Just before the US election, we laid out the details and implications of the 'other' major 'election' occurring in the world - that of China's Supreme Leader of Awesomeness. Last night the details were announced of the makeup of the new Politburo Standing Committee. As Bloomberg notes, the panel - the most powerful decision-making body in China - was reduced from nine to seven members and will be led (unsurprisingly) by Xi Jinping. Perhaps, in a lesson for our own politicians, the 'new' committee is 'bipartisan' with five members from Xi Jinping's own Jiang Zemin faction and two members from Hu Jintao's faction (more a balance of reformers and reactionaries). But, in a similar vein to the US, as The Diplomat's David Cohen notes,"If Xi is to achieve even the economic policy goals that already appear to enjoy consensus support in Beijing, he will need to find ways of overcoming some of the largest entrenched interest groups in contemporary China. To do so, he may have to set about creating new entrenched interest groups."
Moments ago Ben Bernanke released a speech titled "Challenges in Housing and Mortgage Markets" in which he said that while the US housing revival faces significant obstacles, the Fed will do everything it can to back the "housing recovery" (supposedly on top of the $40 billion in MBS it monetizes each month, and/or QEternity+1?). He then goes on to say that tight lenders may be thwarting the recovery, and is concerned about high unemployment, things that should be prevented as housing is a "powerful headwind to the recovery." In other words - the same canned gibberish he has been showering upon those stupid and naive enough to listen and/or believe him, because once the current downtrend in the market is confirmed to be a long-term decline, the 4th dead cat bounce in housing will end. But perhaps what is most amusing is that the Fed is now accusing none other than the US household for not doing their patriotic duty to reflate the peak bubble. To wit: "The Federal Reserve will continue to do what we can to support the housing recovery, both through our monetary policy and our regulatory and supervisory actions. But, as I have discussed, not all of the responsibility lies with the government; households, the financial services industry, and those in the nonprofit sector must play their part as well." So "get to work, Mr. Household: Benny and the Inkjets, not to mention Chuck Schumer's careers rest on your bubble-reflation skills."
- Don't jump to conclusions over general, Pentagon chief says (Reuters)
- Bad times for generals: Pentagon demotes 4-star General Ward (Reuters)
- Investors Pay to Lend Germany Money (WSJ)
- Noda will no longer be watching... watching: Japan PM honors pledge with December 16 vote date, to lose job (Reuters)
- New China leadership takes shape (FT)
- Hispanic Workers Lack Education as Numbers Grow in U.S. (Bloomberg)
- Quest for EU single bank supervisor stumbles (FT)
- Anti-austerity strikes sweep Europe (Reuters)
- Amazon faces new obstacles in fight for holiday dollars (Reuters)
- SEC Expands Knight Probe (WSJ)
- Singapore’s Casinos Lose Luster as Gaming Revenue Decline (Bloomberg)
- Amid Petraeus sex scandal, Air Force to release abuse report (Reuters)
- Geithner’s Money Fund Overhaul Push Sparks New Opposition (Bloomberg)
Over the past several days there had been concerns that even if Greece managed to roll its maturing €5 billion in Bills with a new Bill issuance (which it did earlier today), it would be unable to actually obtain cash for this worthless paper, through a repo with the European Central Bank. The reason being that last week the ECB allowed a temporary extension in Greek ELA collateral eligibility to expire, enacted on August 2, which in turn reduced the amount of repoable T-Bills from €7 billion to just €3.5 billion, in the process reducing the amount of cash Greece can obtain in half from the Bill roll. And while there had been lots of speculation and rumors that the ECB would, as in the case of Spain, either make a "mistake" or extend the collateral pool exemption once more, this did not occur. Instead, as we have just learned, the ECB has allowed Greek banks to use "asset-backed" securities to plug the collateral gap. Needless to say, one can only conceive just what unencumbered assets still can be found on Greek bank balance sheets (here is one artist's impression) but it was largely expected that in the race to debase its currency, the ECB would once again admit that when it comes to perpetuating the Ponzi, especially at a marginal cost of a token €3.5 billion, anything goes (just don't tell Germany). And so, Greece kicks the can once again.
- Jefferies to be bought by Ian Cumming's Leucadia in an all-stock deal for $3.59 billion or about $17/share (WSJ)
- FBI Scrutinized on Petraeus (WSJ)
- Identity of second woman emerges in Petraeus' downfall (Reuters)
- SEC staffers used government computers for personal use (Reuters)
- Japan edges towards fifth recession in 15 years (FT)
- Europe Finance Chiefs Seek Greek Pact as Economy Gloom Grows (BBG)
- Americans Say Europe Lesson Means Act Now as Austerity Will Fail (BBG) - of course it would be great if Europe had ever implemented austerity...
- Greece battles to avert €5bn default (FT)
- You don't bail out the US government for nothing: No Individual Charges In Probe of J.P. Morgan (WSJ)
- Israel Warns of Painful Response to Fire From Gaza, Syria (BBG)
- Greece's far-right party goes on the offensive (Reuters)
- Don’t fear fiscal cliff, says Democrat (FT)
- Apple Settles HTC Patent Suits Shifting From Jobs’ War (BBG)
- Man Set on Fire in Argentina Over Debt (EFE)
- Iraq cancels $4.2-billion weapons deal with Russia over corruption concerns (Globe and Mail)
- An Honest Guy on Wall Street (Bloomberg)
With Spanish unemployment at record levels over 26% (and youth unemployment over 50%), even the bailout-avoiding prime minister is now recognizing the "terrible things and inhumane situations" that many real people are dealing with. To wit, a 53-year-old woman died after she threw herself from a window of her apartment when representatives of Spanish bank La Caixa arrived with locksmiths to evict her yesterday morning. The suicide (following another last month in Granada) has prompted Rajoy to temporarily halt evictions of the most vulnerable families as the government devises measures to help people stay in their homes. And yet, we are told again and again by Juncker, Barroso, van Rompuy et. al that the corner has been turned... we suspect not!
Economists the world over can take comfort that the laws of supply and demand still largely rule the marketplace. However, we believe there is a noted exception for a yellow, largely useless metal. A metal that just happens to have shaped the world’s monetary systems for the last several thousand years. Gold’s “supply” traditionally defined as global mining production is virtually meaningless in determining its’ price. How can this be? Gold, even when viewed as a commodity, is unique in that it is not consumed. Rather than supply in the traditional sense, what drives the gold price is the percentage of the existing stock (170,000 tons) that is available for sale on any given day. Gold, in our opinion is what is often referred to as a Giffen good. We believe that a massive revaluation of gold denominated in dollars can happen quite suddenly, almost overnight. But not because of any sustained long term demand for gold, but simply because owners of metal simply withdraw it from sale, sending the stock to flow ratio to infinity. This is why understanding gold’s stock to flow ratio is so vital. What happens to the “price” of gold when it ceases bidding for dollars? Zero. Or infinity. Take your pick.
Now that I've released my early Apple research and the collapsing stock cat's out the bag, I hear very, very few Margin Compression theory bashers. Crickets anyone? Let's dissect the near 25% drop and how I made the call.
Back in the late 1980s, the entire business world was obsessed with Japan. It's no wonder that this was the case: here was a country which had emerged from the ashes of World War 2 and had become the world's second-largest economy. They made high-quality cars, consumer electronics, semiconductors, plus they seemed to have a management style and work ethic that put the "good old USA" to shame.
Perhaps those sage English philosophers 'The Vapors' were on to something 32 years ago when they asked if we were "Turning Japanese" for it seems the following charts from Nomura certainly suggest the US bond market is heading in that direction. From demographics to monetary policy; from investor allocations to flows; and from bond bubbles and volatility to long-term interest-rate paths, it seems we share a lot more than a love for sushi and pachinko with our neigbours across the ocean as we seem to be chasing after many Japanese models (of asset allocation and macro-economics).
At some point or another, anyone who is even remotely paying attention to reality will likely reach two critical moments of awakening in their lives. The first is what I call the “Aha! moment”. The ‘Aha! moment’ is usually brought about by something you learn or read… When you talk to your friends and family, most of them don’t want to hear about your ideas. They think you’re nuts. They haven’t had their ‘Aha! moment’ yet. Eventually, you learn to keep it all inside. But then, at some point down the road, the second critical moment occurs– the Breaking Point.
- Obama First Since FDR Re-Elected With 7.9% Joblessness (Bloomberg)
- China Party Meets to Anoint Next Leader (WSJ)
- Hu Sets China Income Target for Xi as Communists Gather (Bloomberg)
- Hu Jintao dashes hope for political reform (FT)
- Spain Sells $6 Billion Debt, Placing Longest Bond Since 2011 (Bloomberg)
- Japanese Politicians Move to Steer Away From Fiscal Cliff (Bloomberg)
- Hu says graft threatens state, party must stay in charge (Reuters)
- Weidmann in Defeat Still Influences ECB Bond-Buying Plan (Bloomberg)
- Spain Said to Consider Palace Sales to Raise Cash (Bloomberg)
- First-term headwinds look set to turn (FT)
- Focus Shifts to 'Fiscal Cliff' (WSJ)
- Obama Victory Paves Way to Continue Fed Policies (Hilsenrath)
- Swiss, Greeks Begin Talks on Tax Deal (WSJ)
The "Believe In Germany Bailing The EU" Trade: Go Long Magic Wand Raw Materials & Harry Potter ParaphernaliaSubmitted by Reggie Middleton on 11/07/2012 09:56 -0500
How's this for a Harry Potter-like Incantation? Margin up magic, go short math! Believe Germany will escape unscathed, prepare to take a bath!
Canadian household debt as a percentage of income by now vastly exceeds the peak that was seen at the height of the US real estate bubble. CIBC thinks the huge amount of household debt in Canada and the beginning cracks in the housing bubble are nothing to worry about. The main reason for this benign assessment seems to be that there have been a few other credit and real estate bubbles in the world that have grown even bigger than the US one before it burst. What a relief. It is generally held that Canada's banking system is in ruddy health and not in danger from the extended credit and real estate bubble, mainly because a government-owned organization, Canadian Mortgage Housing Corp. This kind of thinking has things exactly the wrong way around. It is precisely because such a state-owned guarantor of mortgages exists that the vaunted lending standards of Canada's banks have increasingly gone out of the window as the bubble has grown.
Tired of pundits with black boxes and book deals telling you the election is a done deal because some statistically-sampling, biased, Garbage In, Garbage Out model "said so" (remember when the same GIGO logic made every structured piece of toxic RMBS toxic be rated AAA simply because the rating agency models couldn't account for the improbable case of real estate prices actually going down?) Then decide for yourselves. With 48 hours left until polls close, below are the 512 permutating paths available to the two candidates on their way to the White House throne (assuming the other states vote the way they are "expected"). And with the election having crossed far beyond mere theatrical tragicomedy and now well into NCAA finals knock out fever, one can see why Florida and Ohio are really all the matter.