In performing a 180 from our view of H1 and Q3, 2012, we have highlighted since the election that the overall key to FI types now is to look for “surprising” weakness, not vigor in the US real sector vs than built into most models; this is tied to our view that corporate planners (regulatory cliff) and consumers (taxes, uncertainty) will both be discouraged just ahead.
We’re not especially pleased with results so far; certainly today’s advance Q4 GDP print is not a fit nor a reason for us to celebrate; yes, defense and inventory were a drag but that is not telling. Consumer activity was decent; business investment was more than decent, especially the increase in equipment and software investment. We had looked for something less (and still do for Q1).
We are no doubt at the cusp of a major turning point and want to get it right. We continue to feel something lurks just back stage.
Experience at stream side translates very well to market-crowd behavior. Trout “key in” to a certain insect, either floating just overhead or subsurface and completely ignore other, even more delectable treats although they may be easily obtainable. Trout look for certain clues as to insect body type and ignore the rest, temporarily. Then after a time, the principle hatch being finished, they will “re-key.” This describes the mkt crowd’s present mentality - ignoring anything that may indicate weakness ahead.
We may be wrong; maybe we need to re-key, but probably not. Thus, the preferable way to react to Friday’s Jan NFP read is to leave it if weak but to pause, and then strike on FI pricing vulnerability if the headline is well through expectations.
Robert Craven
We’re not especially pleased with results so far; certainly today’s advance Q4 GDP print is not a fit nor a reason for us to celebrate; yes, defense and inventory were a drag but that is not telling. Consumer activity was decent; business investment was more than decent, especially the increase in equipment and software investment. We had looked for something less (and still do for Q1).
We are no doubt at the cusp of a major turning point and want to get it right. We continue to feel something lurks just back stage.
Experience at stream side translates very well to market-crowd behavior. Trout “key in” to a certain insect, either floating just overhead or subsurface and completely ignore other, even more delectable treats although they may be easily obtainable. Trout look for certain clues as to insect body type and ignore the rest, temporarily. Then after a time, the principle hatch being finished, they will “re-key.” This describes the mkt crowd’s present mentality - ignoring anything that may indicate weakness ahead.
We may be wrong; maybe we need to re-key, but probably not. Thus, the preferable way to react to Friday’s Jan NFP read is to leave it if weak but to pause, and then strike on FI pricing vulnerability if the headline is well through expectations.
Robert Craven
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