- Fed’s Fisher Says Economy Strengthening as Payrolls Rise (BBG)
- Russia Knows Europe Sanctions Ineffective With Tax Havens (BBG)
- EU Cuts Euro-Area Growth Outlook as Inflation Seen Slower (BBG)
- U.S. Firms With Irish Addresses Get Tax Breaks Derided as ‘Blarney’ (BBG)
- Portugal exits bailout without safety net of credit line (Euronews)
- Puzzled Malaysian Air Searchers Ponder What to Try Now (BBG)
- Barclays, Credit Suisse Battle Banker Exodus, Legal Woes (BBG)
- Germany says euro level not an issue for politicians (Reuters)
- Alibaba-Sized Hole Blown in Nasdaq 100 Amid New Stock (BBG)
- Obamacare to save large corporations hundreds of billions (The Hill)
For 364 days of the year, the theater that the press and the administration are on the opposite sides of the table, continues without a glitch. However, one day a year, during the annual White House Correspondents' Association dinner, the facade falls and Obama, together with his fawning press corps, have a night of laughs in an Oscar-inspired night of self-congratularoty excess. Which, just like every other night in Washington, is at the taxpayers' expense. Here are the highlights from last night's festivities.
A perfect sign of the times is the unexpected success of a 700-page economics text called Capital in the 21st Century by French college professor Thomas Piketty reigniting the popularity of Marx's view of the world. Marx’s critique of the modern world was right-on, and the first half of his scenario is playing out just as he predicted; unfortunately, he went on to predict that the revolt of the 99% would result in a “dictatorship of the proletariat” in which workers of the world abolished private property and ran things so wisely that government would just fade away... This is of course crazy, and when it was tried in the 20th century it failed with catastrophic consequences for the Soviet Union, China, and a long list of smaller but no less tragic countries. The result: brutal dictatorships and the eventual dismissal of the Marxist ideas on which those societies are founded. Now the challenge is devising a monetary/financial reset that brings the 99% back into the game without producing a stagnant dictatorship. It will help if we understand why it’s happening.
Back in December of 2012, the Fed, after two and a half failed attempts to stimulate the economy (via QE1, QE2 and Operation Twist), announced Open-Ended QE of an indefinite injection of $85 billion per month (which it currently is tapering at a pace of $10 billion per month on the realization that it has soaked up virtually all high quality collateral). Since then the Fed's balance sheet has grown from $2.9 trillion to $4.3 trillion: a direct injection of $1.4 trillion in liquidity into the stock market, if not so much the economy, which as Wall Street is suddenly busy telling us following the latest disappointing construction spending data (the same Wall Street which initially expected Q1 GDP to be 2.75%), probably contracted for the first time in three years!
Curious why after inexplicably turning red earlier today (because as everyone knows in the New Normal selling is largely forbidden and the Caracas stock market is the model to imitation), the DJIA is about to turn green again and press on new all time record highs? Simple. Following the earlier disastrous construction spending report which feeds directly into the GDP calculation, banks promptly revised their Q1 GDP estimates. To negative.
It is May Day, which means half the world - the half where welfare contributions to one's standard of living are off the charts - celebrate labor, or rather the lack thereof, by taking a day off. Which means virtually all of Europe is closed, as are Eurex and Euronext futures, and most European markets expect the UK. In light of the non-existent volume, futures are relatively unchanged despite the latest Chinese Mfg PMI disappointment (50.4, below the 50.5, expected but just above the prior print of 50.3), and of course yesterday's US GDP debacle which helped push the DJIA to a record high. The good news is that with volume even more miserable than usual, the few momentum ignition algos that are operating will have a field day with the now standard low-volume levitation that happens like clockwork if the news is bad, and also happens just in case if the news is bad.
Here is a shocker: for all the damnation Obamacare, which according to poll after poll is loathed by a majority of the US population, has gotten if it wasn't for the (government-mandated) spending surge resulting from Obamacare, which resulted in the biggest jump in Healthcare Services spending in the past quarter in history and added 1.1% to GDP, real Q1 GDP, which rose only $4.3 billion sequentially to $15,947 billion, would have been negative 1%.
Despite consensus at 1.2% growth QoQ, the "weather" destroyed the fragile stimulus-led economy of the US which managed only a de minimus +0.1% QoQ growth (the lowest since Q1 2011). However, as Steve Liesman noted on the heels of Mark Zandi's comments "basically ignore this number" - ok then. Spending on Services, however, surged by the most since 2000 - heralded as great news by some talking heads - but is merely a reflection of the surge in healthcare and heating costs (imagine if it had not been cold and if Obamacare hadn't saved us). As a reminder - this is the growth that is occurring as QE has run its course, as stimulus ends, and as escape velocity nears... if the "weather" can do this much damage to the US economy, should stocks really be trading at the multiple of exuberant future hope that they are?
This is how empires collapse: one complicit participant at a time.
“Why does Obama suck?” If you’re not sure, ask Google. It seems that millions of Americans already have asked this question, along with: “Why does the government want to kill us?”, and “Can the government take your gold?” These are among the jewels of Google autocomplete - instantly displaying results from the most popular searches. The institution of government is now viewed as the problem, not the solution. And this represents a complete breakdown in the social contract. We suspect that if Google had been around in the mid-1780s, autocomplete would probably tell us things like “Why does the King Louis” suck? And, “Will France” collapse?
We all know the Federal Reserve is terrified of deflation, because they keep telling us that deflation is the equivalent of death and inflation is the equivalent of oxygen. What they fail to mention is that inflation is only oxygen for debtors barely able to service their debt and those who profits from debt, i.e. bankers and financiers. For everyone earning a wage or salary, inflation is the equivalent of death by a thousand cuts and deflation is the elixir of life. When prices decline, our money goes further, i.e. our purchasing power increases. Only bankers, governments and other parasites that live off the carrion of debt fear deflation and try to destroy the purchasing power of wages with everything in their power.
Did you know that the number of Americans getting benefits from the federal government each month exceeds the number of full-time workers in the private sector by more than 60 million? In other words, the number of people that are taking money out of the system is far greater than the number of people that are putting money into the system. And did you know that nearly 70 percent of all of the money that the federal government spends goes toward entitlement and welfare programs? When it comes to the transfer of wealth, nobody does it on a grander scale than the U.S. government. Most of what the government does involves taking money from some people and giving it to other people. In fact, at this point that is the primary function of the federal government.
An impromptu press conference... on Obamacare but we are sure there'll be time to poke the bear...
Krugman: "There's zero evidence that the kind of extreme inequality that we have is good for economic growth. In fact, there's a lot of evidence that it is actually bad for economic growth. Nobody wants us to become Cuba." Ah yes, inequality, the same inequality that the Fed - Krugman's favorite monetary stimulus machine - has been creating at an unprecedented pace since it launched QE. Just recall: "The "Massive Gift" That Keeps On Giving: How QE Boosted Inequality To Levels Surpassing The Great Depression." So while Krugman is right in lamenting the record surge in class divide between the 1% haves and the 99% have nots, you certainly won't find him touching with a ten foot pole the root cause of America's current surge in inequality. And, tangentially, another thing you won't find him touching, is yesterday's revelation by Gawker that the Nobel laureate is the proud recipient of $25,000 per month from CUNY to... study inequality.
- Putin Doesn't Rule Out Sending Troops (WSJ)
- Japan Cuts Economic View on Tax Rise (WSJ)
- No "harsh weather" in Chipotle restaurants where comp store sales rose 13.4% (PR)
- No sanctions for you: EU sanctions push on Russia falters amid big business lobbying (FT)
- Consumer Spending on Health Care Jumps as Obamacare Takes Hold (BBG)
- China Seen Cracking on Property Controls (BBG)
- Google, IBM results raise questions about other tech-sector companies (Reuters)
- California city evacuation lifted after military ordnance found (Reuters)
- For Obama, Standoff With Moscow Jumbles Plans at Home and Abroad (WSJ)