G3 Recap 2-7-11

Main Items:

  • US Consumer Credit increased 6.1bn in Dec vs 2.4bn expected and 1.3bn previously. Credit Card debt increased for the first time since August 2008.
  • FDIC voted 5-0 to require banks to pay insurance on reserve deposits held at the Fed. The new assessment base will be based on assets instead of deposits, exempt firms with assets below 1bn, require incentive pay to be deferred over 3 years, which would need to be adjusted for losses.

Overseas Data:

  • EU Sentix investor confidence increased to 16.7 in Feb vs 14 expected and 10.6 previously.
  • The ECB will have to raise interest rates if the rate of inflation does not begin to slow by the end of 2011, ECB Executive Board member Jose Manuel Gonzalez-Paramo said.
  • Australia Real Retail Sales declined -0.3% QoQ in 4Q as expected, vs 0.7% previously


  • The S&P 500 Earnings Surprise as calculated by Bloomberg suggests that the spread between beats and misses has fallen sharply since late last year. Typically, the slowing of this second derivative measure occurs with a deceleration in the pace of S&P appreciation. However, since the S&P sold off in 3Q on the back of double dip fears despite the earnings beats, there is some ‘catch-up’ that suggests further intermediate term upside fro the market.


2 thoughts on “G3 Recap 2-7-11

  1. is it just me or does there seem to be a lot of signs that we are in the later stages of a business cycle rather than start?

    1.earnings misses to upside surprises start balancing out
    2. inflation, to me the most prevalent late cycle phenomena is prevalent
    3. margin contraction should start happening (think germany/china) as labour market tightens and gets pricing power
    4. companies with excess cash start doing takeovers for top-line growth
    5. stupid multiples get paid for dubious cash flow generating capabilities

    i just wonder if instead of the usual 7-9 year lags between recessions, we aren’t going to start having cycles of 4-5 years being more prevalent.

    1. Definitely seems to be the case for EM Bert. It’ll be interesting to see how EM performs with an easy Fed. Inflation tail risks, anyone?

      Also seems like the 4-5 year cycle is more likely going forward. The secular increases in the size of the workforce, as well as the long term decline of real rates seem to have slowed sharply or ending. And the drivers of global GDP, the EM’s, are manufacturing oriented & commodities oriented, which subjects them to the inventory cycle, as you know.

      Certainly, for China anyway, this growth cycle is now 2 years old. Leading indicators for Europe also suggests some sort of a mid cycle slowdown in 2Q.

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