31/12/2012: Pimco Twitter-cast for 2013

Bill Gross of Pimco issued his 'twitter-cast' for 2013:

Gross: 2013 Fearless Forecasts: 

1. Stocks & bonds return less than 5% (so shallower returns for 2013 across both asset classes than in 2012, e.g. S&P500 YTD gain of 12.2%, US 10year Treasury yield index down from 1.880 to 1.7574 YTD)
2. Unemployment stays at 7.5% or higher 
3. Gold goes up (no indication by how much, but gold rose 6.3% in 2012 and is now on the longest price appreciation trend since 1920, having clocked 12th consecutive annual gain)
4. 5yr US Treasuries yield 0.70% by end of 2013 (5yr Ts started 2012 at 0.830 yield and closed off on 0.7229)
5. Dollar declines (see below)
6. Oil above USD100 at 'some point in year' (WTI is now down 8% for 2012 on foot of shale gas boom in the US, with WTI-Brent spread averaging at a discount USD17.44/barrel against a premium of USD0.95 for the 10 years period through 2010 (according to Bloomberg data). Brent was up 2.8% this year - a fourth consecutive annual gain. The significance of shale effect is hard to overestimate: US crude production is at 6/985 million barrels per day - the highest since 1993.)

And couple of precedent 'tweeter-casts':

Two charts for USD and Euro YTD changes:

Update: fresh closing data: Nasdaq Comp up almost 16% y/y, DJIA up 7.3% and S&P 500 up 13%.

30/7/2012: Euro Area forecast by Standard and Poor

S&P's note on euro area crisis is a rather entertaining read, if you are into the sort of 'entertaining' a la mode of Quentin Tarantino... The note is The Curse Of The Three Ds: Triple Deleveraging Drags Europe Deeper Into Recession, authored by EMEA Chief Economist: Jean-Michel Six.


Snapshot of views (emphasis mine):

• A combination of public, household, and bank deleveraging are stifling growth in most European economies. [Now, I've been saying all along that we cannot ignore household debts, yes so far, European and National policymakers are utterly hell-bent on saddling indebted households with the bills for indebted states and banks. Just look at Ireland, where the banking sector is now outright moving into enslaving households by dictating to them how much they should spend on food & clothing so they can maximize extraction of mortgages repayments. And the Irish Government only eager to lend their support to the banks.]
• This is also limiting the effectiveness of the European Central Bank's efforts to support the financial sector and eurozone economies. [Not really, folks. You might missed it, but European 'leaders' are heavily taxing economy already to subsidize insolvent banks and sovereigns. Alas, the room for more taxes is limited in Europe not by household debt - about which the respective National Governments give no damn - but by the fact that Europe already has some of the highest income taxes in the world.]
• Subsequently, the S&P is cutting their base-case growth forecasts for the eurozone and U.K. economies for 2012 and 2013. See two tables below

• S&P also see a 40% chance that downside risks could push European economies into a genuine double-dip recession in 2013 (second table above).

So risk-weighted expected growth is now forecast, for the Euro area to be -0.76 in 2012 and -0.08 in 2013. If we take potential growth at 1.5%, this would imply an opportunity cost of over 3% in 2012-2013 to the Euro area economy.

And the core downside risks are:

• A hard landing in some emerging markets, delaying the recovery in world trade;
• The prospect of one of the main eurozone countries losing access to capital markets for a prolonged period; and
• A more pronounced retrenchment in consumer demand, especially in the core countries.

Key changes to previous forecasts:

• "We have cut our forecast for GDP growth in France to just 0.3% this year and 0.7% in 2013, from 0.5% and 1%, respectively, in our previous forecasts. 
• "We've also revised downward our GDP projections for Italy to negative 2.1% for 2012 and negative 0.4% in 2013. 
• "In the case of Spain, we now forecast GDP will decline by 1.7% this year and that it will be negative 0.6% next year—a cut from our previous forecast declines of 1.5% and 0.5%. 
• "For the U.K., we have revised our 2012 estimate to 0.3% this year. Yet, the provisional GDP estimate released on July 25 by the U.K. statistical office for the second quarter of negative 0.7% makes our full-year forecast more uncertain. If confirmed, this result would most likely lead to zero or slightly negative growth this year."