In the largest sense, desk strategy should be to look for US real sector “surprising" weakness, not vigor. This is so because job creators will continue to be discouraged; because consumers will remain concerned and their activity will wilt relative to expectations.
Past the orgasmic response to the “cliff compromise” most anchored observers understand that little has changed; the spending fight is merely postponed for two months; only higher taxes are baked in the cake.
“I think this deal’s a disaster,” said Peter Huntsman, chief executive of chemical producer Huntsman Corp. “We’re just living in a fantasy land. This did absolutely nothing to address the fundamental issues of the debt cliff.”
But the fact that the debate exists at all is key; it is this change in electorate attitude, as demonstrated Nov/6, that most discourages risk takers. They see no end to what is rapidly becoming the "Europeanization" of America - the regulatory cliff, and the now-popular style of redistribution that remains on the horizon, even past any short-term fix. That is why small business owners’ net capital spending intentions in November fell to the lowest level in two years as recorded by the Wells-Gallup Small Business Index. And that is why the Dec NFIB small-business optimism index, at 88, is the second lowest since Mar/10. Seventy percent of owners surveyed characterized the current period as a bad time to expand.
We have highlighted these developments in more detail, past sketches. And sure enough, as predicted, business investment has contracted; sure enough, consumer retail activity has come in south of expectations (exception - vehicle sales).
One way to capture this reality is with the spread we often use in this blog – the term structure. Look for opportunity to sell (S-L) this spread, not to own it. On a sudden expansion, something past 285 perhaps, 2-30, the spread is to be sold; then to be taken in at 255 or so. A multitude of other strategies can be tethered to this exercise. We want to harvest the bounty provided by an overly-exuberant market crowd.
One observer noted that, “If there were a scientific method of predicting whether political drag will offset the private sector’s inclination to go about the business of investing, creating jobs…I would use it. There isn’t. All I can offer is my guess that event an inept government cannot for long stifle the animal spirits of America’s investors and consumers…” Irwin Stelzer may be right; after all, this was the default, past years, for most of us of the old school.
We would like to agree on this occasion but for the first time in nearly two decades, we are reluctant to do so.
Robert Craven
Past the orgasmic response to the “cliff compromise” most anchored observers understand that little has changed; the spending fight is merely postponed for two months; only higher taxes are baked in the cake.
“I think this deal’s a disaster,” said Peter Huntsman, chief executive of chemical producer Huntsman Corp. “We’re just living in a fantasy land. This did absolutely nothing to address the fundamental issues of the debt cliff.”
But the fact that the debate exists at all is key; it is this change in electorate attitude, as demonstrated Nov/6, that most discourages risk takers. They see no end to what is rapidly becoming the "Europeanization" of America - the regulatory cliff, and the now-popular style of redistribution that remains on the horizon, even past any short-term fix. That is why small business owners’ net capital spending intentions in November fell to the lowest level in two years as recorded by the Wells-Gallup Small Business Index. And that is why the Dec NFIB small-business optimism index, at 88, is the second lowest since Mar/10. Seventy percent of owners surveyed characterized the current period as a bad time to expand.
We have highlighted these developments in more detail, past sketches. And sure enough, as predicted, business investment has contracted; sure enough, consumer retail activity has come in south of expectations (exception - vehicle sales).
One way to capture this reality is with the spread we often use in this blog – the term structure. Look for opportunity to sell (S-L) this spread, not to own it. On a sudden expansion, something past 285 perhaps, 2-30, the spread is to be sold; then to be taken in at 255 or so. A multitude of other strategies can be tethered to this exercise. We want to harvest the bounty provided by an overly-exuberant market crowd.
One observer noted that, “If there were a scientific method of predicting whether political drag will offset the private sector’s inclination to go about the business of investing, creating jobs…I would use it. There isn’t. All I can offer is my guess that event an inept government cannot for long stifle the animal spirits of America’s investors and consumers…” Irwin Stelzer may be right; after all, this was the default, past years, for most of us of the old school.
We would like to agree on this occasion but for the first time in nearly two decades, we are reluctant to do so.
Robert Craven
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