Archive - Nov 2013 - Story

In the worst possible news for the wealth effect and stocks (recall JPM's warning yesterday), moments ago the Non-manufacturing ISM printed at 55.4, beating expectations of a 54.0 print and above September 54.4 number proving once again that all the fire and brimstone about the government shutdown having an adverse impact on the US economy was nothing but hollow propaganda. As for the actual print, this is horrible news for those betting on ongoing US economic collapse as it means the Fed may, just may, reduce its $85 billion in monthly flow some time in the future. Sure enough, stocks kneejerked lower, as did gold and the EURUSD, while 10 Year yields spiked to 2.664%. And while the bulk of internal numbers also rose, those who live and breathe the destruction of the US economy to send the S&P to recorder highs, can find solace in a New Orders print of 56.8, down from 59.6, which was the lowest number since July.

In brief: in the past year, the poorest 23.3 million Americans earned 36% less than the richest 2,915 Americans (and less than twice more than the richest 166).

Overnight weakness from China's 'taper talk' has been exaggerated this morning as Fed's Rosengren, speaking on CNBC, warned that while inflation was not a problem, the costs of QE were a potential problem and risk to financial stability.

*ROSENGREN SAYS FED MUST BE ATTENTIVE TO POSSIBLE QE COSTS
*ROSENGREN SAYS `WE'RE IN UNUSUAL TIMES' WITH FED POLICY

This somewhat hawkish tone sent the USD higher in a hurry, Treasury yields higher and US equities lower as the 'market' reacts to every headline once again.

Over the past year, pictures of China's unprecedented air pollution have been seen around the world (for a sample see here and here), Chinese smog has been exported to Japan, and there is even a dedicated hourly twitter update looking at the quality, or lack thereof, of Beijing air. As such, it was only a matter of time before the tragic consequences of China's unprecedented and unplanned scramble to industrialize started manifesting themselves. This happened overnight when an eight-year-old girl has become China's youngest lung cancer patient, reports said, with doctors blaming pollution as the direct cause of her illness. The girl, whose name was not given, lives near a major road in the eastern province of Jiangsu, said Xinhuanet, the website of China's official news agency.

The extreme experiment of current US monetary policy has evolved (as we noted yesterday), from explicit end-dates, to unlimited end-dates, to threshold-based end-dates. Of course, this 'threshold' was no problem for the liquidty whores when unemployment rates were extremely high themselves, but as the world awoke to what we have been pointing out - that it's all a mirage of collapsing participation rates - the FOMC (and sell-side strategists) realized that the endgame may be 'too close'. Cue Goldman's Jan Hatzius, who in today's note, citing two influential Fed staff economists, shifts the base case and forecasts that the Fed will lower its threshold for rate hikes to 6.0% (and perhaps as low as 5.5%) as early as December (as a dovish forward-guidance balance to an expected Taper announcement).

While the Obamacare website rollout may be a huge slap in the face of government (in)efficiency and (dis)organization (healthcare.gov has now joined the ranks of all other New Normal "full-time" workers by working part-time following a daily maintenance shutdown from 1 am to 5 am), the reality is that sooner (unlikely) or much later it will be fixed. And while the realization that the Unaffordable Care Act is just that, and will soak up far more cash from the majority of the population will be a slap in the face of all who never understood that socialist Ponzi schemes always cost far more in the bitter end, it is nothing that America's favorite pastime can't resolve - paying on credit. Which means that the biggest threat to Americans as a result of Obamacare is neither the website, nor really who foots the bill (ask future generations), but the actual impact on services, and as CBS reports the next shock to brace for is the sudden drop off in healthcare providers as an imminent "explosion of demand for doctors and services" mean a looming doctor shortage is just around the corner.

• China premier warns against loose money policies (Reuters)
• Brussels forecasts tepid Eurozone growth (FT)
• SAC Case Began With Informant’s Tips on Cohen, Rajaratnam (BBG)
• Dirty Munich Home’s Nazi Loot Estimated at $1.35 Billion (BBG)
• Mortar hits Vatican embassy in Damascus, no casualties (Reuters)
• India Launches Mars Mission (WSJ)
• Lael Brainard to leave Treasury, heading to Fed (FT)
• U.S. Takes Aim at 'Forced' Insurance (WSJ)
• Wife of Jeff Bezos attacks book about Amazon (FT)
• Fall of Brazil’s Batista embarrasses President Dilma Rousseff (FT)
• The One Thing People Still Really Like About BlackBerry (BusinessWeek)

Last's night latest mass shooting event, just three days after a comparable situation at LAX airport, and this time just minutes away from New York City, is over with the alleged gunman, Richard Shoop, 20, taking his life.

This morning US futures are an unfamiliar shade of green, as the market is poised for its first red open in recent memory (then again the traditional EURJPY pre-open ramp is still to come). One of the reasons blamed for the lack of generic monetary euphoria is that China looked likely to buck the trend for more monetary policy support. New Premier Li Keqiang said in a speech published in full late on Monday that adding extra stimulus would be more difficult since printing new money would cause inflation. "His comments are different from what people were expecting. This is a shift from what he said earlier this year about bottom-line growth," said Hong Hao, chief strategist at Bank of Communications International. Asian shares struggled as a result slipping about 0.2 percent, though Japan's Nikkei stock average bounced off its lows and managed a 0.2 percent gain. However, in a world in which the monetary tsunami torch has to be passed every few months, this will hardly be seen as supportive of the "bad news is good news" paradigm we have seen for the past 5 years.

UPDATE: First images from inside the mall...

Shots were fired Monday night at the 2.1 million square feet Garden State Plaza mall in Paramus, New Jersey. Local TV network PIX11 reports, "according to a police source: the shooting began near the Nordstrom’s department store on the second level of the mall; At least eight shots have been fired;  The gunman is believed to be wearing body armor; Stores are on lockdown;

CNN reports from mall insider:"There was just people running like crazy so I quickly just closed my doors, ran to the back, turned off all the lights, music and everything, just to stay hidden,"

Finally, several hours after it started, the situation ends with the suspected gunman allegedly shooting himself.

As we recently noted, China is taking over the world on gold bar at a time. This growing world super-power has, it would appear (by words and deeds) grown tired of being on the receiving end of the USDollar and Fed money printing. The Real Asset Company illustrates how, in the space of a few decades, China has opened up her huge gold market which is now hungrily devouring the world's physical gold.

Obamacare goes dark.

The goal of forward guidance is to steer market, as well as public, expectations about the future path of monetary policy. It would appear, to those without PhD.s that central banks are drifting from actions to words and the following chart shows the devolution over the past 20 years of central-banker-speak. We have come quite a way from the "never explain, never excuse" view of Montagu Norman in the early 20th century to the hope-laden promises of increasingly wordy statements today...

October was Iraq’s deadliest month since April, 2008. In those five and a half years, not only has there been no improvement in Iraq’s security situation, but things have gotten much worse. As post-“liberation” Iraq spirals steadily downward, Prime Minister Nuri al-Maliki was in Washington last week to plead for more assistance from the United States to help restore order to a society demolished by the 2003 US invasion. Obama pledged to work together with Iraq to address al-Qaeda’s growing presence, but what was not said was that before the US attack there was no al-Qaeda in Iraq.

Never in US history have so many individuals earned over $50 million per year. Never before has the divide between the wealthy and the poor been so wide (never). The source of this catalyst for unrest in society, as Mark Spitznagel warned, is not runaway entrepreneurial capitalism, which rewards those who best serve the consumer in product and price. (Would we really want it any other way?) There is another force that has turned a natural divide into a chasm: the Federal Reserve. The relentless expansion of credit by the Fed creates artificial disparities based on political privilege and economic power.