Macro Picture Recap: A Cautionary Note

1) Fed has run out of policy options
2) Asset reflation failed for housing, worked for stocks, very successful for bonds
3) Inventory restocking fizzling out 2H-10
4) Coincides with fading ARRA: ARRA to subtract from GDP growth in 2011
5) Structural unemployment in US caps consumption recovery
6) Rising trade deficits amidst a weak Euro will depress US growth
7) Sub-par 2-3% trend growth for US over next 10 years
8) Shorter economic cycles (~4 years between recessions): bad for business
9) China tightening, if overshoots to hit Asia badly
10) European austerity good for Germany and France, bad for others in Eurozone
11) Implications for export dependent Malaysia not good: trend GDP slow to 4%
12) Private sector withdraws as government involvement in economy grows
13) Rising taxes, removal/lowering of subsidies diverted to Japan-style stimulus
14)Renewed monetary easing very possible later
15) Decade of low interest rates, high house/land prices, weak Ringgit post crisis
16) Rising household leverage/more taxes/less subsidy amidst slow growth will bite