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Posts tagged ‘Greenspan’

Albert Edwards’ “WOW!” Chart, Or Why “Draghi Makes Greenspan Look Like A Rank Amateur”

Back in January, when European stocks were only starting their unprecedented QE ramp, we presented the “Driver Behind The European Stock Surge” in which we showed that ever since Mario Draghi’s “whatever it takes” speech in July 2012, European equity prices were up 50% (even higher now) even as corporate earnings had actually declined by 7%.

It is a take on the chart above that has sent Albert Edwards over the edge once again, and in his latest letter he presents another way of visualizing the data above, with the help of what he dubs the “WOW!” chart.

Edwards begins with the standard, and well-deserved, rant against central bankers who now merely need – and create – ever greater bubbles in hopes of preserving a system, which can no longer function away from a “bubble” state.

We have long fulminated against strategists who are unwilling to predict sharp market moves. The violent downmove in the euro over the last few weeks is a case in point. Mario Draghi and the ECB’s manipulation of asset prices makes Greenspan’s Fed look like a rank amateur. More shocking though than the plunge in the euro, and more shocking even that 25% of sovereign eurozone bonds now trade in negative territory, is what has happened to eurozone equity valuations. For, as we approach the sixth anniversary of the US cyclical bull market (a post-war record), the PE expansion of eurozone equities is simply off the scale. History suggests this will end very badly indeed. Ask Alan!

What is he talking about? Presenting Albert Edwards’ “WOW!” chart:

Edwards’ explanation:

This extraordinary multiple expansion is most shockingly illustrated by the chart [above] showing eurozone trailing PEs expanding to the moon (on trailing PE, the eurozone now stands at 20x vs 18.5x in the US). The chart below shows developments for only the past couple of years – this time using the 12m forward PE. The interesting point here is how, despite a profit explosion in Japan, the Japanese forward PE is unchanged at around 14x whereas US and eurozone forward PEs have both surged.

While we agree with everything Edwards is saying, we don’t agree with his assessment that Japan’s epic clobbering of its currency is helping its corporations. Sure, there are benefits, mostly in the area of exports and a brief spike in profitability, which Edwards notes in detail…

The surge in Japanese company profits on the back of the yen?s devaluation since early 2013 is truly extraordinary, but this has not (yet?) fed through to a booming Japanese economy. Like QE, the liquidity surplus…………………………….

full article at source:http://www.zerohedge.com/news/2015-03-12/albert-edwards-wow-chart-or-why-draghi-makes-greensplan-look-rank-amateur

 

 

Behind The Global – Game Of – Thrones

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Greek PM Alexis Tsipras yesterday laid out Syriza’s stance, and from what I saw he didn’t pull even one punch. Despite all the suggestions from the financial press throughout the past week that Tsipras and Varoufakis reneged on campaign promises to seek debt write-downs, they didn’t, and never have – other than perhaps in semantics.

Which I don’t find the slightest bit surprising. I would have been very surprised if they had. The misinterpretation, and the faulty expectations, are easily explained through the fact that – most of – these guys are not politicians, which they very deliberately expressed in the way they dressed for their meetings with ‘Europe’s finest’.

They don’t see the ‘space’ career politicians see to negotiate away the mandate their voters have given them. For them it’s simple: we were elected on our program – which in this case happens to be to end the misery forced upon Greece by the European and Troika schemes -, and we’re not going to move away from that just because ‘the other side’ starts threatening us, or (a crucial difference in politics) because our voters may not vote for us again in a next election.

In their view, trying to scare Greece into even more submission, which is the overlying message emanating from Brussels and beyond, is entirely null and void because Greece can’t – and shouldn’t – sink any lower than it has. Very and refreshingly simple. No surprise there, but, at least on my part, just support and admiration. Syriza is fighting the fight many others don’t have the intellect, the chutzpah and/or the courage for.

The first thing they did, apart from hiring back the government offices’ cleaning ladies the Troika got fired, was to say they wanted nothing to do with that same Troika. That to me is the most important statement so far by Yanis Varoufakis and his crew. Because that goes to the heart of why Greece is where it is, and why the entire world is.

I saw a headline last night that said something like ‘Greece doesn’t want to talk to the EU’. But that’s not true. Syriza merely wants the IMF out of the picture. And then it would prefer to talk to separate EU nations and offices, rather than top down Brussels bureaucrats. Not just because of the Colonel Blotto game theory I talked about before, but because they recognize how insidious and ruthless the IMF is. I’ll get back to that in a minute.

The most remarkable ‘news item’ for me yesterday came not from Tsipras (or Greenspan), but from former French President Nicolas Sarkozy, who did something he would never have when he was in office. Sarkozy went against the grain of the official western narrative vis à vis Ukraine and Russia. He said what no acting French president could possibly say (including himself), because as president he would have been beholden to the US and NATO dictated doctrine, that Putin is evil, and Ukraine should be ‘liberated’.

Sarkozy: Crimea Cannot Be Blamed For Joining Russia

Crimea cannot be blamed for seceding from Ukraine – a country in turmoil – and choosing to join Russia, said former president of France, Nicolas Sarkozy. He also added that Ukraine “is not destined to join the EU.” “We are part of a common civilization with Russia,” said Sarkozy [..]. “The interests of the Americans with the Russians are not the interests of Europe and Russia,” he said adding that “we do not want the revival of a Cold War between Europe and Russia.”

Regarding Crimea’s choice to secede from Ukraine when the country was in the midst of political turmoil, Sarkozy noted that the residents of the peninsula cannot be accused of doing so. “Crimea has chosen Russia, and we cannot blame it [for doing so],” he said pointing out that “we must find the means to create a peacekeeping force to protect Russian speakers in Ukraine.” In March 2014 over 96% of Crimea’s residents – the majority of whom are ethnic Russians – voted to secede from Ukraine to reunify with Russia.

That is pretty close to 180º different from what the official western position is. Putin has taken note. Because it destroys everything the West, as represented by Germany’s Merkel and France’s Hollande, brought to the talks in Moscow this weekend (and Minsk today). More importantly, it throws out what NATO wants and prepares for. In the exact same way that Greece seeks to throw out the IMF.

And that is no coincidence. Sarkozy reveals his dismay at being told what to do, when he was in office, by the supranational NATO. Tsipras and Varoufakis refuse being told what to do by the supranational IMF. Same difference. Well, to an extent: Sarkozy did the NATO and IMF’s bidding when he was in office, Syriza never has.

Merkel, meanwhile, ceased resisting Mario Draghi’s mad €1 trillion+ QE program recently, and along that same vein she may today, as she’s talking to Obama in Washington, give up her resistance to the west arming Kiev. Which would be equal to a declaration of war against Russia. The pressure on her is obviously huge and increasing, but Angela should be smart enough to know that it’s impossible for Russia to stop looking out for the Donbass.

Because just about every Russian citizen has family connections in the region, who’ve been shelled by their own government for close to a year now. And if Russia were to retreat, chances are these people will be obliterated in very ugly ways. What Merkel should be demanding at the ‘peace’ talks is for not-so-very-democratically-elected PM Yatsenyuk and his shady government to step down, and nationwide fair elections to be held that include the Donbass. But she won’t.

full article at source: http://www.theautomaticearth.com/2015/02/behind-the-global-game-of-thrones/

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