Below is an extract of the full statement whose summary kept everyone up this morning, most certainly the headline reacting algos, and which the robots so far seem to like more than dislike.
Despite an initial knee-jerk higher on the 'ratification' confirmation, risk-asset markets seems less than enamored at the new European Conditional Union. European and US stocks popped but are falling back now - only marginally higher. EURUSD is back to pre-decision levels - though swung around in some crazy stop-seeking runs up and down. Bunds and TSYs are modestly higher in yield; Spainish and Italian bond yields are flat (so spreads are marginally lower). The biggest movers are Gold and Silver so far.
UPDATE: EURUSD unsure - but seems like 'Unlimited' ECB Bazooka's trigger (ESM) is now capped at EUR190bn from Germany.
The Kardinals of Karlsuhe kame through. As somewhat expected, they declined the complaint that, simply put - and among many other things, the ESM structure (i.e. German payments into it) stretches German constitutionality and can proceed to a broader vote next year - but basically - in a nutshell - there's no coming back now. As expected there are conditions though - that the market seems perturbed by:
- *GERMAN COURT ALLOWS ESM RATIFICATION WITH CONDITIONS :13347Z US
- *GERMANY MUST SET CAP FOR LIABILITY UNDER ESM WEHEN RATIFYING
- *GERMANY MUST MAKE SURE ITS ESM SHARE IS CAPPED AT EU190 BLN
Limited ESM (primary market) vs Unlimited secondary bond market buying (OMT). Go figure it out
The "fate of Europe" rests in their hands. Watch the decision live here.
As the world waits with baited breath for the Karlsruhe Klan to decline (the positive risk-on decision), markets are leaking modestly off their overnight best levels. Barroso's State of the Union seemed to have been the trigger for some weakness as he reminded everyone just how political this problem is. EURUSD is up 10pips, S&P 500 e-mini futures are up 2.5pts, European stocks are up marginally (IBEX +0.5%, MIB +0.17%, CAC -0.15%, EuroStoxx unch), Financial and corporate credit is 2-5bps tighter (XOver -9bps at one-year tights), and Sovereign spreads unch to slightly tighter.
- *BARROSO CALLS FOR DECISIVE DEAL TO COMPLETE EMU
- *BARROSO SAYS FEDERATION WILL ULTIMATELY REQUIRE NEW TREATY
- *BARROSO SAYS EU MUST COMPLETE DEEP ECONOMIC, POLITICAL UNION
- *BARROSO CALLS FOR FEDERATION OF NATION STATES, NOT SUPER-STATE
A whole lot of pundits are spending column inches trying to explain the cruel reality of the last forty years — stagnant wages for full-time male workers, falling wages for men as a whole, and a huge outgrowth of men who aren’t in the labour force. The question is why. Mainstream media pundits are suggesting that men are unsuited to the present economic landscape. It’s not at all the case that the United States is cutting back on industrial jobs because industry is less in demand. The United States still has plenty of demand for industry. America has cut back on industrial jobs because it has the ability to run huge trade deficits, through the dollar’s role as global reserve currency, and shipped its manufacturing industry abroad. Yet the present paradigm has severely damaged the prospects of young men, for whom a generation ago jobs in industry and manufacturing were once plentiful. Quantitative easing led to a jobs boom — in China, for Chinese industrial workers. And it seems unlikely that the industrial jobs are coming back any time soon.
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 - 18:23
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).