-Albert Edwards (h/t Zero Hedge):
“…a recession seems a distant prospect in the minds of most investors. Yet one key precursor for a recession has now fallen into place. Slowing productivity growth means that unit labour costs are now running well ahead of output price inflation. This means a margin and profits downturn is now about to unfold. That typically is a key precursor of recession.”
“That confidence in a long cycle comes partly with a high level of certainty that the monetary authorities remain in control of the economic cycle. The doomsayers who predicted that this recovery was on the verge of faltering have been proved wrong, and like the boy who cried wolf, can be safely ignored by the market. Yet that is exactly what happened in 2006 with the US consumer and housing boom, where the voices of caution had been so wrong, for so long, that their Cassandra-like utterances were ignored. Cassandra’s forecasts may have been ignored, but they proved to be correct. Investors demand a sign of when to get out and that trigger may have just arrived.”
-Exhibit A for why banks continue to be black boxes and there is no way to feel comfortable about their balance sheets and respective valuations.
-Given my views on Japan, this article demands further research.
-Over the holiday weekend I spent time with family and friends at different gatherings. In that setting, I have always seen myself an outlier in terms of political and economic views. And in talking about both this past weekend, nothing has changed. What is also abundantly clear, though, is that most of these people (and bear in mind that I care about them) take their views from the mainstream media, and only seem capable of regurgitating the usual recycled talking points. Beit the healthcare law, Iran or the state of the U.S. economy. The contrarian voice holds few in its ranks, and a great many have capitulated to the majority. I see it in the newsletters that I read, and it is definitely prevalent in the people that I interact with. All of which is to say, be mindful when everyone is on the same side of the trade…
