Whenever I'm in New York I make a point of calling a number of my economist and investor friends and arranging a “dinner with interesting people.” Thankfully, Rich Yamarone is almost always at the table, because his insights into what's happening in the real economy, beyond Wall Street, are unrivaled.
Rich is Chief Economist at Bloomberg and the creator of Bloomberg's Orange Book, a compilation of key insights from CEOs, taken from quarterly earnings calls. He is also part of the team of 7 top economists who write the daily must-read Bloomberg Economics Brief. (Tom Keene of Bloomberg Surveillance is a contributor, too.) If you are a trader, broker, or portfolio manager or are just interested in keeping up with all things economic, this is a good way to do it. You can learn more here.
For today’s Outside the Box, Rich has written a piece that summarizes his chief concerns about the domestic economy in 2014. Those concerns focus around the fact that growth in both real disposable personal incomes (adjusted for inflation and taxes) and consumer spending have barely advanced in the wake of the Great Recession.
In compensation – and it’s an unhealthy form of compensation – government transfer payments as a percentage of disposable income have grown from 9% in 1970 to nearly 20% today.
To make matters worse, the Affordable Care Act (Obamacare) is having a real impact not just on hiring and firing but also on hours worked per employee; and Rich gives us some helpful anecdotes and data on this situation.
I am really looking forward to having Rich – who many of his friends have taken to calling “Lord Vader” – debate David Zervos, Chief Economist at Jefferies, who is more the Obi Wan Kenobe type – sweetness and light and lover of all things to do with quantitative easing.
I find myself this afternoon in Geneva, where tomorrow I will make several presentations and do a lot of interviews. This is a beautiful city but ghastly expensive for someone using dollars.
It seems I caused the recent weakness in the dollar and strength in the Japanese yen by actually buying ten-year put options on the yen. I would expect these things to come back, of course, but perhaps I should alert traders when I decide to put on the rest of the trade. The market so likes to make me look foolish, at least in the short term. Some friends here in Geneva have decided to take me out to eat at a Japanese restaurant tonight as consolation, which is fine, as I do love sushi and things that go with it.
And let me address one failure last week when I was listing the people who helped me with my house and mortgage process. The entire process was orchestrated by my able young associate Shannon Stanton. The massive paperwork would not have gotten done, nor would the budgets or anything else. And my other assistant, Mary Haddad, keeper of the schedule and coordinator of everything, is also key in making my life run semi-smoothly while on the road. Thanks!
Have a great week.
Your thinking about currency flows and valuations analyst,
John Mauldin, Editor
Outside the Box
Don't Ignore the Anecdotes
By Richard Yamarone
My top three fears for 2014 are: 1) income inequality that erodes the middle class, reducing the income and spending power of the primary engine of the U.S. economy, 2) widespread Chinese economic deceleration and an associated shadow banking crisis, and 3) a possible student loan bubble and widespread defaults amid elevated delinquencies.
After speaking extensively in 2013 and almost every week of this…