Quick: which BRIC nation has the highest consumer loan default rate?
If you said China, India or Russia, you are wrong. Actually, if you said China you are probably right, but since absolutely all economic "data" in China is worthless, manipulated propaganda, only a retrospective post-mortem after the Chinese credit, housing, commodity, consumption bubbles have all burst will we know the answer. So excluding China, which country's consumers after a multi-year shopping spree funded entirely on credit, are suddenly suffering the epic hangover of soaring non-performing loans as they suddenly find themselves unable to even pay the interest on the debt? Just ask former billionaire Eike Batista whose OGX oil corporation is days away from filing bankruptcy. The answer, with 5.6% of all loans in default, above Russia, South Africa, Mexico, Turkey and India, is Brazil.
Overnight trading over the past week has been a bipolar affair based on algo sentiment about what is coming out of D.C. But which the last session was optimistic for some inexplicable reason that a deal on both the government shutdown and the debt ceiling out of DC was imminent, today any optimism is gone in the aftermath of the latest comments by Boehner on ABC, in which he implied that a US default is not unavoidable and that it would be used as more political capital, as it would be once again blamed on Obama for not resuming negotiations. As a result both global equities and US futures are down sharpy in overnight trading. And since the government shutdown, better known as a retroactively paid vacation, for everyone but the Pentagon (whose 400,000 workers have been recalled from furlough) continues it means zero government economic statistics in today's session with the only macro data being the Fed-sourced consumer credit report at 3 pm. This week also marks the unofficial start of the Q3 reporting season in the US with Alcoa doing the usual opening honous after the US closing bell tomorrow. JPMorgan’s and Wells Fargo’s results on Friday are the other main ones to watch to see just how much in reserves are released to pretend that banks are still making money. As usual, expect disinformation leaks that send the market sharply higher throughout the day, which however will only make the final outcome that much more painful, because as during every US government crisis in the past, stocks have to plunge so they can soar again.
- Mounting Wall Street fears of US default (FT)
- This is what the US government does when it is "shut down" - CIA ramping up covert training program for moderate Syrian rebels (WaPo)
- SEC Weighs Overhaul of Exchanges’ Self-Regulatory System (WSJ) - just let Goldman and JPM do all the policing; not like anyone cares anymore
- Reid Sets Tone for Democrats in Shutdown Fight (WSJ)
- No Movement in Shutdown Standoff (WSJ)
- Shutdown will not slow Fed nomination, says Obama (FT)
- Syrian Regime Chokes Off Food to Town That Was Gassed (WSJ)
- Tesla Says Car Fire Began in Battery (AP)
- China Services Index Increases in Sign of Sustained Rebound (BBG) or sustained data manipulation
- U.S. Government Shut Down With No Quick Resolution Seen (BBG)
- 12 House Republicans now say they’d back a ‘clean’ CR (WaPo)
- Republicans’ 2014 Senate Edge Muddied by Shutdown Message (BBG)
- Obama Shortens Asia Trip Due to Government Shutdown (WSJ)
- Fed Said to Review Commodities at Goldman, Morgan Stanley (BBG)
- Foreign Firms Tap U.S. Gas Bonanza (WSJ)
- Behind Standoff, a Broken Process in Need of a Broker (WSJ)
- Japan Awaits Abe’s Third Arrow as Companies Urged to Invest (BBG)
- Microsoft investors push for chairman Gates to step down (Reuters)
- Government Heads Toward Shutdown (WSJ), First U.S. Shutdown in 17 Years at Midnight Seen Probable (BBG), Congress in game of chicken (RTRS)
- Italian Premier Pursues Last-Ditch Rescue of Government (WSJ)
- Election risk rattles Italian government bonds (RTRS)
- Obama and Ryan Stay on Sidelines on Budget (WSJ)
- Volcker Rule Costs Tallied as U.S. Regulators Press Deadline (BBG)
- Faltering Chinese Factory Growth Adds to Rebound Fears (FT)
- Health Law Hits Late Snags as Rollout Approaches (WSJ)
- Apple Overtakes Coca-Cola as Most Valuable Brand, Study Finds (BBG)
- Euro-Area September Inflation Slows More Than Forecast on Energy (BBG) - Puting will fix that shortly
‘Tapering’ may be put off indefinitely due to the very fragile state of the massively indebted U.S. economy. This means that interest rates must be kept low for as long as possible, leading to money printing and electronic money creation on a scale never before seen in history.
This will inevitably lead to higher gold prices - the question is when rather than if.
One would think following the ever louder public complaints against the use of drones that the Obama administration would take the hint and perhaps taper their remote controlled less-than-surgical-strike use. One would be wrong because as we have learned, the president has instead opted to double down and expand drone use by branching out into such manned legacy fighter jet territory as remote-controlled F-16s.
"My daughter was raped and abducted," said a Mexican farmer. President Obama says, "What's different in America is it's easy to get your hands on a gun."
Following the FOMC surprise, no less than twelve Fed speeches will provide some "clarifications" on where the Fed now stands. It is very likely that this subject will continue to dominate the discussions of market participants. At the same time, US data will get scrutinized after the recent weakening and to see how warranted the Fed's concerns were. Two US consumer sentiment surveys, durable goods orders, and the third reading of Q2 GDP are important. In addition, monthly consumption and income data for August provide more information on the third quarter and of course there will be interest in the latest weekly claims numbers after some distortions in recent readings.
- Triumph Confirms 'Era of Merkelism' (Spiegel)
- Merkel must reach out to leftist rivals after poll triumph (Reuters)
- Norwegian Air says both its Dreamliners hit by technical issues (Reuters)
- Chinese court gives Bo Xilai life sentence (CBS)
- Social Dems Deflect Talk of Merkel Alliance (Spiegel)
- Blasts shake Nairobi mall, smoke pours from building (Reuters)
- Open-Government Laws Fuel Hedge-Fund Profits (WSJ)
- Forbes Calls Goldman CEO Holier Than Mother Teresa (Matt Taibbi)
- BlackBerry move away from consumers unlikely to stem decline (Reuters)
- And another Greek strike: Greek teachers, civil servants to strike against layoffs (Reuters)
The most important event of the "coming" week was unexpected, and did not even take place during the week, but the weekend. So with Summers unexpectedly, and uncharacteristically out, here is what else is in store.
As opposed to the "pixie dust tout of fairy tales forever" that is trotted out by the herd every day, the fllowing brief look at Taper realities, 'manufactured' numbers unreality, systemic Muni bonds concerns, and of course, political risk provide color for what was described this morning on CNBC as a market bereft of 'bear market theses. As Tartakower once wrote, "The winner of the game is the player who makes the next-to-last mistake;" until then ts all foreplay.
Jitters from Syria still abound, as confirmed by reports from the Israeli army that two shells had hit the Southern Golan region. Despite the reports that the shelling appeared to be errant, WTI remains near session highs as markets remain sensitive ahead of the meeting between US Secretary of State Kerry and Russian Foreign Minister Lavrov in Geneva over the next two days. Buying of the 10Y is also prevalent and the yield on the benchmark bond was has dropped below 2.90%, or at 2.88% at last check. Today's key economic news in the US session will be the weekly claims report, the Fed buying 10 Year bonds at 11 am followed by the Treasury selling 30 Year bonds at 1 pm (this follows the Fed buying 30 Year bond yesterday: yes ironic).
In June 2012, Ron Paul warned the 'warmongers' in Congress of the "plans, rumors, and war propaganda for attacking Syria and deposing Assad." In an ironic twist, he also notes, "this past week however, it was reported that the Pentagon indeed has finalized plans to do just that. In my opinion, all the evidence to justify this attack is bogus. It is no more credible than the pretext given for the 2003 invasion of Iraq or the 2011 attack on Libya." The following speech may well be 15 months old, but is as relevant - if not more - than ever ahead of Obama's pleas tomorrow.
Ian Buruma: “The truth can be brutal, and makes life uncomfortable. So one looks the other way.”