Archive - Nov 12, 2013 - Story

With the numbers of 'real' enrollees in Obamacare looking dismal relative to government expectations, and the deadline for the first official details of the health law's enrollment figures due later this week, the administration has decided - in an oh so US Government-esque move - to change the rules. An enrollee is now defined as people who have purchased a plan (normal health insurance plan protocol) as well as those who have a plan sitting in their online shopping cart but have not yet paid. As The Washington Post notes, the disparity in the numbers is likely to further inflame the political fight especially in light of the fact that - for context - the average e-commerce shopping cart abandonment rate is 67%.

A central tenet of propaganda is that the Big Lie repeated often enough is accepted with greater ease than small lies. Thus it is no surprise that the leadership and propaganda organs of the Fed, Federal government and the Keynesian cargo Cult of fellow travelers all repeat our era's Big Lie: There is a free lunch after all. There are two free lunches, according to our financial and political leaders: free money, in the form of money created out of thin air by the Fed, and almost-free money borrowed into existence by the Federal government. The problem with Big Lies is reality has not been disappeared; it still exists. Actions create consequences, and not necessarily the consequences that were planned or expected.

A few hours ago, the "historic" and "most important ever" (just like ever payrolls report) Chinese plenum concluded. And like everything out of China, it was big on promises and scant on details. Among the numerous assurances of reform, the plenum promised: to deepen reform of the medical system and in the education sector, to speed up free trade zone development, to clear barrier in markets, to deepen national defense and military reform, to reform the income distribution system, reiterated the main role of public ownership and said there would be reform of government-market relations. And all of this would yield results by 2020. Essentially, words so hollow one can't help but doubt this was merely the latest smokescreen to justify the perpetuation of the status quo, investment-based economy which as the BBG Brief chart below shows, instead of becoming more consumption driven which is what China has been feverishly attempting to achieve, has instead become ever more reliant on consumption.

• China Pledges Greater Role for Market in Economy (WSJ), China vows 'decisive' role for markets, results by 2020 (Reuters)
• China expected to cut growth target to 7% (FT)
• World Trade Center Tower Debuts in Manhattan Leasing Test (BBG)
• Job Gap Widens in Uneven Recovery (WSJ)
• Khamenei’s conglomerate thrived as sanctions squeezed Iran (Reuters)
• Swiss referendum on wages of high earners stirs debate (FT)
• Obama to Nominate Massad to Head CFTC (WSJ)
• Japan readies additional $30 billion for Fukushima clean-up (Reuters)
• Target Fills Its Cart With Amazon Ideas (WSJ)
• Shadow banks reap Fed rate reward (FT)

Following a brief hiatus for the Veterans Day holiday, the spotlight will again shine on treasuries and emerging markets today. The theme of higher US yields and USD strength continue to play out in Asian trading. 10yr UST yields are drifting upwards, adding 3bp to take the 10yr treasury yield to 2.78% in Japanese trading: a near-two month high and just 22 bps away from that critical 3% barrier that crippled the Fed's tapering ambitions last time. Recall that 10yr yields added +15bp in its last US trading session on Friday, which was its weakest one day performance in yield terms since July. USD strength is the other theme in Asian trading this morning, which is driving USDJPY (+0.4%) higher, together with EM crosses including the USDIDR (+0.6%) and USDINR (+0.6%). EURUSD is a touch weaker following a headline by Dow Jones this morning that the Draghi is concerned about the possibility of deflation in the euro zone although he will dispute that publicly, citing Germany’s Frankfurter Allgemeine Zeitung who source an unnamed ECB insider. The headline follows a number of similar stories in the FT and Bloomberg in recent days suggesting a split in the ECB’s governing council.

"I can only say: I'm sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed's first plunge into the bond-buying experiment known as quantitative easing.... We were working feverishly to preserve the impression that the Fed knew what it was doing...  The central bank continues to spin QE as a tool for helping Main Street. But I've come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time....  Having racked up hundreds of billions of dollars in opaque Fed subsidies, U.S. banks have seen their collective stock price triple since March 2009. The biggest ones have only become more of a cartel: 0.2% of them now control more than 70% of the U.S. bank assets.  As for the rest of America, good luck..... The implication is that the Fed is dutifully compensating for the rest of Washington's dysfunction. But the Fed is at the center of that dysfunction. Case in point: It has allowed QE to become Wall Street's new "too big to fail" policy."