Archive - Sep 11, 2013 - Story

The last time the top 10% of the US income distribution had such a large proportion of the entire nation's income was the 1920s - a period that culminated in the Great Depression and a collapse in that exuberance. As AP reports, the very wealthiest Americans earned more than 19% of the country's household income last year — their biggest share since 1928, the year before the stock market crash. And the top 10% captured a record 48.2% of total earnings last year. Analysis by Emanuael Saez shows that, based on IRS data, in 2012, the incomes of the top 1% rose nearly 20% compared with a 1% increase for the remaining 99%. Economists point to several reasons for widening income inequality including globalization and technology. However, as John Taylor explains in his recent WSJ Op-Ed, using this as a lever for Obama's "middle-out" policies - higher tax rates, more intrusive regulations, more targeted fiscal policies - will not revive the economy. More likely they will perpetuate the weak economy we have and cause real incomes—including for those in the middle—to continue to stagnate.

The man who could barely recall anything at his various Congressional hearings, has no problem with remembering one key aspect of the MF Global bankruptcy: Jon Corzine is innocent! And, as a result, yesterday his lawyers filed a motion to dismiss a civil case brought against him by the CFTC in which the legal team shows that the best defense is a good offense and openly critiques the commodities regulator. DealBook excerpts from the filing: "There is no evidence demonstrating that Mr. Corzine knowingly directed unlawful conduct or acted without good faith," wrote the lawyers from Dechert, Andrew J. Levander and Benjamin E. Rosenberg. "Rather than acknowledge that reality and move on, the C.F.T.C. has clung to its baseless presumptions and manufactured charges of wrongdoing that are supposedly connected to Mr. Corzine." Right: the commingling just happened on its own. Twas but a glitch.

Smashing the previous record $17 billion deal from Apple which is doing so badly (in yield and spread terms), Verizon - in order to fund the mega deal with Vodafone - is launching an 8-part $49 billion deal done at what appear reasonable spread levels (though spreads are dramatically wider than a month ago as one would expect for such a releveraging). With the bulk of the deal ($36 billion) maturing 7 years or longer, it would appear that (and desk chatter confirms) demand was relatively high and BofAML also notes that Verizon will now have a huge $69 to $79 billion of index-eligible bonds. This will make Verizon the 4th largest issuer in the US high-grade market index, right up their with Goldman Sachs and Citigroup. Amid all this exuberance though, something odd popped up:

• *VERIZON POSTPONES EUROPE INVESTOR MEETINGS ABOUT VODAFONE DEAL

Reuters is reporting that with a $101 billion order book already, it appears they had no ned to shop the deal in Europe. Amazing what ZIRP repression will do...

Plastic phones, a gold cover, and no China Mobile deal seems to have disappointed more than a few AAPL investors this morning. Downgrades are a plenty but we await confirmation from Carl Icahn's twitter account of what to do next as the price of the stock has just fallen below his initial tweet level. Oh well, perhaps now that Apple's conversion to a Wall Street darling is complete (despite the downgrades by UBS, BofA, Credit Suisse and JPM) it is time for even more iBonds to reclaim the largest bond issuer ever title from Verizon...

There is a saying: if in doubt, ask an economist, and do the opposite.

There is also consensus among the people inhabiting the real world -the one that is found outside the ivory towers of the economics departments of all US and global Tier 1, 2 and 3 universities - that the only reason the world is currently in its sad, deplorable and deteriorating economic state (which however keeps making the rich richer), is precisely due to these same economists, whose tinkering and experimentation with DSGE models, differential equations, curved lines, and all such things all of which have no real world equivalent, and specifically due to economists like Greenspan and Bernanke. These two men, both of whom barely have seen the real world for what it is or held a real job outside of their academic outposts, who surround themselves with brownnosing sycophants and who do the bidding of Wall Street, are the primary reason for the current centrally-planned quagmire. Which is why we wonder: is the fact that some 313 economists (and counting) have signed a petition pushing for Janet Yellen (aka Freudian slip "he" if you are the president), and against Larry Summers, sufficient grounds to actually like the outspoken former Harvard head?

• Obama Holds Fire on Syria, Waits on Russia Plan (WSJ)
• China Shadow Banking Returns as Growth Rebound Adds Risk (Reuters)
• Not one but two: Greece May Need Two More Aid Packages Says ECB’s Coene (WSJ)
• BoJ insider warns of need for wage rises (FT) ... as we have been warning since November, and as has not been happening
• California city backs plan to seize negative equity mortgages (Reuters)
• Home Depot Is Accused of Shaking Down Suspected Shoplifters (BBG)
• Most-Connected Man at Deutsche Bank Favors Lightest Touch (BBG)
• Norway Pledges to Limit Oil Spending (BBG)
• China Shadow Banking Returns as Growth Rebound Adds Risk (BBG)
• Gundlach Says Fed Is Mistaken in How It's Ending Easing (BBG)

What is offsetting the drop in crude prices following Obama's latest embarrassing backtracking from his "blow things up first, ask Congress later" peace track? According to some, it is this note from Goldman which suggests oil price pressure from an improving geopolitical picture will be offset by rising backwardation.

Despite earlier comments from Obama on Tuesday night, who called for a pause in authorizing military strikes on Syria, which led to another drop in crude prices overnight, the drop has since reversed and both WTI and Brent Crude contracts are trading in the green. Whether this is the result of a note by Goldman analysts who noted that the Brent crude sell-off was overdone and that they see no improvement regarding the conflict in Libya which is constraining oil production, or because Russia is once again throwing hurdles in the international process to force Syrian disarmament, is unknown.  The lack of any key catalysts and no USDJPY levitation, led to most global markets unchanged, and futures currently trading sideways. What is not trading sideways is Apple which is down over 2% to just over $480 as all hopes of a China Mobile deal fall apart, coupled with pervasive critical panning of the new iPhones which, aside for the commodity version, is just the old iPhone with an extension that allows the NSA's new fingerprint database to be filled in record time.