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The Elusive Bottom – ein ‘MUST READ’

Wöchentlich präsentiert John Mauldin in seinem ‘Outside the Box’ unterschiedliche Ansichten diverser Autoren. Diese Woche erfreut er seine Leserschaft mit einer empfehlenswerten Analyse von David Rosenberg, Nordamerika-Ökonom bei Merrill Lynch; dieser gibt eine Analyse der aktuellen Situation nebst Ausblick zum Besten.

Rosenberg favorisiert ein deflationäres Szenario; die momentane Rezession vergleicht er mit der 1975. Den Beginn datiert er auf den Januar diesen Jahres, erwartet ein Ende nicht vor Mitte 2009.

Die positive Wachstumsrate des Bruttoinlandsproduktes führe einen in die Irre, verleite zu verzögerten Investmententscheidungen. Die Rezessionskriterien (Beschäftigung, Industrieproduktion, Realeinkommen, inflationsbereinigte Umsätze des Handels/verarb. Gewerbes) des National Bureau of Economic Research, NBER, seien bereits erfüllt.

Die Rezession hat bereits mehrere Kapitel geschrieben:

  • Chapter 1 was the end of the res construction bubble
  • Chapter two was the end of the home price bubble
  • Chapter three was the end of the credit cycle
  • Chapter four was the end of the employment cycle
  • Chapter 5 is the first consumer recession since 1990-91

Im Folgenden ist Rosenbergs Ausblick wiedergegeben:

Three markers to turn us bullish

In terms of what are some of the markers that I’m weighing down to turn more bullish? I think this is very important. I look at not so much where am I going to be wrong, but looking at what are the things that will turn me more positive?
There are three markers that I have laid down. The first marker is the personal savings rate. I have to see the personal savings rate go back to the pre-bubbles, normalized levels, which was 8%. I’m not talking about the Jurassic period here.
I’m talking about where we were in the late 1980s and the early 1990s, before the last two bubbles. That’s why I said plural.

We had a tech stock bubble followed very quickly by a housing bubble. This had tremendous implications for perceived net worth and perceived future asset growth of the household sector. It had monumental impact on how people spent their after-tax income. That’s why we got to a point last year where briefly the savings rate got to negative for the first time since the 1920s. There was a belief system that we could retire on our assets, and now these assets are deflating and people’s expectations of how they’re going to retire is going to force that savings rate higher. That’s going to be very disinflationary, by the way.

I think it’s important to note that, in 2002, as the tech sector was deflating, Greenspan and Bernanke decided that it was a good idea to re-slate the housing stock as an antidote to the deflation in the tech capital stock. This is almost a piece of Mary Shelley’s Frankenstein; we built the monster, now we have to tear it down. I don’t know what else is left. We’ve had an equity bubble followed by a housing bubble, followed by a credit bubble. I don’t think there are any more rabbits in the hat to create the next bubble, unless that bubble is going to be in Treasuries, and maybe that is, in fact, going to happen. It’s pretty clear that the Fed is going to be concentrating a lot more in the future on non-traditional measures to ease monetary conditions, and not just cutting the Fed fund rate.
Part of that may be reflating by expanding its balance sheet, which means that it’s not just talk. The Fed is actually going to add to its balance sheet, and that’s exactly what happened.

1) Need to see the savings rate go to eight percent

With the Bank of Japan and the operations they conducted back in the 1990s, this is just stuff to consider for the future. Let me just say that a savings rate of 8% would leave me feeling very good about the fact that we would have gone to a level of pent-up demand that would help us embark on the next bull market and economic expansion. That’s going to take quite a bit of time. This is a process.
This a process we’re talking, even after the recession ends, that’s going to be an elongated recovery, as there was in the early 1990s, after that asset cycle.
Remember, the recession might have ended in November 2001, but that did not give you a “get out of jail free” card as an equity investor, and certainly the recovery was a good two years away, even if the recession technically ended at the end of 2001. I’m talking about the markers that will turn me bullish for the next cycle. An eight percent savings rate, to me, would be a very critical launching pad.

2) Months supply below eight months

What else? Well, I doubt that anything is really going to bottom, including the financials, until we’re convinced that house prices have hit bottom. For that we have to look at the inventory to sales ratio, and there are different measures.
There is the new inventory, which is a 10-month supply. There’s the resale; that’s 11-month supply. When I take a look at the Census Bureau data, which includes total vacant units for sale, single-family, condo, it’s more like 17-month supply.
We need to include everything, including foreclosed properties. I have to see that number sliced in half. I have to see it down below eight months supply before I’ll be convinced home prices don’t bottom, at least the second derivatives start to turn positive. I have to see that metric at the eight-month supply. I’m keeping a very close eye on it. That will make me feel a lot more comfortable with turning bullish for the next cycle.

3) Interest coverage ratio has to come down to 10.5%

The third and last marker comes down to the household balance sheet. What I’m referring to here is interest coverage in the household sector. We have a record debt-income ratio, but that’s a stop-to-flow concept. I’m talking about interest coverage, how much are principal and interest payments from the record debt absorbing out of household income? It is 14.1%. It’s at a near-record high. We have never been in a recession with this metric at this level. So, that means there are too many things that are levels we’ve never seen before. The whole thing about economic bottling is you run the rest of it based on the past, and there are so many things that we’re entering into this thing that I’ve never seen before.

There is, I’d have to admit, a wide dispersion around the forecast I am providing. What I am really trying to do is put things into a certain perspective. What I know, being an economist, is that in some sense you’re a glorified historian. So when I take a look at the chart of interest coverage in the household sector, what do I see? I see that after the recession of the early 1980s, this interest coverage ratio got down to 10.5% by 1982 and, voila, that was the touch-off point for a multi-year bull market and economic expansion.

Then we had the recession of the early 1990s, and what do you know? In 1992, interest coverage went down to 10.5% again. That was the launching pad for a multi-year bull market and economic expansion. We’re 14.1% in this metric today. I know this historical record tells me that there is something about a 10.5% ratio that is a very cathartic event. The problem is that to get there from here would require the elimination of $2 trillion of household debt. So, maybe when NYU’s Nouriel Roubini talks about that the total losses could be up to $2 trillion, maybe he’s not talking through a paper bag.

Frugality is going to set in

As far as I know, there are only two ways to eliminate debt. You either walk away from it, which people obviously are doing, which is why we got these write-downs and these foreclosures, or you pay it down. I think people with a FICO score that they are concerned about are going to pay that down. That means that the savings rate is going to be forced higher. This, again, is going to be very, very disinflationary. It means that fashions are going to change. It means frugality is going to set in. We’re going to be living in smaller houses, driving smaller cars and living more frugally. It’s not going to be the end of the world; it’s going to be a necessary process to truly embark on getting the balance sheets down to more comfortable levels so that we can actually embark on the next cycle.

Intense deleveraging in the banking sector

The whole thing about being an economist is that you’re being requested to model behavior. What I found recently was three signs of significant changes in behavior. We obviously know of at least one investment bank that is taking aggressive action to sell assets and to deleverage. That’s going to force a lot of action in other parts of the industry. What we’re talking about here is intensified deleveraging in the banking sector.

Inventories cut by $62 billion despite tax stimulus

What else did we see? Well, those GDP numbers were just fascinating when you dig through them. Think about it for a second. How did businesses respond to the biggest tax stimulus of all time? They cut their inventory by $62 billion. Can you fathom that? Instead of boosting production as a result of the stimulus, they just allowed the stimulus to absorb past production. We already know that the inventory component went down another five points based on the July ISM number, so this inventory liquidation process is continuing.

Savings rate boosted despite stimulus too

Alan Greenspan cut his teeth on inventory investment cycles. So banks are deleveraging, and companies are liquidating inventories. How did households respond to the biggest tax stimulus of all time? They boosted their savings rate from 0.3% in the first quarter to 2.6% in the second quarter, which is only the third steepest increase in the savings rate in any given quarter in the past 55 years.
Now you probably didn’t read that in the front page of The Wall Street Journal, but I find that to be a very relevant statistic.

So we have financial sector deleveraging. We have business sector inventory liquidation overlaid with the households boosting their savings rate. These are new themes, and the theme is about getting small. That’s going to play very well into Rich Bernstein’s decision two months ago to allocate an extra 15 percentage points to his fixed income portfolio. Now we’re talking about fixed income. We’re talking about bonds that are high quality and have non-callable protection.

Nominal GDP growth has highest correlation with yields

I’ll tell you that the really key forecast next year coming from the economics department here is the nominal GDP, nominal, price times quantity, because we’re calling for nominal GDP growth next year to average 1.5%. That is going to be very bullish for sectors that have proven earnings stability and reliable dividend growth, and it’s going to be very bullish for bonds. I say that, because I know that the critical driving factor for bonds is not fiscal deficits. It’s not the dollar and, guess what, it’s not commodities. Nominal GDP growth has the highest correlation. People look and they say, “Four percent 10-year note; who’d want to touch it?” The reality is that nominal GDP growth this year is averaging 4%. The fact that the 10-year note is averaging 4% is not really a big mystery, if you’re looking at the macro underpinnings.

Now, if I’m right on 1.5% nominal GDP growth for next year, all I can tell you is that the last time we had a condition like that was in 1958. All I can tell you is that 1958, the funds rate averaged to 1.5% and the 10-year note averaged 3%. If you’re going to ask me if we have a realistic chance of going back and retesting the June 2003 lows and the 10-year note or the March 2008 lows and the 10-year note, I firmly believe that’s going to happen. I believe that’s going to also provide you with very handsome total returns.

Quelle: The Elusive Bottom

1 Kommentar

1 martin r - 19.08.2008 um 21:25

John Mauldin ist gut, seine Gäste nicht immer ! Da die Zahlen zeigen, daß die beim Verbraucher und den Firmen ankommenden Energie und etc-Preise auf breiter Front weiter steigen, müssen wir mal überlegen, ob es das gibt: Deflation bei steigenden Preisen. Wäre das nicht Stagflation? Das würde letztlich den Crash des amerikanischen Verbrauchers bedeuten, denn nur höhere Einnahmen sichern dem Fiskus (in diesem Fall dem amerikanischen) und damit dem Staat das Überleben – wer bezahlt die Sch…..?
Wir erlebten seit wieviel Jahren Verbraucherdeflation = sinkende Einkommen hierzulande ? In Deutschland denke ich seit der ‘Wiedervereinigung’.
Entweder enden wir in der Sklaverei oder einer Revolution, die Situation ist prekär – anders lautenden Gerüchten zum Trotz. (Man denke:Firmen verdienen weniger und Aktien steigen, von den Banken ganz zu schweigen, allmählich wird die Veranstaltung zirkusreif.)

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