Yesterday, in a rather paradoxical development, the Japanese Cabinet formally announced that the government will purchase several disputed islands that China also claims — a move that Beijing said would bring "serious consequences." The issue at hand is that China and Taiwan also claim the islands, which are part of what Japan calls the Senkakus and China the Diaoyu group. It is paradoxical because the last thing Japan, and its statutory deflationary and demographic collapse needs right now is to "antagonize" the world's fastest growing economy, and its neighbor to the west with whom it had a rather violent give or take as recently as 1945. Japan spin was naive: Chief Cabinet Secretary Osamu Fujimura repeated that the islands are part of Japan's territory and should not cause any friction with other countries or regions. "We certainly do not wish the issue to affect our diplomatic relations with China and it is important to resolve any misunderstanding or miscommunication." Turns out quite a bit of friction was caused as a result, as well as a substantial amount of misunderstanding and miscommunication. As Globe and Mail reports, "China has dispatched two patrol ships to the East China Sea in a show of naval strength and antagonism toward Japan after Tokyo said it had purchased a group of disputed islands from their private owners. China’s aggressive response ratcheted up tensions in a long-standing conflict between the two countries over claims to the territory."
Lakshman Achutan, ECRI (Economic Cycle Research Institute) made a recession call for the US on September 30, 2011 (and confirmed it multiple times since then). Gary Shilling, titling his August letter “Global Recession”, says “We are already in a global recession.” However, equity markets don’t think so, with the S&P 500 trading less than 10% away from a new all-time high. Only one side can be right. Could this be a repeat of October 2007, when the S&P 500 hit new all-time highs mere six weeks before the “Great Recession” began? Are so-called leading indicators, as used by the Conference Board, still reliable? Established leading indicators incorporate questionable input. While there is no perfect indicator, a combination of the ones tested here, weighed by accuracy, confidence and timeliness should produce a good reading. The higher-confidence indicators say that 2011 was a “close call”, but we are currently not in a recession. However, a lot of lower-confidence indicators are showing readings consistent with a severe recession.
Firm That Brought You Holo-Tupac Dies Less Than A Year After IPOing, Taking Millions In Taxpayer Subsidies With ItSubmitted by Tyler Durden on 09/11/2012 - 19:23
Most people know that during this year's Coachella festival, Tupac made a surprising appearance, if not in the flesh for obvious reasons, then in hologram form. What fewer people know is that the firm that created Holo-Tupac is special effects producer Digital Domain Media, which after years of failed attempts to do so, finally went public in November with Roth Capital as underwriter (there is now an Urban Dictionary definition for 'Rothed') at a price of $8.50 (well below the preliminary range of $10-12/share) and at a time when its burn rate was well above 50% of revenues, and which filed for bankruptcy hours ago. In other words, the company destroyed over $400 million in market cap in under 10 months. What is known by very few is that this is yet another public equity disaster of this administration: as filed in the bankruptcy Affidavit, "the Company has worked closely with State and local government authorities in Florida to execute economic stimulus contracts designed to create jobs and stimulate Florida’s economy. As of the Petition Date, the Company had contracted to receive a total of approximately $135 million in such government stimulus financing, including $19.9 million in tax credits. This financing consists of cash grants, land grants, low-interest financing, and tax incentives." In other words, in addition to the government's remarkable track record in the alternative energy field, public equity is now in the digital movie studio subsidization business. End result: bankruptcy, of a publicly funded company, shortly after IPO and sadly the realization that US capital markets are now so broken that the combination of private and public funding can sustain a company for less than one year.
Presented for your viewing pleasure are ten of the most prescient indicators of the resilience of the consumer and his largest asset (liability) since the 'supposed' end of the recession. We thought the subtle hint at which of these trends is not like the others would help; but, just in case you missed it, it's the part of the economy that is government-backed, subprime-funded, over-inventoried, and entirely channel-stuffed. Aside from all that, entirely sustainable, we are sure.
'He' has spoken; and the stock hath obeyeth - for now. Thanks to a transcript from Forbes we can now quantify the hidden message of Mr. Zuckerberg's interview. The results (from the 1400 words or so): Mobile 22; Money 6; Search 4; Stock 4; Spend 3; Time 3; IPO 1; Profit 0;
Double-Line's Jeff Gundlach presented 66 pages of chart-pr0n covering everything from Government Spending to Consumer Spending; from eating-out costs to food inflation; from future economic growth slowdown indicators to housing recovery hopes and reality; and from foreign stocks to Treasuries, MBS, and metals. Between a lack of surprise if 10Y rates were 100bps higher by year-end; and his call to 'sell the S&P 500 against a long in the Shanghai Composite', there's a little here for everyone (and his funds are killing it).
Retirement must be on again as the Dow creeps up to close at its highest since 12/28/2007 - no more reassuring sign that we need QE stat!! The high-yield bond ETF (HYG) also pushed to new highs - amid heavy volume - as it left its credit-spread and equity risk reality in the dust (as well as its intrinsic value) but who cares - QE/ESM/OMT/WTF - it's on like donkey kong. At least VIX kept some sense of rationality as it closed near its highs on the day, pricing in somewhat the binary concerns of the next 24-36 hours. Volume was nothing to write home about - nor was average trade size - as S&P futures rolled well off their highs to fall back below VWAP into the close and after-hours (when volume picked up). Commodities were mixed with Oil and Copper up, Gold flat and Silver down as the USD dropped (down 0.3% on the week) and stabilized after Europe's close. Treasuries leaked higher in yield (despite a record-breaking 3Y) but remain below Friday's peak-yield levels.
Between Boehner and Reid's comments today, the dial on the politicization-of-the-fiscal-cliff amplifier just got turned to 11. This is no surprise to regular ZH readers who know the record levels of polarization that remain among our politicians (and citizens). While some (cough Insana cough) believe the magical faeries are at work behind the scenes to solve the fiscal-cliff; we present, via Citi, the best visualization of the changing face of hands-across-the-aisle compromise 'change' in the last 45 years is presented below. Sigh...
On the anniversary of the most emotional day in our collective memory, here are some key statistics in the interest of truth, justice and the American way:
While it appears the mainstream media has forgotten about the ongoing drama in South Africa, the tensions are rising rather dramatically around the Marikana mines (owned by LonMin mining). As Al Jazeera reports, thousands of miners (along with wives and supporters) have defied an extended deadline (brokered by the government) and decide to remain on strike. The following clip provides some rather concerning color on what is occurring as Julius Malema, the expelled ANC leader, has already been charged with inciting violence - and is "playing a rather dangerous game." He is calling for a national strike as he addresses the people: "they have been stealing this gold from you. Now it is your turn, you want your piece of the gold." The tough reality is that as extraction costs rise (energy/depth) and now miners' costs rise, then the end-product's cost must rise, or - as Melema suggests - supply goes offline. Must see clip.
The conundra continue to mount up around the world as central planning efforts dislocate asset-values from reality wherever one looks. Nowhere is the juxtaposition of hope-and-fear more evident than in the industrial metals. We have discussed the reality of Iron Ore, and the unreality of China stimulus (funded or unfunded) bringing the excess inventory back from the edge ad nauseum but, as the WSJ notes, the stacks of copper slabs inside the warehouses of Shanghai last month grew by 20% since July. In fact, so much copper has been sent into storage that it is being lined up outside some buildings as "there's much more metal than we'd expected," and some would see this huge inventory growth as a signal of "people's uneasiness about Chinese growth." However, sure enough, copper prices are soaring - on the back of expectations that inventories are so high that the PBoC will step in with some stimulus and all will be well in the world again. While Deutsche Bank opines "any rally in copper prices based on expectations will likely not be sustainable," the alternate perspective, based on hope and dreams is that "just a couple of months of better demand - it will quickly change the perception of surplus to tightness." Meanwhile, the effervescence of central-bank-driven exuberance in prices has driven the 'value' of a good-old-US-Nickel up to 5.2 cents (its highest in four months).
It happened in September 2011, again in April 2012, and now its starting again. Despite the launch tomorrow of Apple's iPhone 5 (rumored to include the happy-ending-hand-extension), AAPL has notably underperformed in the last few days. Whether this is to do with the 20%-plus weighting in the NASDAQ-100 or whether, as we show below, the market's wise-men see AAPL's P/E ratio approaching that of the exuberant market and capping their attention, we do not know. What we do know is that each time, AAPL has notably underperformed the broad market for the next month (whether an up-market or down-market).
Three months ago, the Muslim Bortherhood supported, US-endorsed and recommended candidate, Mohammed Mursi won the Egyptian presidential election. Fast forward to today, when we learn from Al Jazeera that the grateful Egyptian population has decided to conduct a little Arab Spring repeat rehearsal in the fall, as Egyptian protesters scaled the walls of the U.S. embassy in Cairo on Tuesday and some pulled down the American flag during a protest over what they said was a film being produced in the United States that was insulting to the Prophet Mohammad, witnesses said.