August 23

Are corporate earnings sustainable? EconompicData.

The last chance to avoid a global trade war. Michael Pettis, FT.

Euro crisis has not gone away, it is merely masked by other troubles. Roger Bootle of Capital Economics, Telegraph.

If the world economy is heading for a slowdown, and I think that it is, then on past form the eurozone will join in.... A marked slowdown will bring to the fore all the problems which caused such anxiety earlier in the year. It is the weakest members who have most to fear. As the eurozone economy softens, worries about the future of the euro will soon resurface.

Making it up. Paul Krugman, NYT.

The Taylor Rue and the "bond bubble". Krugman again.

my sense is that a lot of people just can’t bring themselves to face the reality that we’re likely to be in a zero-interest world for a long time. They just keep assuming that the Fed is going to raise rates soon, even though there is absolutely nothing about the macro situation that would justify such a rate increase. But once again: if you take standard economic forecasts seriously, they point to near-zero short-term rates for a very long time, which in turn justifies low longer-term rates.

Now that's rich. also Krugman.
according to Republicans and conservative Democrats, the deficit and debt need to be addressed, so no further fiscal stimulus for the economy can be afforded; but

politicians are eager to cut checks averaging $3 million each to the richest 120,000 people in the country. What — you haven’t heard about this proposal? ... I’m talking about demands that we make all of the Bush tax cuts, not just those for the middle class, permanent. ... The Obama administration wants to preserve those parts of the original tax cuts that mainly benefit the middle class — which is an expensive proposition in its own right — but to let those provisions benefiting only people with very high incomes expire on schedule. Republicans, with support from some conservative Democrats, want to keep the whole thing.... According to the non-partisan Tax Policy Center, making all of the Bush tax cuts permanent, as opposed to following the Obama proposal, would cost the federal government $680 billion ... over the next 10 years. For the sake of comparison, it took months of hard negotiations to get Congressional approval for a mere $26 billion in desperately needed aid to state and local governments.

Housing in ten words. James Kwak, Baseline Scenario; and Housing: no longer a surefire wealth builder. Barry Ritholtz, The Big Picture.

Mea culpa from Jim Caron, Global Head of Interest Rate Strategy at MorganStanley, and new forward-looking view, including how to front-run the Fed, in August 19 Interest Rate Strategist.

I like long bonds, but even I wouldn't buy a 100-year bond!

data today:
Chicago Fed NAI rebounds in July to 0 from downward revised -0.7 in June;
the boost in July was due to the 1% boost in industrial production, which itself was accentuated by an 8.8% boost in the auto products component --- but there were some issues with the seasonality factor applied to autos in July, so the 1% IP gain was overstated (the expectation of a 0.5% gain was probably more accurate) and there will likely be some future give-back

tomorrow: Canadian retail sales and U.S. existing home sales and Richmond Fed
Wednesday: US durable goods and new home sales
Thursday: US claims, as usual, plus mortgage delinquencies and foreclosures
Friday: US Q2 GDP (1.4% now expected)
Aug 26-28: Fed's annual pow-wow at Jackson Hole


other fare:
We've gone into the ecological red. Andrew Simms, Guardian.


p.s. a note on Links

I may link to articles by authors who I don't necessarily agree with

obviously, I have a clear bias to link to the views I find most informative to developing my own view, and, as such, tend to be (at this particular moment in time) more negative on economic prospects --- this is largely because I often don't agree with the views of the economic bulls, typically finding their analysis less than robust; therefore you'll almost never see links to articles authored by Malpass or Kudlow or Brian Wesbury, etc. --- unless I'm doing so in an obviously sarcastic way

but I will link to comments/interviews/op-eds/articles of authors if the topic matter of that piece is thought-provoking, even if I don't agree with it --- or, more typically, is a specific view I think worthy of consideration and may agree with, even if I don't agree in general with the author's views

for example, I think guys like Roubini and Taleb and Krugman are worth listening to even if I think they're wrong on something; they may be right, I may be wrong, and if they are analysts whom I know are serious, are not politically or otherwise conflicted, have a good track record, study objective reality rather than pander subjective B.S. because they have some kind of agenda, etc., then I ought to be willing to analyze their analysis to determine whether or not I've missed something and ought to revise my own analytical process; John Hussman would also fall into this category; I don't think there's anyone who I respect more, who I almost always agree with, and who I believe I have learned a lot from (in the same category as James Montier and Barry Ritholtz) --- and yet I disagree with the view he published today that QE will result "in an abrupt collapse" of the dollar (speaking of Ritholtz, for an excellent piece sort of along these lines, see Seeking the truth -- or obscuring it?, which is well worth a read)

I may also link to articles by authors who I haven't actually heard of

what most often matters to me is not WHO is saying something, but WHAT that person is saying; and if the specific WHAT I'm linking to is informative, reasonable, insightful, etc., or is simply highlighting an event or fact that I think is worthy of acknowledging, then it doesn't necessarily matter to me if the author's other views (past and present) are ones I agree with; bona fides don't interest me as much as facts, ideas and analysis

for example, I was much more familiar with the reputation of BCA than I was with either Lombard Street Research or Capital Economics when I started reading them, but it was the latter two shop's research than I found more compelling than that of the former, so reputation was to me less important than analysis

as another example, I recently linked to a piece by John Rubino; at the time, I knew nothing about him --- other than that he was highlighting the VIEW that, with a dearth of reasonably-yielding investment options, investors' reaching for yield is likely responsible for the FACT that junk bonds are getting issued and bought at a record pace, such that high yield issuance YTD is already very close to breaking the 2009 record for issuance

neither the fact that Rubino wrote a book in 2003 about how to profit from the coming real estate bust, nor the fact that he is currently predicting a collape of the dollar (and, as a corollary, I presume he believes bonds are a bubble waiting to crash at the same time that inflation causes the dollar to crash) impacts my belief that the point about junk bond-issuance is worth thinking about

so, to sum up, the view of an article I link to is not necessarily one I agree with, but is simply one I believe should be acknowledged and/or incorporated into my big picture view, and though the author's reputation, if I know anything about the author at all, may affect the # of grains of salt, if any, I attach to a view, that's much less important to me than the analysis or views themselves