Archive - Nov 2013 - Story

The Foreign Office has summoned the Spanish Ambassador amid a standoff over a ship that entered Gibraltar waters.

*U.K. CITES `ONGOING INCURSION' INTO BRITISH GIBRALTAR WATERS
*U.K. SUMMONS SPANISH AMBASSADOR OVER `CONCERNS' ABOUT GIBRALTAR

Sky reports, the Spanish survey ship has been in Gibraltar waters for more than 18 hours and repeatedly refused direct orders from the Royal Navy to leave. As a result, the Foreign Office has summoned Spanish Ambassador Federico Trillo to try and resolve the situation. One can't help but wonder if this is Rajoy's cunning plan to get the youth back to work... conscription?

You may find what is happening at one Wal-Mart in Ohio very hard to believe. At the Wal-mart on Atlantic Boulevard in Canton, Ohio employees are being asked to donate food items so that other employees that cannot afford to buy Thanksgiving dinner will be able to enjoy one too. On the one hand, it is commendable that someone at that Wal-Mart is deeply concerned about the employees that are so poor that they cannot afford to buy the food that they need for Thanksgiving. On the other hand, this is a perfect example that shows how the quality of the jobs in this country has gone down the toilet.

The ECB tried to "do whatever it takes" this morning by floating QE rumors (Constancio - QE is a possibility but not discussed in any detail) with the endgame being a weaker EUR (since a stronger EUR has crushed Eurozone corporate earnings). But, the Fed was having none of that, and as POMO started it dominated the ECB's "weak" kung-fu, ramping stocks and EURUSD to new highs... as we chronicled on Twitter... banging EURJPY (the all-important carry driver of all thinsg risk) to new 4-year highs).

The GOP's normal press conference is hotting up:

• *BOEHNER SAYS OBAMACARE SHOWS `PATTERN OF BROKEN PROMISES'
• *BOEHNER SAYS OBAMACARE `NEEDS TO BE SCRAPPED NOW'

Much is made of the expected hockey-stick - any quarter now - in US GDP growth (whether it's a lower fiscal drag or rise in CAPEX or any range of miracle-driven hope factors). Credit Suisse is not so sure; not just in the short-term, but in the long-term of the potential for US GDP growth. They note that basic growth accounting provides links between potential GDP to the size of the labor force, its productivity, and the capital assets – both public and private – it has available to work with. The problem - longer-term for the US, is, as CS notes, the following four exhibits collectively speak to the recent slowdown in potential, and do not augur positively for future growth.

As a result of yesterday's report that Census was caught manipulating the September 2012 jobs report, the BLS provided the following response via CNBC:

"the incident has been reported to the Commerce Dept Inspector General Office for investigation. We no further (sic) comment."

In other words, one part of the government - the Commerce Department - will investigate another part of the government - the BLS. We can only assume the NSA will certify the findings of the Commerce Department? Rinse. Repeat.

The last week has seen retailers begin to push "the promotional panic button" as holiday sales are expected to collapse to the weakest since 2009 (as we discussed here, here, and here). As Bloomberg reports, faced with wary shoppers and a shorter holiday season, retailers are piling on deals as they jockey for market share and are faced with "too much inventory, which doesn't bode well for 2014." U.S. retail sales excluding autos and gasoline grew 0.2% in October, half the month-earlier gain leaving this year likely to be the worst and most promotional shopping season since 2008 and perhaps Wal-Mart's $98 32-inch flat-screen TV is just the start of the deflationary spiral that benefits the stagnant incomes of the middle-class.

Over three years after current Warburg Pincus Managing Director and former US Treasury Secretary Tim Geithner welcomed everyone to the recovery, here is where we stand: "According to Markit, optimism is improving among developed economies while emerging markets still show low levels of confidence. Subdued expectations about future activity have led to restrained hiring plans. On net, only 14% of companies worldwide expect to add employees." And just in the U.S. this number is 19%. Per the WSJ: "Companies continue to fret about further disruptions from unresolved fiscal issues, and are still particularly cautious about committing to hiring in this uncertain environment," says Chris Williamson, Markit’s chief economist. That is all.

With Richmond, CA's plans to use eminent domain to "help" underwater homeowners still ongoing (as suits from mortgage-backed securities owners such as PIMCO, Blackrock, and DoubleLine having been initially dismissed), it appears the "wealth transfer" scheme is gaining traction around the nation. As we warned it would, the appeal of this "bailout" - with no thought to the unintended consequence of crushing an entire investing class out of the market (and its implicit rate-increasing result) - is just too strong for local government and sure nough New Jersey town Irvington is moving in that direction. As AP reports, Irvington's plan would focus on using eminent domain to purchase so-called "private label" security mortgages, or ones that are not backed by the U.S. government.

Tonight at 7 pm Ben Bernanke will be speaking at the National Economists Club Annual Members Dinner. As Credit Suisse's Carl Lantz notes, nobody knows the topic or the title of the speech: we can only assume it is some variation of the now trite and generic "BTFATH" coming from the Fed endlessly for the past 5 years. However, we do know one thing: the menu of the dinner that will accompany Bernanke's remarks. We are certain that in a world in which a tweet by a 70 year old billionaire moves markets as much as a statement by a current or future uber CTRL-Peers, it is the details of what the glorious chairman eats that is the most marking-moving event du jour, and as such the menu will be today's most important "fundamental" news. Jon Hilsenrath will follow up with his detailed analysis shortly.

• J.P. Morgan, U.S. Reach Historic Settlement (WSJ)
• OECD cuts global growth forecast (AP)
• Guess the profit margin: Wal-Mart Touts $98 TV as Holiday Seen Weakest Since 2009 (BBG)
• Republicans defy threat, block another Obama judicial pick (Reuters)
• Fed Ponders How to Temper Tapering Without Rate Increase (BBG)
• Wall Street uses 'merchant' workaround to cling to commodity assets (Reuters)
• PBOC to ‘Basically’ End Normal Yuan Intervention, Zhou Says (BBG)
• Italy’s leader warns Germany of rise of anti-European sentiment (FT)
• Yellen Nomination for Fed Chairman to Get Vote This Week (BBG)
• As U.S. default threatened, banks took extraordinary steps (Reuters)
• NSA vowed repeatedly to fix its collection errors (AP)

When all else fails, and/or when the president is caught in yet another major scandal, there is only one way out: war. As many expected, but as nobody knew what shape the latest provocation would take, overnight at least 23 were killed and dozens hurt after a twin bomb attack shook the Iranian embassy in Beirut. As NBC reports, a local al Qaeda affiliate, the Abdullah Azzam brigades, claimed responsibility for the explosions – the latest sign that Syria’s civil war is spilling over the border into Lebanon. Burning cars, bodies and pools of blood littered the front of the embassy building, in the Hezbollah-dominated south of the city. The Zahraa hospital nearby told AFP that it had received the bodies of five people and was treating at least 35 others for wounds. Lebanese media broadcast harrowing images from the scene of the blast, with charred bodies on a street lined by blazing cars and strewn with the rubble.

It is time for the centrally-planned markets to "try" for the round number trifecta of 16000, 1800 and 4000 again, although it may be a tad more difficult on a day in which there is no double POMO and just $2.75-$3.50 billion will be injected by the NY Fed into the S&P - perhaps it is Bitcoin that will hit the nice round number of $1000 first? Overnight, the Chinese Plenum news rerun finally was priced in and the SHComp closed red, as did the Nikkei 225 as the Asian euphoria based on communist promises about what may happen by 2020 fades.  What's worse, the Chinese 7-day repo rate is up 140bp this morning to 6.63% amid talk of tightening domestic liquidity conditions, and back to levels seen during the June liquidity squeeze. All this is happening as China continues leaking more details and hope of what reform the mercantilist country can achieve, and how much internal consumption the export-driven country can attain: overnight there were also additional reports of interest rate liberalization and that the PBOC are to set up a floating CNY rate. Good luck with that.

On Friday October 5, 2012, the BLS released what was arguably the most important report of Obama's first term: the final jobs number, and unemployment rate before the November 2012 presidential election. As so many predicted, it "plunged" from 8.1% to 7.8% allowing the president to conduct countless teleprompted speeches praising the success of his economic recovery. It also served as the basis for the infamous Jack Welch tweet: "Unbelievable jobs numbers..these Chicago guys will do anything..can't debate so change numbers" and prompted the pro-Obama media to quickly brand all those who questioned it as conspiracy theorists...  Well, as it turns out over a year later, the conspiracy theorists were once again, spot on: the Bureau Of Lies And Subterfuge manipulated the most important jobs report in Obama's career.

"Reuters was completely accurate that I am concerned about the level of the market.  But I also made it clear on the conference call (and I believe as Reuters reported it), that it is almost impossible to predict what a market will do in the short term.  There are too many variables." - Carl Icahn