Tuesday, April 14, 2009

Mr Green Shoot: Mr Weed Is On The Line With A Margin Call

Dave is pissed.

More yellow weeds than green shoots in today’s data-flow

At some point in the not-too-distant future, we believe the markets will begin to second-guess the widespread view that the economy is heading into sustained recovery mode. It may take more than what we saw today, but we continue to hold the view that investors are confusing an ‘improvement’ relative to the post-Lehman shock when the economy was literally falling off a cliff to an actual improvement that would lead us to believe that a renewed upturn is at hand. These are two different events in terms of asset mix, risk assessment, the direction of bond yields and sector allocation.

Small business expansion plans sink

Small business plans to expand slid to a mere 1% in March from what were already microscopic levels in January and February (6% and 3% respectively). Capex plans were also trimmed to their lowest levels since 1975 – to 16% in March from 18% in February. So, without business spending, and without the consumer or housing that at best will flatten once the downturn ends, the only areas left, which can possibly sustain a renewed and sustainable expansion would seem to be exports and government spending.

Green shoots have bypassed the jobs market

For all the talk of ‘green shoots’, they seem to have bypassed the most important market of all, which is the market for jobs. The NFIB job openings index inched lower in March to 10 from 11 in each of the previous two months to stand at its lowest level since November 1991. If memory serves us correctly, a sustained and robust recovery – one that is usually confirmed by a bear market in Treasuries – was at least two years away. And, in the 35-year history of the series, the hiring intentions component, at -10, has never been as low as it is today.

Deflation risks continue to trump inflation risks

NFIB intentions regarding wage increases have also collapsed to zero – again for the very first time. Based on this data, we would have to conclude that even with all the gobs of government intervention, deflation risks continue to trump inflation risks. That the equity market has enjoyed a very sharp and snappy shortcovering rally over the past month has not dissuaded us from this viewpoint.

Overall credit conditions remain exceedingly tight

We are being told that credit conditions are easing and there is actually no doubt that spreads have been tightening, though in many cases they still remain in the stratosphere. While there has been buoyant debt issuance activity, bank lending is actually contracting at a record rate and this is where most small businesses secure their financing. As the charts below illustrate, overall credit conditions remain exceedingly tight.

We will be waiting a good while for inflation to come back

Something tells us that waiting for inflation to come back this cycle, dramatic stimulus notwithstanding (though how much stimulus is there with the record amount of fiscal tightening being undertaken by cash-strapped state and local governments?), will be a mix between Scarlett waiting for Rhett, Lara waiting for Yuri, and Vlad waiting for Godot.

It’ll be a good while.

compliments of the smart people at BofA Sphere: Related Content
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Anonymous said...

Did someone say weed? I'm all ears.

Anonymous said...

This is a dis-info site put up by Goldman, to tell us all the obvious facts, that we already know, thereby distracting us from the real conspiracy of GS crahing the market in 08!
Here is how I see it.
1. GS shorts the ABX(subprime) in 07. Makes a Billion or 2. Sends a ripple in the markets.
2. GS men at the Exchanges raise margin requirements forcing massive liquidation in JULy 07, not to mention cornering the oil market.
3. GS men at the SEC raise margin in 08, lower regulation increasingly over entire tenure.
4. There man Hank Paulson took Lehman in the other room, executation style. That really got things rolling (downhill)
5. Then, GS influence at Mood'yS(warren buffet) slashed AIG rating forcing them to find Billlions overnigth,
6.Then Hank Pauslon shows up with his $700 Billion ransome note. After stock markets crash around the world for 10 days, congress gives the big five banks their money.
7. Jim Cramer, former partner of GS, after watching the market crash for 10 days, tells America to sell everything. If we see a rally this year, you know Cramer is in on it
8. Rubin was a trojan horse on Citi's Board, encouraging them to get long and heavy in realestate.
9. AIG and Citi were made fall guys from the beginning, "to big to fail" was the plot
10. It's possible that GS even inflitrated Freddie and Fannie. It's obvious IndyMAc was a front to push liars loans.

john bougearel said...

"Mr. Green Shoots, Mr. Weed is on the line!"

That is priceless, freaking priceless!!

HazeNYC said...

The inflation may be a bit of a ways off but it will be severe when it happens.

Anonymous said...

wow, Anon. (2nd comment), you sound like a dedicated conspiracy nut

Anonymous said...

i mean goldmansach666 is a GS put up site.

Anonymous said...

TD is buying SWIM right? Makes sense now.

Anonymous said...


How in the world do you think we opened at 846?

Read comment #1


Anonymous said...

Mr.Weed? I think you're mistaking him for his associate; Mr. Roundup

Anonymous said...

Love the "new" blog tyler. I'm sure it will soon be on par with the likes of slope, es, and xtrends.

Anonymous said...

there you go again with your "facts and figures". All I's know is that Cramer said that the depression in the stock market is over so things are ok.

In all seriousness, we run several businesses and we are seeing stabilization - no growth or new future growth in site but at least stable with an up tick in business spending.

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