Archive - Oct 2013 - Story

UPDATE: Tepco Orders Evacuation of Fukushima Power Plant Workers

A 7.3 (according to USGS) magnitude earthquake just struck 311 miles ENE of Tokyo at a depth of 10km. The Pacific Tsunami Center has issued a warning and VOA reports a 1-meter high tsunami could hit Fukushima coast at 02:40 local - 1340ET)....

NHK radio and TV announcers airing repeated warnings to residents of #Fukushima to stay away from the coast. #tsunami #Japan

— Steve Herman (@W7VOA) October 25, 2013

The Obamacare tech team should add another pressing cyber issue to its to-do list. As Mother Jones reports, web secuirty experts warn that that Healthcare.gov (and various state exchanges), the Obamacare websites, has a security flaw that could make sensitive user information, including Social Security numbers, vulnerable to hackers. The website, reportedly, has a coding problem that could allow hackers to deploy a technique called "clickjacking," where invisible links are planted on a legitimate web page. Using this scheme, hackers could trick users into giving up personal data as they enter it into the web site, potentially placing Americans at risk of identity theft or allowing fraudsters to file bogus health care claims.

As Alan Greenspan described this week, in an interview with John Stewart on “The Daily Show,”

“We really can't forecast all that well. We pretend that we can but we can't. And markets do really weird things sometimes because they react to the way people behave, and sometimes people are a little screwy.”

Which means they don’t necessarily go along with your central planning, no matter how good you think it is. But still economists insist that, if they are allowed to monkey around with it, they can make an economy better. And therefore, the Fed, which has lived by the sword of QE, will probably die by it too.

First: we are not suggesting Japan's army is comprised of radioactive mutants - perhaps just those stationed within 10 kilometers of the Fukushima gift that keeps on giving alpha through gamma rays. We are merely saying that if one takes Abe's latest deluded ramblings that Japan is "ready to counter China's power" literally instead of merely more nationalistic bluster by a prime minister whose first term ended in the runs (literally), then the demographically crippled island nation that has a soaring food and energy inflation problem, sliding wages and radiation that comes in 100,000+ RDA dosage increments, would be well advised to have a few invincible X-Men in its army's ranks if indeed it has any intention of taking on China. Because as Walter Sobchak would say, "this is not Man(churia)."

A key challenge for most investors is meeting return bogies, but as Citi notes in the following 6 slides, generating a 10% return in this low-yield environment is still possible (aside from riding short-squeezes in #N/A P/E stocks) as long as you have the intestinal fortitude for the kind of leverage required...

As the status quo crumbles, the state responds in the only way it knows: expand control and become increasingly authoritarian.

While no longer actively engaged in politcs, one of Ron Paul's crowning achievements while in Congress, was to bring some much needed sunlight to the balance sheet, the activities, and secret bailouts of the Fed, and according to some, was being responsible for the "transaprency, openness, and forward guidance" approach to monetary policy. The paradox here, as the whole Taper - Non Taper shocking episode provied, is that the Fed itself is now caught in a  reflexive Catch 22, and no longer can "renormalize" and extricate itself from its policy through "guidance" without in the process destroying everything it has achieved during the prior period of central planniing. Still, despite Ron Paul's unsung accomplishments there is much more to be done to expose just how actively the NY Fed's trading desk participates in the fixing of the S&P500's closing price day after day. For that, he will need the help of his son, Rand. Which is why as the Sunshine State News reports, "Sen. Rand Paul, R-Ky., is ramping up his opposition to President Barack Obama’s nomination of Janet Yellen to chair the Federal Reserve. Paul is teaming up with the Campaign for Liberty, chaired by his father former U.S. Rep. Ron Paul, R-Texas, to stand in opposition to Yellen and push legislation taking aim at the Fed."

Having fired a shot across Carl iCahn's bow yesterday, PIMCO's Bill Gross has a new target - once again talking his book...

Gross: By the way, I should spend more TIME like Bill Gates too -- we all should. He and Melinda are great paragons.

— PIMCO (@PIMCO) October 25, 2013

Perhaps more Americans should spend more time that way... instead of watching every tick in AMZN and dreaming of retirement...

Following record UMich misses, Gallup's economic confidence collapse, the slump in the conference board's measure of confidence, and Bloomberg's index of consumer comfort signaling major concerns among rich and poor in this country (in spite of record highs in stocks), today's Consumer Confidence data from UMich continues to confirm a problem for all those 'hoping' for moar multiple expansion. Falling for the 3rd month in a row, and missing expectations for the 2nd month in a row, this is the lowest confidence print in 2013. Perhaps even more worrisome for the 'hope and change' crowd is that the 12-month economic outlook has collapsed to its lowest since Nov 2011. It would seem that all that free money flooding our 'markets' has reached peak efficacy in terms of confidence inspiration, and as Citi notes, when this cycle has played out in the past, equity market corrections are often quick to follow...

A lot is riding on the answer...

As the 'diplomatic' debacle continues to rage between the US and Europe (most loudly France and Germany) over the Obama administration's ongoing eavesdropping on its allies' cell phones, Reuters reports that (state-backed) Deutsche Telekom is calling for German comms companies to cooperate to shield local internet traffic from foreign intelligence services. "It is internationally without precedent that the internet traffic of a developed country bypasses the servers of another country," notes one academic, warning that if more countries wall themselves off, it could lead to a troubling "Balkanisation" of the Internet, crippling the openness and efficiency that have made the web a source of economic growth. Despite Obama's denials, the situation is not fading away, and Germany and France continue to demand a "no spying" agreement.

The headline September Durable Goods number was great: rising at 3.7%, this was well above the August revised 0.2% increase and far above expectations of a 2.3% increase. However, a quick glance into the reasons shows why the reality is - once again - far uglier. Actually, the reason is just one: Boeing, which reported 127 plane orders in September compared to just 16 in August. This translated into a 57.5% monthly increase in non-defense aircraft orders in September (and Syria's contribution can't be denied either, leading to a 15.2% increase in defense airplane orders). So what does the US capital spending climate look like when stripped away from very volatile (and very cancelable) Boeing orders? In a word ugly: Durable Goods ex transports actually declined by -0.1, on expectations of a rebound to 0.5%, following an even more downward revised August print of -0.4%.

As frequent readers will recall, one of our favorite series of posts describing the "Walking Dead" monetary zombie-infested continent that is Europe is the one showing the abysmal state Europe's credit creation machinery, operated by none other than the Bank of Italy's, Goldman's ECB's Mario Draghi, finds itself in. As a reminder, it was as recently as September when we found that "Mario Draghi's Nightmare Gets Worse" because "European Loans Declined At Record Rate." To our complete lack of surprise, when a few hours ago the ECB released the latest monetary and credit creation update for the month of September, it showed... no change. Or rather, while loans to the private sector are at all time record lows, that other metric which Draghi at least has some direct control over (since he obviously can't control the amount of confidence in the system aside from threats of brute force), M3, just had its lowest pace of increase since January 2012.

Two days after Spain reported its first positive sequential GDP print (unclear just how adjusted the definition of GDP was to get to this watershed moment after 9 quarters of declines) and a day after it unemployment supposedly dropped more than expected (what was left unsaid is that the Spanish working age population dropped 85,200 in Q3 and -279,000 YoY and that of the 39,500 "jump" in Q3 employed people, virtually all were self-employed or temps while employees on permanent contracts were down by 146,300), the 5 second attention span investing herd is now convinced the housing market in Spain has dropped. This was "formalized" after billionaire Bill Gates invested $155 million, also known as pocket change, in Spain's infrastructure group Fomento de Construcciones & Contratas. Surely, if anyone knows how to time housing market turns it is the guy who brought us MS-DOS 3.1. Unfortunately, the mythical housing bottom may have been just that - mythical - following news that Spain's bad bank (oh yeah - lest we forget, Spain has a wonderful rug under which it can hide all insolvent bank NPLs)  failed to attract high enough bids in its first sale of commercial real estate and will cut the size of the portfolio being offered to make it easier to sell, according to Bloomberg which cited three people familiar with the matter.