EDITOR: | December 15th, 2013 | 5 Comments

The Laird Economics Report: “the economy is improving across the globe.”

| December 15, 2013 | 5 Comments
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ProEdgeWire-Economic-reality-weeding-out-the-weak-kneedWe are pleased to provide InvestorIntel readers with the latest edition of The Laird Economics Report — hot off the digital press, so to speak. Each month, The Laird Economics Report examines where we are today, based on a detailed presentation of economic indicators with some historical context. This comprehensive downloadable monthly report — prepared by financial expert Jim Laird — compiles a plethora of key economic data in one easy-to-understand summary.

In this month’s report, it seems as though everyone has his or her head around the notion that “the economy is improving across the globe.” China isn’t blowing up with a hard landing and the power transition went smoothly. Europe still has horribly bad unemployment, Spain and Greece in particular, but it seems stable. The UK is on an absolute tear lately — and it seems we hear rumblings of yet another housing bubble. The US is done punching itself in the head for the time being, while its economy slowly improves. There is increasing talk of stagnant growth across the world. It’s been a long recovery process from the 2008-2010 horror show, but lately we’ve seen some big names talking about how low global demand just can’t seem to fix itself. There are bubbles here and there, but global inflation (or lack thereof) seems to be an indicator that demand is just too low. Note, however, that it used to be globalization’s job to keep inflation low — and that was viewed as a good thing. Now, not so much. As resource demand is driven in a large part by growth, we are seeing global sentiment shift away from the Canadian dollar — lots of predictions of a USD$0.80-$0.90 dollar going forward. If Canada can’t grow its way out of its problems, maybe a quick 10%-off sale on everything in Canada will do the trick here? This month’s report intentionally ignores the continuous stream of housing bubble articles… for now.

In next month’s edition, Jim Laird will begin tracking the US Taper (the US Federal Reserve’s reduction in the size of its bond-buying program; otherwise known as quantitative easing). The Fed’s quantitative easing, which was designed to stimulate the economy, has served the secondary purpose of supporting financial market performance in recent years and remains fully intact at a pace of USD$85 billion per month.

The Laird Economics Report

Download (PDF, 1.92MB)


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Comments

  • Dave G.

    Really appreciate access to the Laird Report and especially pleased when I read this one! Looking forward spending some more time reviewing and to your next update.

    December 16, 2013 - 2:19 PM

  • Dr. Copper

    Thanks for the read. Have them come around that QE is not money printing
    but actually forced deposits ?

    Key here is that the sooner the QE ends the faster the chase on the
    beaten down commodities and miners will occur. Still time to pick them
    cheap biggest trade may be gold because with Taper Syndrome soon to
    set in – we will soon hear how the World really can blow up without
    support.

    Copper looking good just broke out to the upside.

    xmas greetings with thanks for a great site.

    Dr. Copper

    December 16, 2013 - 3:21 PM

    • Sue Glover

      Thanks Dr. Copper for your continued insights and contributions on InvestorIntel. We appreciate your support and wish you and your family all the best for a joyous holiday season.

      December 17, 2013 - 1:13 PM

  • Jim Laird

    As I understand it, the various QE programs means that they have given up trying to lower short term rates (because, you know, they are effectively zero) so they attempt to drive down long term rates – which seems unnatural in an environment where “things are getting better” – surely the economy can withstand higher long term rates? The US 10yr yield advanced about 100 basis points over the past year and it’s not like the world collapsed. Although there is still much sobbing and gnashing of teeth, the economy is actually pretty strong relative to the cost of capital, but I suspect because capital doesn’t make enough return given ordinary business risk – perversely, no one wants to make long term investments (i.e. lend money at crappy rates) – so we see S&P companies all borrowing money to re-leverage and use it to make share buybacks, rather than, say, invest in productive capacity for the future.

    I think QE did what it was supposed to do – but I’m not sure that the ultimate policy objective (ie. lower rates = higher employment) is being met. In an ordinary world, business would be clamoring to fund projects at lower cost (and thus growing and hiring), but so far, it’s like the “Underpants Gnomes” episode of South Park (look it up on wikipedia if you have no idea what that means – you’ll thank me).

    The reality is that between shutdowns & sequesters etc., fiscal policy has been a horror show – there’s only so much monetary policy can do to fix that problem. QE1-3 probably hasn’t made that much of a difference at the end of the day in my mind – the repair of fiscal policy dysfunction is the only thing that slays that beast – and that isn’t coming soon enough (current budget deal aside).

    On the other hand, if long rates would shoot to the moon that would kill the economy and so QE would return anyhow. In any event there’s no way in the world they are cranking short term rates in the near future with unemployment high (I’m not sure recent drops help much given how labour participation rates have dropped so much) and inflation low (conspiracy theories that they are lying about inflation set to one side for now).

    I could see a good argument for QE ending (i.e. there’s not great need to keep rates down artificially if things are getting better) – the bigger question, is “will they leave all the assets on the fed balance sheet, or does unwinding mean that they are getting them off ASAP as well?”. The unwinding would create an economic drag (sale of assets drives down prices and cranks long term yields) that no one wants right now.

    That part of the hangover is unanswered and I suspect politics being what it is, it will sit there for a very long time on the fed balance sheet and might actually form an interesting policy tool – the ability to crank long term rates in a mythical overheated economic future by unwinding the assets, without being seen as the bad guy by cranking short term rates – maybe this ends up being a useful exercise after all!

    December 16, 2013 - 10:43 PM

    • Sue Glover

      Thank you Jim for providing this additional and invaluable information for the InvestorIntel audience.

      December 17, 2013 - 1:10 PM

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