Ugly numbers speak volumes on how Fed policies hurt the economy. But those policies enable Congress and the White House to run up deficits that make the Eurozone look benign.
An hour after getting a whopper in the retail sales number, which handily beat all expectations, we get "confirmation" that consumers are not only more optimistic, with overall Michigan confidence sliding from 59.4 to 57.5, on expectations of 60.2, but that they have less to look forward to than ever in the past 31 years, with the consumer expectations number dropping from 49.4 to 47.0, the lowest since May 1980. Yet expectations for a Dow 36,000 are easily the highest since October 2007. Although the chart that will blow everyone's mind is this comparison of the YoY change in retail sales and consumer sentiment. Two words: Peak Schizophrenia.
- S&P downgraded the long-term sovereign rating of Spain by one notch to AA- from AA with a negative outlook
- Fitch placed five major European commercial banks – namely, Barclays, BNP Paribas, Credit Suisse, Deutsche Bank and Societe Generale - on credit watch negative
- Strong corporate earnings from Google boosted appetite for risk during the European session
- The French/German 10-year government bond yield spread widened to a record level on concerns surrounding the impact of an EFSF leveraging on the French sovereign ratings
- Market participants keep a close eye on the outcome of the confidence vote in the Italian Parliament. In latest news, according to ANSA, Berlusconi has enough votes to win the confidence vote
What The Failing Eurozone Can Learn From The Break Up Of The US Fiat Currency Unions Of 1933, 1861 And 1744Submitted by Tyler Durden on 10/12/2011 08:42 -0400
Only the most drunk on hopium (and Absinthe) among us can harbor any doubt that the eurozone, and hence the common monetary union currency the zEURq.bb, can survive without a dramatic change in the current European monetary (and fiscal) structure and an unprecedented overhaul to the status quo. But it can be done: after all there are numerous case studies across history, when various fiat monetary unions either succeeded or failed. Ironically, according to a just released report by UBS' monetary expert Stephane Deo (which we will discuss more later), three of the better such examples ironically can be traced to none other than the good old United States, which, and this may come as a surprise to some of our readers, had several failed monetary union regimes in the past before it finally arrived on the current stable (relatively speaking) "dollar" solution. So here, courtesy of UBS, are the lessons that Europe can hopefully learn (once again) from America's bitter experience in this matter. Because the alternative to success is failure (more on that shortly), and as UBS notes, "The economic and political consequences of a monetary union break up are also so severe as to deter all but the most determined – or to deter all but those already suffering extraordinary economic distress (occasioned by war or by depression)." So without further ado...
We are confident the spinmasters will spin the first major domino in the muni crisis as bullish: after all it "removes uncertainty." Bloomberg reports that "The city of Harrisburg, Pennsylvania, facing a state takeover of its finances, filed for bankruptcy protection following a vote by the City Council, according to a lawyer for the council.Mark D. Schwartz, a Bryn Mawr, Pennsylvania-based lawyer and a former public finance banker for Prudential Financial Inc., said he filed the documents by fax to a federal bankruptcy court last night. The filing couldn’t be confirmed with the U.S. Bankruptcy Court in Harrisburg.The state capital of 49,500 faces a debt burden five times its general-fund budget because of an overhaul and expansion of a trash-to-energy incinerator that doesn’t generate enough revenue. “This was a last resort,’’ Schwartz said in an interview after the council voted 4-3 to seek bankruptcy protection. “They’re at their wits’ end.’’While bankruptcy would mean the loss of state aid under a law passed in June, it would be preferable to a proposed recovery plan, said Councilwoman Susan Brown-Wilson." Well, at least Jefferson County will not have the dubious legacy of being the first muni to push everyone else over. And now that the precedent has been set (yes, Virginia, it can be done) watch as tens if not hundreds of other cash-strapped towns, cities, localities and other entities follow suit promptly to quite promptly.
Key Market Events In The Coming Week: More Promises, Headlines And Rumors; And A Very Critical Vote In SlovakiaSubmitted by Tyler Durden on 10/09/2011 21:39 -0400
Key this week will be the final missing EFSF votes, in particular Slovakia. The latest headlines over the weekend suggest the governing coalition has still not found a compromise and will meet on Monday again. The votes of 22 MPs for the SaS party in the 150-member Slovakian government are now the main stumbling block to bringing the effective EFSF lending capacity to EUR440bn and to increase the EFSF’s flexibility. The parliamentary EFSF vote is scheduled for Tuesday. On Monday, the second-to-last vote on the EFSF will be held in Malta. Still linked to the Eurozone crisis, President Sarkozy and Chancellor Merkel agreed over the weekend on the need for bank recapitalisations and the need to find a “durable” solution for Greece. There has also been talk about a “vision” for the Eurozone and a promise for a plan by the November 3 G20 summit. Markets will likely focus on any additional details regarding the bank recapitalisation plan. Of course, Greek issues will remain important as well, in particular after Troika officials have been quoted in the media as criticizing the Greek Government’s determination to implement structural reforms. The results from the Italian bond auction on Thursday may increase the pressure on the Italian government to undertake more growth-enhancing structural reforms, as again demanded over the weekend from the next ECB President Draghi.
Wake up as many people as you can.
Your one stop, comprehensive summary of the past week's key positive and negative events.
Today’s session has been a quiet one so far as markets digest yesterdays German EFSF vote and trading has seen light volumes heading into the month and quarter end. Weakening in the Euro currency was observed after higher than expected Eurozone CPI, which led to market participants further questioning whether the ECB will now be cutting interest rates in their monthly Governing Council meeting next week. As European bank fragility has remained in focus in recent times, news came from the EU Commission that they have temporarily approved state aid worth EUR 4.75bln to recapitalize three Spanish savings banks, although little reaction was seen in the markets. The largest moves have been seen in crude futures today with WTI and Brent trade down around USD 1, extending their quarter losses which remain on track for their biggest drop in 15 months. We’ve also seen the German upper house now approve EFSF expansion, and are awaiting final approval from Austria at today, although no time has been given. Looking ahead to the US cash open, focus will be on the US Chicago PMI data which is expected to show a slightly lower than previous reading at 55.0, plus the final University of Michigan Confidence number 10 minutes later. Hope will be that these readings add to yesterday’s indication of some recovery in the US economy.
While the deranged, schizophrenic market could not care less about actual facts and data, and continues to trade purely on month end liquidations, and the now traditional bailout rumors, here is what to expect in terms of scheduled releases today: Personal income and spending, Chicago NAPM and consumer sentiment indexes. Also today the Fed will announce the first Operation Twist schedule which will consists of 13 bond purchases in October, as well as 6 sales.
- China’s Developers Face More ‘Severe’ Credit Outlook, S&P Says (Bloomberg)
- Hong Kong’s Tsang Sees ‘Soft Landing’ for Property, Keeps Peg (Bloomberg)
- SEC Eyes Ratings From S&P (WSJ)
- Geithner Predicts Europe Will Step Up on Crisis After Chiding (Bloomberg)
- Big audit firms face Brussels onslaught (FT)
- Fed Officials Express Doubt About Faster Inflation as Tool to Boost Growth (BBG)
- Medvedev fires mutinous finance minister (FT)
- EU urged to probe Hungary mortgage move (FT)
- Anger rises in India over redrawn poverty line (FT)
GATA's Chris Powell speaks: "The speaker following me, George Clooney, will be able to tell you what it's like to be handsome, talented, rich, and famous. I could tell you what it's like not to be. But instead the conference has asked me to talk about gold, which at least might make you rich, or help you preserve some of whatever you've got. This opportunity is full of risk, because the gold market long has been manipulated by Western central banks to restrain the gold price. The Western central banks are slowly losing control of the market but they are not giving up easily. Why do Western central banks manipulate the gold market? The gold market is manipulated because, despite Federal Reserve Chairman Ben Bernanke's insistence to Congress a few weeks ago that gold is not money, just "tradition," gold is indeed a currency that competes brutally with government-issued currencies and helps determine not only the value of those currencies but also interest rates and the value of government bonds...."
Another Victory For Ron Paul Who Wins 44.9% In California Straw Poll To Perry's 29.3%, Bachmann's 7.7%Submitted by Tyler Durden on 09/18/2011 13:15 -0400
The Republican presidential candidate whom everyone (at least in the mainstream media, on both the right and left, as they are, after all, funded by the status quo to preserve the status quo) has written off, has won his latest landslide victory, this time in a straw poll in California during its 2011 Fall Convention in downtown LA JW Marriott. The LA Times details what transpired: "One presidential candidate, Minnesota Rep. Michele Bachmann, spoke at a dinner on Friday night, and Saturday morning's breakfast featured two more contenders: Michigan Rep. Thaddeus McCotter and Texas Rep. Ron Paul. Paul's fans were out in force both outside the hotel -- awaiting his arrival -- and inside the ticketed Lincoln Clubs Breakfast. He spoke last and was late, allowing McCotter to add a question-and-answer period to his prepared remarks." There was nothing substantially new in Paul's speech which can be summarized as follows: '"You ought to have a right to work hard, and you ought to have a right to keep what you earn." As for the straw poll, "Saturday at the convention also featured a straw poll, conducted between the hours of 9 a.m. and 5 p.m. Pacific, with results announced during an evening banquet. Considering the large numbers of Paul fans who made their way to the Marriott, it's not surprising that he won the poll by a handy margin over second-place finisher Perry. But after the two Texans, the percentages drop precipitously, with Bachmann only managing fourth despite her convention appearance." Something tells us that nothing prevents "large numbers" of other candidate fans from making their way to the Marriott. The results: "Congressman Ron Paul (374, 44.9%); Governor Rick Perry (244, 29.3%); Mitt Romney (74, 8.8%); Congresswoman Michele Bachmann (64, 7.7%); Jon Huntsman (17, 2.0%)."