By: Elliot Turner
- The Case for a V: Could 7% Growth Rates Return?–The Economic Cycle Research Institute argues that in assessing bond spreads between high and low quality bonds, we are seeing an especially bullish trend develop. This relationship hints that a bounce-back in GDP from the deep recession could come with a greater than 7% growth rate.
- Is this just the beginning of a depression?–In contrast to the ECRI, David Rosenberg, formerly of Merrill Lynch, argues that the ongoing deleveraging in America is more analogous to a depression, rather than a recession and does not bode well in the immediate future.
- Households cut debt, have long way to go–Household debt continues to contract at a rapid rate, yet based on historical trends the debt to disposable income ration remains at an elevated rate.
- Stiglitz Urges “Powell Doctrine” to Fix Jobs Picture–“There is, in economics, something akin to the Powell doctrine in the military: One needs to attack the problem with overwhelming force.” Stiglitz reasserts the notion that the stimulus is too small and believes that more must be done to improve a deteriorating job market.
- Hedge Fund Exposure Levels: Still Very Long Equities–By and large, the hedge fund community remains historically long/bullish on equities; however, the net-long exposure has been trimmed from 50% net long in mid-November, down to a more modest 45% today.
- The U.S. trade deficit declined in October. Global trade imbalances have been a consistent theme of late, particularly the U.S. trade deficit with China. The Chinese pegging the Yuan to the dollar serves a dual role in China–it is both an economic and social policy. An artificially low Yuan leads to increased job creation in China. As a result, abandoning that policy would threaten the social fabric in China and also make their foreign policy appear weak in the face of American power. Angry Bear argues that this situation will take many years to resolve, as we saw with the U.S./Japan relationship in the past.
- This relationship has implications beyond just the U.S. and China. In particular, this puts upward pressure on the Brazilian Real, to the point where Brazil is talking about implementing interventionalist policies in order to put downward pressure on the Real relative to the dollar.
