Did the world of retail investors just realize that they are indeed the greater fool (as we showed here), as it seems this high-volume dip in US equities - the largest since the July 5th ramp-fest began - is not seeing the BTFATH mentality coming in quite yet. Or perhaps it is the somewhat belligerent tone that the President is using towards the hard-working US CEOs who see profits over employment.
Just 45% of those surveyed in the NBC News-WSJ poll said they approved of the job the President was doing. This is a big drop from just a few months ago - even as stocks surge (and apparently so do jobs?). This is close to the lowest ever approval rating for a President proclaiming things are on the up. Congress is even worse - with its lowest approval rating on record - as bad as during the debt-ceiling debt debacle. What is most stunning is that a huge 57% of those surveyed would vote fopr a ballot measure to replace all members of Congress. As is clear from the charts below - people in the real economy do not care about the market (anymore) as it appears the link between Obama's popularity and stocks broke in February 2013.
We had absolutely no concern about the outcome of today's 5 Year auction: after all, when push comes to shove, Bill Gross who yesterday was pitching 5 Year bonds to twitter would have certainly bought up the entire issue. Yet we were surprised to find that Direct Bidders, among which such bond kings as PIMCO, tendered only $6 billion (a 47% hit rate) in bids into today's $35 billion auction. Odd - could Bill Gross have been untruthful in expressing his interest in the bond and was merely looking for greater fools? Unpossible.
With his report cards firmly in the 'failing' category, President Obama begins his own 'New Deal' path. Starting with today's speech at Knox College (scheduled to begin at 1255ET), Obama will unveil his grand plan for "A Better Bargain for the Middle Class." Explaining what it means to be 'middle-class in America' (who are ranked 27th in the world), he notes "the success of our economy has always depende not just on the size of our GDP, but on the reach of our prosperity." Sounds to us like some more wealth transfer is on its way. As long as Bernanke can keep elevating stock prices then the wealthy can afford to vig a few points off to the plebians to keep the social unrest at bay.
As the President prepares to address Congress (and the nation) with his next new new 'better bargain' deal to secure the economic future for the US, we thought it appropriate to dust off the economic scorecard for how things are going under his old new deal. Obviously, the President of the United States is not really solely responsible for where we are economically. The condemnation, or praise, must be applied equally to all branches of government responsible for the fiscal and monetary policy decisions made. The problems that exist today were not due to just the last few years of excess but rather come as a result of more than 30 years of fiscal irresponsibility that spans both Republican and Democratic Administrations alike. However, since President Obama has taken the position of responsibility for "clearing away the rubble and getting us back to where we were", we can review the economic data to see whether, or not, this is indeed the case.
French bonds are rallying; French stocks are rallying; French PMI is rising (though still below 50); so everything must be great in the Gallic nation. Despite a Brit having won the Tour de France for the 2nd year in a row, however, it seems the dismal reality on Main Street is that the number of unemployed French people has reached yet another all-time record high. As Les Echos noted previously, this casts even greater doubt on President Francois Hollande's pledge to reverse a long-running rise in joblessness. As we have explained in great detail (here and here most recently) France's economic fortunes remain depression-like and today's Jobseeker data merely goes to confirm this.
Several days after Schrodinger's Egyptian coup, which is both a particle and a wave, but certainly not a coup in the eyes of the Muslim Brotherhood-backing Obama administration, the Pentagon decided that it would go ahead and proceed with a previously planned sale of several F-16 fighter jets to the country, even though it was unclear just who the recipient would be: the revolutionary forces or the previous administration. Moments ago AP reported that this sale has now been "delayed" for reasons unknown.
Today's entertaining European PMI data has gotten quite a few participants excited, with some of the more tabloidy elements even proclaiming that the recovery has arrived. Amusing: one wonders if they did the same when the European PMI printed above 50 the last time around Europe "telegraphed" a recovery back in early 2012 only to crash and burn promptly thereafter. The answer, of course, is rhetorical. Sadly for Europe, not its subsidized industrial complex, what PMI does is a month to month phenomenon driven by FX, government injections, and restocking cycles. A far more important question to the overall European economy caught in a Keynesian debt trap is what is happening with credit creation. It is here that the true fundamental problem affecting Europe is exposed and demonstrates precisely what it is that keeps Mario Draghi up at night.
Portugal, Spain, and Italy all saw healthy high-beta gains in stocks and bonds today as the EU Composite PMI printing fractionally above 50 'proves' the crisis is over (just like it did in January 2012). Bunds suffered in this 'growth' rennaisance - underperforming Treasuries by 2bps and rising 9.5bps on the day. This is the worst day in Bunds in 5 weeks. Sell-side strategists couldnt get out of each other's way fast enough to proclaim the 'bottom is in'. Sadly, Greek stocks and bonds did not manage gains on the day as delays remain (even though D-Boom promised it will all be fine by July 29th).
With the Detroit bankruptcy hearing under way (constitutional crises notwithstanding), we thought it useful to cut through the rhetoric, break-down the mutally-assured-destruction barriers, and peer into the cold-hard facts as the city looks to restructure its $18 billion in debt.
That's ok though: soaring mortgage rates are having "zero impact" on prices, give or take, according to the TeeVee. And really, all that's needed is just a little more record-er Option ARMs.
First the bad news (which for the market is good news): the revised May New Home Sales number was 459, down from 476K, which means last month's beat of expectations of 462K was actually a miss which would have sent the S&P soaring. Now the good news (which for the market is bad): the June New Home Sales seasonally-adjusted annualized number was 497K: the highest since May 2008 (even if far below the prior housing bubble peak) represented by an unadjusted June number of 48K actual houses sold, with more than half of it coming from the 26K new homes sold in the south. So good right right? Not really: the reason why there was a pick up in volume was not because there was far greater demand, but for the usual Economics for Dummies reason why there is demand: prices plunged.
Kate and William had a boy. Our bet on a name is George, but only because that appears to be the odds-on favorite among the London bookies. Still, all that money flowing around must at least be a little “Smart”, right? But as ConvergEx's Nick Colas notes, the same dynamic applies, albeit on a larger and hopefully more informed scale, when it comes to how capital markets price securities. We have our baselines – the price-earnings ratio of the market, the interest rate on Treasuries, the average price per square foot for real estate, and so forth – and then we tweak everything else up or down from there. That method has the benefit of simplicity, but comes with problems as well. More than anything, Colas warns, it pushes investors to “Anchor” their notions of valuation to benchmarks which may move when the wind shifts.
"In the last week of June, the dollar value represented by ARM applications accounted for 16 percent of mortgage requests, the highest share since July 2008, two months before Lehman Brothers Holdings Inc. collapsed, according to Mortgage Bankers Association in Washington." Oops.
While Edward Snowden can perhaps breathe a sigh of relief at being abale to avoid the humdrum beat of airport food for a while, he will be stepping out into the 2nd most expensive city in the world. Based on a survey of over 200 items, Moscow ranks 2nd in the world (with $8 cups of coffee and $4,600 average apartment rental costs), and Tokyo 3rd (with $5 newspapers and $7 coffees). But the most expensive city in the world will come as a surprise to most and likely create the need for a Google Maps search. With 40.5% of the population of this nation living in property and the average monthly rent a sky-high $6,500, this southern African country's capital is the most expensive city in the world (it would seem the Chinese arrival in resource-rich African nations - N'Djamena, Chad is 4th - has had its hot-money inflationary effects).