https://twitter.com/janewells/status/309887535948107776"Wow. Just attended forecast dinner for San Diego CFA. Bottom line, central banks are literally papering over everything and it's all a lie."
"...after all, companies still are sitting on cash because they know the world is not well. Have a good day!"
"...that central banks are printing money and bailing out to fill holes in rickety ship, markets get complacent, when they shouldn't. (Cont)"
"janewellsVerified account @janewells
@dannyboi965 no. That's it. We're all being lied to. Back to you."
lol. Poor Jane Wells. She seems like the most down-to-earth CNBC personality, and yet she's always stuck reporting from the state fair or something.
______________
Edited to add: CNBC reporter Jane Wells was the moderator for the event and wrote the above after listening to the presentations by those listed below, including Blackrock's Chief Investment Strategist for fixed income.
The presenters were - "There will be presentations by Jeffrey Rosenberg, CIS at BlackRock, Bricklin Dwyer, Economist at BNP Paribas, and John West, Director at Research Affiliates"
Information:
http://www.cfasociety.org/sandiego/Linked Files/2013_Forecast_Dinner/2013-CFA-Forcast-Dinner-Brochure.pdf
Comments
Uhhh ... honesty? Introspection? A clue?
David
Moving on...
Now do I believe that we are worse off than 4 years ago? No. Not even worse off a year ago. But there are always someone claiming the collapse will be around the corner and press and reporters love to bring these people out. It sells.
We as investors should learn to filter out these sort of stuff. If you look you will find plenty of this junk.
2. No one said anything about collapse above, did they? Simply that the Fed was papering over everything.The unusual nature was the idea that someone from CNBC moderated a panel of three people - all of whom gave a similarly dour forecast and the first thing out of her mouth after hearing it wasn't, Maria Bartiromo-like, "So, what stocks should people buy now?" Maria Bartiromo could be told that there's an asteroid that's going to wipe out Earth and the response would be, "So, what do you think of Apple at these levels?"
As I've said on this board a number of times lately, I think people should remain invested in equities. Primarily because, as Gundlach said the other day, "The major global central banks are all engaged in circular financing schemes, funding gaping government deficits with money minted at the touch of a button. As a group, the central banks are expanding balance sheets by about 3.5%/year. The Fed's QE isn't going anywhere for years, because the Fed can't exit", as well as "He thinks the Fed will continue QE until some negative consequence arises." (http://on.mktw.net/14q4fV1)
I also thought, years ago on fundalarm, that QE wasn't going end after QE2 (btw: doesn't QE2 feel like five years ago? Maybe it's just me.). "No, no, everything's great, this is it for QE."
Oh, one more prediction that I'll throw out. If it is announced that Yellen is in fact replacing Bernanke, that day: 300 point rally.
2a. If someone disagrees, they can go take it up with presenters Jeffrey Rosenberg, CIS at BlackRock, Bricklin Dwyer, Economist at BNP Paribas, and John West, Director at Research Affiliates. Their "junk" (as it was called above) lead to the reaction.
Oh, and "Central banks are doing what central banks do. Their main job is to backstop the financial system and banks. It is from this need they were borne out."
Additionally, I agree that looking after the banks is their main job and pretty much the main task of that job is, as noted above, "papering everything over." That's their only real concern. In fact, it can be said that their two mandates are really actually: "papering everything over" and "asset bubbles."
---
Also, speaking of banks, I'm thinking about investing in bank stocks. One doesn't even need to go through the effort of pesky things like making a fundamental case or valuations or whatnot, as they're backstopped from both sides. On one side, the Fed, on the other:
"Senator Chuck Grassley, a Republican, asked for more information on why federal and state authorities chose not to indict HSBC after it acknowledged laundering money for Mexican drug cartels, helping rogue states avoid international sanctions and working closely with Saudi Arabian banks linked to terrorist organizations.
Mr. Holder said: “I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.”
http://takingnote.blogs.nytimes.com/2013/03/07/banks-above-the-law/
----
Finally, a couple of other Gundlach notes from the presentation that weren't widely discussed:
"DoubleLine Funds don’t have exposure to student-loan debt, Gundlach says. "
(http://on.mktw.net/14qaTue)
"Gundlach sees the yield on the 10-year Treasury note at 1.63% by the end of 2013"
(http://on.mktw.net/Z8ssQ1)
"In response to a question, Gundlach says he thinks the euro will break apart during our generation"
(http://on.mktw.net/Z8rh32)
I honestly enjoy both points of view. But since I don't know who's right or wrong (some where in the middle I suppose), I'll let my fund managers interpret the data
I'm actually quite heavily invested and I think there's a number of interesting and exciting stories, such as the energy transportation thread I started today. Someone else may think there's other themes that have long-term potential, and that's great. I love hearing people's ideas on themes/stories.
It comes down to disagreeing over monetary policy and the effectiveness, ultimate cost, sustainability, etc. of what has (and continues, and will continue) to be done (QE, ZIRP) which I've discussed at length before. Not pleased with the government, either, nor do I feel the need to defend them - either party - every time someone has a slightly negative thing to say. Criticizing the government is popular, because they're doing a lousy job. Does Paris Hilton still have a higher approval rating than Congress? (http://abcnews.go.com/Politics/OTUS/socialism-paris-hilton-popular-congress/story?id=15542237) I didn't like the previous administration, either.
These arguments go around and around like Santelli and Leisman (and I'm glad they are apparently entertaining some people), but I've done them less since Fundalarm because they have become very tiresome and never really go anywhere and there's never really any debate as much as continued talking points.
World going to end? No. I question whether this era of ZIRP and QE will end well, but that doesn't mean collapse. It just may mean yet another bubble breaking, and that's an unfortunate and - I think - unsustainable path.
Additionally, the idea that you have banks that can go, "Cover my losses, prop us up and by the way, if you try to go after us, the economy goes to hell - heads we win, tails we win" is - I think (maybe it's just me, apparently) - an upsetting situation and one that I see having negative effects, but it's one that I think is entirely unsurprising (omg, we bailed out all the banks and now they think they can continue to demand it whenever they get in trouble - who could have known?) The banks learned their lesson after 2008? No they didn't, because they realized they didn't have to.
Seth Klarman did note "collapse" the other week: "The Fed's "relentless interventions and manipulations" have left few purchase targets for Baupost, he laments. "(The) underpinnings of our economy and financial system are so precarious that the un-abating risks of collapse dwarf all other factors."
I don't think there's a risk of "collapse" but I question the foundation that things like QE and ZIRP offer, and continue to think that they are more stringing one sugar high after another. Eventually another recession will naturally come along (at this point, probably sooner vs later), and the question becomes - and then what? More QE?
We have no real, apparent goals or plans to move forward as a nation (we've spent trillions bailing out the financial system and now we find things like "....indict HSBC after it acknowledged laundering money for Mexican drug cartels, helping rogue states avoid international sanctions and working closely with Saudi Arabian banks linked to terrorist organizations.", but we have so many other problems that have yet to get attention and are clearly starting to seem like they aren't a priority in the slightest.) However, that's a fault of this government (the one that's too busy arguing to agree on anything, although apparently Rand Paul can talk for 12 hours straight or whatever it was the other day.)
You have a government that has accomplished... what? The market is at a new high, but is that really shocking given all the money that's been printed? As Jim Rogers once said, "Give me trillions of dollars and I could throw a good party, too." Money is going to go into assets (and then government is going to get surprised that the evil speculators put it into oil.) Actually making difficult decisions and fixing what got us to the point in 2008 would impress; papering over the problems and hoping they don't become an issue again doesn't. Remaining a credit-addicted economy and figuring out how to reboot that as quickly as possible after how much trouble that caused in 2008 and learning nothing from it doesn't. Sorry. Beyond that:
"In terms of types of financial wealth, the top 1% of households have 38.3% of all privately held stock, 60.6% of financial securities, and 62.4% of business equity. The top 10% have 80% to 90% of stocks, bonds, trust funds, and business equity, and over 75% of non-home real estate."
http://seekingalpha.com/article/193014-the-haves-and-have-nots-of-the-stock-market
Ramping assets effects a small portion of the populace to a significant degree (top 10% owns 80-90% of stocks), but - and this again gets into the wealth distribution discussion from the other day - how much stock does the bottom 80% own and how much of an effect do they see? Is it a free lunch (and I think that's what really gets me, people acting like what the Fed is doing is a free lunch - there is no free lunch nor is there a magic money tree), or does it effect them negatively in ways.
As David Einhorn noted, and I agree with: "
We have just spent 15 years learning that a policy of creating asset bubbles is a bad idea, so it is hard to imagine why the Fed wants to create another one. But perhaps the more basic question is: How fruitful is the wealth effect? Is the additional spending that these volatile paper profits are intended to induce overwhelmed by the lost consumption of the many savers who are deprived of steady, recurring interest income? We have asked several well-known economists who publicly support the Fed’s policy and found that they don’t have good answers."
"If Chairman Bernanke is setting distant and hard-to-achieve benchmarks for when he would reverse course, it is possibly because he understands that it may never come to that. Sooner or later, we will enter another recession. It could come from normal cyclicality, or it could come from an exogenous shock. Either way, when it comes, it is very likely we will enter it prior to the Fed having ‘normalized’ monetary policy, and we’ll have a large fiscal deficit to boot. What tools will the Fed and the Congress have at that point? If the Fed is willing to deploy this new set of desperate measures in these frustrating, but non-desperate times, what will it do then?"
I think a lot could have been done by this government to create a real foundation during the last four years and pushing for real, actual change in the real economy - improvements in education, infrastructure, smart grid and other core needs that would save money and boost efficiency. Instead, we have more regulatory uncertainty, more upset over healthcare and senators that, rather than doing anything, tell Bernanke to "get to work." Trillions went into the financial system, and yet - nearly five years later - we haven't really gotten to square one with a number of issues facing the real economy.
However, is the Fed doing what it knows (printing money) for the foreseeable future because the government won't do anything the right answer? You have a grand monetary experiment and the easiest monetary policy in history - letting that settle in for years risks addiction (a mere mention of "less QE" and the market freaks out and you have Fed governors on CNBC two days later walking back those comments in a hurry - does anyone actually think it's going to be easy to ween this market off of QE at some point far down the road? I don't) and other consequences. Not surprisingly, you have other central banks joining in because they certainly don't want to be left behind in the race to debase. I won't go into the fact that years of the easiest monetary policy in the nation's history and we have a GDP reading the other week of -0.1 that was revised to 0.1. Because we have a government who cannot agree on a naming a street, how much QE do we need to get back to 3%?
Still, there's stories that I think are compelling long-term themes and companies I quite like as long-term investments. However, most also pay significant dividends - if the market comes down, I'll just continue to reinvest. I've become a lot more long-term in my thinking but acting like "everything is just going to be okay" is - I think - incorrect (to put it lightly) to some degree. To some degree, one has to be aware of and manage risk and be reasonably aware of risk - from political stupidity, monetary policy or otherwise. It is, I suppose, whether one broadly manages risk or chooses to micro-manage risk. Broadly being aware and handling risk, I think, works better in this environment of less attention span/time horizon and more noise than trying to micro-manage. But I just can't agree with the "everything's just going to be fine" mentality. Hope for the best, have some degree - however minor - of preparation for the possibility that things turn sour, especially in a time period where I think no one involved learned a damn thing from 2008.
You can't always be as optimistic as you'd like. However:
World going to end? No. Has a sustainable foundation been put in for future growth so that people can be confident that the broader economy is on the right path? I don't think so either. Still, even in that situation there can be pockets of things that are working and are exciting stories with demand.
That's all.