CS global risk appetite index.doc Hits “panic” level
Posted by WARREN MOSLER on August 2nd, 2011
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August 2nd, 2011 at 11:14 am
Are you saying this is a HUGE buying opportunity?
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Dimm Reply:
August 2nd, 2011 at 4:01 pm
Inflection point.
The index was under until March 09, then it was over and now it is under again. Suggests downside if I read it right.
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WARREN MOSLER Reply:
August 3rd, 2011 at 1:21 am
by that one indicator, maybe. but not today for sure.
stocks do look cheap again.
Depends on whether GDP stays positive or goes negative.
risks remain,
euro problem/lack of demand and strong dollar, systemic risk
Uk austerity
china hard landing risk
will be writing something on that soon.
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Jan Reply:
August 3rd, 2011 at 3:19 am
@WARREN MOSLER,
strong dollar???
aud 1.07
cad 1.05
yen 77
gold 1650
how can u say the dollar is strong???
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WARREN MOSLER Reply:
August 4th, 2011 at 5:32 pm
sorry, a day early…
:)
Mario Reply:
August 4th, 2011 at 6:11 pm
@WARREN MOSLER,
“stocks do look cheap again.
Depends on whether GDP stays positive or goes negative.”
well if wall street wants the big O back in office in 2012 more than likely they’ll jack up the stock market for him to give him that extra boost, but overall things looks pretty shitty to me…I’m not an investor though so I don’t know jack on that one.
I do know that all we talk about and hear is earnings estimates downgraded day after day and now with deficit cuts I can’t exactly see a big move up…maybe more ranging sort of below are latest range at the highs? I don’t know, but I do know some guys who are investors are waiting/hoping for a real nice rally but not necessarily a sustainable one (whatever that’s supposed to mean). ;)
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Mario Reply:
August 4th, 2011 at 7:09 pm
@WARREN MOSLER,
we’ll at least need to see a bottom form in equities at this point before we can tell what’s next up on the program I think.
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August 2nd, 2011 at 3:23 pm
I have the same question as Mike.
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August 2nd, 2011 at 3:55 pm
Spain is tipping into a flat spin right now. Italy is tipping into a flat spin…..
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August 2nd, 2011 at 9:11 pm
Upside when Obama says, ‘now is the time to buy stocks’.
Too bad he doesn’t say when it’s time to sell.
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August 3rd, 2011 at 8:07 am
Every indicator I look at is on the cusp of indicating recession. Corporate profit cycle is peaking, meaning earnings growth in low single digits or less ahead of us. EU and ECB are fundamentally unprepared for the meltdown occurring in Italian and Spanish debt. US merely backloaded a carpet bombing of its economy (phew?), and that could be pulled forward given the legislation’s conditionalities. BBA would be a nuclear strike on the global economy. Demographic cycle in most developed countries looks lousy for economy and markets starting in 2012. Em mkts appear to have peaked, and (along with some of their developed economy suppliers) are showing signs of private sector financial strains.
Most importantly, in the prior crisis, no paradigm shift was required to deal with a private sector financial meltdown. In the developing one (EU and ECB are the coal mine canaries to watch), policymakers seem fundamentally unprepared to do what needs to be done. In other words, this time around will have to abandon their existing paradigms before they can do the right thing.
Buying opportunity? Hell, no. Not in my humble opinion.
DISCLOSURE: This is not investment advice!!! My firm and some of its clients hold investment positions that will benefit if markets decline. However, I’m not talking my book (all the portfolios we manage have net long equity exposure). Just felt it was important to weigh in here.
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Tom Hickey Reply:
August 3rd, 2011 at 9:42 am
@Art,
I’m with you on this, Art. That is the way it looks from where I am perched.
With Spanish and Italian long bonds over 6%, that’s entering the endgame. No way that is sustainable under their monetary arrangement. This is not Credit Anstalt redux. It is whole countries going under this time.
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Art Reply:
August 4th, 2011 at 2:03 pm
@Tom Hickey,
It’s more than just current arrangements that need tweaking to have a meaningful resolution. Serious paradigm shifts have to occur. And judging by history, the sh*t usually needs to hit the fan pretty hard for that to happen. The last few weeks might be a start, but the ECB has made clear that they’re not yet ready to throw out the old models. I wish I could be more sanguine about it, but even if we got some shocks of good news, I don’t see much if anything in the way of long-term upside.
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Art Reply:
August 4th, 2011 at 2:21 pm
[Apologies in advance for the vent/rant.]
On a related note, I caught a bit of Bob Rubin on Charlie Rose last night. Talk about someone who should be the target of mass class action civil lawsuits, if not criminal negligence investigations. He’s still sticking to his story that the markets and economic actors just need certainty that govts are finally–wait for it, and try not to vomit when you hear it–”getting their fiscal affairs in order”! Still!!!!! In my current profession and at least one prior one, when a client gets hurt because of your stupidity or well-meaning mistakes, they have a cause of action against you. But if you’re a professional economist who shapes the ideas and laws that impact the well-being of millions or even billions of people and you screw up badly? No worries there, mate. Hell, you can go on screwing up for as many decades as you’d like, and be richly compensated for it. Enjoy your stays in _______ [Davos, Jackson Hole, insert any prime destination here, and wonder if he's ever had to pay out of his own pocket]. Make the most of your director and chairmanships, whatever outcomes the underlying organization and its employees, suppliers, and customers might have to endure. And of course, enjoy your pensions and other perquisites. You’re a genius, and you deserve them. Every single one of them. WTF?!?!?
I have a much easier time accepting the ignorance of the Tea Party freshmen who are sleeping in their offices in-session. Their hearts are clearly in the right place, despite the damage they’re intent on doing (though maybe some should know better, depending upon the makeup of their donors?). It’s the alleged geniuses who’ve led us all into today’s macro policy cul-de-sac (where all we end up fighting over is whether to sharply raise taxes or sharply cut spending, while do presious little about unemployment that is twice its customary level and lasting three times as long as it used to) that I have a real problem with.
All I can infer is that Rubin is either much duller or far more evil (or both?) than is widely believed. Ditto for his old sidekick Larry, who co-authored a paper with Robert Barsky that absolutely nailed how the classical gold standard worked, yet still can’t get his fat, thick head (I can say that, given our similar cranial structures) around the fact that govt deficits (and certain types of central bank policies which are rarely ever pursued) are the modern analogue of gold mine output (in other words, just as precious metal(s) standards required mines to run ongoing and persistent ‘deficits’ of ore in order to function properly, a system based on inconvertible money requires, under almost all circumstances, ongoing and persistent deficits of new money from the monopoly supplier of it; which means, of course, that there can be no intertemporal govt budget constraint on a sovereign). Yet Rubin and many other economists are still emphatically peddling his toxic meme that the private sector will begin hiring and expanding, if only the federal govt will enact measures that ensure a balanced budget at some point in the future. It’s frustrating as hell to bear witness to.
ESM Reply:
August 4th, 2011 at 2:50 pm
@Art,
Agreed Art. Bob Rubin has been my vote for worst Treasury Secretary ever for a long time. It is very frustrating that he is considered by many people as the best.
I still remember his brilliant idea to add a 3rd capital gains tax rate for holding periods between 12mths and 18mths, and then later a special tax rate for holding periods of over 5 years. I guess he thought the tax code was too simple. It wasn’t enough that taxpayers spent over $500B a year in compliance costs.
WARREN MOSLER Reply:
August 4th, 2011 at 5:37 pm
especially if that single mandate ecb hikes rates to fight what they call inflation
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anarchistas Reply:
August 3rd, 2011 at 6:20 pm
Next step is known in advance – eventually we will see the policy makers agree that the ECB can buy EFSF issued liabilities.
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Art Reply:
August 4th, 2011 at 3:52 pm
@anarchistas,
Thanks for the link to Rob’s article. I hope he’s right, but I think ECB making *permanent* purchases of ESFS securities is what has to happen at a minimum.
I’ll bow out of this thread with that, since I try very hard not to be the kind of investor Rob describes (and would love to be wrong or at least proven overly pessimistic on the market and macro outlook).
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WARREN MOSLER Reply:
August 4th, 2011 at 5:35 pm
good call!
Japan has muddled through with 8% or so deficits and 0 growth for a couple of decades.
likewise, I don’t see much upside to growth but not much downside either.
unless the other risks I’ve outlined bite hard enough for a temp setback.
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Tom Hickey Reply:
August 4th, 2011 at 5:56 pm
@WARREN MOSLER,
I see at least three wild cards in play.
1. Unanticipated shock due to unknown unknowns.
2. (Mis)perceptions wrt global finance feeding back into national and international decision-making. (I think that Ramanan and anon are right at least about the perceptions.)
3. Political effects due to social unrest resulting from imposed austerity.
Add to that ignorance of MMT in a precarious world, and anything is possible. I would want a seat close to the emergency exit.
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February 16th, 2012 at 2:05 pm
Where can you access the data series for the global risk appetite index?
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