Archive - Aug 2, 2013

Traders shot for and managed to hit 1,700 on the S&P 500. At this point, there is no real reason for this other than trader games (start of the month buying).

The past few weeks have seen the tech and business media abuzz about a not-so-little warehouse in Tennessee. That's because this distribution center, opening its doors with a burst of fanfare and even a few visits from nearby politicians, isn't a jumping-off point for Macy's or Target. Instead, the warehouse is the latest in a series of new locations being opened by retail technology giant Amazon.com. The jobs this new mega-warehouse is purported to create: 5,000. However, as we discuss below, for every job Amazon "creates," four other jobs go away at a company like TJX.

In short:

Since the March 2009 lows, US GDP has increased by $2.3 trillion.
Since the March 2009 lows, the capitalization of the US stock market has increased by $12.3 trillion.
Delta between the two: 436% in favor of stocks.

In the aftermath of the global financial crisis, world leaders repeated a soothing mantra. There could be no repeat of the Great Depression, not only because monetary policy was much better (it was), but also because international cooperation was better institutionalized. And yet one man, the American former intelligence contractor Edward Snowden, has shown how far removed from reality that claim remains. Prolonged periods of strain tend to weaken the fabric of institutional cooperation. The two institutions that seemed most dynamic and effective in 2008-2009 were the International Monetary Fund and the G-20; the credibility of both has been steadily eroded over the long course of the crisis. The Snowden affair has blown up any illusion about trust between leaders – and also about leaders’ competence.

With the mean-reverting extrapolators all calling the bottom in Europe and scandal-plagued PM Rajoy desperate for distraction repeatedly arguing that the country's depressed economy is finally emerging from a two-tear slump, the FT reports that IMF has just popped that balloon of hope. "Spain has historically never generated net employment when the economy grew less that 1.5-2%,” the IMF notes, pointing out "yet growth is not projected to reach these rates even in the medium-term." In fact, echoing recent warnings from independent economists at exuberance over the most recent data (driven by seasonally-enhanced tourism) as the start of a new trend, the IMF warns, "the weak recovery will constrain employment gains, with unemployment remaining above 25 per cent in 2018." So, for Rajoy, its back to the grift.

The latest buzz circulating around the gold market relates to news that Pakistan’s Economic Coordination Committee of the Cabinet (ECC) has decided to ban duty free gold imports for thirty days. Why you ask? Because those pesky Indians are using Pakistan as a conduit to get around the country’s recent 8% duty imposed on gold imports. All of this of course begs the question: With the price of gold “plunging” over the past several months, why did Pakistan and India both feel the need to take such draconian measures against a barbarous relic that everyone is supposedly panic selling? If there is so much gold to be had and no one wants it, what’s the problem? Strange indeed...

With US leaks about Israeli air strike on Syria, John Kerry stirring the civil war pot in Egypt, and the closure of US embassies across the Muslim world (Iraq, Afghanistan, Qatar, Bahrain, Oman, Kuwait, Bangladesh, Saudi Arabia, Libya, Yemen, UAE, Algeria, Mauritania, Sudan, Israel (Tel Aviv) and Jordan), it appears something is afoot. To add to the intrigue, the US State Department just issued a worldwide travel alert for US citizens.

*STATE DEPARTMENT WORLDWIDE TRAVEL ALERT EXPIRES AUGUST 31, 2013
*STATE DEPT ISSUES WORLDWIDE TRAVEL ALERT FOR U.S. CITIZENS

An Al-Qaeda threat has been posited but with no follow-up but we can't help but fear what we wondered about previously - the need for deficits to re-awaken (via some external event that no-one can 'un-patriotically' demur) providing more room for Bernanke to avoid his need for Taper.

A discussion post NFP of markets, economics and tapering!

While we have banged the table on the full vs part-time disconnect for so long even the mainstream media has finally caught up, another issue that few outlets mention let alone discuss is that all the job growth in the US has, so far, only benefited old workers: those 55 and older. July was no difference. As the chart below shows, of the 160k jobs broken down by age group, 60% went to workers aged 55-69. No jobs were added by those 16-19, 49K jobs went to recent college grads, or those otherwise aged 20-24, and a measly 15K jobs were gained by Americans in the prime working age between the years of 25-54.

"The more stocks go up, the more analysts, strategists, the financial media - and inevitably investors - firmly believe that the US economy has to be on the verge of rapid growth." TrimTabs' CEO Charles Biderman is back and blasting the "mass psychosis" that has overtaken the markets - driven by endless liquidity from a consequence-blind central bank - as the real economy struggles to keep its head above water. Growth must be coming sometime soon, "or else the market would not be going up," right? The "belief in the growth fairy," is not new. Since 2010, economists and sell-side strategists have been betting it all (and encouraging investors) on this faith that growth will arrive any day now. In fact, as Biderman lays out in unarguable facts, that this is simply not true - job growth is slowing, economic growth is slowing, and income growth is stagnant.

Amid all the high-fives over stocks hitting all-time highs and Edward Snowden's temporary freedom hogging the headlines yesterday, State Department spokesperson Marie Harf quietly pointed out that, due to an "abundance of caution," an unspecified number of US embassies and consulates in the Muslim world will be closed this weekend (and diplomatic facilities maybe longer). House foreign affairs committee chairman Royce suggested this morning that this closure is 'Al-Qaeda-threat-related'; and, as AP reports, the last major warning came last fall when embassies warned American diplomatic facilities across the Muslim world of potential violence around Sept. 11. (and the disaster that was Benghazi). But we can't help but worry about the coincident 'leak' by US officials of Israel's airstrike on Syria (and the potential forced response from Assad this would seem to portend).

This data really doesn't need much explanation. Here are the facts: so far in 2013:

There have been 246.5K Waiter and Bartender (Food Service and Drinking Places) jobs added
There have been 24.0K Manufacturing jobs added

The ratio of waiters and bartenders to manufacturing jobs: 10 to 1.

For the third month in the last four, US Factory Order growth missed expectations. In fact the last four months have seen the biggest plunge in a year. Adding to the disappointment for the 'manufacturing renaissance' hopes (despite proof in the payrolls data that it does not exist) is the fact that New Orders (ex-transports) dropped 0.4% (its worst in 3 months) with non-durable shipments down 0.6%.

The man who saved the global economy...