One of the most entertaining if absolutely flawed fables we have heard over the past several months is that Japan is currently undergoing some mythical V-shaped recovery, based on some even more mythical surge in car production and sales. Courtesy of a thing called "facts", summarized by Reuters, we can now effectively ignore this growth strawman for good. "New vehicle sales in Japan fell by a record in July, battered by production disruptions from the March 11 earthquake, while South Korean rivals extended their winning streak to report strong global sales. Sales of new vehicles, excluding 660cc minicars, in Japan fell 27.6 percent to 241,472 vehicles, with Toyota Motor Corp leading the decline. "Looking at the trend from April onwards, the situation hasn't changed much from June," said Michiro Saito, general manager at the Japan Automobile Dealers Association. "Vehicle supply won't return right away and we're looking forward to the production recovery at automakers from around September." Toyota's sales fell 37 percent, while Honda Motor Co's dropped 33.2 percent. Nissan Motor Co , which has been less impacted by the March earthquake and tsunami, fared better with a 17.6 percent fall." Incidentally, it is time to get an update of our own nationalized, taxpayer-subsidized union blackhole: Government Motors and specifically its record channel stuffing shennanigans due out shortly.
Today's ISM will almost certainly be a major disappointment based on regression analyses, although it will be largely ignored in the major headline onslaught, as the soap opera continues even though at this point the most it can do is lead to a massive market drop since the market has already priced in a successful, if short term, "debt man walking" (thank you Bill Gross) solution.
News from last night out of China, coupled with early morning news from Europe confirmed what many speculated: namely that global manufacturing is now in a toxic spiral and absent another stimulus kick from various monetary and fiscal authorities there is no catalyst on the horizon to put the global economy into second gear. As Reuters observes, factories in Asia and Europe all but stagnated in July, according to business surveys that showed the weakest rates of growth since major industrial powers were struggling through the 2009 recession. While stock markets rose on signs of a last minute solution that would avoid a U.S. debt default, manufacturing purchasing managers indexes (PMIs) provided the latest evidence of a slowing global economy. The euro zone manufacturing PMI, which gauges the activities of thousands of businesses, fell to 50.4 in July from 52.0 in June -- its worst showing since September 2009 and barely above the 50 mark dividing growth and contraction. Perhaps more worryingly, China's official government PMI dropped to 50.7 from 50.9 in June, its weakest in more than two years, while the HSBC PMI fell below the 50 mark for the first time in a year -- to 49.3 in July from 51.6. Following Friday's horrendous GDP and Chicago PMI readings these are hardly a surprise. Needless to say, the reverse decoupling thesis will be tested once again today after the July ISM is released with consensus looking for a 54.9 print, and Zero Hedge looking for number just a tad above 50. But none of this matters. As Bloomberg's James Halloway points out, "Markets are for now shrugging off Friday’s poor U.S. GDP report, softening PMI prints in China and Germany, contractionary PMI readings for Ireland, Spain, U.K." One couldn't have put the idiocy of the market any better. Oh, and did we mention there is actually still no deal on the debt ceiling. It is merely priced in. As was Tarp 1 before the vote, leading to the biggest then historical collapse in the Dow once the market realized it had gotten ahead of itself. Deja vu coming up?
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The Bipartisan Debt Deal Fact Sheet: A "Victory" For The Republicans, The Democrats And, Of Course, The White HouseSubmitted by Tyler Durden on 08/01/2011 00:43 -0400
Hot off the presses, here is the White House's very own "debt deal" fact sheet, which is apparently a "win for the economy and budget discipline." Which is great since we already know it is a win for the GOP and the Democrats. In other words, the only thing better than a Win-Win, is a Win-Win-Win... in which the only loser, of course, is America. We caution readers on high blood pressure medication, on blood thinners, those on dialysis, and those prone to incontinence or murderous acts of rage to please skip this post.
My fellow Americans...
There's a drunken debt party going on right here...
Essentially, growth is not the problem for China, but nor is it the solution.
Obama Says Debt Deal Reached, America To Avoid Default, Or "Hank Gave Us A 3 Page Term Sheet; Boehner Gives Us A 7 Slide Powerpoint"Submitted by Tyler Durden on 07/31/2011 21:03 -0400
In a much anticipated statement, Obama just announced that he has struck a deal with Boehner on the debt and the deficit, which will allow the US to avoid default. And also, as Reuters adds, Obama said that spending cuts included in deal to raise the debt ceiling will not happen so quickly that they will drag on the fragile U.S. economy. In other words, there will be no cuts for the immediate future. But there will be a single $2.4 trillion debt ceiling raise (based on a Joint Committee green light, LOL) just as Obama desired. And of course, there will be no tax hikes. Bottom line: there will be about $40 billion in actual, real spending cuts until the next, $16.7 trillion debt ceiling limit is hit some time in Q1 2013, at which point it will have to be raised to $20+ trillion. But no really, they are cutting spending and all that.
SkyNet has taken over the market, it now appears poised to make labor and wages redundant (and while we hardly welcome our new robotic overlords, we doubt anyone would shed a tear if the House and Senate replaced its 535 corpulent windbags with a bunch of Johnny 5s engaged in binary colloquies). The world's biggest non-debt based slave-driver, Taiwanese technology giant Foxconn, also known as the place where all of your iPhones, Pads, etc, are made, has just announced that it will deal with rising wages by doing what US-based quants have figured out years ago: outsource it all to robots. About a million of them. The irony is that the last time we looked at Foxconn, we asked: "what happens when this million realizes it can only buy half a McRib sandwich with the money it makes, courtesy of the primary US export to China, and demands a pay raise. What happens to Apple margins then?" We now have our answer. Per Xinhua: "Taiwanese technology giant Foxconn will replace some of its workers with 1 million robots in three years to cut rising labor expenses and improve efficiency, said Terry Gou, founder and chairman of the company, late Friday. The robots will be used to do simple and routine work such as spraying, welding and assembling which are now mainly conducted by workers, said Gou at a workers' dance party Friday night." As a reminder, with over 1 million workers, Foxconn has enough people on its payroll that if mobilized would be the 5th largest army in the world, and just after WalMart in total number of employees, albeit instead of spread out around the world, are all concentrated in one small space.
Consider those power and money hungry people who want more and more. It is not the quantity that matters because the rush from the control and power is no longer fully realized or experienced since long ago they became desensitized and essentially dead to the world you and I occupy.
Oops. From Washington Wire again: "House Speaker John Boehner (R., Ohio) appears to be balking at the debt ceiling deal that Senate Democratic Majority Leader Harry Reid of Nevada has signed. Mr. Boehner is concerned about provisions in the deal that could lead to sharp cuts in military spending, say people familiar with the situation. House aides have warned that just because Mr. Reid has signed off on the deal doesn’t mean the deal is done." From limit up to limit down in one easy (yet unconfirmed) headline.
The first prints are in and the relief kneejerk is here, as much expected. ES prints +17 at 1306, USDJPY jumps, although the fade is already there, while the Franc is dripping lower although we expect the same fade to come to it soon. Obviously gold is off, by just about 1% to levels last seen... five days ago. We wonder how long until the vacuum tubes realize that with the debt ceiling raise, Obama has just given Bernanke the green light to monetize up to $2.8 trillion in brand spanking new pieces of one-ply US debt. In other news, a Reuters blast just announced that a Senate vote on a debt deal is "highly unlikely" before Monday, confirming that the market will now have to price in what is effectively becoming TARP 2, with the same potential dire consequences to the market if it is wrong as it was last time around. Overall, we expect the computers to create their self-referential momentum buying sprees until such time as the big boys come in and start offloading the big blocks.
With the debt ceiling "compromise" deal still in flux, although at least according to the FX market expected to be approved shortly, despite the protestations of liberal democrats (one wonders if Obama will accuse said group of hostage tactics much as he accused conservative republicans of the same last week), below is what the current shape of the proposed deal looks like courtesy of the WSJ's Washington Wire blog.