The Hardest Part

We've often said, the hardest part of history to understand is the part you're living now. The inside and outside lags of economics are a big part of the distortion haze. The mood that we are picking up in the Twittershere has a distinctly negative aroma. The miss today on ISM removed all mention of data conspiracies and EOTW commentary was down right giddy. We're puzzled because the negative view is a rehash of what's gone on this year. In short, the EOTW bearishness is an accurate depiction of the present that still gets the net change wrong.

We've never been accused of being optimists. In fact, my firm was founded in 2007 on the notion that something terrible was coming. Our seed investors knew they didn't hire us to be long the SP. Oddly, in 2012(and now it looks like 2013) we find ourselves in the uncomfortable condition of "constructive." Our 2012 theme of "things kinda sorta working out" is morphing into "everything that happens is not a crisis." The shocks that 2012 delivered, though not solved, were taken by a low geared well buttressed system.

Corporate profits are too big a slice of GDP. We believe labor will increase and capital is stalling. This is a nominal plus and a long view change.(see our notes on Abundance Economics) The economy will be better, will the stock market? Inflation should perk up. The Fed will be in to take 90% of the new supply, or more. Debt owned by the public has almost doubled since 2009, however, going from 5.74T to 10T. If we are right about the mood (and Twitter is a fade) then John Q's bond fancy will wane. The Fed has had it easy with everyone rowing together, we think their lifting gets heavier.

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