There are those here who "poo-poo" Zero Hedge and its reporting. However, this document at ZH is an existing report from a Swiss financial publication which has been published at ZH, too. This link is in printer format and much more readable than the original version or at other publications.
This is a fairly long read; but may provide you with a few other perspectives and/or things to consider, they you may not have already considered regarding future investment paths and decisions.
http://www.zerohedge.com/print/521417Regards,
Catch
Comments
2015
Zulauf: The oil-price slump will hurt the economy dramatically in terms of capital spending and employment, and a lot of oilfield jobs are high-paying jobs. Yes, lower oil prices will bring down the cost of energy, which is good for consumers, but the private sector is going to save this money, instead of spending it.
Japan’s yen devaluation is negatively affecting the price of all globally traded goods. Inflation is diminishing even in weak-currency countries. In Europe, it is below zero. It could approach zero in the U.S. this year. At some point, this will hurt the stock market. There will be a crisis in the junk-bond market, where spreads [between junk-bond and Treasury yields] are widening. In the past, when Treasury-bond yields went down and the yield curve flattened, a recession usually followed. I’m not forecasting a recession, but I am expecting the world economy and the U.S. economy to be much softer than the consensus view.
Zulauf: What might have started as a political move also has an economic rationale. In recent years, crude oil, and particularly OPEC oil, has lost market share among energy sources. It is important for the Saudis to ensure that their most precious asset, crude oil, has a good market, long term. Therefore, they have to kick out some of the marginal players to ensure the market share of crude in the energy equation. Natural gas and alternative energy have been gaining share. To be successful, the Saudis will have to keep prices down for at least a year. It has only started. The spot price has fallen, but the effects haven’t been felt through the real economy yet. A lot of production has been hedged. Those hedges will run off by summer.
Zulauf: Yes. The Saudis have a game plan and want to see their goals achieved before they change policy. This will not happen in three months’ time. The next OPEC meeting is in June. Perhaps there will be an emergency meeting before that if the Saudis achieve what they want to achieve. The Russian situation is unclear. Putin was expecting to be hit with sanctions for his invasion of Ukraine and annexation of Crimea, but he wasn’t prepared for the oil-price decline. It is creating a difficult situation for him. Also, internally, he might come under pressure from the oligarchs. Russia is a wild card, but Russia won’t start a war.
Zulauf: Abenomics [the economic policies advocated by Japanese Prime Minister Shinzo Abe] is based on three arrows: currency devaluation, fiscal stimulus, and structural reform. The first two have occurred, but the third hasn’t, because it is difficult politically. Reform means taking away something from somebody. Europe faces the same problem. Germany is moving backward on reform. Italy and France aren’t moving at all. Most European governments can’t pass necessary reforms. Introducing the euro, which acts as deflationary straitjacket for at least half the members of the European Union, was the dumbest thing they could do. I see no hope for Europe. It is going the way Japan did.
Zulauf: More central banks will buy bonds this year. You can’t just declare your currency lower; you have to print more of it. That money must be invested, and it goes primarily into fixed-income assets. That’s why interest rates will stay low, and go even lower this year. There won’t be any rate hike in the U.S. That’s off the table.
Zulauf: The best capital allocator is the free market. In recent years, and probably for a few years to come, central-bank policy has distorted all that. Capitalism won’t function as we knew it in the past. We will also see the yield curve flatten as investors move into longer-dated bonds to capture a more attractive return. This is happening throughout the world.
Zulauf: The biggest thing going for stocks is paltry bond returns. If I am right that the economy will struggle, equity investors could be disappointed. The major U.S. stock indexes haven’t declined by 10% for the past 3½ years. Extreme readings of investor sentiment reflect a lot of complacency, which usually makes a market vulnerable. A lot of multinational growth stocks are extended on the upside, and cyclicals are extended on the downside. Usually, this situation ends in a big correction. I expect a decline of 15% or so moving into the spring. It could be worldwide, and probably triggered by earnings disappointments in the U.S., due to the strong dollar. I assume central-bank monetary policy will get even easier in the face of this decline. Thereafter, markets could rally, perhaps into 2016. There will be a lot of volatility. It will be a trader’s dream, but an investor’s hell.
The yield on the 30-year Treasury is at 2.53%, near its 30-year low. I expect the 30-year bond to break that low decisively, and yield 2% or even less than 2% when the stock market sells off. The major stock-market indexes are in for a correction of 15%. Large-cap stocks are overvalued.
Earnings estimates will come down. The dollar is strong against foreign currencies, and foreign earnings will be weaker than the market expects. I am looking for a big selloff, probably in the first half of the year. During that selloff, the TLT will rise dramatically and the yield will fall sharply. When that happens, I will sell the ETF. I sold it in mid-October when the stock market fell sharply and bond prices spiked up, and I bought it back shortly thereafter.
The TLT is the biggest position in my portfolio, by far. U.S. bond yields are the highest in the world. Italy’s 10-year bond yields 1.9%. Spain’s yields 1.7%. France is at 0.8%, and Germany is at 0.49%.
http://www.businessinsider.com/felix-zulauf-barry-ritholtz-2010-8
Regards,
Ted
http://www.barrons.com/video/felix-zulauf-global-stock-selloff-will-continue/2369D430-4ABC-414D-B0F6-09DA326D2B33.html?mod=trending_now_video_3
The link was not posted as a pure and expert driven presentation; but as a readable document that can provide other "food for thought" for those so inclined. As is normal, one's investment mileage will vary.
I did see and find the other Zulauf postings, as with the Baron's report. Thank you for extending this too, with your link.
Now, all here need to insert a huge smiley face at this point of my text..............relative to experts...............but, reading or hearing information is not the killer with investments nor other things in life.........but:
"A man's got to know his limitations"
Dirty Harry provided an ongoing life lesson with this simple statement.
I would substitute "person's" versus "man" in the quote, but I retained the original quote.
My absorption rate of, for and with information varies. Retention is a whole other problem area for me.
Lastly, for others here; I am also named Mark, but not the poster "Mark" here at MFO.
Catch
Here is a great interview with Brad Dourif, talking about his role in the movie and its purpose as he saw it, which makes it appropriate for this thread: the futility of a life lived following any absolute dogma: