Retail Sales Miss, Ex-Auto Virtually Unchanged; Building Materials, Clothing Sales Decline

The all important retail sales report, the final economic data point before next week's taper announcement, has just come and it was a disappointment, printing at just 0.2% for the month of August, down from an upward revised 0.4% in July, and below the 0.5% expected. Excluding the government loan-funded autos and volatile gas sales, retail sales barely rose, increasing at the lowest possible pace, or 0.1%, and below the expected 0.3% rate, and well below the revised 0.6% from July. General merchandise stores went so far to post a -0.2% dip. However, the most notable number is likely the -0.9% drop in building and garden material sales, which is a screeching halt to the recent upward bias in home renovation, and further evidence that the recent cheap-credit fueled housing bubble has finally popped. As for clothing retailers: with a -0.8% drop in August, don't expect a rebound any time soon. So much for retail strength. But hey: at least consumers have stocks they can buy... at all time highs.

White House Shoots Down Nikkei's Summers Trial Balloon

Earlier today, when we observed the overnight "news" floated by Japan's Nikkei we cautioned that the Nikkei is best known not for breaking news but for floating trial balloons. In other words, the report was merely leaked to gauge the market response. Sure enough, the response was gauged, and here comes the official news, shooting down this latest trial balloon.

  • White House Is Saying Reports In Japanese Press That Obama Is Set To Name Larry Summers Are Wrong - Dow Jones

Sure enough, any modest USD strength accumulated on the overnight rumor, is now being promptly unwound.

Frontrunning: September 13

  • U.S., Russia to push for new Syria peace talks (Reuters)
  • Elite Syrian Unit Scatters Chemical Arms Stockpile (WSJ)
  • Obama to nominate Summers as Fed chief: Nikkei (Reuters)
  • Boehner Wants Joint Talks on Debt, Budget (WSJ)
  • House Republicans go for broke in fiscal battles (Reuters)
  • Pimco, BlackRock Together Received More Than a Quarter of Verizon's $49 Billion Bond Deal (WSJ)
  • Insane financial system lives post-Lehman (Gillian Tett)
  • JPM to add $2.5 billion to its litigation reserves in the second half of the year (WSJ)
  • Goldman’s Zurich offices visited over working-hours complaint (FT)

Friday 13th Markets Jolted By News Summers Appointment Coming As Early As Next Week

Overnight asset classes got a jolt following a report by Nikkei that Obama was moving toward naming Summers the next Fed chairman, citing “several close US sources,”  pushing stocks modestly lower in Europe, with bond yields higher. According to the report, Obama is to name Summers as next Fed chairman as early as late next week, after the Federal Open Market Committee meeting. Otherwise, risk is still digesting the news of the confidential Twitter IPO, as it is becoming quite clear that some of the largest names (Hilton also announced yesterday) are seeking to cash out in the public markets. Is this the top?

Three Killed In Attack On US Consulate In Afghanistan

Two years after insurgents attacked the main U.S. embassy and NATO headquarters in the heart of Kabul, killing at least nine people in a battle lasting several hours as attackers fired from a partially constructed building, and one year after the infamous Benghazi consulate attack which resulted in the deaths of Americans, overnight yet another attack was staged against US property in Afghanistan, this time the US consulate in Herat, western Afghanistan's main city, where detonated a powerful bomb outside the front gates and launching a gunbattle with security forces. At least three people were killed, however none of them Americans. The attack began at about 6 a.m. (0150 GMT). A Reuters witness said he saw flames in front of the compound rising from the wreckage of the vehicle and could hear the gunbattle as the attack unfolded.

Harry Reid Proclaims: "The Anarchists Have Taken Over"

"We’re diverted totally from what this bill is about. Why? Because the anarchists have taken over. They’ve taken over the House and now they’ve taken over the Senate... People who don’t believe in government - and that’s what the Tea Party is all about - are winning, and that’s a shame." - Harry Reid on the Senate Floor earlier today.

The best thing about inept, crony, powerful politicians is that when they realize they are losing the battle for the hearts and minds of the public they simply don’t know what to do. We suppose it’s also anarchic to want to not start World War III, right Harry? Enjoy!

Nigel Farage Slams Barroso's European "Disaster"

Following Barroso's State of the EU speech, we thought it useful to reflect on the true state of the EU. Nigel Farage's recent tirade slamming "Communist" Barroso's pro-bureaucrat policies are poignant as he exclaims the "disaster" that the EU has become for the poor and unemployed. To further color this rant we note Charles Gavekal's recent note on why Europe's still broken as worthless IOUs are 'transferred' around the union and "no one really knows who is going to take the final loss." Perhaps it is The Hamiltonian's summary of the structural problem (an interlocking set of European political, bureaucratic, media, academic and financial elites) and the sad fact that history suggests a crisis deferred is a crisis magnified.

Last Time We Checked, "Hope" Still Isn't A Strategy

Equity markets have to explaining to do, regardless of where you think they are heading.  As ConvesrgEx's Nick Colas notes, if bullish, riddle me this: are stocks just going to hop-skip-jump over Fed tapering, U.S. budget battles, a new Federal Reserve Chair, Syria, Greek bailout 3.0, German Elections, and other near term speedbumps?  Last time we checked "hope" still isn’t a strategy.  And for the bears: Colas asks, how has that been working out for you over the last week of boa constrictor-like squeezes higher?  Not so good. In the following note, Colas takes an out-of-the-box approach to explaining the recent rally by looking at some new academic work on the subject of stress.  As it turns out, stress is only harmful if you believe it is.  Maybe markets have 'learned' that lesson and view all these potential stomach-churning headlines as annoyances, rather than existential crises-in-waiting.

On A Taper "Relief-Rally", Moar "Boots On The Ground", And "European Instability"

An increasing cacophony of prognosticators are of the status-quo sustaining belief that stock and bond prices will rally next week when the Fed announces the taper. As Scotiabank's Guy Haselmann notes, the thinking goes that alleviation of the uncertainty will cause a "relief rally." However, as Haselmann notes, since the Fed has provided 5 years’ worth of massive stimulus that has launched asset prices to record highs, the commencement of the withdrawal process is significant... and any relief rally that ensues next Wednesday should be sold. His thoughts extend from Indonesian central bank's dilemma to European political instability, and the next stage of the Syrian crisis...

Goldman Expects $10-15bn Taper And Fed Walking-Back From Employment Thresholds

With bonds and stocks rallying (and the USD dropping) notably in the last few days, one could be forgiven for believing the Taper is off but Goldman's baseline forecast remains for a $10bn reduction in asset purchases - probably all in Treasuries - and $15bn is possible (though recently mixed labor data may choke that a little) and a strengthening of forward-guidance. As they note, the current redction in uncertainty (or rise in complacency some might say) has the potential to offset the tightening in financial conditions, barring another major outbreak of DC strife in the run up to the debt ceiling in late October/early November. However, what is most notable is Goldman's expectation that the Fed will start walking-back its unemployment-rate threshold as it has been clearly shown not to be a good catch-all indicator of broad economic and labor market performance. So it's data-dependent - but the data is unreliable at best and false at worst.

Vibrator Sales Help Make "Hello Kitty" Founder A Billionaire

85-year-old Shintaro Tsuji is the founder of Sanrio - the firm that introduced "Hello Kitty" in 1974. Sanrio's shares have doubled this year making the founder a billionaire, amid the Abenomics levitation. The success of the brand appears to be its ubiquity - as Bloomberg reports "it must be way up there in terms of the most recognized franchises in the world", - adorning everything from wallets, bags, golf clubs, and iPhone cases. But it's his latest venture - into "Hello Kitty" vibrator massager mastubrator - new from Japan" that caught our eye. As one shopper in a Times Square store noted, "it’s nice to have something a little girly and flashy and fun," and it doesn't show any sign of slowing with sales of around $900 million last year, "it’s very hard to see any diminution for the Japanese fondness for cuteness."

2600 Years Of Financial Innovation

In a world in which "can kicking" has become the only way out, it appears that the only thing that can prevent systemic collapse due to is even more financial innovation. And while we have no idea what is the next milestone in financial ingenuity, we present the key milestones over the past 2600 years that defined modern finance as we know it.

The "Gold" iPhone?

Sometimes you have to step back and laugh... spurious correlation perhaps, but over 10 years, 2 years, 2 months, or 2 weeks; the ebbs and flows of AAPL shareholders and spot gold prices seem oddly similar... so which is in a bubble and which is a screaming buy?

Employment: Trending Down

The growth rate of employment is declining over time, as positive growth weakens and recessionary declines deepen. For all the reasons addressed here and many other sites over the years - offshoring, global competition, labor-replacing technologies, the perverse incentives of financialization, structural changes in the economy, etc. - there is no one simple way to boost full-time, higher-wage employment. If wages cannot easily be increased, the alternative approach is to dramatically lower the cost of living.

The Slow Rise And Quick Fall Of The SEC's Enforcements

New SEC Chair May Jo White's motto "you have to be tough" and plans to toss out the SEC enforcement policy that allowed almost all defendants to settle cases without admitting wrongdoing sound great; but the reality is, as the WSJ reports, the policy shift comes as the SEC turns the page on its financial crisis work. New investigations into misconduct linked to the meltdown have slowed to a trickle. And a statute-of-limitations deadline that generally restricts the sanctions the SEC can get for conduct more than five years old is looming for many cases. The SEC's crisis-related actions are producing diminishing financial returns as the following charts suggest... As one law professor noted, "they've not had the big case that everybody wanted to see... a major player being held really accountable." Perhaps more reading and less porn would be a start?

Twitter Files To Go Public

Precious Metals Monkey-Hammered As Equity Winning Streak Ends With A Thud

It started early this morning as Asia really went to bed - when gold markets were temporariliy halted. Someone decided that was the perfect time to sneak a few thousand contracts through the futures market (and clearly has no fiduciary duty to a client for best execution). As the US day-session opened, it was silver's turn totake a hiding (and gold less so that time); and then into the close, with both precious metals (and copper) heading towards their lows, Silver nose-dived (now -8% on the week) and its worst day in almost 3 months. Away from precious metals, Oil surged back over $109 as Syria chatter hotted up again (from Assad this time), the USD slid further (though ended flat on the day after an opening dump), and Treasuries shrugged off early gains to close red even as stocks closed lower (despite a late-day ramp effort) - breaking the streak and stunning a few TV anchors as VIX-slam and the 'short squeeze' seems over for now.