President Obama

There were two major datapoints overnight: the first one came out early in the session, when the Chinese Flash HSBC PMI (not the official one), printed in contraction territory for a 12th consecutive month but jumped sufficiently to 3 month highs to give the algobots hope that China may be turning (it isn't: China, like the US has a major political event early November and all its data is more manipulated than ever). Regardless, this sent future rising to session highs until virtually yesterday's entire gap down was eliminated. The euphoria continued until several hours later we got composite European (as well as the most important German PMI data, and to far less relevant extent France, which always has been the dynamo in European economic growth), manufacturing and services PMI, both of which missed expectations or declined substantially, reaffirming that the German economy is getting dragged down more and more into recession even as continues funding the rescue of the periphery. As the chart from Markit below shows, German PMI is hinting at a solidly negative German GDP print, further confirmed by the German IFO business print which came at 100, a drop from 101.4 and below expectations of 101.6. Other secondary macroeconomic data was just as bad, which explains why futures are now well on their way to dropping back to their lows. Finally, today we get the FOMC statement, which will be much ado about nothing, and will merely serve as an appetizer to the December FOMC meeting, when Goldman (and Zero Hedge) now expected the Fed to expand unsterilized monthly monetization to increase from $40 billion to $85 billion (more on the shortly). Yet perhaps the biggest shift in mood has been coming out of our old friend Greece, where Troika negotiations, largely under the radar, are progressing from bad to worse, where the bond buyback plan was scuttled last night (as ZH reported sending Greek bonds 70 bps wider on the day and rising), and where the probability of another flash election, which can crash the precarious European balance in an instant, is rising with each passing day.

What is wrong with this market? The S&P 500, instead of grinding higher in the aftermath of QE3 actually hit its peak for the year the day after the policy announcement. Go figure. Maybe economic reality finally caught up with Mr. Market (there is a very fine line between "'resiliency" and "denial" — and keep in mind that the S&P 500 is still up 14% in a year in which profits are now contracting, not just slowing down)... On average, six weeks hence, the S&P 500 was up more than 9% after the policy announcement. It was all so novel! Tech on average was up over 11%, industrials were up 12%... ditto for Consumer Discretionary and Materials. The cyclicals flew off the shelves. But this time around. either Mr. Market is jaded or the laws of diminishing returns are setting in. Six weeks after the unveiling of QE3, the market is down 2%. This hasn't happened before. Every economic-sensitive sector is in the red, and even Financials — the one sector that should benefit from all the "sucking at the Fed teat" — have made no money for anybody!

• Moody’s Cuts Ratings on Catalonia, Four Other Spanish Regions (Bloomberg)
• And the market top: Billionaire Ross Interested in Buying Spanish Bank Assets (Bloomberg)
• Japan Jojima denies govt seeks $250 bln BOJ asset buying boost (Reuters)
• China hints at move to strengthen Communist rule (Reuters)... well everyone else is doing it
• Euro-Area Bailout Fund Faces Challenge at EU’s Highest Court (Bloomberg)
• Obama, Romney now tied in presidential race: Reuters/Ipsos poll (Reuters)
• Former China Leader Jiang Resurfaces Before Political Transition (Bloomberg)
• Some in Congress look to $55 billion fiscal cliff 'fallback' (Reuters)
• CLOs stage comeback in US (FT)
• TXU Teeters as Firms Reap $528 Million Fees (Bloomberg)
• China’s Factories Losing Pricing Power in Earnings Threat (Bloomberg)

The blinding nominal light of a Dow Jones Industrial Index near pre-crisis highs is enough provocation for most of the well-assuming US citizenry to 'believe'. Ahead of the third and final Presidential debate this evening, QBAMCO's Paul Brodsky and Lee Quaintance distill the listening audience into Realists and Nominalists. The critical difference between the two, which is described below, is hidden notably from view as the rhetoric within the institutionalized process of vetting and voting for our next President is narrowly focused, intentionally avoiding any major sticking points that will really bring change. As a result, they note, public policy and the people picked to craft and execute it have become anodyne; further implying that regardless of the outcome of the election, inflation will be the accepted manner of de-leveraging to be pursued; but the re-awakening of the so-called 'Chicago Plan' does acknowledge that significant monetary change is likely (for better or worse). Our leaders are dividing us with idealism and conquering us with vote counting. And yet... we all know it’s fake.

Schmitt ? Strauss ? University of Chicago ? Neocons, Obama  ? Banzai!!!

What if the fiscal cliff collides with a replay of the Bush vs Gore 2000 election fiasco...

With less than 20 days to go to the election, the Presidential race has tightened following Romney's performances in the debates, as the Republican challenger has overtaken the president in the national averages for the first time this year (and RealClearPolitics has him with an edge in the electoral college also). But ever the fair-and-balance bank, Citi believes that Obama's advantages remain substantial, as an incumbent president in an improving economic environment. In this broad discussion, the Pandit-less bank addresses 'the data' driving their Obama call, what would have to happen for a Romney win, the Senate and House split, The Tea Party (and other unusual events), and the 'bungee jump'-causing headline risk of the pending Fiscal Cliff debate. Everything you need to know about the election-critical states, players, and events (and who would win in a fist-fight), but were afraid to ask Wolf Blitzer.

From a "Europe in pieces" to a "Europe of peace" and back?

With the market seemingly oblivious to the dismal reality of the fiscal-cliff (from a priced-in perspective) in the same way as equities trade at four-year highs while earnings are at three-year lows; it is perhaps useful to get a grasp of the maelstrom that awaits congress as they begin to tackle the fiscal-cliff on November 12. As we discussed here, the downside potential is considerable with complacency high and just as Goldman expects no real progress to be made until December (at the earliest), the market (i.e. a correction) may be the only lever to move our political elite from their respective higher ground. While talk will be of 'grand bargains', we, like Goldman, remain skeptical that any broad reform package will be completed and instead some short-term extension may be achieved. The following Q&A explains how that sausage could be made in all its gory detail. (e.g. Q: Can Congress actually put together a "grand bargain" fiscal agreement in the short time available? A: It is difficult to see how.)

Overnight sentiment is decidedly negative, following the across the board cut of growth forecasts by the IMF late yesterday. The only bright light was the PBOC dumping 265 billion yuan ($42.1 billion) in reverse repos in an open-market operation (a liquidity adding operation) whose only purpose was to roll the massive reverse repo from before the Golden Week. The resulting 2% jump in the Shanghai Composite came as traders expect an imminent rate cut by the PBOC. The irony of course is that as long as Reverse Repos are the liquification instrument of choice, the local central bank will do nothing else in an economy which is once again overheating in several industries, the most important of which continues to be housing. Furthermore, as long as the spectre of a 15% surge in pork prices is over the horizon, the PBOC will do nothing. Period. Elsewhere, as BBG summarizes, FX is mostly modestly lower with the AUD outperforming on rising iron ore price. Metals mostly modestly lower despite the crippling South African strike which has now migrated to catch iron ore mines as well. Treasury yields moderately lower, partly in catch-up after yesterday’s holiday. Bund yields modestly higher sovereign-to German yield spreads mixed with mostly modest changes. Few if any macro economic news today.

Polticians lie. Obama and Romney are politicians. They talk. Therefore they lie. They lied big time during the debate. Are our choices between evil and lesser evil?

Now what?

As Mr. Lehrer stumbled through the evening and the incumbent's odds of a repeat fell as fast as his frustration appeared to rise, a few things became very clear. President Obama spoke for over four minutes longer than Governor Romney in this evening's slug-fest. However, the fast-talking Mitt managed to squeeze in over 8300 words as opposed to Barack's 7400 words. The word-clouds below suggest each of the candidates' focus tonight with Obama appearing focused on his opponent 'Governor Romney' with heavy use of the words 'Got' and 'Medicare'; while word-wrangler Romney focused on 'People', 'Get', 'Going', 'Government', and 'Plan' (and no 'zinger'). If you are still standing after the drinking games, here are the details...

Since the U.S. and E.U. first enacted sanctions against Iran, in 2010, the value of the Iranian rial (IRR) has plummeted, imposing untold misery on the Iranian people. When a currency collapses, you can be certain that other economic metrics are moving in a negative direction, too. Indeed, using new data from Iran’s foreign-exchange black market, we estimate that Iran’s monthly inflation rate has reached 69.6%. With a monthly inflation rate this high (over 50%), Iran is undoubtedly experiencing hyperinflation. The rial’s death spiral is wiping out the currency’s purchasing power

Americans Are Largely Responsible for Japan’s Ongoing Nuclear Policy