Why can't, or rather won't, the Fed let the bubble market collapse once again? Simple - as the following chart shows, the illusion of wealth is now most critical when preserving the myth of the welfare state: some 50% of all US pension fund assets are invested in stocks and only 20% in Treasurys.
"Loan forgiveness creates incentives for students to borrow too much to attend college, potentially contributing to rising college prices for everyone," is a study's warning over government plans that allow students to rack up big debts and then forgive the unpaid balance after a set period. As WSJ reports, enrollment in student debt forgiveness plans have surged nearly 40% in just six months, to include at least 1.3 million Americans owing around $72 billion. The administration is looking to cap debt eligible for forgiveness, as President Obama's revamped Pay As You Earn scheme has seen applications soar and is estimated to cost taxpayers $14bn a year. The 'popularity' of the student loan bailout plan surged after Obama promoted it in 2012, and now the administration must back-track as costs have massively outpaced government predictions.
For the wealthy Chinese with 5 million Yuan (around $800,000) burning a hole in their pocket, there is a new must-have 'toy'. Instead of the latest Ferrari or Lambo, it is none other than the provocatively named "Red Flag L5" that is popping eyeballs and leaving the wealthy Chinese breathless...
You know it's bad when... The central bank inspired nominal price surge in everything expensive has not quite exhausted the greater fool trend-chasing muppet "wealth-builders" yet. As HedgeCo reports, Classic Auto Funds Limited (CAF) is launching several investment partnerships using collectable classic cars as the "hard asset". Forget oil-wells, real estate, or precious metals, as Robert Minnick (senior managing partner at CAF) states confidently, "many investors are recognizing the rising returns in specific classic cars as a low-risk asset." A "low-risk" "investment" indeed... what could possibly go wrong?
Add a 70s style moustache (and a red Ferrari) and BusinessWeek's Bill Gross cover is the spitting image of Tom Selleck's infamous investigator... but the analogies run deeper as the PIMCO front-man continues to search for his next steps and figure out the past
*GROSS ON EL-ERIAN: "I THOUGHT I KNEW HIM BETTER"
*GROSS SAYS FOR MOST PART, "I'M THE PERSON I THOUGHT I WAS"
Very philosophical - but as the cover asks "is he really such a jerk?"
Presenting the US car market this cold, stormy, sunny, dry, and rainless winter according to "The Haves... and The Have-Nots..."
- Ukraine leader denounces coup bid, West weighs sanctions (Reuters)
- Time to buy Imodium calls: Kuroda Easing Doomed as Yen Seen Missing 120 Level (BBG)
- Teens Disappear From U.S. Workforce (BBG)
- Fed Sets Rules for Foreign Banks (WSJ)
- Quant Funds Feel Investor Bite After Underperforming (BBG)
- China Probes Qualcomm, InterDigital Over Monopoly Concerns (WSJ)
- Capital One says it can show up at cardholders' homes, workplaces (LATimes)
- SEC Gains Power to Take Profit Made From Insider Trading (BBG)
First Mercedes, then Porsche, and now Ferrari and Maserati post record US sales in January...
*FERRARI POSTS RECORD SALES IN U.S. AND U.K. IN 2013
*FERRARI AND MASERATI GLOBAL MORE THAN DOUBLE IN JAN TO 2,400
...a month where the non-1%-auto-makers struggled mightily. Of course, the latter missed expectations are blamed on weather (as opposed to dealer inventories stuffed at record levels, a replacement cycle that has run its course, or a consumer that is once again credit-tapped out). So, the clear findings from this is that the 1% - who are buying more luxury cars than ever before in January - clearly don't feel the weather...
The economist Herbert Stein once said that if something can't go on forever, it will stop. The pattern of the last few decades, in which higher education costs grew much faster than incomes, with the difference made up by borrowing, can't go on forever... There is no point in trying to preserve the old regime as "working your way through college" is now impossible. For an 18-year-old, investing such a six-figure sum in an education without a payoff makes no more sense than buying a Ferrari on credit.
When the first response taken by major banks such as JPMorgan, in the aftermath of the massive 40 million credit and debit card hack of the third largest US retailer Target, was to lower ATM withdrawal and purchase limits, it became clear that there was more here than simply a well-organized credit card number scrape. And indeed, as Reuters reports, the hackers who compromised up to 40 million credit cards and debit cards also managed to steal encrypted personal identification numbers (PINs) according to a senior payments executive familiar with the situation. And since from there to emptying bank accounts and saved deposits is only a keystroke away, with no credit card processor intermediate to offload liability to, banks had no choice but to immediately limit debit card access to as much 10% of their clients, in JPM's case, in an unprecedented first, which just may have shown the way of how to limit a cash withdrawal panic if and when the need to do so arises.
From the United States to Europe and Asia: The world's central banks are flooding markets with liquidity and pushing deeper into unknown monetary policy territory. Jim Grant tells Germany's Finanz und Wirtschaft that he "fears that this journey will not end well." The sharply thinking Wall Street veteran doesn’t trust the theoretical models of the central banks and warns of irrational exuberance in the financial markets adding that "the stock market is increasingly full of stocks that are borne aloft by hope rather than demonstrated performance."
In the US and Europe, 95% of the buyers are male. Average age is 55. What's different in China?
In China, 9 out of 10 billionaires are self-made, the highest percentage of any country (and by self-made we are unsure whether BusinessWeek's Christina Larson means via entrepreurial spirits or government connected handout) but there is another fact that makes the Chinese billionaire different from the rest of the average run-of-the-mill billionaires we discussed here. The average age of the country’s 157 billionaires is 53 years old - nine years younger than the world average. But perhaps the most shocking statistic among the luxury buyer is that the average Ferrari buyer in the U.S. is 47 years old; in China, he is 32.
The electric car dream may be ending, one flaming Lithium Ion battery pack a time (no matter how Borgified the cult following of the carmaker may be), but when it comes to combustible engines, some have never had it better. Such as Mercedes. According to Reuters "Daimler's luxury brand Mercedes-Benz sold the most cars in one month in its history in September, German paper Bild reported on Thursday. The carmaker sold over 142,000 cars last month, a rise of 15.9 percent, driven by demand in China and the United States, the paper said in an advance copy of an article to be published on Thursday." So who again says the wealth effect does not trickle down... If mostly to the Mercedes-Benz and the 0.01%-ers bottom line that is.
Crashing luxury sales in China is a hard-to-swallow concept for the industry.