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Monday, January 6, 2014

Nobody saw the 2014 crisis coming



Predictions are a mug’s game. That’s the standard disclaimer on almost every story, column, or post that somehow ends up making predictions anyway.

That said, predictions are often a useful way of identifying the most solidly conventional wisdom. In a speech Friday, Ben Bernanke admitted that the Fed tends to be too optimistic in its growth predictions and too pessimistic about the unemployment rate. Still, Bernanke echoed the broadly upbeat consensus for 2014, citing “the combination of financial healing, greater balance in the housing market, less fiscal restraint, and, of course, continued monetary policy accommodation”. Even Nouriel seems relatively cheery: In Roubini-speak, tail-risks are now “less salient”.

As usual, Bill McBride at Calculated Risk has some of the smartest thoughts on the year-ahead. His list of 10 economic questions for 2014 aren’t quite predictions, but they come close. Looking back on GDP since since 1999, he says “it is likely that 2014 will be the best year of the recovery, and possibly (with some luck) the best year since Clinton was president.” The job market, McBride writes, will be buoyed by two long-term trends: rising residential investment and state and local governments that have stopped laying people off. He expects between 200,000 and 225,000 jobs to be created per month in 2014. If that type of growth doesn’t materialize, Neil Irwin suggests we all revisit our economic models.

As for the markets, Josh Brown warns that “the first thing you need to know is that there are less opportunities in the stock market than there were one year ago and significantly less than there were during the year prior.” (A 30% rise in the S&P tends to do that). Brown plots out a few possible scenarios, including a 1994-style slow-mo correction, and a hyper-bullish outcome in which businesses finally start investing, hiring and America experiences a labor shortage. Sudeep Reddy wonders if this may be the year “businesses finally shed their caution.”

Ed Yardeni asks if we’re in for a market melt-up in 2014. His case: the “Great Rotation” of retail investor money from bonds into stocks, coupled with a continuing flood of buybacks could send the market higher. Dan McCrum has more charts on retail investors piling into equities. As McCrum puts it: “What will people do with their clean slates, we wonder? Buy equities is a strong contender.” -- Ryan McCarthy

The Fed
How women organized to make Janet Yellen Fed Chair - Laura Bassett and Ryan Grim

Politicking
Rapid response: high-frequency traders form lobbying group - WSJ

Plausible Theories
Entrepreneurs are like con men, but are delusional enough to believe their own fantasies - James Surowiecki

Crime And/Or Punishment
JP Morgan may pay $2 billion over the Madoff case - DealBook

Charts
America's increasingly effective war on poverty - Jared Bernstein
"Poverty has fallen significantly since 1967" - Center on Budget and Policy Priorities
The war on poverty 50 years later - Annie Lowrey

Wonks
On secular stagnation - Larry Summers

It's Academic
A fierce photo of Carmen Reinhart; plus a new study on recoveries following financial crises - NYT

Pivots
Bill Clinton is a paid pitchman for a private-equity backed for-profit college - Bloomberg

Yikes
America's over-reliance on refrigeration is making us less safe - Modern Farmer

Wow
An anonymous tipster delivered Steve Cohen's deposition on a Bugs Bunny USB drive - William Cohan

Oxpeckers
A primer on what not to say if you want to buy the NYT - Global Times

Servicey
Where to eat in 2014 - Adam Platt

Energy
Fisking the 60 Minutes report on cleantech - Gigaom

Revolving Door
The Carlyle Group has hired former FCC Chairman Julius Genachowski - PE Hub

Follow Counterparties on Twitter. And, of course, there are many more links at Counterparties.

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Business Today: Wall St. dips for third straight day after mixed data

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01/6/2014
Reuters Election 2012 Daily round-up of the day's top news from the campaign trail, the White House and all the politics in between
Wall St. dips for third straight day after mixed data
NEW YORK (Reuters) - U.S. stocks slipped on Monday after a mixed batch of economic reports, which showed a slowdown in growth in the U.S. services sector and a rebound in new orders for factory goods.
U.S. business bankruptcies dropped 24 percent in 2013
WILMINGTON, Delaware (Reuters) - Business bankruptcy filings in the United States dropped 24 percent in 2013 to their lowest level since at least 2006, according to a report on Monday.
U.S. judge orders RBS unit in Japan to pay $50 million over Libor
(Reuters) - A Japanese investment banking unit of Royal Bank of Scotland Group Plc was ordered on Monday to pay a $50 million criminal fine after pleading guilty to wire fraud over its role in manipulating the benchmark interest rate Libor.
Samsung Electronics braces for weakest year of smartphone growth
SEOUL (Reuters) - Samsung Electronics Co Ltd is bracing for its weakest smartphone profit growth this year since 2007 as arch rival Apple Inc challenges its domination in China's $80 billion market.
Trial to focus on trades by SAC's Cohen
NEW YORK (Reuters) - A trial starting this week over what U.S. prosecutors call the most lucrative insider trading scheme ever will likely delve into the trading activity of Steven A. Cohen, founder of the SAC Capital Advisors hedge fund.
Analysis: Cash crunch signals policy dilemma for China's reformist central bank
BEIJING (Reuters) - China's central bank looks set to risk another cash crunch at the end of January, barely a month after the last market squeeze, as policymakers press ahead with a crackdown on shadow financing and other risky bank lending.
Services sector slows in December, factory orders rise
NEW YORK (Reuters) - Two measures of activity in the U.S. services sector showed slower growth in December, pointing to an economy that continues to expand at a modest pace, while factory orders rose in November.
T-Mobile to buy Verizon spectrum for $3.3 billion, eyes more purchases
(Reuters) - T-Mobile US Inc is buying wireless airwave licenses from Verizon Wireless to improve its high-speed network in a $3.3 billion deal and said it hopes to follow up with more spectrum purchases.
Airbus outsold Boeing in 2013: sources
PARIS (Reuters) - European plane-maker Airbus won its annual order race with U.S. rival Boeing in 2013, industry sources said.
Boeing delivers record 648 jets in 2013; likely top planemaker
(Reuters) - Boeing Co delivered a record 648 jetliners in 2013, beating its own target and likely securing its place as the world's biggest plane maker for the second year in a row.
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