Archive - Jul 31, 2013

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To Save Spain's Housing Market, It Must First Be Destroyed





About a decade ago, Spain set off to "grow" its economy by launching an unprecedented homebuilding campaign. Several years later the campaign backfired, when the global housing bubble popped, and hundreds of thousands of houses ended up underwater, vacant or simply incomplete while millions of people lost their jobs, resulting in possibly the worst depression in Spanish history. Fast forward to today when Spain is about to set off to "grow" its economy by launching an unprecedented counter-homebuilding campaign, one in which the housing excesses of the last "growth" campaign will be literally demolished. And thanks to the magic of modern Keynesian math, both construction and destruction will result in growth for Spain.

 

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Guest Post: China’s Housing - Living In A Bubble





Rising home prices, especially in major cities, are prompting a growing chorus of discontent among ordinary Chinese. Our Japanese friends would no doubt feel more than hint of nostalgia should they visit Beijing. For just like the famous Japanese “bubble economy” of the late 1980s, Beijing has been virtually turned into one big construction site with constantly changing streetscapes. The real estate industry may have played a role in China’s economic development, but it appears to have been for the benefit of the few at the expense of the many. In the long term, the trade-off seems poor. For that, not just the general manager, but the premier too needs to take responsibility.

 

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Elliott Management: "The Entire Developed World Is On A Slippery Slope"





Elliott Management's 22-page letter to investors has something for everyone as Paul Singer ascribes his uniquely independent wisdom. From the fragility of the financial system to the hubris of academic pretenders; from inflation's various devious impacts on assets and reality to the floundering of the world's bankers; from America's "cooked data" to the pending social unrest in Europe and the perils of centralized power, Singers stresses "the temptation to debase fiat currencies... means owning claims on paper money is an act of either faith or denial." Recent market movements, Singer warns "indicate a world on life-support," and "for every day, month and year that policymakers try to substitute failed, inappropriate and risky QE policies for pro-growth policies, the debt mounts, as does resentment among middle-income families that their situation is not improving." The fact of the matter is that "no government has ever reached fiscal 'nirvana,' yet our central bank (and its peers) continues to push the envelope of risk, confidence and inflation." Despite the confident and brave words in which they are wrapped, central bank actions currently seem underscored by quiet panic.

 

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The U.S. Military Has Awarded Contracts To Al-Qaeda In Afghanistan





We suppose it just wasn’t enough that our allies, “the rebels” in Syria, have significant Al-Qaeda elements to them. No, we are the USA! USA! Best country ever. Defender of human rights. City on a hill. We must do far more than that. So we did. This story below from Bloomberg, highlights a 236-page report by the U.S. Army Suspension and Debarment Office, which shows that military contracts have been granted to the Taliban and Al-Qaeda in Afghanistan. Yep, this is exactly what happens when an empire gets too big, too corrupt, and ends up in the hands of a bunch of sociopaths.

 

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China Bucks AsiaPac Trend With 'Miraculous' Rise In Its PMI





UPDATE: China HSBC PMI prints 47.7 - same as Flash - for worst 4-month decline in 3 years

Following Japan's disappointing PMI last night, and after some 'hope' in June,  Aussie PMI collapsed from an almost 'recovering' 49.6 to 42.0 with only 1 in 12 industries expanding and production, employment, and new orders all falling further into contraction. Then came a formerly consistent bellwether of the global recovery (until of course it started to fall when it became irrelevant) - South Korea's PMI tumbled to 47.2 (from 49.4) - its lowest since Sept 2012 (and falling for the 3rd month in a row) and employment down the fastest in 17 months. Then after the early Flash HSBC PMI printed at 11-month lows (final HSBC PMI shortly) and firmly in contraction, China's official PMI just arrived at a perfectly 'reasonable' 50.3 (highest in 2 months) and well ahead of a contractionary 49.8 expectation. Remember this is the same data whose subsets were temporarily (and then permanently) removed last month. This is the widest disparity from HSBC's measure in 15 months.

 

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NSA Admits: 'We Do Store All Your Data But We Don't Look At It All'





The Director of National Intelligence released three declassified "in the interests of transparency" documents this morning that authorized and explained the bulk collection of phone data - one of the secret surveillance programs that Snowden revealed. As Reuters reports, much of what is contained in the documents has already been divulged in public hearings by intelligence officials but the National Security Agency's "Bulk Collection Program," carried out under the U.S. Patriot Act, is now in the open. Have no fear though, "Although the programs collect a large amount of information, the vast majority of that information is never reviewed by anyone in the government," the report said. As Senator Patrick Leahy commented, "what has to be of more concern in a democracy is whether the trust of the American people is beginning to wear thin."

 

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44 Facts About The Death Of The Middle Class That Obama Should Know





As Obama parades around middle-America, promoting hope-and-change amid a "Better-Bargain for the middle-class," it seemed only appropriate to lay out a few 'facts' before his next pronouncement. Once upon a time, the United States has the largest and most vibrant middle class in the history of the world. Sadly, things have dramatically changed in America since that time.  There just aren't as many "middle class jobs" as there used to be.  In fact, just six years ago there were about six million more full-time jobs in our economy than there are right now.  Those jobs are being replaced by part-time jobs and temp jobs. We live at a time when incomes are going down but the cost of living just keeps going up. As a result, the middle class in America is being absolutely shredded and the ranks of the poor are steadily growing.  The following are 44 facts about the death of the middle class that every American - especially President Obama - should know...

 

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Dylan Grice On The Intrinsic Value Of Gold, And How Not To Be A Turkey





Today’s bizarre confluence of negative real interest rates, money printing, eurozone sovereign default, aberrant asset prices, high unemployment, political polarization, growing distrust… none of it was supposed to happen. It is the unintended consequence of past crisis-fighting campaigns, like a troupe of comedy firemen leaving behind them a bigger fire than the one they came to extinguish. What will be the unintended consequences of today’s firefighting? We shudder to think.

 

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Presenting The Location Of The NSA's Secret FISA Court





The nation's spy court has begun operations in a new, secure space on the third floor of the E. Barrett Prettyman Courthouse in downtown Washington, ending its 30-year run of issuing secret warrants from within the Justice Department, according to three sources connected to the Foreign Intelligence Surveillance Court who spoke on the condition of anonymity, citing the strict secrecy surrounding it.

 

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Count Yourself Among The Poor!





Go ahead, be a fool, tell yourself that you are still part of that once proud American “middle-class,” then dare look in the mirror and see yourself as nothing but a zombie. Or, rather, the new identifiable species in the US: the Amerizombie, a reanimated economic corpse, undead but politically clueless to the new global realities.

 

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Financial Sense And Nonsense





“…the best way to get interest rates up is to have low interest rates" —Fed Chairman Bernanke responding to a Congressional testimony question

“We all know it’s going to end badly, but in the meantime we can make some money.”  —Jim Cramer, CNBC

“Thank God for the Fed.” —Australian Treasurer Wayne Swan

“Let’s be clear. We’ve intentionally blown the biggest government bond bubble in history.” —Andy Haldane, Bank of England director of financial stability

 

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The Financial System Doesn't Just Enable Theft, It Is Theft





It is painfully self-evident that our financial system doesn't just enable theft, it is theft by nature and design. If you doubt this, please follow along...

"The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists."

Ernest Hemingway, The Next War
 

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Fed Humiliated With Red Close Despite Dovish FOMC And GDP Revision





A very volatile day in stocks ended with a violent high volume dump from post-FOMC highs on heavy MoC selling pressure that left the S&P and Dow with red closes. S&P futures still managed their best month since Oct 2011 - though unable yet again to capture the 1,700 flag. The size and scale of the 'rotation' into the close (and strength in bonds) leaves us wondering who is buying and who is selling. For some context, post-FOMC, S&P -4pts, 10Y -8bps, Gold +$10, USD -0.15%; so it seems bonds benefited the most and stocks seem to be crying out for moar. The Dow has now closed red for 3 days-in-a-row - the worst streak in seven weeks.

 

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It Really Isn't Ackman's Day As CIT Pulls JCPenney Credit





While we have heard this rumor before, the NY Post is reporting that CIT - the largest commercial lender/factor in the US apparel industry - has abruptly stopped supporting deliveries from smaller manufacturers to JCPenney stores. Insiders speculated that CIT got skittish after meeting with JCP officials yesterday and getting a glimpse of financials. It really is not Bill Ackman's day - HLF +10%, JCP -6.7%.

 

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Chart Of The Day: Foreigners Are Quietly Getting Out Of Dodge





While the Fed is posturing daily whether it will or it won't monetize an ever greater portion of gross US issuance (and considering the drop in US funding needs, unless the Fed tapers it will soon very soon buy more than 100% of all 10 Year equivalent issuance going forward), foreigners have made their position vis-a-vis US paper loud and clear. What is their position? The following chart from today's TBAC presentation to the Treasury makes it very clear. With an ever declining, and recently the smallest on file, notional amount of Treasurys at auction going to foreigners since 2009 (and certainly much further back), they are not sticking around to see what happens.

 

 
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