Can markets be saved an eighth time, a ninth time, a tenth time this year? How about next year?
"The reality is that business and investment spending are the true leading indicators of the economy and the stock market. If you want to know where the stock market is headed, forget about consumer spending and retail sales figures. Look to business spending, price inflation, interest rates, and productivity gains." The Skousen index suggests that the current economy is significantly weaker than headline statistics state.
While the Puerto Rican creditors' bargaining power on the island is to put it mildly, negligible, especially after the budget director made the imminent default into a crusade of poor versus rich, saying he won’t redirect cash from its operating budget to make debt payments, an unexpected supporter has emerged thousands of miles from the beleaguered island: New York's socialist mayor Bill DeBlasio. As CBS reports "New York City Mayor Bill de Blasio demanded President Obama and Congress immediately come to the island's fiscal rescue." "It's the federal government's obligation to act, because they can't stand idly by and watch Puerto Rico fail," de Blasio told a crowd of hundreds of Puerto Rico boosters gathered on the steps of City Hall.
Credibility matters, it will matter even more in the near future when there seems none to be had from those who may have lost – or sold theirs.
- Second-quarter GDP seen rebounding on consumer spending, housing (Reuters)
- China Stocks Fall as Traders Puzzle Over Sudden Late-Day Swings (BBG)
- European 'alliance of national liberation fronts' emerges to avenge Greek defeat (Telegraph)
- Thomas Cook warns on earnings over Greece (MW)
- Largest Greek toy seller Jumbo warns of hit from capital controls (Kathimerini)
- Chevron and Exxon Get the Plaudits, but Some Smaller Drillers Faring Well (WSJ)
- Schäuble outlines plan to limit European Commission powers (FT)
- UBS Deal Shows Clinton’s Complicated Ties (WSJ)
Religious imagery... peak condescension... everyone proclaiming "gold is dead"... In a nutshell, sentiment has plunged to negative levels not seen in years, if not more than a decade. Here are four mainstream media articles that provide some evidence we may be approaching a sentiment low. Some of them we're sure you’ve seen, others perhaps not. What amazes us is how they’ve all come out within the last two weeks.
Why are governments suddenly so keen to ban physical cash? The answer appears to be that the banks and government authorities are anticipating bail-ins, steeply negative interest rates and hefty fees on cash, and they want to close any opening regular depositors might have to escape these forms of officially sanctioned theft. The escape mechanism from bail-ins and fees on cash deposits is physical cash, and hence the sudden flurry of calls to eliminate cash as a relic of a bygone age — that is, an age when commoners had some way to safeguard their money from bail-ins and bankers’ control.
"The Federal Reserve on Wednesday kept interest rates near zero but cited progress in the U.S. job market, a sign it remains on course to raise interest rates in September or later this year. At the same time, however, it flagged a nagging concern about low inflation, which is creating caution among officials and could convince them to delay the day of the first increase."
Did you know that the Federal Reserve pays an annual 6% dividend to its shareholders, i.e., the member banks of the cartel? Must be nice, considering savers who had nothing to do with cratering the world economy, and failed to receive a taxpayer funded bailout, can barely earn 0.5% on their money. It’s also quite bizarre. How many other “public institutions” have private shareholders to whom they pay 6% risk free dividends? None, which once again highlights the point that the Federal Reserve is NOT a public institution working on behalf of the citizenry, but is rather a banking cartel designed to enriched and protect its member banks (as we saw on clear display in 2008). It appears that some members of Congress are now targeting the estimated $17 billion per year paid out by the Fed to its member banks via the highway-funding bill.
Here is the paradox as succinctly summarized by Deutsche Bank, which notes that the current -29% year-over-year drop in the CRB index implies YoY headline CPI inflation falling from 0.1% to -0.9% over the next couple of months, or just in time for the September or December FOMC meetings both proposed as the "lift off" date. This would be the largest year-over-year drop since September 2009 (-1.3%) and one of the lowest prints in modern history.
"How would US Treasury bulls in the private sector react if they knew in advance that the second largest owner of Treasuries, the PBOC, was a forced seller of Treasuries. Such compelled selling would be obvious before US markets opened each morning as downward pressure on the RMB exchange rate in Asia forced the PBOC to liquidate foreign currency assets to defend the fixed exchange rate. Would even Treasury bulls stand in the way of such a large and predictable liquidation? If they didn’t then the second phase of The Great Reset would come to pass and the decline of EM external deficits would force tighter monetary policy in both EM and DM."
The bear market in bullion is an artificial creation. This artificial, indeed fraudulent, increase in the supply of paper bullion contracts drives down the price in the futures market despite high demand for bullion in the physical market and constrained supply.
The 0.18% month-over-month decline in Case Shiller home price index is the biggest since July 2014 which confirms the David Blitzer's view that "over the next two years or so, the rate of home price increases is more likely to slow than to accelerate." His biggest fear is that "first time homebuyers are the weak spot in the market," adding that prices are increasing about twice as fast as inflation or wages. Moreover, other housing measures are less robust - housing starts are only at about 1.2 million units annually, and only about half of total starts are single family homes. Sales of new homes are low compared to sales of existing homes.
Greece has no future, so long as it clings to the euro. The dollar won't servce you much better. A drachma will only harm the Greek people. That leaves one other option.