8/8/2019 Morning News Notes: 2010-10-01

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Friday, October 01, 2010 – my comments are in italics

Personal Income: Survey 0.3% Actual 0.5 Prior 0.2

Personal Spending: Survey 0.3% Actual 0.4 Prior 0.4

U.S. Q2 2010 GDP Revised Up to 1.7%; Final Sales Down to Anemic 0.9% - Revised estimates

suggest the U.S. economy grew at a 1.7% annualized rate in Q2 2010, slightly above the previousestimate of 1.6% but far below the advance estimate of 2.4% and significantly below potential.

Meanwhile, growth in final sales was revised down to 0.9% from the previous estimate of 1% and the

advance estimate of 1.3%. With temporary factors that boosted growth in H1 2010 set to turn neutral or

even negative in H2 2010, there are as yet few signs of a counterbalancing resurgence of final demand.

Real-time indicators of economic activity in Q3 show marked weakness. – Roubini Global Economics 

The First World War will officially end on Sunday, 92 years after the guns fell silent, when

Germany pays off the last chunk of 

reparations imposed on it by the Allies.  – 

London Telegraph 

Asked whom they would support if Secretary of State Hillary Clinton were to

challenge President Barack Obama for the

Democratic presidential nomination in

2012, 52% of Democrats nationally say

Obama, while 37% say Clinton. – Gallup 

The massive economic stimulus

package President Obama pushed through

Congress last year is coming in on time

and under budget - and with strikingly few

claims of fraud or abuse - according to a White House report set to be released Friday.  – Washington

Post 

Year to Date sector returns for S&P 500 – big bets on energy, healthcare & IT did not fare well  

The whipsawing of markets has made this an awful year for active managers with 27% trailing

their benchmark by 500bp and 30% behind their 3-year benchmark by 500bp. Given the positive

bias of equity markets into YE in midterm election years, both hedge funds and asset managers are likely

to make a pronounced positive shift into Beta (ß) by YE.  –  JP Morgan  –  in other words, they will buy

stocks chasing returns.

8/8/2019 Morning News Notes: 2010-10-01

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  Some Relief for Consumers as Interest Payments Fall  –  Interest payments as a proportion of 

disposable income are falling (see first chart below ), indicating that pressure on the U.S. consumer is

easing slightly. The ratio of total debt to income has also fallen somewhat, to 108 percent as of July

from a record 115 percent in February 2008 (second chart below ). Goldman’s Chief  Economist Jan

Hatzius delved into this topic in a recent report, discussing how high inflation in the 1980s, when

required debt service payments were also elevated, eroded the real value of household debt. As Hatzius

wrote, continued disinflation will require households to “continue running large fiscal surpluses”. That

would prolong consumer deleveraging.  – Bloomberg –  this is a key reason inflation would be a good 

thing at this point in the cycle because one of its consequences is to reward fixed rate borrowing (while

 penalizing the other side of that transaction).

Household debt service ratio 

Debt service ratio –  Required payments on outstanding mortgage and consumer debt divided by 

disposable personal income. Source: Federal Reserve