As we wrap up a most interesting, and volatile, week there are some things that we have discussed previously that are now brewing, interesting points to consider and risks to be aware of. In this regard we thought we would share a few things that caught our attention:
1) Angela Merkel Election No So Assured
2) The Debt Ceiling Debate
3) The "Taper" Indecision Is Back
4) In The "Economy Is Improving" Camp
5) Syria Already Set To Miss A Deadline
6) Everything Else...
Simply put, complacency is not an option; Stocks are overvalued, rates are rising, earnings are deteriorating and despite signs of short term economic improvements the data trends remain within negative downtrends. Investors, however, have disregarded fundamentals as irrelevant as long as the Federal Reserve remains committed to its accommodative policies. The problem is that no one really knows has this will turn out and the current assumptions are based upon past performance.
As we noted earlier this week, the German election is still very uncertain (with regard the fragile coalition that Merkel will have). What is perhaps worrisome for the glass-half-fulls is the rapid rise in the Anti-Euro Party:
*GERMAN ANTI-EURO AFD PARTY UP 1 POINT TO 4.5% IN FORSA POLL
This is critically close to the 5% required to enter parliament and it seems the most-likely-to-be-hurt by any less-than-generous reaction post-election is Greece and Greek stocks are tanking on this news...
There are very few people that actually give even one hoot and even fewer that could give two of them when it comes to poverty of people that are living in society alongside us.
In a world in which when the numbers don't comply with the propaganda, the only recourse is to change the rules, and if that fails, change the numbers themselves (see Fukushima radiation count, US GDP, Employment numbers, anything out of Europe, etc.) it was only a matter of time before that last sticking point of the grand made up narrative, the lack of economic improvement in the European despite evil, evil austerity (which somehow has resulted in record debt which is rising faster than expected virtually everywhere in Europe) resulting in unpalatable deficits, was magically "fixed." This was resolved moments ago when as the AP reports, "European Union finance officials have reached a preliminary agreement to change the way the bloc determines some deficit figures, which might lessen the pressure for austerity measures in crisis-hit economies." In other words, Europe's "recovery" will now be based on even more made up numbers. One wonders: since Europe is finally admitting that the numbers are fake, i.e., lying, are things finally getting truly serious again?
The (G)Reekovery, in which unemployment just rose to a new record high, must be so strong that the economy can easily afford another two days of lost output as virtually all public sector workers have decided to take another two day break from a grueling work schedule (one in which they used to get a week off for just using a computer) and go on strike. From WSJ: "Greek public servants began a two-day walkout Wednesday over plans to place government workers in a labor reserve that is widely seen as a step toward future layoffs. Teachers, hospital doctors and court officials, among others, participated in the walkout, leaving schools, courts and government offices closed across the country and hospitals operating on skeleton staff. On the streets of Athens, public sector unionists staged two separate demonstrations that brought about 10,000 protesters to the streets, according to police estimates."
A very soon tomorrow will bring the decision of the Fed concerning tapering into focus. Ok, a kind of fuzzy, hard to see and wispy focus. The one thing that we can assure you of is that whatever is to come our way it will not be a singular event. You will hear from the imbibers of Cool Aid and other mischievous reality altering drinks that it could be a one-off event. Tomorrow a process will be started, it will probably go in fits and starts but do not blind yourself; it will be the beginning of the journey to cut back on the propping up of the markets by the Fed.
With Syria now quickly fading from the headlines and Wall Street believing that Yellen is a "shoe in" for the Fed, what headwinds still remain for the markets ahead...
For all complaints about painful, unprecedented (f)austerity, the PIIGS (even those with restructured debt such as Greece) sure have no problems raking up debt at a record pace. Over the weekend, Spanish Expansion reported that Spanish official debt (ignoring the contingent liabilities) just hit a new record. "The debt of the whole general government reached 942.8 billion euros in the second quarter, representing an increase of 17.1% compared to the same period last year. Debt to GDP of 92.2% exceeds the limit set by the government for 2013..." Moments ago, it was Italy's turn to show that with employment still plunging, the only thing rising in Europe is total debt. From Reuters, which cites a draft Treasury document it just obtained: "Italy's public debt will rise next year to a new record of 132.2 percent of output, up from a previous forecast of 129.0 percent."
Greek PM Antonis Samaras: "You have to tell people the truth but you have to give them hope as well." i.e., lie
It had become clear that the President's own political base in the Senate were not going to support Mr. Summer's ascendancy. The eye of the Press will now turn to Mr. Kohn, Ms. Yellen, who does not seem to have the support of Mr. Obama, and the long, though interesting shot, of Stanley Fischer. Mr. Obama appears to be easing into a lame duck presidency far earlier than once thought and the reality of Obamacare will hit Main Street on October 1 which may tip the scales further out of his control. It may not be either the best of times or the worst of times but very volatile times that mark this week.
From Berlin to Ankara and even Damascus, the questions seem to be the same: Has the world order as we know it in the post-war era come to an end? What will the world look like without the United States in the role of superpower and ‘boss’?
Merkel Wins Bellwether Vote As Coalition Partner Founders; Anti-Euro Party Ascent Could Derail CoalitionSubmitted by Tyler Durden on 09/15/2013 12:50 -0500
There was good and bad news for Angela Merkel as today's exit polls from the Bavaria (GDP of $619 billion, bigger than the output of Poland or Austria) state elections - the bellwether vote ahead of next weekend's federal elections (previewed here) - were released. On one hand, the CDU's sister party, the Christian Social Union or CSU, was set to win a majority in Bavarian state elections (where the CDU does not contest the ballot), giving the incumbent a boost as she heads into the final week of her campaign before a national vote Bloomberg reports. But the surprise of the day was the strong showing of the The Free Voters, who want Greece to exit the euro, oppose euro-area bailouts and want to trim the power of the European Union, won 8.5 percent, the ZDF projection showed. It is precisely the ascent of anti-Euro powers that could upset the final election "arithmetic" in jeopardy. As Reuters reports, "a new anti-euro party could enter Germany's national parliament after an election next week, pollsters said on Sunday, potentially upsetting Chancellor Angela Merkel's hopes of returning to power with her current coalition partner."
US Fed's exit plan poses a critical dilemma and underscores important contradictions. The calendar says Europe should be talking about exits too--as aid packages for Spanish banks, and Ireland and Portugal are to wind down in the coming year--yet more rather than less assistance may be neeed.
Confused why despite numerous rounds of bailouts, a sovereign debt restructuring, an imminent bail-in, and years of so-called austerity, Greek debt is once again "Rising At Its Fastest Rate Since March 2010"? Maybe anecdotes such as the following will put the big picture in context: as reported by the BBC, Greek civil servants will no longer have an additional six days of extra holidays each year. What was the reason for the nearly full week of vacation time? Why using a computer. "The privilege was granted in 1989 to all who worked on a computer for more than five hours a day. However, Reform Minister Kyriakos Mitsotakis, speaking on Greek TV, said the custom "belonged to another era." What is shocking is that nearly four years after the first Greek bailout of May 2010, this custom from "another era" was still active and public workers were happy to partake in its generosity. Ironically, since now the perks from using a computer are no longer there, watch the Greek economy flounder even faster as instead of playing solitaire, Greek finmin workers migrate to playing tic-tac-toe on paper, not to mention using an Abacus to calculate just how much better than the IMF expectations, Greek 2022 debt/GDP will end up being.
Five years after the collapse of Lehman Brothers triggered the largest global financial crisis since the Great Depression, outsize banking sectors have left economies shattered in Ireland, Iceland, and Cyprus. Banks in Italy, Spain, and elsewhere are not lending enough. China’s credit binge is turning into a bust. In short, the world’s financial system remains dangerous and dysfunctional. Worse, despite years of debate, no consensus about the nature of the financial system’s problems – much less how to fix them – has emerged. And that appears to reflect the banks’ political power. Unfortunately, despite the enormous harm from the financial crisis, little has changed in the politics of banking. Too many politicians and regulators put their own interests and those of “their” banks ahead of their duty to protect taxpayers and citizens. We must demand better.