For 2012, in the face of a delevering zero-bound interest rate world, investors must lower return expectations. 2–5% for stocks, bonds and commodities are expected long term returns for global financial markets that have been pushed to the zero bound, a world where substantial real price appreciation is getting close to mathematically improbable. Adjust your expectations, prepare for bimodal outcomes. It is different this time and will continue to be for a number of years. The New Normal is “Sub,” “Ab,” “Para” and then some. The financial markets and global economies are at great risk.
In a scary and painfully frank interview BBC interviewer Maxine Croxall, is visibly shaken when market trader Alessio Rastani predicts that the "Market is Toast." Apparently there is nothing Euro governments can do.
Between Errors of Optimism and Pessimism – Observations on the Real Estate Cycle in the United States and China
Topic: Markets & Investing
8:22 pm EDT, Sep 19, 2011
Many Americans seem convinced that their housing market will remain in the doldrums indefinitely. Conversely, the rapid recovery of China’s economy from the global financial crisis has led many to believe that real estate in the Middle Kingdom is a one-way bet. In fact, property is the most cyclical of assets. Housing booms crater, while depressed real estate markets eventually recover. Part One of this paper aims to describe a typical real estate cycle through its various stages. In particular, I try to identify the characteristic features of the cyclical peaks and troughs.
Part Two applies this understanding of the real estate cycle to the world’s two most important property markets, namely those of China and the United States.
Nomura Research Institute's Richard Koo says that what the world is experiencing right now, a "balance sheet recession," is different from traditional recessions. However, Japan recently experienced a similar type of recession, and Koo says we can learn a lot from that country's experiences
Commentary: Canadian strategist says debt will produce ‘ugly’ result
That’s the view of sober-minded Canadian strategist and money manager John Stephenson, senior vice president of First Asset Management in Toronto. He predicts a new, Lehman-like financial crisis in the next six to 12 months, only this time involving the debt of governments and European banks.
He thinks it could drive stocks much lower, to levels at which they traded, well, just after the collapse of Lehman and AIG in fall 2008. “When it happens, it’s going to happen fast, and it’s going to be ugly and very deep,” he told me in a telephone interview, adding that he expects it to be “worse than the last crisis. Last time around, the governments had some room to bail people out. They don’t have that capacity [now].”
The Toronto Globe and Mail was all over this Canadian angle, quoting approvingly from the New York Times that “American policy makers might learn a thing or two from Canada’s patient, hysteria-free pruning.”
“But it isn’t just spending cuts that dug Canada out of debt trouble,” added the Globe, Canada’s newspaper of record. “Tax reform, including the contentious introduction of the goods and services tax in 1991, provided Ottawa with a surge of revenue, without hitting up wage earners and businesses.”
While the U.S. remains mired in debt and slogs through a subpar economic recovery, Canada is moving ahead steadily. Its unemployment rate peaked at a little over 8.5% and is now 7.4%, and there were no bank bailouts. Real GDP growth is expected to be roughly 3% this year. ..
Canada's government, for example, has grown smaller over the last 15 years. Total government spending as a share of the economy peaked at a little over 53% in 1993. Through a combination of spending cuts in the 1990s and spending restraint during the 2000s, it declined to a little under 40% of GDP by 2008. (It's currently about 44% due to the recession.)
Reductions in government spending allowed for balanced budgets and the retiring of debt. Federal debt as a share of the Canadian economy was almost halved from nearly 80% to a little over 40% over the same period. --
NEW YORK (CNNMoney) -- QE2 is just about done. But the Federal Reserve will still be buying massive amounts of long-term Treasuries. In fact, the Fed's purchases over the next year will likely be at least $300 billion. That's half the size of QE2 -- even if QE3 never takes place.
Think of it as QE2.5.
While the Fed's efforts to pump about $600 billion of new cash into the economy over the last eight months comes to an end this week, the program, known as quantitative easing or QE2 for short, was not the only way the central bank was an active buyer of Treasuries.