Archive - Oct 23, 2013 - Story

In 223 years, the average real GDP growth for the USA has been 3.8%. At 1.9%, the 2000-2010 decade was the 2nd worst decade for real GDP growth in the storied history of the United States. The worst since 1790 was the 1930s which was followed by what many hope for now, an explosion of growth that occurred in the 1940s. However, three years in, real GDP growth for the 2010-> decade does not look as good as 'hope' would like it to be. So what is different this time and what 'facilitated' the 1940s recovery? The sad, but very real, truth is... war... but funding that this time will be problem...

BofAML's MacNeil Curry is changing his view on gold from bearish to bullish. The impulsive gains from the 1251 low of Oct-15 and break of the two-month downtrend (confirmed on the break of 1330) tells him that a medium-term base and bullish turn is unfolding. BoFAML looks for an ultimate break of the 1433 highs of Aug-28, with potential for a push to 1500/1533 long term resistance. In the next several sessions Curry suggest buying dips into 1309, cautioning that this bullish view is "wrong" if gold breaks below 1251. For those awaiting additional confirmation of a turn, Curry notes you need to see a break of 1375 (Sep-19 high & right shoulder off a multi-month Head and Shoulders Top).

Alan Greenspan is out pitching his news book. We explained the miracle of revisionist history and questioned the sanity of anyone buying this 'guide to economic forecasting' earlier in the week, but in his appearance this morning on CNBC, the "maestro" did a great job explaining just how flawed his own logic was (without our help). He explains (sadly reflective of the current clairvoyance of Jim Bullard) that, speaking for himself and his FOMC colleagues, "all of us knew there was a bubble," though failing to admit to being the progenitor, "but we badly missed the timing."  But, perhaps summing up the mantra of his ilk better than any other sentence, Greenspan concludes, "a bubble in and of itself does not give you a crisis..." adding, during a later Bloomberg TV clip, "I missed certain forecasts, you don’t apologize for that... We are not omniscient. I am a human being."

In a stunning claim, Germany's Der Speigel reports that the US targeted Angela Merkel's private mobile phone for years...

• *MERKEL TOLD OBAMA TAPPING WOULD BE UNACCEPTABLE, SEIBERT SAYS
• *MERKEL COMPLAINED TO OBAMA ABOUT PHONE SURVEILLANCE: SPIEGEL
• *MERKEL DEMANDS FULL EXPLANATION FROM OBAMA, SPIEGEL SAYS

So Obama promptly complied:

• *OBAMA TOLD MERKEL U.S. NOT TAPPING HER PHONE, SPIEGEL SAYS

We await Snowden and Greenwald's clarification...

In a “Sponsorship Agreement” between the Maryland Health Connection and the Ravens, Judicial Watch reports that the state (read taxpayers) will pay the Super Bowl champs $130,000 to push Obamacare on television, radio, the team’s official website, its newsletter and in social media. If Obamacare is the great thing that we are constantly reassured it to be, why are we seeing the administration feeling the need to constantly market, pitch, and sell the idea by any means possible (from keg standing college students to Superbowl shuffles)?

Which comes first, Dow 20,000 or Dow 5,000... and when?

When economic troubles strike, policymakers are eager to do something (anything) to try to help the citizenry. But, as Prof. Lawrence H. White argues in this brief clip, government doesn't necessarily know how to relieve economic woes, and in fact, often wastes and mismanages resources. Individuals in the market know better what they need in their circumstances, as economist Friedrich Hayek argued during the Great Depression. Critically, he points out, relying on government to fix our economic woes instead of allowing individuals to make decisions for themselves means putting all of our eggs in one basket. Individual decisions in the market won't be mistake-free, but each individual mistake will be smaller and will correct more quickly. The unusually slow and painful recovery that we have seen in this recession surely points to problems with the "government should do something" view.

Albert Edwards: "Only the brave can react to what they see and leave the markets. The global macro looks an appalling mess and even more importantly, long-term equity investors can find nothing worth buying. For equity investors we are closer to 2007 than 2001 as the vast bulk of the equity market, as represented by the median PE, PB or Price/Sales, is expensive. The US median price/sales ratios is at a record high, indicating that there is practically nothing cheap in the equity market left to buy."

Across the board, we are seeing European bank stocks (most notably Italian) trading halted. The 5-7% plunge in prices - just when everyone is proclaiming victory in Europe - reflects an apparent concern that the tougher-than-expected European bank stress-tests will expose the Italian banks for the bloated sovereign debt issuance soaks that they have become. As Draghi himself noted, in a desparate plea to maintain some credibility "banks do need to fail" to prove the credibility of the exercise, adding "if they do have to fail, they have to fail. There’s no question about that.". Spain is also under pressure and it would appear the "smart"money that chose to catch some knives in Greek banks may just lose more than one finger...

The global scramble for Africa's estimated 25 billion barrels of oil is on. Those scrambling to secure (and/or exploit) the continent's abundance of fossil fuels include each oil-rich nation's political and economic Elites, international oil corporations, regional powers, trading blocs and the four major (and energy-hungry) economic players: the E.U., the U.S., Japan and China. But, Oil-rich nations are bedeviled by the Resource Curse...

Today's Chart of the Day comes by way of SocGen's Albert Edwards who in one image shows why, with gross debt issuance needs between budget funding and rolling maturities at 60% of GDP, Japan has no choice but "to print and print and print"

We can only imagine the overwhelmingly positive perspective that Boehner and the GOP leadership will have as they discuss Obamacare's early days... What's worse than a "train wreck?" ...grab your popcorn...

We're not criticizing Krugman for the number of battles he gets himself into. If he argued his case truthfully and respectfully, there would be little reason for this post. But Krugman accumulates enemies by inventing his own facts, denying obvious mistakes, displaying über-arrogance and insulting those with opposing views. Fortunately, folks such as Ferguson occasionally bring these points to light.

While the world awaits with bated breath until the moment that Greece can no longer afford to pretend it is solvent and has to apply for its third bailout from Europe, or else threaten to take down Deutsche Bank and its tens of trillions in gross derivatives, the world has to listen to the constant jawboning from the Troika which for the past nearly 4 years continues to express its displeasure with Greece, and yet still provides every Euro of funding the imploding country requests. In the latest iteration of this charade, the Troika has apparently flexed its muscles and made it clear that if Greece wants to receive the next round of cash, it will have to shutter the state-owned Hellenic Defense Systems (EAS) and the Hellenic Vehicle Industry (ELVO). In short: shut down the domestic defense and auto industries, and we'll talk. Oh, and if as a result you have to import your guns and cars from Germany (whose generous funding has kept you afloat so far), and have to take out Deutsche Bank loans to pay for them, so be it.

The FHFA reported home prices gained at the lowest pace in 11 months (0.3% MoM vs 0.8% expected) missing expectations by the 2nd largest amont on 13 months. It seems, just as we pointed out that with fast money leaving the room and slow money crushed by higher mortgage rates at the margin that indeed something had to give... Prices in the South Atlantic and East Central actually fell MoM.