Over 1 in 5 homes (with $674 billion of mortgages) in China stand empty... and if you think that urbanization will fix that, as WSJ reports, a 10 percentage point rise in the urbanization rate (already at 54%) would result in only a 2.6% drop in vacancy rates. China has a major over-supply issue thanks to property developers who had rushed into the market to build homes, which have been a popular investment as prices seemed bound to keep rising. But now, as Vanke recently warned, things are changing and "the golden era" of China's property market are over. The vacancy rate of sold residential homes in urban areas reached 22.4% in 2013 and as new home prices are slashed to move product, a 30% drop would leave 11.2% of Chinese homes underwater on their mortgages...
Brazil wins the world cup... according to Bloomberg, 171 economists, and Goldman Sachs. They beat Spain, Germany, or Argentina in the final respectively but as one survey participant noted, "It’s kind of hard to bet against Brazil -- they have home advantage, the climate, crowd and recent record." Goldman's 'model' implies a 48.5% chance that Brazil wins it all (with Argentina 2nd most likely to win at 14.1%). While all eyes will be on Ronaldo, Goldman's Dream Team is dominated by 3 Brazilians (including Neymar of course) but based on the 6-factor Poisson distribution-based regression model, Goldman predicts the scores of every game (and Bloomberg's interactive graphics allow to create your own bracket). If only the Brazilian people were so certain about their futures...
A computer program called “Eugene Goostman,” has reportedly become the first artificially created human being to fool more than 30% of judges that he is a real person (the Turing Test). It is thought to be the first computer to pass the iconic test. Though other programs have claimed successes, those included set topics or questions in advance. The computer program claims to be a 13-year-old boy from Odessa in Ukraine. This is particularly interesting in light of a recent piece from the MIT Technology Review titled, "How Advanced Socialbots Have Infiltrated Twitter," which demonstrated the ability of Twitterbots (i.e., fake computer generated Twitter accounts) to not only gain more followers than actual human users, but to also infiltrate social groups within Twitter and exercise influence within them.
With the world cup set to kick off in three days, things in the host country - which according to numerous report is largely unprepared for the grand spectacle - are going from bad to worse.
With the VIX smashing last week to levels not seen since early 2007, the S&P rising to all time highs, and European core and peripheral bond yield this morning touching historic lows, it would appear that the "market" has priced in every possible negative outcome. Which, as Goldman showed over the weekend is clearly not the case at least as investors are concerned who continued to sell stocks across the board in May even as the market broke out to record levels making many wonder who is buying stocks (for more read here)? Expect more of the same, and with some luck we will get a single digit VIX in the coming days as newsflow slows down following payrolls week and ahead of the world cup start in Brazil.
In just about any realm of activity this nation does not know how to act. We don’t know what to do about our mounting crises of economy. We don’t know what to do about our relations with other nations in a strained global economy. This is a society in deep danger that doesn’t want to know it.
This week's busy calendar starts off with today’s global PMIs and ISMs. On Tuesday, President Obama begins a four day European trip ahead of the G7 meeting which starts on Wednesday. This G7 meeting is replacing the G8 meeting that was originally scheduled in Sochi but was cancelled after Russia’s annexation of Crimea. Tuesday’s data docket is important with Euroarea data releases including inflation and unemployment expected to further cement the ECB’s resolve in easing policy come Thursday. Wednesday features the global services ISMs and PMIs. Other data releases scheduled for that day includes the ADP employment report, which will provide an important preview to Friday’s NFP, and US trade. The Fed releases its Beige Book on Wednesday too and the second estimates of Euroarea GDP will be published on Wednesday as well. Apart from the ECB on Thursday, we also have the BoE policy meeting.
The melt up is accelerating and with the momentum tailwind back, newsflow is once again irrelevant: any news that are even remotely good are trumpeted, and any bad news - such as Europe's right storm rising in the northern states, and left storm surge in the states that demand more handouts from the northern states or China sinking a Vietnamese boat, the most serious bilateral incident since 2007 - are once again (and as usual) nothing more than a catalyst for even more liquidity injections. End result: the S&P futures this morning are 5 points above Goldman's year end target of 1900 and 45 points away from its June 30, 2015 target. Can this breakneck scramble on zero volume continue until Grantham's bubble peak level of 2,200 is hit? Well of course: after all anything goes in the centrally-planned new normal. To be sure, this is an equity only phenomenon: moments ago the Bund future hit its highest level since May 19, while the 10 Year remains unchanged at 2.53% as it continues to price in the new "deflationary" (and Japanese) normal. And as has been the case during all such divergences of late, either bonds or equities are making a horrible mistake: the question remains: who? Since all equities are doing is tracking FX pairs to the pip and have completely forgotten all about fundamentals, we have a pretty good idea what the answer is.
With the Fed tapering and both China “I don't think the markets are discounting what’s really happening in China,” and Japan’s currencies likely to weaken, the net impact on the U.S. will be deflationary, Kyle Bass warned in a recent presentation. That trend will be accelerated by the improvement in the balance of trade for the U.S., which had its current account deficit shrink due to increased hydrocarbon production. Bass warns, the crucial moment will come when the U.S. reports a sub-6% unemployment rate, meeting the target it has set for normalizing its monetary policy by ending QE and raising rates. He predicted that will come in July. That will be the Fed’s “worst nightmare,” he said. Raising rates would stifle growth and recreate unemployment problems, which would be disastrous politically, according to Bass.
China and Russia signed an historic agreement in Shanghai this week - the ramifications of which have yet to be appreciated ... Reserve currency status does not last forever. Empires rise and fall. The world is constantly changing and evolving. Nothing lasts forever …
Having watched Tim Geithner's disgusting defense of the tax-payer-backed re-inflation of a corrupt and knowingly devastating banking system on Jon Stewart's Daily Show, and watching the US fine (no jail time for anyone) a Swiss bank which admits its guilt over billions of fraud yet allow them to remain a prime dealer of US Treasuries; we thought the following story from a '3rd world banking system' would open a few eyes in the US this weekend as 'we remember'. As AP reports, a billionaire businessman at the heart of a $2.6 billion state bank scam in Iran, the largest fraud case since the country's 1979 Islamic Revolution, was executed Saturday, state television reported.
- McDonald’s Workers Arrested at Protest Near Headquarters (BBG)
- U.S. Sends Troops to Chad to Hunt for Abducted Nigeria Girls (BBG)
- BofA Scrapping Market-Making Unit Amid Trading Scrutiny (BBG)
- Biggest attack in years kills 31 in China's troubled Xinjiang (Reuters)
- Intense Fighting Flares in Eastern Ukraine (WSJ)
- Fed Officials Tussle Over Labor Market Slack (Hilsenrath)
- Ikea Economics Lure Central Bankers Seeking New Tools (BBG)
- When Putin ordered up new hospitals, his associates botched the operation (Reuters)
- Norway’s $33 Billion Man Steps Up Search in Asia Real Estate Bet (BBG)
The key news overnight were global manufacturing PMIs which can be summarized as follows: Japan contraction; China contraction, but less than expected (as reported before); and most recently, Europe which expanded but dropped and missed, at 52.5, down from 53.4 and below the consensus estimate of 53.2. The weakness was fully driven by France which has moved back into a contraction phase in both manufacturing and services, which were 49.3 and 49.2, down from 51.2 and 50.4, respectively (although with the recent surge in train station remodelling, the mfg aspect may soon be boosted). The market soaked up the Chinese numbers with fervor, sending the algo-controlled USDJPY into a buying frenzy which in turn pushed up US equity futures, only to see a gradual fade of the Chinese euphoria when the European data hit.
U.S. demand for coal has fallen in recent years and export has become ever more important to domestic coal producers. Asia is the obvious export target, but challenges abound.
China Bans Windows 8 From Government Computers After Leaked Warning By Germany About Backdoor To The NSASubmitted by testosteronepit on 05/21/2014 12:07 -0400
Retaliation for the indictment of five Chinese military officials accused of hacking into Corporate America? Nope. This is much more serious.