Government Stimulus

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Frontrunning: November 25

  • European stocks up, oil slides as concerns ease over Russia-Turkey tension (Reuters)
  • ECB discusses two-tiered bank charges, broader bond buys (Reuters)
  • New agonies, alliances as Fed debates post-liftoff plan (Reuters)
  • A New Military Power Rises in the Mideast, Courtesy of One Man (BBG)
  • Russia's Gazprom says halts gas supplies to Ukraine over payment (Reuters)
  • Other central banks set to act, but Swiss policy cupboard bare (Reuters)
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Fourth Turning: Crisis Of Trust, Part 1

We're beginning to believe the nation will not be unified behind a common cause when the coming financial eruption unleashes molten lava of chaos, punishing economic distress, civil strife, class warfare, race wars, and ultimately global war. As Strauss and Howe foretold, the establishment (aka corporate fascist military industrial surveillance state) has seen a sequential loss of popular trust as their blatant corruption, sociopathic stranglehold on the levers of power, and unrelenting greed have angered the critical thinking aware citizens of this country. The next leg down in this Greater Depression will sever the remaining trust, disintegrating any remaining support for the existing civic order. What comes next will be heavily dependent upon whether the 5% to 10% of liberty minded believers in the Constitution are able to gain the trust of the masses.

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Chinese Intervention Rescues Market From 2-Day Plunge, Futures Red Ahead Of Inflation Data, FOMC Minutes

With China's currency devaluation having shifted to the backburner if only for the time being, all attention was once again on the Chinese stock market roller coaster, which did not disappoint: starting off with yesterday's dramatic 6.2% plunge, the Shanghai Composite crashed in early trading, plunging as much as 5% in early trading and bringing the two-day drop to a correction-inducing 11%, and just 51.2 points away from the July 8 low (when China unleashed the biggest ad hoc market bailout in capital markets history) . And then the cavalry came in, and virtually the entire afternoon session was one big BTFD orgy, leading to a 1.2% gain in the Shanghai Composite closing price, while Shenzhen and ChiNext closed up 2.2% and 2.7%, respectively.

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Chinese Iron Ore, Steel Prices Collapse Despite Government Stimulus

A funny thing happened in the last year since China gave up on its hard-line reforms and folded back to stimulate by all means necessary... the financial economy soared and the real economy sunk. Iron Ore prices are near record lows and Rebar prices are at record lows as stocks spike.. and this should be no surprise since we were told by a rural Chinese chap recently that "making money in stocks is a lot easier than farmwork" or construction or real world activity.

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Short-Term Gains & Long-Term Disaster

It’s time for the Japanese to get seriously scared now. Like many other countries, Japan – and its political class – creates a false image of enduring prosperity by letting its central bank increasingly buy up ever more of its sovereign bonds. It’s a total sleight of hand, there is nothing left that’s real. There’s no there there. This is of course the same as what happens in Europe. And it’s precisely because central banks buy up all these bonds, that their yields scrape the gutter. It’s a blueprint for killing off the last bit of actual functionality in an economy.

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Dr. Mark Skousen: I’ve Been Fighting a Battle Against these Ideas – the ‘Paradox of Thrift’ is a Myth (Sprott`s Thoughts)

According to Austrian economists like Dr. Skousen, consumption and consumer spending are not the main drivers of economic growth. What really drives an economy are investments and innovation from businesses.

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How Germany Is Blowing Up The European Union

If Greece gives in, Germany will have won, but its bully status will come to bite it in the face. European nations don’t accept bullying, and certainly not from Germany. It’ll be a Pyrrhic victory: the beginning of the end. If Greece however stands firm in its demands, it’s also curtains for the EU. If Greece leaves, it won’t leave alone. Only the third option, Germany caving to Greek demands, can save the EU. But Merkel and Schäuble have prepped their people to such an extent with the wasteful lazy Greeks narrative that they would have a hard time explaining why they want to give in. The EU may thus fall victim to its own propaganda

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Japan Is Writing History As A Prime Boom And Bust Case

The fate of countries like Japan is really in the hands of central bankers. However, central planners are not able to manipulate markets infinitely. At a certain point, something has to give. That is when the markets will give up and disbelief will replace trust. In such a bust scenario, people flee down the Golden Pyramid of asset classes to their safe haven, being gold.

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Further Proof That Abenomics Is A Total Disaster: Japan Car Lobby Admits "Sense Of Panic"

"Abenomics is not having clear traction across the country," warned the head of Japan's auto lobby on Thursday as unexpectedly weak domestic sales revealed - yet again - what an utter disaster government policy is. "We feel a sense of crisis about the fact that cars are actually not selling," he exclaimed, saying that, as Reuters reports April sales tax hike was only partly to blame for the domestic sales weakness, citing the government's failure to boost consumption. But, but, but Japanese stocks are up 1000 points in the last 2 days so how can this be?

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Key Events In The Coming Week

Today US activity will be very light given the Columbus Day holiday. As DB summarizes, we have a relatively quiet day for data watchers today but the calendar will pick up tomorrow and beyond with a big focus on inflation numbers amongst other things. Indeed tomorrow will see the release of Germany’s ZEW survey alongside CPI prints from the UK, France and Spain. Wednesday’s data highlights will include the US retail sales for September, the Fed’s Beige Book, CPI readings from China and Germany, US PPI, and the NY Fed Empire State survey. Draghi will speak twice on Wednesday which could also be a source for headlines. On Thursday, we will get Industrial Production stats and the Philly Fed Survey from the US on top of the usual weekly jobless claims. European CPI will also be released on Wednesday. We have the first reading of October’s UofM Consumer Sentiment on Friday along with US building permits/housing starts. Yellen’s speech at the Boston Fed Conference on Friday (entitled “Inequality of Economic Opportunity”) will also be closely followed.

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"We All Lost"

“I say to all those who bet against Greece and against Europe: you lost and Greece won. You lost and Europe won.” - Jean-Claude Juncker...

[Spoiler Alert: No, it's not over yet]

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Guest Post: Demography + Debt = Doom

A ‘Perfect Storm’ of demography and debt will economically and financially doom almost every country on earth. It will be TEOTWAWKI – ‘The End Of The World As We Know It’. No, it’s not the end of life or even the end of civilization. However, when it’s all over, nothing will ever be the same and that includes the disappearance of much of the middle class.  The good news - The storm won’t last forever. The bad news is there will be much more pain before it ends unless you make an effort to understand what’s happening and why.

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Equity Futures Languish Unchanged Ahead Of FOMC Minutes

The positive sentiment stemming from a positive close on Wall Street and saw Shanghai Comp (+0.33%), Hang Seng (+1.09%) trade higher, failed to support the Nikkei 225 (-2.10%), which underperformed its peers and finished in the red amid JPY strength as BoJ's Kuroda failed to hint on more easing. Stocks in Europe (Eurostoxx50 +0.32%) traded higher since the open, with Bunds also under pressure amid the reversal in sentiment.
Alcoa kicked off earnings season yesterday, with shares up 3% in after-market hours. Focus now turns to the release of the FOMC meeting minutes.

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It's Another Non-Virtual Futures Ramp In A Virtual Reality World

Another morning melt up after a less than impressive session in China which saw the SHCOMP drop again reversing the furious gains in the past few days driven by hopes of more PBOC easing (despite China's repeated warning not to expect much). A flurry of market topping activity overnight once again, with Candy Crush maker King Digital pricing at $22.50 or the projected midpoint of its price range, and with FaceBook using more of its epically overvalued stock as currency to purchase yet another company, this time virtual reality firm Oculus VR for $2 billion. Perhaps an appropriate purchase considering the entire economy is pushed higher on pro-forma, "virtual" output, and the Fed's capital markets are something straight out of the matrix. Despite today's pre-open ramp, which will be the 4th in a row, one wonders if biotechs will finally break the downward tractor beam they have been latched on to as the bubble has shown signs of cracking, or will the mad momo crowd come back with a vengeance - this too will be answered shortly.

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