Blogs y opiniones de economia en ingles

Morgan Stanley: Today We Are Facing Another Growth Scare, And It Too Will Fade

By Chetan Ahya, Morgan Stanley's Chief Economist and Global Head of Economics

Nearly a year ago, we wrote in the Sunday Start about the first growth scare of the new cycle (see Three Reasons Why the Recovery Is on Track, July 26, 2020). Then, a rise in COVID-19 cases sparked fears of renewed lockdowns, and the delay in passing additional fiscal stimulus in the US led to concerns that the consumption recovery would sputter.

Today, we are facing another growth scare. Just like the last time, we see good reasons why these fears will fade.

#1 – The virus/economy equation continues to evolve

The more transmissible Delta variant is leading to a renewed rise in cases, particularly among unvaccinated populations. Encouragingly, while case counts are rising, all indications are that existing vaccines are still highly effective in preventing severe illness and, more importantly, hospitalisations.

Hence, for economies with relatively high vaccination rates, like the US, UK and euro area, we don’t expect hospital system capacity to be overwhelmed and thus see a low probability of strict lockdowns returning. For economies which are lagging in their vaccination efforts, for instance parts of Asia, the risk is that variants will delay a full relaxation of restrictions. While the recovery in external demand and capex is advancing for these economies, we see domestic consumption being held back over the next 3-4 months. However, vaccinations are expected to pick up, which would give policy-makers greater flexibility to reopen their economies, setting the stage for a broad-based recovery to take hold late this year.

#2 – US: Withdrawal of policy support is not as premature as you think

As recoveries progress and economies move towards a self-sustaining path, it is only natural for policy-makers to start thinking about exit strategies. However, we believe that neither fiscal nor monetary policy support will be removed at a faster pace than warranted.

The US economy is already on a strong footing. Wage incomes stand at 105% of pre-COVID-19 levels, real investment is already 4% higher and GDP has reached its pre-COVID-19 path.

While the fiscal impulse is turning negative this year, its impact on growth has been overstated. That’s because fiscal measures have largely taken the form of transfers to households. In fact, the excess transfers are still sitting on household balance sheets, waiting to be spent. US households have accumulated US$2.3 trillion in excess saving, and our strong US GDP growth forecasts of 7.1%Y for 2021 and 4.9%Y for 2022 don’t assume that this stock will have to be drawn down.

As regards the Fed, our chief US economist Ellen Zentner continues to expect forward guidance in September and an official announcement of tapering in March, with the risks skewed towards an earlier start. By the time tapering starts, we forecast that the US economy will be well above its pre-COVID-19 path, core PCE inflation will exceed 2%Y sustainably (adjusted for base effects and transitory factors) and U-6 unemployment (the broadest measure) will reach ~8.5% (versus a pre-pandemic low of 7%) as compared to 13% during the time of tapering in December 2013 – hardly conditions that indicate the withdrawal of accommodation is premature.

#3 – China: From tightening to modest easing

While growth is usually sustained by external demand and capex during periods of counter-cyclical tightening, COVID-19 flare-ups have hampered the private consumption recovery in this cycle. Accordingly, policy-makers are beginning to fine-tune their policy stance to offset the effects of the resulting small growth downside. Our chief China economist Robin Xing expects modest fiscal easing, complemented by liquidity injection and the cut in the reserve requirement ratio on July 9. We remain confident that China’s GDP will grow by 8.7%Y this year.

#4 – Supply-side constraints are transitory

Supply-side constraints continue to be reflected in the sub-indices of the manufacturing PMIs – supplier delivery times and inventories. What’s more, these obstacles have dampened production, with a shortage of chips crimping auto production and leading to downside surprises in Japan and Korea’s industrial production growth. Similarly, labour shortages have hampered services sector growth, especially in the US, where labour participation has been held back in part because generous unemployment benefits are still in effect in some states and schools have yet to fully resume in-person learning. However, we expect labour supply conditions to improve over the next 3-4 months, enabling production to ramp up and inventories to return to more normalised levels, providing a strong boost to GDP growth.

Overall, we see this growth scare as just that – a scare. Indeed, while there have been some downside growth surprises in economies like China and India, they have been offset by upside surprises in Europe and Latin America, keeping our global growth forecasts unchanged (at 6.5%Y for 2021 and 4.9%Y for 2022) since we published our mid-year outlook. More fundamentally, the outlook for demand is strong, and we remain convinced that the unfolding of a red-hot capex cycle will sustain global GDP above its pre-COVID-19 path from this quarter on through to end-2022.

Tyler Durden Sun, 07/11/2021 - 12:30

In reply to Rob.

It is wishful thinking, in our current political climate this will not get passed through. Coupled with the fact that high end homes are selling like hot cakes, there is little organic potential for this to happen. Nonetheless, recognizing the problem is the first step.

Related Stocks: SUI,

"Tear Up The Streets, Not The Planet" - Dodge To Unveil World's First Electric Muscle Car In 2024

Dodge, an American brand of automobiles and a division of Stellantis, used its time during Stellantis' EV Day to announce the world's first electric muscle car will hit the streets in 2024. 

Dodge CEO Tim Kuniskis was featured in a 5 min video, talking about the company's multi-decade muscle-car heritage. He said the company must adapt to the changing times as millennials become a more significant part of the overall US population with more spending power, adding this generation embraces electric cars the most. 

With that being said, Kuniskis revealed that Dodge has plans to sell the world's first electric muscle car in 2024. He said, "Tear Up the Streets … Not the Planet."

However, only a conceptual version of what the new electric muscle car would look like was revealed in the video. Even then, the lighting was too dark to capture what the overall design of the car would look like but certainly had some "retro-inspired styling cues, with a fastback roofline and blunt fascia that look vaguely reminiscent of the iconic 1969 Dodge Charger," said Autoblog.

The front of the concept car sports a unique lighting profile, with what looks to be an LED light bar that mimics the square-jawed shape of the classic muscle car but with the addition of a lighted emblem directly in the center. Several jump cuts showed some very wide-looking wheels with meaty tires ... and we're certain that all four of those tires go up in smoke at the end.

The car will be built on the STLA Large platform, one of four battery electric vehicle platforms announced by Stellantis, with a 0-to-60 time as low as 2 seconds and a range of up to 500 miles, Stellantis said. The automaker also hinted at a maximum power output of as high as 886 horsepower courtesy of a pair of 330-kilowatt electric motors.

-Autoblog

With Dodge engineers hitting the limit of what they can pump out of Hemi engines, it appears the company must embrace electrification for more horsepower to take on the Tesla Model S Plaid. 

The next Tesla killer? 

Tyler Durden Sun, 07/11/2021 - 12:00

Virgin Galactic Unity 22 Successfully Reaches Outer Space

Update (1140ET): VSS Unity has touched down at Spaceport America in Las Cruces, New Mexico. 

* * * 

Update (1125ET): Mothership Eve has dropped VSS Unity at around 50,000 feet. VSS Unity has now ignited its rocket-powered engines and is heading to outer space.

 The spacecraft is now Mach 3 50 seconds into flight. 

The spacecraft has reached 282,000 feet. 

The U.S. military and NASA define space as about 50 miles altitude or about 264,000 feet - the spacecraft reached 282,000 feet and was in space for about a minute. 

* * * 

Update (1104ET): Once the carrier plane VMS Eve, the mothership for SpaceShipTwo VSS Unity, reaches an altitude of about 50,000 feet, it will drop the VSS Unity that will use its rocket-powered engines to reach outer space. 

Flightradar24 data shows the VMS Eve and VSS Unity are around 42,000 feet. 

* * * 

Update (1045ET): According to Virgin Galactic's live feed, Unity22 has taken off for a high-altitude plane launch to the edge of space with a full crew, including billionaire co-founder Richard Branson. 

Track Virgin Galactic's VSS Unity live via Flightradar24. 

* * * 

Virgin Galactic is preparing to fly billionaire co-founder Richard Branson to space on the first crewed spaceflight above New Mexico on Sunday morning, possibly beating fellow billionaire and Amazon founder Jeff Bezos.

It’s a beautiful day to go to space. We’ve arrived at @Spaceport_NM. Get ready to watch LIVE at 7:30 am PT | 10:30 am ET | 3:30 pm BST https://t.co/PcvGTmA661 #Unity22 pic.twitter.com/4KjGPpjz0M

— Richard Branson (@richardbranson) July 11, 2021

Virgin Galactic tweeted "launch and live stream" of the Company's VSS Unity spaceship will begin around 1030 ET from the state's private Spaceport America. 

"Unity 22" mission will be the twenty-second flight test of their spacecraft, and the company's fourth crewed spaceflight. It will also be the first to carry a full crew.

The announcement comes a few weeks after the Federal Aviation Administration approved Virgin Galactic to fly customers to space. 

"After more than 16 years of research, engineering, and testing, Virgin Galactic stands at the vanguard of a new commercial space industry, which is set to open space to humankind and change the world for good," Branson said in a statement earlier this month. "I'm honored to help validate the journey our future astronauts will undertake and ensure we deliver the unique customer experience people expect from Virgin."

The Company, whose intentions are to become a leader in space tourism, will use the upcoming flight to focus on cabin and customer experience objectives, including:

• Evaluating the commercial customer cabin with a full crew, including the cabin environment, seat comfort, the weightless experience, and the views of Earth that the spaceship delivers — all to ensure every moment of the astronaut's journey maximizes the wonder and awe created by space travel
• Demonstrating the conditions for conducting human-tended research experiments
• Confirming the training program at Spaceport America supports the spaceflight experience

That crew will include two pilots and four mission specialists, including Branson. The Company said on the flight Branson will be "testing the private astronaut experience.

If successful, Branson's trip to space this morning would beat Bezos' planned trip to space on July 20 aboard a rocket and capsule via his own Company called Blue Origin. 

Watch Live: Virgin Galactic Unity 22 Spaceflight Livestream

Tyler Durden Sun, 07/11/2021 - 11:44

Dear President Biden, You Need An Education, Starting With The Meaning Of "Free"

Authored by Mike Shedlock via MishTalk.com,

Let's discuss the meaning of "free" through the eyes of president Biden.

Free? Really?

Dear Mr. President, who pays for "Free College" and "Free Preschool"?

The fact is 12 years of education is no longer enough to compete in the 21st Century.

That’s why my Build Back Better Agenda will guarantee four additional years of public education for every person in America – two years of pre-school and two years of free community college.

— President Biden (@POTUS) July 7, 2021

If someone is paying by force of taxes then it isn't free. Only if "free preschool" comes from volunteers and charitable donations with no external costs is it truly free.

First-Time Homebuyer Act

Let's also discuss Biden's proposed "First Time Down Payments" for buying a home.

"The Downpayment Toward Equity Act of 2021," would create a grant program allowing states to provide first-timers with cash for down payments, closing costs or fees that result in lower mortgage rates.

The second bill, introduced in late April and dubbed the “First-Time Homebuyer Act,” would provide a tax credit of up to 10% of a home’s purchase price — or as much as $15,000 — to first-timers.

To access the tax credit, you won’t necessarily need to be a "first-time" buyer. You’ll be eligible if you haven’t owned or bought a home in the past three years.

It seems Biden and the Democrats have a peculiar definition of "First-Time". 

Why Things are Unaffordable 

A key reason many things are not affordable in government actions. "Free" down payments  artificially boost demand. 

We have had countless "affordable home" programs all of which failed for the same reason, free government programs inevitably have a huge cost. 

On top of affordable home programs, tariffs raise costs on steel, lumber, and  concrete. The lumber tariffs on Canadian lumber which Biden just increased are beyond insane. 

The cost of private medical insurance is crazy high as are costs anywhere where government interferes.  

George W. Bush signed the "Bankruptcy Reform Act of 2005" making student debt uncancellable in bankruptcy. Guess what happend? 

Biden's solution of course is a "free" money student debt forgiveness program. 

Free Stimulus 

We have had three rounds of "free" stimulus to such an extent that it "pays" more for many millions of people to collect unemployment rather than work. 

That in turn drives up prices at restaurants and other places that have a hard time competing with "free". 

Tired of Paying for Free Stuff 

Is this an admission that not everyone is college material https://t.co/mnijiCsTCi

— Andy Swan (@AndySwan) July 9, 2021

Dear Mr. President many of us are tired of footing the bill for government-sponsored "free" stuff. 

To that end, I graciously volunteer my time for free (no cost to anyone else) to teach you the true meaning of "free" and "first-time" as well.

*  *  *

Like these reports? I hope so, and if you do, please Subscribe to MishTalk Email Alerts.

Tyler Durden Sun, 07/11/2021 - 11:30

In reply to The Real Estate Captain.

Sure, the key differences are the level of passivity, concentration risk, and diversification. Hence, the variables in my chart and post.

It’s not easy doing a 1031 exchange given you’ve got to identify and buy a property within a certain amount of time. I tried and couldn’t find a like-for-like property.

Further, I didn’t want to invest $2.75 million into another property. Instead, I wanted to diversify into stocks, bonds, and heartland real estate. See: Reinvestment Ideas After Selling A House For Big Bucks

That’s the beauty of so many asset classes. You invest according to your situation in life. As someone with two young children, I’m at my capacity with four rental properties. The rest of my real estate capital is going into REITs, crowdfunding, and real estate stocks.

You’ve got to invest based on your situation. Thankfully, we’ve got a lot of choice.

Related Stocks: UFPT,

Commercial Landlords Are Throwing "Lavish Parties" To Sell NYC Office Space

At this point, commercial landlords will likely try anything to keep people in office buildings in New York City.

As we have noted over the last 18 months, New York has suffered an exodus not only as a result of the pandemic, but also of the ensuing utopian policies of the ever-oblivious Bill de Blasio, who has helped usher in a new wave of high taxes and crime that have forced individuals and businesses to pick up shop and leave the city in favor of places like Florida and Texas. 

And so commercial landlords are now resorting to throwing "lavish parties" to try and get people interesting in city real estate, the NY Post reports, as Manhattan grapples with a record-high 18.7 percent office availability rate.

At one party at Marx Realty’s 545 Madison Ave. location, "a contortionist in gold leggings twisted herself into pretzel shapes." Peking duck pancakes and vodka sno cones were even offered to those attending. Marx CEO Craig Deitelzweig told the Post that “People wanted to be together again” and that the party was full of "pent up energy and demand". 

The Post noted that the party featured "abundant alcohol" - with developers perhaps trying their hand at how casinos make their money - get you hammered and then move in for the kill. 

JKS Events founder Janeen Saltman, who has planned similar events, said: "We once had incredible scotch-pairing carts wheeled around for a 'Mad Men'-themed event."

Additionally, the report notes that commercial real estate services and investment firm CBRE recently hosted a small party at 441 Ninth Ave. and landlord Joseph Moinian also threw a party at 3 Columbus Circle. CBRE tristate CEO Mary Ann Tighe offered up a bit of a more realistic take, stating: “As nice as broker parties are, what I like most are closing dinners.”

The parties cost between $50,000 to $100,000 to set up, but Deitelzweig says there's no better way for people to "actually experience" the space up for lease.

Cushman & Wakefield dealmaker Tara Stacom was reminded of what doing business was like around 1500 Broadway in the 1980s. She said: “I had the idea of something for everybody. I asked everyone for their shoe sizes in advance. My team and I ended up handing out 800 pairs of Topsiders.”

“Business is booming well beyond the doomsayers. The recovery is already under way,” said CBRE global brokerage head Stephen B. Siegel.

Maybe if you keep repeating it, Stephen, it'll come true. 

Tyler Durden Sun, 07/11/2021 - 11:00

Yields Plunge, Dollar Surges As The Reflation Trade Unravels

Authored by Lance Roberts via RealInvestmentAdvice.com,

Market Stumbles But Rallies Back

Last week, we discussed the market hit new highs with the index getting back to more extended and overbought conditions. To wit:

“The technical backdrop is not great. With the market back to 2-standard deviations above the 50-dma, conviction weak, and investors extremely bullish, the market remains set up for additional weakness.

However, we are in the first two weeks of July, which tends to be bullishly biased. After increasing our equity exposure previously, we will give the market the benefit of seasonality for now.”

While market volatility did pick up this past week, the index held its breakout support levels and closed at a new high. Such keeps the bullish bias intact. However, as shown, the money flow signals are now back to more elevated levels, which will provide resistance to higher prices short term. 

We are still within the seasonally strong period of July, which tends to last through mid-month. However, August and September are typically more challenging for returns. As we stated last week:

“The bulls are indeed in charge of the markets currently, but the clock is ticking.”

The market is also weak from a breadth perspective. While large-cap stocks have done better as of late, the rest of the markets have not. I discuss this in more detail in Friday’s 3-minutes video.

The critical point, as noted in the video, is there has been a definite rotation out of the “reflation trade” (small, mid, emerging, and international markets) into the large-cap names (primarily technology), which is the “deflation trade.”

As we will discuss, the reflation trade ran well ahead of reality. Over the next couple of months, the test will be to see if earnings can support the surge in prices and valuations.

Yields Overbought

We will discuss the “yield warning” momentarily. However, in the short term, yields have gotten very overbought. We suspect we could see a retracement in yields short-term, but such will likely be an opportunity to increase bond exposure in portfolios as we head further into the year. 

As shown, previous overbought conditions (indicators get inverted concerning yields) lead to retracements to resistance. Currently, a retracement to 1.5% would be likely. Ultimately, a break below 1.25% will suggest much lower yields are coming. 

From a positioning standpoint, we increased our bond duration several weeks ago. However, while we want to increase our exposure eventually, we need to wait for the short-term overbought condition to reverse. 

Longer-term, as we will discuss next, we believe yields are potentially headed lower as economic growth and inflationary pressures wane.

Yield Plunge, Dollar Surge

In our #MacroView this week, we discuss the warning sign that yields are sending in more detail. However, importantly, the plunge in yields is suggestive that something in the market is becoming strained. As discussed in that article, when interest rise, and peak, such has corresponded with more negative market outcomes.

Is the current rise in rates signifying the next market downturn? Historically, sharp spikes in rates have done so by slowing economic growth more than expected. However, as we noted previously in our Commitment Of Traders report:

“The number of contracts net-long the 10-year Treasury already suggests the recent uptick in rates, while barely noticeable, maybe near its peak.”

Some of the pressure in bonds has come from the market bracing itself for some large auctions of new bonds next week. A lot of the action on Friday was the shift in focus to next week’s auctions. On Monday, there will be $38 billion in 10-year notes and $24 billion in 30-year bonds on Tuesday.

However, as noted by Zerohedge on Friday:

“But those who are betting on a continued rise in yields may get disappointed for one key technical reason. As Morgan Stanley’s derivatives strategist Chris Metli notes, CTAs – those mindless trend-followers who just ride on momentum waves until they crash, are still short bonds and at current yields have to buy $95bn notional of TY-equivalent duration over the next week.

As Morgan Stanley notes such ‘could continue the bond rally and put pressure on stocks as equity investors fear the bond market knows something they don’t about future growth prospects.'”

The dollar is also confirming the same.

The Dollar Is Confirming The Same

We specifically noted that the dollar was about to rise sharply. To wit:

“The one thing that always trips the market is what no one is paying attention to. For me, that risk lies with the US Dollar. As noted previously, everyone expects the dollar to continue to decline, and the falling dollar has been the tailwind for the emerging market, commodity, and equity risk-on trade. So, whatever causes the dollar to reverse will likely bring the equity market down with it.”

While the dollar rally is still young, there was a successful test of the “double bottom” with higher lows. The break above the 50- and 200-dma also suggests the rally is just getting started. A further rally in the dollar will get fueled by additional short-covering.

There is a significant difference between a “recovery” and an “expansion.” One is durable and sustainable; the other is not.

Dollar & Rates Are Warning Signs

Those expecting a significant surge in inflation will likely be disappointed for the one reason which seems to get mostly overlooked.

“If the economy were growing organically, which would create stronger rates of wage growth and inflation, then there would be no need for zero interest rates, continued monetary interventions by the Federal Reserve, or deficit spending from the Government.”

The obvious problem is that not all “spending” is equal. Pulling forward consumption through stimulus is indeed short-term inflationary but long-term deflationary. Moreover, since 1980, there has been a shift in the economy’s fiscal makeup from productive to non-productive investment. 

As we have pointed out previously, you can not overstate the impact of psychology on an economy’s shift to “deflation.” When the prevailing economic mood in a nation changes from optimism to pessimism, participants change. Creditors, debtors, investors, producers, and consumers change their primary orientation from expansion to conservation.

• Creditors become more conservative and slow their lending.

• Potential debtors become more conservative and borrow less or not at all.

• Investors get increasingly conservative, and they commit less money to debt investments.

• Producers become more conservative and reduce expansion plans.

• Consumers become more conservative, and save more, and spend less.

As we have been witnessing since the turn of the century, these behaviors reduce the velocity of money. Consequently, the decline in velocity puts downward pressure on prices. Moreover, given the massive increases in debt and deficits, the deflationary drag increases as the stimulus fades from the system.

Likely, the dollar and rates already figured this out.

The Reflation Trade Unravels

The importance of this analysis relates to a potential change in investor positioning in the market. To wit:

“The unraveling of the inflation/reflation trade has accelerated over the past week. US 10y bond yields continue to decline and have now broken a crucial technical level. Such could see the rally accelerate sharply, and with it, the continued unraveling of both cyclicals and commodities.” – Albert Edwards

Albert’s comment aligns with our views previously that such would likely be the case.

I believe that the pandemic recession allowed policymakers to cross the Rubicon of fiscal rectitude. They have reached a new land where existing monetary profligacy can now get coupled with fiscal debauchery.

In that respect, I am very much in the inflation/reflation camp. But I think it is a secular theme that will play out later in this cycle. The problem is the markets have been too early in betting on the reflation trade and have gotten set up for a huge disappointment.”

We have previously discussed the change in the deflationary credit impulse. But, importantly, the bond and dollar markets are now reflecting that deflation.

Does such mean the markets will crash tomorrow? No.

What is critical to recognize is that the market is well ahead of what reality will turn out to be. As such, when overly exuberant earnings and economic growth expectations fade, the justification supporting overpaying for assets will run into trouble.

Tyler Durden Sun, 07/11/2021 - 10:30