In the US, retail sales on Friday will be the main data release. In addition, Congress will return from its 5-week recess on Monday and will likely keep their focus on Syria this week. Finally, San Francisco Fed President Williams (who does not vote on FOMC policy this year) will speak on Monday. Last week, Williams argued that the FOMC should maintain its focus on the unemployment rate, despite its limitations. After Friday's employment report saw the unemployment rate drop again due to falling participation, this issue is likely to resurface. The Fed's communication blackout period begins on Tuesday so Williams will be the last FOMC speaker before the September meeting ends on the 18th.
- SURPRISE - Goldman Sachs won a preliminary victory to limit losses from a wave of erroneous trades that roiled U.S. options markets (WSJ)
- HP’s Whitman abandons 2014 revenue growth target (FT) - just keep doing those buybacks and ignore CapEx: revenue growth estimated in 2022
- Republicans in Echo Before Big Burn Defy Affordable Care (BBG)
- China's banks to take next step in rate reform push (Reuters)
- Berlin’s Consistency on Greece’s Rescue (FT) and lack thereof
- Summers as Obama Voice of Authority Rides Car Rescue in Fed Race (BBG)
- Cuomo in Manure Fight as New York Promotes Yogurt (BBG)
- Yellen’s Ties From London to Shanghai Bypass White House (BBG)
- Sanctions Gap Allows China to Import Iranian Oil (WSJ)
The middle of the month brings a mixture of second-tier macro numbers punctuated by the market-moving (and Taper-cementing) retail sales report. We get IP, CPI and PPI from the US this coming week. In terms of hard activity numbers, US retail sales on Tuesday will be the highlight which as a reminder is, in addition to Jackson Hole, seen as one of two key pre-Taper catalysts to keep an eye on. Outside the US, the key data will be the quarterly publication of German, French and Eurozone GDP, as well as Japanese GDP, which has already been released (weaker real growth, higher inflation). The second week of the month also tends to show the first survey results with the Phily Fed and Empire surveys on Thursday. In Germany the ZEW will come on Tuesday. Finally, from an FX point of view, we will be focused on balance of payments related data, with the trade balance in India and TIC data in the US. After a few very weak TIC releases in recent months we would expect more evidence of weak capital inflows into the US.
In what some would call a victory for free speech, Lukas Novy, a follower of the Church of the Flying Spaghetti Monster, has been granted permission to wear a sieve on his head in his official ID card. As Prague Daily reports, Novy explains that the plastic kitchenware is a crucial part of his "Pastafarianism" faith. Officials, who initially denied his request, were swayed by his commitment to "His Noodliness," agreeing that this fits in with laws that allows Czech citizens to wear headgear for religious or medical reasons. Think that is 'humorous', look at a chart of TSLA... or listen to any recent 'Abe' speech...
If S&P had any guts it would lower the US another notch.
We previously showed hard evidence of the Bank of England's complicit hiding of the truth about the quality of Bundesbank gold stored in the Fed's vaults. A few weeks later in a "completely unrelated" action, the Bundesbank dramatically shifted its recent stance, and demanded that its gold be repatriated into its own vaults (and we now know the impact that has had on the paper-physical paper markets). However, in yet another one of the 'darkest episodes in central banking history' the FT reports, the Bank of England facilitated the sale of gold that was looted by the Nazis after their invasion of Czechoslovakia in 1938. Of course, judging today's central bankers by this ethical (and potentially criminal) behavior of over 70 years ago is unfair but it is notable that the pattern of whatever-it-takes and at-all-costs decisions, coupled with pervasive opacity and stark unaccountability, appear to have been formed a long time ago.
After a slow start in the week, there is a substantial pick up with announcements from the FOMC, ECB and BOE (as well as monetary policy updates from the RBI, RBA, Israel, and Czech Republic) with the possibility, if not probability, of a Fed update on tapering expectations. On Wednesday we get the much expected wholesale GDP revision which will boost "growth data" all the way back to 1929 and is expected to push current GDP as much as 3% higher, and on Friday is the "most important NFP payroll number" (at least since the last one, and before the next one), where the consensus expects a +183K print, and 7.5% unemployment. All this while earnings season comes to a close.
Surplus capital used to be the understood as the primary challenge, but this fell out of favor. This essay seeks to return it to the center of the narrative.
Sovereign debt is the bonds that are issued by national governments in foreign currencies with the intent to finance a country’s growth. The risk involved is determined by whether that country is a developed or a developing country, whether that country has a stable government or not and the sovereign-credit ratings that are attributed by agencies to that country’s economy.
Some thoughts on why US auto sales are at their strongest pace since prior to the crisis, while EU auto sales are at 20 year lows.
As everyone knows, the only reason to become a banker, and be subject to constant derision, abuse, scorn and hatred by the "99%", and potentially to a fate comparable to that of the aristocracy in France circa 1789, is a simple one: money. Specifically, get as much of in as short a time period as possible, be rewarded with a taxpayer bailout or two when massive bets go epically wrong, then convert all your cash into "hard assets" and escape to a non-extradition country before the latest credit bubble pops. In other words, a simple opportunity cost analysis. Which then begs the question: why are there bankers in the following European countries: Slovenia, Romania, Malta, Lithuania, Estonia, Czech Republic and Bulgaria. The one thing in common these countries have is that according to a just released European Banking Authority study, in the year ended 2011 not a single domiciled banker made over €1 million! In other words: bankers working for feudal peasant salaries. What a scam.
In a world of surging youth unemployment, increasingly-wide wealth inequalities, and generation of older citizens working longer implicitly impacting the youth, we thought it perhaps useful to see which nations in the world are the most prone to 'vice'. Bloomberg ranked countries on their propensity for vice, measured by alcohol and cigarette consumption, drug use and gambling levels and found that the Czech Republic and Slovenia top the charts while Zambia and El Salvador are the most virtuous (least vice-prone). The US sits at a 'healthy' 16th in the world overall (just above the UK) but Italy, Spain, and Greece are all more vice-prone; but have no fear as the USA is Number 1 in the world for the annual prevalence of all drug usage.
In the week ahead, we get the usual middle-of-the-month batch of early business surveys, including the New York Empire, Philly Fed and Eurozone Flash PMIs. The second key focus will be a number of important monetary policy meetings, including the FOMC, as well as the Swiss, Norwegian Turkish and Indian policy decisions. The latter two are particularly interesting in the light of the recent EM weakness. The main event this weak will be the FOMC meeting after the recent market focus on the timing of tapering of the QE3 program. Swings in bond markets related to the FOMC meeting could be the primary source of FX volatility this week.
- Obama prepares for chilly talks with Putin over Syria (Reuters)
- G8 opens amid dispute on Syria arms (FT)
- Economists Blame Fed for Higher Bond Yields (WSJ) - wait... what? Isn't the "stronger economy" to blame?
- What a novel concept - In the Czech Republic, a spying scandal has forced the PM to resign (BBG)
- Rigged-Benchmark Probes Proliferate From Singapore to UK (BBG)
- Economists Wary as Fed's Next Forecast Looms (Hilsenleak)
- Banks Balk at New Rules for Small Loans (WSJ)
- Sporadic clashes in Turkey as Erdogan asserts authority (Reuters)
House prices - with respect to both levels and changes - differ widely across OECD countries. As a simple measure of relative rich or cheapness, the OECD calculates if the price-to-rent ratio (a measure of the profitability of owning a house) and the price-to-income ratio (a measure of affordability) are above their long-term averages, house prices are said to be overvalued, and vice-versa. There are clearly some nations that are extremely over-valued and others that are cheap but as SocGen's Albert Edwards notes, it is the UK that stands out as authorities have gone out of their way to prop up house prices - still extremely over-valued (20-30%) - despite being at the epicenter of the global credit bust. Summing up the central bankers anthem, Edwards exclaims: "what makes me genuinely really angry is that burdening our children with more debt to buy ridiculously expensive houses is seen as a solution to the problem of excessively expensive housing." It's not different this time.