Archive - Aug 2013

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?

How have the investment banks performed against each other this year? It's Goldman by a nose so far through the first half of 2013.

The warning signs were all there. Long, long ago they were all right there. Reading this article from the New York Times, published thirty years ago, brings forth emotions of frustration, disappointment and even a sense of resentment. Resentment that many of those that came before us knew about all of this and basically did nothing.

Just over three hours ago, when discussing the NASDARK 3 hour trading halt, we asked: "what was it about Apple's locked Bid and/or Ask that caused the NASDAQ freak out, and was all the Tape C trouble at the NASDAQ purely a function of a locked order originating at NYSE Arca?" Moments ago, we got one half of the answer courtesy of the WSJ, which reports that "Nasdaq OMX Group Inc. executives internally on Thursday pointed to a "connectivity" problem with competing electronic exchange NYSE Arca as the trigger to technical issues that led to a three-hour halt in trading of Nasdaq-listed stocks, according to people familiar with the matter." Of course, Zero Hedge readers already knew that.

Almost three years ago we warned of the consequence of the disincentives for the working man in the US at the lower-income level. Then, last November we noted the dismal fact that 'work is punished' in America for a large majority of the non-elites. And now, as the part-time new normal becomes more and more understood in the mainstream, we ask once again... If you could stay home and relax all day and actually make more money than you do at your current job, would you do it?

Poverty has an impact on the mental health of all Americans. Those living below the poverty line are three times more likely to have serious psychological distress as compared to those living above the poverty level. The following infographic provides some shocking statistics on how this has accelerated in recent years.

A steady rise in leverage in recent years means Corporate Asia now has the most leveraged balance sheets globally. As Morgan Stanley's Viktor Hjort notes, with Fed liquidity anticipated to slow, now the cycle turns more adverse. Asian corporate balance sheets face a combination of slower growth and higher funding costs. Slower economic growth is putting downward pressure on earnings growth and rising real rates is putting upward pressures on funding costs turning bad macro into even tougher micro. Asian banks are tightening lending standards in their procyclical way but Asian credit markets are facing a fundamental environment that for many corporate borrowers will feel like a recession.

As we pointed out first, the Nasdaq outage can be directly and indirectly traced to action in Apple stock from mere minutes (when it suddenly dropped to under $500) to just over an hour before the Tape C halt was announced. And while the plunge below $500 may have been the proximal cause for the lock up that crippled the Nasdaq in a historic three hour episode of unprecedented humiliation, Nanex, which also uncovered the real quote-stuffing reason behine the May 2010 flash crash (and which the SEC tried to pin squarely on Waddell and Reed) has just disclosed that Nasdaq was already demonstrating explicit "glitches" in the trading of Apple well ahead of the 12:21 pm trading halt.

So what does Ben Bernanke do? According to these two perfectly spot-on Australians, "he makes statements... very, very, very, very, very, very, very, very, very, very, very, very, very, very careful ones..." And when he does there are safety procedures, "get under your desk, in a doorway... somewhere safe." But, they go on, "What would happen if companies improve on their own? Well that would be an even bigger disaster... because Ben might turn off the easing tap." It's funny, coz it's sadly true...