June 15th, 2013
With the world seemingly of the belief that the US is the cleanest dirty (it is not), we thought it might be useful - should you have money burning a hole in your sidelines pocket that 'needs' to be invested in stocks - to at least comprehend how rich or cheap the rest of the world is. UBS global equity strategy heat-map below identifies the most expensive (red) and cheapest (blue) sectors across 20 regions (and the aggregate) in one easy pocket-size cocktail-party-usable cheat-sheet. The US currently is most expensive and intriguingly Australia the cheapest relative to their own historical valuations.
As we rapidly approach the 100 year anniversary of the Federal Reserve (signed into law on December 23, 1913) and the 16th amendment (ushering in that IRS favorite - the income tax) a question arises: what was life like a century ago? Conveniently, the following infographic breaks down some of the main ways in which life has changed in the past 100 years: from life expectancy, to marriage, education, employment, wages, entertainment, sport, and shopping (we finally find a time when JCPenney was actually popular), all the key ways in which the world and life in the US has changed in the past century are mapped out.
Spread the Word!
Back in May 2012, when we were making fun at the latest iteration of the now fatally discredited European stress tests, we took the first of many jabs at the what may currently be the world's most systematically important, and undercapitalized, bank in the world, Deutsche Bank, which was so bad that it wasn't even allowed to appear on a screen of Europe's most undercapitalized banks - and we helpfully pointed out its true capital ratio of just under 2%, and an implied leverage of 60x! Fast forward 13 months to a Reuters interview with former Kansas City Fed president and FOMC dissenter and sole voice of reason at the Federal Reserve, and current FDIC Vice Chairman Tom Hoenig, who confirmed that once again Zero Hedge was just a year ahead of the curve: "It's horrible, I mean they're horribly undercapitalized," said Federal Deposit Insurance Corp Vice Chairman Thomas Hoenig in an interview. "They have no margin of error."
Bernanke claims the Fed can successfully exit its current strategy. He’s lying. Or he’s adhering too strongly to economics and ignoring human nature.
The Plight Of Europe's Banking Sector, Its €650 Billion State Guarantee, And The "Urgent Need" To RecapitalizeSubmitted by Tyler Durden on 06/15/2013 12:37 -0400
Since the topic of quantifying how big the sovereign assistance to assorted banks - both in Europe and the US (which Bloomberg calculated at $83 billion per year) - has become a daily talking point, we are happy to read that Harald Benink and Harry Huizinga have reached the same conclusion as us in their VOX analysis, and further have shown that in Europe the implicit banking sector guarantee by the state is a whopping €650 billion. "Europe has postponed the recapitalisation of its banking sector for far too long. And, without such a recapitalisation, the danger is that economic stagnation will continue for a long period, thereby putting Europe on a course towards Japanese-style inertia and the proliferation of zombie banks... Banks are already saddled with ample unrecognised losses on their assets, estimated by many observers to be at least several hundreds of billions of euros and mirrored by low share price valuations, and an additional loss of their present funding advantage will be crippling."
Who Said It: "This Administration Acts Like Violating Civil Liberties Is The Way To Enhance Our Security"Submitted by Tyler Durden on 06/15/2013 11:02 -0400
"This Administration also puts forward a false choice between the liberties we cherish and the security we demand. I will provide our intelligence and law enforcement agencies with the tools they need to track and take out the terrorists without undermining our Constitution and our freedom. That means no more illegal wiretapping of American citizens.... No more ignoring the law when it is inconvenient. That is not who we are. It's not what is necessary to defeat the terrorists... Our constitution works. We will again set an example for the world that the law is not subject to the whims of stubborn rulers and that justice is not arbitrary. This administration acts like violating civil liberties is the way to enhance our security. It is not."
This Friday's night tape bomb came not from the administration, which may have run out of scandals to reveal for the time being, but from FaceBook which late in the evening disclosed the extent to which it has been cooperating with the government on spying on its users. Which also changes the public narrative built upon a pyramid of lies and secrecy one more time - recall how one week ago the company tried to wash its hands one weeks ago when Mark Zuckerberg said that "Facebook is not and has never been part of any program to give the US or any other government direct access to our servers." Just indirect. So in what was spun to be a rebellious act by a private company, long-cooperating secretly with the government, FaceBook's general councel posted on the company's news blog that the company is releasing data "including all national security requests." In doing so FB became the first US internet company to reveal the extent of official US government demands to hand over information, including confidential, about its users.
Stock-market crashes saw the light of day more and more as the world became industrialized. The 19th century saw a rapid increase in their numbers.
Tryingto make sense of the price action in the foreign exchange market. The dollar was heavier than we anticipated and there is no compelling sign of a turnaround, but the key is the FOMC meeting.
Well, isn't that convenient? At the moment when the Obama administration is feeling more heat then ever before, it starts another war. Suddenly everyone in the mainstream media is talking all about Syria and not about the IRS scandal, Benghazi, NSA snooping or any of the other political scandals that have popped up in recent weeks. As if on cue, Obama made headlines all over the globe on Thursday by claiming that the Syrian government has used chemical weapons against the rebels "multiple times", and that the U.S. was now ready to do more to assist the rebels. As far as the Obama administration is concerned, there is no such thing as a coincidence. The timing of this announcement regarding Syria was not an accident.
If stock markets really do their best to discount earnings six months ahead of time, then it’s beginning to look a lot like Christmas. ConvergEx's Nick Colas' monthly review of analysts’ revenue expectation for the Dow 30 companies finds that hopes for growth in the second half of 2013 continues to diminish. The upcoming Q2 2013 results won’t be much to write home about either, with average top line growth versus last year of just 1.1% and (0.7% ex-financials), the lowest comps analysts have put in their models since they started posting expectations last year. Back half expected sales growth is down to an average of 3.0 – 3.2%, where these estimates were over 5% just three months ago. If you are hoping for 3-4% revenue growth – the kind that allows profit margins to expand – you’ll have to wait until 2014, at least according to Wall Street analysts. The bottom line is that this data provides a less-discussed reason for all the recent stock market volatility.
Sometimes one must see to believe, in this case believe just how massive the raw demand for the shiny, barbarous relic is in China during times of relative monetary stability (in this case the Dragon Boat Festival). Now assume runaway inflation as we saw in 2011 China, which may be unleashed by something as catalytic as the PBOC once again deciding to inject liquidity in its suffocating banking system and to revive growth in the stalling economy.
We have been writing extensively about the data behind the headline media reports and discussing the importance of the underlying data trends relative to the broader macroeconomic perspectives. However, it is sometimes helpful just to view the various economic indicators and draw your own conclusions outside of someone else's opinion. With the economy now 48 months into an expansion, which is long by historical standards, the question for you to answer by looking at the charts below is: "Are we closer to an economic recession or a continued expansion?"
We’ll know more next week Wednesday when the Fed meeting concludes with a language parsing contest. In the meantime, stock market volatility is increasing as we’re experiencing alternating triple digit days now.