It looks like Hussman and ECRI are going to be vindicated. This morning’s economic reports filled out a pretty gloomy picture that is taking shape. Real personal consumption was flat for the third month in a row, and real disposable income declined. The big miss on the manufacturing ISM index, together with the 4% decline in durable goods orders released earlier in the week, have put the kibosh on the manufacturing resurgence, which has been the bulls’ great white hope. The pumps are still running and great streams of hopium are being fed to the naive, of course, but market internals are sick and this is not a growing economy. The oil price, fueled by central bank liquidity injection, is all that is needed for a perfect storm. Any economic downturn will pretty much guarantee the end to this nutty rally. Now it is just a matter of picking the spot to get short stocks again, while staying the course on bonds.
Some pieces worth reading:
– Bill Gross on Football as Investing
- Over the past 30 years, an offensively minded Federal Reserve and their global counterparts were printing money, lowering yields and bringing forward a false sense of monetary wealth.
- Successful investing in a deleveraging, low interest rate environment will require defensive in addition to offensive skills.
- The PIMCO defensive strategy playbook: Recognize zero bound limits and systemic debt risk in global financial markets. Accept financial repression but avoid its impact when and where possible. Emphasize income we believe to be relatively reliable/safe; seek consistent alpha.
– The New Priesthood (Economists, of course)
If what you say is true – and I believe the evidence is unquestionable in this regard – then economics is not a science whatsoever. It more so resembles a school of morality or even a philosophical cult. The old Greek Stoics spring to mind. They were a school of philosophy that not only taught certain ideas but demanded that their followers live these ideas in their day-to-day lives. But in economics the students aren’t even told that they’re signing up for a moral vision, a sort of religion or belief system, they’re told that they’re being initiated into an objective science.
– Retirement with Dignity (Good luck with that)
The 80th percentile 57 year old household income is little changed from 2 years ago (or 4 years ago, for that matter) and stands at $150,000. They have, on average, a $200,000 mortgage on a home valued in the low $300 thousands. (The value was $370,000 in 2007). If they have a 401K or IRA, the balance is approximately $100,000.
Financial Reality 