Starting with the day Lehman Brothers collapsed, Bloomberg Businessweek examines the financial crisis as it affected the lives of the people who created it, tried to stave it off, protested it, profited from it, and lost everything to it.
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.
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."
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.
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?
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.
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?
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.
It will likely come as no surprise but the political one-up-manship continues as the Obama White House try to rescue themselves from a face-melting Putin Op-Ed... As Politico reports, WH press secretary Jay Carney stated: “If we were to see a situation unfold where Assad were to give up his chemical weapons to international supervision that would be an enormous accomplishment ... would be due to the decisions made by the Russian leadership but also the decisions made by the United States, by the president, to take the approach he has taken in response to the horrifying use of chemical weapons on his own people." Feeling the need to make one more jab at the Russians, Carney added, "The United States, in part because it is an exceptional nation, is called upon the lead in situations like this." Indeed, that's what it felt like eh? Under control the whole time...
In the summer of 1956, Egyptian president Gamal Abdel Nasser nationalized the Suez Canal, sparking a worldwide crisis. Britain was a major stakeholder in the canal, and almost immediately, the British government put together a small coalition consisting of the UK, France, and Israel to regain Western control. Their subsequent military action, however, greatly displeased the US government. And Uncle Sam quickly asserted its new role as the world’s superpower. But to anyone paying attention, this status has waned. Asia is rising. Major centers of wealth and power have grown around the world. US finances are desolate. And its currency is now widely reviled by foreign governments. But US politicians have completely ignored this trend over the last decade. They spend and act as if US global dominance is an endless river. With Syria, though, the US may have finally reached its Suez moment.
Moments ago the Treasury reported its deficit for the month of August, which was $148 billion, slightly less than the $150 billion expected. More importantly, it was over 22% less than the deficit from August 2012 when it was $191 billion. And that, in a nutshell, is the main reason why the Fed has no choice but to taper. What the chart below shows is the cumulative deficit of the US for fiscal 2012 and 2013. What becomes immediately obvious is that with the total deficit Year to Date of $755.3 billion running 35% below the $1,165 billion from a year ago, the Fed has far less room to monetize gross issuance.
As Angela Merkel prepares for her third term - in whatever odd coalition that lurches from the election - the following four charts may surprise many that believe in the core European nations' dominance uber alles. As Bloomberg's Niraj Shah notes, Merkel may find rebalancing the German economy, as its reliance on exports increases, harder than ever. The low levels of growth, high trade balances, excepotionally low consumption and homeownership, and growing "shadow" economy all point to a European core that is far from the beacon of stability so many assume it to be.