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“WASHINGTON (AP) — A growing number of chief executives at large U.S. companies say they are more optimistic about the economy and plan to hire in the next six months.

The Business Roundtable says a survey of its CEO members found that 42 percent expect to hire over the next six months. That’s up from 35 percent three months ago. Nearly half plan to spend more on machinery and other capital equipment and more than 80 percent expect their sales to rise.

The chief executives’ overall outlook on the economy improved sharply. The group’s outlook index jumped to 96.9 in the current quarter from 77.9 in the final quarter of last year. That’s the highest since last summer.

The group is an association of the leaders of the 200 biggest U.S. companies.”

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“U.S. stocks are overpriced by 50 percent but corporate buying is keeping them up, at least until there is a decline in the U.S. fiscal deficit, Andrew Smithers, the author of the book “Valuing Wall Street: Protecting Wealth in Turbulent Markets” wrote in a recent research note.

Other analysts, such as Goldman Sachs’ Jim O’Neill, said they were optimistic about the prospects for stock markets as the world economy was on the mend due to good data on the U.S. economy….”

Full article

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Now the former manager is a chicken farmer…..

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German business confidence unexpectedly rose to an eight-month high in March, suggestingEurope’s largest economy will return to growth even as the sovereign debt crisis curbs euro-area demand for its exports.

The Munich-based Ifo institute said today its business climate index, based on a survey of 7,000 executives, increased to 109.8 from a revised 109.7 in February. Economists forecast it would remain unchanged at the initial February reading of 109.6, according to the median of 44 estimates in a Bloomberg News survey.

Unemployment at a two-decade low is fueling domestic demand, while the European Central Bank’s injection of more than 1 trillion euros ($1.3 trillion) into the banking system has helped to bolster investor sentiment. Germany’s benchmarkDAX share index is up 18 percent this year. Still, manufacturing output unexpectedly contracted this month as governments and households reduced spending across the euro region,Germany’s largest export market….”

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Indeud

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“All the evidence points to the fact that the Federal Reserve’s loose monetary policy did not cause the housing bubble, Ben Bernanke told students at the George Washington University School of Business today.

While he acknowledged that this issue is still very much up for debate—and added that increased demand for housing based on low interest rates could have contributed to the wave that caused the bubble—he gave three reasons for why the Fed should not be held completely responsible:

• “The boom and bust in the us was not unique.” Indeed, he specifically points to the U.K. as an example of a housing bubble even during tight monetary policy.
• “The increase in housing prices was way too large to be associated with the small changes in monetary policy.”
• “The timing of bubble, he argued, did not coincide with the Fed’s policy decisions. He asserted that 1998 was the start of a major uptick in housing prices—not when the Fed was aggressively lowering rates in the 2000s. That “was right in the middle of the tech boom,” Bernanke said, adding that it’s possible “the same mentality that was feeding stock prices may have been feeding house prices as well.”

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No need to explain the obvious with thin floats; these three trades take the cake.

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“It started subtly, about a month ago, in the fed funds futures market, where investors had come to view Federal Reserve Chairman Ben Bernanke’s word as deed: first, the August pledge to hold the benchmark rate near zero until mid-2013; then, on Jan. 25, the extension of that target date to late 2014.

Investors priced fed funds futures contracts accordingly. At least they did until early February, when traders started to challenge the Fed’s forecast ever so slightly. (The contracts are cash-settled against the effective federal funds rate for the particular delivery month.)

The March 2014 contract, for example, peaked at a high of 99.77 on Jan. 30, an implied yield of 0.23 percent, within the Fed’s current 0 to 0.25 percent target. The yield rose to 0.65 percent earlier this week. Volume and open interest shot up, as well. Even the late-2013 contracts are starting to suggest zero isn’t a sustainable equilibrium.

Last week, the unthinkable happened: Long-term notes and bonds took a shellacking even as the Fed gobbles up the equivalent of the Treasury’s long-term issuance.

Not content merely to project a path for overnight rates, the Fed has engaged in several rounds of bond buying since 2009 — more than $2 trillion of Treasuries and agency mortgage- backed securities — to ensure that long rates don’t start thinking independently. A manipulated market leaves little room for self-expression, even among those gun-slinging Masters of the Universe….”

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“NEW YORK – Corporate narcissism could be the key to keeping the stock bull market alive.

Three years after the worst stock swoon since the Great Depression, Main Street investors still don’t view U.S.stocks as must-own assets, draining the market of the cash injection it needs to prosper. In contrast, corporations have been fawning over their own stocks and buying back shares in such ample amounts that the market has been able to power higher to new bull market highs.

Flush with cash and in search of good investments in a world of 0% interest rates, more companies have been slapping buy ratings on their own stocks — which they view as undervalued — at a time when individual investors have been content to play it safe and park their cash in bonds and money market funds.

Last year, companies in the Standard & Poor’s 500-stock index spent $404.2 billion to buy their own company’s stock, nearly double the amount back in 2009, says Thomson Reuters Eikon.

Carmine Grigoli, chief investment strategist at Mizuho Securities, attributes the market’s 100%-plus gain since the March 2009 bear market bottom to the stock buyback binge. He says buybacks could total $550 billion this year, creating a positive supply-and-demand dynamic that could catapult the S&P 500 up nearly 11% to 1550 and near its all-time high in the next 12 months.

“It is, has been, and will continue to be the biggest driver of the stock market,” Grigoli says.

Fueling the buyback trend is an “extraordinarily cheap” stock market in relation to Treasury bonds and a corporate sector sitting on more than $1 trillion in free cash, Grigoli says….”

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“The latest letter from GMO portfolio strategist James Montier tries to explain the source of ultra-high corporate profits in the midst of a mediocre recovery

You can read his letter here. We summarize it here, though the basic gist is that corporate profits are being fueled by unusually large deficits.

The source of profits aside, the big lesson for investors is summarized in the title, which is: What Goes Up Must Come Down!

Indeed, Montier presents what on the surface appears to be one of the bears’ most compelling arguments, which is that no matter how much the economy is recovering, or how cheap stocks seem to be, margins are just ridiculously high now, and have to come down.

This is the money chart right here.

Click to enlarge…

 

 

So not only are margins already historically high, but analyst projections anticipate them going even higher.

If you’re bullish on stocks, what’s your answer?

A few ideas we can think of:

• PE multiples will expand, ergo margin pressure isn’t a problem at these levels (This is an argument that Citi’s Tobias Levkovich has made).
• Stocks are still very cheap on an equity risk premium basis (i.e. compared to how expensive Treasuries are).
• Growth will surprise to the upside. In particular, rising wages and employment will improve the topline, cancelling out margin pressure.
• Margins are on a secular uptrend (there’s some evidence for this) and so historical levels don’t matter.

Your thoughts? “

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“Despite a record breaking run Credit Suisse is sticking to their guns on higher equity prices.  They are now calling for a year end target of 1470 on the S&P 500 and offer 9 reasons to stay bullish:

“(1) Bond yields could rise further… this might help equities
(2) The macro environment is supportive:
-Economic momentum indicators suggests global and US growth is still well above consensus
-The breadth of the US recovery is now impressive: investment; housing; employment; the
process of consumer deleveraging in the US is quite advanced; inventories are low and bank
loan growth has returned
-China easing: half of GDP is coming from emerging markets
-Europe: muddling along but mutualisation is advancing
(3) The dovishnessof central banks and the synchronised QE as the end game
(4) Rising global excess liquidity is consistent with c10% re-rating
(6) Valuations relative to bonds are still attractive
(7) Equities remain the hedge if , as we expect, long term inflation expectations continue to rise.
(8) Positioning still cautious relative to optimistic sentiment
(9) Earnings: upgrades continue, global revisions just turned positive”

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For now nobody knows for sure and the assumptions of who is selling is more important…..

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“Martin Feldstein, former chief economic adviser to Ronald Reagan, says the most important cloud on the economic recovery horizon is the large tax increase that will occur next year unless legislation is passed to block it.

“The Congressional Budget Office predicts that, under current law, the revenue of the federal government will rise from $2.4 trillion in the current fiscal year, which ends in September, to $2.9 trillion in the following fiscal year,” Feldstein writes in the Financial Times.

That increase of $512 billion is equivalent to 2.9 percent of GDP, bringing federal revenue as a share of GDP from 15.8 percent this year to 18.7 percent next year, notes Feldman, a professor of economics at Harvard University. …”

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For several weeks now, the “dumb money” has been extremely bullish and the “smart money” has been extremely bearish.  These are signs that we are closer to the end of the rally as opposed to the beginning.

Read the rest, and see the very informative graphs, here.

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Some interesting charts and good commentary on the very steep VIX futures curve.

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Enjoy your green beer weekend!

[youtube://http://www.youtube.com/watch?v=6MWpxH-RlFQ 450 300]

“It is a well-known fact that our society is structured like a pyramid. The very few people at the top create conditions for the majority below. Who are these people? Can we blame them for the problems our society faces today? Guided by the saying “A fish rots from the head”we set out to follow that fishy odor. What we found out is that people at the top are more likely to be psychopaths than the rest of us.

Who, or what, is a psychopath? Unlike Hollywood’s stereotypical image, they are not always blood-thirsty monsters from slasher movies. Actually, that nice lady who chatted you up on the subway this morning could be one. So could your elementary school teacher, your grinning boss, or even your loving boyfriend.

The medical definition is simple: A psychopath is a person who lacks empathy and conscience, the quality which guides us when we choose between good and evil, moral or not. Most of us are conditioned to do good things. Psychopaths are not. Their impact on society is staggering, yet altogether psychopaths barely make up one percent of the population.

Through interviews with renowned psychologist Professor Philip Zimbardo, leading expert on psychopathy Professor Robert Hare, former President of Czech Republic and playwright Vaclav Havel, authors Gary Greenberg and Christopher Lane, professor Nicholas Christakis, among numerous other thinkers, we have delved into the world of psychopaths and heroes and revealed shocking implications for us and our society.”

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I will not disagree….

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“Earlier today, we suggested that in the aftermath of the Greg “Muppets” Smith NYT OpEd, contrary to assumptions by Jim Cramer, a bevy of potential whistleblowers would step up to tell their tale of fraud and corruption across all walks of life – from Wall Street to, far more importantly, Washington, consequences be damned. This was paralleled by an alleged JPM whisteblower describing to the CFTC the firm’s supposedly illegal activities in the precious metals space, which while we initially dismissed, we now admit there may be more to the story (stay tuned), even though we still have our doubts. What we are 100% certain of, however, is that yet another whistleblower has stepped up, this time one already known to the general public, and one that Zero Hedge covered just over a month ago: we refer to the case of former CBO worker, Lan T. Pham, who, as the WSJ described in early February, “alleges she was terminated [by the CBO] after 2½ months for sharing pessimistic outlooks for the banking and housing sectors in 2010” and who “alleges supervisors stifled opinions that contradicted economic fixes endorsed by some on Wall Street, including research from a Morgan Stanley economist who served as a CBO adviser. As part of the review, Sen. Grassley’s staff is examining whether Wall Street firms or others exert influence that compromises the office’s independence.” As we observed in February, “what is most troubling is if indeed the CBO is nothing but merely another front for Wall Street to work its propaganda magic on the administration. Because at the core of every policy are numbers, usually with dollar signs in front of them, numbers which have to make sense and have to be projected into the future, no matter how grossly laughable the resultant hockeystick.” As it turns out, somewhat expectedly, the WSJ version of events was incomplete. There is much more to this very important story, one which has major implications over “impartial” policy decisionmaking, and as a result, Ms. Pham has approached Zero Hedge to share her full story with the public….”

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Another view of Goldman backing up this mornings op-ed on GS culture…..

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and the banks are not societies drug dealer…..

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