The FOMC minutes were full of doom and gloom: if things get worse then we'll save the day; the economy is deteriorating; growth is not great etc. All of which for one glorious moment raised speculation that the 'many' may get their way on the committee sooner than some think. However, a funny thing happened since their last meeting - US Economic Data has improved dramatically relative to expectations. As the chart below shows, the rise in Citi's economic surprise index in the last four weeks is nearly record-breaking since the crisis began. Perhaps, the 'many' could explain which economy they are looking at and just what their economic projections look like now?
FOMC Minutes Indicate No Shift In Fed's Views, Even As Many Members See More Easing Likely WarrantedSubmitted by Tyler Durden on 08/22/2012 - 14:02
The thoughts of the FOMC from a mere three weeks ago - before a 30bps rise in 10Y yields (40bps in 30Y), 5% rise in the NASDAQ, 8.5% rise in AAPL, and 85bps compression in Spanish bond spreads - are out. It appears little has changed in their muddle-through, always at-the-ready, wish-it-were-better view of the world. Via Bloomberg,
- *FOMC PARTICIPANTS SAW ECONOMY DECELERATING AFTER JUNE MEETING
- *MANY FOMC PARTICIPANTS SAID MANUFACTURING WAS SLOW OR FALLING
- *FOMC PARTICIPANTS DISCUSSED QE, EXTENDING 2014 FORECAST ON RATE
- *FED STAFF SAID MARKETS HAVE LARGE CAPACITY TO HANDLE MORE QE
- *MANY FOMC PARTICIPANTS SAW NEW QE AS BOLSTERING U.S. RECOVERY
- *MANY ON FOMC FAVORED EASING SOON IF NO SUSTAINED GROWTH PICKUP
Translation: "Many on FOMC want the S&P at all time highs without actually doing any QE, ever, because that will mean the Fed is officially out of bullets"
As European markets have rallied - just like in the US - forward earnings estimates have inched down, leading to a significant multiple (eurhopia) re-rating. As we noted last week, this multiple expansion is dramatically 'rich' compared to sovereign risk changes and is now at the top-end of the euro-zone crisis range. Meanwhile, sentiment has become palpably positive - put/call ratios near lows (highs in complacency; and at the same time European cash equity trading volumes have plunged to 12-year lows (with no high-priced AAPL to 'defend' this with); while fundamentally earnings momentum among cyclical stocks has continued to deteriorate since May 2012. But apart from that, it's all good...
Romney's selection of Paul Ryan as his veep clarifies the policy debate (forcing typically middle-of-the-road voters to become more polarized to the size of government) into the November election and materially changes the odds of the fiscal cliff's resolution. As Morgan Stanley's Vince Reinhart notes, "by tying one side to an explicit plan for fiscal consolidation, the Ryan selection makes it much more likely that the campaign will focus on the appropriate role of the government. That is, the debate will be about the right level of federal expenditure relative to national income, the progressivity of the tax system, and the extent to which family incomes are protected on the downside by Washington, DC." Although theoretically the Ryan pick raises the chance of a benign, before-the-election resolution to the fiscal cliff 'issue', it also worsens the likely outcome if the legislative stand-off continues into 2013 - which the odds suggest is the case.
The Truth Behind Juncker's Lies: In The Second Largest Greek City, 1250 Companies Have Shuttered In 2012Submitted by Tyler Durden on 08/22/2012 - 12:53
European viceroy of various neo-colonial territories Jean-Claude Juncker, best known for being a self-professed pathological liar, just concluded a press conference in which he did what he does best: lie. Here is a sampling of the soundbites along with our commentary:
- EU'S JUNCKER SAYS TRUTH IS GREECE SUFFERS CREDIBILITY CRISIS - coming from a pathological liar, this one is our favorite
- EU'S JUNCKER SAYS CONVINCED GOVERNMENT WILL TAKE ALL MEASURES. "all measures" = "all gold"
- EU'S JUNCKER: FULLY CONFIDENT GOVERNMENT TO TAKE ALL EFFORTS "all efforts" = "all gold"
- EU'S JUNCKER SAYS GREECE MUST OPEN UP CLOSED PROFESSIONS. Chimneysweep? Bootblack? Telegraph Operator? Tax Collector? Prosecutor? Uncorrupted muppet?
- EU'S JUNCKER SAYS BALL IS IN GREEK COURT; IS LAST CHANCE. The ball will be repoed to the ECB shortly
- EU'S JUNCKER SAYS NOT SAYING THERE WON'T EVER BE A 3RD PROGRAM or 33rd program
- EU'S JUNCKER SAYS GREEK EURO EXIT WOULD BE RISK TO EURO AREA and Obama's reelections
- EU'S JUNCKER SAYS BALL IS IN GREEK COURT; not for long: ball will soon be repoed to the ECB
And much more propaganda. Here is the truth. According to Greek Thema, in Thessaloniki, the second-largest city in Greece, so far in 2012, an unprecedented 1,250 companies have shut down. This means no jobs, no tax revenues, no money in circulation. A complete and total economic collapse.
The jury is still out whether Israel will or will not attack Iran, despite the endless and relentless (dis)information in the media from all sides, and certainly when such an attack might happen, but if it did take place, these are all the logistically possible formats what an airborne attack could look like.
In tort law, an attractive nuisance is any potentially hazardous object or condition that is likely to attract the naive and unwary, i.e. children. A classic example is an abandoned swimming pool half-filled with fetid water. The stock market is demonstrably an "attractive nuisance" and should be closed immediately. It should never be reopened unless these conditions can be met: 1) All shares must be owned for at least four hours 2) All trading must be executed by humans on a transparent exchange where all trading activity (and open orders) is visible to all participants 3) Intervention in the market by the Federal Reserve or any Central State agency or agents is against the law. If you insist on putting money at risk in the stock market, be aware that you are playing a rigged roulette wheel and thus you are a mark. You might win, or the entire game might collapse in a rotten heap of lies and corruption. Just remember that the market is ruled by parasites who need to keep their hosts (investors) alive so they can continue to feed off them (i.e. biotrophic parasites). If the hosts all leave the market, the parasites will have only themselves to feed on, and they will quickly expire.
Europe just can't make its mind up this morning. Some chatter of a Fed adviser's report of more investigation into QE3 spurred USD weakness and implicit EUR strength which stands in the face of a weakening European credit and equity market today...
Capital Markets Über Alles: What Mitt Romney's Economic Advisor, Goldman Sachs (And The NY Fed) Really ThinkSubmitted by Tyler Durden on 08/22/2012 - 11:09
When it comes to Glenn Hubbard, the man needs no introduction, at least to those who have watched the Charles Ferguson seminal movie 'Inside Job.' Indeed, the extensive connections of the Dean of the Columbia school of business to the financial industry is well known, a fact which served as the basis of Ferguson's question: just how corrupt is America's elite educational establishment, and just how much of a factor in the perpetuation of the status quo is Wall Street's puppet control over each generation of rising financial and economic thinkers. For those who are unaware, Hubbard also happens to be presidential candidate Mitt Romney's top economic advisor. The reason why Hubbard has suddenly made the headlines, is because of his overnight statement that contrary to what the potential future president has said, namely that Bernanke's days would be numbered under a Romney presidency, and that the Fed would be audited, Glenn has taken the other side of this argument, and told Reuters that Bernanke should "get every consideration" to stay beyond January 2014, when Ben's term expires. But why? Well, for the answer to this particular question, we have to go back to that long ago year 2004, when Glenn Hubbard together with current Fed president, and former chief Goldman chief economist Bill Dudley, authored a white paper bearing the Goldman sachs logo, titled "How Capital Markets Enhance Economic Performance and Facilitate Job Creation." In a word: for Mr. Hubbard (as well as for Mr. Dudley, Goldman Sachs, and thus, the New York Fed) it is all about the capital markets.
In the past 50 years, the way health care is financed has changed, with private payers and public insurance paying for more care. The California Healthcare Foundation has created this excellent interactive graphic shows who paid for the nation's health care and how much it's costs have shifted since 1960. The tree-map provides an intriguing exposition of the 'relative costs' but as The Economist adds, with regard the 'absolute costs': American healthcare costs increased by roughly 100 times, from $27 billion in 1960 to $2.6 trillion in 2010.
The topic of Obama and his teleprompters (one of which was stolen a year ago, causing a public appearance delay) has been so pervasive in the "counterculture" that it led to the creation of the term TOTUS. But it wasn't until today that TOTUS is now officially part of the mainstream media lexicon courtesy of this slideshow via Reuters, which should explain just who pulls the strings.
Syria and Iran are, in a way, the first dominos in a long chain of terrible events. This chain, as chaotic as it seems, leads to only one end result: Third world status for almost every country on the planet, including the U.S., leaving the financial institutions, like monetary grim reapers, to swoop in and gather up the pieces that remain to be fashioned into a kind of Frankenstein economy. A fiscal golem. A global monstrosity that removes all sovereignty whether real or imagined and centralizes the decision making processes of humanity into the hands of a morally bankrupt few. The only people celebrating at the end of the calamitous hostilities will be the hyper-moneyed power addicted .01%, who will celebrate their global coup in private, laughing as the rest of the world burns itself out, and comes begging them for help.
And the payroll propaganda was going so well until... New Jersey happened. As the chart below shows, in the month of July the state, arguably the Tristate area's most employer friendly, saw a sequential drop of 12,000 jobs, which was the largest one month drop since June 2009. Outlier? Or the harbinger of things to come at the national level? We will likely not now for sure until after the presidential election at which point the endless data fudging and manipulation finally ends.
Spain's IBEX equity index is down 2% today - the largest drop in three weeks - after touching the 200DMA on Monday and turning down (-3.3%). The equity market - which appears to be trading like nothing more than an upside call on any potential for survivability (and is 'helped' by a short-selling ban) - remains notably rich to its relatively less-ebullient sovereign bond market - which suggests a minimum downside of 6-7% more - just to shake off the exuberance. Yes, the short-end has done better, roll risk aside, but today 2Y is 9bps wider as the 5Y CDS is 13bps wider and 10Y spread 15bps wider. Is Draghi's 'Eurhopium' dream wearing off?