Our hats off to JP Morgan for a creative depiction of the current European debt crisis, although we typically take a dim view of any investment vehicle that's associated with the word "leveraged" as recommended by JPM.
Even a broken clock could be right at least twice a day....
Funny how much can change in a month. After everyone was making fun of David Rosenberg as recently as June, not a single pundit who owns a suit and can therefore appear on CNBC dares to mention the original skeptic. Why? Because he has was proven correct (once again) beyond a reasonable doubt (and while we may disagree as to what asset class is best held into the terminal systemic collapse, Rosenberg has been one of the most steadfast and consistent predictors of the 'non-matrixed' reality in the world). Yet oddly enough there are still those who believe that a double dip (or, more accurately, a waterfall in the current great depressionary collapse accompanied by violent bear market rallies) is avoidable. Well, here, in 12 bullet points, is Rosie doing the closest we have seen him come to gloating... and proving the the double dip or whatever you want to call it, is here.
Was A Double Dip Recession Really Hard To See Coming? Is It A Double Dip Or A Large Serving Of A Single Recession?Submitted by Reggie Middleton on 08/10/2011 07:06 -0400
How can it be a double dip if the first recession never ended? The Fed spent $1 for every 80 cents of "supposed recovery", all of which lasts only as long as the Fed keeps spending those $1s. Patently unsustainable, as we are now seeing...
Today's Economic Data Docket - Case Shiller Hits New Double Dip Low, Chicago PMI Tumbles, But Consumers Very ConfidentSubmitted by Tyler Durden on 05/31/2011 08:00 -0400
Case-Shiller house prices, the Chicago PMI, and consumer confidence. Fasten your seatbelts: bizarro day will be fully enforced today with horrible data leading to market surges.
And continuing with the rates discussion from the prior post, next up we have that "other" bond manager, DoubleLine's Jeff Gundlach, chiming in on what would cause a treasury rally following QE2. His assessment: nothing short of a confirmed double dip, or "zero GDP growth." Dow Jones reports: "Over the past two months, government bond market participants have fiercely debated whether the end of the Fed's $600 billion in Treasury bond purchases in June will trigger a market sell-off or rally...the U.S. government bonds' rally in recent weeks shows investors have already bet the Fed's exit from the market will boost safe-harbor Treasurys because the economy will slow. So any gains will be limited. "The 10-year Treasury yield has hit the moment of truth," Gundlach said in an interview with Dow Jones." Needless to say, 0% growth, which is already in the cards according to a simple correlation analysis between Y/Y GDP growth and initial jobless claims, will force the Fed, in the absence of another fiscal stimulus (which everyone knows is not coming from DC this year and possibly next year either), to step up double time and to launch far more easing to offset the economic weakness which we have been predicting for 6 months, and which the recent Japanese earthquake, and Chinese slowdown, merely accentuated. The only wildcard continues to be Japan, which many have expected would take up the monetary slack and issue tens of trillions in yen in QE, yet which has so far been slow to come, leaving the ball in either the US or European court. However, with the ECB in transition as JCT wishes to cement his hawkish legacy, the only real alternative continues to be the Fed. Oddly enough, stocks today appear to have started to already price in the start of QE3. When this sentiments shifts to precious metals and crude, our advice would be to hide you kids, and hide your wife...
Sterling Tumbles As UK Double Dip Comes Back With A Vengeance After PMI Misse, Comes Lowest In 7 MonthsSubmitted by Tyler Durden on 05/03/2011 07:15 -0400
After a few less than negative pieces of economic data out of the UK came out recently leading some to believe that the UK appreciation is a safe bet in advance of what seems an imminent BOE hike, today all the GBP bulls got another cold dose of reality after the PMI came at 7 month lows. From Reuters: "Manufacturing activity grew more weakly than expected in April, at its slowest pace in 7 months, and a sharp slowdown in new orders cast a cloud over a sector that has been a rare bright spot in the UK economy. The Markit/CIPS manufacturing PMI headline index, published on Tuesday, fell to 54.6 in April, its lowest since September, from a downwardly revised 56.7 in the previous month and well below the 56.9 consensus forecast in a Reuters poll on Friday." So to update: Japan slashes growth forecasts, Europe is overheating and due for a major monetary tightening, China already is (although the PBoC it pushed the parity to just above 6.50 last night so as not to seem too desperate), and the UK is in shambles. And somehow reverse decoupling is still expected to work? Judging by the now traditional futures levitation each and every morning the answer is a resounding yes.
As of December, so almost three months ago, the housing double dip was getting increasingly worse. This was confirmed by the latest Case Shiller data, according to which the 10- and 20-City Composites posted annual rates of decline of 1.2% and 2.4%, respectively. The 20 City Composite printed at 142.16, the lowest since June 2009 when it was 141.75. Luckily, NAR's now completely disgraced Larry Yun is nowhere to be found in this release, from which we quote: "Data through December 2010, released today by Standard & Poor’s for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, show that the U.S. National Home Price Index declined by 3.9% during the fourth quarter of 2010. The National Index is down 4.1% versus the fourth quarter of 2009, which is the lowest annual growth rate since the third quarter of 2009, when prices were falling at an 8.6% annual rate. As of December 2010, 18 of the 20 MSAs covered by S&P/Case-Shiller Home Price Indices and both monthly composites were down compared to December 2009." Bottom line: the chart says it all.
Something funny happened on the way to the "wealth effect": we call it affectionately, the "poverty effect." At least for those who have homes. The November Case Shiller index confirmed that the double dip in housing is accelerating, with the composite index posting its 5 sequential decline. The 20 city composite came at -1.59% Y/Y on expectations of a rebound to 1.7%. Perhaps the Chaircreature should finally consider lowering those mortgage rates instead of focusing so much on the Russell 2000. What we are amazed by is that all that abundant California snow was not blamed on this one particular negative surprise.
How The Commerce Department Pulled $46.3 Billion In Personal Income Out Of Thin Air To Prevent The Double DipSubmitted by Tyler Durden on 01/06/2011 10:44 -0400
It is a good thing that America has a functioning, objective and analytical media, as otherwise we might need David Rosenberg to point out that one of the key factors for the avoidance of the technical double dip was a completely unexpected number fudge courtesy of the Commerce Department which, at the most crucial stage in the economy's conversion into a re-recession, miraculously "found" $46.3 billion in personal income that "the consumer thought wasn't there before." In other words, the government literally pulled a number out of thin air which created a relative sequential boost to the economy, even though it was just a non-recurring accounting adjustment to continuous numbers and should have been completely ignored! By then it was too late (very much in the same way that the BLS has had 44 out of 52 adverse data revisions after the data has been reported, when it is too late for its to impact asset prices): it set off a chain of events which resulted in a jump in ISM, diffusion and various other indices (not to mention the BLS endless data adjustment) which caused a last second avoidance of the double dip becoming official. Oh and the Fed's QE2 did not hurt either...
And predicts banks could face another trillion in housing-related losses ...
With housing - just like with unemployment and every other portion of the economy - failure to prosecute the fraud is killing us ...
With everyone's attention focused squarely on Ireland and whether or not the country would be finally put out of its misery, one thing that most missed is that after today's release of subpar economic data, Europe has now entered a double dip. While this is not news to Zero Hedge readers, as we were confident this would happen when the EURUSD passed 1.30 for the first time several months ago, it may take others by surprise. Unfortunately Europe's troubles are only going to get worse. The only way to stimulate organic growth now, read create another export-led bounce, requires the devaluation of the euro. However, that would mean that the ECB would have to not only launch a comparable program to QE, which would paradoxically anger an inflation-weary Germany (whose economy would benefit the most from an export boom) but far more importantly, anger the New York Fed. And this Europe can not afford - keep in mind that in Europe's rickety financial structure in which a whole lot of countries are kept on life support, the ECB is only the second to last (and far less reliable) provider of resuscitation services. The last one is the New York Fed, which courtesy of its FX swap lines, now has infinite leverage over what happens in Europe. Should there be another crisis, and there will be, the Fed's generosity will be tested again. As will the IMF... to whose various credit lines America just happens to be the biggest sole contributor. There is a word for this type of arrangement: total leverage.
Rosenberg Agrees With Goldman: Sees Inventory Surge As Precursor To Negative Q4 GDP Print, "Double Dip Delayed, Not Derailed"Submitted by Tyler Durden on 10/29/2010 12:35 -0400
Eerlier we pointed out that Goldman anticipated that a surge in the inventory number (which it did, coming at $115.5 billion compared to Goldman expectations of a sub $100 billion change), would simply lead to even more Cash 4 Clunker like forward performance pull, resulting in a collapse in the quarter in which inventory clearances finally took place. It seems the quarter in question is the current one. Indeed, various channel checks have confirmed that inventory levels at assorted businesses have been trimmed aggressively into the year end, and it is not unfeasible that we could see a $30-40 billion drop in inventory levels in Q4. Problem with that is, it will result in a negative GDP print due to the high marginal impact of a swing as seemingly small as the anticipated. Here is Rosie's explanation for why the government can play timing tricks all it wants but at the end of the day, it is inevitable that the economy is now contracting. How long before it is officially disclosed is at this point far more of a political issue than an economic one.
Irish bond spreads are back in the spotlight, with Bund spreads jumping by over 20 bps to over 415 bps, although not on the heels of a failed auction (the country did auction off €400 million in February and April 2011 bills earlier, which was less than sought), but rather on news that Ireland is the first country in Europe to officially double dip back into negative growth. Ireland was also the first European country to dip into recession what may seem like an eternity ago. The stunner is just how vast the difference between the expected and the actual economic reality was. As BBC reports: "The Irish economy shrank in the second quarter
from the previous three months, surprising analysts who had been
expecting growth. Gross domestic product (GDP) fell 1.2%, the Central
Statistics Office said. It also revised down its measure of growth in
the first quarter to 2.2% from 2.7%." So poor Ireland not only has to deal with a drunk PM, insolvent bank system, and, what is not surprising a new economic crunch, but what is far more concerning, a Department of Truth and Unicorns, which is unable to lie its teeth off and paint a rosy picture when the feces are already in process of being fanned.