Outrageous Predictions for 2015 is out! - page 2

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God knows who they are....:)

If you ask them they will tell you that the god is looking at them whenever they look in the mirror ...

 

Goldman's Top Economist Just Answered The 8 Most Important Questions For 2015

Goldman Sachs's chief economist Jan Hatzius just published answers to what he believes are the eight top questions for next year.

Here's a list of the questions and our quick summaries of his thoughts:

1. Will the US economy continue to grow above trend? Yes. Domestic strength should offset weakness from other economies.

2. Will the dollar appreciation weigh on growth? Yes, but it's manageable in the short term because of lower oil prices.

3. Will the housing recovery accelerate? Yes, especially in the single-family sector. Household formation should improve as young adults move out of their parents' homes.

4. Will consumer spending growth accelerate? Yes, as real disposable income increases because of lower oil prices.

5. Will capital spending growth accelerate further? No. Business capital spending does not look depressed relative to the long-term fundamentals and the decline in oil prices is likely to take a toll on energy sector.

6. Will wage growth move into the 3%-4% range identified by Chair Yellen as “normal”? No. There's still slack in the labor market as measured by the U6 underemployment rate.

7. Will core inflation rise toward the Fed’s 2% target? No. The dollar is strong, wage growth is low, and depressed oil prices should have a negative impact.

8. Will the Fed hike rates by the June FOMC meeting? No, because inflation probably won't hit the 2% target. "Based on our below-consensus forecasts for wage and price inflation we expect the first funds rate hike to occur after June 2015; our base case is September," Hatzius said.

So in summary, the US economy will grow together with the dollar, faster than its global peers. But inflation below the Fed's target will push its rate hike back to at least September, and the impact of lower oil prices will continue to be felt throughout the economy.

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...nice to place this in Zerohedge...and then take some time off...make some pop-corn, coffee...may be a few beers...come back to my laptop and read comments

 

Trade-weighted euro may be set for shock upswing in 2015

While investors are betting the euro will fall against the dollar next year, hopes that the European economy will therefore get a boost could be premature: it may not depreciate at all against currencies of other major trading partners.

As speculation grows that the European Central Bank will ease monetary policy more aggressively, some economists predict the euro could even slide to parity with the dollar by the end of 2015 from around $1.22 now.

However, the dollar is no longer the most important element in the ECB's trade-weighted euro index, its favoured gauge of the euro's strength. That position is now held by the yuan and against the Chinese currency -- along with others such as sterling, the Swiss franc and Japanese yen -- the euro's prospects are far from clear.

The euro has already lost around 3 percent against the dollar since early October when the ECB said it would buy rebundled packets of debt, as it tries to fight off the threat of deflation in the euro zone.

Expectations are strong that the ECB will move on to quantitative easing next year by buying government bonds. This would involve printing money in the hope of pushing inflation that is close to zero towards its target of just under 2 percent, a policy that should weaken the euro.

The ECB reckons that a 10 percent fall in the euro's effective exchange rate would deliver 40 to 50 basis points of much-needed inflation to the euro zone. However, the euro has actually gained around a third of a percent on a trade-weighted basis since October.

China is now the euro zone's biggest trading partner, and the common currency has held steady against the yuan over the past month while it has fallen 1.5 percent against the dollar.

Any euro rise against the yuan would effectively import disinflation from China, hurting the ECB in its campaign to avoid the kind of deflation that has hit the Japanese economy so badly in the past decade.

The U.S. economy is expected to grow strongly in 2015, prompting the Federal Reserve to start raising interest rates and thereby boosting the dollar, but the outlook for China and its currency is far less clear.

"The potential for the yuan to become more volatile next year is certainly there," said Paul Lambert, head of currency at Insight Investment. "There are certainly scenarios in which the yuan would weaken."

Saxo Bank's Chief Economist Steen Jakobsen reckons the yuan will fall at least 5 percent against the dollar next year as the Chinese economy slows.

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The Fed. Is Losing If Not Already Lost Control

We witnessed a few things for the start of 2015 in the financial markets that were unlike any previous. The first three days of the new year produced the worst three-day stint in the markets – ever. A meaningless, insignificant, trivial, data point? Possibly. However, when it coincides with other noticeable factors taking place across the financial spectrum It behooves any thinking person to sit up and take notice. (Unless you’re the next scheduled appearing CNBC™ “Everything’s Awesome!” fund manager. Then it’s more like a Servpro™ tag line: Like it never even happened.)

The reason why this sell-off in conjunction with its timing raises eyebrows is its direct proximity to the release of the latest FOMC meeting and conference. Here was where markets were supposed to get their “guiding principles” for how to proceed into the new year.

What they seemed to get was nothing more than gobly goop. The all fearing word “patient” reared its supposed vampire slaying head, but instead of replacing the soothing phrase of “considerable time,” it was added too. This in-turn sent some very expensive headline reading HFT computers, along with some very expensive highly paid fund managers into a “Huh what?” state of confusion.

Was the language (as well as the delivery channel) intentionally meant to cause confusion? Possibly. For if one understands how those in the world of “policy wonk” think: Language and the parsing of it will/should only be interpreted in the way those that are writing and delivering it want it too – at any given moment of time.

So they bend and twist every possible meaning into a statement, rather than wring confusion out. This way when the desired action isn’t forthcoming one can always state, “Oh, well I didn’t intend that to mean this, I meant it to be read as that. See!”

This only works when nobody’s really paying attention. But when people are, and real consequences are on the line (as in billions if not trillions of dollars) confusion, double-speak, and the like sets into action a multitude of unintended consequences which the once “masters of communication” never envisioned.

Let’s put into perspective a few items that’s appeared on the screens for both those at the Federal Reserve as well as all those “Everything is awesome” camped fund managers that owe their 2014 bonuses too of late.

First we have the collapse of oil. Good thing for the consumer. Of course. Good for the economy as a whole? Sure, in some areas of business there will be considerable cost saving benefits. However, in other areas it is beginning to show signs of great stress. Primarily in the areas where the latest true growth of late took place: in the areas affiliated to anything relating to oil exploration of any type. Not only here in the U.S. but globally as well.

The real issue of concern for those at the Fed (which one has to assume they are more than aware of) are the stresses continuing to mount within the High Yield credit market. A market in which they are directly responsible for malfeasance with its proportionate risk-taking.

This is where the demand for yield trade was pushed by a Fed. that was relentless on keeping interest rates at the Zero bound. Now that market along with its inter-tangled web of cross, carry, swaps, you name it derivative trades is beginning to buckle. This is one of just a myriad of concerns that must be making all Fed. participants uncomfortable.

You know what is also a factor in driving down the price of oil separate from the underlying weakness that is truly within the global economy? A stronger Dollar. And guess what’s getting stronger by the week? That’s correct the U.S. Dollar. Why?

Well there are a host of reasons and most of them are nothing more than the equivalent of the old saying “It’s the cleanest shirt in the dirty laundry.” That said it should not be underestimated just how dirty the surrounding laundry can get. Especially if more wide-spread fears come into play. And rest assuredly it seems not a case of “if” fears occurs but we are much, much closer: to when.

Remember, the stated intention of the Federal Reserve’s intervention into the capital markets was to help foster a targeted 2% inflation rate. You know what throws all of that out the proverbial window? A rising dollar. The dollar has gained so much strength over the these last few months it is at levels not seen since the financial crisis began. So much for the omnipotence of a Fed. policy hitting it’s target with precision no? But wait…There’s more! (sorry, couldn’t help myself)

How about that latest employment data? Wasn’t it just the best?! The unemployment rate dropped down to (wait for it…) 5.6%. That’s one of the lowest rates again since the crisis began. A number far closer to (and possibly even sooner) of hitting the Fed’s number of “full employment.”

However, hidden within that report were a few other dirty little secrets. As the number of “Mission accomplished” for the Fed. notched closer, the number of long-term unemployed jumped to its highest in decades. As reported by ZeroHedge™ Record 92.9 Million Americans Not In Labor Force.

However shocking as that number is to any American, it’s probably not as shocking (or panic filling) as another number contained within that report to the very people fueling this economy with KoolAid®.

That number is the one that showed wage growth (e.g. average hourly earnings. a requisite data point in calculating inflation) printed not the expectations for an increase of 0.02%. But rather: a decrease of -0.02%!

All that money printing. All that balance sheet inflation (the only place where true inflation is currently) and the result to show on the final report of the year? A year when QE has now been shelved. It can’t even get a print of flat?! Never mind an increase.

And this data point is essential in helping make the argument that interventionist monetary policies resulted in the desired effect of an omnipotent Federal Reserve. What are we to hear at the next press conference: “Ooopsy?”

Once again we saw Fed. officials take to the airwaves in any way, shape, manner, or form to get a message out that whatever you thought was intended for the messaging from Chair Yellen’s last conference might be “misinterpreted.”

instead of a non-voting member it must have been decided with both the release of the latest minutes in conjunction with the subsequent release of other government data points – it was time to get the word out and proclaim that a raise in rates would be a “catastrophe.” But this time it must be said by a voting member for true accountability.

Once again as the markets showed weakness and didn’t seem to get that resounding “seal of approval” in response to the release of the Fed.’s minutes, non other than a voting member of the committee speaking during a forum in Chicago was reported to proclaim “raising rates would be a catastrophe.” That statement at around 8pm EST sent a highly illiquid overnight futures market soaring. The result was a near 2% rally.

Now let me ask you a question dear reader: Why does one believe the word “catastrophe” was used? Hmmmmm? After all, the very articulated and polished minutes of what members expressed to one another as to set the current policy was just made public.

Where was the argument or verbiage contained within of a voting member stating that the raising of rates would be a “catastrophe?” I thought the verbiage of choice was now “patient.” Unless…

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