Gross Domestic Product
Last week in the Land of the Free, I heard a radio campaign ad for a local political candidate while in Texas. In the ad, he was talking about the debt and excessive government spending. And then he said something along the lines of, “We need to get this under control before America goes bankrupt.”
‘Buddy,’ I remember thinking, "America isn’t going bankrupt. It already IS bankrupt."
This is the stuff that revolutions are made of. It’s already happening around the world from North Africa to Southeast Asia. And it’s starting to spread to the West.
"...Since March, 20 property developers in Guangzhou have been offering "zero down-payments" to attract buyers, in addition to large discounts and tax refund, the National Business Daily reported Monday."
"by July we expect the US economy to be in full recovery from the weather- and inventory-induced slowdown in Q1, and this should push US rates higher and boost the Dollar, including against the Yen." - Goldman Sachs
Having questioned whether Tim Geithner leaked every Fed announcement to the banks during his tenure (but did not mention it in his memoirs) and shown that traders acted on information at faster than the speed of light (and thus were indeed aware of leaked decisions ahead of time), it should be no surprise that a new research paper has found “robust evidence” that some traders have been getting early news of U.S. Federal Reserve rate announcements and then trading on it during the Fed’s media lockup. The trading anomalies that Bernile and his colleagues spotted begin about 15 minutes before the news embargo is lifted and continue at a fairly even pace and are "statistically significant and in the direction of the subsequent policy surprise." So - are the markets rigged?
"New starts contracted 15% yoy (vs. -21.9% yoy in March); property sales fell 14.3% yoy (vs. -7.5% yoy); and land sales (by area) plunged 20.5% yoy (vs. -16.9% yoy previously). ... the housing market situation has undoubtedly turned quite gloomy. There has been a constant news stream of falling property prices everywhere, even in the 1-tier cities. A number of local governments, as we expected, have started to ease policy locally, especially relaxation of the home-purchase restrictions." - Soc Gen
When it comes to the Goldman team of crack freaconopenguins the fun never ends.
Here is the spin: tapped out US consumers simply did not have money to go out and splurge after the March spending bonanza, which sadly fell in a quarter which as we already know, will have a negative GDP print and thus is a wash (due to weather, remember). However, as a result of the blamy (sic) spring weather, US consumers didn't spend online either, as they were forced to go outside and enjoy the lovely weather... where as already noted they didn't spend any money either.
More Reasons QE Is a Dud
There's not much good news for housing these days. For a little while, the Fed's suppression of interest rates juiced housing enough to distract Americans from weak job creation and stagnant real wages. Don't have a job? No problem! Just borrow against the appreciation of your house to feed your family. But Yellen's interest rate wand looks to be out of magic. The government had a pipe dream of white picket fences for everyone. But Americans can't refinance their way to wealth. Especially in the Greater Depression.
Every wondered why the rest of the world envied the US middle-class? There were many reasons once, a long time ago and one of them was their affluence, their wealth, their ability to be able to afford whatever they wanted.
This week markets are likely to focus on a few important data prints in DMs, including Philly Fed in the US (expect solid expansionary territory) and 1Q GDP releases in the Euro area (with upside risks). In DMs, the highlights of the week include [on Monday] Japan’s trade balance data and Australia business conditions; [on Tuesday] US retail sales, CPI in Italy and Sweden; [on Wednesday] US PPI, Euro area IP, CPI in France, Germany and Spain; [on Thursday] US Philly Fed, CPI, capacity utilization, Euro area and Japan GDP; and [on Friday] US Univ. of Michigan Confidence. In the US, we expect Philly Fed to print in solidly expansionary territory (at 14, similar to consensus) and to inaugurate what we call the active data period of the month. We also expect CPI inflation to print at 0.3% mom (similar to consensus), and core CPI inflation at 0.18% mom (slightly above consensus).
- Hillary and Me: The 2008 campaign was a nightmare. Will 2016 be as bad? (Politico)
- What Timothy Geithner Really Thinks (NYT)
- Rebels declare victory in east Ukraine self-rule vote (Reuters)
- Race for AIG's Top Job Has Two Favorites (WSJ)
- America on the Move Becomes Stay-at-Home Nation for Millennials (BBG)
- Old, Fired at IBM: Trendsetter Offers Workers Arbitration (BBG)
- Bad luck Jonathan: Pressure Mounts on Nigerian President (WSJ)
- Iran leader slams West's 'stupid' missile stance before talks (Reuters)
- Conchita Wurst of Austria Wins Eurovision Song Contest (WSJ)
- Greek Finance Ministry expects Q1 GDP contraction of less than 1.5 pct (Kathimerini)
East Ukraine may be independent in a result which the Kremlin said it "respects" and hopes for a "civilized implementation" of the referendum results, and which assures further military escalation in the proxy war of east versus west, but stocks are happy to ignore it all again. The reason: a positive close over in Asia (ex-Japan) after China’s State Council pledged to reform markets buoyed demand for risk, although it really is just a follow through to the furious VIX slam in the last hour of US Friday trading, which said otherwise, means buying of US equities was the reason to buy US equities. More importantly and adding to the early spoo euphoria were comments by ECB's Nowotny who said that interest rate cut alone would likely be too little to combat low inflation - suggesting a European QE is coming - also acted as a catalyst for the latest uptick in stocks: when trapped like the ECB and when "guiding" to future activity, if unable to actually execute it, may as well go all the way. End result, Spoos up nearly 0.5% because, well, others are buying spoos.
... To the astonishment of almost everyone in the room, Angela Merkel began to cry. “Das ist nicht fair.” That is not fair, the German chancellor said angrily, tears welling in her eyes. “Ich bringe mich nicht selbst um.” I am not going to commit suicide. For those who witnessed the breakdown in a small conference room in the French seaside resort of Cannes, it was shocking enough to watch Europe’s most powerful and emotionally controlled leader brought to tears....