If you’re one of the tens of millions of unemployed in the western world, I have good news and bad news. The bad news is that your situation at home isn’t getting better anytime soon. The good news is that many foreign job markets are quite strong. Here in the Middle East, there are a number of countries that shook off the effects of the economic downturn and are still growing feverishly. If you’re looking for a job, this may be a good place to start. Most of the positions, especially the better paying jobs, have great benefits. And no I’m not talking about casual Friday. In this part of the world, it’s common for employers to provide a house and chauffeured car in the package, and sometimes even private schooling for the kids. Commissions and profit shares are also common, depending on the position. And as an added benefit, most of these places have little or no local tax… so you keep what you earn. By way of comparison, if you make $4,000/month ($48,000 annually) in Abu Dhabi, that’s the after-tax equivalent of making $65,000/year in the US. If you make $7,500/month ($90,000 annually) in Dubai, it’s like making $130,000 in the US. What’s more, US tax law excludes the first $92,900 from income tax. Other nationalities pay nothing.
If the market always finds the pain trade, making an entire industry feel like they are back in high school, would have to be the mother of all pain trades. It seems like there is a "cool" group that knows what to focus on. What is hot and trendy and important at any given moment. Some kids are left wondering why they were part of the cool group last year, but suddenly are sitting by themselves at the cafeteria (hedge funds down 10% or more on the year, know that feeling well). There are even a few new kids at the cool table - most noticeably, that weird kid who always talked about gold is suddenly popular.
Once is fine, twice - passable, three times - eh... But when one has missed forecast after forecast after forecast as many times as Greece, one wonders what the hell is going on. Earlier today we got confirmation that what everyone with half a brain (obviously this excludes the apparatchik idiots in Brussels) had been expecting had come to pass, namely that the Greek economy has completely imploded. Per Reuters: "GDP contracted at an annual pace of 7.3 percent in the three months to June, from 8.1 percent in the previous quarter, according to seasonally unadjusted figures by statistics agency ELSTAT, while unemployment stayed near record highs. "Domestic demand is incredibly weak, exports do not benefit from global economic growth ... A 2011 deficit of 8.5 percent to 9 percent doesn't seem implausible," said Ben May, a London-based analyst at Capital Economics. Unemployment fell slightly to 16.0 percent in June, helped by seasonal tourism jobs. But it remained close to a record 16.6 percent it hit the previous month, well above its 11.6 percent level in June 2010. And as rumblings from everywhere confirm, most notably from Greek 1 Year bond yields which are pennies away from 100% (i.e. one doubles their money if Greece does not go broke n the next 365 days), and Greek CDS which now predict a virtual certainty of bankruptcy, Europe has had enough of being used as a liquidity source over and over. Because as speculated ever so often, Greece (and now Italy) realized that the balance of power in Europe is entirely with the broke nations: after all what will Brussels do: blow itself up by kicking Greece out? As a result, Greece continued to promise and promise while doing nothing. Well, it appears that Europe is now about to test just what happens when Greece is kicked out. According to sources Greece will either be kicked out of the Eurozone by the end of the year or will be insolvent in the next 4 months. Either way, things are about to get truly exciting. And unfortunately, what Greece is doing by leeching of the Eurozone is precisely what the US is doing by "leeching" of the (temporary) dollar reserve standard. As Greece is about to find out, all good things come to an end. Soon after, America will also discover that those 4 week Bill yields of 0.000% will be a much cherished memory.
In the month since Bernanke extended ZIRP til mid-2013 and explained that he really is not out of bullets, we thought it interesting to look at commodity (or perhaps real currency) movements since then. It is rather notable that Dr. Copper, oh so notably used by the cognoscenti to explain global growth remains miraculous, has underperformed the potentially more critical exchangeable stores of value such as Gold, Silver, and Oil. Even more surprising, and potentially signaling the disaster that is Europe, the USD (based on the Dollar Index) is stronger by 2.5%.
Think only you lost money in August? Wrong: even such titans of fair and perfectly legal stock picking as Stevie Cohen lost money. How much? Lots. At -2.96%, this was the first negative month for blue eyes since June 2010, and the single biggest monthly loss since November 2008.
Following today's New York Times invasion of CNBC, where two of its most irrelevant columnists are now part of CNBC's most irrelevant hourly block so at least it is symmetric, Rick Santelli and "The Earth is flat...but I sure am round" author Tom Friedman had a choice exchange of words which culminated with Rick Santelli finally telling the world's most overhyped patron saint of globalization the bitter truth. In the meantime, not even the very non-flat Friemdan had an answer to Santelli's very simple question: is Social Security a ponzi scheme... And while we are there, we wonder just what noun would be used to describe Friemdan if asked if the entire Keynesian model is an even bigger ponzi.
Think the ECB is unable to maintain the illusion that central planning works? Think again. Some unlucky sod dares to ask Trichet how the central bank plans to defend its failure as a monetary authority, to which the French president proceeds to have an unprecedented (for a central head banker) on air meltdown with literal foaming in the mouth. "You want the lies?... You can't handle the lies. It is all about ze price stabeeleetee." Hilarity ensues, especially after JCT proceeds to bash his one and only nemesis: Germany. Prepare to watch many more such episodes over the next 2 years as the world voodoo economist PhDs have so carefully constructed for themselves in their ivory towers comes crashing down.
While not considered in the same category as the UMichigan or the Conference Board confidence indices, the Bloomberg (formerly ABC) Consumer Comfort index, which is just as familiar with statistical sampling and using phones as the prior two (and does not share their penchant for calling Wall Street execs to break any market downward trend), just found that the week of September 4 saw consumer confidence drop from -49.1 to -49.3, the second lowest in 2011. Worse is that confidence in the state of the economy has now plunged to the lowest since 2009, or basically since the market generational lows, confirming that "confidence" is nothing but a way of saying popular perception of the S&P, pardon Russell 2000. Lastly, and worstly, while the the confidence of of $100K+ earners dropped to -18.2 from -15.1, the confidence, whatever that means, of those earning the least is now at a record low. Luckily, this is certainly not the social group most targeted by Obama in his reelection bid. Oh wait, nevermind.
Speaking at a Bloomberg inflation meeting this morning, former St. Louis Fed official William Poole was quite vociferous in his concerns over current Fed policy noting that Bernanke paid too much attention to equity prices. He also noted that there is a risk of an 'astonishing rise in inflation.
Yesterday we documented that the by now widely bashed Operation Twist has been a failure before it was even launched as confirmed by recent trends in mortgage refinancing, or more specifically, lack thereof. Today, none other than market (and alleged bar) veteran Art Cashin confirms precisely what we said: that the one goal of the Twist - to get mortgage rates lower and refinancing higher - is and will be a failure. Again, it is very unfortunate that what is by now glaringly obvious to all will never become clear to the Fed until after the economy has finally been pushed over the precipice.
While politics will play a big part in today's market tone, with everyone hoping for the best from the president, expecting the worst, or about par for the course, and in the end getting more of the same (i.e. nothing), there are quite a few other things happening in DC today, among which are the first meeting of the “super committee” along with events on infrastructure and housing finance…
The BLS playbook in full force today: miss expectations of 405K - check, by printing at 414K; another weekly print over 400K - check (21 out of 22 weeks over 400K), revise prior week's higher - check (from 409K to 412K). Unfortunately, unlike two weeks ago when another blowout miss was reported, this time there is no striking phone carrier to blame it to. And as usual, those coming off their extended claims cliff keeps increasing, with 78K people dropping off EUCs and Extended claims: nearly 2 million people have been cut off from any extended government benefits in the past year. Overall, another weekly data set that confirms that next month's NFP number will most certainly not be positive... or zero.
- Yuan Convertible By 2015: China to EU Chamber (Bloomberg)
- European Bailout Tensions Threaten German Coalition (WSJ)
- Greek backsliding sparks euro exit talk (Reuters)
- Perry, Romney Clash at Debate (WSJ)
- Fitch warns of downgrades for China (Reuters)
- Mists Clear on China's Policy Outlook (WSJ)
- Dutch PM calls for Europe budget tsar (FT)
- Libor inquiry looks at criminal angle (FT)
- Business Leaders Call for More Central Bank Stimulus to Aid Economy (WSJ)