The grind higher in equities, and tighter in credit, continues as markets brush aside concerns about a December taper for the time being. Overnight futures levitation has pushed the Fed balance sheet driven record high S&P even higher, despite as Deutsche Bank points out, the fact that we had three Fed speakers advocate or talk up the possibility of a December taper, including the St Louis Fed’s James Bullard who is viewed as a bit of a bellwether for the FOMC. Bullard said the probability of a taper had risen in light of the strengthening of job growth in recent months. Indeed, he noted that the best move for the Fed could be a small December taper given the improving jobs data but below-target inflation readings. The Fed could then pause further tapering should inflation not return toward target during the first half of 2014. Looking at today’s calendar, the focus will be on US JOLTs job openings - a report which Yellen has previously highlighted as an important supplement to more traditional labour market indicators. US small business optimism and wholesale inventories are the other major data releases today. As mentioned above, US financial regulators are due to announce Volcker rules at some point today although as we just reported, the CFTC's meeting on Volcker was just cancelled due to inclement weather.
- Glass-Steagall Fans Plan New Assault If Volcker Rule Deemed Weak (BBG) ... "if"? The banks control the legislators and regulators...
- Cellphone data spying: It's not just the NSA (USA Today)
- Major tech companies push for limits on government surveillance (Reuters)
- Shanghai Warns Kids to Stay Indoors for Seventh Day on Smog (BBG)
- Protesters fell Lenin statue, tell Ukraine's president 'you're next' (Reuters)
- Everyone must be flying private these days: EADS to cut 5000-6000 jobs, close Paris HQ in restructuring (FT)
- Big Players Trade 'Upstairs' (WSJ)
- There’s no way to tell how many people who think they’ve signed up for health insurance through the U.S. exchange actually have (BBG)
- Slower China inflation reduces worries of tighter policy (Reuters)
It wasn't long after three former General Electric Co. executives were convicted of rigging auctions for municipal-bond investment contracts that they received the ultimate sendoff: A 7,400-word torching in Rolling Stone magazine by Matt Taibbi, the writer who branded Goldman Sachs Group Inc. with the nickname "vampire squid." "Someday, it will go down in history as the first trial of the modern American mafia," Taibbi began his June 2012 opus about Dominick Carollo, Steven Goldberg and Peter Grimm. "Over 10 years in the making, the case allowed federal prosecutors to make public for the first time the astonishing inner workings of the reigning American crime syndicate, which now operates not out of Little Italy and Las Vegas, but out of Wall Street." Then came a surprise last week, right before Thanksgiving. A federal judge ordered the men released from prison.
The Shocking Reasons that Americans Are Right to Be More Afraid of Bad Government Policy than Terrorism
We wish we could say we didn't warn Boeing's machinists about the key trend taking place in the US economy under the Obama "recovery" but unfortunately we did. Three years ago, to be specific, when we wrote: "Charting America's Transformation To A Part-Time Worker Society" and followed it up with "A "Quality Assessment" Of US Jobs Reveals The Ugliest Picture Yet" in which we explained that while the propaganda machine was fixated on numeric, quantitative, job additions every month, what has subversively going on, was the constant deterioration in the quality of jobs - and specifically the declining wages - available to those Americans who had not rotated outside of the labor force permanently (currently at a record 91.5 million). We say "alas" because it once again took several years before our cautions to be felt by the broader population, in this case the Boeing machinist union struggling to extract a wage increase from its employer: Boeing, whose stock keeps hitting new record highs with every passing day.
On Friday October 5, 2012, the BLS released what was arguably the most important report of Obama's first term: the final jobs number, and unemployment rate before the November 2012 presidential election. As so many predicted, it "plunged" from 8.1% to 7.8% allowing the president to conduct countless teleprompted speeches praising the success of his economic recovery. It also served as the basis for the infamous Jack Welch tweet: "Unbelievable jobs numbers..these Chicago guys will do anything..can't debate so change numbers" and prompted the pro-Obama media to quickly brand all those who questioned it as conspiracy theorists... Well, as it turns out over a year later, the conspiracy theorists were once again, spot on: the Bureau Of Lies And Subterfuge manipulated the most important jobs report in Obama's career.
- US admits surveillance on foreign governments ‘reached too far’ (FT)
- He must be so proud: Obama halted NSA spying on IMF and World Bank headquarters (RTRS)
- Obamacare website gets new tech experts; oversight pressure grows (Reuters)
- R.B.S. to Split Off $61 Billion in Loans Into Internal ‘Bad Bank’ (NYT)
- Draghi’s Deflation Risk Complicates Recovery (BBG)
- Abenomics: Nissan slashes full-year profit forecast 15% (FT)
- Credit Suisse Dismisses London Trader Over 'Unusual Trading' Losses (WSJ)
- RBS avoids break-up with 38 billion pounds 'internal bad bank' (Reuters)
- Twitter Said to Attract More Than Enough Interest for IPO (BBG)
- Despite budget win, Obama has weak hand with Congress (Reuters)
- Carney Brings In McKinsey for Bank of England Strategy Rethink (BBG)
- Bill Gates Buys Stake in Spanish Construction Company FCC (WSJ)
- Jerusalem Mayor Barkat Seeks New Term in Race Arabs Sitting Out (BBG)
- J.P. Morgan Aimed to Limit Damage (WSJ)
- EU Lawmakers Reject Draghi Call for Bank Bondholder Clemency (BBG)
- Wall Street Profits May Halve in Second Half (WSJ)
- Petrobras-led group wins Brazil oil auction with minimum bid (Reuters)
- Apple to Refresh IPads Amid Challenges for Tablet Share (BBG)
- Italy plans to offer guarantees on govt bond derivatives (Reuters)
- Berkshire Beats Apple as Favorite Stock of Tiger 21 Group (BBG)
While the US economic data reporting machinery slowly starts churning again following the "reactivation" of government, last night it was China 's turn to report a slew of goalseeked economic items. Q3 GDP (+7.8% yoy), Industrial Production (+10.2% yoy), Fixed Asset Investments (+20.2% YTD yoy) and Retail sales (+13.3% yoy) for September all came in broadly in line with market consensus. The economy grew at a faster pace on a sequential basis with Q3 growth being 0.3ppts higher than Q2. Nonetheless, many observers forecast yoy Q4 GDP growth to decline due to the end of inventory restocking and the fade out of a major credit stimulus in the prior quarter, even as total Chinese debt continues to push ever higher into bubble territory.Speaking of China, however, it is worth noting that overnight the Chinese Yuan rose to the highest level against the dollar in 20 years. This happens as the USD tumbles to nearly a year low, which incidentally is the theme of the overnight session: the ongoing dollar poundage is reverberating across the globe, and the resulting unleashing of global funding carry trades looks set to take the S&P (and everything else) to fresh record highs on the back of even more generous Fed Kool Aid expectations.
Recent speeches from the SEC indicate they plan to use Midas to look at the details behind quote stuffing, excessive order cancellations, the cause of mini flash crashes, and other nefarious activities. While these are all good uses for a market analysis tool (Midas), they pale in comparison to a data-feed delay analysis, because the former are governed by blanket, hard-to-prove manipulation laws, while the latter can be tied directly to a core rule that lies at the heart of Regulation NMS. An improper data-feed delay was the reason for the $5 million fine against an exchange in September 2012. Furthermore, millions of people are directly affected and disadvantaged by illegal data-feed delays. Therefore, it would be a great waste of public resources to not immediately pursue a data-feed delay analysis, because there exists ample evidence that an illegal speed advantage exists in direct feeds over the public quote.
As the US government shutdown enters its 7th day today it looks as if we shouldn’t be holding our breath unless we want to go blue in the face in the hope that there might be a compromise or somebody might actually cave in.
David Stockman, author of The Great Deformation, summarizes the last quarter century thus: What has been growing is the wealth of the rich, the remit of the state, the girth of Wall Street, the debt burden of the people, the prosperity of the beltway and the sway of the three great branches of government - that is, the warfare state, the welfare state and the central bank...
What is flailing is the vast expanse of the Main Street economy where the great majority have experienced stagnant living standards, rising job insecurity, failure to accumulate material savings, rapidly approach old age and the certainty of a Hobbesian future where, inexorably, taxes will rise and social benefits will be cut...
He calls this condition "Sundown in America".
- Government Shuts Down as Congress Misses Deadline (WSJ); Shutdown starts, 1 million workers on unpaid leave (Reuters); Government Shutdown Begins as Deadlocked Congress Flails (BBG)
- This is not The Onion: Stocks Rise on U.S. Government Shutdown (BBG)
- Pentagon chief says shutdown hurts U.S. credibility with allies (Reuters)
- In historic step, Japan PM hikes tax; will cushion blow to economy (Reuters)
- Obama Says He Won’t Give Into ‘Ideological’ Budget Demand (BBG)
- More part-time warehouse workers: Amazon to Hire 70,000 Workers for the Holidays (WSJ)
- Less full-time legitimate workers: Merck to fire 8,500 workers (BBG)
- Education cuts hit America’s poor (FT)
- Euro-Zone Factory Growth Slows (WSJ)
- Watchdog Warns EU Not to Water Down Insurance Rules (Reuters)
- The new normal name of a broken market: glitches - NYSE, Nasdaq Consider Cooperating to Address Glitches (WSJ)
- Early Thursday Humor: Abe Tells Wall Street Japan’s Economy Is Exceptionally Good (BBG)
- Rising Rates Seen Squeezing Swaps Income at Biggest Banks (BBG)
- JPMorgan Mortgage Talks Said to Discuss $11 Billion Deal (BBG)
- Can't make this up: HFT firm "finds" Fed did not leak data early to benefit HFT firms (FT)
- Hertz Cuts Full-Year Forecast on Weak U.S. Airport Rentals (BBG)
- Greece does not need third bailout, seeks debt 'reprofiling' - deputy PM (Reuters) - right, it needs a fourth and fifth
- Hezbollah gambles all in Syria (Reuters)
- Twitter Adds J.P. Morgan and Morgan Stanley as Bankers on IPO (WSJ)
- Messi in Court Shows Tax Collectors Set to Pursue Star Athletes (BBG)
A decisive tipping point in the evolution of American capitalism and democracy - the triumph of crony capitalism - took place on October 3, 2008. That was the day of the forced march approval on Capitol Hill of the $700 billion TARP (Troubled Asset Relief Program) bill to bail out Wall Street. This spasm of financial market intervention, including multi-trillion-dollar support lines provided to the big banks and financial companies by the Federal Reserve, was but the latest brick in the foundation of a fundamentally anti-capitalist régime known as “Too Big to Fail” (TBTF). It had been under construction for many decades, but now there was no turning back. The Wall Street bailouts of 2008 shattered what little remained of the old-time fiscal rules. There was no longer any pretense that the free market should determine winners and losers and that tapping the public treasury requires proof of compelling societal benefit.