Following last night's surprise event, which was China's HSBC PMI dropping into contraction territory for the first time since July, which in turn sent Asian market into a tailspin, the most relevant underreported news was a speech by International Monetary Fund Deputy Managing Director Naoyuki Shinohara who said that "As long as steady progress is being made toward the 2% target, we do not see a need for additional monetary accommodation in Japan." He added that while exit from unconventional monetary policy "is still very likely some way off for the euro area and Japan, I believe that the moment to start planning is now." This warning - an echo of prcisely what we said yesterday - promptly roiled the Yen, sending it far higher and sending the EMini futures sliding by over 10 tick in no time: a drop from which they have not recovered yet.
Bernanke may be printing the wealth effect to the benefit of the richest 1%, but that only serves to make the already wealthiest even wealthier. When it comes to the creation of new millionaire households, the epicenter of new wealth creation is about as far from Wall Street, West Putnam Avenue or Rodeo Drive as can be. In fact, the state that saw the fastest climb up in millionaire rankings in 2013 doesn't have a single Tiffany or Saks Fifth Avenue, and the closest BMW dealership is a six-hour drive from the capital (stats which are guaranteed to change by the end of the year). Presenting North Dakota: the state which jumped 14 spots in the latest ranking of millionaire households.
If you want to get an idea of where the rest of America is heading, just take a trip through the western half of West Virginia and the eastern half of Kentucky some time. Once you leave the main highways, you will rapidly encounter poverty on a level that is absolutely staggering. Overall, about 15 percent of the entire nation is under the poverty line, but in some areas of eastern Kentucky, more than 40 percent of the population is living in poverty. After decades of decline, vast stretches of impoverished Appalachia look like they have been through a war. Those living in the area know that things are not good, but they just try to do the best that they can with what they have.
- NSA phone data control may come to end (AP)
- China to rescue France: Peugeot Said to Weigh $1.4 Billion From Dongfeng, France (BBG)
- China to rescue Davos: Davos Teaches China to Ski as New Rich Lured to Slopes (BBG)
- Hollande’s Tryst and the End of Marriage (BBG)
- Iran has $100 billion abroad, can draw $4.2 billion (Reuters)
- Target Hackers Wrote Partly in Russian, Displayed High Skill, Report Finds (WSJ)
- Nintendo Sees Loss on Dismal Wii U Sales (WSJ)
- Goldman's low-cost Utah bet buoys its bottom-line (Reuters)
- Royal Dutch Shell Issues Profit Warnin: Oil Major Hit by Higher Exploration Costs and Lower Oil and Gas Volumes (WSJ)
- EU Weighs Ban on Proprietary Trading at Some Banks From 2018 (BBG) - so no holding of breaths?
- Sacramento Kings to Accept Bitcoin (WSJ)
Mess with us, we'll mess with you. That is the message one can derive from JPMorgan's surprise announcement that it plans to "sell or wind down its business of issuing prepaid cards for corporate payrolls and government tax refunds and benefits." Which also includes the infamous Electronic Benefits Transfer, or foodstamps, card. According to Reuters, the product, which has been offered with cash and treasury services to companies and governments, "had become a headache of risks in operations and regulations, according to a person familiar with the matter who was not authorized to speak publicly." In other words, JPM just told the government which has been going after it relentless for the past year, forcing JPM to rack up some $25 billion in litigation reserves, you can find someone else to manage your wholesale welfare program for nearly 50 million Americans.
It’s NEVER to Protect Us From Bad Guys
The polar vortex came, saw, and is on its way out, and now comes the time for the damage report. As Reuters reports, "At least nine deaths have been reported across the country connected with the polar air mass that swept over North America during the past few days. Authorities have put about half of the United States under a wind chill warning or cold weather advisory.... Homeless shelters and public buildings took in people who were freezing outside. Daniel Dashner, a 33-year-old homeless man who typically sleeps under a bridge on Milwaukee's south side, said he opted to seek a spot at a shelter on Monday night. "Usually if I have four or five blankets, I can stay pretty warm, but when that wind is blowing, I don't care how many blankets I have, the wind blows right through me," he said, as temperatures dropped to minus 6 degrees Fahrenheit (minus 21 degrees Celsius)." On the other hand, there was some levity in the newsflow, when as AP reported, an escape inmate opted for the familiar warmth of prison and turned himself in.
- Yellen’s Record-Low Senate Support Reflects Fed’s Politicization (BBG)
- Euro-Zone Inflation Rate Falls in December, even further below ECB's target (WSJ)
- Zambia politician charged for calling president a potato (AFP)
- Blame gold: India Savings Deposit Scam Collapse Leaves Thousands Penniless (BBG)
- Hedge Funds Raise Gold Wagers as Yamada Sees $1,000 (BBG)
- George Osborne limits cuts options with pensions promise (FT)
- Vietnam Raises Foreign Bank Ownership Caps to Aid System (BBG)
- But they said buy a year ago... Goldman to JPMorgan Say Sell Emerging Markets After Slide (BBG)
- SAC Trial Seen by Probe Convict as Latest Abusive Tactic (BBG)
Heading into the North American open, stocks in Europe are seen broadly higher, with peripheral EU stock indices outperforming after Ireland successfully returned to capital markets with its 10y syndication that attracted over EUR 10bln. Financials benefited the most from the consequent credit and bond yield spreads tightening, with smaller Italian and Spanish banks gaining around 4%. Following the successful placement, IR/GE 10y bond yield spread was seen at its tightest level since April 2010, while PO/GE 10y spread also tightened in reaction to premarket reports by Diario Economico citing sources that Portuguese govt and debt agency IGCP consider that the current level of yields already allows Portugal to go ahead with a bond sale. Looking elsewhere, the release of better than expected macroeconomic data from Germany, together with an in line Eurozone CPI, supported EUR which gradually moved into positive territory. In addition to that, smaller MRO allotment by the ECB resulted in bear steepening of the Euribor curve and also buoyed EONIA 1y1y rates. The Spanish and Italian markets are the best-performing larger bourses, Swedish the worst. The euro is stronger against the dollar. Japanese 10yr bond yields fall; Spanish yields decline. Commodities gain, with wheat, silver underperforming and Brent crude outperforming. U.S. trade balance data released later.
Having doubled off the post-PBOC-ban-and-Fed-Taper lows, Bitcoin, trading at USD910 currently is becoming increasingly ubiquitous as a payment method for many businesses. The latest, as NY Post reports, is Manhattan-based real-estate broker Bond New York, is "using Bitcoins to help facilitate transactions." With overseas money-laundering as a key support, and Manhattan apartment sales setting a record in Q4 for volume of transactions (+27% YoY), we suspect the acceptance of Bitcoin will merely ease the Chinese (or Russian) ability to transfer funds directly into NYC housing - blowing an even bigger bubble.
Despite his various "nanny-state" failings (all of which have been prominently featured on these pages in the past) outgoing New York City mayor Mike Bloomberg has had an impressive track record: New York crime rates are at historic lows, the $72.7 billion budget is balanced, jobs are at an all-time high and a record 54 million tourists pumped money into the economy this year. Homicides have declined by almost 50 percent since Bloomberg became mayor in 2002, and this year’s total of 333 through Dec. 29 is 20 percent below last year’s record low. Of course, how much of this is due to Bloomberg's own actions and how much due to the "rising tide" wealth effect resulting from the Fed's actions that gentrified New York over the past 20 years thanks to Fed wealth-effect boosting policies and which have led to a perilously unstable financial system, is a different question. Regardless, as of midnight the billionaire mayor is no more. His replecament, Bill de Blasio, 52, is the first democrat to run City Hall in 20 years.
In America today, there are close to 50 million people living in poverty and there are more than 100 million people that get money from the federal government every month. As the middle class disintegrates, poverty is climbing to unprecedented levels. Even though the stock market has been setting record high after record high, the amount of anger and frustration boiling just under the surface in our nation grows with each passing day. And now extended unemployment benefits have been cut off for 1.3 million unemployed Americans, and it is being projected that a total of 5 million unemployed Americans will lose their benefits by the end of 2014. In addition, 47 million Americans recently had their food stamp benefits reduced. The conditions for a "perfect storm" are certainly being created. So how much longer will it be until we see all of this anger and frustration boil over in the streets of our major cities? Is America about to reach a breaking point?
The noise in the jobless claims data over the past few months has been unprecedented and yet the impressive jump lower in recent weeks has been trumpeted as the all-clear for Tapering and as a signal that the recovery is 'real' this time. Except, thanks to a huge 'glitch' in Florida's new CONNECT unemployment claims website, the data is completely FUBAR...