<<Reap, do you suppose we're into the next phase now? I've been expecting a turn from the reflation-wins theme toward another deflationary scare>>
i honestly don't know (or, maybe more appropriately, i don't think that i know), at least as it relates to your "now" question. i have no doubt that it is coming, but whether it is NOW in motion.....
what is clear to me is that Friday caught pretty much everybody leaning the wrong way. EVERYBODY is leveraged to the hilt, and positioned for GRADUALLY RISING SHORT rates and a flattening yield curve. NOBODY is positioned for RAPIDLY FALLING LONG rates and a flattening yield curve. what will be interesting now is to see the follow through. the TNX bounced pretty much at a nice fib ratio the MCHJC observed a couple of days ago today. IF we hold here, and there is not required hedging on top of hedging, then we have staved off execution for another day. what makes me think we MIGHT hold here is that spreads have NOT blown out in other risk markets -- i.e. high yield, corporates, dollar swap, etc. that is where i continue to look for my clues.
the reason i have not really switched over to the "reflation wins" camp is average hourly earnings. they were +1.8% or so in the last month (on a year-over-year basis), which is among the lowest readings in the last 18 years. while people are all concerned about the JOBS number, what they really should be concerned about is average hourly earnings. if you sit down and do the math, you will see that whether we add 0k or 200k jobs per month is friggin' irrelevant vis-a-vis whether the 150mm people who ARE working are getting average hourly earnings of >+3.0% or <+2.0%.
there is a backlash coming against corporate America, and the results are not going to be pretty. all corporations are evil for outsourcing. drug companies are evil for charging too much for medication. food companies are evil for making us obese. WalMart is evil for not paying peopel enough (we'll ignore that by not paying people enough you can buy groceries at a 25% discount to a Safeway or Kroger supermarket). Martha Stewart is going to jail for doing friggin' nothing. every day CNBC leads off with Scrushy or Ebbers or the Enron crew or the Rigas family. people are apolplectic over Janet Jackson's breast. Clear Channel is throwing Howard Stern and Bubba the Love Sponge off the air.
we have soooooooo seen this movie before.
by the way, does anybody think its just a coincidence that the Naz topped the day before John Kerry won New Hampshire and solidified himself as the dem front-runner and likely next President???
Cheers |
