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Sat, 25th February 2017

Anirudh Sethi Report

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Archives of “TIME” Tag

10 Life Lessons We Learn Too Late

What Are the Lessons People Often Learn Too Late in Life?

1. Time passes much more quickly than you realize.

2. If you don’t take care of your body early then it won’t take care of you later. Your world becomes smaller each day as you lose mobility, continence and sight.

3. Sex and beauty may fade, but intimacy and friendship only grow.

4. People are far more important than any other thing in your life. No hobby, interest, book, work is going to be as important to you as the people you spend time with as you get older.

5. Money talks. It says “Goodbye.” If you don’t plan your finances for later in life, you’ll wish you had.

6. Any seeds you planted in the past, either good or bad, will begin to bear fruit and affect the quality of your life as you get older — for better or worse.

7. Jealousy is a wasted emotion. People you hate are going to succeed. People you like are going to sometimes do better than you did. Kids are going to be smarter and quicker than you are. Accept it with grace.

8. That big house you had to have becomes a bigger and bigger burden, even as the mortgage gets smaller. The cleaning, the maintenance, the stairs — all of it. Don’t let your possessions own you.

9. You will badly regret the things you didn’t do far more than the things you did that were “wrong” — the girl you didn’t kiss, the trip you didn’t take, the project you kept putting off, the time you could have helped someone. If you get the chance — do it. You may never get the chance again.

10. Every day you wake up is a victory.

Jeff Gundlach’s Forecast For 2017

Investors will confront excessive debt, high P/E levels and political uncertainty as they enter the Trump presidential era. In response, according to Jeffrey Gundlach, U.S.-centric portfolios should diversify globally.

Gundlach is the founder and chief investment officer of Los Angeles-based DoubleLine Capital, a leading provider of fixed-income mutual funds and ETFs. He spoke to investors via a conference call on January 10. Slides from that presentation are available here. This webinar was his annual forecast for the global markets and economies for 2017.

Before we look at his 2017 predictions, let’s review his forecasts from a year ago. His two highest conviction forecasts were that the Fed would not raise rates more than once, despite the Fed’s own predictions, and that Trump would win the presidency. Both predictions were accurate.

But he was also downbeat on emerging markets, and singled out Brazil and Shanghai as likely underperformers. Brazil turned out to be the best-performing emerging market last year, gaining 69.1%, but he was correct about Shanghai, which was the worst performing market, losing 16.5%.

Gundlach said he had a “low conviction” prediction that the yield on the 10-year Treasury would break to the upside. It began 2016 at 2.11% and ended at 2.45%. He said the probability was that U.S. equities would decline in 2016, yet the markets gained approximately 13%. Gold, he said, would hit $1,400 at some point in 2016. It began the year at approximately $1,100, hit a high of $1,365 during the summer and closed at approximately $1,150. 

FOMC Minutes: Saw gradual rate hike pace appropriate for now -Full Text

Highlights of the Minutes of the Dec 14 FOMC meeting

The Fed hiked rates by 0.25% at this meeting

Highlights of the Minutes:

  • Almost all officials saw upside risks to growth on expectations fiscal policies will be more expansionary under Trump
  • About half of policymakers incorporated those assumptions into forecasts
  • Many saw increased chance of faster rate hike pace due to higher risk of sizeable undershooting of longer-run normal unemployment rate leading to higher inflation
  • Policymakers emphasized their considerable uncertainties on timing, size and composition of legislative and spending changes
  • Almost all members saw unemployment rate running below longer-term normal level
  • Generally agreed o continue to closely monitor inflation
  • Full text

There is never as much detail or conviction in the Minutes as market-watchers hope for. This is the closest thing there is to guidance:

“At this meeting, members continued to expect that, with gradual adjustments in the stance of monetary policy, inflation would rise to the Committee’s 2 percent objective over the medium term as the transitory effects of past declines in energy prices and non-energy import prices dissipated and the labor market strengthened further. This view was reinforced by the rise in inflation in recent months and by recent increases in inflation compensation. Against this backdrop and in light of the current shortfall in inflation from 2 percent, members agreed that they would continue to closely monitor actual and expected progress toward the Committee’s inflation goal.”

The knee-jerk reaction in the FX market was disappointment and the US dollar fell 30 pips but it quickly rebounded back to unchanged.

On the election, here is what the Minutes said:

The Ten Harsh Financial Commandments

I) You will not buy low or sell high.

II) You will cut your winners and let your losers run.

III)  You will wish you owned more of what’s going up and less of what’s going down.

IV) You will be fearful when others are fearful.

V) You will fight the trend.

VI) You will not buy when there is blood in the streets.

VII) You will spend too much time worrying about low probability outcomes.

VII) You will invest for the long-term, or until we get a ten percent correction, whichever comes first.

IX) You will go broke taking small profits.

X) You will not just sit there, you’ll do something.

ECB leaves interest rates on hold – Extends QE but lowers buying rate

Details of the December 2016 ECB governing council meeting 8 December 2016

  • Main refi rate 0.0%
  • Dep rate -0.4%
  • Marginal lending facility 0.25%
  • QE kept at €80bn until April 2017 then will continue at €60bn until the end of Dec 2017, or beyond if necessary
  • Will comment further at the presser

PRESS RELEASE

Monetary Policy Decisions

8 December 2016

At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council continues to expect the key ECB interest rates to remain at present or lower levels for an extended period of time, and well past the horizon of the net asset purchases.

Chinese Bond Yields Jump Most In 10 Months On “Liquidity Fears”

It is probably a coincidence that one day after we commented on what is emerging as “the market’s next headache”, namely China’s (not so) stealth tightening, which in the last few weeks has led to a creep higher across the curve, the yield on China’s sovereign 10Y bond jumped 6.5bps to 2.94% on what Bloomberg dubbed were “liquidity fears.” This was the biggest one day spike for the benchmark bond since Jan. 25, according to ChinaBond data.

As a result of the selloff, the most actively traded 10-year govt bond futures were down 0.72%, while five-year futures dropped 0.74%.

The tightening was broad-based, with 1-year rate swaps rising 13bps to 19-month high at 3.17%; additionally the overnight repo rate also rose to 2.31%, the highest level this month.

Quoted by Bloomberg, Wu Sijie, bond trader at China Merchants Bank said “tightening interbank liquidity and the expectation of even higher short-term borrowing costs are driving up swap costs and affecting sentiment on the cash bond market.”

Meanwhile, signalling no change at all in its posture, overnight the PBOC drained funds in open-market operations for the fourth consecutive day, bringing the total withdrawal to 130 billion yuan.

Eurozone retail PMI’s fall in October but what happened in Sep?

A poor showing from retail PMI’s in October

The latest retail PMI’s from the Eurozone fell in October.

  • Eurozone 48.6 v s49.6 prior
  • Germany 51.0 vs 53.0
  • France 47.5 vs 49.1 prior
  • Italy 46.5 vs 45.0 prior

Italy was the only one that gained but is still in contraction.

Perhaps more importantly we need to look at the Sep numbers ahead of the main Eurozone retail sales report at the top of the hour.

They we’re much better either.

  • EZ 49.6 vs 51.0
  • Germany 53.0 vs 54.1
  • France 49.1 vs 53.0
  • Italy 45.0 vs 43.2 prior

US Dollar Spikes To Fresh 8-Month Highs As Dec Rate Hike Odds Top 70%

The US Dollar Index is up 5 weeks in a row and has just crossed above 99 for the first time since January 2016. As December rate-hike odds have surged since the Brexit vote, so the USD Index has tracked almost perfectly, rising almost 7% in that time (the fastest rise in 18 months)

As Bloomberg’s Richard Breslow noted, The Fed has a Plan A. Go for a December rate hike and work the low and slow mantra to keep everyone calm — and the bubbles from bursting too quickly. There’s no Plan B because that will be decided by results and events as yet unknown.

As long as equities remain in demand, the drag on financial conditions indices from a higher dollar or long-term rates will be muted. And the excuse to ignore numbers which debunk crisis pricing becomes more problematic

Top 5 Events For Next Week

As for the top 5 events and releases, this is how I see it:
1.  US Employment report (Friday, October 7th at 8:30 AM ET/ 1230 GMT). The September US employment report will be released with the expectations for nonfarm payroll to increase by 170 K vs. 151K last month.  The unemployment rate is expected to remain unchanged at 4.9%. Average hourly earnings for the month are expected to rise by 0.3% versus a 0.1% in August.  With the Fed buying employment and inflation for additional evidence of a stronger economy worthy of a rate rise, the employment report is always an important economic release.
2.  RBA  interest rate decision (Monday/Tuesday l11:30 PM ET/ 0330GMT):  All economist polled by Bloomberg expect the rate to remain steady at 1.5%(the rate was last changed in July from 1.75% to 1.50%).  At the last meeting the RBA said:
  • Recent data suggest that overall growth is continuing, despite a very large decline in business investment, helped by growth in other areas of domestic demand and exports. Labour market indicators continue to be somewhat mixed, but suggest continued expansion in employment in the near term.
  • Inflation remains quite low. Given very subdued growth in labour costs and very low cost pressures elsewhere in the world, this is expected to remain the case for some time.
  • Low interest rates have been supporting domestic demand and the lower exchange rate since 2013 is helping the traded sector. Financial institutions are in a position to lend for worthwhile purposes. These factors are all assisting the economy to make the necessary economic adjustments, though an appreciating exchange rate could complicate this.
3.  CAD employment report (Friday, October 7 at 8:30 AM ET/1230 GMT).  This month, Canada release their unemployment statistics on the same day and time of the US employment report. The expectations for change in employment is 7.5 K versus 26.2 K in August. The unemployment rate is expected to remain unchanged at 7.0% and the participation rate is also expected to remain unchanged at 65.5%