It was a quiet start to the week today with just the June Euro area trade balance (which rose €21.9bn vs €23.1 bn expected, up from €21.3 bn) in the European timezone and Empire manufacturing and NAHB housing market index for August this afternoon in the US. Under the radar, but perhaps the most news today, is the June TIC data which will likely confirm the ongoing liquidation of "FX Reserves" aka TSYs by "Belgium" aka China. Expect another $15-20 billion drop in Belgian Treasury holdings in the month of June.
It was a relatively quiet weekend out of China, where FX warfare has taken a back seat to evaluating the full damage from the Tianjin explosion which as we reported on Saturday has prompted the evacuation of a 3 km radius around the blast zone, and instead it was Japan that featured prominently in Sunday's headlines after its Q2 GDP tumbled by 1.6% (a number which would have been far worse had Japan used a correct deflator), and is now halfway to its fifth recession in the past 6 year, underscoring Abenomics complete success in desrtoying Japan's economy just to get a few rich people richer. Of course, economic disintegration is great news for stocks, and courtesy of the latest Yen collapse driven by the bad GDP data which has raised the likelihood of even more Japanese QE, the Nikkei closed 100 points, or 0.5% higher.
One of the most disturbing and recurring themes highlighted on this site over the past year has been the ever greater disconnect between the worlds of equity and fixed income, whether in terms of implied volatility, or actual underlying risk. It turns out there is be an even more acute, and far more concering divergence, which was conveniently pointed out overnight by Bank of America and which suggests that a Bear Stearns type event may be just a few days ahead.
- China central bank tries to soothe global markets, says no reason for yuan to fall further (Reuters)
- Huge blasts at Chinese port kill 44, with hundreds injured (Reuters)
- China efforts to slow yuan fall hoist Europe shares, bond yields (Reuters)
- Greek Economy Unexpectedly Surged Before Capital Controls (BBG)
- Joe Biden Is Sounding Out Allies About a 2016 Bid (WSJ)
- U.K. Tries to Kick-Start Shale Gas With Planning Speedup (BBG)
Chinese Devaluation Extends To 3rd Day - Yuan Hits 4 Year Low, Japan Escalates Currency Race-To-The-Bottom RhetoricSubmitted by Tyler Durden on 08/12/2015 22:23 -0500
The "one-off" adjustment has now reached its 3rd day as The PBOC has now devalued the Yuan fix by 4.65% back to July 2011 lows.
PBOC tries to reassure: *CHINA PBOC SAYS YUAN REMAINS STRONG CURRENCY IN LONG-TERM
Housing is a very important component of any economy, and often an indicator of the well-being of a society. In the US, housing has been deteriorating since the sub-prime crisis. The changes are not only cyclical but structural. Past experiences need to yield to an objective analysis of where we are heading. Here is the way we see it...
"The question for 2015 is whether Fed actions are going to take away the liquidity punch bowl, and create a problem for the next rally's ability to achieve escape velocity... We saw this principle of diminished liquidity back in 1998-2000, and again in 2007-08..."
What do you do when even wealthy people begin to face an increasingly hard time purchasing a home in a vertical market completely disconnected from income trends? You reduce downpayments and lower credit standards, of course. Where have we seen this story before...
Pervasive “occupancy fraud in lending” – purposely misidentifying “investment” properties as “second/vacation” for the purpose of obtaining prime, “owner-occupied”, low-down payment mortgages vs expensive “investment” property loans — is back in a big way and driving housing demand, based on NAR’s “2015 Investment and Vacation Home Buyers Survey”. It comes on the heels of a multi-year cycle of increasingly “bad” appraisals – a widespread problem — by the Appraisal Management Companies (AMC) that in Bubble 2.0 are similarly conflicted, as independent residential appraisers were during Bubble 1.0 . Both appraisal and occupancy fraud are primary features to a speculative, house-price bubble. This is an identical replay of 2005 to 2007 that nobody recognizes, expects, or is even looking for, which will present an opportunity at some point.
- Turkey says coalition to launch 'comprehensive battle' against Islamic State (Reuters)
- Buffett’s Celebration Tempered by 50th Anniversary Stock Slump (BBG)
- SEC Set to Approve CEO Pay-Gap Disclosure Rule (WSJ)
- Greece wants full bailout, not bridge loan, ruling party says (Reuters)
- Stocks Rise Fueled by Strong European Corporate Earnings and Chinese Data (WSJ)
- JPMorgan Reclaims Place Among U.S.'s Top 10 Biggest Stocks (BBG)
- Eurozone retail sales fall sharply in June (MW)
There’s nothing quite like a grotesquely lopsided “economic recovery” in which a handful of cities boom, while the rest of the nation stagnates. Even worse, millennials living in such chosen cities face one of two options. Either live in mom and dad’s basement, or face a standard of living far more similar to 19th tenement standards than the late 1990’s tech boom. With that out of the way, I want to introduce you to what a $1,000 per month rental in the San Francisco Bay area looks like. Shipping containers...
We are delighted to report that about 7 years after it was glaringly obvious to everyone except the Fed of course, now - with the usual half decade delay - even the NY Fed has finally figured out what even 5 year olds get. "A new study from the New York Federal Reserve faults these policies for enabling college institutions to aggressively raise tuitions. The implication is the federal government is fueling a vicious cycle of higher prices and government aid that ultimately could cost taxpayers and price some Americans out of higher education, similar to what some economists contend happened with the housing bubble."
Just the tip of the iceberg?
- 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)
"It Depends On What The Meaning Of The Word "Some" Is": Goldman Says Don'tt Read Too Much Into Fed StatementSubmitted by Tyler Durden on 07/29/2015 14:17 -0500
When even Jon Hilsenrath is clueless what the Fed is trying to say, we go with old faithful, the company that runs the NY Fed, Goldman Sachs. Here is Jan Hatzius' take. "The statement following today's FOMC meeting made relatively few changes compared to June, and did not affect our view that the first rate hike is most likely to occur in December. The most notable change was the addition of the word "some" in the committee's description of desired progress in the labor market."