What happens when even Zero-hedge turns bullish? Small macro comment:

Happy Sunday,

I find and found this Fridays action extremely telling for this zero-rate, turbo Bu..S..., euphoria environment we trade in. The interview by CNBC w. David Tepper (http://www.cnbc.com/id/39341388)  catapulted the market higher: "....whatever happens is good for the stock market" - an interesting comment - not with any foundation in reality, but it reflects the admiration we are all prone to: Who dares fade one of the most famous billionaire investors - who went all in long in 2009 and so far is up 30%-ish.

That is the point - the media loves winners - and love them even more if their message fits the "bill". CNBC is now Obama's best hope for reelection. This Friday they rolled out Jack Welch (what a joke he is - GE is the biggest financial pyramid scheme in the world!) and Warren - aka- I am merely a simple guy from Oklahoma - Buffet....... An all star line up for people believing in hope and empy rhetoric. Market was looking for Gospel and got it plenty-

Then this Sunday morning I find Zero Hedge giving up to - in a, as always, well argued piece: http://tinyurl.com/33429a2 . The ultimate reversal indicator?
:
Now you probably feel I'm jealous of their success - who would not be? - but that's not the point: The world is not this simple: The Warren Buffet buy-and-hold theory will NOT work, its not working really now, forever, its precondition is exactly the condition we have seen since 1987: Lower and lower inflation and central banks willing to go all in........we are at ZERO percent effectively - will we go to minus 5 pc for Warren to continue to make money?

Then there is the David Tepper story - refreshing as it was, it was merely his opinion - he was clearly high on his own his own success(nothing wrong with that!) - and for my own experience in the very little success I have had, the worst time to make bold predictions is in a time of peak success.

He could be proven right in the direction of the market, but if so.. it will not be due to his arguments like: QE will make everything go up... but rather the fact by some miracle, that Obama/Geithner/Bernanke get some help from the REAL economy (which look very unlikely as of now)

There are really two worlds:

The one Tepper/Welch/CNBC/Buffet lives in: Zero rates, massive lobbyism from Wall Street securing NOTHING CHANGE in Wall Street-land, and free ride with Ben Bernankes Fed Helicopter (with a crash free design)

Then there is the REAL WORLD: One where housing sales continues to disappoint: http://tinyurl.com/25s6y9e. Unemployment continues to rise and consumption continues to decline.

Maybe my economics studies where obsolete but one thing I took note of was: Ultimately you need to remember three things: Housing and consumption leads the business cycle and productivity gains are the only "true" creater of growth.

I do not see anything Tepper/Buffet/Welch/CNBC said changing the gravity or constitution of these  economic facts: Low growth, low employment, low sentiment, but do not let that stop you from buying into this dream and hope scenario, if Zero Hedge has given up so has many others.......


STRATEGY:

Core views:

US Dollar: Bottom around here. Reached 50% retracement of whole move Friday - looking for serious correction into year-end.US dollar index

Fixed Income: Some more upside in prices (lower yields) - test of August low in yields likely and then its time to take profit and going into cash.Fixed Income shown via IEF ETF

Equities: Still some room before we hit "top of range" - several of my cycle indicators looking for correction - and soon..... ------ SPX chart w. cyclical indicators

Commodities: Gold took out 1.300,00 but.... volatility coming of and momentum falling..... still see more upside as it makes sense.....but...freight still coming off (China closing for growth), and some signs market is getting ready for lower growth.....Commodity overview

Performance: Been tough September (reverse of Tepper :-)) but it takes more than a bullish fund manager and CNBC to change my view - after all: I do believe in facts more than fiction.

Nice sunday,

故兵貴勝，不貴久。 What is essential in war is victory, not prolonged operations.

Europe

This is becoming one slow move into the summer period here in Europe. The politicians is even worker longer to secure some sort of movement on their national budgets. The joke being they are moving around 1-5% of the budget and none of it has to do with real structural reforms.

Europe will become a theme park shortly - The choice being one of Lego-Land or Disney?

The outlook is growing darker day-by-day as the ageing population and lack of productivity kills the ability to secure growth.

I had a long and super interesting lunch with one of the senior economist' involved in the early 1990s draft for the Euro-zone. The general take away:

We have to move towards economic union - the rules needs to be enforced and the survival of EU is 50/50.

Major macro theme

The major theme I am wrestling with right now is the fact that the leading model on growth I use is indicating Q3 GDP of MINUS 2% vs. a consensus call for 1.5% ish (Goldman)

Source: http://www.consumerindexes.com/
This index is leading by roughtly 90 days - which means the -2.0% reading is equivalent to Q3 this year.

Source: Goldman Research

Goldman, who is not super bullish on US growth(and which I rate the best on US economy) is looking for +1,5% growth - ergo: We got "gap" of 3.5% growth-points in the outlook for the US.

It should be added that GS and other have noted how the weak consumption in April seems to have continued in May - and now add the massive lay-offs announced by Citigroup & HP this week alone - and I am getting nervous!!!!!!

If the forecasting model is right - and I give it 60% odds - then we will be looking at major stimulus package into the Mid-term election in November and clearly Obama will be in even more political trouble as unemployment will be 10.0% plus and rising towards the 12%........

Also the "financial conditions are tight" according to GS:

The above issue is the main concern for me - and should be for you as well - as its totally undermines the whole: ".. Things are good and improving right now" -


I met with Treasurer of major European producer this week-end and EARNINGS/SALES are looking good for Q2 and partly for Q3 (although less so) - this particular producer has major exposure to EMG and their management wants to go FULL THROTTLE in hiring new labour.

I doubt they are right (but yes I am always sceptical) but for once I seem to have the statististic with me.

I should be noted that the slow-down is classic economic theory - as the stimulus has fast forwarded consumption and investment to 2009 and early 2010, there is now now major vacuum to fill as demand comes down, structural unemployment remains high, and the incoming austerity reduces volumes and increased tax, but hey....  logic has NO place in trading.

Strategy


Read interesting paper by David Rosenberg of Gluskin/Sheff:

This matches pretty well with out long-term target(eqilibrium  @ 850-00 ish)

Finally the most overrated investor


I have long argued that Warren Buffet strategy was "lucky" in the sense, he happened to be living at exactly the right time, as the world went on major debt binge financed by tax payers and easy monetary policy.

Now it's time for his value-investing to show it's strength and for now the results are pretty poor:

Berkshire sold of BEFORE the rest of the market

Most concerning being NET outflow in the stock

Do not get me wrong - Who am I to judge Buffet - but as a good analyst you need to able to seperate cause and effect.

Finally,

We remain in Doom-and-Gloom mode as that models outperforms, but recognize the risk for knee-jerk reactions up and serious manipulation.....but for now.. keep your powder dry.

Winston