Investors Moving Out of Risk Positions: Brusuelas

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Aug. 23 (Bloomberg) –- Bloomberg’s Joe Brusuelas previews what investors should watch for next week on Bloomberg Television’s “Bottom Line.” (Source: Bloomberg)

Attendees likely to to hear about central-bank policy?

What -- we have heard a defense of what the fed has done and that they don't. short of the goal line.

They don't want to prematurely raise the rates due to pressure.

The goal line is to get the economies back towards closing the output gap.

When the papers today , they're making the case that they're getting the bang for their buck.

They are getting the bang on the buck.

This shows mortgage backed securities as a percentage of the fed balance sheet.

You can see what has been going on.

They are being urged to continue to purchase these assets even at a slower pace.

The fed will remain quite accommodate it.

You will be surprised when tapering starts that there is an asymmetrical tilt towards the purchases of mortgage- backed securities.

That means that they will pare down the purchase of treasuries a bit faster.

What about some of the divisions that we saw in the fomc minutes?

That was pretty clear.

The dubs are very reluctant to pull back on the asset purchase program.

-- the dubs doves are very reluctant to pull back.

They want the policy rate at zero and they want to provide monetary accommodation through the asset purchase.

You go to the next chart.

You see the response by investors, this is the bloomberg financial conditions index.

What you are seeing is the financial tightening.

Indeed, the fed noticed that in minutes.

This is a real risk.

This is the first thing i look at every day.

It gives me a real appetite for daily risk-taking or a daily appetite for risk taking.

Evil are moving out of the risk positions.

How quickly.

-- people are moving out of the risk positions.

How quickly?

This is not what you want.

From the dow, the s&p, year to date, they are all up a double digits.

Why?

Earlier in the year, we have that wave of cash that rolled through the economy as people pulled forward.

This bolstered markets through the first two quarters of the year.

Now, we are getting a correction.

Monday, durable goods numbers, may and june.

This was due to civilian aircraft orders.

Our the july figures going to show straight?

They will not.

Every year in may and june we get a surge of aircraft orders primarily due to the paris air show.

Boeing was very very strong with the 90 orders in july.

You are likely to see the top line with the negative number.

This included transportation,. this is usually about a half of a percent increase.

That is good, but it needs to get better.

The forecast for the second half of the year, the forecast is that it will grow above the 2.5% trend.

That is what we want to see you.

Wednesday gdp number, revisions in trade and inventory.

How will that impact the growth.

This is likely to get boosted to about 2.2%. this is better than 1.7. we had really impressive trade numbers since the first estimate.

Some of that has been reduced a little bit.

We will see what we have seen, tepid growth.

What is the fed looking for in jobless claims?

Look at how we get bad bounce.

There is the improvement on the jobless claims.

The fed believes that the pace of firings has slowed but it has not translated to a much faster pace.

The hawks will look at this and say that we have to start normalizing rates.

This is one of the interesting things that investors will want to watch.

Personal income numbers.

The pace of firings has slowed.

Employment gains have increased.

This is where the rubber hits the road.

It is not improving in the way we want to see.

It is up 4-10 of one percent.

This is showing the 1.6% average on spending that is 20 years, even though they are only showing 10 years.

Real consumption is moving.

What does this show you?

We are spending beyond our means.

We are paring down savings to plug that gap.

Government transfers have helped to support spending.

Now they are slowing.

Something has got to give.

Hiring has got to increase.

Or we should expect to see spending slow.

This is what keeps policymakers up at night.

This text has been automatically generated. It may not be 100% accurate.

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