[FoRK] A Global Bond Bubble Is Emerging That Professionals Never Could Have Imagined, Re: JPMORGAN: We're Not Far From A 'Picture-Perfect World', Re: Obama wins? Deficit now cut by $4 trillion

Stephen Williams sdw at lig.net
Sat Mar 9 10:50:33 PST 2013

I don't understand everything going on here, but it sounds like A) too much of a good thing and B) slim pickings for those who 
thrive on crisis.
> Europe is on the ropes as investors shun peripheral euro area government debt. In the United States, interest rates are fixed 
> at zero, and government bonds are arguably already quite far along in an epic 30-years-and-running bull market.
> Given the state of global debt markets and the apparent lack of value across the investment landscape, it's easy to see why 
> interest has turned to emerging economies.
> Gabriel Sterne, an economist at the frontier market brokerage firm Exotix, told /Business Insider 
> <http://www.businessinsider.com/blackboard/business-insider>/, "You get some of these big funds – a lot of the funds in the 
> States – just getting these inflows every month. What do they do with them? They tend to just double up and put them in 
> [emerging markets]."
> Sterne went on, saying, /"In the absence of any bad news, there is not enough supply out there, so yields just fall down."/
> UBS <http://www.businessinsider.com/blackboard/ubs> rates strategists Bhanu Baweja, Stephen Mo, and Nicholas Smithie were 
> lamenting the lack of "distressed" investment opportunities around the world right now – given all of the recent interest in 
> EM debt and assets – in a note to clients Wednesday.
> One of the biggest risks to investors in emerging market 
> <http://www.businessinsider.com/emerging-markets-debt-bubble-2012-10#> debt is the economic instability that results in small 
> economies as all of this investment money flows in without restraint.


On 3/9/13 10:41 AM, Stephen Williams wrote:
> Ouch.  What happened to the predicted doom and gloom and FUD?
> http://www.businessinsider.com/jpmorgan-sees-picture-perfect-world-2013-3
>> JPMORGAN: We're Not Far From A 'Picture-Perfect World'
>> Matthew Boesler    | Mar. 8, 2013, 12:31 PM | 3,494 | 17
>> This is one of the more bullish takes we've heard lately on the way things are shaping up across global markets, courtesy of 
>> the equity derivatives team at JPMorgan (led by Michiro Naito).
>>> In the picture-perfect world: We are all aware that the equity market looks "overheated" and that there are many stumbling 
>>> blocks ahead, as we argued last week. The uncertainty surrounding the US sequestration and Italian election looms large, not 
>>> to mention potential oppositions to Abe's TPP drive from within his own party.
>>> What we might have learned in the past week, however, is that as long as economic recovery stays in its track, the equity 
>>> market, albeit subject to short-term corrections, will likely steam ahead.
>>> So let us assume that sequestration will become less of an issue and US economic growth remains intact. We will also assume 
>>> that Italy will not abandon Euro and Abe’s economic agenda will receive approval from inside and out.
>>> While this may sound all too picture-perfect, it is by no means unrealistic, in our view. And if we are right, comparing the 
>>> current levels to the levels seen from 2005 to 2007 may become much more reasonable.
>> Sequestration, Italian elections, and Abenomics.
>> Coincidentally, notably pessimistic PIMCO bond manager Bill Gross just doubled his U.S. GDP forecast today.
> Ah, here they are, sort of:
> http://www.businessinsider.com/wall-streets-most-worrying-charts-2013-3
>> Wall Street's Brightest Minds Reveal The Charts That Worry Them Most
>> Matthew Boesler    | Mar. 1, 2013, 8:06 PM | 359,264 | 5
>> Laenulfean / Flickr
>> With optimism resurfacing over the global economy and the perception that major tail risks in the United States, the euro 
>> zone, and China have been mostly squared away, what's left to worry about?
>> We posed the question to our favorite analysts, economists, and traders across Wall Street – and we were surprised at the 
>> number of people who declined to give an answer, telling us that they just couldn't really think of anything too worrying 
>> right now.
>> However, we still got plenty of responses.
>> While general developments in the world's largest economies seem encouraging, there may be several reasons to be concerned 
>> lurking just beneath the surface.
> I don't think that French competitiveness is a big issue.  What's your favorite scary chart here?
> sdw
> On 3/3/13 8:22 PM, Stephen Williams wrote:
>> President Obama "had to" sign the sequestration cuts into law last night.  I can hear it from here: "Oh please don't make me 
>> do it!" "If you don't like any part of this, blame the GOP."
>> So, Obama wanted and promised $4T reduction over 10 years, everyone said it couldn't be done, and now he's done it, barely 
>> into his second term.  Were the GOP (and some Dems too maybe) just gamed?  He has plausible deniability for painful cuts with 
>> Dems and pulled off major cuts in defense etc.  Managed not to cut anything for Medicare, Medicaid, and Social Security. 
>> Obamacare is still in place.  Game over?
>> Or you could assign success to Congress, but that's probably not how it will play.  Maybe they all colluded to have plausible 
>> deniability for responsibility for decisions or shirking principles.
>> If Obama quit now and played obstructionist from now on, would he be the most fiscally successful president for decades past 
>> (and probably future)?
>> Probably won't hold or hold to scrutiny, but it's an interesting prospect.
>> To work well, we'd have to come up with a solution for creating jobs, improving quality and efficiency of education, reducing 
>> health care, etc.  But we have those problems anyway, although this is expected to cause 700,000 job losses.
>> I could work with this.  There is plenty that could be done to spur jobs and increase various efficiencies.  There is plenty 
>> of Federal land, plenty of things states could be pushed into doing with the right support.  Plenty of foreign related 
>> opportunity. Re: Federal land: Many options, but for instance: where things could be built with Makerville-like arrangements 
>> that wouldn't necessarily cost anything in Federal dollars, using a long-term lease and special status.  You could start with 
>> Indian reservations even.
>> http://www.news-journal.com/news/nation/congress-obama-cut-deficit-by-trillion-on-paper/article_d1438876-5361-5d0a-85e6-99fcb66147c5.html 
>>> Carolyn Kaster
>>> Congress, Obama cut deficit by $4 trillion — on paper
>>> President Barack Obama gestures Friday as he speaks to reporters in the White House briefing room in Washington. On paper, 
>>> President Obama and Congress have reduced projected deficits by nearly $4 trillion through 2023.
>>> Posted: Sunday, March 3, 2013 4:00 am
>>> By JACKIE CALMES New York Times News Service
>>> WASHINGTON — The latest budget impasse ushered in a new round of austerity Saturday, with the nation facing reduced federal 
>>> services, canceled contracts, job furloughs and layoffs.
>>> But lost in the talk of Washington’s dysfunction is this fact: On paper at least, President Barack Obama and Congress have 
>>> reduced projected deficits by nearly $4 trillion over a decade — the widely embraced goal for stabilizing the national debt.
>>> The spending cuts that began to take effect Friday, known as sequestration and totaling about $1 trillion through 2023, come 
>>> on top of $1.5 trillion in reductions that Obama and Congress committed to in 2011, mainly from the accord that averted the 
>>> nation’s first debt default.
>>> Nearly $700 billion more will come from tax increases on wealthy Americans, the product of the brawl in December over 
>>> Bush-era tax cuts, and another $700 billion is expected to be saved in projected interest on the reduced debt.
>>> If the latest cuts stick, the two parties will have achieved nearly the full amount of deficit reduction over the next 
>>> decade that economists and market analysts have promoted. Yet the mix comes with substantial downsides.
>>> It does not add up to the “grand bargain” that the two parties had been seeking, because it leaves virtually untouched the 
>>> entitlement programs — Medicare, Medicaid and Social Security — that are responsible for projections of an unsustainably 
>>> rising federal debt in coming decades.
>>> “This is not a result that deals with our long-term debt problem,” said Vin Weber, a Republican former congressman. “The 
>>> fact we’ve gotten to a $4 trillion deficit-reduction deal without tackling entitlements is almost a bad thing,” he added, if 
>>> it lulls the public and the politicians into thinking the problem is solved.
>>> Job creation hampered
>>> The progress on deficit reduction during the past two years will also probably hamper job creation and the economic 
>>> recovery. Private and government forecasters project that sequestration alone will cost about 700,000 jobs this year and 
>>> will shave at least a half percentage point from economic growth. The Congressional Budget Office now forecasts a falling 
>>> deficit but high unemployment.
>>> For Democrats, at least, the mix of spending cuts and tax increases in the package is another reason for disappointment. The 
>>> deficit deals to date would yield $4 in spending cuts for every dollar of new revenue. Obama, as well as several bipartisan 
>>> groups, including the commission led by Erskine Bowles and Alan K. Simpson, call for $1 of tax increases for every $2 to $3 
>>> in spending cuts.
>> http://www.politifact.com/truth-o-meter/statements/2012/oct/04/barack-obama/obama-says-he-will-cut-deficits-4-trillion/
>>>  Obama says he’s "put forward a specific $4 trillion deficit reduction plan."
>>> Barack Obama on Wednesday, October 3rd, 2012 in the first presidential debate
>>> Obama says he will cut deficits by $4 trillion
>>> In the first presidential debate, President Obama and Mitt Romney disagreed sharply over who had the best way to rein in 
>>> federal deficits.
>>> Romney relies on spending cuts and reshaping the tax code. The first would make it easier to reach fiscal balance and the 
>>> second would spur growth that would fill the government coffers with higher tax revenues, he says.
>>> Obama favors what he calls a balanced approach. It uses a mix of spending cuts and a variety of tax and fee increases to 
>>> curb the deficit .
>>> "I've put forward a specific $4 trillion deficit reduction plan, Obama said. "You can look at all the numbers, what cuts we 
>>> make and what revenue we raise. And the way we do it is $2.50 for every cut, we ask for $1 of additional revenue."
>> http://www.washingtonpost.com/blogs/wonkblog/wp/2012/09/06/is-obamas-4-trillion-deficit-reduction-plan-for-real/
>>> Is Obama’s $4 trillion deficit-reduction plan for real?
>>> Posted by Ezra Klein on September 6, 2012 at 11:21 am
>>> In his fact check of the second night of the Democratic National Convention, my colleague Glenn Kessler zeroed in on Bill 
>>> Clinton’s claim that “[Obama] has offered a reasonable plan of $4 trillion in debt reduction over a decade.”
>>> Are Obama’s budget proposals for real?
>>> Kessler has three problems with this comment. First, he says, it is “counting some $1 trillion in cuts reached a year ago in 
>>> budget negotiations with Congress.” Second, “the administration is also counting $848 billion in phantom savings from 
>>> winding down the wars in Iraq and Afghanistan, even though the administration had long made clear those wars would end.” 
>>> Third, “the administration also counts $800 billion in savings in debt payments (from lower deficits) as a ‘spending cut,’ 
>>> which is a dubious claim.”
>> http://www.weeklystandard.com/blogs/abc-obama-falsely-claims-he-has-plan-cut-4-trillion-deficit_653574.html
>>> ABC: Obama Falsely Claims He Has a Plan to Cut $4 Trillion from the Deficit
>>> 12:43 AM, Oct 4, 2012 • By JOHN MCCORMACK
>>> "I've put forward a specific $4 trillion deficit-reduction plan," President Obama said during his debate with Mitt Romney on 
>>> Wednesday night. "It's on a website. You can look at all the numbers, what cuts we make and what revenue we raise."
>>> ABC's Jon Karl correctly calls Obama's claim "mostly fiction."
>>>     Does President Obama have a plan to cut the deficit by $4 trillion?
>>>     No.  The “$4 trillion plan” he is referring to includes about $1 trillion Congress has already agreed to and $1 trillion 
>>> in savings from ending the wars in Iraq and Afghanistan, which are already ending.
>>>     This would be Mostly Fiction.
>>> The Washington Post’s Glenn Kessler has also noted Obama's claim is "simply not accurate," and pointed out that “virtually 
>>> no serious budget analyst agreed” with the administration’s accounting. Andrew Stiles of the Washington Free Beacon has more 
>>> on Obama's false budget claim:
>> http://www.americanprogress.org/issues/budget/news/2013/01/08/49137/the-deficit-reduction-we-have-achieved-so-far/
>>> The Deficit Reduction We Have Achieved So Far
>>> President Obama fiscal cliff speech
>>> SOURCE: AP/Charles Dharapak
>>> President Barack Obama gestures as he speaks about the fiscal cliff, Monday, December 31, 2012, in the South Court 
>>> Auditorium at the White House in Washington.
>>> By Michael Linden and Michael Ettlinger | January 8, 2013
>>> Since the start of fiscal year 2011, President Barack Obama has signed into law approximately $2.4 trillion of deficit 
>>> reduction for the years 2013 through 2022. Nearly three-quarters of that deficit reduction is in the form of spending cuts, 
>>> while the remaining one-quarter comes from revenue increases. (see Figure 1) As a result of that deficit reduction, the 
>>> projected rise in debt levels from today through 2022 has decreased by nearly 10 full percentage points of gross domestic 
>>> product. In fact, under today’s policies, debt levels in 2022—as a share of GDP—will be only slightly higher than they are 
>>> expected to be by the end of next year. That doesn’t mean there is no more work to be done, but it does show we’ve come a 
>>> long way already.
>> Stephen
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