Six months of calm

[Детективное агентство Тула]

US margin of safety will be enough right up to presidential election, if war does not happen earlier in Iran

Over the past few days, speculative markets have been falling in the US and the world. Such a reaction of the stock market, along with lower prices for natural resources, according to analysts, followed the recognition of the recession in the European economy and the contradiction between the parties on the exchange of Greek debt. At the same time, shares of almost all market sectors decreased in the USA, and the leaders were construction and production of building materials (-3.148%), automotive (-3.582%) and the banking sector (-2.916%). Blue chips, with the exception of Intel (0.264%), also declined. The biggest losers were Citigroup Inc (-4.545%), American Intl Group Inc (-4.536%), Alcoa Inc (-3.854%). The broad S&P 500 index only yesterday fell by 1.537%, the Dow Jones index - by 1.571%, NASDAQ - by 1.361%.

Moreover, the EU economy actually declined completely uncritically - at the level of -0.3% on a quarterly basis and + 0.7% on an annualized basis. The volume of exports decreased to 0.4% in the IV quarter compared to III, which, however, is observed for the first time since 2009. In addition, the eurozone GDP growth for 2011 was slightly revised from 1.5 to 1.4%, but this is still growth.

You can also add a significant (especially over the past three months) expansion of the monetary base (ECB balance sheet), to $ 3.02 trillion, but this, in general, is not very big news. And, of course, the question arises: what actually happened? Especially against the background of official data on the USA, which look not just optimistic, but very optimistic; just look at the picture that the Fed painted last week in its Beige Book.

Actually, the study of this very “book” (that is, the report of the regional reserve banks on the economy in their regions) just gives a possible answer to my question. It is enough to simply cite the main points of this document taken from the site k2kapital.ru:

- The economy grew at a pace “from modest to moderate”;

- US manufacturing activity grew at a moderate pace;

- Consumer spending was mostly positive;

- Prospects for sales in the near future are mostly optimistic;

- The situation with residential real estate has “slightly” improved in most regions;

- Hiring “slightly” has grown in a number of regions;

- The situation on the commercial real estate market is also positive in some regions;

- Banking conditions have generally improved;

- Salary pressure is generally restrained, prices are stable.

I will not comment on these theses separately, this was partially done in a number of previous texts, but you can pay attention to their, so to speak, demonstrative optimism, which speaks only about one thing: the Fed has joined the election campaign, and on the side of the current administration . Again, I wrote many times why such an option is much more likely than neutral or, especially, aggressive-negative behavior, so I won’t repeat it (and it doesn’t matter: the fact is, in general, obvious). But what conclusions follow from it, and how are they related to the decline in recent days?

I see the situation like this. People, even playing the stock exchange, in general, usually do not have a more or less clear idea of how the economy works. I know this well by myself: even when I was already working in the Ministry of Economics and professionally engaged in economics, I could not immediately imagine a more or less complete picture of the situation, and that only seriously went beyond the formal boundaries of my job responsibilities. What can we say about normal people, especially Western people, not “spoiled” by the Soviet education with its craving for generalizations and the acquisition of new knowledge, as well as faith in advertising, especially coming from official institutions ...

This means that, faced with massive propaganda of significant improvements in the economy, these people (i.e., almost everyone who owns some kind of albeit relative capital) are beginning to look optimistically into the future - with all the consequences for the markets. These consequences have happened: the markets have been growing pretty well lately. And in general, no one gave special attention to the negativity that constantly appeared somewhere on the periphery of vision.

But the data on the eurozone GDP were in sight. And because the views of the whole world are riveted to Europe, for it is precisely it that must show the world new principles for working with debtor states, and because it has been very actively printing money recently, and therefore, in the end, because there are elections in major countries. And the rather clearly expressed negativity turned out to be so inconsistent with official American optimism that the markets froze in bewilderment and, just in case, decided to drop a little.
I think that no particularly long-term effect will come of all this: the next wave of official positive will cover society, and the markets will go up again. If it suddenly turns out that by the end of spring there is no more money to support the markets, and there will still be plenty of time left before the elections, then, as some Fed leaders and some banks “especially close” to it have already openly told us, by the end of the second quarter possible emission from the Fed. And, before the election, in any case (that is, until the beginning of November), everything will be fine in the markets.

There is only one situation in which something serious can happen - if sharply negative data on the economy go. But this is only possible in the event of a sharp drop in private demand, and this, most likely, will not happen. No wonder Obama has once again increased the limits of the state debt: there will be money for social payments, and it is they who today support, in general, falling demand.

Thus, there will be no critical events until the fall, unless some cataclysms occur outside the United States. In potential, in any case, there are two of them so far. The first is the war in Iran, and for this reason, I suspect Obama has so far backed away. The second is some kind of collapse in Europe: whether in Greece, in the elections in France or elsewhere. The second is less dependent on the United States, but I suspect that the ECB has printed so much money for good reason: they are needed just to close short-term “holes” in the economy. Of course, they cannot close long-term ones, they will most likely create new problems, but by the end of the year there will most likely be enough resources.

So, the situation seems to me as follows: until the end of the year everything will be more or less calm (well, except that in November-December there will be some increase in inflation), and then another wave of falling private demand can begin, which can only be controlled very massively emission - with all that it implies. But in the next six months, most likely, everything will be calm.


Source: [DLMURL="https://www.km.ru/biznes-i-finansy/2012/03/07/ekonomika-i-finansy/mirovoi-ekonomike-ostalos-polgoda-spokoinoi-zhizni"] http: / /www.km.ru/biznes-i-finansy/2012/ ... noi-zhizni [/ DLMURL]