Archive - Dec 2013

“The only thing we have to fear is fear itself.”

As the world mourns the death of Nelson Mandela; following his oration, it seems President Obama has taken the opportunity to seek advice from world leaders on better managing his nation...

GM has named Mary Barra to succeed Dan Akerson as CEO, making her the first female CEO in global auto industry:

GM SAID TO NAME BARRA AS FIRST FEMALE CEO, SUCCEEDING AKERSON
GM'S AKERSON SAID TO STEP DOWN IN JANUARY

Yesterday, we pointed out that according to the latest Bloomberg survey of economists, roughly 70% of respondents now believe that a taper is coming in either December or January, further accentuated by the recent flipflopping of Fed "bellwether" James Bullard who after holding out for a much delayed reduction in the Fed's monthly flow, admitted that the "probability of a taper had risen ". Today, some additional thoughts on what now seems the consensus from Credit Suisse: "With the labor market looking to be on a more sustained recovery trend following a late summer set-back we think tapering is now virtually inevitable with the decision between a Dec or Jan taper a virtual toss-up that may come down to Fed perceptions of market liquidity in the latter part of December." And just to add fuel to the flame here comes CNBC's own staff "Fed expert" Steve Liesman with "get ready, here it comes: A December taper."

Emergency resolutions and legislation would be likely in many countries in the event of another Lehman Brothers collapse and another global credit and financial crisis. 

Particularly vulnerable banks in each country are....

Gold (>$1260) and silver (>$20) are extending yesterday's gains as US markets awake this morning. The crack higher at around 8:07ET caused the futures market to be halted after 3,000 Gold Futures contracts traded in one second at 08:07:45 on December 10, 2013 sending the price up $10 and tripping circuit breakers for 10 seconds. Silver is now +4% on the week and gold +2.5% as Treasuries are also bid. Stocks are stumbling overnight, driven by the "fundamentals" of a drop in EURJPY after it tagged 142 overnight and fell back.

As opposition party offices are raided and streets continue to fill with protesters, the "precarious" funding sitaution in the nation is beginning to flash red as interbank lending rates spike to 20%. Banks, clearly concerned about their own and each other's liquidity in the face of potential deposit runs (and the accompanying counterparty risk) and huge demand for liquidity. The hryvnia is falling and bond yields are rising but it is the spike in KievPrime overnight rates that is most concerning - and policy-makers have little room to help.

The average "Hope" phases last 10 months. In the US it is now running on 4 years... and counting.

• U.S. set to adopt Volcker rule to curb bank trading gambles (Reuters) After vote, lawsuits likely next hurdle for Volcker rule (Reuters)
• U.S. Congress budget talks could produce Tuesday deal, aides say (Reuters)
• Wealthy Go Frugal This Holiday Amid Uneven U.S. Recovery (BBG)
• Tearful Thai PM urges protesters to take part in election (Reuters)
• Fed’s Bullard Sees Higher QE Taper Odds as Labor Market Improves (BBG)
• Coeure Says ECB Would Offer More LTROs Only When Banks Can Lend (BBG)
• Inside China's Super-Sterile Chicken Farms (WSJ)
• Mandela Service Rivals JFK’s as Leaders Meet in South Africa (BBG)
• China data defy slowdown forecasts (FT), and of course the word is "data"
• Cold, ice grip U.S. as more snow to blanket East (Reuters)

The grind higher in equities, and tighter in credit, continues as markets brush aside concerns about a December taper for the time being. Overnight futures levitation has pushed the Fed balance sheet driven record high S&P even higher, despite as Deutsche Bank points out, the fact that we had three Fed speakers advocate or talk up the possibility of a December taper, including the St Louis Fed’s James Bullard who is viewed as a bit of a bellwether for the FOMC. Bullard said the probability of a taper had risen in light of the strengthening of job growth in recent months. Indeed, he noted that the best move for the Fed could be a small December taper given the improving jobs data but below-target inflation readings. The Fed could then pause further tapering should inflation not return toward target during the first half of 2014.  Looking at today’s calendar, the focus will be on US JOLTs job openings - a report which Yellen has previously highlighted as an important supplement to more traditional labour market indicators. US small business optimism and wholesale inventories are the other major data releases today. As mentioned above, US financial regulators are due to announce Volcker rules at some point today although as we just reported, the CFTC's meeting on Volcker was just cancelled due to inclement weather.

From Bernanke's infamous 2008 "not forecasting a recession" call to Fannie Mae CEO Franklin Raines 2004 "subprime assets are riskless" commentary, the following 10 "predictions" - as opposed to Wien "surprises" - will go down in infamy for their degree of errant-ness...

Japan's PM Shinzo Abe has seen his approval ratings collapse for the first time since his 'devalue-to-glory' strategy was unveiled a year ago. Kyodo News reported, support for Mr. Abe fell 10.3ppt to 47.6%, while Japan News Network reported a 13.9-point fall to 54.6% as WSJ reports, public concern over the controversial secrecy bill (designed by Kafka, inspired by Hitler) and its nationalist overtones merely exacerbated Japanese people's concerns about their pocketbooks (as incomes stagnate and costs rise). As Abe plays lip service to economic issues (with a very Maduro-like speech recently on profit margins and wage increases), there is little but public outrage to hinder his plans as his ruling Liberal Democratic Party has big majorities in both houses of parliament, with no election scheduled until 2016. So much for Abenomics...

The current malaise of news, data, and spin is "meaningless," David Stockman tells Bloomberg's Tom Keene, adding that markets are exhibiting "the kind of speculative froth you get at the top of a cycle where valuation loses any anchor in the real world; from earnings or the prospects of the economy." As he argued before, "owning stocks here is very dangerous," and despite Keene's best efforts to denigrate Stockman's "of course it's a bubble," perspective; the former inside-man exposes the hard mathematical truths of valuations, performance, and reality in this brief clip. Who is to blame - The Fed or Wall Street? "It is a question of who has taken whom hostage," Stockman concludes ominously, "it's a co-dependency... it's very dangerous."

"If you repeat a lie often enough, people will believe it."  Sadly, that appears to be the approach that the Obama administration and the mainstream media are taking with the U.S. economy.  They seem to believe that if they just keep telling the American people over and over that things are getting better, eventually the American people will believe that it is actually true. And of course the reality of the matter is that we should have seen some sort of an economic recovery by now.  Those running our system have literally been mortgaging the future in a desperate attempt to try to pump up our economic numbers.  The federal government has been on the greatest debt binge in U.S. history and the Federal Reserve has been printing money like crazed lunatics.  All of that "stimulus" should have had some positive short-term effects on the economy. Sadly, all of those "emergency measures" do not appear to have done much at all.