Macro Economic Update – “Another Spring Another Slow Down”

I attach the WF economic update below.

We have growth with the US GDP coming in at 2.5% today for Q1, below consensus but in a world awash with slow, or negative – Europe, growth a positive reading is something at least. German pmi came in weak again and the UK managed to score a positive gdp number which was a relief to all those holding UK assets long the GBP. (No matter hedonic and substitution changes to the inflation calculations probably grossly over states all of these “growth” nos).

Yields across all asset classes have continued to fall with high yield junk bonds this week reaching record prices and therefore low 2008 yield levels. Even Spain’s sovereign ten year notes are now below 2008 levels whilst her debt and unemployment levels are twice as high as they were in 2008. US stock indexes continue to push ahead with much market breadth and internals improving this week. This equity bull run has legs to run further, apparently. With yield compression across all asset classes at feverish levels is it any wonder. The theme of “cash is trash” continues care of the developed world’s central banks. Its noteworthy to see how the emerging world’s surplus reserves are now also in the hunt for yield and protection from currency debasement.

Care of Bloomberg here:

http://www.bloomberg.com/news/2013-04-24/central-banks-load-up-on-equities-as-low-rates-kill-bond-yields.html

Quite simply the amount of paper money created from the credit expansions of the last few decades as well as recent qe programs means the world is awash with money. There is a glut of paper and not enough physical assets. The search for yield and protection continues therefore in a world of negative interest rates.

The ongoing bullion physical issues remain with this week the US mint suspending all physical shipments, Comex stocks sinking again and JPM’s own store being halved to the lowest levels since store records began. The bullion story has a long way to run it seems. Asian demand has been immense in the last two weeks now. The disconnect between the US paper markets and the physical market has never been greater. How the issue is eventually resolved is anyone’s guess but a large physical seller needs to be found. My guess the IMF will soon step forward as custodian of the piigs (and other’s) gold.

Here the WF macro pdf.

WeeklyEconomicFinancialCommentary_04262013

Have a great weekend all and onwards we march

Rich