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Notes to myself, possibly of interest to others.
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Tuesday, November 8, 2011

Rosenberg Daily - Ever the Optimist

  • Geopolitical risks are on the rise again in the Middle East and as such the oil price has traded up to its highest level in over three months. We shall see how this surreptitious tax hike affects the economy and earnings in coming months. 
  • [I]t’s not just an unemployment rate hovering near 9% now for 30 months in a row, but also the fact that home prices, after experiencing a decline this cycle that exceeded the deflationary spiral in the 1930s, are still not gaining any traction at all. In fact, CoreLogic just reported that U.S. home prices fell 1.1% in September, the second decline in a row.
  • [B]anks are starting to tighten their lending standards again, especially with regard to commercial and industrial lending, but the equity market is reading this as a sign that the Fed is going to have to pursue yet another round of quantitative easing. This is likely one reason why the equity market has held in of late.  
  • Bloomberg recently reported that long Treasury bonds have provided a greater total return than stocks for the last 30 years. The bond benchmarks cited in the Bloomberg article only capture the return in aggregate of 20-year and longer coupon bonds. The resulting 30-year returns are similar for stocks and bonds: greater than 10% per year. Over the last 12 years however, the S&P 500 has returned less than 1% per year, whereas the U.S. Treasury Long Bond Index has returned over 9.5% per year.
  • The developed world’s baby boomers arrived on the doorstep of retirement in 2007 with a household debt/disposable income ratio exceeding 130%. That compares to a ratio of less than 30% at the end of WWII when they were being conceived. Let’s face it, we could not have timed the real estate mania any worse. Theoretically, we boomers should be flush with cash as we approach our 60s; however, look around, the 80th percentile 57- year-old household owes more in mortgage debt on their home(s) than they have in their 401ks.
  • [I]f you think the extreme market volatility is going to subside anytime soon, consider that countries that represent half of global GDP will see political leadership changes in the coming year from France to Russia, to China to the good old U.S. of A

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