CNBC Notes - Steen Jakobsen

My latest piece:  The Chicago Plan – Are you ready for the helicopter money

Allocation:  We have 70% in Beta allocation – our All-Weather/Neutral market portfolio:

Equity – 18,75%

Gov. Bonds – 25%

TIP – 20,84%

HY Bonds – 6,25%

EMG Bond – 14,58%

Gold – 14,58%

Then 30% in tail-risk and options:

Long Soybeans

Long Put on DAX

Short AUDJPY

Long volatility – new

Overall:  The new highs in stocks market and unemployment remains hard to reconcile medium- and long term. There is growing bureaucratic and policy support for some form of “helicopter” money should economy – and it looks that way – continue its slide ….

We prefer Eurocoin Growth Indicator – which is a real-time, monthly estimate of area-wide GDP growth, computed each month by the staff of Banca d’Italia.

2013 is increasingly looking like a transition year from QE to other even more unconventional measure as the debt trap/none lending and falling growth continues to fail to response to low interest rate for longer. Lord Turner and several others have recommend “a small dose of medicin which could turn into poision (Turner’s own words) in his “special situation” – where central banks believe there is big inelasticity of inflation upside relative to nominal monetary growth and helicopter money.

We initially saw 2013 as transition from extend-and-pretend towards reforms and a much needed wake-up call, but if the recent discussion of Chicago Plan and Helicopter money is any indication – and I think it is – the Overt Monatary Financing is something which is only months away.

Euro will cost 0,3-0,4 pc of growth and is the main headwind in Europe – Earnings per share expectations is already reduced from double digit to 5-6% less than two month into the year.

The improvement in survey data continues – The “feel better factor” is present – but the real economy like car sales and growth continues and to drop. The gap between Main Street and City of London/Wall Street is opening up each day. Social tension is close by and the Italian election could be first sign although consensus have Centre Left still winning Senate.

Steen