Bill Gross Prefers Stocks Over Bonds

Gross said:

Let’s suggest the economy looks good, that risk assets – whether it’s high-yield bonds or whether it’s stocks – have a decent return relative to the potential of declining bond prices. I’ll go with the stock market.

Seeking Alpha Link

Nouriel Roubini's 2010 Outlook

U-Shaped at best with a rising risk of a Double Dip.

A slew of poor economic data over the past two weeks suggests that the U.S. economy in 2010 is headed for – at best – a U-shaped recovery. The macro news, including data on consumer confidence, home sales, construction and employment, actually suggests a significant downside risk even to the anemic 2.7% growth which RGE forecast for H1. With the positive effects of the historic levels of fiscal stimulus due to fade this year, the U.S. faces at best a 1.5% growth rate in H2, which looks too close for comfort to a tipping point of a double-dip [...]

Source: RGE Monitor, 3-26-2010

More $s For Companies, Less $s For Workers

The reason people are unhappy about the economic recovery, take a look at where the money is going, as calculated by Dhaval Joshi of RAB Capital, according to The Economist's Buttonwood's Notebook blog. "This recovery has benefited companies a lot and workers not at all," the blog notes. U.S. corporate profit has increased $280 billion since March 2009, while wages fell $90 billion. "One would have to go back to the 1950s to find profits outperforming wages in absolute (cash) terms, and even then it was on a much smaller scale," according to the blog. The Economist/Buttonwood's Notebook blog (22 Mar.)

The Economist Article Link

Is Real Estate Recovering?

Very interesting article. Based on this and other post I have made recently we my be heading into a double dip. Or an elongated U shape recovery.

On Nouriel Roubini's Global EconoMonitor, Nouriel argues that unsustainable private-debt problems must be resolved by defaults, debt reductions, and conversion of debt into equity and warns that if instead private debts are excessively socialized, the advanced economies will face a grim future.

I hope I wrong.

Article Link

Are We In The Eye of The Financial Huricane?

US Could Lose It's Triple-A Credit Rating

Triple-A credit rating of U.S. could be at risk, S&P warns. Standard & Poor's issued a warning that the U.S. needs to adopt a plan to rein in spending or its triple-A credit rating will be in jeopardy. There is a risk that "external creditors could reduce their U.S. dollar holdings, especially if they conclude that eurozone members are adopting stronger macroeconomic policies," S&P said in a report.

Source: Financial Times

Market Comments

Government stop-and-go policies have fostered an environment of intense volatility for equity markets over the past 12 years. The market has basically been flat for a buy-and-hold investor during this period. While this may make a great case for active portfolio management, chasing performance at this juncture is probably unwise. Housing is the quintessential leading indicator for economic activity, and many realtors still say business is slow. As the Japanese experience shows us, a double-dip recession may come faster than we think.

Source: Seeking Alpha

Bloomberg Report: China to Nullify Financing Guarantees by Local Governments

Watch out for China, it may not be the investment haven many think it is.

Now comes news, from top regulators in Beijing, that “China plans to nullify all guarantees local governments have provided for loans taken by their financing vehicles as concerns about credit risks on such debt surges.” (According to the report, the Ministry of Finance is also drafting rules to ban local governments from issuing any more such guarantees in the future). Without the guarantees in place, Shih believes, China could face a “gigantic wave” of bad debts and halted projects.


Resource Article - "Seeking Alpha"

Nouriel Roubini's US Growth Outlook

U.S. Growth Outlook: Still Anemic and U-Shaped but Risks of a Double-Dip Recession Are Rising by Nouriel Roubini. A slew of poor economic data over the past two weeks suggests that the U.S. economy in 2010 is headed for – at best – a U-shaped recovery. The macro news, including data on consumer confidence, home sales, construction and employment, actually suggests a significant downside risk even to the anemic 2.7% growth which RGE forecast for H1. With the positive effects of the historic levels of fiscal stimulus due to fade this year, the U.S. faces at best a 1.5% growth rate in H2, which looks too close for comfort to a tipping point of a double-dip recession.

Source: RGE's Daily Top 5, 3-5-2010

CNBC Interview With TX Fed Gov.

Uncertainty in "Social Cost" is holding back hiring.

Earlier on Squawk, Fmr. Gov Corzine announced unemployment + underemployment + no longer track at approximately 25%.

Fed Increases and The S&P 500

Fed Increases and The S&P 500

Months to recover

The stock market’s initial reaction in all three instances was a sell-off, with the S&P 500 Index ending down on average by 3.2% after a one-month period. During the second month the market was slightly negative on two occasions (1999 and 2004) but tumbled in 1994. In that year it took seven months for the S&P 500 to return to the pre-rate hike levels, while in 1999 and 2004 it took five months.

Source: Plexus Asset Management (based on data from I-Net Bridge).