The US data flow is relatively light which is typical of a post-payrolls week but it’s worth noting wholesale inventories on Tuesday and retail sales on Thursday. Importantly US House and senate negotiators are supposed to come to an agreement on a budget before the December 13th deadline. A lot of optimism has been expressed thus far from members of congress, and there are reports that a budget deal will be unveiled this week.
As a distant but interested observer of history and investment markets, Marc Faber is fascinated how major events that arose from longer-term trends are often explained by short-term causes.; and more often than not, bailouts (short-term fixes) create larger problems down the road, and that the authorities should use them only very rarely and with great caution. Faber sides with J.R. Hicks, who maintained that “really catastrophic depression” is likely to occur “when there is profound monetary instability — when the rot in the monetary system goes very deep”. Simply put, a financial crisis doesn’t happen accidentally, but follows after a prolonged period of excesses (expansionary monetary policies and/or fiscal policies leading to excessive credit growth and excessive speculation). The problem lies in timing the onset of the crisis.
Moments ago, the Census Bureau announced that in October the US trade gap narrowed to $40.6 billion (which still missed expectations of "only" a $40 billion deficit) from an upward revised September deficit of $43 billion, as oil sales boosted exports to record level. Total exports rose to a record $192.7 billion up $3.4 billion from last month's $189.3 billion, while imports rose just $1 billion to $233.3 billion resulting in a $40.6 billion gap. Among the report highlights: October exports of goods and services ($192.7 billion), exports of goods ($135.3 billion), and exports of services ($57.4 billion) were the highest on record; October imports of goods and services ($233.3 billion) were the highest since March 2012 ($234.3 billion); and perhaps the best news for shale fans: October petroleum exports ($12.5 billion) were the highest on record.
As an experiment, Bloomberg Businessweek typed the names of the 50 states into Google to see what people most frequently ask about them. The questions range from dumb (well, mostly dumb) to revealing, both about the states and about the people doing the searching. Lots of questions about carrying a gun, buying alcohol, getting divorced, and fighting union organizers. Whether a state is in the Midwest or South seems to be a particular obsession. But the most common question about the states is even more basic: Is it a state? or Is it racist?
- With website improved, Obama to pitch health plan (Reuters)
- Joe Biden condemns China over air defence zone (FT)
- Tally of U.S. Banks Sinks to Record Low (WSJ)
- Black Friday Weekend Spending Drop Pressures U.S. Stores (BBG)
- Cyber Monday Sales Hit Record as Amazon to EBay Win Shoppers (BBG)
- Ukraine's Pivot to Moscow Leaves West Out in the Cold (WSJ)
- Investment banks set to cut pay again despite rise in profits (FT)
- Worst Raw-Material Slump Since ’08 Seen Deepening (BBG)
- Democrats Face Battles in South to Hold the Senate (WSJ)
- Hong Kong reports 1st case of H7N9 bird flu (AP)
- In Fracking, Sand Is the New Gold (WSJ)
Previewing the rest of this week’s events, we have a bumper week of US data over the next five days, in part making up for two days of blackout last week for Thanksgiving. Aside from Friday’s nonfarm payroll report, the key releases to look for are manufacturing ISM and construction spending (today), unit motor vehicle sales (tomorrow), non-manufacturing ISM (Wednesday), preliminary Q3 real GDP and initial jobless claims (Thursday), as well as personal income/consumption and consumer sentiment (Friday). Wednesday’s ADP employment report will, as usual, provide a preamble for Friday’s payrolls.
In addition to its three previously announced so far "Top Trades" for 2014 (see here, here and here), just over an hour ago Goldman revealed its fourth top recommendation to clients. To wit: Goldman is selling China equities (via the HSCWI Index), while buying copper (via Dec 2014 futs), or at least advising its flow clients to do the opposite while admitting that "for the long China equity/short commodity pair trade to “work” best, these two assets, which are usually positively correlated, will have to move in opposite directions." For that and many other reasons why betting on a divergence of two very closely correlating assets will lead to suffering, read on. Finally - do as Goldman says, or as it does? That is the eternal question, one whose answer is a tad more problematic since the author in this case is not Tom Stolper but Noah Weisberger.
While moderate recovery in growth and inflation is BofAML's rates team's base case, there are numerous risks to that forecast. The risk of tapering is already quite well known and they suspect it may not result in the significant market-moving event many expect when it actually happens; however, the following downside and upside risks threaten BofAML's central scenarios for 2014 as well.
Predictions for 2014 from a cold war spy
- M&A Mystery: Why Are Takeover Prices Plummeting? (WSJ)
- Hedge-Fund Fight Club Traded Illegal Tips Not Punches (BBG)
- Speed Traders Meet Nightmare on Elm Street With Nanex (BBG)
- A new wave of U.S. mortgage trouble threatens (Reuters)
- Penny Lane: Gitmo's other secret CIA facility (AP)
- US hardens threat to leave Afghanistan with no troops (WSJ)
- Russian Prison Stuns Captain of Greenpeace’s Bombed Ship (BBG)
- ECB's Weidmann Warns Central Banks Might Be Too Dominated by Fiscal Concerns (WSJ)
- China Air Move Splits Japan as Carriers Obey New Rules (BBG)
- Inside the Breakup of the Pritzker Empire (WSJ)
Looking ahead at the week ahead, data watchers will be kept fairly occupied before Thanksgiving. Starting with today, we will see US pending home sales with the Treasury also conducting the first of 3 bond auctions this week starting with a $32 billion 2yr note sale later. We will get more housing data tomorrow with the release of housing starts, home prices as well as US consumer confidence. Durable goods, Chicago PMI, initial jobless claims and the final UofM Consumer Sentiment print for November are Wednesday’s highlights although we will also get the UK GDP report for Q3. US Equity and fixed income markets are closed on Thursday but US aside we will get the BoE financial stability report, German inflation, Spanish GDP and Chinese industrial profit stats. Expect market activity to remain subdued into Friday as it will be a half-day for US stocks and bond markets. As ever Black Friday sales will be carefully monitored for consumer spending trends. So a reasonably busy, holiday-shortened week for markets ahead of what will be another crucial payrolls number the following week.
The following five themes (and three bonus ones) are what UBS Andrew Cates believes will be of the greatest importance for global economic and capital markets outcomes for the next five years. There is little to surprise here but the aggregation of these factors and the increasingly binary outcomes of each of them suggest there may be a little more uncertainty about the future than most people sheepishly admit...
Within the last seven years 11 countries (Poland (2006), Russia (2008), Finland (2009), France (2009), Sweden (2010), Iceland (2011), Spain (2011), Denmark (2012), Singapore (2012), Canada (2012) and Japan (2013) have realized the need to appoint their own Arctic ambassadors. These ambassadors are used for analysis and situational assessments in the emerging “grand Arctic game,” with the ultimate aim of exploiting mineral resources and using the Arctic route for shipping cargo from Europe to Asia. At present, China’s Arctic initiatives suggest that Beijing is eager to camouflage its true interests in the region with environmental monitoring, Arctic life protection and concerns about indigenous peoples. At the same time, Beijing is dropping hints that China is not satisfied with the current balance of power in the Arctic region.
Despite the great shale revolution, US exports posted a $0.4 billion decline to $188.9 billion in October driven by decreases in industrial supplies and materials ($1.3 billion), other goods ($0.2 billion), consumer goods ($0.2 billion), and capital goods ($0.1 billion). This was offset by a $2.7 billion increase in imports to $230.7 billion broken down by increases in industrial supplies and materials ($0.9 billion); automotive vehicles, parts, and engines ($0.9 billion); capital goods ($0.8 billion); and consumer goods ($0.6 billion). End result: a September trade balance of $41.8 billion, which was higher than the highest forecast of $41.6 billion among 72 economists queried by Bloomberg, and the highest deficit print in 4 months.
- Philippines Left Reeling in Wake of Storm (WSJ)
- Khamenei controls massive financial empire built on property seizures (RTRS)
- Race to Bottom Resumes as Central Bankers Ease Anew (BBG)
- U.S. Postal Service to deliver Amazon packages on Sundays (LA Times)
- Obama Stocks Among Best After Re-Election as Rally Tested (BBG)
- Health-Law Rollout Weighs on Obama's Ratings, Agenda (WSJ)
- Twitter in Celebrity Spat With Facebook as Rivalry Builds (BBG)
- Iran deputy industry minister shot dead (AFP)
- Financier of Taliban-linked group shot dead in Pakistan (RTRS)
- Obama: The Lonely Guy (Vanity Fair)