Portafogli e Strategie (investimento) Goodbye, Great Bond Bull Market?

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THE WEEKEND INTERVIEW
FEBRUARY 12, 2011 The Fed's Easy Money Skeptic

'Monetary policy can't retrain people. Monetary policy can't fix those problems.'

By MARY ANASTASIA O'GRADY

Philadelphia
Federal Reserve Chairman Ben Bernanke was on Capitol Hill this week to answer critical questions about monetary policy, amid rising bond yields and sharply higher commodity prices. Mr. Bernanke showed no self-doubt, and Friday's resignation of Fed Governor Kevin Warsh, one of the board's inflation watchdogs, means that Mr. Bernanke's easy-money inclinations will have even fewer internal checks.

Enter Charles Plosser, the president of Philadelphia's Federal Reserve bank. A former dean of the William E. Simon School of Business at Rochester University, Mr. Plosser is widely known as an inflation hawk. And this year he has a vote on the Federal Open Market Committee (FOMC), which sets monetary policy. He's now a man to watch.

One of the most perplexing questions for the Fed these days concerns the continuation of "QE2," its second round of quantitative easing, which will dump $600 billion in new money into our banking system over the first half of this year.

Mr. Plosser doesn't see a deflation risk for the U.S. economy right now. Even those who were worried about deflation six months ago, he says, have begun to change their tune. That means that, with moderate GDP growth and low inflation in the mix, the only thing left as an excuse for QE2 is high unemployment. Can lax monetary policy change that picture?

Mr. Plosser's answer is unequivocal: This mess was caused by over-investment in housing, and bringing down unemployment will be a gradual process. "You can't change the carpenter into a nurse easily, and you can't change the mortgage broker into a computer expert in a manufacturing plant very easily. Eventually that stuff will sort itself out. People will be retrained and they'll find jobs in other industries. But monetary policy can't retrain people. Monetary policy can't fix those problems."

Mr. Plosser reminds me that when QE2 was first proposed last year, he wasn't in favor. "I didn't think it was necessary and I thought that the costs outweighed the benefits." He says he thought that "it carried some very significant risks" that "would not be borne today but would be borne down the road when the time comes to unwind what we've been doing."
But last month, when Mr. Plosser got his first chance to vote on the FOMC, he didn't dissent. When I ask why, he launches into a summary of his four principles of good policy-making: "clear communication of objectives," "credible commitments toward achieving those objectives," "transparency" and "independence."

Credibility demands that the bank not "stomp on the brakes and then floor the accelerator," he says. "Why do you want to signal something and then yank it out from under the market? That's just not a good way to conduct policy."

I'm skeptical that policy makers will know when to change course, so I ask Mr. Plosser what signals he'll be looking for. He begins by cautioning that "with food and commodity prices, as well as oil prices for that matter, the challenge you always face is distinguishing relative price movements from price-level movements." For this reason, he tries "to get a feel for the underlying trends."

And how does he do that? By examining changes in the consumer price index's headline and core inflation, in the growth of the economy, and in employment figures. But he also pays a lot of attention to inflation expectations "because they can be a source of inflationary pressure all on their own."

Mr. Plosser says he likes to look at surveys, one of which, the Philadelphia Fed's "business outlook survey," is particularly "interesting" right now. The survey asks manufacturers about the prices they pay for their inputs and the prices they charge for their products. Businesses often feel, Mr. Plosser points out, that they are getting squeezed on inputs and yet can't raise prices. But over the last three months, the survey indicator has gone from "negative in November, minus-3, to plus-3 in December, [and then] to plus-17." In other words, "manufacturers are beginning to raise their prices."

But might it be too late to stop an inflation spiral if the committee waits too long for confirmation of pricing pressure? "That's why I focus on growth rates," says Mr. Plosser. "Many people like to focus on output gaps"—a measure of slack in the economy—"and stuff like that, which I don't believe in. I'd rather focus on the growth rate of the economy, the growth rate of employment, and the growth rates of prices and expectations of prices. By looking at growth rates, you react earlier."

Speaking of reacting, I'd like to know what is to be done when all this newly created money starts chasing too few goods. One possibility is to stop QE2. Another is to stop reinvesting the cash flow from the Fed's portfolio of mortgage-backed securities, so that the balance sheet shrinks naturally. "Or you can raise the interest rate on [excess] reserves" in the banking system.

Those reserves are another signal that Mr. Plosser is watching closely. "We have all these excess reserves sitting in the banking system, a trillion-plus excess reserves," he says. This is money that banks choose to hold rather than lend out. "As long as [the excess reserves] are just sitting there, they are only the fuel for inflation, they are not actually causing inflation. But they could, because when banks convert those excess reserves into loans . . . we could see a very rapid increase in liquidity," he says. "That would be a very important signal, to me, that we are going to have to start reining in those excess reserves. Otherwise, if they flow out too rapidly, we will potentially face some serious inflationary pressures.

"If banks suddenly decide that there are loan opportunities out there that are attractive and they'd rather make those loans than keep the money [for a .25% annual return] at the Fed, what we don't know is how quickly we'll have to raise those rates in order to prevent all those reserves from flowing out. Maybe it will be just gradual. But the risk is that we'd have to raise rates really quickly."

If that happens, says Mr. Plosser, the Fed would be "faced with a dilemma" because "some people will be worried that we will stifle the recovery."

Are there other ways out? "We could sell assets," he says, and thereby take dollars out of circulation. But that too sounds risky. "It depends on how rapidly rates go up and how rapidly we have to sell [the bonds]." He points out that selling them before rates go up would allow the Fed to avoid capital losses. That's because when interest rates go up, bond prices go down.

Could selling assets also stifle the recovery? Mr. Plosser says it might work out fine, but it might not. Dumping all those securities on the market would push bond prices down and interest rates up. "Suppose then the political hue and cry comes up and says 'Oh, you can't do that, you're disrupting the housing market, you're driving mortgage rates up.'"

In other words, the Fed would feel political heat for not letting the good times roll. "So then the Fed is faced with a situation whether it's either going to fight that political battle and say 'We don't care, we have to do this.' Or it's going to tolerate more inflation" by refusing to act. (I should note that Mr. Plosser says that inflation expectations "are not out of line yet" and that "they have been fairly stable over the course of the crisis.")
The Fed has enormous discretion, and it has not even been clear what its end game is for QE2. And as it turns out, there isn't one end game. There are two.

"When the FOMC came out for QE2, we had two different explanations for what we were doing," Mr. Plosser explains. "One was that we were trying to raise inflation expectations. And the other was that we were trying to lower real interest rates. So, okay, if those were our objectives, how would we determine if we were successful? Were you really worried about deflation or were you really worried about unemployment?"

To stop this kind of thing from recurring, Mr. Plosser would like to see a rules-based Fed. "One of the things we have learned about policy is that rules dominate discretion. Limiting discretion— tying the hands of policy makers to only behave in limited dimensions—is usually a good thing."
He adds that the Dodd-Frank banking-reform bill failed to deal with this problem, especially regarding banks considered too big to fail. "There's still lots of discretion in Dodd-Frank," he says. Then he dreams out loud: "It'd be nice if we could get into a debate about what's the best rule to follow. We may disagree, but just getting to the point where we could discuss the various benefits of different rules" would be progress.

His personal pick would be an inflation target. This gets back to credibility, one of his four principles of policy making. "The central bank in a country with a fiat currency is the only entity capable and responsible for ensuring price stability. Nobody else can do it. That's why the central bank exists. So it's got to be that that's job one."

 

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L'articolo qui sotto illustra bene il grande dubbio del momento: l'aumento dei tassi è qui per restare oppure è una grande sceneggiata, come l'anno scorso? Se si azzecca la risposta giusta......

Analysis: Bond market to Fed: you're wrong about inflation

(Reuters) - Listen up, Fed, because the bond market has something very important to tell you: Inflation is a problem and you're making it worse.
Bond investors are piling into bets that will pay big if inflation takes off -- short selling everything from interest rate futures to long bonds while snapping up securities that offer protection from price growth.
After the beating they suffered on similar bets a year ago, these investors think the U.S. central bank has turned a blind eye on inflation, asserting high unemployment will damp price growth. These inflation fighters find support in improving economic growth and high oil and food prices. They also see the Fed's near zero-rate policy fueling future inflation.
And, the bond market is now moving in their direction. Treasuries fell in eight out of the last 11 sessions, pushing benchmark 10-year yields to 9-1/2 month highs last week.
"The good news on inflation is behind us," Ken Volpert, head of the taxable bond group with the Vanguard Group in Valley Forge, Pennsylvania, told Reuters. Volpert, one of the biggest U.S. bond managers, oversees $360 billion in assets.
FLASHING RED
The change in sentiment has been striking. Three months ago, interest rate futures factored in virtually no chance of a rate increase. Now, traders have priced in a 93 percent chance that the Fed will raise interest rates in December, which would be the first rate increase in five years.
This comes with the shift in inflation perceptions. One closely watched gauge, the Treasury Inflation-Protected Securities (TIPS) market, is flashing warning signals.
The yield spread or "breakeven" rate between 10-year TIPS and regular 10-year Treasuries has grown to 2.30 percentage points after hitting its highest in about a year in January.
That reading last August was about 1.50 percentage points before Fed Chairman Bernanke signaled he would pump cash into the economy with a second round of large-scale bond purchases.
Similarly, the gap between two-year and 10-year Treasury yields -- another sentiment barometer on inflation -- has widened to 2.76 percentage points from 2.00 percentage points, not far from record highs which neared 3.00 percentage points on February 4.
GIMME SHELTER
Rising prices and a less easy Fed "can spell disaster for bonds," said Mike Ruff, portfolio manager with Russell Investments in Seattle, which manages $155 billion in assets.
Investors have poured money into stocks, gold and other investments to achieve higher returns and to hedge against inflation. They have poured $22 billion into TIPS funds since the start of 2008, according to Thomson Reuters' Lipper service.
Investor appetite for inflation protection will be tested on Thursday when the U.S. sells $9 billion of 30-year TIPS.
Less than a year ago, traders who were bearish on bonds took a bath on their rising-inflation bets as the European debt crisis and fear of deflation emerged. The Fed responded by launching its $600 billion bond-buying spree.
Now the threat of falling prices has abated, but Bernanke and most of his colleagues say there's little evidence the trend will reverse any time soon.
Sure, gasoline and other commodity prices are rising, Bernanke acknowledged last week before a Congressional panel.
"Nonetheless, overall inflation is still quite low and longer-term inflation expectations have remained stable," he said on February 9. Inflation expectations as measured by TIPS have risen, he said, but only from "low to more normal levels."
DATA BACK FED ... SO FAR
Indeed, the inflation data are backing up the Fed.
The core rate on personal consumption expenditure, the Fed's preferred inflation gauge, eked out a 0.70 percent rise in 2010, the smallest annual rise on record.
To the majority of Fed officials, inflation is not likely to be a problem so long as unemployment -- at 9 percent in January - remains high. As John Williams, head of research at the San Francisco Fed put it, "Millions of people could be put back to work and many more goods and services could be produced without igniting unwelcome inflation."
But some investors are betting that an upturn in inflation will take off faster than what the Fed expects if the economy continues to accelerate, even as the Fed views inflation, without food and oil, as benign.
"Real-life inflation is going up, even if it won't be as bad as some bond bears think," Carl Kaufman, portfolio manager at Osterweis Capital Management in San Francisco, which oversees $5 billion in assets.
(Editing by Theodore d'Afflisio)

 

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Un sondaggio interessante

SAN FRANCISCO (MarketWatch) — Fund managers are more bullish about global equities than at any time in the past decade, according to a survey released Tuesday.
Of 188 fund managers polled around the world, a net 67% say they are overweight global equities — the highest reading since the survey began asking the question in April 2001, according to the Bank of America Merrill Lynch Fund Manager Survey for February.
The survey also noted respondents’ changing attitudes regarding investment risk: Only 5% of fund managers had an overweighting toward global emerging-markets equities, down from January’s net 43%.
That’s the steepest monthly decline in exposure to emerging markets in the survey’s history.
“Unusually, higher risk appetite has been accompanied by a dramatic downsizing in asset allocation to emerging markets, as surging global growth expectations have increased the value attractions of developed-market alternatives,” said Gary Baker, head of European equities strategy at B. of A. Merrill Lynch Global Research, in a statement.
A net 11% of investors are overweight in euro-zone equities, compared with a net 9% underweighting in January, the survey showed, and a net 34% of respondents are overweight U.S. equities, up from the 27% net seen in January.
The U.S. and the euro zone now rank as the two regions that investors would most like to overweight, according to the survey.
(EEM 45.48, +0.08, +0.17%) has fallen 4.7% in the year to date as of Monday, while the S&P 500 Index (SPX 1,326, -5.90, -0.44%) has gained 5.9% and the Stoxx 600 (STTOXX600 289.44, +0.33, +0.11%) , which tracks European equities, is up 4.8% over the same period.
“The surge in equity and commodity weightings, uber-low cash levels, rising inflation expectations and crashing EM allocations indicate that we are no longer in a Goldilocks environment,” said Michael Hartnett, chief global equity strategist at B. of A. Merrill Lynch Global Research.
Investors have identified commodity prices as the biggest risk, with a net 33% ranking it ahead of all other threats, up from a net 13% in January, the survey showed.
But fund mangers are also seeking to benefit from rising commodity prices, with a net 28% now overweighting the asset class, up from a net 16% a month earlier.
The survey also showed that a net 70% of investors now see the Federal Reserve raising rates in the next year, up from 62% a month ago, to mark the first time in a year that respondents accelerated their timetable for higher U.S. rates.

 

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La discussione e le speculazioni sul possibile aumento dei tassi sono sempre molto vivaci:



Feb. 18 (Bloomberg) -- European Central Bank Executive Board member Lorenzo Bini Smaghi said the bank may need to raise interest rates as global inflation pressures mount.

“As the economy gradually recovers and global inflationary pressures arise, the degree of accommodation of monetary policy has to be monitored and, if needed, corrected,” Bini Smaghi said in an interview with daily newsletter Bloomberg Brief: Economics. Commodity-price increases will “have an unavoidable impact” and “it is a key challenge for monetary policy to avoid spillovers and maintain inflation expectations in check,” he said. “This requires the ability to take pre-emptive actions if needed.”

Bini Smaghi’s comments suggest officials are becoming more concerned about inflation, which has already breached the ECB’s 2 percent limit and is running at the fastest pace in more than two years. Companies are facing stronger input-price pressures, and forecasters in an ECB survey this month raised their longer- term inflation expectations to 2 percent.

“The continued firm anchoring of inflation expectations is essential,” Bini Smaghi said in the interview, which was conducted by e-mail on Feb. 16.

The euro jumped more than half a cent against the dollar to $1.3624 after the remarks were published. Government bonds fell and the yield on December Euribor futures increased eight basis points to 1.88 percent.

September Increase?

While ECB officials have tempered their inflation-fighting rhetoric somewhat since January, investors have increased bets that the central bank will raise rates as early as the third quarter, EONIA forward swaps show.

“Markets now see a risk of the first rate increase coming as early as September,” said Laurent Bilke, head of global inflation strategy at Nomura International in London. “The inflation outlook warrants that.”

Political tensions in the Middle East and North Africa are stoking oil prices, while in Germany, where import-price inflation is running at the fastest pace in 29 years, workers are demanding bigger pay increases. Euro-area inflation accelerated to 2.4 percent in January, and a survey of purchasing managers in the manufacturing industry this month showed input-price inflation jumped to a record in France, Italy and Austria.

ECB ‘Alertness’

Asked whether markets are correct to assume that the ECB may raise rates later this year, Bini Smaghi said: “Financial market participants know that the ECB’s objective is to maintain price stability for the euro area as a whole. The ECB has clearly and repeatedly communicated its alertness.”

The ECB has held its benchmark rate at a record low of 1 percent for almost two years, helping the euro area haul itself out of recession.

A sovereign debt crisis and economic divergences in the 17- nation currency bloc are complicating the ECB’s task of applying a one-size-fits-all monetary policy. While Germany’s economy, Europe’s largest, is booming, Ireland, Greece, Portugal and Spain are struggling to emerge from their slumps.

“The degree of heterogeneity plays no role in setting the appropriate monetary-policy stance,” Bini Smaghi said. “It is the task of other policies to avoid the emergence of imbalances, especially in asset prices, which in turn may lead to divergent economic trends.”

Policy makers convene in Frankfurt for their next rate- setting meeting on March 3, when the ECB will also publish new growth and inflation forecasts.

 

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Intanto i tassi (di mercato) sono in crescita un po' dappertutto, così come le aspettative di inflazione.

Treasuries Retreat on Inflation Concern as Stocks, Oil Advance

By Stephen Kirkland and Rita Nazareth - Feb 18, 2011 5:41 PM GMT+0100

Treasuries fell and the euro rebounded from an early drop as a European Central Bank official said the bank may need to boost interest rates as inflation pressures grow. U.S. stocks rose amid improving earnings and oil rallied as Egypt approved Iran warships to use the Suez Canal.

Yields on two-year U.S. notes rose three basis points to 0.80 percent at 11:31 a.m. in New York. Germany’s 10-year bund yield added seven basis points, and the euro climbed 0.4 percent versus the dollar, erasing earlier declines. The Standard & Poor’s 500 Index rose 0.2 percent to a 32-month high, extending a third weekly gain. The cost of insuring Bahrain’s debt climbed as Middle East unrest spread and oil jumped 1.8 percent.

U.S. government debt extended declines and the euro reversed its earlier loss as the ECB’s Bini Smaghi said monetary policy “has to be monitored, and if needed, corrected.” China’s central bank raised reserve requirements for lenders for the second time this year to counter inflation and curb property-price gains. German producer prices increased at the fastest pace in more than two years, a day after the U.S. consumer price index topped estimates.

“Yes, inflation will be a dominant theme,” said Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which manages $53 billion. “The bigger picture here is to what degree China is able to tame inflation without throwing its economy into a hard landing,” he said. “I’m also keeping an eye on Treasury prices because of all the inflation concern. At this level, it’s not something that will derail the equity market, but it’s something that should be watched carefully.”

Treasury Yields

Ten-year Treasury yields climbed four basis points to 3.62 percent, erasing most of yesterday’s drop. Thirty-year yields increased four basis points to 4.72 percent. The difference between yields on two-year notes and Treasury Inflation Protected Securities, which tracks the outlook for consumer prices over the life of the debt, increased to 1.99 percentage points, the widest since July 2008.

Health-care and energy companies had the biggest gains among 10 groups in the S&P 500, while telephone and utility stocks fell the most.
Brocade Communications Systems Inc. advanced 10 percent, while SunPower Corp. surged 7 percent after both companies forecast earnings that topped analysts’ estimates. Campbell Soup Co. retreated 4.6 percent as the world’s largest soupmaker reduced its projections for 2011 profit and sales.

98 Percent Rally

The S&P 500 yesterday rose to the highest level since June 2008, extending its rebound from a 12-year low in March 2009 to more than 98 percent. U.S. markets will close for a three-day weekend tonight for the President’s Day holiday.

Group of 20 policy makers meeting today in Paris will confront inflation as they seek ways to sustain the global recovery.

Reserve ratios will increase half a percentage point starting Feb. 24, the People’s Bank of China said on its website today. China raised interest rates 10 days ago.

“This is just the start from China and they will continue tightening lending and raising interest rates, doing their utmost to contain this,” said Philippe Gijsels, the Brussels- based head of research at BNP Paribas Fortis Global Markets. “If the Chinese start to take out the liquidity that’s been so important, it’s got the potential to be a disturbance for the world’s stock markets.”

Cost of Living

The cost of living in the U.S. rose more than forecast in January, with the so-called core rate, which excludes food and fuel costs, having the biggest gain since October 2009, a report showed yesterday.

The euro gained against 13 of its 16 major counterparts, strengthening 0.3 percent against the Swiss franc.

Commodity-price increases will “have an unavoidable impact” and “it is a key challenge for monetary policy to avoid spillovers and maintain inflation expectations in check,” the ECB’s Smaghi said in an interview with daily newsletter Bloomberg Brief: Economics. “This requires the ability to take pre-emptive actions if needed.”

The pound climbed against 13 of 16 peers, rising 0.3 percent versus the dollar, as a report showed retail sales rose almost four times as much as economists forecast in January. Sales gained 1.9 percent from the previous month, when they fell a revised 1.4 percent as snow and freezing temperatures kept Britons from shopping, the Office for National Statistics said today in London.

British Gilts

The yield on the two-year gilt climbed seven basis points to 1.53 percent. Short-sterling futures fell, sending the implied yield on the contract expiring in December up eight basis points to 1.74 percent as traders added to bets that U.K. interest rates will rise.

Three companies fell for every two that rose in Europe’s Stoxx 600. TomTom NV sank 11 percent after the region’s biggest maker of portable navigation devices forecast “broadly flat” sales and earnings this year. Rentokil Initial Plc tumbled 5.9 percent after posting a loss.

Credit-default swaps on Bahrain climbed 21 basis points to 307, the highest in 19 months, according to CMA in London. Yields on the country’s dollar bonds due 2020 increased for a ninth day, rising four basis points to a record 6.56 percent, according to data compiled by Bloomberg.

A senior leader of Bahrain’s Shiites said the government must resign in an address to the biggest crowd in five days of protests, while Egypt’s state television reported that the nation approved a request from Iran to send two naval ships through the Suez Canal en route to Syria. The move has ratcheted up Middle East tensions as Israel called it a “provocation.”

Swaps on Saudi Arabia, used as a measure of confidence in the country although they reference no debt, jumped 11.5 basis points to 138, the highest since July 2009, according to CMA.

The MSCI Emerging Markets Index climbed 0.9 percent to the highest level on a closing basis since Feb. 8. Asian equities led the advance after a report showed Taiwan’s economy expanded more than analysts estimated. The Taiex Index of shares traded in Taipei climbed 1.8 percent, the most since Sept. 13.

 

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Come dice il titolo dell'articolo, in questo momento gli investitori sembrano cercare lumi più nei segnali inviati dall'inflazione che dai risultati economici delle aziende:


Inflation Fears Expected to Overshadow Retail Earnings
Published: Friday, 18 Feb 2011 | 2:04 PM ET
By: Courtney Reagan
CNBC Reporter
While many analysts expect sales numbers to be strong, Wall Street is expecting earnings conference calls to serve more as inflation strategy sessions than as quarterly reviews. The pleased executive voices on conference calls are expected to quickly turn to voices of concern.
The rising cost of cotton, now at 150-year highs, is certainly grabbing headlines, but the weakening U.S. dollar as well as increasing labor, freight and production costs are all major concerns for retailers in 2011. Investors want to know if growth will be muted and gross margins squeezed, as a result.
Citi analyst Deborah Weinswig certainly thinks the rising input costs will have a negative impact. As a result, she is raising her inflation expectations from 4 percent to 6 percent in apparel for the first half of this year and from 13 percent to 15 percent in the second half.
Additionally, Weinswig lowered her full-year 2011 EPS estimates on seven major broad-line retailers: JCPenney [JCP 37.02 0.08 (+0.22%) ], Kohls [KSS 53.42 -0.12 (-0.22%) ], Macy's [M 23.75 -0.31 (-1.29%) ], Saks [SKS 12.90 -0.07 (-0.54%) ], Target [TGT 51.90 -1.25 (-2.35%) ], Walmart [WMT 55.38 0.63 (+1.15%) ] and Nordstrom [JWN 46.91 0.43 (+0.93%) ].
Weinswig is also lowered her target prices for Kohls, Macy's and Walmart shares, while raising targets for JCPenney, Nordstrom and Saks shares.
Jan Kniffen, CEO of J. Rogers Kniffen Worldwide Enterprises, told CNBC that after he spoke with vendors and apparel retailers at the MAGIC conference in Las Vegas, it seems inflation for second half of 2011 is running more in the 12 percent range for large apparel retailers, and even higher for the smaller players.
So what will retailers do to maintain margins in this enivornment?
Analysts largely agree that at least some of the costs will have to be passed on to the consumer.
Craig Johnson, president of Customer Growth Partners, remains cautiously optimistic.
“The 90 percent of people with jobs, who account for 96 percent of retail sales, are clearly spending again," Johnson said. "But unlike the mid-2000's bubble years, they are spending smartly and strategically—and out of current income rather than with ‘plastic'—across all categories."
But still he said he thinks there are questions as the industry enters a new fiscal year.
"The question is whether they can pass along rising input costs to today’s much smarter shoppers—or whether these shopping app-equipped consumers will simply get the same item elsewhere, or online,” he said.
Dana Telsey of Telsey Advisory Group said retailers that will be best positioned to successfully pass along costs are those on the higher-end as opposed to mid- to lower-end, and those that cater to more novelty items than to basics.
Kniffen agrees. "The more affluent the customer, the more that can be passed through, as long as the fashion is right," he said.
As far as earnings results go, there will be winners and losers. Telsey thinks Macy's and Limited [LTD 33.50 0.35 (+1.06%) ] will report strong fourth-quarter earnings and expects an improvement in Chico's [CHS 12.44 -0.01 (-0.08%) ].
Telsey is watching the Gap's [GPS 23.05 0.02 (+0.09%) ] earnings after the company raised its guidance as well as Home Depot [HD 38.48 0.30 (+0.79%) ] and Lowe's [LOW 26.30 0.16 (+0.61%) ] to see the macro-environment impact on sales.
As retail executives discuss inflation strategy, they will have to also address areas of potential growth, something Telsey watches closely.
"Growth initiatives are also key because many of the growth incentives—whether it's online, international or outlet—generate higher levels of profitability than the core stores," she said.
Johnson thinks the strongest retail sectors in 2011 with be home-related, including home furnishing retailers Bed Bath and Beyond [BBBY 50.82 1.38 (+2.79%) ] and Williams-Sonoma [WSM 38.19 -0.25 (-0.65%) ] as well as home-improvement players Home Depot and Lowe's as pent-up demand comes into the market.
Johnson also sees luxury retailers, particulary Tiffany [TIF 64.70 0.84 (+1.32%) ] and Signet [SIG 45.21 0.38 (+0.85%) ], continuing the stellar growth seen during the holiday season.
Perhaps this period of inflation will not turn out to be as detrimental as feared for retailers. After all, the "great recession" just ended, and retailers made it through and are expected to report strong earnings next week.
As Telsey puts it: "We're going from a period of uncertainty to a period of clarity. We're getting clarity because we've had nearly two months of sales now in 2011, orders have been placed for the back half of the year, retailers know what the pricing pressures are and can be flexible and adapt. They showed they could do that during the recession, and now is their time to show it again.

 

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Il punto di vista di un investitore in bonds

Bonds and Emerging Markets: Surviving the Tumult









Equity markets continue to rally as global inflation gathers steam. In this environment many investors have adopted a pessimistic view toward fixed-income investments. Mark Beischel, co-manager of Ivy Global Bond A, provided us with a trench-level view of the bond market. Beischel acknowledged the challenges facing fixed-income investors in 2011, but noted that opportunities remain amid the turmoil.

Many expect that this will be a tough year for bonds. What’s your take?
We’re concerned with international developments. We’re concerned about inflation, rising interest rates and the massive compression we’ve seen in credit spreads since they peaked in 2008. That compression has been a function of the first and second rounds of quantitative easing (QE1, QE2). A tremendous amount of capital has entered the bond market, chasing yields and pushing spreads to levels that we think are unjustifiably tight. In the last three or four weeks, investors have withdrawn capital from the bond market in favor of chasing returns in the equity market.
We could see credit spreads widen and interest rates move higher. If I can capture a 3.5 percent yield in this environment, then 2011 will be a very good year.
Some analysts believe that emerging-market nations have tighter monetary and fiscal policies than their peers in the developed world. Is that true?
At the outset of the credit crisis many emerging-market countries were in a better fiscal position than developed nations. Now a massive deleveraging is occurring in the private sector, particularly in the U.S. and in the U.K. These governments are taking on enormous amounts of leverage -- a cause for concern among investors.
The U.S. has a structural deficit that will be $1.5 trillion this year, following last year’s deficit of more than $1 trillion. Developed markets must come to grips with this situation and devise a credible plan that’s going to address those structural deficits. If they don’t, it will lead to problems with interest rates and the U.S. dollar.
However, the fiscal position of emerging-markets countries is totally different. A lot of these countries were in relatively good shape in terms of their deficits-to-GDP, current accounts and capital flows for fixed asset investments. Their monetary policies were also fairly stimulative.
Now we see inflation starting to rise in these economies. These governments don’t have a lengthy history of managing their monetary policy, and they’re trying to constrain inflation with different tools. Obviously the question is whether they will be able to maintain a fairly smooth level of growth while keeping inflation at bay. That’s something we’re watching closely.
Why were these countries better prepared for the financial crisis?
The Asian currency crisis absolutely brought them back into line. That crisis happened so recently that they haven’t had time to fall away from the policies they put into place at that time.
What countries face the greatest inflation risk?
Inflation isn’t out of control right now. But there’s some reason for concern in Indonesia, India and Australia. Food price inflation is a big topic right now, but the Chinese government is implementing policies to tame inflation and target rising prices in the property sector. Brazil has some problems with inflation, as does Russia. The only country that hasn’t experienced high inflation is the U.S., but it’s starting to creep up globally. In Europe many investors are concerned that the European Central Bank will start raising rates at a time when the EU is trying to provide liquidity for the troubled PIIGS countries (Portugal, Ireland, Italy, Greece and Spain).
What regions and types of credit are most attractive?
Not sovereign credits. The rates you receive in developed markets such as the U.S., Canada, the EU and the U.K., don’t compensate you for the risk of inflation. If you look at the PIIGS, the 10-year Greek bond yields north of 10.5 percent today. But that’s fluctuated as the EU is formulating a plan to solve the liquidity problem. We just don’t think that you’re being compensated for the risk incurred if you buy into Europe’s peripheral countries.
The rates aren’t high in the developed markets. They’re very high in the PIIGS but you’re not being adequately compensated for the high risk of a default. In the emerging-market sector, if you wanted to buy a Brazilian U.S. dollar-denominated sovereign bond, those spreads are so narrow that you won’t be compensated for the risk. Local market bonds have a much higher yield but the government has levied substantial taxes on investments in local currency.
We’ve tilted the portfolio toward corporate bonds that are domiciled in the emerging markets. These will continue to benefit from higher growth rates in emerging markets. We’re buying Brazilian, Indonesian, Chinese and Chilean credits. These credits typically have maturities of three to five years and are fundamentally sound.
Basically, you anticipate that 2011 will be a very challenging year.
Very challenging. Who would have thought at the beginning of the year that we’d be concerned about unrest in Egypt? People have speculated that the turmoil was ultimately caused by food prices, but there was also a spark of social unrest, which is something you can’t predict.
Still, you’ve got a very young, poor, fairly radical population that’s had it with the regime and has been able to promote change. One hopes it will change for the better, but we’ll have to see how the situation unfolds. There’s absolutely an element of that to be found in Europe. The austerity programs that will have to be implemented in Greece and Ireland and Portugal could also translate into turmoil similar to what we’ve seen in Egypt.
Japan and the U.S. are going to have to make some very difficult choices over the next year to address structural deficits. If the U.S. doesn’t reduce unemployment, the situation could get messy. President Obama has a year at the most to bring the unemployment rate down to 6 or 7 percent or he’ll likely be voted out.
Do you see any value in dipping down into credit quality to pick up extra yield?
We’ve put the fund in a defensive position because we are concerned about rising rates and widening spreads. We’re focused on liquidity and credit quality. We also have a quarter of our portfolio rolling off on a yearly basis, allowing us to reinvest at higher rates.
We like corporate bonds, so we are dipping into the lower credits, particularly in the emerging markets sector, which makes up about 30 percent of our portfolio.
Our credit analysis is very thorough and diligent, and we typically buy credits of companies that hold the No.1 or No. 2 position in their country or industry. We require a very sound balance sheet and predictable earnings, which translates into cash. These companies must have proved themselves through an economic cycle and have management that is aligned with the holders of equity and bonds.
This rigorous analysis allows us to buy credits that might be rated "BB" because of the country in which the issuer is domiciled. However, these credits are fundamentally sound and might be rated "BBB" if they were domestic credits. We’re able to get additional yield while taking on less risk.
Is there any good news for 2011?
The global fixed-income investor should be looking for yield. Many of the companies we own are tilted toward growing economies, their balance sheets are very solid and they’re going to be able to pay back their bondholders. That’s what I’m looking for as an investor. We’re cautiously optimistic for 2011 but we’ve positioned our portfolio in a defensive manner that should protect it if interest rates stay at current levels or if they rise.
The equity markets have rallied substantially over the last three months, primarily in response to QE2. We’ve had some fairly good economic data that we hope will continue; otherwise we may see another round of quantitative easing.
When we started debating QE2, President Obama was enacting a liberal agenda. As the Democrats have lost the House of Representatives that agenda has been tossed aside. We’ve seen the continuation of the George W. Bush-era tax cuts. The capital markets have responded positively to the change in philosophy in Washington. But QE2 will finish up in June, and we hope the economic data will continue to support the equity markets.
What’s your best piece of advice for investors?
Understand the risk that you incur when you buy a fixed-income portfolio. That risk is basically interest rate risk, credit risk and currency risk. Many people have jumped into the fixed-income markets on the assumption that they’ll just receive income. They don’t always appreciate the level of risk involved. The key is to understand that risk and make sure you’re being adequately compensated for it.

 

[Rottweiler]

L'articolista continua a credere negli emergenti e, perchè no, anche nell'Egitto. Nonostante il recente esodo degli investitori.


What's Driving the Emerging Markets Panic?
14 comments | February 16, 2011

Even in the midst of an ongoing eurozone crisis with no obvious solution in view, investors have no trouble distinguishing between one European country and another, as the yield spread between German and Greek government debt (currently 860 basis points, or 8.6 percentage points) clearly demonstrates. Why, then, are investors so amazingly dense by comparison when it comes to emerging markets? Why do they – willfully, it seems – refuse to recognize that there are huge differences between, say, Chile and Venezuela, which lumping them together into an emerging markets basket or a Latin America basket can only obscure?

Ten days ago, while the Egyptian democracy movement was still gathering steam and uncertainty abounded as to the political fate not only of Egypt but of the entire Arab world, the Financial Times reported that investors had pulled more than $7 billion out of emerging markets equity funds during the preceding week. This was the biggest withdrawal in over three years, which the FT attributed to “turmoil in the Middle East and rising food inflation [which] raised fears of economic instability.” Egypt, it said, may have been the catalyst, “but the fund outflows also reflected deeper unease about economic overheating in China, India, Brazil, and other big emerging economies.” The article went on to quote several fund managers who said that developed markets now represent greater value than emerging ones and as proof pointed out that nearly all of the $7bn lost to emerging markets had been reinvested into funds focused on the United States, Europe, and Japan. Though the magnitude of emerging market outflows and developed market inflows during the week of January 31 was the biggest so far, it was the fifth consecutive week in which investors had fled emerging markets for the relative safety of the big developed markets. Apart from political turmoil, investors apparently were spooked by rising inflation in emerging markets. The proof? Indonesia, Brazil, India, and South Korea have all raised interest rates this year.

True enough, emerging market indices overall are down this year: the Morgan Stanley Emerging Markets Index was down by about three per cent when the FT article was written; on Monday it closed five per cent down for the year. Signs, to be sure, of a self-fulfilling prophecy. Further signs, if any were still needed, that over the long term throwing darts at the stock market pages will produce higher yields than entrusting your money to most fund managers, and it will cost you a whole lot less.

Although their ads always contain the disclaimer that past performance is no guarantee of future results, few money managers act as if they believe it. The U.S. and European equity markets grew like gangbusters in 2010, mainly because they had fallen so far in 2008 and 2009. Some markets, like Denmark, registered gains that would have made any emerging market proud. All three U.S. indices showed double-digit gains for the first time in years.

Many emerging markets, which suffered much less, if at all, from the global financial crisis, did not have as far to rebound. The MSCI Brazilian stock market index gained only 3.8% last year, while the MSCI Egyptian index was up about 9.5% – respectable, but not the kind of blistering return emerging markets investors seem to think is their birthright. So far this year, the Egyptian index had fallen more than 20% by the time the exchange halted trading on January 27.

There is a well-known statistical term called reversion to the mean, which holds that if a variable is extreme on its first measurement, it will tend to be closer to the average on a second measurement, and if it is extreme on a second measurement, will tend to have been closer to the average on the first measurement. There are all kinds of caveats about using this as a principle to guide your investing behavior but, put simply, it means that if a market gains or loses a huge percentage – say, 60% – in a given year, it is unlikely to do so the next year. Over time, values are likely to revert to their long-term trend line of growth, stasis, or decline. Put another way, if you pour all your money into a Danish market index fund at the beginning of this year, expecting a repeat of 2010’s gain of 29.81%, you are likely to be disappointed. Although I am a big fan of Thailand, whose stock market, in spite of tremendous civil unrest last summer gained over 50% in 2010, I don’t expect it to rise that much this year.

So if you are tempted to follow the herd and stampede out of emerging markets into more mature North American and European markets, bear a few things in mind: 1) the inflationary pressures that have investors worried about emerging markets are equally present here at home. The difference is that our CPI strips out energy and food when measuring “core inflation,” so the numbers don’t look so bad; 2) Dilma Roussef, the successor to former Brazilian President Luis Ignacio Lula da Silva, who everyone feared would be more populist than her predecessor, raised interest rates to head off inflation. We can’t do that in the U.S. for fear of choking off a weak recovery; 3) As the New York Times reports, core inflation in the U.S. is almost certain to rise in the coming year as sharp hikes in prices for energy and other commodities start to be reflected in prices for final consumer and industrial goods.

If you’re investing with a very short time horizon you probably don’t belong in emerging markets. In spite of the many falsehoods bandied about, it is certainly true that they are more volatile than most mature markets. But if you have a medium to long horizon, ask yourself which equity markets are likely to perform best over the next 10 or 20 years, and make your choice accordingly. Nathan Rothschild said, “Buy when there’s blood in the streets.” Now could be a good time to buy.

 

[Rottweiler]

Anche qui i ragionamenti ruotano attorno al tema delle tendenze inflazionistiche


A chi piace l'inflazione?
Con la ripresa mondiale crescono i prezzi al consumo, soprattutto nei Paesi emergenti. Meglio adattare la strategia.
Stampa ArticoloCopyrightCommento
Marco Caprotti | 15-02-11 |

Alle prese con la crisi scatenata dai subprime prima e con quella del debito europeo poi, i mercati sembravano aver dimenticato l’inflazione. Questo elemento dell’economia è tornato prepotentemente all’attenzione degli investitori nelle ultime settimane con le manovre della Cina per controllare la crescita economica (+10% nel 2010) e con le nuove previsioni di crescita (migliorate) per l’economia mondiale e per i Paesi sviluppati in particolare. Gli investitori, da parte loro, iniziano a domandarsi quale strategia adottare.
L’inflazione non è tutta uguale
“Lentamente, insieme ai segnali di una ripresa mondiale che coinvolge anche le aree più sviluppate, sta ritornando la paura dell’inflazione”, conferma Jim O’Neill, presidente di Goldman Sachs Asset Management. “Gli ottimisti pensano che si tratti di un elemento che viene insieme alla crescita. Per i pessimisti è una nuova fonte di preoccupazione dopo la crisi”. Non tutta l’inflazione, sottolineano però gli operatori, è uguale. Una significativa parte dell’aumento dei prezzi al consumo in Cina, India e, più in generale nei mercati emergenti, è dovuto a una crescita del valore del cibo. “In Cina il 75% dell’aumento dei prezzi registrato l’anno scorso è dovuto alla componente food”, spiega uno studio di Merrill Lynch Wealth Management. “Si tratta di un fenomeno che si registra, di solito, quando c’è un aumento dei salari”.

Il discorso è parzialmente diverso per i Paesi sviluppati, dove l’elemento alimentare non è quello predominante nella dinamica dei prezzi. “Negli Stati Uniti e nella zona Euro, per il momento, l’inflazione non sembra essere una minaccia, anche perché i salari sono tutto sommato stabili”, continua lo studio di Merrill Lynch. La situazione su questo fronte, tuttavia, potrebbe cambiare. Gli ultimi dati americani dicono che la disoccupazione è scesa dal 9,5% al 9%. Se la strada verso la stabilizzazione dovesse continuare, col tempo le buste paga diventeranno più pesanti.

Le paure delle aree più industrializzate in questo momento sono essenzialmente due. La prima è che la frenata controllata delle economie emergenti per diminuire l’inflazione si traduca in un rallentamento globale. La seconda, sottolineata peraltro nelle settimane scorse dal numero uno della Banca centrale europea Jean-Claude Trichet, è che ci possa essere una pressione sui prezzi dovuto alla corsa del petrolio.

Le scelte operative
Cosa implica tutto questo dal punto di vista operativo? “Io sono convinto che assisteremo a una ripresa degli Stati Uniti e, in generale, dell’economia globale”, risponde O’Neill di Goldman Sachs. “In uno scenario del genere le obbligazioni governative sono un asset pericoloso da avere in portafoglio, soprattutto se confrontate con le azioni”.

Sulla stessa lunghezza d’onda sono gli analisti di Merrill Lynch. “Noi continuano a essere ottimisti per quanto riguarda i mercati equity”, dice il report. “Specialmente quelli dei mercati sviluppati dove i tassi di crescita dell’economia continueranno ad essere maggiori dell’inflazione. Al contrario crediamo che la dinamica dei prezzi al consumo creerà dei problemi ai government bond visto che una maggiore inflazione porterà a più alti rendimenti e a un contestuale calo dei prezzi. Siamo cauti per quanto riguarda i mercati in via di sviluppo, che avranno un aumento sostenuto non solo del Pil, ma anche della dinamica inflattiva”.

 

[Rottweiler]

Trichet al G20

L'ultima volta che Trichet aveva espresso delle preoccupazioni per l'inflazione europea i tassi reali ne avevano risentito. Vediamo se ci saranno delle reazioni lunedì:

Trichet Says ECB Doesn’t Exclude Possibility of Inflation Risks

By Simone Meier


Feb. 19 (Bloomberg) -- European Central Bank President Jean-Claude Trichet said the central bank isn’t discounting the possibility that the euro-region may face a greater risk of inflation.

“In our own judgment there was a balance between risks of the price stability in the medium run but we did not exclude that the future of this balance is unbalanced on the upside,” Trichet said at a press conference after a meeting of Group of 20 nations in Paris today. He also said that the ECB’s rate- setting policy is independent from unconventional measures.

Trichet last month toughened his tone on inflation as labor unions use strengthening economic growth to justify pay demands and companies pass on higher energy costs. Euro-region inflation in January accelerated to 2.4 percent, the fastest since October 2008, and Volkswagen AG, Germany’s biggest automotive employer, earlier this month agreed to raise compensation for 100,000 workers by 3.2 percent to avert strikes.

The ECB is looking “very, very carefully” at oil prices, Trichet told reporters after the briefing. “No second-round effects,” that “is our motto.”

Crude oil prices have surged 14 percent over the past six months, eroding households’ purchasing power and adding pressure on companies to protect their earnings through price increases. Trichet said that G-20 ministers also “noted inflationary pressures” and that they “were to be taken seriously.”

The Frankfurt-based ECB, which aims to keep annual gains in consumer prices just below 2 percent, in December forecast inflation to average about 1.5 percent in 2012. It will release its latest inflation forecasts next month.

ECB governing council member Axel Weber also noted that “the upward pressure is increasing” on inflation.

“I think this is the best characterization of what we see in Europe,” he told reporters. “I’ve already said in the past that we’re above 2 percent now, with a tendency to increase. I think that the turnaround in inflation developments might not come as soon as we expected in the past. So, clearly, there are risks to the upside.”