Today the Chinese stock market did something unthinkable: it plunged to fresh post 2009 lows on news so bad they would have been enough to send the stock markets of such "developed" bizarro economies as the US and Europe limit up. The catalyst, as Bloomberg reports, was that Chinese industrial companies’ profits fell in July by the most this year, a government report showed today, adding to evidence the nation’s economic slowdown is deepening. Income dropped 5.4 percent last month from a year earlier to 366.8 billion yuan ($57.7 billion), the fourth straight decline, National Bureau of Statistics data today showed. That compares with a 1.7 percent slide in June and a 5.3 percent drop in May. What is disturbing is that the slide persisted even as revenue in the first seven months increased 10.6 percent to 50 trillion yuan, today’s report showed. Which means that cost and wage pressures are starting to truly bite Chinese corporations, that the US ability to export inflation to China is much more limited, and that one can forget the PBOC easing monetary conditions any time soon for many of the reasons discussed in the past week. It also means that China is now stuck hoping that Wen Jiabao will at least implement some fiscal stimulus. The reality however, judging by the SHCOMP's reaction, is that the benefit from fiscal programs in China, and everywhere else, is far more limited than monetary policy intervention. End result: SHCOMP down 1.74%,to 2,055, a three year low.
The lull in market activity over the past weeks is poised to give way to a multitude of events that could potentially determine the market direction for the remainder of the year. Policy responses from both sides of the Atlantic are awaited, though nuances rather than headlines may be more important. In the short run however, Deutsche Bank notes some indicators suggest that risky assets may be vulnerable. Specifically, relative to fundamentals they also find that the US equity rally over the past quarter has now been excessive relative to the US economic leading indicators. Looking at cross asset valuations by comparing the level of asset prices today vs. their peaks and troughs since Sep-2008 we also find that the S&P500 appears to be the richest relative to fundamentals.
Simple equation:free, open uncontrollable Internet versusshackled newspapers equals no newspapers. Let's get real.
— Rupert Murdoch(@rupertmurdoch) August 26, 2012
A beautiful post from Murdoch disclosing fully and unashamedly the big media agenda; the use of state power to shut down more efficient and better competition. Newspapers can survive by being creative and compelling, Murdoch. Just because your revenues are nosediving doesn’t mean that we should all lose our freedom to pay for your success.
On the 'new' eve of the Republican Convention, it appears all is not well in the Romney-Ryan ranks. In what is quite a stunning admission, though not entirely surprising given his outspoken desire for a change to the status quo, the NY Times is reporting that Ron Paul does not fully endorse Romney for President. Mr. Paul, said convention planners had offered him an opportunity to speak under two conditions: that he deliver remarks vetted by the Romney campaign, and that he give a full-fledged endorsement of Mr. Romney. He declined. "It wouldn't be my speech," Mr. Paul said. "That would undo everything I’ve done in the last 30 years. I don’t fully endorse him for president." Whether this is Paul playing an admirable 'long-game' and/or standing by his libertarian roots (or angry at his apparent marginalization) is unclear but one thing is for sure; with the dominance of 'young' voters (seeking 'change'?) behind Ron Paul relative to 'old' voters with Romney, this rebuff will not help in the fight against TOTUS. As BigStory reports, Paul is telling his supporters to stand firm because "we will become the tent eventually!"
Nanex's excellent and thorough analysis of sub-penny trade data doesn't support SEC's conclusions about internalizers as written in the final flash crash report. There is abundant evidence that internalizer software was acutely sensitive to the integrity of the consolidated feed and would switch off internal matching only if and only when the quote was crossed. Furthermore, short term volatility had little, if any impact on the number of sub-penny trades. About the only thing Nanex findings have in common with the SEC report on this matter, is that the date in question was May 6, 2010. This revelation, that internalizer software is sensitive to the integrity of the consolidated quote, means someone could manipulate the consolidated quote in order to cause internalizer software to reject valuable retail orders and spill them to dark pools or exchanges. This may explain the common micro-bursts of activity that occur throughout the trading day and cause a number of stocks to have crossed quotes in the consolidated feed - and implicitly open the broad market itself to these micro-bursts causing another flash crash.
What do we call a power center that enables and enforces neofeudal exploitation and predation? We call it evil. The Federal Reserve is a force of evil that should be abolished at once. Its purpose - enabling and enforcing a neofeudal transfer of wealth from the productive many to the unproductive, parasitic few - is evil. Those within it are serving evil. Those who defend it are serving evil. Those who worship its power are serving evil. Those who mask its true nature are also serving evil. In a society and culture that has lost its moral compass, a culture of greed, self-serving lies and corrupt vested interests, the word "evil" has lost its power. It has been reduced to a cartoonish label, a cynic's smarmy joke.
Tropical Storm Isaac has battered the hopes of an on-time departure of the Romney-Ryan express and now looks set to threaten New Orleans and the Gulf. Weather trackers are predicting an increase in intensity given its size and the storm's predicted paths are set to cross straight through the middle of the Gulf's oil production in a replay of the terrible August of Katrina (though we can only hope not as severe). All major rig operators are evacuating which leaves output notably down already. (via Bloomberg)
*U.S. SAYS 24% OF OIL OUTPUT SHUT FOR TROPICAL STORM ISAAC
*U.S. SAYS 8.2% OF NATURAL GAS OUTPUT SHUT FOR ISAAC
*U.S. SAYS 39 PLATFORMS EVACUATED FOR TROPICAL STORM ISAAC
*U.S. SAYS 8 RIGS EVACUATED FOR TROPICAL STORM ISAAC
and as a reminder - the average US retail gas price rose 75c during Katrina...
Bail me out once, shame on you; bail me twice, shame on me; shame on me; come back for a third (and final, we promise!) bailout, only a Franco-Belgian SNAFU is capable of such Einstein-ian repetition. Dexia, that stress-test-passing bastion of all things entirely wrong with European banking and politics is back at the trough. Reuters is reporting what we have known all along, that without massive additional capital injections the bad-bank, crap-bank model simply cannot work. To wit: Dexia needs to recap its Luxembourg unit (BIL) before its apparently 'imminent' sale to a Qatari sovereign wealth fund (one more billionaire sucker family born every day it seems). The somewhat comical aspect is that the post-October (the second - and final, we promise - bailout), BIL's 'legacy' bond portfolio was 'transferred' to its parent Dexia at December 2011 prices - creating a net loss of EUR1.9bn for the subsidiary. This significantly affected the sub's solvency - making it unlikely to meet its capital requirements (which it was 'sure' would be 9% Tier 1 by now!). But given Dexia's own extensive losses - EUR11.6bn in 2011 and EUR1.2bn in the first six months of 2012 - a capital increase for Dexia BIL may force Dexia to seek funds itself. That would mean mo' money, mo' bailout from the states currently guaranteeing its borrowings - principally Belgium and France, and to a lesser extent Luxembourg - which now look set to rise to EUR90bn in aggregate!
With Vacation Over, Europe Is Back To Square Minus One: Merkel Backs Weidmann, Demands Federalist StateSubmitted by Tyler Durden on 08/26/2012 - 13:04
Earlier today we showed for the nth time that with insanity and insolvency ravaging the old continent, at least one person has the temerity to avoid sticking his head in the sand of collectivist stupidity and denial. That person is Bundesbank head Jens Weidmann, who until now may or may not have had the backing of Germany's elected leader, Angela Merkel. Moments ago it became clear whose side Merkel, who recently came back from vacation and is set to spoil the party that the (insolvent) mice put together in her absence, is on. From Reuters, who quotes Merkel in her just released interview with German ARD: "I think it is good that Jens Weidmann warns the politicians again and again," Merkel said. "I support Jens Weidmann, and believe it is a good thing that he, as the head of the German Bundesbank, has much influence in the ECB."
There was a time when the market at least pretended to be influenced by the economy. Alas, with the advent of officially endorsed central planning those days are gone. Which in turn may be the primary reason why so many retail investors, brought up on the myth that the market is efficient and anticipating the facts instead of, as it has now become all too clear, reactionary, and anticipating liquid release by central planning academics who have never held a real job in their entire lives, have left the rigged casino. So what's a status quo regime that needs the retail dumb money (which is anything but in the past three years) to do? The only thing it can do: lower expectations. Which is precisely what Goldman has done. Because apparently one no longer needs growth to justify insane multiples. All one needs is a, drumroll please, stagnation. That's right - all you need, apparently, to buy stocks is hope and prayer that the US economy can sustain its stagnant state, and all shall be well. Of course, with GDP rising at best at a 2% rate each year, even as the public debt soars at 4-5x times that level, stagnation may well be the best thing the US economy can hope for.
If the following "heatmap" of readership political bent by state from Amazon is any indication of the votership inclination in the coming election, then Mitt Romney, more natural disasters notwithstanding, has nothing to worry about. Then again in the world of oxymorons, there are few quite as potent as "America Reads" (with the exception of the occasional money-losing Kindle for the aspirationally cool reader).
Forget Merriam-Webster. The Mario-Webber dictionary is where it's at these days...
It is one thing for various anti-Central Planning (and thus central bank) outlets to warn, over 3 years ago, that easy monetary policy is merely an enabling substance, and is addictive as any drug to a dysfunctional political establishment which is more than happy to avoid fiscal prudence if monetary policy is readily available to delay the inevitable day of reckoning when monetizing the debt will no longer work. It is a different matter entirely when the head of the world's only solvent central bank - the German Bundesbank, which happens to be the biggest guarantor of that other mega hedge funds the ECB, and which of all developed economies also happens to have had the closest recent encounter with hyperinflation (unlike all the "other" theoretical experts who enjoy talking extensively about matters they have zero experience with). In an interview with German Spiegel magazine, Buba head Jens Weidmann, once again has loudly warned what as recently as 2009 very few dared to even think: namely that rampant and gratuitous deficit plugging using central bank debt issuance, and thus explicitly monetizing the debt, "can be addictive as a drug." Obviously, like any drug overdose, the aftereffects are always fatal.