Archive - Nov 2013 - Story

Despite the stock's renaissance (eerily reminiscent of Eastman Kodak), recent images of the crammed and disorganized racks at various JCPenney stores do little to conjure confidence that staff or management either know what they are doing - or give a shit... except for this clarifying quote...

"What one may misconstrue as clutter is merely a strategic effort to meet high customer demand," said Penney spokeswoman Daphne Avila.

Is that like saying, "one man's trash...?" It seems, for JCPenney that marketing and product placement come a weak second to a pit full of tangled clothes...

When Abenomics was unveiled in Japan upon the re-election of Shinzo Abe as prime minister in late 2012, it is safe to say that, having been mired in a 20-year deflationary spiral and with debt totaling 240% of GDP, Japan was nearing an endgame of sorts. Realizing just how late in the game he found himself, Abe promised to change all this, but in order to do so he needed to pursue a high-risk strategy with a low probability of success. The press (ever hungry for a new, catchy portmanteau word) dubbed it "Abenomics." Grant Williams, in his latest excellent letter prefers to call it "Avenomics": the economics of the hopeless. Bringing Kyle Bass' thesis up to date, Williams concludes, "say a prayer for Shinzo Abe, folks. For Avenomics to score, he's gonna need a miracle."

With delays, glitches, and broken promises plaguing the President's healthcare reform, it is perhaps surprising that the level of coverage among the mainstream media of the SNAFU - and more importantly its potential implications - is not higher. Of course, in each news cycle, Obamacare is mentioned, along with a soundbite of how it will all be fixed soon and it's only the website, but, as the following uncomfortable clip shows, there are notable and far-reaching implications (not the least of which is the progression to a part-time economy that we have so vociferously pointed out - explicitly here and anecdotally here) for Americans and the US economy as a whole.

With the "inmates in charge of the asylum" during this holiday shortened trading week it seemed to be an apropriate opportunity to share a virtual cornucopia of topics to consider while enjoying the delicious delicacies, and subsequent tryptophan induced comas, of a traditional Thanksgiving.

Things are rapidly escalating between the land of rising sun and the sleeping dragon who has now fully woken up...

The Fed is busy doing everything in its considerable power to get credit (that is, debt) growing again so that we can get back to what it considers to be “normal.” But the problem is that the recent past was not normal. For the Fed to achieve anything even close to the historical rate of credit growth, the dollar will have to lose a lot of value. This may in fact be the Fed’s grand plan, and it’s entirely about keeping the financial system primed with sufficient new credit to prevent it from imploding.

With the bulk of the US still sleeping on this day of giving thanks, it is perhaps ironic that the Brits have been pounding away at the USD driving GBPUSD to 2013 highs. S&P futures jerked higher on the European open and clung to those gains, extending yesterday's small green close to new record highs (+4.5 points). US Treasury futures sold off modestly then recovered back to unch as the USD slipped gently lower (even as JPY weakness continued). Gold and silver are up around 0.5% from yesterday's close.

Gross: Give “thanks,” but not your wallet to the #Fed. Begin to de-risk if you haven’t already. @federalreserve

— PIMCO (@PIMCO) November 28, 2013

For Shawndraka Mack, a 100% pay rise from her current $7.60 "would do just fine." While some employees turn to blood plasma donation, and most are on food stamps (and other benefits), the mother of two teenagers (on Medicaid) told Bloomberg Businessweek, “I love what I do, but I don’t want to work for nothing." Between the 40 hours a week she works and the benefits, Mack explains, “I work at McDonald’s and I can’t afford to eat there. It’s crazy.” Of course, McDonalds has 'tips' for surviving on their state-subsidized wages but once again, despite Harry Reid's extrapolated charts, the reality of raising the minimum wage is lost on most who never stop to think of where the 'money' comes from; and besides employees have little to no leverage as we explained here.

Despite the US being largely on holiday, the demand for digital currencies continues to surge. Bitcoin has rallied another 10% overnight as Chinese appetite for alternative stores of value remains unabated (BTC China is nearing its record highs) as USD/BTC is trading at $1170 - on its way to crossing the Maginot line of gold's spot price (within a few hours at this pace). Bitcoin though has nothing on its smaller cousin Litecoin which has now run from $1.11 to over $48 in the last 5 weeks. In fact, almost every crypto-currency in the world - from Infinitecoin to AnonCoin is surging... with only the ironically named PhoenixCoin (-68% overnight) not rising from the flames of fiat torment.

On November 7, when the ECB announced a "surprising" rate cut, 67 out of 70 economists who never saw it coming, were shocked. We were not. As we observed ten days prior, Europe had just seen the latest month of record low private sector loan growth in history. Or rather contraction. Back than we said that "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." We concluded: "we now fully expect a very unclear Draghi, plagued by monetary zombie dreams, to do everything in his power, even though as SocGen notes, he really has no power in this case, to show he has not lost control and start with a rate cut in the November ECB meeting (eventually proceeding to a full-blown QE) in order to boost loan creation." Less than two weeks later he did just that. The problem, as the ECB reported today, is that not only did M3 decline once more, to 1.4% or the slowest pace in over 2 years and well below the ECB's 4.5% reference growth value, but more importantly lending to companies and households shrank 2.1% in October - the biggest drop on record! Draghi's monetary zombies are winning.

• CME/CBOT/NYMEX Closed
• CME Globex -
  • Equity products halted (halted between 1030CST/1630GMT and 1700CST/2300GMT);
  • Interest Rate Products halted (halted between 1200CST/1800GMT and 1700CST/2300GMT);
  • FX halted (halted between 1200CST/1800GMT and 1700CST/2300GMT)
• NYMEX and Comex halted (halted between 1215CST/1815GMT and 1700CST/2300GMT)
• NYSE Closed
• NYSE LIFFE Regular Close
• Eurex Regular Close

• The second coming of Obamacare website - will it work? (Reuters)
• Winter Storm Moves North as Macy’s Waits to Make Parade Call (BBG)
• Eyeing holiday sales, more U.S. retailers to open on Thanksgiving (Reuters)
• It's all Verizon's fault: H-P Will Replace Verizon in Hosting HealthCare.gov Website (WSJ)
• Bitcoin Service Targets Kenya Remittances With Cut-Rate Fees (BBG)
• Embattled Thai PM easily survives no-confidence vote, protests persist (Reuters)
• For U.S. stores it is ugly out there: in more ways than one (Reuters)
• Japan and S Korea military flout China air zone rules (FT)
• UBS Restructuring Forex Unit (WSJ)
• Trader Messages Scrutinized as UBS Bans Chats Among Firms (BBG)
• ECB warns on external risks to eurozone financial system (FT)

Based on the Fed's wealth effect creating surge in stock prices, Guggenheim's Scott Minerd believes retail sales should be up 5.8% in Q4 2013. However, as we noted before, expectations are for a dismal 1-2% holiday spending growth at best; as 2013 is set to be the worst holiday spending season since 2009. Stores from Tilly's to Abercrombie and Wal-Mart are warning, the NRF projects the first drop YoY since 2009, and gas prices are set to rise (further pressuring consumers' disposable incomes). The bottom line - as we already know - is that QE's effects on the real economy (if there were ever any?) are set to end in the 2013 holidays.