As Jevons alludes to — and especially in a world where most of us live in an irrigated industrial society — it would seem that there are many other significant factors in determining both long and short term variations in food price — technology shocks, wars, energy shocks, social changes. Food prices are a complex and multi-dimensional equation with a lot of variables. But the impressive thing is that even in a modern agriculturally mechanised and industrialised economy there remains a discernable underlying association between food prices and the solar cycle.
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 -0400
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"
This month marks the 50th anniversary of Thomas Kuhn’s The Structure of Scientific Revolutions, one of the landmark philosophical texts of the last century. The central thesis of the book is that science advances in fits and starts, clustered around the advent of new 'Paradigms' - a term that Kuhn introduced in the book and much of academia subsequently coopted as their own. This was a novel thought for the times, since the conventional philosophy held that science advanced through the ages in plodding but rigorous steps. Kuhn’s observation about science is equally applicable to capital markets, for the range of 'Paradigm shifts' underway goes a long way to explaining everything from why companies refuse to invest to why earnings multiples on U.S. stocks remain so low. Today, in celebration of Kuhn's opus, ConvergEx's Nick Colas offers up a list of the 'Top 10 Paradigm Shifts' currently underway; and notes that new paradigms don't often have as much to them as the old ideas they replace. They are often actually inferior. Over time they get their bearings, yes. But the transition is rough.
Markets taking any negative news as additional must-have accelerators of a bail-out.
Time being of the essence.
But what if things just drag on?
University of Michigan Consumer Confidence came modestly higher than expected and limped higher off the lowest levels of the year. However, aside from this apparently positive event (accoding to some media pundits), there are two worrying things shifting rapidly. Consumer outlook for the economy (as opposed to current conditions) dropped to their lowest of the year with the largest 3-month drop in 11 months (so much for hope?); and inflation expectations soared by the most in 17 months.
Just when you thought it was safe to get back in the water of shark-infested algos; just as we hit multi-year equity index highs (with the entire interest rate complex devastatingly divergent still - despite very-recent weakness), we thought it might be at least a little instructive to remember what happened in the late 1970s as analog. These 3 simple charts of Consumer Confidence, Capacity Utilization, and Initial Jobless Claims show just what can happen when you think it's all over. While there are many 'goal-seeked' analogs, we find these extremely timely given the somewhat similar underlying conditions that the world faces; to wit, Citi notes: "A Middle East 'tinderbox' that is very susceptible to a food price shock and a likely cause of an Oil price shock (as we saw in 1973-1974 and again in 1978-1979)."
Last week was a scratch in terms of events, if not in terms of multiple expansion, as 2012 forward EPS continued contraction even as the market continued rising and is on the verge of taking out 2012 highs - surely an immediate catalyst for the New QE it is pricing in. This week promises to be just as boring with few events on the global docket as Europe continues to bask in mid-August vacation, and prepare for the September event crunch. Via DB, In Europe, apart from GDP tomorrow we will also get inflation data from the UK, Spain and France as well as the German ZEW survey. Greece will also auction EU3.125bn in 12-week T-bills to help repay a EU3.2bn bond due 20 August held by the ECB. Elsewhere will get Spanish trade balance and euroland inflation data on Thursday, German PPI and the Euroland trade balance on Friday. In the US we will get PPI, retail sales and business inventories tomorrow. On Wednesday we get US CPI, industrial production, NY Fed manufacturing, and the NAHB housing index. Building permits/Housing starts and Philly Fed survey are the highlights for Thursday before the preliminary UofM consumer sentiment survey on Friday.
- Regulators irate at NY action against Standard Chartered (Reuters)
- Recession Generation Opts To Rent Not Buy Houses To Cars (Bloomberg)
- Egypt launches air strikes on militants in Sinai (Reuters)
- Loan-Shark Lending Surge Feared In Japan (Bloomberg)
- US seeks $3bn for Sudan oil deal (FT)
- Home Prices Climb as Supply Dwindles (WSJ)... not really- just money laundering in the form of ultra luxury home purchases soars
- A lifeline is thrown to the periphery - Smaghi (FT)
- Standard and Who? Greece Credit-Rating Outlook Lowered by S&P as Economy Weakens (Bloomberg)
- BOE Cuts Growth Forecast, Sees Inflation Below Goal in Two Years (Bloomberg)
- S&P Takes CreditWatch Actions On Four Spanish Banks (Reuters)
- Japan Gets Reprieve as Drop in Oil Eases Trade Impact (Bloomberg)
BS At The BLS Leads To Profitable Short Opportunities As Hopium Smokers Get High Off Of Depreciated Dime Bags Of Manipulated EupSubmitted by Reggie Middleton on 08/06/2012 09:12 -0400
Rosy econ data + low valuations in markets + cure to European debt crisis, Abercromie & Fitch, Aeropostale, etc. a screaming buy?
- U.S. nuclear bomb facility shut after security breach (Reuters)
- EU Commission Welcomes Greek Reform Pledge, Wants Implementation (Reuters) -> less talkee, more tickee
- China Cuts Stock Trading Costs to Lift Confidence (China Daily) as France hikes transactions costs
- Holding Fire—for Now—but Laying Plans (WSJ)
- ECB-Politicians’ Anti-Crisis Bargain Starts to Emerge (Bloomberg)
- Dollar falls back as non-farm payrolls loom (FT)
- Ethics Plan to Raise Consumer Confidence (China Daily)
- Brazil backslides on protecting the Amazon (Reuters) - fair weather progressive idealism?
- Japan Foreign-Bond Debate May Boost BOJ Stimulus Odds (Bloomberg)
- Japan’s Lower House Passes Bill to Let Workers Stay on to 65 (Bloomberg)
The Hilsenrath-Haggle Federal Open Market Committee (FOMC) is likely to ease monetary policy at the July 31-August 1 meeting in response to the continued weakness of the economic data and the persistent downside risks from the crisis in Europe. While we expect nothing more exciting than an extension of the current “late 2014” interest rate guidance to "mid-2015", Goldman adds in their preview of the decision that although a new Fed asset purchase program is a possibility in the near term if the data continue to disappoint, their central expectation is for a return to QE in December or early 2013.
Just when you thought it was safe to hope for more bad news being good news we complete the triumvirate of housing, manufacturing, and now confidence all beating expectations. But we Moar QE. Consumer Confidence just beat expectations for the first time in 5 months rising to its highest level since April as it appears the self-reinforcing 'Fed's got your back' belief once again becomes a self-defeating 'how can we QE when everything's peachy' scenario. To wit, 12-month inflation expectations rose from 5.3% to 5.4% - as we noted the inflation-argument for NEW QE here. This is simply remarkable levels of cognitive bias considering the savings rate just rose to a one-year high implying people are expectation deflation - dis-inflation at the least. It would appear that indeed - given the market's downward trajectory - that the stealing of one's own punchbowl realization is occurring.
European equities are trading in flat-to-positive territory going into the North American crossover with the FTSE-100 the primary laggard, being driven lower by individual earnings releases. Oil supermajor BP released a disappointing set of Q2 earnings, reporting a net loss of USD 1.39bln, pressing the stock lower by 4.25% at the midpoint of the European trading day. Data releases from Europe today have picked up in volume, but come alongside expectations, proving unreactive across the asset classes, as German unemployment changes matches estimates at a reading of +7K for July. The topic of a banking licence for the ESM has arisen once more, as German politicians have begun voicing their concerns on the issue, with a German senior lawmaker commenting that he cannot see an ESM banking licence becoming a reality. However, this appears to be another reiteration of the German political stance, and therefore not a particular shock to markets. With today the last trading day in the month, larger than average month-end extensions have proved supportive in the longer-end of the curve today, with notably large extensions in Germany, France and the Netherlands.
- Hilsenrath: Heat Rises on Central Banks (WSJ)
- Some at Fed Are Urging Pre-Emptive Stimulus (NYT)
- Obama Warns of Headwinds in Europe; Urges European Leaders to Take Decisive Action on Euro (WSJ) - also needs reelection
- ECB thinks the unthinkable, action likely weeks away (Reuters)
- Games Turn London Into ‘Ghost Town.’ (FT)
- Greek Leaders Seek to Defer Austerity Cuts (FT)
- Hong Kong Builders Unload Properties to Raise Cash for Land Rush (Bloomberg)
- North India Crippled by Power Cuts (FT)
- Euro-Area Unemployment Rate Reaches Record 11.2% on Crisis (Bloomberg)
- Italy's Monti sees hope of end to euro crisis (Reuters)