Archive - Nov 2013 - Story

As H.L. Mencken opined, 'The most dangerous man to any government is the man who is able to think things out for himself, without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane, and intolerable.' It is no wonder that, according to a Gallup Poll conducted in early October, a record-low 14% of Americans thought that the country was headed in the right direction, down from 30% in September. That's the biggest single-month drop in the poll since the shutdown of 1990. Some 78% think the country is on the wrong track. Simply put, Faber explains, it is most unlikely that US economic growth will surprise on the upside in the next few years. It is more likely there will be negative surprises.

Today, with the traditional one year delay (we assume they had to give it the benefit of the doubt), the mainstream media once again catches up to what Zero Hedge readers knew over a year ago, and blasts the outright failure that is Abenomics, but not only in the US (with the domestic honor falling to the WSJ), but also domestically, in a truly damning op-ed in the Japan Times. We will let readers peruse the WSJ's "Japan's Banks Find It Hard to Lend Easy Money: Dearth of Borrowers Illustrates Difficulty in Japan's Program to Increase Money Supply" on their own. It summarizes one aspect of what we have been warning about - namely the blocked monetary pipeline, something the US has been fighting with for the past five years, and will continue fighting as long as QE continues simply because the "solution" to the problem, i.e., even more QE, just makes the problem worse. We will however, show the one chart summary which captures all the major failures of the BOJ quite succinctly.

It may appear to be safe for everyone to be on the same side of the boat, but the gunwale is awfully close to the water.

Well you buy what's working, right? Don't fight the Fed? Oh wait...

Somehow, Fed head Bill Dudley has managed to encompass the entire "we must keep the foot to the floor" premise of the Fed in one mind-bending sentence:

• *DUDLEY SEES 'POSSIBILITY OF SOME UNFORESEEN SHOCK'

So - based on an "unforeseen" shock - which he "sees", and while there are "nascent signs the economy may be doing better", the Fed should remain as exceptionally easy just in case... (asteroid? alien invasion? West Coast quake?)

The CFTC has won a consent order against MF Global requiring it to pay $1.212 billion in restitution to customers and a further $100 million civil penalty:

• *MF GLOBAL TO PAY $1.2 BLN RESTITUTION, $100M PENALTY
• *CFTC:PENALTY TO BE PAID AFTER MF FULLY PAYS CUSTOMERS/CREDITORS
• *CFTC:LITIGATION CONTINUES VS CORZINE,O'BRIEN,MF GLOBAL HOLDINGS
• *CFTC: MF GLOBAL ADMITS TO ALLEGATIONS OF LIABILITY IN ORDER

The big question is - of course - where is the money coming from?

As Silk Road emerged from the "dark-web", other sites have appeared offering services that are frowned upon by most. As Forbes reports, perhaps the most-disturbing is "The Assassination Market" run by a pseudnymous Kuwabatake Sanjuro. The site, remarkably, a crowdfunding service that lets anyone anonymously contribute bitcoins towards a bounty on the head of any government official–a kind of Kickstarter for political assassinations. As Forbes reports, NSA Director Alexander and President Obama have a BTC40 bounty (~$24,000) but the highest bounty - perhaps not entirely surprising - is BTC 124.14 (~$75,000) for none other than Ben Bernanke. Sanjuro's raison d'etre is chilling, "as a few politicians gets offed and they realize they’ve lost the war on privacy, the killings can stop and we can transition to a phase of peace, privacy and laissez-faire."

As reported earlier today, Paris was the latest city to succumb to a rogue shooter when a gunman shot a photographer at left-leaning French newspaper Liberation, following by a shooting near the  headquarters of French bank SocGen.  The lone gunman is shown on the picture below. How the Paris situation differs from numerous such incidents taking place recently in the US, however, is that so far the gunman has not been captured or otherwise "incapacitated." Furthermore, as was reported subsequently, the Paris prosecutors are now treating the shooting as a "terrorist" case. And now, as the WSJ reports, Paris in now gripped in a manhunt for the gunman who is currently on the loose.

China's GDP is about to undergo the same magic that US GDP received earlier in the year. The "Chinese system of National Accounts" will see five significant adjustments that are expected to (surprise) boost the size of the nation's estimate of its GDP. The National Bureau of Statistics is considering making the changes to reflect the latest economic and social developments and implement the reform guidelines unveiled at the 3rd Plenum recently. From the addition of research and development - intellectual properrty - (just as the US did) to including mark-to-market changes (read rises) in employee stock options and real estate in consumption data, the Chinese appear dead set on making a once-unbelievably goal-seeked number into an entirely fantastical representation of reality (which of course enables moar higher manipulation as to avoid any debt-to-gdp hurdles that the real world might see as a concern).

The stock below is up 1200% year-to-date. The company in question is insolvent by any and all measures and has a "parent" under great pressure to take whatever gains it can get (as opposed to leave anything for shareholders). The company is exposed to the worst of the worst in the housing market. The smart money (as they are called) is piling in. The company is, of course, Fannie Mae (or Freddie Mac - same discussion). This chart, like none other, reflects the "investment" thesis in America today, as Grenwood's Walter Todd notes, “Either you’re going to make a lot of money or you’re going to lose everything you put into it."

While the domestic euphoria in the stock market bubble has succeeded to sucker in everyone into the biggest multiple expansion rally in 15 years (as was noted earlier today, 75% of the S&P's YTD return has come from its trailing PE expanding to 16.5x now from 13.7x in 2012 - the largest increase since 1998), foreigners continue to vote with their feet. In fact, as today's August TIC data report showed, in August - perhaps due to Tapering fears - foreigners sold $16.9 billion in US equities. This was the fourth largest equity outflow in history. Transactions in other securities were mixed, with $10.8 billion in long-term Treasury sales offset by $16.8 billion in MBS/agency purchases, as well as $2.3 bilion in Corporate Bond buys.

NAHB sentiment dropped to its lowest since June (after hitting 8-year highs just 3 months ago). This is the 3rd miss in a row as a huge rebound in prospective buyer traffic (read hope) in the NorthEast seemed to save the data from a fate worse than death. The prior print was revised down from 57 to 54 as it appears for the 3rd time in 20 years, the exuberance in realtor confidence is shown to be a false flag...

Thanks to some overnght levitation (and in spite of major outflows from foreigner from the US as seen in the TIC data), US equities have opened this morning to new all-time highs. As "investors" watched in disappointment on Friday at the 'miss', the opening this morning - amid a double POMO day - has lifted the Dow above 16,000 and the S&P 500 above 1,800 for the first time ever (now up around 10% from the debt-ceiling lows in the last month). Caracas here we come...

Lately Bill Clinton has not been doing the president many favors. First, the "is" definition-challenged former president had some harsh words about Obamacare, and most recently in an overnight question-and-answer session before a standing-room-only crowd in a Beijing hotel ballroom, Clinton who was in Beijing for meetings with China’s President Xi Jinping as well as to promote the work of his New York-based philanthropic organisation, the Clinton Foundation, while withholding comments on Obama - whose approval rating has plunged to an all time low - refused to criticise Edward Snowden. Instead he said he believed it was "perfectly legitimate" for the US government to search “big data pools… to see if there are patterns of communication between certain numbers or sites and others known to be in the possession of terrorist groups”. But he went on, via AFP: “The question is when, if ever, is the government justified in going beyond the patterns to listen to telephone calls, read emails, read text messages, and who’s supposed to decide that? Mr Snowden obviously thought that it was excessive.”

Amid the Spanish FinMin's "concerns about the pace of the increase" in government debt, and PM Rajoy's confidence that the nation would exit the eurozone-fueled banking bailout by January, bad loans in the still disastrously-troubled nations have re-accelerated to an all-time record high of 12.68% of total loans. Mostly linked to the collapsed property sector, bad loans climbed by 6.9 billion euros from the previous month to an unprecedented 187.8 billion euros ($254 billion) in September. Having almost completed the drawdown of its 41 billion bailout - and with the situation fundamentally worse than ever (e.g. record high unemployment), Spanish bond spreads have collapsed to 250bps - their lowest in 29 months.