Archive - Aug 2013 - Story

• Solyndra Cola: California aims to 'bottle sunlight' in energy storage push (Reuters)
• Ackman may sues himself after all - Penney Board Assails Director William Ackman, Considered 'Rogue' After Releasing Deliberations (WSJ)
• CFTC subpoenas metals warehousing firm as inquiry heats up (Reuters)
• Obama Plan to Revamp NSA Faces Obstacles (WSJ)
• Japan growth slows in second quarter, adds to sales tax uncertainty (Reuters)
• China Urbanization to Hit Roadblocks Amid Local Opposition (BBG)
• Parents Losing Jobs a Hidden Cost to U.S. Head Start Budget Cuts (BBG)
• US seeks better access to Africa as part of trade pact review (FT)
• Singapore Cuts Trade Outlook as China Slowdown Caps Recovery (BBG)
• White House Sifts Fiscal Ideas With Band of Senators (WSJ)
• Spain may ask United Nations for support over Gibraltar (Reuters)
• Michigan Safety Net for Boomers Frays on Bankrupt Detroit (BBG)

The middle of the month brings a mixture of second-tier macro numbers punctuated by the market-moving (and Taper-cementing) retail sales report. We get IP, CPI and PPI from the US this coming week. In terms of hard activity numbers, US retail sales on Tuesday will be the highlight which as a reminder is, in addition to Jackson Hole, seen as one of two key pre-Taper catalysts to keep an eye on. Outside the US, the key data will be the quarterly publication of German, French and Eurozone GDP, as well as Japanese GDP, which has already been released (weaker real growth, higher inflation). The second week of the month also tends to show the first survey results with the Phily Fed and Empire surveys on Thursday. In Germany the ZEW will come on Tuesday. Finally, from an FX point of view, we will be focused on balance of payments related data, with the trade balance in India and TIC data in the US. After a few very weak TIC releases in recent months we would expect more evidence of weak capital inflows into the US.

Despite an overnight surge in the Chinese markets, with the Shanghai Composite closing up 2.4% following reports that China will not only continue with its "liquidity tightening" operation by, paradoxically, cutting RRR for smaller banks, but launch a stimulus for several Chinese provinces and city governments "on the quiet" in the form of jumbo-sized bank loans, and GDP news in Japan that were so bad they were almost good (although not bad enough to close the Nikkei in the green) US futures continue to take on water following the second worst week of 2013 as the market now appears resigned to a Taper announcement in just over 5 weeks (as we have claimed since May). News in Europe continues to be bipolar, with the big picture confirming that only dark skies lie ahead following yesterday's news that a new Greek bailout is just around the corner, or rather just after the Merkel reelection (even though Kotthaus perpetuated the lies and said a second cut in Greek debt is not on the agenda - although maybe he is not lying: maybe only Greek deposits will be cut this time), offset by on the margin improvements in the economic headlines, even as credit creation remains not only non-existent but as the FT reports (one year after Zero Hedge), some €3.2 trillion in financial deleveraging is still on deck meaning an unprecedented contraction in all credit-driven aggregates (one of which of course is GDP).

Just over a week ago, the probability of a September 'Taper' were a mere 14% with the majority of the 'smart' money betting on a 'December 2013 at the earliest' start to the Fed's removal of the punchbowl. September 2013 is now the front-runner at a 36% probability, based on PaddyPower's latest odds. September has surgede from a 7/1 outsider to a 7/4 favorite in that brief time (and October also improved from 11/1 to 7/1). It seems that JPY-carry is well aware of this shift (having surged over 4% in the same period). Between Merkel's election and the FOMC, the 3rd week of September (which just happens to perfectly correspond to an option expiration) looks set for some fireworks one way or another.

There goes the tax hike (and any expectation of fiscal balance). Japanese GDP grew at a miserly 0.6% QoQ, missing expectations of +0.9% (the biggest miss in a year) and slowing from an already revised lower 0.9% growth in Q1. So much for Abenomics breathing life back into a balance-sheet-recessed nation. Typically this kind of miss would be met with cheers as bad is good but in the case of Japan where they are so far down the rabbit hole, there is no moar left. The already collapsing JPY-carry trade is unwinding in a hurry as JPY surges to a 95 handle on the news; the USD is dropping, Nikkei futures are down 200 points, S&P futures are down a few handles, and gold is holding notable gains.

The best returning asset class traded in the NY Metro area is yellow but doesn't change hands on Wall Street. As ConvergEx's Nick Colas notes, over the last 12 months New York City taxi medallions have risen 49% in price, besting the relatively humdrum returns of the S&P 500 (up 21%), the NASDAQ (22%) and the Dow (18%).  Medallions – essentially the right to operate a for-hail taxi in New York City – now trade for as much as $1.3 million, an all-time record.    Part of this dynamic is fixed supply – there are just 13,336 medallions available for a city of 8.3 million people.  There is also a macroeconomic point, with a stronger NYC economy for those inhabitants who can afford the service.  The more surprising observation, however, is that new technology in the form of in-car credit card machines and more recently smartphone hailing apps both materially increase the value of owning a medallion.  In a world where every technology is deemed “Disruptive”, here’s a case where the status quo has actually reaped much of the reward.

With record-breaking gridlock a reality, it is not a great time to be a member of Congress if you like getting things done. Nor is it a great time to be in Congress if you like people thinking you’re doing a good job. In a recent Gallup poll, Americans gave the current Congress the lowest confidence rating ever measured for any institution in 40 years. But what does having “confidence” in Congress mean? How does confidence affect our legislature’s ability to implement new laws? In the Infographic below we walk through why Congress has such a low approval rating, how that affects legislators who want to pass bills, and how the leaders of the Senate and Congress compare.

An internal Bundesbank document discovered by Der Spiegel states, in opposition to the comments by Germany's electioneering Chancellor Merkel, that Europe "will certainly agree to a new aid program for Greece" by early 2014 at the latest. As Reuters reports, Frau Merkel has repeatedly played down suggestions Greece will require more aid (or debt relief) in light of German voters major skepticism over moar of their money being flushed into the Mediterranean. The document notes that the risks of the current aid package for Greece are "extremely high" and that recent approval of the tranche payments were politically motivated - directly contradicting Merkel's 'praise' for Greek efforts as the report concludes Athens' performance as "hardly satisfactory." Opposition parties suggest Merkel is throwing "sand in the eyes" of the electorate as the Bundesbank warns "there is no private buffer left that could protect the European taxpayer."

Should we broadcast a message to the rest of the world that anyone that can find a way to enter this country and somehow get to a “sanctuary city” can sign up for a plethora of welfare benefits and live a life of leisure at the expense of hard working American citizens?  Yes, this question sounds absurd, but what we have just described will essentially be official U.S. government policy if the immigration bill going through Congress becomes law. Sadly, in politically correct America you can’t even talk about the problem of illegal immigration these days without being labeled as a “racist”. Our immigration system is completely broken, but these days we cannot even have a rational debate about these issues.  In politically correct America, illegal immigrants have become a “favored class” of people that you are never supposed to say anything bad about. The following are 19 very disturbing facts about illegal immigration that every American should know...

With the NSA already combing through and recording every form of electronic communication (or 1.6% of all global internet traffic to be precise), it was only a matter of time before a scare involving plain vanilla physical mail took place. Such as what just happened at JFK airport at 9 am this morning, when as ABC reports (with a substantial delay) that "Two postal inspectors at JFK Airport were sickened Sunday after opening a package at a postal processing facility. Field tests showed an initial finding of nerve gas, though authorities believe it's a low likelihood that it's actually nerve gas. It is more likely a standard-use chemical that shouldn't have been in the mail like a solvent or degreaser. The FBI was called in and additional testing is underway. The condition of the customs agents is not yet known."

As the disconnect between payroll data and GDP grows, and the schrodinger reality of a non-farm-payroll print and JOLTs data increases; it will not come as a total surprise to Zero Hedge readers that Goldman Sachs has finally been forced to admit that investors have been fooled by the relative importance of jobs data. While the payrolls data has the largest financial market effect of all economic indicators (by a large margin), Jan Hatzius finds that neither payrolls (or Advance GDP) provide any incremental information about the broad strength of the economy.

Nearly a month after Egypt underwent a truly embarrassing, if mostly for the US department of state, coup and days after international "mediator" US Deputy Secretary of State William Burns left Cairo, having made no headway in finding a compromise between the army-installed government and supporters of deposed Islamist president Mohammed Morsi, it appears that the catalyst to push the already unstable social situation into a state of borderline civil war, is about to be unleashed following a Reuters report that "Egyptian police are expected to start taking action early on Monday against supporters of deposed President Mohamed Mursi who are gathered in protest camps in Cairo, security and government sources said on Sunday, a move which could trigger more bloodshed."

The origin of today’s monetary policy of course lies in Keynesian economics, and Keynes was quite explicit that monetary authorities should intentionally use deception as a primary tool. He spoke of the need to gull workers into thinking that wages were going up even if net of inflation they were going down. At least he had a sense of humor about it, calling a central bank a "green cheese factory" that would persuade the public to accept "green cheese" (newly created money) as the real thing.

As demonstrated previously, there is a direct correlation between the excess reserves created by the Fed, and the cash holdings of domestic and foreign banks (operating in the US) disclosed by the Fed's weekly H.8 statement. So with the Fed's reserves reaching new all time highs with every week courtesy of the $85 billion in monthly flow injected by the Fed some wonder where is this cash ending up. The answer: in the week ended July 31, a record $1,157 billion was parked with foreign banks in the US, while "just" $1,112 of the Fed's created reserves was allocated to US banks.