Super Bears on the current state of global economy, John Corney and Keith Dicker of IceCap Asset Management say that the only thing accelerating lately is the distinct lack of anything accelerating. They talk about the tricks of Bernanke’s bouncing ball in the latest monthly letter, which should be credited for the surging stock markets, the brand new bubble of today’s economy.
IceCap Asset Management Mocks The Huge Market Correction:
In the past few days, we have seen a string of letters in which hedge fund managers have become more and more vocal about their disbelief of the over zealous equity markets. The latest from IceCap Asset Management mocks the huge market correction of -0.53 percent in S&P 500 that occurred on May 16. It seems that markets have learned to climb higher every time some bad news breaks, poor earnings season, bad manufacturing data, all have failed to break the charm of this honey badger market. They call the US the “cleanest dirty shirt in the bin” and based on that reasoning they expect the US to become an even bigger darling of investors if problems of Japan and eurozone further deteriorate.
Recovery, What Recovery?
IceCap sees people getting heady under the constant mantra of accelerating recovery, which in reality is not that accelerated at all. John Corney and Ketith Dicker, big bears on the current state of economic affairs argue that the claims of recovery in the US housing market have also been exaggerated. IceCap‘s managers quash the growth indicators in housing that have been touted incessantly. The fund calls low mortgage rates a blessing of Fed’s excessive money printing and not any sign of actual recovery.
The managers also point out that judging by the output of US manufacturing, it is clear that the industry is decelerating instead of accelerating. Another bad sign is that an increasing number of people have stopped looking for jobs which has falsely reduced unemployment numbers. It is also comical when it is said that US home sales are accelerating, while they have picked up but have only managed to touch the lows of 1966.
Each month the $80 billion that is printed in the US to buy treasuries and bonds has a snowballing effect on the financial markets, where one stimulant acts on the other and investors get crazy for high yielding stocks, buy risky assets and this all culminates into a false picture of accelerating growth. IceCap remains convinced that despite of Fed’s confused mutterings of tapering QE, the event is unlikely to happen for a longer period and will materialize only when Fed’s hand is forced.
The Fed still remains far away from the illusive 2 percent inflation and 6.5 percent unemployment target, both of which are unlikely to happen until the Euro and Japan sort out their mess. Fed’s way of doing things has created a stock market bubble and as IceCap points out that history has proven Fed’s lack of judgment in abetting and limiting the damage from these bubbles, so nobody should have high hopes that they will be able to control the Frankenstein that they have unleashed.