Saturday, December 29, 2012

Kyle Bass: 5 Reasons Why The Japanese Bond Market Will Collapse

1. Japan simply cannot repay its existing debt
(240% Debt to GDP, 25 times tax revenue; total on-balance-sheet debt is one quadrillion yen; Bass expects a bond crisis in 2-3 yrs)

2. Japan's Interest Expense is Unsustainable
(Japan spends a quarter of their tax revenue on interest even at near-zero rates; "this is what the non-linearity looks like"; the "most obvious thing" he's seen in his career, "only a question of when")

3. Japan is not self funding. Current Account deficit will grow. BOJ will need to print more
(Current Account Surplus at under 1% is much lower than Fiscal Deficit of 10.5%, so not self funding; Current Account will be negative by Q3/4 next year; Balance of trade is deteriorating fast)

4. Japan's population crisis is here. Taxable Income will decline, savings rate will decline, Social Security Payments will rise
(Population peaked at 129M people and now at 125M, one of the most homogeneous and xenophobic developed nations in the world; Life Insurance companies are paying out more than they're bringing in)

5. Japan's govt has no idea what to do
(Elected 10th finance minister in the last 6yrs; Privately saying can't implement consumption tax hike; Posted budget on xmas eve last year and showed social security expenditure decreasing 8% even though it was increasing by 9.5% a year for the last 5 years; They would finance this by issuing "compensation bonds" that will be paid for by future radical reform of the tax system; Ministry of Finance said they didn't want to issue more JGBs so as to not upset the "delicate balance" of the JGB market)

Tuesday, December 25, 2012

Felix Baumgartner's incredible space jump

Felix Baumgartner has completed a jump from a balloon 128,000 feet above New Mexico. He reached a top speed of 833.9 miles per hour. He deployed his parachute after falling for four minutes and landed just under ten minutes after jumping.

Stein: Static Rates Would Be `Highly Unusual'

Gabriel Stein, founder of Stein Brothers, discusses interest rates and fiscal policy.

Streible: Silver is #1 Commodity Pick of 2013

RJ O'Brien & Associates Senior Commodity Broker Phil Streible explains why he thinks silver will be the number one commodity pick for 2013

Morganlander: Global Growth Dead in the Water

Stifel Nicolaus Portfolio Manager Chad Morganlander sees a choppy first half in 2013, but second half growth could surprise to the upside and even reach "escape velocity."

Barron's: Europe Stocks on Sale

Ralph Silva, VP of Banking Strategy, HfS Research discusses Barron's cover story which forecasts Europe stocks could rally as much as 20% in 2013.

Jason Trennert's 'Nifty Fifty'

Jason Trennert of Strategas Research Partners, explains why he thinks some US stocks (Google, Microsoft, McKesson) are headed towards a "nifty fifty" trend because of financial repression. There are 25 companies whose CDS are trading below US Sovereign CDS.

James Montier at the European Investing Summit

Michael Mauboussin on luck vs. skill

Michael Mauboussin of Legg Mason is the author of The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing. He was recently interviewed by Miguel Barbosa.
Michael Mauboussin: The Success Equation Untangling Skill and Luck in Business, Sports, and Investing from Miguel Barbosa on Vimeo.
Interview with Michael Mauboussin: The Success Equation Untangling Skill and Luck in Business, Sports, and ...

Howard Marks on Value Investing,

Jim Grant: Honey, I Shrunk the Yield Curve!!

Jim Rickards: Fed is Racing to Create Inflation

Ryan Morris: 28-Year-Old Activist Investor

Ryan Morris launched Meson Capital Partners in Feb 2009 with $50K. He invested 40% of the fund in 3 companies and was up 753% gross for the year. In 2010, Whitney Tilson and Zeke Ashton of Centaur Capital Partners became seed investors, but Morris struggled and evolved into an activist investor knowing that he couldn't count on 2009-type market opportunities, and needed a more durable advantage.

Morris currently has 33 investors and $15M AUM.

Activist situations he has been involved in include HearUSA, InfuSystem, Pinnacle Airlines, and Lucas Energy.

See full article in Businessweek: Ryan Morris, 28-Year-Old Activist Investor

Howard Davidowitz on Holiday Sales, Economy

Retail sales are a "train wreck." Autos and homes are doing well, but are vulnerable.

Thursday, December 20, 2012

Leon Cooperman on CNBC

Kyle Bass speech at AmeriCatalyst

Sadly, embedding of the video is disabled, but Kyle Bass's speech can be viewed in its entirety on Youtube: AmeriCatalyst 2012 The Entanglement

ValueWalk also has a good read on recent position changes at Hayman: Kyle Bass Purchases Ten Percent Of Two Companies

50 minutes of Marc Faber. Better than porn??

One of the comments on Youtube: "Marc Faber? 50 minutes? Almost better than porn"

Mebane Faber: US Equities Not That Interesting

Mebane Faber, CIO of Cambria Investment Management says that U.S. stocks are are overvalued. He recommends looking at foreign equities like those in Europe and elsewhere.

JCPenney Stock 'a Disaster'

Despite JCPenney CEO Ron Johnson's best efforts, the retailer's shares have very little going for them, Durban Capital's Steve Kernkraut says.

Nate Silver on US Gun Control Laws, Statistics

Saxo Bank's `10 Outrageous Predictions' for 2013

Steen Jakobsen, chief economist at Saxo Bank, talks about his "outrageous predictions" for the global economy and financial markets in 2013

10 Outrageous Predictions
1. DAX plunges 33 percent to 5,000
2. Nationalisation of major Japanese electronics companies
3. Soybeans to rise by 50 percent
4. Gold corrects to $1200 per ounce
5. WTI crude hits $50
6. USDJPY heads to 60
7. Hong Kong unpegs HKD from USD – re-pegs to RMB
8. EURCHF breaks peg, touches 0.95
9. Spain takes one step closer to default as interest rates rise to 10%
10. 30-year US yield doubles in 2013

Gary Shilling on Treasuries, U.S. Economy, Budget

Whalen: Banks Are Becoming Dividend Plays

Jack Schwager interview with Opalesque

Bestselling author Jack Schwager sits down with Opalesque.TV to discuss the findings from his latest book, Market Sense and Nonsense.

Bill Ackman tears into Herbalife

The biggest news of the day. Ackman skewers into Herbalife at Ira Sohn, calling it a  "pyramid scheme." He is short over $1B (over 20M shares). It's the second "Big Short" in his career after MBIA. He claims he did not share his views with his tag team buddy Einhorn, which we doubt very seriously.

Monday, December 17, 2012

Ray Dalio at the DealBook conference

For Mr. Dalio, the world is in a great period of deleveraging. But he thinks that risk premiums could stand to be squeezed a bit more. At the same time, any expansion of risk premiums will generally be a negative development for asset classes as a whole. At some point, however, Mr. Dalio said that betting against corporate bonds will prove to be highly attractive. That time hasn’t come yet, he said.

Mr. Dalio says that within his firm, there’s a constant discussion about tactics, and where to be, and where not to be. “It’s hard to have a portfolio without bias, and have a very well-balanced portfolio,” he says, with too many people having a bias toward being long. That said, here’s what he thinks: 
There’s a place for gold. 
Equities will probably do better than bonds longer term 
Emerging markets will do well, with the squeeze on their currencies largely over.
Watch live streaming video from dealbook at

Top Tech Picks For 2013

"I am not a big fan of PCs but I am a big fan of storage," said Walter Price, Allianz RCM Technology Fund, revealing his top tech picks for next year. And the Fast Money traders reveal their top plays of the day.

Alexandra Lebenthal on Muni Bonds

Alexandra Lebenthal, Lebenthal & Co., explains how the "fiscal cliff" has impacted Puerto Rico's municipal bonds, and the challenges facing U.S. municipalities. [Further reading: Fortune Magazine's "Alexandra Lebenthal: The new queen of Wall Street"]

JPMorgan's 2013 Equity Outlook

Thomas Lee, JPMorgan chief U.S. equity strategist, reveals his top five predictions for the new year.

A Sweet Spot For Indian Rupee in 2013

Robert Prior-Wandesforde, Director, Asian Economics Research, Credit Suisse says India's currency will hit a cyclical sweet spot in 2013, given the positive market impact from reforms.

Jason Trennert on CNBC

Jason Trennert, Strategas Research Partners, provides several investment strategies on where to put your money now, amid market volatility.

Minerd: Only Policy That Matters Is Monetary Policy

CNBC's Steve Liesman offers insight on the market reaction to Fed Chairman Bernanke's comments about the U.S. economy. And Scott Minerd, Guggenheim Partners CIO, explains why the problem with the economy is spending, not taxes.

Fisher on Fed's 'Hotel California' Fiscal Policy

John McAfee: 'I Will Not Be Charged With This'

"I had nothing to do with the murder of Gregory Faull," said John McAfee, McAfee founder, talking with CNBC's Robert Frank about why he went on the run when police in Belize wanted to question him in connection with the murder of a neighbor

Fed's Fisher: 'There's a Lot of Verbiage Here'

Dick Bove's 2013 Bank Plays

Mauldin on U.S. Economy, Fiscal Policy

Roubini Says Fed Inflation Targeting Out the Window

Barry Ritholtz: Fiscal Accord Possible in Jan

Scott Minerd: Fed Policy Will Drive Stocks Higher

Eurasia's Bremmer on Abe Win, Bank of Japan Outlook

David Tepper: Fed Betting 6% Unemployment Inflation Trigger

"The Fed is taking a chance that 6% is where you start triggering inflation. I don't know if that's right. The question is do you trigger at 7%. the big concern is ... that you're going to get inflation sooner [but] remember it's very hard in this economy to have inflation when you have a high employment rate. I'm not concerned until somewhere in the 7s ... On the way to inflation, you're going to have another ... inflation in asset prices."

"If you waited for them to do the LTRO in Europe  then you invested, in December, and you invested fast, you could take a lot of money. So we made a lot of money on that first move. Then it comes into April and the economy looks like it's going to be slowing. A week before the Greek election, put vols were at 13. They basically said to me, 'hmm we're not concerned about Greece, we're not concerned about the economy. why don't you have these put calls they're really almost for free.' We bought puts so we didn't have a loss in that drawdown. Again, we get into the next time, and Draghi is talking about this, that the other, talking about this put and boy he gave away this put ... we got invested. and that worked too. Then we got to this election and we said boy doesn't look like the market is going to be happy about this election because Obama is going to win, whether or not that was right or wrong, and they're going to be concerned about the fiscal cliff. We took down our position again. Now when the market went down again, we said, okay, what are we going to do now? Hmm, they're giving away call premium now. call volatility traded really cheap. We also got longer because the market came back down to 1350, 1360 and we viewed that as too cheap given what was likely to happen"

David Tepper: Not Much Downside in Markets

"At 12 times next years with these interest rates, with these Fed, yeah, of course [Equities are] cheap. But you still do have the stuff that's going on in Washington that's holding back everybody and everything ... if it does blow up, the market will probably go down 2% or 3% ... but I think there's very limited downside. I think that on the upside a lot. "

"If you do the senate bill, you have no problem for ten years. Your debt to gdp is not going up for ten years. can you do the numbers. it's not going up for ten years. After ten years you have a real problem ... we should really make a down payment on the problem now"

David Tepper: 'Pretty Good Economy, Right Now'

David Tepper of Appaloosa Management, says the question you have to ask is what happens with the Fed when the unemployment rate comes down. They'll keep doing what they're doing till that happens, he adds.
"I've got an economy that has tailwinds -- housing, auto. And, it's a growing economy. And now I'm going to put a trillion dollars a year by the Fed ... Look at the united states of america. Looking at the LDP that got elected. Everybody knows that Japan is going to kind of pump it up starting in March/April. An ECB that has given you two different things and people only read one thing. they gave you the put with the OMT with Spain but they gave you a second put ... the second piece was when they ... didn't lower interest rates this time ... Basically you're in this situation, whenever Draghi wants to lower interest rates in Europe, he can do it."

Monday, December 10, 2012


This is the 1500th post in the short life of this blog.

Michael Mauboussin on Consuelo Mack WealthTrack

Michael Mauboussin is the Chief Investment Strategist, Legg Mason Capital Management  and Author of The Success Equation
"... I think today the most interesting anomaly that I see continues to be what is high equity risk premium. So in plain words, you think of a risk-free rate of return. In the United States, a 10-year Treasury note is a good proxy for that. And that's today about a 1.8% yield. An equity risk premium is the return above and beyond that you would expect for taking on additional risk on equities. Now, over the long haul, that equity risk premium has been about three or four percent, something like that, and today, by most reckoning, it's a lot closer to six percent. It's very, very high. So to me, I don't know if it's bonds going down, in other words, yields going up because bonds going down, or stocks going up or some combination of these two things, but I have to believe, if you said to me three to five years what's a good thing to bet on, I think it's going to be that equity risk premium shrinking… so it could be, again, because of bonds doing poorly, equities doing well or some combination thereof. 

Yeah, so I mean, go long equities would be one answer, but it's really the relationship between equities and bonds I think is the most... equities versus bonds."

Goldman Analyst: Fixed-Income Not a Bubble

Jonathan Beinner, head of global fixed income at Goldman Sachs Asset Management, talks about global credit markets and investment strategy. He speaks with Erik Schatzker and Stephanie Ruhle on Bloomberg Television's "Market Makers." Clifford Asness, co-founder and managing principal of AQR Capital Management LLC, also speaks

AQR's Asness on Investment Strategy

Morningstar: Fund Favorites and Follies Over 20 Years

Interview with Erwin Brunner (BrunnerInvest)

Interview with Jean-Marie Eveillard

Mohnish Pabrai and Guy Spier interview

Value superinvestors Mohnish Pabrai, Managing Partner of Pabrai Investment Funds, and Guy Spier, CEO of Aquamarine Capital Management, joined ValueConferences attendees live on November 7th for Japan Investing Summit 2012. Mohnish and Guy answered many questions about their philosophy and favorite ideas.
[Transcript here. HT: ValueInvestingWorld]

Alan "Ace" Greenberg on Bloomberg

Alan "Ace" Greenberg, vice chairman emeritus at JPMorgan Asset Management, talks about investment strategy, the outlook for the U.S. economy and the impact of regulation on the banking industry.

John Bailey (Spruce) on Investment Strategy

John Bailey, founder and chief executive officer of Spruce Private Investors LLC, talks about investor sentiment and strategy.

Andrew Redleaf (Whitebox) Sees Opportunities in Equities

Andrew Redleaf, founder and chief executive officer of Whitebox Advisors, talks with Bloomberg's Stephanie Ruhle about his investment strategy.

Saturday, December 8, 2012

Irving Kahn: A "Super Ager"

(from May 2012)
106-year-old Irving Kahn still goes to work every day, keeping tabs on the financial firm he built with his family. His sister named Happy, lived to be 109. His baby brother Peter is a 105. The Kahns are part of a group of Ashkenazi Jews, those from Eastern Europe, who live unusually long, healthy lives.

Healthy lifestyle is not the key to the exceptional longevity seen among super agers. Sixty percent of the men, including Irving Kahn, smoked at some point. Less than half exercise on a regular basis and they don't eat particularly healthy diets. Irving Kahn said his favorite food is "a rare hamburger...and a good cheese."
Barzilai and his team discovered that people who live to be 100 are more than twice as likely to have a certain variant of a gene called CETP. It helps control cholesterol and protects against heart disease and dementia. Irving Kahn has that gene variant.

Chris Whalen on the Fiscal Cliff

More on Special Dividends

A look at which companies could be next in line, with Jay Kaplan, Royce Dividend Value Fund.

Hans Humes on Greece's bond buyback program.

Hans Humes, Greylock Capital CEO, explains how to make money in Greece's bond buyback program.

Kevin Gaynor is Bullish on China for Next 6 Months

Kevin Gaynor, Co-head of Macro Strategy Research, Nomura is bullish on China in Q4 and Q1 next year, but explains why growth is expected to fade rapidly in the second half of 2013.

Mark Travis (Intrepid Capital) on small caps he likes

Mark Travis, Intrepid Capital Funds president, discusses companies he believes have a lot of room to grow, including World Wrestling Entertainment, Speedway Motors.

Carson Block: Olam's Debt Offering a Victory for Muddy Waters

Olam's Debt Offering a Victory for Muddy Waters: Block Carson Block, Founder of Muddy Waters Research says Olam's rights issue is a clear victory for the research firm. He characterized the company's $1.25 billion fund-raising plan as a "sovereign bailout".

Steen Jakobsen (Saxo): Cautious On 2013

Steen Jakobsen, chief economist at Saxo Bank, tells CNBC that he is suspicious of the consensus for 2013 that the market will be up by ten percent.

Ashok Amritraj on the International Film Market

Ashok Amritraj, chairman and CEO of Hyde Park Entertainment, tells CNBC that there are films that will play very well for an international audience, especially Hollywood action films.

Fortune Magazine's Best Stocks for 2013

Align Technology Inc [ALGN 25.51]
Pentair Ltd [PNR 48.04]
Moody's Corp [MCO 49.36]
Gilead Sciences Inc [GILD 73.91]
VeriFone Systems Inc [PAY 32.56]
U.S. Bancorp [USB 32.02]
Ford Motor Co [F 11.48]
Unilever PLC [UL 38.71]
Citigroup Inc [C 37.64]
Google Inc [GOOG 684.21]

Pimco's Kashkari Betting On This 'Cliff' Stock

Neel Kashkari thinks there will be a "fiscal cliff" deal, so he's bullish on a stock that's been held back by its "cliff" exposure - General Dymanics.

Friday, December 7, 2012

Lakshman Achuthan: US has been in recession since July

Lakshman Achuthan, Economic Cycle Research Institute (ECRI), says the U.S. has been in a recession since July

Jan Hatzius: Goldman's 2013 Outlook

Mexico Is Taking Off

Irenea Renuncio, senior Latin America analyst at Maplecroft, tells CNBC that Mexico could soon overtake Brazil in terms of growth as it is a lot easier to do business in the country.

Thursday, December 6, 2012

Todd Buchholz (Tiger): Market `Complacent' on Fiscal Cliff

Todd Buchholz, a former managing director at Tiger Management LLC and former White House economic adviser, discusses investment strategy and the prospects for an agreement on avoiding the so-called U.S. fiscal cliff.

Examining the Russian Real Estate Market

Dmitri Boulkhoukov, executive director of the Etalon Group, discusses the Russian real estate market.

Egypt Seen as `Fantastic' Investment Opportunity

Sven Richter, managing director of frontier markets at Renaissance Asset Management, discusses investing in Egypt, Nigeria, Kenya and Indonesia.

Knighthead Capital's Wagner on Distressed Opportunities

Thomas Wagner, co-founder of Knighthead Capital Management, talks about investment opportunities in distressed debt and the potential impact of the so-called fiscal cliff on strategy.

GoldenTree Co-Founder Wagner on Investment Strategy

Leon Wagner, co-founder of GoldenTree Asset Management, talks about investment strategy, Federal reserve policy and the so-called fiscal cliff.

Pine Capital's Kuhn on Fiscal Cliff, Strategy

Steven Kuhn, head of fixed-income trading at Pine River Capital Management, talks about mortgage-related equity investments and implications of the so-called fiscal cliff on trading strategy

Golden Age of the Relative Value Hedge Fund

Michael Woodford (Olympus) on his book, HP

Michael Woodford, former chief executive officer of Olympus, talks about his book "Exposure: Inside the Olympus Scandal: How I Went from CEO to Whistleblower." Woodford also talks about Hewlett-Packard and corporate governance.

Bruce Richards (Marathon Asset): Fiscal Deal Close

Bruce Richards of Marathon Asset Management, discusses the meeting between White House officials and Wall Street executives yesterday and the outlook for a resolution to the so-called fiscal cliff.

Neil Chriss (Hutchin Hill) on Bloomberg

Neil Chris of Hutchin Hill Capital discusses the fiscal cliff, investment strategy, and the outlook for hedge-fund markets. Marc Lasry of Avenue Capital Group also speaks.

FX Concepts' Taylor Likes Dollar, `Hates' Euro

CLSA Analyst Michael Mayo on Citigroup Job Cuts

Nassim Taleb interview on PBS

Watch Author Nassim Nicholas Taleb on PBS. See more from Tavis Smiley.

Chanos: Short Sellers Are Financial Detectives

Chanos: Europe Returning to Ways of 1930s

Marc Lasry Keeping Cash to Trade on Fiscal Cliff

Marc Lasry, founder of Avenue Capital Group LLC, talks about investment strategy and outlook for a deal to avert the so-called fiscal cliff of automatic spending cuts and tax increases. Lasry also discusses Europe's debt crisis. He speaks with Katherine Burton at the Bloomberg Hedge Funds Summit in New York.

Geoff Oltmans: Hedge Funds to Outperform

Geoff Oltmans, portfolio manager of Silver Lake Credit, discusses market conditions with Bloomberg's Cristina Alesci at the BLink Hedge Fund Summit.

Tom Hill (Blackstone): Hedge Fund Market to Hit $5T in 5 Years

Tom Hill, a vice chairman at Blackstone, discusses hedge fund market conditions with Bloomberg's Cristina Alesci at the BLink Hedge Fund Summit

Dwight Anderson (Ospraie) On Commodities

John Bader (Halcyon): Likes ING, Nervous on Europe, Banks

John Bader, chairman and chief investment officer at Halcyon Asset Management LLC, talks about the hedge fund's investment strategy and fiscal negotiations in Washington.

Renee Haugerud (Galtere): Commodities Super Cycle Not Over

Renee Haugerud is a rare bird: a female hedge fund founder and CIO. A class act and a savvy commodities manager, she continues to believe in the decline of paper assets against real assets. Her fund is up over 7% YTD.

Bubbles Greenspan: There will be pain

Sam Zell on Archstone, US Outlook

Richard Clarida (Pimco): Fed Balance Sheet To Keep Growing

Wilbur Ross: Q1 Growth `In Jeopardy'

Monday, December 3, 2012

Aswath Damodaran discusses Facebook on CNBC

Bill Nygren interview with Morningstar

Nygren: Growth a Bonus at Right Price
The Oakmark manager says many growth stocks are worthy of his value-oriented portfolios, so long as he doesn't have to overpay to get them.

Nygren: Double-Digit Earnings Growth Possible for B of A
Bank of America's current management team has allowed the firm to have possibly the strongest capital position among major U.S. banks, says Oakmark's Bill Nygren.

Why Nygren Likes This Health-Care Name
Medtronic's current P/E and solid fundamentals make the stock more worthy of owning, says Oakmark manager Bill Nygren.

Nygren: Disney's Value in Cable, Not Parks
Wall Street tends to focus too much on Disney's theme-park traffic and too little on the firm's cable operations, which carry the majority of Disney's value, according to Oakmark's Bill Nygren.

Saturday, December 1, 2012

Bill Ackman: Everything You Need to Know About Finance and Investing in Under an Hour

Robert Kraft reflects on the Patriots rise and why he loves the game

Sovereign debt 401 with Lee C. Buchheit

Internationally renowned sovereign debt adviser Lee C. Buchheit sits down with Reuters columnist Felix Salmon to discuss his efforts in Greece, what's next for Spain and Italy and the future of the euro zone. (November 15, 2012)

Quantitative easing a time bomb: Stephen Roach

Break up the big banks: Dr. Doom

Henry Kaufman, the famed "Dr. Doom" of the 80s, reflects on the origins of the fiscal cliff, offers his opinion on Ben Bernanke's performance, and says now is the time to break up the big banks.

Carson Block looks inside China's "massive slowdown"

Combining market research and gangster rap to uncover fraud in China, the founder of Muddy Waters Research tells Reuters why he thinks Beijing's all crunked up. He also waxes on Apple. Should Tim Cook be worried?

Tad Rivelle: Fed feeds credit market hangover

The Fed's latest stimulus plans are creating another bubble in junk bonds and Treasuries, according to Tad Rivelle, Fixed Income Chief Investment Officer at TCW.

Marc Lasry on why the hedge funds abandoned Obama

Bond guru Dan Fuss doesn't see bond bubble

Dan Fuss, Vice Chairman of Loomis, Sayles & Company and called by some, “The Real Bond King,” tells Reuters’ Jennifer Ablan that a bond bubble is unlikely and argues, instead, that it is simply a very strong market.

"There's a limit you say 'Oh My Goodness, it was issued at 100 and it goes to 116' and you think that's a bubble - no that's not a bubble. If it goes to 250, that's a bubble and that doesn't tend to happen with bonds."

Hedge fund Omega sees disappointing corporate earnings in 2013

Omega Advisors, which oversees $7 billion in assets, has been among the year's standouts with double-digit returns. Steven Einhorn, the firm's vice chairman, sees below consensus earnings given a combination of softer revenue growth and profit margins reverting to the mean. 

"Year-over-year revenue growth in the third quarter was about 1 or 2 percent. It may accelerate a bit next year but it will not be robust certainly. Second and more important, profit margins for the S&P companies are several hundred basis points above trend and profit margins are mean-reverting, not immediately but over time."