Barron's discute della "piramide" del debito - gz
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By: GZ on Sabato 13 Gennaio 2007 19:10
Stock:
Treasury Bond
I numeri tipo inflazione e consumi vanno visti nel contesto della liquidità e credito. Ho fatto l'esempio del credito al consumo che è salito del +30% in Italia nell'ultimo anno, senza questi 15 miliardi in più di spesa veniva a mancare un 1% di PIL
Se hai Pil, reddito e consumi a +3% per 4 anni e il credito nell'economia è cresciuto del 20% non è la stessa cosa che se tu hai pil, reddito e consumi su del 3% e il credito totale è salito del 100%
Se ho cinque appartamenti che dal 2002 sono aumentati di valore di 400.000 euro e decido di prendere 80.000 euro a debito e spendere io sono più ricco di 320.000 e ho anche goduto di consumi addizionali di 80.000. Non è male no? Perchè non lo facciamo tutti gli anni e in tutti i paesi e non solo in alcuni paesi fortunati come quelli anglossassoni e spagna ?
C'è la tavola rotonda annuale di Barron's oggi e discutono questo fatto, che negli ultimi 4 anni l'Asia che esporta ha accumulato 400 miliardi di $ di riserve in valuta e i paesi OPEC 500 miliardi di $ l'anno. E per motivi già discussi alla noia in larga parte li hanno "riciclati" sui mercati obbligazionari, immobiliari ed azionari occidentali. Sono circa 1.000 miliardi l'anno di liquidità andati a spingere in basso i tassi e quindi in alto tutti gli "asset"
"..Combined, Asian countries accumulate about $400 billion of excess reserves per year. OPEC-related nations have $500 billion. That's almost $1 trillion a year of surplus monies that, in a sense, have been oversaved and underspent. They have been flowing into global asset markets via higher commodity and stock prices. They have come back in the form of subsidized yields not only in the Treasury market but in corporate bonds. They've come back in almost all risky-asset markets....."
Ma non è che si diventa più ricchi se ogni anno 1.000 miliardi frutti di export dell'OPEC e dell'Asia vanno in investimenti finanziari.
Questi soldi in buona parte sono usciti dalle tasche di lavoratori (spostamento in asia delle fabbriche) e consumatori (petrolio), americani e occidentali. MA LA COSA E' STATA COMPENSATA dall'AUMENTO DEI MERCATI E DEGLI IMMOBILI che ha consentito di consumare come prima.
Sembra meraviglioso perchè i produttori di petrolio, l'Asia e anche l'Occidente arricchiscono tutti assieme. Ma alla fine è una piramide basata sull'aumento del debito dei consumatori che ogni anno sale. Quando poi i mercati e gli immobili scendono di valore il debito invece non scende (anzi può salire di valore)....
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Cohen: The single largest buyer of U.S. Treasuries outside the U.S. has been oil-producing nations, via their investment offices in London, over the last two years. If oil prices stabilize at today's levels or continue to fall, the Treasury market could be affected. One potential area of vulnerability could be the U.S. bond market, including corporate bonds, about 30% of which are owned by foreigners. There could be a widening of yield spreads, which are at historical lows now.
Gross: Abby has hit the nail on the head. In the U.S., housing has not done well in the past six months, but other assets have. Liquidity has been provided on a global basis not only by the petroleum-reserve nations, but by Asian exporters with surplus reserves. Combined, Asian countries accumulate about $400 billion of excess reserves per year. OPEC-related nations have $500 billion. That's almost $1 trillion a year of surplus monies that, in a sense, have been oversaved and underspent. They have been flowing into global asset markets via higher commodity and stock prices. They have come back in the form of subsidized yields not only in the Treasury market but in corporate bonds. They've come back in almost all risky-asset markets.
Zulauf: The market is overheating and trends are aging or losing power.
Central banks now are raising rates and constricting liquidity. If oil, which has fallen from $72 a barrel in August/September to the high-$50s, stays at current levels, that, too, represents a contraction in liquidity, perhaps of $200 billion to $300 billion. If levered up -- and it has been levered in all these markets -- it represents a contraction of perhaps $1 trillion.
What happened to the cliché that falling oil prices are a tax cut for the consumer?
Gross: They are a tax cut in terms of expenditures, but higher oil prices also have been stimulative in the past 12 to 24 months. OPEC has spent the money in the asset markets, exerting a multiplier effect in terms of wealth creation.
Faber: Bill is correct to talk about an excess of liquidity, but I disagree about its cause. America's current-account deficit has led to surpluses elsewhere. In China, the trade and the current-account surpluses have expanded in the past two years. To bring the imbalances into order -- to reduce the current-account deficit -- you need a significant recession in the United States. In other words, consumption must go down. Otherwise there is no chance in a million years that the U.S. deficits will shrink.
Cohen: Be careful what you wish for. A weaker U.S. economy would have a dramatic impact on economic activity outside the U.S. If the United States is the ultimate end-user, all of Asia, China included, would suffer.
Faber: The U.S. overestimates its importance in the global economy today. It might have been true in the 1960s and '70s that when the U.S. sneezed, the world caught a cold. But in Asia today, we have an economic bloc that is far bigger than the U.S. or Europe. There are 3.6 billion consumers. Also, 56% of U.S. imports from China represent goods made by subsidiaries of American companies. If you run a company and there's a demand deficiency, which production would you maintain: the high-cost or low-cost producer? In the next U.S. recession, there will be even more outsourcing.
Zulauf: If the U.S. enters a recession, the world will be affected by the shrinking of trade surpluses elsewhere and the multiplier effect.
Archie, what do you think?
MacAllaster: We've had five good years and the stock market is due for a correction. There appears to be way too much leverage. Margin accounts are sky-high, about as high as they have ever been. Even though you can find a lot of reasonably priced stocks -- I can, in my kinds of stocks -- it is likely the market will have a good selloff at some point. With 2½% growth in the economy for the year, the market will do a little better in the second half. But it will close just about where it is now. If I had to pick one or the other, I'd say lower.
I want to re-emphasize that margin debt is way, way up. You know, sometimes the borrowing is 10 times the equity provided. At some point, all these private-equity investors and others can't be geniuses. Some will do well -- the old 10% -- but some won't, and that could become a real problem for the economy and the market.
Faber: Let's talk about China's currency. The Chinese pegged the yuan at 8.28 to the dollar in 1994. The peg held until 2005, when they let the currency float upward. Now it's around CNY7.80 to the dollar. In the long run, the yuan and other Asian currencies will appreciate against the dollar. But it won't make a difference to the U.S. trade deficit because the Chinese import resources and components. They will buy these resources with a stronger currency, process them and send them to the U.S. The Chinese will maintain a trade surplus for a very long time, and their currency could double in value.
Witmer: Most stocks are properly valued right now.
A strong currency makes you strong, a weak currency makes you weak. If the U.S. opts for a weak currency, as Abby says, it should be careful what it has wished for. A weak dollar could lift inflation rates substantially and potentially lead to a breakdown of the U.S. bond market.
Cohen: Trade relationships depend on more than currency. Much relates to differentials in growth rates. For example, since 2000 Europe has grown at about a third of the pace of the U.S. That alone is a solid explanation for the growth of America's trade deficit with Europe.
Samberg: Where is the bubble? I'm confused. Marc appropriately gave us a history lesson about how the world has changed to one in which economic growth and personal freedom and better lifestyles are adopted across the globe. The most mature financial markets are here in the U.S., and we're the clearinghouse for the world, which can lead to long-term problems. But why turn a positive into a negative? The world is awash with growth. It is awash with liquidity, and our markets can clear liquidity better than any others.
It is also awash in consumption, extravagance and debt.
Faber: America's current-account deficit has greased the whole world. Latin American markets are in the midst of a huge boom. The Argentine stock market is up 10 times from the lows. Latin American debt on a total-return basis has doubled in the past five years. In Asia we have bubbles in real estate. In the U.S. there's a debt bubble. Debt is now 330% of GDP. That will prevent the Fed from ever pursuing tight monetary policies, even if it becomes necessary.
Hickey: Asset bubbles are always fun while you are going through it. The tulip bubble was fun. The Mississippi bubble was fun. But they always end in tears and disaster.
Gabelli: I'll float a bubble. Abby, the Democrats won the midterm elections in a landslide. Marc, should we worry about a politically motivated constraint on global trade?
Faber: I'm less worried about that than this: The five brokerage firms in New York -- Merrill Lynch, Morgan Stanley, Lehman Brothers, Bear Stearns and Goldman Sachs -- paid out $36 billion in 2006 bonuses. Compensation and bonuses together roughly are equal to Vietnam's GDP. I see a bipolar word in which there's the typical household in the U.S. or Western Europe, and then this huge wealth concentration. It will lead to a political backlash one day.
Starting in Connecticut.
Cohen: I don't believe there is going to be a significant change in the next couple of years. The Democrats took control of the House. They have a razor-thin margin in the Senate, and they are posturing and preparing for the next presidential election. In terms of economic policy, they'll do things that won't face much resistance and will look good for the '08 election, like raising the minimum wage. With regard to protectionism, I don't hear people talking about restrictions on imports. American consumers benefit from them. The real discussion will focus on making sure markets in Europe and Asia are open to U.S. goods and services.
Schafer: One bubble in the making is the private-equity market. Buyers took four of our companies last year, which is fine. But there is so much money being thrown at companies. Henry McVey at Morgan Stanley has talked about the fact that company managements are not being paid to take risks. They are being paid to have more cash on the balance sheet. There is too much cash on corporate balance sheets. One reason the market will be buoyed is because LBOs [leveraged buyouts] will continue in 2007. When and how it ends I don't know, but it may not be pretty.
Black: Housing has knocked 1.5 percentage points off GDP growth, but the bad news is out.
In the meantime, investment banks are being asked by companies to examine strategic alternatives. After sending a team to spend time with management for six months, they decide the best alternative is to go private, with the bank participating in the deal. But the company's board says "that's a potential conflict of interest, let's have an open auction." For only one month, other people try to get the information the investment banker had for six months. There is a conflict of interest on the part of investment bankers.
Gabelli: The bigger conflict is that management knows the company and is stealing it from shareholders. The management buyout is the ultimate form of acting on inside information.
Samberg: In 1982 cash and marketable securities were 12% of the assets of the typical American corporation. Now they are 24%. You buy a company with a very liquid balance sheet and leverage it up. That's how you get the excess returns. These liquidity things are so intact that the market is going to be up 10% this year.
Meryl, what have you got to say?
Witmer: A lot of private-equity firms are selling to one another, which raises my eyebrows. Of course, sometimes it's justified when the buyer has a business insight or the timing is right and they cash out. As for the stock market, I don't think it's particularly overvalued, but I don't see a lot of appreciation this year. We run stocks through our model, and most come out valued at the right price.
You ought to take a year's vacation
Witmer: A lot can happen in a year. If there's a downdraft, I might find something good. It only takes a few stocks to have a good year. But it is tough to find really good, cheap stocks, especially in the U.S.
Zulauf: Going back to buyouts, at the last peak, in the late 1990s, buyers paid an average of nine times Ebitda [earnings before interest, taxes, depreciation and amortization]. Now they're paying slightly below six times, and interest rates are much lower. The process will continue, which will help to support the stock market.
It doesn't hurt that the Fed has been so expansive.
Zulauf: The world is expansive. Monetary policy will probably remain expansive, leading to an investment mania in coming years.
Scott, want to say something?
Black: We recognize the senior senator from Thailand. You've got five minutes. I'm on the right tail of the normal distribution curve this year. I'm mildly optimistic about the U.S. economy and the stock market. The economy is much more resilient, year in and year out, than people give it credit for. We've had structural deficits since Reagan took office. The accumulated national debt has gone from $1 trillion to $8.7 trillion, and somehow the stock market continues to go up. Notwithstanding Fred Hickey and the debacle in housing, real GDP grew at 2% in the latest quarter, while core CPI is down to 2.2%.
Cohen: Not as bullish this year as last year.
In the first four or five months of the year, inflation will abate. [Fed Chairman Ben] Bernanke's threshold is 2%; he's striking a delicate balance between core inflation and recession, and he will opt not to be the first Fed chairman in a while to cause a recession. Core inflation will drop below 2%, and the Fed will cut rates to 5% in either March or May. I wouldn't be surprised to see a 4¾% fed- funds rate by the end of the year.
What do you see for the stock market?
Black: Nominal S&P 500 earnings will grow 6.5%. Friday [Jan. 5] the S&P closed at 1409.71. We have $86.70 in '07 earnings, so the index sells for 16.2 times forward earnings. By historical standards, from 1946 on, it's in the comfort zone between 16 and 17 times earnings. The market is fairly priced. Based on my dividend-discount model, using a 6½% growth rate on dividends, I've got S&P dividends of $27.35 at the end of the year. This implies the market could be up about 8½% year-over-year.
Witmer: That's not a bad year.
Black: It is good year considering the market has been at an all-time high. Let's go back to deals, deals, deals, as Mario likes to say. Last year there were $3.79 trillion of mergers and acquisitions. Private-equity buyers took out $660 billion of stock. You have a shrinking supply of equities, a shrinking float. A lot of money is moving from traditional money managers such as myself into the private-equity world. There's an impetus to put that money to work. It's not going to be a blowout year, but a better one than most people think.
Faber: The supply of stock in the U.S. shrunk by 5% last year. There was one big seller: the individual investor. One portion of the economy -- the asset shufflers -- is ultra-liquid. But the individual is illiquid. Individuals have to sell stock because home prices aren't going up any more.
Cohen: The flow-of-funds data suggest something different. Home prices stopped rising about 12 to 18 months ago and mutual-fund inflows began to improve, which says something about the incremental dollar. I'm not talking about expenditures on primary residences, but people who might have been contemplating a second home no longer necessarily view that as a good investment. They are now looking more actively at financial assets.
John, what is your take on the new year?
Neff: I'm in the Goldilocks school.
Samberg: That school has a very big class.
Neff: I see the economy up maybe 2½%, moderate wage-benefit increases, some price increases, some decline in commodity costs -- oil, principally. Copper and some of the other ones are starting to take a lacing, too. That nets out to about an 8% to 10% earnings increase. If you buy that, the market trades for about 15.4 times the new year's earnings, which is not exactly a giveaway. But it's reasonable relative to the alternatives. I've got the market going up 8% to 10%, plus a 2% yield. The consumer is not overextended, in my view.
You don't get out of enough.
Neff: Consumers are biding their time. Sooner or later, the department stores or Detroit start to give stuff away. There is a disservice being done in the way the savings rate is calculated. It was minus 1% in November, meaning the consumer spent 1% more than he had coming in. But that calculation does not include any appreciation in what you already own, like your home or your stock portfolio. Some homes are down in value, but it's a local market.
Hickey: Every area is down!
Faber: But Park Avenue is up!
Gross: One macro point: We make a mistake -- and I've made the same mistake -- focusing exclusively on real GDP. We assume a 2% real GDP number is a Goldilocks number. It's not too hot or too cold, and it's certainly not a recession. In so doing, we fail to focus on nominal GDP, which is buried in the Commerce Department's press release. In a debt-laden economy that requires appreciation of the nominal economy to service its debt, nominal GDP is critical. In 2007, it is nominal GDP that stands a chance of encountering a recession. I don't mean it goes below zero, because that rarely if ever has happened. But a nominal-GDP recession is somewhere in the 3% to 4% vicinity. It is at that point that asset appreciation begins to go in reverse, which is what we're really talking about in terms of a market outlook.
Faber: Every region of the world has a current-account surplus with the U.S.
Oil is about 8% of the total CPI package. When oil prices decline by 20% or so, you see a 1½% to 2% subtraction from core CPI. The consumer-price index will be in the 1% zone, plus or minus, by midyear, which means nominal GDP will be approaching 3%. Be careful about forecasting nominal earnings growth of 6% or 8% or 10% in a world in which the nominal U.S. economy is only going to grow by 3%-4%.
Let's go on to the stock market. Felix?
Zulauf: This will be a transition year to a better '08-'09. There will be a shakeout at some point, and some difficulties in corporate earnings. What I'm not sure about is the timing of the shakeout. The market is overheated and trends are aging or losing power. Particularly if the carry trade [borrowing at low rates to purchase higher-yielding assets] goes into reverse -- if the yen suddenly starts to strengthen -- some players will have to reduce their leverage and sell.
What does that imply for rates?
Zulauf: You could have a brutal correction in all asset markets. One is on the way in commodities, which began topping last May. If commodities peaked last spring, they could make a low around the middle of '07. A lot of aggressive money is positioned on the long side in commodities. That's a problem, together with those who have financed carry-trade positions in yen. If the yen goes against them, they will either have to hedge the yen -- meaning they will buy it and push it up more -- or reduce their asset side. All these things together could lead to a brutal shakeout in the next few months. There could be a 15% to 20% drop in the general markets. That would be the better outcome because it would clear the markets of excess and bring the central banks in to loosen credit. A good shakeout first would be a wonderful scenario. Then the market could go up, slowly at first, accelerating over the next two to three years. If the corrective process in the first few months of '07 is shallow and mild, we'll have one later, from a higher level. But the odds are it will happen sooner.
Art, what do you think about the market and interest rates?
Samberg: Rates will probably go up and then go down. The economy is having a little bounce. Later this year there will be a slowdown, and rates will come down by maybe half a percentage point, not much.
Zulauf: Are you talking short or long rates?
Samberg: I am talking short. As for the market, I hope we get a correction early on. You know there will be a correction sometime, with the VIX [volatility index] so low. I don't see why there should be a huge one. But there are those asset shufflers. Others, like me, call them asset allocators.
Gabelli: Asset enhancers, hopefully.
Samberg: John is involved with some investment committees and so am I. The world is a helluva lot different than it used to be. One committee I'm on had a ton of money with one U.S. long-only manager, and it no longer does. The committee's portfolio was up 23% last year for the fiscal year ended June 2006. There has been a much greater allocation of institutional money into hard assets and other things. When then happens, you have to look not only at economic growth, but all the financial strategies that go on around it. You could have a melt-up in commodities that is futures driven, not physically driven. It complicates relationships. You've got to look below the surface and find out what's really going on.
