• Marc To Market
    12/20/2014 - 12:21
    When the dollar falls, we are told it is logical.  The empire is crashing and burning.  When the dollar rises, the markets, we are told are manipulated.    Well, the dollar is...

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Guest Post: We Are All Currency Manipulators Now

Every country with a central bank is by definition and without exception a currency manipulator.
Every country that devalues its country to boost exports is a currency manipulator.
Every country that bails out banks is a currency manipulator.
Every central bank purchase of treasury securities, mortgage-backed securities or equities is currency manipulation.
Every central bank that inflates away treasury debt is a currency manipulator.
And that is why America would look clownish and absurd to label China a currency manipulator, when China can throw back the exact same accusation even more forcefully. China holds trillions and trillions of dollar-denominated assets.



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America's Lost Decade In One Simple Chart

Forget the stock market's dismal decade of much-ado-about-nothing and ignore the USD Dollar's declination; when it comes to reflection on what this once great nation has 'created' since 2001, the following chart from Pennsylvania's Department of Public Welfare sums it up better than most.



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Guest Post: We're Heading For Economic Dictatorship

We are all now members of the Permanent No-growth Club. And the United States has just re-elected a president who seems determined to sign up too. No government in what used to be called “the free world” seems prepared to take the steps that can stop this inexorable decline. They are all busily telling their electorates that austerity is for other people (France), or that the piddling attempts they have made at it will solve the problem (Britain), or that taxing “the rich” will make it unnecessary for government to cut back its own spending (America). So here we all are. Like us, the member nations of the European single currency have embarked on their very own double (or is it triple?) dip recession. This is the future: the long, meandering “zig-zag” recovery to which the politicians and heads of central banks allude is just a euphemism for the end of economic life as we have known it. Democratic socialism with its “soft redistribution” and exponential growth of government spending will have paved the way for the hard redistribution of diminished resources under economic dictatorship.



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Six Charts To Summarize The NY Fed's Un-Deleveraging Report

The NY Fed's quarterly smorgasbord of everything debt-related to the good old American household has little fresh and exciting from the top-down as the nation in aggregate (according to the data) continues to delever - though ever so slightly this time (-0.7% to $11.31tn of total consumer indebtedness) driven mostly by a drop in mortgage indebtnedness (defaults?). However, bottom-up things are a little more interesting; aside from the aforementioned Student Loan debt bubble going 'pop', the glorious states of California, Nevada, New Jersey, and New York each have a little something special for us to focus on as our nation (rightly so) slides uncomfortably down the deleveraging path and along with average collections at record highs, surging auto loans, and jumps in Nevada's new foreclosures, there's a little here for everyone. As Keynesian Yoda might have said, "Deleveraging is the path to the dark side; deleveraging leads to reduced credit demand; reduced credit demand leads to less growth; and less growth leads to suffering," though he might have also added (on the de minimus deleveraging that actually occurred): "size matters not."



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Guest Post: The Definition Of Insanity

By now there is likely not a single individual who is not aware of the impending "fiscal cliff" and the economic impact that it represents. Obama, and the Democratic controlled Senate, have already lined up on raising taxes on the "rich" while the Republican controlled House has firmly asserted that they are amenable to closing tax loopholes in conjunction with spending cuts.  The two sides could not currently be farther apart from reaching a deal - yet, as Yoda would say: "Reach a deal we must." The Democrats have given no indication that they will compromise on any front and that tax hikes are all that is available for discussion.  Likewise, the stance by the Republicans is just as firm as they stand behind their pledge of no tax increases.  However, in the end, it will be the Republican led house that will again define "insanity" by repeating the same mistakes of their past - 'Caving'. In the next few days as the "fiscal cliff" draws nearer that media pressure from the White House will intensify to a fevered pitch with threats of economic recession due to Republican's unwillingness to compromise. This is the same tactic that was used during the debt ceiling debate in 2011 and until the politicians realize that slower economic growth is the "short term pain" required to establish the stable economic foundation from which "long term gains" may be achieved, the Republicans (in this case) will repeat the same 'caving' errors and expect a different outcome.



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Reid-On; Risk-Off

The cone of silence has lifted; and while some will argue that correlation is not causation, we present a today's market performance (and volume) and Harry Reid's well-chosen words of un-compromise. Stocks fell dramatically on heavy volume as the 'efficient' discounting mechanism somehow hadn't expected a bumpy ride to the end of the year...



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Is JPMorgan About To Take Over America, Again?

Great and wondrous things seem to be afoot among the righteous bankers of the world. A few months ago Matt Zames was named to get JPMorgan's CIO office out of trouble - and also happens to be the Chairman of the all-powerful Treasury Borrowing Advisory Committee. Just yesterday, Mark Carney completed Europe's full-house of ex-Goldman Sachs alum running the region's monetary policy. Today we hear Lloyd Blankfein will be sidling up to Obama tomorrow. And now this; from the never-crony-capitalist himself, billionaire Warren Buffett has publicly blessed Jamie "apart from the failure of control" Dimon as the best man for the top job at the Treasury. "If we did run into problems in markets, I think he would actually be the best person you could have in the job," Buffett added (sounding more like the 'we' meant he) and dismissed the London-Whale "failure of control" with sometimes "people go off the reservation." With Zames running the Shadow Treasury and Dimon running the Real Treasury, is it any wonder that inquiring minds are asking who really runs America (and for whom)? Of course, in the pre-Fed era - over 100 years ago, JPMorgan Sr. 'bailed-out' America before...



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Head Of The Fed's Trading Desk Speaks On Role Of Fed's "Interactions With Financial Markets"

In what is the first formal speech of Simon "Harry" Potter since taking over the magic ALL-LIFTvander wand from one Brian Sack, and who is best known for launching the Levitatus spell just when the market is about to plunge and end the insolvent S&P500-supported status quo as we know it, as well as hiring such sturdy understudies as Kevin Henry, the former UCLA economist in charge of the S&P discuss the "role of central bank interactions with financial markets." He describes the fed "Desk" of which he is in charge of as follows: "The Markets Group interacts with financial markets in several important capacities... As most of you probably know, in an OMO the central bank purchases or sells securities in the market in order to influence the level of central bank reserves available to the banking system... The Markets Group also provides important payment, custody and investment services for the dollar holdings of foreign central banks and international institutions." In other words: if the SPX plunging, send trade ticket to Citadel to buy tons of SPOOSs, levered ETFs and ES outright. That the Fed manipulates all markets: equities most certainly included, is well-known, and largely priced in by most, especially by the shorts, who have been all but annihilated by the Fed. But where it gets hilarious, is the section titled "Lessons Learned on Market Interactions through Prism of an Economist" and in which he explains why the Efficient Market Hypothesis is applicable to the market. If anyone wanted to know why the US equity, and overall capital markets, are doomed, now that they have a central planning economist in charge of trading, read only that and weep...



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The Scariest Chart Of The Quarter: Student Debt Bubble Officially Pops As 90+ Day Delinquency Rate Goes Parabolic

We have already discussed the student loan bubble, and its popping previously, most extensively in this article. Today, we get the Q3 consumer credit breakdown update courtesy of the NY Fed's quarterly credit breakdown. And it is quite ghastly. As of September 30, Federal (not total, just Federal) rose to a gargantuan $956 billion, an increase of $42 billion in the quarter - the biggest quarterly update since 2006. But this is no surprise to anyone who read our latest piece on the topic. What also shouldn't be a surprise, at least to our readers who read about it here first, but what will stun the general public are the two charts below, the first of which shows the amount of 90+ day student loan delinquencies, and the second shows the amount of newly delinquent 30+ day student loan balances. The charts speak for themselves.



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Bulk Investors And The Real-Estate 'Recovery'

Bulk (Wall Street) buyers have been receiving a lot of attention recently. It's time to take a closer look. There is little data available pertaining to bulk investors and even less meaningful analysis. Historically, Wall Street has never been active in direct ownership of single family homes, so there is no past histrory to learn from. We need to start from scratch. Anecdotally, Las Vegas is the most shocking: "... never seen a market where over half of the buyers paid cash and over 1/3 of the sales were financed via the FHA, leaving only 14% of sales in the "other" category." The herd mentality is in full control with buying increasing at all levels. How long will this feeding frenzy last? Will the bulk investors be able to generate enough returns to whet their appetite for more? Stay tuned.



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Goldman's Guess At 'Cliff' Compromise Composition

With hope high that TPTB will see fit not to plunge us over the cliff, we thought it useful to get some perspective on what the grand compromise might look like. Goldman's central assumption - albeit a close call - is that an agreement is found that includes a tax increase of a magnitude similar to the upper income tax cuts, though the composition might differ. Entitlement reforms also seem likely to be part of a package, particularly related to health programs. "Down-payments" in both areas seem likely, with additional deficit reduction to be enacted in 2013 as part of a two-stage process. The working deadline for an agreement appears to be December 21. While talks are ongoing, we, like Goldman, would not expect serious negotiations to begin for another couple of weeks. In the interim, headlines out of Washington are likely to be mixed, but we would expect more negative than positive news until at least mid-December.



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14% Of S&P 500 Earnings Is "One Time Write Off" Vaporware

With everyone now well aware that revenues of S&P 500 companies have taken a turn for the worse and are declining for the second consecutive quarter (with well over a majority missing sellside estimates and trimming Q4 guidance), many are wondering: how can corporate EPS continue to grow, even if nominally? Are there really so many people left to be laid off? The answer, to the latter, is no, for the simple reason that it is not layoffs that have driven the upward persistency in corporate earnings. Then what has? Simple: when in doubt, "charge it" - this axiom seems to work not only for cash strapped consumers, but for corporations who know very well that when unable to satisfy earnings estimates using regular way earnings, companies can just write off "one time charges" and get the going concern EPS benefit for such an action.In fact, as the table below shows, a whopping 14% of all 'pro forma' 2012 EPS will be due to "one time write offs" - the highest proportion of total earnings since 2009!



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Guest Post: Is This Recovery "Self-Sustaining" Or Merely A Mind Trick?

Those with vested interests in the Status Quo tout data that supports the claim the "recovery" is now "self-sustaining," meaning that the economy is now expanding fast enough to fuel new growth. In this view, the Federal Reserve's extraordinary policy interventions (zero interest rate policy, $23 trillion in support provided to the global banking system, 3.4% mortgage rates, etc.) and the Federal government's unprecedented fiscal stimulus (borrow and blow $1.3 trillion a year) have done their job; the economy is now "self-sustaining," meaning that it can continue growing as Federal deficits shrink and the Fed trims its quantitative easing policies.  Those looking at fundamentals such as household income/debt and sales see more of a Mind Trick being played on the weak-minded. If you can convince me the economy is expanding and inflation is rising, I will be more likely to risk borrowing and spending more than I can afford. The "real" economy might be sputtering, but my belief in the "recovery" will support my confidence in the wisdom of leveraging more of my (shrinking) income into debt-based consumption.



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When Work Is Punished: The Tragedy Of America's Welfare State

Exactly two years ago, some of the more politically biased progressive media outlets (who are quite adept at creating and taking down their own strawmen arguments, if not quite as adept at using an abacus, let alone a calculator) took offense at our article "In Entitlement America, The Head Of A Household Of Four Making Minimum Wage Has More Disposable Income Than A Family Making $60,000 A Year." In it we merely explained what has become the painful reality in America: for increasingly more it is now more lucrative - in the form of actual disposable income - to sit, do nothing, and collect various welfare entitlements, than to work. This is graphically, and very painfully confirmed, in the below chart from Gary Alexander, Secretary of Public Welfare, Commonwealth of Pennsylvania (a state best known for its broke capital Harrisburg). As quantitied, and explained by Alexander, "the single mom is better off earnings gross income of $29,000 with $57,327 in net income & benefits than to earn gross income of $69,000 with net income and benefits of $57,045."



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Home Equity Lines Of Credit Are Back As The Worst Of The Housing Bubble Worst Returns

"After six years of declines, lending for so-called Helocs will rise 30 percent to $79.6 billion in 2012, the highest level since the start of the financial crisis in 2008, according to the economics research unit of Moody’s Corp. Originations next year will jump another 31 percent to $104 billion, it projected."



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