Thought for
the day
“Republics decline into democracies and democracies
degenerate into despotisms”
-
Aristotle (Greek, 384-322BC)
Word of the
day
Exiguous (Adj)
Extremely scanty; meager.
(Source: Dictionary.com)
Shri Nārada
Uvāca
Is Modi focusing too much on the Gandhi family in his
discourse?
In case he wants to veer the traditional Congress voters
away from the Family, he should set a positive socio-economic agenda to which
Congress Party cannot reply.
What he is doing will only strengthen the bond between the
Family and the loyalists.
Flock of black swans on the horizon
When we boldly suggested that QE is here to stay not going
anywhere in May 2013,
we were criticized by many for being unnecessarily contrarian. The analysis
during most of July-September quarter was debating the extent of moderation in
Fed’s bond buying program (“tapering”). Estimates ranged between USD10-25bn and consensus was building around
USD10bn.
We believed
that the conventional wisdom suggest that QE shall continue and strengthen till
it is being noticed and talked about. Any talk of tapering is thus contrarian.
In fact being conformist is quintessential to our investment strategy. (See here)
“If there is anything the market has shown in the past 16
days of government shutdown, which is set to reopen this morning in grandiose
fashion following last night's 10pm'th hour vote in the House, is that it no
longer needs Washington not only to function but to ramp higher. All it needs
is the Fed, which in turn needs an unlimited debt issuance capacity by the US
Treasury which it can monetize indefinitely, which is why the debt ceiling was
always the far more pressing issue. In other words, the good news is that the
can has been kicked, and now the government workers (who will need about a week
to get up to speed), can resume releasing various government data showing just
how much 5 years of now-open ended QE have impaired the US economy, and why as
a result, even more years of unlimited QE are in stock (because in a Keynesian
world, what caused the problem is obviously what will fix it). The bad news:
the whole charade will be repeated in three months.
More importantly, with futures no longer having the hopium
bogey on the horizon, namely the always last minute debt deal, they have
finally sold off on the back of a weaker USD. It is unclear if the reason for
this has more to do with climbing the wall of shorters which is now gone at
least until February when the soap opera returns, or what for now, has been an
absolutely abysmal Q3 earnings season. Luckily, in a centrally-planned world,
plunging stocks is bullish for stocks, as it means even more Fed intervention,
and so on ad inf.
And since a repeat of the whole soap opera in January is
highly likely and the government will be shuttered once more, the only thing
that will really be impaired - not government workers, they love the paid
vacation with retroactive salaries - will be concurrent government data, so
"very critical" for the Fed to decide on future policy, which simply
means if the BLS' random number generators stop humming in early 2014, all that
will happen is for the Taper, which is now expected to take place between March
and June 2014, to be delayed once more in what is now the playbook: shut down
government 2-3 months before taper is due, kick can, rinse, repeat.”
In our view, the latest debt deal by US politicians has
created a breeding ground for black swans. We shall see them flocking the
horizon in next 12-15months.
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