It used to be all we needed to make strategy was a handle on the real sector just ahead. Now it’s necessary to have a bug in Brussels, or Washington.
Without the plant we have no idea what our E-Z pals may come up with. Thus, we have had no recommendations to clients for fixed income, this region, nor spreads to this region.
We have a little better idea of events in the UK. It is true that after a satisfactory run, all of 2011 we over-estimated UK consumer appetite for H1, ’12, and manufacturing. Weakness is now priced in, including contagion to the E-Z.
Thus, in the broadest sense the default or course-of-least resistance for the UK term structure is wider, even though mkt consensus is for more general weakness ahead. This spread may come in a bit given the circus in the E-Z; if it does so, and for example 2 – 30 approaches 270, then look to own (L-S) the spread. Do not look to sell it under any circumstance. The odds are not on your side, especially if the Bk of Eng decides for additional firing.
Things are simpler for the US. As we highlighted earlier, key to understanding economic reality ahead is to be acquainted with politics, more so than any other time since the 30’s.
Thus, to the extent corporate planners expect a Republican victory in Nov, one can expect NFP’s to spark. This is not about party affiliation; it is about being right.
Uncertainty is death for corporate types. They are paid to take risks but not on an uneven playing field with rule changes every quarter. They stay at the sidelines, which means cash.
Key culprit to a recovery is Obama. From Harvard prof Robert Barro: “Consider the expansion of social-safety-net programs, including food stamps, unemployment insurance, Medicaid (prospectively) and housing and mortgage programs. In a study published last month by the National Bureau of Economic Research, University of Chicago economist Casey Mulligan observed that, because these programs were means-tested (falling or ending as income rises), expanding them raised the effective marginal tax rate on labor income.”
Barro continues, “To achieve a real recovery, government policy should focus on individual incentives to work, produce and invest. Central here are tax rates and regulations, including especially clarity about future policies. In a successful policy package, the government would get its fiscal house in order and make meaningful long-term reforms to entitlement programs and the tax structure.”
But then we all know that, don’t’ we? You want to devastate jobs creation? “The most damaging and devastating thing you do to any businessman in America is to keep him in doubt and to keep him guessing on what our tax policy is.” Who said this? Lyndon Johnson.
But then Johnson was not a radical.
Robert Craven
Without the plant we have no idea what our E-Z pals may come up with. Thus, we have had no recommendations to clients for fixed income, this region, nor spreads to this region.
We have a little better idea of events in the UK. It is true that after a satisfactory run, all of 2011 we over-estimated UK consumer appetite for H1, ’12, and manufacturing. Weakness is now priced in, including contagion to the E-Z.
Thus, in the broadest sense the default or course-of-least resistance for the UK term structure is wider, even though mkt consensus is for more general weakness ahead. This spread may come in a bit given the circus in the E-Z; if it does so, and for example 2 – 30 approaches 270, then look to own (L-S) the spread. Do not look to sell it under any circumstance. The odds are not on your side, especially if the Bk of Eng decides for additional firing.
Things are simpler for the US. As we highlighted earlier, key to understanding economic reality ahead is to be acquainted with politics, more so than any other time since the 30’s.
Thus, to the extent corporate planners expect a Republican victory in Nov, one can expect NFP’s to spark. This is not about party affiliation; it is about being right.
Uncertainty is death for corporate types. They are paid to take risks but not on an uneven playing field with rule changes every quarter. They stay at the sidelines, which means cash.
Key culprit to a recovery is Obama. From Harvard prof Robert Barro: “Consider the expansion of social-safety-net programs, including food stamps, unemployment insurance, Medicaid (prospectively) and housing and mortgage programs. In a study published last month by the National Bureau of Economic Research, University of Chicago economist Casey Mulligan observed that, because these programs were means-tested (falling or ending as income rises), expanding them raised the effective marginal tax rate on labor income.”
Barro continues, “To achieve a real recovery, government policy should focus on individual incentives to work, produce and invest. Central here are tax rates and regulations, including especially clarity about future policies. In a successful policy package, the government would get its fiscal house in order and make meaningful long-term reforms to entitlement programs and the tax structure.”
But then we all know that, don’t’ we? You want to devastate jobs creation? “The most damaging and devastating thing you do to any businessman in America is to keep him in doubt and to keep him guessing on what our tax policy is.” Who said this? Lyndon Johnson.
But then Johnson was not a radical.
Robert Craven
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