• Steve H. Hanke
    02/11/2016 - 16:08
    The burgeoning literature contains a great deal of hype, which validates the 95% Rule: 95% of what is written about economics and finance is either wrong or irrelevant.

NFIB

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European Banks Soar On Rumor ECB May Monetize Bank Stocks; Japan Crash Continues





While algos patiently await the only thing that matters for US stocks today which is Janet Yellen's testimony before Congress. expected to be released at 8:30 am (and previewed here), the rest of the world this morning is a hot mess of schizophrenic highs and lows.

 
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Key Events In The Coming Week: Janet Yellen Testifies, China Closed





With China celebrating the Lunar New Year and offline until next weekend, and with the US in the usual post-payrolls macro newsflow lull, the markets will have more than enough time to stew in the latest source of contagion fears, namely Europe, the same Europe which until recently was fixed but is broken all over again.

 
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Futures, Global Stocks Tumble As Europe Bank, Periphery Carnage Unfolds





Everything went from bad to worse once Europe opened, and things started going "bump in the morning" across the European banking sector, where not only has it been more of the same with CDS spreads for major banks - most notably Deutsche Bank - continuing their surge wider, but also EM spreads to Bunds all following, with the Portugal-Germany Yield spread blowing out above 300 bps for the first time since 2014, and other peripheral nations following.

 
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Global Stocks Rebound As Fears Of Chinese Hard-Landing Pushed Back On Strong Trade Data





After two months of sharp currency devaluation, the market was carefully watching last night's China trade data to see if the Yuan debasement had led to a positive trade outcome to the world's second largest economy, and as reported last night, it was not disappointed when China reported a December trade surplus of $60.09 billion from $54.1 billion in November, as a result of exports beating expectations and rising 2.3%, the first increase since June, while imports declined by just 4%, the smallest drop since 2014 despite China importing a record amount of oil, or 33.2 million tons, in December.

 
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Futures Jump After Oil Rebounds From 11 Year Low On Turkish Terrorist Attack





With China now "murdering" Yuan shorts, markets are content that the Chinese debacle seems to be contained if only for a while, and so the attention of both traders and algos alike has focused on oil, which earlier in the session dragged global equities lower as it dropped by 3%, just shy of the $30 level, a new 11 year low, before staging another dramatic rebound in minutes, wiping out all losses in the aftermath of what appears to have been a deadly suicide bomber terrorist explosion on a square the middle of Istanbul's historic district.

 
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If Companies Are Telling The Truth, Profit Margins Are About To Collapse The Most In The 21st Century





if companies are being honest about their intentions to raise wages, then US corporate profitability is about to fall off a cliff. As the chart below from JPM shows, the difference between "intentions to raise prices" less "intentions to raise wages" - a proxy for operating margins - has not been this negative in the 21st century.

 
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Global Stocks Slump As Mining Rout Accelerates, Concerns Grow About Chinese "Stealth Devaluation"





Overnight market action has largely been a continuation of Tuesday's key themes with European stocks falling as a selloff in mining companies extended to a 7th day, even as metals prices rose and crude oil rallied modestly from a six-year low after yesterday's API crude inventory draw. U.S. equity futures have rebounded from modest declines, as emerging-market shares extended their losing streak to a 6th day while Asian stocks dropped to 2 month lows.

 
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Key Economic Events For This Week





After a week full of macroeconomic and headline news (and blooper) fireworks, it’s a fairly quiet start to the week today, with the usual post-payrolls lull in the US.

 
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Global Stocks Fall For 5th Day On Disturbing Chinese Inflation Data; Renewed Rate Hike Fears; Copper At 6 Year Low





The ongoing failure of China to achieve any stabilization in its economy, after already cutting interest rates six times in the past year, and the prospect of a U.S. interest rate hike in December, had made markets increasingly jittery and worried which is not only why the S&P 500 Index had its biggest drop in a month, but thanks to the soaring dollar emerging market stocks are falling for a fourth day - led by China - bringing their decline in that period to almost 4 percent, and the global stock index down for a 5th consecutive day.

 
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The Looming Death Of Small Business In America (In 1 Simple Chart)





The latest small business survey from NFIB shows mounting pressures for small business resulting from limited pricing power and modestly rising wages (in fact the worst pressure since 2008's crash and 1999/2000's plunge). This has not ended well in the past...

 
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Weekend Reading: Copious Contemplations





"After many years of ultra-accommodative polices, it is clear that ongoing interventions have failed to boost actual economic growth and only exacerbated the destruction of the middle class. It is clear that employment growth has only been a function of population growth, as witnessed by the ongoing decline in the labor-force participation rates and the surging levels of individuals that have fallen out of the work-force. While we will continue to operate to foster maximum employment and price stability, the reality is that the economy overall remains far to weak to sustain higher interest rates or any tightening of monetary policy."  

 
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Futures Continue Slide On Latest Chinese Economic Disappointments, Gold Hammered





When China was closed for one week at the end of September, something which helped catalyze the biggest weekly surge in US stocks in years, out of sight meant out of mind, and many (mostly algos) were hoping that China's problems would miraculously just go away. Alas after yesterday's latest trade data disappointment, it was once again China which confirmed that nothing is getting better with its economy in fact quite the contrary, and one quick look at the chart of wholesale, or factory-gate deflation, below shows that China is rapidly collapsing to a level last seen in 2009 because Chinese PPI plunged by 5.9% Y/Y, its 43rd consecutive drop - a swoon which is almost as bad as Caterpillar retail sales data.

 
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