Barrons 2013 Outlook – No Negative Forecasts….

Comments

1. So, what is Barron’s track record on forecasts? Should we take this as a positive, neutral, or a contrarian indicator?

   • I thought Barron’s was nearly always bearish, and normally wrong. But, like a broken watch, correct twice a day for about a minute. A bullish Barron’s is a problem.

2. Not ONE forcaster dares to predict a S&P lower than 1435 ? Oh, I forgot that these folks are talking their own book.

   • Hi.
     They are all correct, the S&P will be going to 1500 & 1600 ( and higher ), no doubts there. BUT..not before it drops to 1167. How fast or slow it makes it to 1167 will influence how soon we get to the 1600′s. But once the 1167 target is hit, ( next few months ), then S&P will climb to new All Time Highs. I disclose i am short 1426 average with a 1167 target and then will be all longs to new highs.
     kind regards……….

     • Long term cycles should lead as to think that the SP500 won’t break the 2000-2007 highs before 2020, and that one last major cyclical bear market is to be expected in the next five years.

       So my take would be the exact opposite of yours: we may very rally up to 1570 next year, possibly in the next 6 or even 3 months (only 10% left to go), but from there we will go sub-1000 points. Difficult to say if we’ll make a higher or a lower bottom than in 2009.

       So all these analysists will be able to say they were right: we will hit 1570 in late winter/spring, and end the year between 1150 and 1250.

     • No, US manufacturing has turned negative for the first time since 2008/2009. As long as manufacturing doesn’t rebound there won’t be a rising stockmarket, anytime soon.

       I continue to be bearish and recently this downturn in manufacturing has confirmed another reliable longterm bearish signal. No, there’s – IMO – absolutely no chance the S&P will go above the ~ 1470 level, reached in september of this year.

3. Now I know why there is a shortage of rose colored glasses.

4. Cullen,

   Know you do not give investment advice, but what do you think of the idea of shorting the 10 year bond as an alternative to fixed interest rates on a mortage?

   I would guess that the long rates go up sooner, and maybe faster, then the short rates. If lucky one could enjoy low interest rates while making money of the protection. Of course I understand that the person doing this must be somewhat sophiaticated, and I would certainly reconmend this strategy to the general public.

   • Hoffa, If you had been reading Cullen for very long you would know that he is not a bond bear, and he would not advocate shorting the 10 yr Treasury bond. Cullen would argue that the Fed puts limits on even longer-term rates. The Fed will exercise its ability (via continued T-bond purchases) to keep the 10 yr T-note yield within a narrow range, likely for the next year or more.

     • Know that he is not a bear, and certainly I do not believe that the bond market is not in a bubble. However, sooner or later the Fed is going to increase the short term rates, before that the long term interest rates.

       I live in Norway, here private dept to disposable income is over 200 percent, that would cap the level the interest rates could be without creating a credit crunch. Also the Central bank is unlikely to increase interest rates before other countries because of the strength of the Norwegian krone. This makes me to conclude that the fixed interest rates offered by the banks is a bad deal. Especially because any move will take a rather long time.

       However, I still want some protection for rising interest rates. Shorting the 10 year US bond seems to me to be a good alternative while hedging currency risk. The Norwegian market for government bond is to illiquid to short. I am patient because I do not think the market will move that much next year. Anyway, I can not see how this would backfire since if yields do not rise I can enjoy low short term interest rates. Unless maybe the Fed raises short term interest rates during a recession, which is highly unlikely.

       • Hoffa, you might have to be very patient indeed if you short 10 yr T-bonds. David Rosenberg says today in his Breakfast with Dave: “We have a widespread consensus that inflation and interest rates have nowhere to go but up.” The contrarian may be rewarded here, following Farrell’s Rule #9, by seeing inflation and interest rates drift even lower. If you insist on betting on higher rates, you might consider dollar cost averaging very slowly into TBT or something similar. I think it is too soon to make that bet.

5. i would not expect anything else than bullishness from wallstreet´s biggest banks.
   how would they explain a bearish tone to their customers who are invested in stocks?

   wait for Barrons roundtable to get something to work with.

6. Time to sell.

7. There are so many bulls around, I can’t help feeling bearish–in fact, most determinedly. Welcome 2013!

8. Beware the consensus of experts.

9. They all share one common characteristic: They are guesstimates supported by historical references, but highly unreliable relative to the future. The future is forever uncertain.

   I will monitor to detect Black Swans, but, by definition, these events are not predictable.

10. We get the same every year from the sell-side, who always have a product to sell. A product based on hope and greed.

11. I think rule 9 is appropriate here:

    http://stockcharts.com/help/doku.php?id=chart_school:trading_strategies:bob_farrell_10_rules

    Bob Farrell’s 10 Market Rules: The 10 Commandments To Remember

    1. Markets tend to return to the mean over time
    2. Excesses in one direction will lead to an opposite excess in the other direction
    3. There are no new eras — excesses are never permanent
    4. Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways
    5. The public buys the most at the top and the least at the bottom
    6. Fear and greed are stronger than long-term resolve
    7. Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names
    8. Bear markets have three stages — sharp down, reflexive rebound and a drawn-out fundamental downtrend
    9. When all the experts and forecasts agree — something else is going to happen
    10. Bull markets are more fun than bear markets.

    These are the ten commandments of investing. Not understanding this is what leads to individuals losing large amounts of money over time.

12. I like the guys who aren’t using the cheap software for their treasury models — taking their numbers out past the decimal by 2 digits.

    Russ Koesterich, BlackRock
    2013 10 Year US Treasury Yield: 2.25%

    Adam Parker, Morgan Stanley
    2013 10 Year US Treasury Yield: 2.24%

13. Cullen, I’ve got an MMT question that has some indirect bearing on the economy next year.
    Is there really a national debt at the Fed? As I understand it, when the Fed buys a T-bill
    from a private bank or institution, it pays for it with money it creates out of thin air. The Fed is also a governmental agency, as says the FAQ’s at the Fed. And creating money out of thin air is only a power granted to and delegated by Congress by the Constitution.
    Hence, regardless of whatever else the Fed is, it is a government agency just like the Treasury. So, when it buys the security from the private party, that implicitly and automatically redeems the debt obligation of the government to the private holder.
    But being a government agency, that means the Fed is not owed for buying the
    security. Why would it need money back if it can create unlimited amounts of it?
    That being so, why is the Treasury now still rolling over the securities held at the Fed constituting the national debt? Isn’t this illegal in the sense that there is no Congressional authorization for the second debt after the first was paid off by
    Treasury with money it got from selling the new security to replace the old, and further
    if the Fed implicitly and automatically redeemed the debt obligation in the first place.
    Has the Fed ever admitted that it has redeemed the debt obligation for the government and is not owed further (except for its 6% transaction fee on the interest of redeemed securities. Something doesn’t make sense here.

    • 1. I am not an MMTer. We started MR because or our disagreements with MMT.

      2. The Fed is not private and it is not part of the US government. It is a strange sort of hybrid entity. See this description.

      3. I think you have to be careful saying that the act of Congress makes the Fed’s liabilities govt liabilities. According to that sort of definition you could say that bank loans are also govt liabilities since the only reason they can legally issue loans is because they are chartered under an act of congress. The definitions of the Fed as independent and the banks as private are very clear definitions that shouldn’t be twisted. Doing so does not add clarity to the discussion, but confuses the current monetary arrangement as it exists.

      So I think your premise that this all constitutes debt being “paid off” is not exactly correct.