Greenspan: Ignore The Economy, “Only The Stock Market Matters”

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It is the best leading indicator and what causes stocks to go up or down also causes a lot of other things to happen.

Greenspan: Ignore The Economy, “Only The Stock Market Matters”

By Tyler Durden

Feb 15 —Starting at around 1:50, Greenspan states the odds of sequester occurring are very high – in fact, the playdough-faced ex-Chair-head notes, “I find it very difficult to find a scenario in which [the sequester] doesn’t happen” But when asked how this will affect the economy, Awkward Alan is unusually clearly spoken – “the issue is how does it affect the stock market.”

While not so many of our leaders have taken the path to direct truthiness, Greenspan somewhat shocks a Botox’d and babbling Bartiromo when he admits “the stock market is the key player in the game of economic growth.”

Bartiromo shifts uncomfortably in her seat, strokes her imaginary beard and stares blankly as Greenspan explains that while the sequester will have a real effect on the real economy, “if the stock market can hold up through this, then the effect will be rather minor.”

He ends with a couple of wonderful truthisms – data shows that not only are stock markets a leading indicator of economic activity, they are a major cause of it – 6% of the change in the growth in GDP results from changes in the value of stocks and homes. So there it is – if we didn’t already know, straight from an old horse’s mouth – it’s all about stocks!

Fiscal problems? “The problem is so severe at this stage that unless we come to terms with it in a large way, we are running into very serious trouble,” but Dr. Greenspan, if stocks stay up, it’s all good right? Greenspan’s wealth effect meme is all there is…

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ECB’S CONSTANCIO SAYS NEGATIVE INTEREST RATES ALWAYS POSSIBLE

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Negative rates are just a tax, of course. Pretty close to a PSI.

With deficits as high as they are, all they need to do is leave it all alone and a modest recovery will quickly materialize. But instead they keep pressing the austerity with a ‘we’ve paid the price to get this far- there’s no going back now’ mentality.

*ECB’S CONSTANCIO SAYS NEGATIVE INTEREST RATES ALWAYS POSSIBLE
*CONSTANCIO SAYS IMPACT OF NEGATIVE DEPOSIT RATE NOT CLEAR
*CONSTANCIO: ECB HAS LOOKED AT NEGATIVE RATES AT OTHER CENBANKS
*CONSTANCIO: ECB IS TECHNICALLY READY FOR NEG RATES IF NEEDED
*CONSTANCIO: ECB HASN’T MADE DECISION ON NEGATIVE DEPOSIT RATE

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>   but also – overlooked:
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*CONSTANCIO SAYS ECB LOOKS AY FX RATE FOR INFLATION OUTLOOK

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>   ECB will revise HICP path at the March meeting
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RBS: U.S. Equity Strategy Weekly; Assessing some Cracks in the Foundation

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Good observations:

Assessing some Cracks in the Foundation

Most measures of investor sentiment rest deep within the optimistic domain. This, combined with the recent decline in volatility and performance correlation, suggests that investors have become much less concerned about the macro economy.

A serious correction has so far failed to materialize and shake out some of the optimism. Pull-backs are more evident in many of the larger markets outside of the U.S., including Brazil, France, Italy, Spain, and South Korea.

However, several leadership themes are beginning to give up some performance ground:

 I. Machinery. The group is starting to lag following a recent peak in the Mainstreet Farm Equipment Sales Index;

 II. Household Durables The stocks are correcting following a sideways move in the HMI;

 III. Autos & Components. This group is losing ground as auto sales growth decelerates;

 IV. Materials. The stocks have pulled back with the rise in the U.S. dollar and the weaker tone set by some global bourses.

Other important leadership themes at risk of rolling over include:

 I. Financials. High-yield credit spreads are beginning to widen and this is usually associated with performance turbulence for the sector.

 II. Consumer Discretionary. A softer tone to consumer confidence on the back of DC’s floundering and the rise in payroll taxes sets the stage for a pullback.

Yet, we continue to view these events as opportunity. The global leading data is rallying, while the monetary authorities continue to subsidize business cycle activity by holding interest rates substantially below the level of nominal GDP growth. In our opinion, these very powerful macro forces argue in favor of a bias towards economic leverage, beta, value and foreign exposure.

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Surge in Chinese credit raises fears

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All else equal, a reduction of state sponsored lending gets ‘replaced’ by non govt lending to the extent it can be sustained by incomes, collateral values, etc.

And not to forget, likewise, the private sector is necessarily pro cyclical.

The western educated kids at the name mainstream schools may not have brought that home with them…

Surge in Chinese credit raises fears

(FT) Chinese credit issuance surged to a record high in January on the back of a boom in shadow banking. Total new financing last month reached Rmb2.5tn ($400bn). Up more than twofold from the same month last year, eclipsing even the start of 2009 when China unleashed stimulus spending to fight off the global financial crisis. The explosion in financing was only partly driven by banks, which made Rmb1.07tn in loans. The rest of the new credit – 60 per cent of the total – came from corporate bonds, loans by investment companies, direct lending from companies to other companies and banker’s acceptances. Since December regulators have started to tap the brakes on shadow banking – in one important move they restricted the financing sources available to local governments.

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