Archive - Aug 23, 2013

Oh it was said...

It has been a wild ride for Steve Ballmer since he became Microsoft CEO in January 2000. A market-cap loss of over $330 billion is hardly the legacy he would want to have left but it is perhaps the $24 billion spike in market cap that has occurred today since his resignation that will have him leaving before the 12 months are up...

"There is never a perfect time for this type of transition, but now is the right time," Ballmer said. "We have embarked on a new strategy with a new organization and we have an amazing Senior Leadership Team. My original thoughts on timing would have had my retirement happen in the middle of our company's transformation to a devices and services company. We need a CEO who will be here longer term for this new direction."

Tepco tank demons...

Between 2000 and 2012, wages are stagnant (or have declined) for the entire bottom 70% of the wage distribution. In fact, as the latest study from the EPI shows, for virtually the entire period since 1979 (as we have discussed a number of times, most recently here and here), wage growth for most workers has been weak. The median worker saw an increase of just 5.0% between 1979 and 2012, despite productivity growth of 74.5%, while the 20th percentile worker saw wage erosion of 0.4% and the 80th percentile worker saw wage growth of just 17.5%. In other words, the vast majority of wage earners have already experienced a lost decade, one where real wages were either flat or in decline; and given the policies (monetary and fiscal) that shows no sign of changing, it seems our recent comment that the US appears to be worse than Japan is becoming more prescient.

There is more than just loan delinquencies, unemployment rates, and PMIs that are on the rise in Europe. As we have long-feared, the relative austerity combined with high unemployment has historically always been a boiling pot for increased social unrest and it would appear this is very much the case among the most troubled peripheral nations in Europe. As Bloomberg's Niraj Shah points out, burglaries in Greece (up a stunning 63%) and Spain (53.5%) have soared since the crisis began in 2007. This compares with a European-Union-wide average increase of 7% (which is notable in and of itself) as Cyprus and Portugal also see ~20% increases in theft. With unemployment rates showing no signs of slowing, we suspect this trend will only get worse as the divide between the haves and have-nothings increases.

Now that the US has made up its mind once more and "knows" that Wednesday's chemical attack in Syria was conducted by the government and targeting the "rebels", even as the "developed" west calls for a UN investigation to determine just that, and as the US (including the CIA), Israel and Jordan have already sent an advance military force into Syria to conduct more false flag provocations and blame it on the regime, the only next step is to soften and prepare popular opinion for what comes next. And what comes next is on the front page of the WSJ this morning: "The U.S. began refining its military options for possible strikes in Syria, officials said... Officers at the Pentagon on Thursday were updating target lists for possible airstrikes on a range of Syrian government and military installations." Then again we have seen all this before. Surely, one of these times the administration will actually go ahead and push the button instead of just talking about it.

The USA puts men behind bars for revealing what the country and the world should have been told a long time ago: the laws are different for those in one place that is high on the hill and for the rest of the population we can whistle until the cows come home because those laws will be applied in a different way

• Lew warns Congress to strike debt ceiling deal (FT)
• Central-Bank Moves Blur the View (WSJ)
• Brazil, Indonesia launch measures to shore up their currencies (FT)
• More mainstream media reminded about Fukushima - Radioactive ground water under Fukushima nears sea (AP)
• Fukushima inspectors 'careless', Japan agency says, as nuclear crisis grows (Reuters)
• New York Banker Arrested on Rape Charges in East Hampton (NYT)
• This time they mean business, for real: CFTC Moves to Rein In High-Speed Traders (WSJ)
• Britain operates secret monitoring station in Middle East (Reuters)
• Moody’s considers downgrading top US banks (FT)
• China's Bo calls wife mad after she testifies against him (Reuters)
• JPMorgan Sub-New Normal Growth Seen Vexing Next Fed Chief (BBG)
• SEC calls for cooling-off period for more staff (Reuters)

It was a quiet overnight session, in which the Nikkei was catching up to USDJPY weakness from the past two days, while China dipped once more despite the NDRC's chief economist stating China may cut RRR or conduct more reverse repos in H2 to maintain stable credit as loan growth slows down (or in other words things go back to normal). In Europe ECB's Nowotny decided to undo some of Draghi's recent work when he said that "good economic news" removes the need for a rate cut which in turn pushed the EURUSD higher (and European exports lower), even as former Cyprus central bank Orphanides said the Euro crisis may flare up after the German elections. In the UK Q2 GDP came in slightly stronger than expected at 0.7% vs 0.6% Exp. letting the GBP outperform since a need for the BOE to ease, at least in the short run, is becoming less pertinent. In amusing news, Moody’s late yesterday put six largest U.S. banks on review as it considers the effect of evolving bank resolution policies under Dodd-Frank and international regulations. As such GS, JPM, MS and WFC may be cut.

A look the end of the rising cycle and the start of the falling cycle, including its dynamics and capital destruction. How does the central bank respond?