Investment Chart Kondratiev Wave

Investment Chart Kondratiev Wave

Monday, 15 November 2010

Good News November 15

o Economic growth in Japan over Q3 surprised to the upside with 3.9% (2.5% expected) because of export growth and ending of subsidies for buying of cars,so growth will fall back in Q4 to 0% or lower. the yoy growth in Japan is now already for some quarters about 4%, not bad for a country where the population is declining.
o In the last hour the Chinese markets recovered strongly.
o Irish crisis will diminish when Ireland gets European support for its banks.
o US Retail sales strong because of car sales:+1,2% (*12 to make it yoy creates a big number) and except cars and gas it was still a good 0.4% (enough for some banks to think about GDP growth above 2.5% in US).
o Mislav Matejka, the excellent strategist of JP Morgan for European equities, repeated his optimism for equities in the next 6-12 months (but after that period he is pretty negative). He has the same arguments as Garthwaite below plus the credit market is open again for corporates.
o Garthwaite of CS had 10 reasons why equities should go up. QE2 is underestimated. Equities are cheap, 20% at current credit spreads; economic growth momentum is world wide improving verbetert, M&A will grow substantially, profit growth of 10-15% in 2011 in US, investors (pension funds, insurers) are too little positioned for inflation and too much for deflation. Only inflation above 4% is bad for equities, 1-
-4% is seen as good for equities etc.
o Goldman Sachs is becoming somewhat more positive about economic growth in the US. Consumption seems to grow a bit faster on lower savings and better income growth, non residential investments and exports; the fear for tax increases is going downnow probably (most of) the Bush tax cuts will extended. Inventories are negative for Q4 growth.
o Republican action groups want the FED to stop with QE2. The Fed will continue (of course), but the probability that QE2 growth will not be excessive is improving. The declining estimated size of QE2 is causing yields to rise. The Tea party has become powerful. Let us hope they don't force protectiomism (charts of Telegraph (UK) and Hein de Kort (FD)). For the time being it causes higher bond yields what is favourable for pension premiums and helps for lower valuations of pension liabilities.

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