:

Another great contrarian indicator is the survey of sentiment by the American Association of Individual Investors. Last week, this showed the lowest proportion of self-described “bears” since February 2007 – when volatility first started to spike as investors at last began to grasp the severity of the subprime mortgage crisis in the US.

Bearishness in this survey hit an all-time high in March last year when the current rally first started, showing how much money can be made by betting against extremes of sentiment.

But it’s not just the retail punter who’s bullish.

The Pros are too.

From Bloomberg:

Investors forecast gains in each of the nine countries represented in the Bloomberg Professional Confidence Survey for the first time since the data began in 2007.

The sentiment measure for the Standard & Poor’s 500 Index climbed 35 percent to 54.37. That’s only the second time the reading exceeded 50, signaling participants anticipate a rally in the next six months.

The responses from 4,101 Bloomberg users were gathered Jan. 4-8 as the MSCI World Index added 2.6 percent.

The Bloomberg sentiment indexes for the U.S., Japan and Spain rose above 50 and reached all-time highs.

The U.K. gauge topped 50 for the first time since October, while Switzerland climbed to a record.

Spain exceeded 50 for the first time, adding 17 percent to 51.41.

Confidence in Switzerland climbed 3.6 percent to 60.89, and the U.K. index surged 22 percent to 55.61. The measures for Italy, France and Germany increased 14 percent, 3.7 percent and 2.4 percent to 62.61, 57.77 and 53.33, respectively.

Does anyone detect a hint of complacency?

FUND MANAGER BULLISHNESS COULD BE WARNING SIGN PragCap

The latest survey showed the highest surge in Merrill’s Risk & Liquidity(46%) indicator since May of 2006. In the past, this indicator has served as a fairly good contrarian indicator.

This survey is showing some contrariansell signals. Just 45% of fund managers are protecting themselves against a downturn versus 52% in December. The survey also shows a strong appetite for risk and high beta names

Faber on complacency & investor sentiment......



EXCELLENT!

Don´t Call It A Bubble........

After the introduction of the "Pay-If-You-Can-Loans" the comeback of Toggle/PIK Bonds are more than early warning signs that something is at least a little bit "frothy"...... The same is true for numerous stock markets ( see the following chart Mexican Stock Market Back To All Time Highs WOW!)

Nachdem ja vor kurzem die "Pay-If-You-Can-Loans" ins Leben gerufen worden sind ist die noch vor wenigen Monaten undenkbare Wiederaufersteheung der Toggle/PIK Bonds ein weiteres Anzeichen, das nennen wir es mal vorsichtig, eine leichte "Überhitzung" eingetreten ist.... Leider sieht es in etlichen Aktienmärkten nicht bedeutend anders aus ( siehe nachfolgden Chart Mexican Stock Market Back To All Time Highs WOW! )

Treasurers Embrace Pay-in-Kind Bonds as Ghost of Lehman Fading
( Bloomberg ) Companies are selling debt with terms last seen before credit markets froze, showing why the world’s biggest bond fund manager says another bubble may be brewing.

JohnsonDiversey Holdings Inc., a Sturtevant, Wisconsin, maker of cleaning supplies, and Wind Acquisition Holdings Finance SpA, parent of Italy’s third-largest mobile-phone company, sold bonds that can pay interest in new debt instead of cash, the first such deals since 2007, according to Bloomberg data.

Goodman Global Inc. raised $320 million to pay its owner, leveraged buyout firm Hellman & Friedman, a dividend, one of at least seven similar offerings since November

Two years after credit markets seized up, treasurers are luring investors to junk bonds that returned a record 58 percent last year, as measured by Bank of America Merrill Lynch indexes. U.S. sales of $162 billion beat the all-time high of $149 billion in 2006, Bloomberg data show.

“Six months ago I wouldn’t have imagined being able to do this deal,” said Karim-Michel Nasr, head of corporate development in Paris at Weather Investments SpA, Wind’s holding company.....

Capital Access

At least two dozen borrowers since November have asked lenders to change terms of debt agreements to permit bond sales, extend loan maturities or pay dividends to their owners, Bloomberg data show.

Access to capital means defaults will likely drop to 3.9 percent by November from 12.7 percent a year earlier, New York-based Moody’s Investors Service says.

Speculation that companies will have less difficulty making payments has led investors to accept lower interest rates and looser borrowing terms. The extra yield demanded on junk bonds instead of Treasuries narrowed to 6.39 percentage points at the end of 2009 from almost 19 percentage points on March 9, Merrill Lynch indexes show. Speculative grade debt is rated below Baa3 by Moody’s and BBB- by Standard & Poor’s.

‘We Forget’

“I’m looking at some of the things that are being priced and I’m saying, ‘Wow, how quickly we forget,’” said JohnsonDiversey Chief Financial Officer Joseph Smorada. The market is “starting to get a little dangerously aggressive,” he said.

The company sold $250 million of so-called toggle debt due in May 2020 on Nov. 20 that allows it to pay a 10.5 percent interest rate either in cash or notes for the first five years.

The first pay-in-kind bonds since 2007 were part of a $2.6 billion recapitalization in which New York-based LBO firm Clayton Dubilier & Rice Inc. agreed to buy a 46 percent equity interest in the company.

Moody’s gave the notes its fifth-lowest ranking of Caa1, saying the debt is five times more than adjusted earnings before interest, taxes and amortization costs. It has had negative free cash flow the past three years, though it’s expected to break even in 2010, Moody’s said.

‘Dangerously Aggressive’

“In early 2009, I don’t think we could have borrowed a nickel if our life depended on it,” Smorada said. Investors submitted bids for almost four times the amount of notes offered, he said.

Investors haven’t lost discipline and companies are mainly selling bonds to refinance or cut interest expenses, said William Cunningham, the head of credit strategy and fixed-income research at State Street Corp.’s investment unit in Boston.

Wind Acquisition of Luxembourg raised $1.1 billion last month selling 7.5-year, 12.25 percent notes in dollars and euros that allow it to pay interest with more debt until 2014. Wind, controlled by Egyptian billionaire Naguib Sawiris and the parent of Wind Telecomunicazioni SpA, boosted the offering 50 percent as demand rose.

The investment flood has undercut efforts to toughen restrictions that protect investors, said Alexander Dill, senior covenant officer at Moody’s in New York. Many covenants are “largely replicating” rules from 2006 and 2007, Dill said in a Dec. 10 report.

TRW Automotive Inc., the world’s biggest supplier of vehicle-safety equipment, sold $250 million of eight-year notes in November rated Caa1 with covenants “substantially unchanged” from its 2007 indenture for debt graded four steps higher at Ba3, according to the Moody’s report. The Livonia, Michigan-based company said Dec. 22 it raised $400 million in term loans as lenders amended and extended its revolving credit facility.

FT Alphaville

Global high yield debt volume for the week of January 11th totaled $11.7 billion, the biggest week for high yield debt on record. The previous record was set during the week of November 5, 2006 when $11.4 billion was raised. With $14.4 billion raised so far this month, it is the best all-time start for the high yield markets since records began in 1980.

Update High Yield Bonds Continue To Do Well Bespoke

Over the past month or so, the only area of the bond market that has done well is junk. Both Treasuries and investment grade corporates have struggled, while high yield bonds have continued to surge. Below we highlight a six-month performance chart of the high yield bond ETF (HYG) and the investment grade corporate bond ETF (LQD).

Mortgage-Bond Leverage Reaches 10-to-1

Wall Street firms are loosening terms of their lending to mortgage-bond investors as markets heal, an RBS Securities Inc. executive said.

Repurchase agreement, or repo, lending against the debt has expanded so much since freezing in late 2008 that some banks now offer as much as 10-to-1 leverage and terms as long as one year on certain securities backed by prime jumbo-home loans

Update

Bubble warning ( Economist )

Once again, cheap money is driving up asset prices ( Economist )

Ladies and Gentlemen, We Are Trading On The Moon :-) Reformed Broker

Anti Spin From Rosenberg

Time for a reality check ....Especially with markets at new highs, priced for perfection, investor sentiment ( Chart from December ) & complacency at "extreme" levels & quite a steep "Wall Of Worries" (H/T Zero Hedge) signalling at least not insignificant headwinds ..... UPDATE: Not a Positive Economic Picture M. Panzner .....

"Rosenberg Warning" ..... Make sure you don´t miss Know Your Market Bears – A Field Guide via The Reformed Broker...Hilarious :-)!

Denke die Zeit für einen Realitätscheck .... Gilt besonders da der Start ins Jahr 2010 neue Rekorde gebracht hat und die Bewertung nahe ( jenseits ) der Perfektion gepreist ist, die Stimmung der Investoren ( Chart aus dem Dezember ) & "Selbstzufriedenheit" schon leicht "euphorische" Tendenzen anzeigt und etliche andere Faktoren zukünftig zumindest erheblichenGegenwind versprechen......UPDATE: Not a Positive Economic Picture M. Panzner

Verweise weil es sich um Rosenberg handelt "warnenderweise" :-)! auf Know Your Market Bears – A Field Guide via Reformed Broker....Wunderbar :-) !

Breakfast With Dave 102609 Top

David Rosenberg

"So this remains the Houdini rally — no jobs; no pricing power; no broad participation; and no volume "

Hussman

"Over the past decade, the stature of the market as an effective discounting mechanism has gradually eroded. The observation and analysis of potential risks – though essential to long-term investing and loss avoidance – is far less actionable than one might expect. Investors will evidently speculate as long they have dice in their hands and the casino is not visibly on fire."

Bob "The Bear" Janjuah FT Alphaville

Well I clearly underestimated the ability & willingness of the Public Sector, notably in the UK, US, parts of periph Europe and Japan, to take huge risks with their sovereign balance sheets, AND IMPORTANTLY, I over-estimated the ability & willingness of the Financial Sector/Market to see things for what they are (Another Debt Fuelled Bubble/Ponzi).

The THE ULTIMATE GUIDE TO 2010 INVESTMENT PREDICTIONS AND OUTLOOKS compilation from PragCap gives numerous market calls from the "Who Is Who" and is a must read! Brilliant!

Wer einen fast kompletten Überblick von allen wesentlichen Adressen der Finanzwelt in Sachen Ausblick haben möchte der sollte THE ULTIMATE GUIDE TO 2010 INVESTMENT PREDICTIONS AND OUTLOOKS von PragCap nicht verpassen. Fantastisch!

But with Bernanke, Geithner, goverments, regulators & central banks around the globe playing the moral hazard card almost on a daily basis ( The Fed Is Preparing QE 2.0, MBS-Only Edition) without being punished significantly from bond & currency markets the party can easily continue for a while..... One of many many reason why i´m a GOLD-BUG .... ;-)

Da Bernanke, Geithner, Aufsichtsbehörden, Regierungen und Zentralbanken rund um den Globus die "Moral Hazard" Karte praktisch tagtäglich ( siehe The Fed Is Preparing QE 2.0, MBS-Only Edition ) in den Ring werfen ohne ernsthaft vom Anleihe und Währungsmarkt "getadelt" zu werden ist nicht auszuschließen das die Party noch ne Zeit lang weitergeht...... Einer von etlichen Gründen warum ich als GOLD-BUG durchgehe .... ;-)

I´m Not An Art Expert, But This Price Looks "Frothy"......

Stories like this might explain why some still call the debt & equity "markets" a buy .....;-) Probably ( not) a coincidence that my May 2007 post Speaking Of Bubbles......What About Art? was highlighting another Warhol work sold for the "distressed" price of just $US71.7 million almost matched the peak for other asset classes as well.....

Solche Geschichten erklären wohl auch warum immer noch fast alle die Aktien und Anleihemärkte als klaren Kauf einstufen.... ;-) Sicher (k)ein Zufall das mein letztes Posting zu diesem Thema vom Mai 2007 Speaking Of Bubbles......What About Art? wo ein weiteres Warholwerk für den Schnäppchenpreis von lediglich 71.7 million $ den Besitzer gewechselt hat zeitlich mit dem Top in anderen Märkten einherging.....


Warhol’s ‘200 One Dollar Bills’ Fetches $43.8 Million in N.Y.

Andy Warhol’s 1962 “200 One Dollar Bills” fetched $43.8 million tonight at Sotheby’s contemporary- art auction in New York.

The seller was London-based collector Pauline Karpidas, according to two people familiar with the situation. Karpidas couldn’t immediately be reached for comment.

The work, estimated to sell for $8 million to $12 million, is among the artist’s earliest silkscreen paintings, a process that became his signature technique

> I don´t argue with the art ( see picture ) but when the price estimate is $8 to $12 million and it the final price is almost 400 percent higher something is indeed very "frothy"...... UPDATE: See final comment in the post.....

> Mir macht weniger der Preis für das Bild ( siehe oben ) zu schaffen als vielmehr das die ursprüngliche Preisspanne von 8-12 Mio $ mal eben um fast 400% übetroffen worden ist.....Solch Verhalten geht unabhängig von der Anlageklasse fast immer mit einerm Top bzw einer Blase einher..... UPDATE: Verweise auf meinen aktualisierten Abschlußkommentar am Ende des Postings....

Alex Rotter , head of the contemporary art department

"Andy Warhol's 200 One Dollar Bills is a hugely important work for American art history. Not only was it one of the starting points of pop art, but this picture had the perfect ownership history - directly from Warhol's dealer to the legendary collector Robert C Scull, and then from his estate sale at Sotheby's to the current owner who acquired it in 1986 for USD 385,000,"

This spinmaster could easily work on Wall Street.....

Man muß diese Kunstkritiker einfach lieben......

UPDATE:

The Great Contemporary Art Bubble Trailer Documentary by Ben Lewis



I hope you have the chance to see this "brilliant" documentary! After watching the entire doc i´m now 100 percent sure that the lates Warhol auction represents a bubble or is a scam.....Not sure what is better..... Guess who shortet the hell out of Sothebys.... Famous Hedge Fund manger Jim Chanos...This guy rocks!

Hoffentlich ergibt sich für Euch die Möglichkeit sich die wirklich bombastische Doku in voller Länge anzusehen....Bin mir nun zu 100% sicher das es sich bei der o.g. Auktion um eine neue Blase handelt bzw die Auktion getürkt gewesen ist...Weiß nicht was ich besser finden soll....Verglichen mit dem Kunstmarkt scheint selbst Wall Street etisch ganz weit vorne zu sein..... Übrigens schön zu sehen das einer der besten Hedge Fond Manager Jim Chanos auch hier das richtige Näßchen gehabt hat und Sothebys in Grund und Boden geshortet hat.... Der Typ rockt!

You Know Something Is Wrong When.......

A veteran like Art Cashin is scared that the markets cannot handle ( QUOTE: "Meltdown" , "800 Point Plunge" ) a 2 percent intraday "spike" in the $......Needless to say that after Cashin finished the interview the market scored the biggest gain fueled from the "blockbuster" Government Domestic Product report since July hand in hand with a weaker $...... Shocking to see that this "bulletprove" strategy cannot work indefinitely.....

Wenn ein Veteran wie Art Cashin Angst vor einem Crash ( ZITAT: "Meltdown, "800 Point Plunge") hat nur weil der $ nach einer langen Talfahrt keine 2% intraday Erholung vertragen kann sollte man zumindest mal kurz innehalten..... Brauche wohl nicht zu erwähnen das nur Minuten nachdem Cashin die Bombe hat platzen lassen die Märkte getragen von dem "überzeugenden" Government Domestic Product den größten Tagesgewinn seit Juli haben folgen lassen.... Hand in Hand mit einem stark schwächelnden $...... Schon schade das diese "idiotensichere" Strategie nicht in alle Ewigkeit fortgeführt werden kann.....



Combine this with one of the biggest stock market rallies of all time ( chart ) & the Highest Risk Appetite Since April 2006 among the so called "smart money" and things can get "interesting"....... God forbid when the $ moves lower and the markets refuse to follow the inverse course.....Would probably qualify at least for a "Grey Swan".....

Wenn man nun noch bedenkt das wir gerade eine der gewaltigsten Aktienmarktrallies aller Zeiten ( Chart ) hinter uns haben und die Risikobereitschaft der "Professionellen" den höchsten Stand seit April 2006 erreicht hat kann es schnell "ungemütlich" werden..... Nicht auszudenken was passiert wenn der $ gen Süden geht und die Märkte daraufhin weigern zu steigen..... Denke dann dürften einige Marktteilnehmer zumindest einen "Grey Swan" am Horizont erkennen....;-)

"A Sham GDP For A Sham Economy"......

The high quality of the GDP aka "Government Domestic Product" growth is indeed "impressive".... As a GOLDBUG you gotta love this kind of "sustainable" growth.....

Solch "solides" und vor allem "nachhaltig" erkauftes GDP bzw "Government Domestic Product" Wachstum verdeutlichen eindrucksvoll warum ich starker Befürworter von GOLD bin..... ;-)

Mean Street: A Sham GDP for a Sham Economy Even Newmark

Americans rejoice! GDP grew by 3.5% in the third quarter and the recession is over.

It’s time to drink champagne, dance in the streets, and have a group hug with Nancy Pelosi and Ben Bernanke. But whatever you do, don’t ask yourself why the recession has ended. The answer might ruin the party.

The recession is over only because Washington decided it should be. With billions in fresh government spending, it was only a matter of time before GDP posted some growth.

It’s too bad all that government spending is borrowed money. Someday, we’ll actually have to pay off this year’s $1.4 trillion deficit.

Of course, all of the president’s Keynesian men will argue that everything is working to plan — the stimulus is stimulating. But it’s hard not to see today’s GDP bounce as a bit of a sham.

Just check out where the economy grew. Almost half — or 1.7% of the pickup in GDP growth came from “motor vehicle output.” That’s the summer’s $3 billion cash-for-clunkers program doing its thing.

H/T Clusterstock

But at what cost?

Edmunds.com just released some compelling analysis on cash-for-clunkers. Apparently, it cost the U.S. taxpayer about $24,000 per vehicle sold. Edmunds gets that number by dividing the $3 billion by the 125,000 additional car sales generated by the program. The methodology makes sense to me, but click here and decide for yourself.

The White House would probably contend that it’s impossible to determine incremental sales — meaning each sale that only happened because of the government $3,500 to $4,500 subsidy. And that the sale of each and every car spurs economic activity well beyond the program’s $3 billion.

But isn’t it possible that the Edmunds.com analysis is actually understating the true costs to the taxpayer? What about the interest costs on the borrowed $3 billion?

What about the cost of propping up GMAC so that it could underwrite cash-for-clunker loans?

That’s the catch with all this government intervention — lots of unforeseen consequences. And we never learn. The trillion dollar disasters with Fannie Mae and Freddie Mac haven’t stopped the government from tinkering with the housing market.

Consider another one of Washington’s smashing successes: the $8,000 credit for first-time home buyers.

For the third quarter, “real residential fixed investment” — also known as “homebuilding” — jumped 23.4%. That boosted GDP by another 0.5%. Do you feel like hugging Harry Reid now?

H/T Mark Hanson

> More Homes.......Just what the Doctor ordered...... Thank god there are only 18.8 Million Vacant Homes In Q3 ......

> Mehr Häuser.....Macht bei Ansicht der o.g. Grafik die das Verhältnis von neuen Hausverkäufen und neuen Zwangsvollstreckungen extrem viel Sinn..... Besonders wenn man bedenkt das in den USA lediglich 18.8 Million leerstehende Häuser existieren ...... Brauche nicht zu erwähnen das diese mehr als sinnvolle Förderung gerade ausgedehnt und verlängert worden ist......

But we’re not seeing the real cost of the homebuyer tax credit. This is very expensive stuff. The Calculated Risk blog figures the home-buyer credit costs the taxpayer $43,000 per incremental home sale. Goldman Sachs ran its own numbers, reckoning that each incremental home sale cost the taxpayer an astounding $80,000. Again, the methodology seems right to me, but decide for yourself.

And again, this analysis understates the program’s true costs. We don’t include the cost of all the fraud — even though we know thousands of false and improper claims are being filed.

We don’t consider the cost of propping up the FHA , which is now underwriting all of the mortgages

And we can never calculate the true economic cost of messing with home prices – though the crisis over the last three years certainly gives us a hint.

So, let’s party as we welcome GDP growth. But never forget how the party ends – a group hug with lots of tears.

UPDATE

Monument Securities' Stephen Lewis via FT Alphaville

Government purchases were surprisingly strong. Instead of falling back from what had looked an erratic 14.0% annualised rise in Q2, defence spending increased further, at an 8.4% rate.

Cheering Over Ugly Report MISH

Personal income decreased $15.5 billion (0.5 percent), while real disposable personal income decreased 3.4 percent, in contrast to an increase of 3.8 percent last quarter. Those are horrible numbers

The savings rate is down, which no doubt has misguided economists cheering, but people spending more than they make is one of the things that got us into trouble.

The government sloshed trillions around and yet disposable income is down, jobs are horrendously weak, and the only reason GDP rose is wasteful government spending, cash-for-clunkers and extremely unaffordable housing tax credits whose effect is soon going to start diminishing even though the program was just extended.

I see plenty of chances for negative territory or at least extremely anemic growth starting in the second quarter of 2010, if indeed not the first quarter.Let's see what Christmas brings.

I am expecting far weaker numbers than most. In the meantime, let's party even if only for a day or two. Reality is likely to return soon.

Mark Zandi H/ Claculated Risk

This suggests that all the growth in Q3 was due to the stimulus package, and the impact will now wane - only 2% in Q4, and 1.5% in Q1 2010 - and then the package will be a drag on the economy in the 2nd half of 2010.

It's Alive, It's ALIVE, It's ALLLIIIIVVVE! Paul Kedrosky

Turns out coursing a few gigavolts of financial stimulus current through even an economy the size of the U.S. will still get Frankenstein off the slab, however briefly.

Inside GDP : The Figures Behind The Number ( nice chart )

Full GDP observations from Goldman Sachs ZH

David Rosenberg: GDP Head-Fake H/T Expected Returns

> Why i´m not surprised that the bubblehead from CNBC brouht up all the "Cash On The Sidelines"...... UPDATE: What a difference a day makes.... The same guys laughing at Rosenberg & spinning the cash on the sidelines, strong gdp, markets moving higher etc have reversed course and are suffering severe AMNESIA.....Click here for BUBBLEVISION at its best.....

> Passend zur euphoriuschen GDP Stimmung verwundert es nicht das der Typ von CNBC das Totschlagargument "Cash On The Sidelines" ins Spiel gebracht hat...... UPDATE: Was für ein Unterschied doch 24 Stunden machen können.... Dieselben "Gestalten" die noch gestern Rosenberg "belächelt" haben und was von Cash on the sidelines, starkes GDP, etc gefaselt haben leiden unter akutem Gedächnisverlust und haben Ihre Meinung um 180% gedreht....Hier klicken um zu erfahren warum CNBC als Bubblevision geadelt worden ist....

From the latest Rosenberg report

U.S. Q3 REAL GDP — ABSOLUTELY NOTHING TO GET EXCITED ABOUT

Never before did a gap between a 3.2% consensus GDP forecast and an actual print of 3.5% manage to elicit so much excitement in the equity market. It just goes to show how speculative the stock market has become. The question is why it is that the economy couldn’t do even better?

Historically, the auto sector adds 0.1 percentage point or 0.2 percentage point to any given GDP report. In the third quarter, courtesy of cash-for-clunkers, the sector added 1.7 percentage points to the headline figure, which is less a than 1-in-10 event in terms of probabilities.

Because of the housing and auto subsidies, the personal savings rate plunged to 3.3% in Q3 from 4.9% in Q2 — in the past quarter-century, there have been only four other times that the savings rate went down so much in one quarter.

If not for that plunge in savings, real GDP actually would have contracted fractionally last quarter. The entire GDP growth was funded by a rundown in the savings rate that occurs less than 5% of the time.

Moreover, what is normal in that first positive post-recession GDP release is a 5% annual rate of growth. That puts 3.5% in Q3 into a certain perspective, especially when you consider the massive amount of stimulus that underpinned the latest batch of data.

While it seems very flashy, 3.5% growth is far from a trend-setter. Let’s go back to Japan. Since 1990, it has enjoyed no fewer than 19 of these 3.5%-or-better GDP growth quarters.

That is almost 25% of the time, by the way.

And we know with hindsight that this was noise around the fundamental downtrend because the Japanese economy has experienced four recessions and the equity market is down more than 70% from the peak

Without "Cash for Kindles, I-Phones, trucks etc" 2010 will be very "interesting".... Thank god the "experts" still argue the stock market is discounting the obviously bright outlook for the coming years....How else would you justify one of the biggest stock market rallies of all time ( chart ) ...... Would be shocking to see the "Herd" get it wrong ......... ;-)

Ohne "Cash for I Phones, LKW´s usw. " dürfte das Jahr 2010 mehr als interessant werden.... Zum Glück schauen die Märkte ja wie uns regelmäßig erzählt wird voraus und haben die "exzellenten" Aussichten für die nächsten Jahre sicher eingepreist.... Wie anders ist einer der gewaltigsten Aktienmarktrallies aller Zeiten ( Chart ) auch sonst zu erklären.....Wäre ja auch das erste Mal das die "Herde" komplett daneben liegen würde, oder ? ;-)

Fuzzy Numbers Chris Martenson

"Enron-esque characteristics".......