My appearance on CNBC on Tuesday was the first in 6 years – basically in 2006 I decided there was going to be financial Armageddon (2 years too early!) and I did not want to be either the bad guy saying that we are doomed and the FTSE 100 is going to halve or not true to myself and feign the defiant optimist suggesting that good times were just around the corner. Unlike many other commentators… There is the other option of fudging, but that is just not me.
Here’s the script – I was told to pick three stocks to discuss and I went for ARM (ARM), Mulberry (MUL) and Whitbread (WTB) and then come up with some of my macro (economic) views, and email them through by midday. Macro discussions are the best really because they make you seem worldly and knowledgeable. Technical’s may be great but even when called correctly they do not really make for good TV as you just sound like a Dalek when you say the FTSE 100 gapped down or gapped through its 200 day moving average, and so on.
The start was supposed to be 1645 and I was all ready to come up with my macro views and which have been hidden from the world for 6 years – one of the most tumultuous in financial history! Unfortunately there was only time for a quick run through of the three stock charts – Dalek fashion, and then, like life, it was all over. But rather than going to waste ,why don’t I reveal the macro notes, just for fun.
Zak Mir, Contributor Spreadbet Magazine
Overall Bearish Macro View:
On a macro basis we are now at the end of the beginning, a 5 year attempt at preventing the meltdown / crash of 2007 being unleashed on the respective economies by the financial authorities/central banks.
While they have been able to ameliorate the effects of the credit crunch/sovereign debt crisis, the key point to note in terms of what has happened in the summer 2012 is that with QE3- both of the European and the US variety, the final joker has been pulled out of the pack. This is said on the basis that the bond buying is unlimited both in its magnitude and in time. There is now nothing else to deliver as a cure , apart from to hope that enough has been done – this is a “watch this space” at best.
I find it amazing that Japan is now seen as being ready to stimulate again, nearlu a decade after it admitted that QE does not work (something “Helicopter Ben” has to yet find out). The West adopted from the same proven losing strategy nearly 5 years ago. True, it is a very good way of playing for time while waiting for the economic recovery, it gives politicians the benefit of being seen to do be doing something and prevents a total meltdown of underlying economies / stocks and the political systems that rest upon it.
However, bond buying is in effect a “mortgaging” of any recovery – a mortgage that will be called in at some point. At best, it seems to create a “flat line” situation – neither a recession nor depression just rolling stagnation. There is nothing wrong with this in itself, but there is little point in thinking of a scenario which may be any better for several years to come – certainly if Japan is anything to go by. All the while , debt continues to pile up.
As far as the Fiscal Cliff is concerned, it is likely the US congress will avert this (currently in a Mexican Standoff) similar to the budget crisis of summer 2011 that preceded the AAA rating downgrade for the US. Nevertheless, while the Fiscal Cliff may be avoided, the posturing ahead of it could be enough on on its own to take the stock market down. We had a taste of how wobbly sentiment is in the wake of last week’s Google Fat Finger episode. There may be further scares of a similar nature over the next few weeks. However, the stock market typically delivers for the end of year rally enthusiasts.
As far as the situation in Spain is concerned, any full bailout would be a poisoned chalice which of course, is impossibly difficult to drink from. With the required austerity measures and the severe political issues, the risk of a breakup of the country with Valencia going it alone should not be underestimated. do not see any positive resolution to the Spanish situation in the near term.
Romney / Obama
On the US presidential election, I was surprised that Romney did not take himself out of the running during the summer between his major gaffes (like his father in 1968). Obama has done more than enough in order to retain his Presidency – as all he has to do now as an incumbent is simply stand firm in my opinion. It is always up to the contender to win it, and, notwithstanding the recent polls surge, Romney looks to me like he has lost it.