Archive - Apr 2012

April 30th

The Decline And Fall Of Suburbia

As Arch Daily notes, for decades the suburbs and the American Dream went hand-in-hand but the age-of-sprawl is ending; people are leaving the suburbs and once again flocking to cities in search of a better way of life. Whether Suburbia can be saved or not, this useful infographic looks at the key factors (from Poverty to Transportation costs to Generation Y's preferences) with a view to reinventing Suburbia as a sustainable alternative to urban life.

China Manufacturing Continues To 'Contract-And-Expand' Even As April PMI Misses Expectations

The topsy-turvy world of Chinese macroeconomic data continues to provide the Schrodinger-prone unreality that we have come to expect in this keep-'em-guessing Central Bank-driven fiat-fest we are experiencing. For 9 of the last 10 months, HSBC's China Manufacturing PMI has been in a contraction (sub-50) regime, while China's own Manufacturing PMI saw only 1 dip below the apocryphal 50-level (in Nov11) and has miraculously expanded for the last six months. The latest data from China (HSBC reports their final number tomorrow - as opposed to the Flash data already reported) showed the highest level of expansion for Chinese manufacturing in 13 months but missed economist's expectations - notably the first miss since November 2011 - as the divergence between HSBC and China remains near record levels. Of course, this makes perfect sense given this evening's 2nd worst three-month plunge in Australian Manufacturing since January 2009 (which seems to fit with the HSBC data as opposed to the 'strength' of the Chinese data). It seems tough for anyone to try to justify expectations of a Chinese stimulus given the country's own indication of its performance - check back to you Ben.

Biderman On The Fed: "They Control The Market, We Play With Their Money"

The pastel-wearing President of TrimTabs proffers an entirely non-perfunctory prose explaining why he believes we are now due for a stock market decline. Echoing our thoughts, Charles notes that "It's the Federal Reserve that controls the market, it's their money, they're the boss, we play with their money that they print or stop printing". Sadly true (especially for all the highly-paid economists and strategists out there), the pre-2009 drivers of equity performance (specifically new or excess savings) are no longer so; since the initial QE1 this has not been the case and providing us with a thoughtful history of equity market valuations relative to the various QE-efforts over the past few years - especially when compared to income growth and/or macro-economic data - provides just the color required to comprehend this essentially a obvious thread of reality that merely  four years ago would have been denigrated to the tin-foil-hat-wearers of the world. Real-time data says that wages and salaries are barely growing above inflation, Europe is a disaster, and the emerging nations are seeing slowing growth; without the Fed's new money where will cash come from to drive stock prices higher? The question is, assuming the Fed will 'stimulate' again pre-Election, will the market react the same way? And will the trigger for such an event be a major decline once again in asset prices?

As Europe's Most Pathological Liar Departs, Questions About Europe's Band-Aid Union Reemerge

We doubt many tears will be shed over the now official departure of Europe's most embarrassing political figurehead: the head of the Euro-area finance ministers, one Jean-Claude Juncker, whose presence did more documented damage to the credibility of Europe than... well, we would say virtually anyone else, but then again since everyone else in the European pantheon is a shining example of DSM IV-level sociopathology, we are kinda stuck. But anyway: Juncker is finally gone "he’s tired of Franco-German interference in managing the region’s debt crisis." And while the decision was known for a while, the ultimate catalyst is rather unexpected, and exposes just how frail the entire Eurozone is: “They act as if they are the only members of the group,” Juncker said today at a podium discussion in Hamburg." If this is coming from the man who admittedly lies for a living, we can't imagine just how bad the truth about the internal fissures within the Eurozone must be. Actually, we can.

Phoenix Capital Research's picture

To give you an idea of how bad things are with the cajas, consider that in February 2011 the Spanish Government implemented legislation demanding all Spanish banks have equity equal to 8% of their “risk-weighted assets.” Those banks that failed to meet this requirement had to either merge with larger banks or face partial nationalization. The deadline for meeting this capital request was September 2011. Between February 2011 and September 2011, the number of cajas has in Spain has dropped from 45 to 17.

 

Today's $1.24 Billion Targeted Gold Slam Down Makes The Mainstream Press

For the first time in what may be ages, a phenomenon that has become near and dear to anyone who trades gold, and which at best elicits a casual smirk from those who observe it several times daily, we find that the WSJ has finally picked up on the topic of the endless daily gold slam down, where the seller in complete disregard for market disruption (because in a normal world one wants to sell any given lot without notifying the market that one is selling so as to get a good price on the next lot... but not in the gold market where the seller slams the bid with reckless abandon) ignores market depth and in a demonstration of nothing but brute price manipulation force, slams every bid down just to demoralize further buying. Naturally, that this simply provides buyers with a more depressed price than is "fair" is lost on the seller, but not on the buyers who promptly bid up the metal as attempt to demoralize buying end in failure after failure. Yet it is peculiar that today, for the first time, the intraday gold slam down has finally made the MSM. To wit: "The CME Group Inc.’s Comex division recorded an unusually large transaction of 7,500 gold futures during one minute of trading at 8:31 a.m. EDT. The sale took out blocks of bids as large as 84 contracts in one fell swoop and cut prices down to $1,648.80 a troy ounce. The overall transaction was worth more than $1.24 billion... Gold traders buzzed with speculation that the transaction was an input error — a so-called “fat finger” trade. “Or a Gold Finger as it might be known in the bullion market,” traders at Citi joked in a note to clients." Well, no. It wasn't.

Rosenberg Takes On The Student Loan Bubble, And The 1937-38 Collape; Summarizes The Big Picture

Few have been as steadfast in their correct call that the US economy sugar high of the first quarter was nothing but a liquidity-driven, hot weather-facilitated uptick in the economy, which has now ended with a thud, as seen by the recent epic collapse in all high-frequency economic indicators, which have not translated into a market crash simply because the market is absolutely convinced that the worse things get, the more likely the Fed is to come in with another round of nominal value dilution. Perhaps: it is unclear if the Fed will risk a spike in inflation in Q2 especially since as one of the respondents in today's Chicago PMI warned very prudently that Chinese inflation is about to hit America in the next 60 days. That said, here are some of today's must read observations on where we stand currently, on why 1937-38 may be the next imminent calendar period deja vu, and most importantly, the fact that Rosie now too has realized that the next credit bubble is student debt as we have been warning since last summer.

Paul Vs Paul Post-Mortem

By way of post-mortem of this afternoon's epic Paul vs Paul Bloomberg TV cage-match, we reflect on the various headlines the two gentlemen made during the event and in the context of the credibility with which one of the gentlemen discusses his ability to manage the world and the 'ease' with which he and his henchmen can control inflation (and yet an unmanaged economy is subject to 'extreme volatility'), we remind readers of the post-WWII years and the extreme swings in purchasing power that their so-called managed economy created. As ever it appears the mutually-assured-destruction fall-back premise of Keynesian Krugman is trumped by the fact-based method of the more Pragmatic Paul.

  • *KRUGMAN SAYS UNMANAGED ECONOMY SUBJECT TO "EXTREME VOLATILITY"
  • *PAUL SAYS FED IS LENDER OF LAST RESORT FOR POLITICIANS
  • *KRUGMAN SAYS U.S. ECONOMY IS "PERSISTENTLY DEPRESSED"
  • *RON PAUL: FED HAS DESTROYED 98% OF DOLLAR'S VALUE SINCE 1913

Treasury Forecasts $447 Billion In Funding Needs Thru End Of September - $300 Billion Shy Of Trendline

Earlier today, the Treasury forecast that in the third and fourth fiscal quarter of 2012 (April-September), the US would need a total of $447 billion in new debt (split $182 billion in Q3 and $265 billion in Q4), bringing the total debt balance to just over $16 trillion by the end of September. While this is a commendable forecast, and one which certainly has provided to alleviate rumors that the US debt ceiling of $16.4 trillion would be breached by the mid/end of September, the chart below shows that it may be just a tad optimistic. 

Treasuries And Gold Outperform As Financials Drag Stocks Down In April

April ended on a weak tone (after another set of weak macro data) with a day of risk-asset deterioration amid low ranges and low volumes as the S&P 500 broke its 4-day rally streak. AAPL was a standout having given back over 60% of its post-earnings spike and nearing a break below its 50DMA once again. HY credit outperformed with an afternoon surge (in HYG also) taking it back into the green for the month - even as the S&P 500 remains marginally off March's close and underperformed along with IG credit today. Treasuries leaked lower in yield for most of the day but gave half of it back into the close (after Treasuries' best month in 7 months - perhaps a modestly expected give back on some rebalancing). Gold outperformed Silver once again today as Silver fell back to basically retrace all of its YTD gains relative to stocks - both up just over 11% YTD now (note that Silver was +32% prior to LTRO2). Stocks remain rich relative to Treasuries less-than-stellar implications but financials (which had their worst month since November) dragged the broad market down for its first losing month in the last six, as Utilities and Staples the only sectors with a reasonable gain this month. JPY strength and AUD weakness were evident and implied weakness today but in general the USD did very little on this last day of the month. VIX ended above 17% on the day, up almost 1vol as the term structure bear-flattened a little. Overall, a weak-end to the month with little apparent confidence in extending the QE-hope trend of the last few days as stocks remain hugely rich to broad risk-assets overall and most notably Treasuries.

Egan Jones Cuts Spain For Second Time In Two Weeks, From BBB- To BB+

Even as the SEC is hell bent on destroying Egan Jones as a rating agency, in the process cementing its status as an objective, independent, and honest third party research entity, the firm is just as hell bent on milking its still existing NRSRO status for all it's worth. Because while Egan Jones was the first entity to cut Spain two weeks ago, only to be followed by Spain, it just did so again minutes ago.

Money Can Buy Happiness

The oft-cited idiom that "money can't buy you happiness" - except in Phat Phong from what we hear - is summarily discussed by Michael Norton in this TED Talk as he notes that if you think that money cannot buy happiness then you are not spending it right. His point is (and his delivery is comedic yet clarifying) that money makes you anti-social or selfish (rather than happy) as we will tend to spend that money on ourselves (or the wrong things - a new Veyron perhaps?). But via experimentation (among people from Vancouver to Uganda) he discovered that spending money in a pro-social way will make you happy... So money can buy you happiness as long as you give it away once you have it - a noteworthy caveat - especially as Norton notes that the size of spending does not matter - as long as it focused towards someone else (and not, as he notes, in a dinner for your girlfriend with hopes of benefits later). In almost every country in the world, people who give money to charity are happier than people who do not give money to charity and interestingly spending-on-other-people made teams or people (sports or sales) more successful - of course, we assume taxation does not count as spending on other people.