Macro Digest: We must accept finite disappointment, but never lose infinite hope. Martin L. King

Easter is over, volatility reaching new lows and complacency new highs:

 

Today's macro is mainly "other people's" ideas as I have said plenty on my views, but I trust you will all of the below links and articles of interest, but first here is my base scenario:

 

·         Fed will taper the tapering by Q3 – end Tapering

·         New lows in yield will be reached this year and early 2015

·         The biggest policy mistake this year will be fighting deflation exactly when marginal wage pressure is rising…….

·         Stock market will sell of 25%-30% in H2 2014

·         2014 is the low in business cycle – low in inflation, productivity, wages – high in complacency, misguide macro policy, and unemployment – in other words: 2015 H2 is the "real recovery" including inflation….

·         Volatility is major buy here – conflicting signals on monetary policy, geo-political risk and waiting for Godot is offsetting each other creating false sense of stability…..

 

Light positioning: Sold GBPUSD 1^st time in months today above 1.6800 – short AUDUSD now – RBA minutes was my CATALYST for selling – LONG, very Long fixed income……

 

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Against this stands CONSENSUS:

 

100% of economists thinks yields will rise within six month

 

Housing starts – which according to consensus will add 0.5%-0.8% to GDP in the US continues to tank:

 

Higher resolution link via Twitter:

 

 

My favorite economist – hard to find! – John H. Makin: Now is the time to preempt deflation

 

Great tool to see where Economic Dashboard is trading relative to average:  Economic Indicators Dashboard

 

Finally,

 

Marginal wages are now rising in Japan, US, UK, parts of Europe & China. Don't forget that one child policy ultimately leads to less working people than retired people, shifting the burden of cost from capital to wages – we are starting to see WAGES pressure on the margin, not due to an improved economy, but mainly due to demographics…. Politicians will misinterpret this…….but in 2015 the compounded impact could be inflation +4% in the US!

 

The one child point was made by Michael Hasenstab of Frankin Templeton in his piece on EM:  Separating the Wheat from the Chaff, an excellent short commentary with some valid points on volatility and wages….

 

Enjoy the Real Madrid vs. Bayern Munich today – a clash of titans… may the best team win …….

 

Safe travels,

 

Steen Jakobsen

 

 

Med venlig hilsen  |  Best regards
Steen Jakobsen  |  Chief Investment Officer

 

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