Markets
Stock Funds Lure Most Cash in 13 Years as Investors Chase Rally – Businessweek
Warren Buffett’s Favorite Market Indicator Shows the Stock Market Is Overvalued (^DJI, ^GSPC, TWTR)
“Corporate profit margins are at all-time highs, and earnings are not growing. The S&P 500 is rising on earnings-multiple expansion, rather than earnings growth, and it looks overvalued.
The cyclically adjusted P/E ratio (a.k.a. the Shiller P/E) is at 25 — about 50% above its historical average of 16.5.
Respected investors including Jeremy Grantham, Wally Weitz, Donald Yacktman, Steven Romick, and Seth Klarman are building large cash positions. This indicates that they do not see opportunity in the marketplace currently and would rather be in cash to take advantage of future opportunities.
All the while the U.S. economy is growing slowly on the back of the Federal Reserve, which is pumping $85 billion a month into the market and now has a balance sheet of $4 trillion.”
Convertible Bonds Get Lift From Stocks – WSJ.com
“Sales of convertible bonds are booming, as investors seeking to benefit from the roaring U.S. stock rally rush to purchase debt that can convert into shares.
Sales of the hybrid instruments in the U.S. have surged this year to $38.3 billion from $18.7 billion by this time in 2012, on pace for their largest full-year total since 2010, according to Dealogic.”
India: Markets addicted to QE: Chris Wood – Economic Times
QE is having a bullish effect in India according to Chris Wood, an Analyst who wrote the seminal book “The Bubble Economy” about Japan in the early 1990s as the bubble popped.
Gold Sinks to Four-Month Low – WSJ.com
HSBC to offer 95% mortgages through Help to Buy scheme | Money | theguardian.com
Central Banks
Fed’s Bullard: Rush To Zero Percent Funds Rate May Have Been Mistake – Real Time Economics – WSJ
“Federal Reserve Bank of St. Louis President James Bullard said Thursday the central bank’s rush to cut interest rates over the course of 2008 may have unwittingly consigned the nation to many years of zero percent short term rates.”
Fed’s Bullard Favors Central Bank Putting Floor Under Inflation – Real Time Economics – WSJ
“Mr. Bullard said it would be a bad idea for the Fed to lower its unemployment threshold as a way to boost the potency of monetary policy, as officials like Narayana Kocherlakota have advocated. Cutting the 6.5% jobless threshold would cost the Fed “credibility” and “if we move [the thresholds] around, markets would start to wonder if we’d move them again,” he warned.”
The irony of Ben Bernanke’s forward guidance
Time inconsistency:
“Let’s say that the market believes Bernanke’s theory about the effectiveness of forward guidance in boosting the speed of the economy. In that case, the market should react to by raising longer-term interest rates sooner than it would otherwise—because it should expect to pass the Fed’s economic condition thresholds for higher short-term rates sooner.
Obviously this makes forward guidance at least somewhat self-defeating.
As economist Warren Mosler points out, this has an ironic consequence: forward guidance will only work if the market doubts its effectiveness. “
ECB’s Praet warns of deflationary pressures in euro zone | Reuters
ECB’s Nowotny says sees no deflation risk | Reuters
Only Praet seems to be talking up the threat of deflation.
Mario Draghi hits at ‘nationalistic’ attacks of ECB rate cut – FT.com
““We are not German, neither French or Spaniards or Italian, we are Europeans and we are acting for the eurozone as a whole.””
German Court Won’t Rule This Year on Legality of ECB Bond Buying – Real Time Economics – WSJ
North America
El PIB mexicano sube 0,84% en el tercer trimestre del año | Economía | EL PAÍS
Growth in Mexico was ).84% in Q3 2013. The government is projecting 1.3% growth for full year 2013
Mexico’s economy finally shows signs of revival | beyondbrics
“During October, close to 143,500 new jobs were added to the economy. Many believe, those new employment opportunities came in construction projects financed by the government.
October’s job creation number was the third-largest for that month since 1998.”
Mexico’s Economy Shows Sign of Recovery – WSJ.com
“The government’s statistics institute said economic output grew 0.8% seasonally adjusted from the second quarter, which translates into a 3.4% annualized growth rate.
“The headwinds that held back the Mexican economy in the first half of 2013 are abating,” said Bill Adams, senior international economist for PNC Financial Services Group, adding that he expects the economy to continue expanding briskly in the months ahead.
The recovery comes after disappointing expansion this year in Latin America’s second-largest economy, which is set to be the slowest since the 2009 recession.
Despite the better numbers, the Finance Ministry cut its full-year forecast for the fourth time to 1.3% from initial expectations of 3.5% growth, a move that belatedly recognizes the country’s weak numbers so far this year. “
US factory activity dramatically slows, says Philadelphia Fed – Telegraph
Manufacturing rebounds in November to 8-month high: Markit | Reuters
Abercrombie Reports Loss on Weak Sales – WSJ.com
Just linking to this because we need to watch retail for signs of economic over-/underperformance
White House Correspondents’ Association Blast Obama Over Secrecy | TIME.com
Europe
UK deficit falls as stamp duty up 46pc – Independent.ie
Domestic-led third-quarter growth bolsters Germany in showdown over trade | Reuters
Allemagne: pourquoi l’instauration d’un salaire minimum inquiète – LExpansion.com
This French article says the SPD want 8.50 euro minimum wage in Germany. That’s the figure they are striving for in negotiations with Merkel.
L’Allemagne va se doter d’un salaire minimum
Here is the French take on the German minimum wage negotiation. According to Le Monde, the CDU/CSU ceded on minimum wage instead of on tax on the rich, both of which the SPD wanted. The French Finance Minister is saying this might be a rapprochement on economic matters in Europe. We will see.
As a result of coalition talks, Germany is looking to get a balanced budget by 2015 according to this article.
Italy to Privatize $16 Billion of Assets – WSJ.com
ekathimerini.com | Privatization revenues target is set at 3.56 bln
EconoMonitor : EconoMonitor » The Perils of Zero Inflation for Swedish Household Debt
Economics
Krugman and Mankiw on “loanable funds” — so wrong, so wrong | LARS P. SYLL
Paul Krugman still thinks in terms of loanable funds | econoblog101
Technology
Spotify Hits a High Note: Valuation Tops $4 Billion – WSJ.com
Jury awards $290 million more to Apple in Apple v. Samsung retrial | Ars Technica
Authy Now Lets You Use Its Two-Factor Authentication System On Multiple Devices | TechCrunch
Lenovo IdeaPad Yoga 2 Pro review | PC Pro
My wife is getting this on recommendation from a friend