As we showed very vividly yesterday, while the world is comfortably distracted with mundane questions of whether the Fed will taper this, the BOJ will untaper that, or if the ECB will finally rebel against an "oppressive" German regime - with $3.5 trillion in asset (and debt) creation per year, is China. China, however, is increasingly aware that in the grand scheme of things, its credit spigot is the marginal driver of global liquidity, which is great of the rest of the world, but with an epic accumulation of bad debt and NPLs, all the downside is left for China while the upside is shared with the world. Which is why it was not surprising to learn that China has drafted rules banning banks from evading lending limits by structuring loans to other financial institutions so that they can be recorded as asset sales. And while we are confident Chinese financial geniuses will find ways to bypass this attempt to curb breakneck credit expansion in due course, in the meantime, Chinese liquidity conditions are certain to get far tighter. This is precisely the WSJ reported overnight, when it observed that yields on Chinese government debt have soared to their highest levels in nearly nine years amid Beijing's relentless drive to tighten the monetary spigots in the world's second-largest economy.
- M&A Mystery: Why Are Takeover Prices Plummeting? (WSJ)
- Hedge-Fund Fight Club Traded Illegal Tips Not Punches (BBG)
- Speed Traders Meet Nightmare on Elm Street With Nanex (BBG)
- A new wave of U.S. mortgage trouble threatens (Reuters)
- Penny Lane: Gitmo's other secret CIA facility (AP)
- US hardens threat to leave Afghanistan with no troops (WSJ)
- Russian Prison Stuns Captain of Greenpeace’s Bombed Ship (BBG)
- ECB's Weidmann Warns Central Banks Might Be Too Dominated by Fiscal Concerns (WSJ)
- China Air Move Splits Japan as Carriers Obey New Rules (BBG)
- Inside the Breakup of the Pritzker Empire (WSJ)
It might have been the Republican shutdown (according to one person at the White House, at least). It might have been the fault of the Syrian leader Bachar Al-Assad gassing his people with chemical weapons.
Encapsulating all that is wrong with the raise-your-stock-price-by-hyperbole-alone strategy of most new 'tech' firms, Tesla's recent claim of a "5.4 Stars - out of 5" safety rating from the National Highway Traffic Safety Administration (NHTSA) perhaps takes the biscuit. But as Jalopnik reports, the NHTSA is not standing for the lies anymore and has issues a statement explaining to car-makers that NHTSA does not award higher than a 5-star rating - advertisers should avoid "double" 5-star rating, numbers greater than 5, and using the terms "perfect," "safest," "flawless" or "best in class" are misleading. What will Elon Musk do now?
The math just shot craps.
- JPMorgan $13 Billion Mortgage Deal Seen as Lawsuit Shield (BBG)
- J.P. Morgan Is Haunted by a 2006 Decision on Mortgages (WSJ)
- World powers, Iran in new attempt to reach nuclear deal (Reuters)
- Keystone Foes Seek to Thwart Oil Sands Exports by Rail (BBG) - mostly Warren Buffet?
- How Would Fed Deal With Debt Ceiling Crisis? Look to Minutes for Clues (Hilsenrath)
- Anything to prevent the loss of prop trading: 'Volcker Rule' Faces New Hurdles (WSJ)
- BOE Sees Case for Keeping Record-Low Rate Beyond 7% Jobless (BBG)
- Obama Backs Piecemeal Immigration Overhaul (WSJ)
- Abenomics Seen Cutting Japan Bad-Loan Costs to 2006 Low (BBG)
...An unidentified local bank reported a 33 percent nonperforming-loan ratio for the solar-panel industry, compared with 2 percent at the beginning of the year, with the increase due to Wuxi Suntech, China Business News reported in September.... China’s lending spree has created a debt burden similar in magnitude to the one that pushed Asian nations into crisis in the late 1990s, according to Fitch Ratings.... As companies take on more debt, the efficiency of credit use has deteriorated. Since 2009, for every yuan of credit issued, China’s GDP grew by an average 0.4 yuan, while the pre-2009 average was 0.8 yuan, according to Mike Werner, a Hong Kong-based analyst at Sanford C. Bernstein & Co.... “The real situation is much worse than the data showed” after talking to chief financial officers at industrial manufacturers, said Wendy Tang, a Shanghai-based analyst at Northeast Securities Co., who estimates the actual nonperforming-loan ratio to be as high as 3 percent. “It will take at least one year or longer for these NPLs to appear on banks’ books, and I haven’t seen the bottom of deterioration in Jiangsu and Zhejiang yet.”
Farewell Mareeaah. The Money Honey who epitomized CNBC in its high flying (pardon the pun) years when it was actually a source of useful information, has just marked the nadir of the TV station which in the past five years rebranded itself stock market propaganda central, and whose viewership plunged appropriately to a 20 year low as we recently reported. As Drudge reports, Bartiromo whose contact is up, is moving to Fox Business. From Drudge: "DRUDGE has learned that Maria Bartiromo is jumping to FOX BUSINESS NETWORK with an announcement expected sometime soon. Sources close to the situation say there have been ongoing conversations throughout the Fall. The new deal calls for Bartiromo to anchor a daily market hours program on FOX BUSINESS. Insiders say there will be a role on FOXNEWS as well."
A rhetorical question that was apocryphal a mere year ago, has emerged as a very realistic option: is Barack Obama the second coming of Dubya? Policy initiatives aside, in this case we simply look at the plunging popularity ranking of both presidents in their second term as shown on the chart below.
Allegations of JP Morgan’s use of clever tactics to bribe Chinese officials recently received mainstream attention when Salon journalist Alex Pareene mentioned it in a comical and classic interview on CNBC (you need to watch the video before reading this) with presstitute Maria Bartiromo. When Mr. Pareene mentioned these claims against the TBTF bank, CNBC mocked him. Howeverer, this article from the New York Times details how JP Morgan paid $75,000 a month to an obscure consulting firm called Fullmark Consultants, which had only two employees. The firm was run by a woman named Lily Chang, which in reality was the alias used by Wen Jiabao’s only daughter Wen Ruchun. Wen Jiabao was the Prime Minister of China at the time.
As DB notes, it appears that markets continue to steadily price in a greater probability of a December taper judging by the 2bp increase in 10yr UST yields, 1.2% drop in the gold price and an edging up in the USD crosses yesterday. Indeed, the Atlanta Fed’s Lockhart, who is considered a bellwether within the Fed, kept the possibility of a December tapering open in public comments yesterday. But his other comments were quite dovish, particularly when he said that he wants to see inflation accelerate toward 2% before reducing asset purchases to give him confidence that the US economy was not dealing with a “downside scenario”. Lockhart stressed that any decision by the Fed on QE would be data dependent - so his comments that the government shutdown will make coming data "less reliable" than might otherwise have been, until at least December, were also quite telling. The dovish sentiments were echoed by Kocherlakota, a FOMC voter next year. In other words, an Oscar-worthy good-cop/bad-cop performance by the Fed's henchmen, confusing algotrons for the second day in a row.
Five years have passed since the onset of what is sometimes called the Great Recession. While the economy has slowly improved, there are still millions of Americans leading lives of quiet desperation: without jobs, without resources, without hope. Who was to blame?
"The government, writ large, had a hand in creating the conditions that encouraged the approval of dubious mortgages. It was the government, in the form of Congress, that repealed Glass-Steagall, thus allowing certain banks that had previously viewed mortgages as a source of interest income to become instead deeply involved in securitizing pools of mortgages in order to obtain the much greater profits available from trading. It was the government, in the form of both the executive and the legislature, that encouraged deregulation..."
- Judge Jed Rakoff
The EU may have many worries and woes that are slapping it around its face right now (and it could be said for a number of years), but there is one thing that is worrying economists more than the sovereign-debt crisis and that’s the fact that prices are not increasing enough.
- Philippines Left Reeling in Wake of Storm (WSJ)
- Khamenei controls massive financial empire built on property seizures (RTRS)
- Race to Bottom Resumes as Central Bankers Ease Anew (BBG)
- U.S. Postal Service to deliver Amazon packages on Sundays (LA Times)
- Obama Stocks Among Best After Re-Election as Rally Tested (BBG)
- Health-Law Rollout Weighs on Obama's Ratings, Agenda (WSJ)
- Twitter in Celebrity Spat With Facebook as Rivalry Builds (BBG)
- Iran deputy industry minister shot dead (AFP)
- Financier of Taliban-linked group shot dead in Pakistan (RTRS)
- Obama: The Lonely Guy (Vanity Fair)
The MSM did their usual spin job on the consumer credit data released earlier this week. They reported a 5.4% increase in consumer debt outstanding to an all-time high of $3.051 trillion. In the Orwellian doublethink world we currently inhabit, the consumer taking on more debt is seen as a constructive sign. The storyline being sold by the corporate MSM propaganda machine, serving the establishment, is that consumers’ taking on debt is a sure sign of economic recovery. They must be confident about the future and rolling in dough from their new part-time jobs as Pizza Hut delivery men. Plus, they are now eligible for free healthcare, compliments of Obama, once they can log-on. Of course, buried at the bottom of the Federal Reserve press release and never mentioned on CNBC or the other dying legacy media outlets is the facts and details behind the all-time high in consumer credit. They count on the high probability the average math challenged American has no clue regarding the distinction between revolving and non-revolving credit or who controls the distribution of such credit. A shocking fact (to historically challenged government educated drones) revealed by the Federal Reserve data is that credit card debt did not exist prior to 1968. How could people live their lives without credit cards? 1968 marked a turning point for America...