Faber News Flow

The numbers just don't add up.  Even if you treat this stuff on the most charitable of terms, dollar for dollar, way too much of the hole almost certainly remains unfilled. That's the thing about "stimulus" talk; for one thing, people seem to be viewing it as some kind of addition without thinking it all the way through first. You have to begin by sizing up the gross economic deficit it is being haphazardly poured into – with an additional emphasis on "haphazardly." Everyone forgets the last time when the government tried this, impressing markets and the media with its huge numbers, that after it was over its proponents complained how it wasn't big enough.  Paul Krugman most of all  (seriously, in November 2009, long afterward, he wrote Obama's plan was awesome but it wasn't "nearly enough"). If you don't know how big is the abyss, if you can't even size the thing up properly  while it's unfolding , how can you even attempt

After spending collapsed (and incomes dropped) in March, April was expected to see even worse but there was a surprise! While  spending collapsed  13.6% MoM (the biggest drop on record),  incomes soared  10.5% MoM (the biggest surge on record) as we assume that this reflects massive government transfer payments... Source: Bloomberg And on a YoY basis, the shift is massive...  an 11.7% surge in incomes and 3.1% slump in spending... Source: Bloomberg The surge in incomes is entirely due to  massive government transfer payments... Here is that percentage change put in absolute context... basically,  the government has added $3 trillion in annualized income...  from $3.348TN in March to $6.367TN in April (both annualized) As private and government  wages collapsed... Consumer spending decreased in April, reflecting decreases in both goods and services. Within  goods , the leading contributor to the decrease was spending on food and beverages data. Spending on prescription drugs also decrea

The numbers just don't add up.  Even if you treat this stuff on the most charitable of terms, dollar for dollar, way too much of the hole almost certainly remains unfilled. That's the thing about "stimulus" talk; for one thing, people seem to be viewing it as some kind of addition without thinking it all the way through first. You have to begin by sizing up the gross economic deficit it is being haphazardly poured into – with an additional emphasis on "haphazardly." Everyone forgets the last time when the government tried this, impressing markets and the media with its huge numbers, that after it was over its proponents complained how it wasn't big enough.  Paul Krugman most of all  (seriously, in November 2009, long afterward, he wrote Obama's plan was awesome but it wasn't "nearly enough"). If you don't know how big is the abyss, if you can't even size the thing up properly  while it's unfolding , how can you even attempt

"Where Alph, the sacred river, ran through caverns measureless to man down to a sunless sea.." Just as I was getting into this morning's Porridge the proverbial "Man from Porlock" arrived in the form of the Ocado delivery! (Extra points to anyone who can connect Porlock, Opium and this morning's quote.) Result is I lost the thread completely… which is apparently happening all around the globe. (This morning had already started badly: my mental health is clearly frayed… for the second time this week I unthinkingly pored milk into my Earl Grey. Next week I'll be going into my office and forgetting to put on a tie. This really is the end…)  Back to markets … While the rest of the World will be focused on what Trump is going to say about China (Clue – he talks big before the event, but will disappoint), this morning's rant is about Yoorp. How many times have we heard some grand poo-bah Eurocrat herald a grand plan to advance the Union.  This time its Urs

The Crosscurrents of In/De-flation The remarkable deflationary and inflationary crosscurrents swirling through the economy are grossly underappreciated and misunderstood. Need proof? Watch CNBC or read Wall Street research and consider the likelihood of the smooth path back to "normal" they tout. It is comforting to think about "normal" and what that may entail for our lives  and  portfolios. However, given the global economic tsunami and extraordinary monetary and fiscal stimulus, we would be remiss if we did not raise awareness that economic and market recovery may be far different from "normal." One of our deepest concerns is a highly inflationary outcome, an experience not seen in fifty years, and one for which we are least prepared. Markets always have a strange way of finding investors weakest points. Disequilibrium Defined "Inflation defined is, in fact,  a disequilibrium between the amount of currency en

Stocks were mixed Thursday morning amid a deluge of new economic data, much of which was still consistent with a contraction but at least signaled some stabilization after an initial slump in activity. A new report this morning showed new unemployment claims totaled a slightly greater than expected  2.123 million last week,  though continuing claims for the prior week pulled back from a record high and fell for the first time during the pandemic. Meanwhile, first-quarter gross domestic product (GDP) was downwardly revised to show a 5.0% annualized decline, from the 4.8% previously reported. So far this week, investors have been weighing signs of stabilizing US economic activity after last month's deep downturn, along with  hopes of a vaccine or treatment , against concerns that relations with  China were set to become increasingly strained.  China  approved a draft decision  for new national security legislation that would impose on freedoms in Hong Kong, in a move that would encro

As we have discussed here over the past few days, there has been a tremendous rotation below the market surface in recent days, one on par with the great quant crash in early September 2019, with value stocks soaring - arguably on reopening optimism and expectations for a rebound in inflation on the back of the fiscal firehose we noted yesterday - as outperforming momentum names have been trampled... ... resulting in the latest shock to hedge funds, which were positioned for a continuation of the legacy momentum-over-value theme. As usual, any time there are such momentous moves in market, Nomura's quant Charlie McElligott is there to provide his unique perspective, and this morning he did just that, pointing out that "remarkable things" are occurring over the past few sessions within the US Equities space in the context of consensus positioning and what he calls " a tectonic "de-grossing" of short books and overall dynamic hedges, acting to propel both ind