It is only fitting that the next business day following a headline that "Global Futures Slide China Tumbles On Short Selling Boost" we would see China, in an apparent panic, not only cut its RRR by 100 bps to 18.5% - far more than expected and the most since 2008 - but, more importantly, hinted that the Friday regulatory decision to encourage short sales and tighter margin rules on "umbrella trusts" was in no way meant to pop that the Chinese stock bubble, ridiculous as it may be. End result: after Chinese futures crashed by up to 6% on Friday after the Shanghai close, overnight the SHCOMP was down just 1.64%, erasing the bulk of the futures loss. More importantly, US equity futures have seen a strong bid this morning in yet another attempt to defend not only the Apple Sachs Industrial Average from going red on the year but the all important 100 DMA technical levels.
Nothing is ever permanent with the QE’s because they were doomed from the start. The “dollar” system can never be refined and remade to its prior station because it was irrevocably broken on August 9, 2007. All that QE’s have done is to create reverberation within the downward channel which may, in the end, only exacerbate the degree of imbalance that weighs on the inevitable shift.
So the fundamental case for a 20-year bull run as BMO is calling for and certainly many other banks seem to be onboard with that is not looking great YTD. In fact, most perma bulls have shy’d away from even mentioning fundamentals other than to say that generally they aren’t looking great but don’t worry the Fed is still engaged. And so we feel its a worthwhile exercise to have a look at the technicals.
As we observed yesterday when we showed that if comparing the collapse in China's housing market with that of the US following their respective peaks then China is already a recession, we added that "as shown in the chart below [China] has recently engaged in several easing steps, with many more to come according to the sell-side consensus." Sure enough, just a few hours later, the PBOC announced its second Reserve Requirement Ratio (RRR) for all banks since February 4, when China had its first industry-wide RRR cut since May 2012. The move will be effective Monday, April 20.
If one compares the history of the Chinese and US housing bubbles, one observes that it was when US housing had dropped by about 6% following their all time highs in November 2005, that the US entered a recession. This is precisely where China is now: a 6.1% drop following the all time high peak in January of 2014. If the last US recession is any indication, the Chinese economy is now contracting! So much for hopes of 7% GDP growth this year.
The entire global financial system resembles a colossal spiral of debt. Just about all economic activity involves the flow of credit in some way, and so the only way to have “economic growth” is to introduce even more debt into the system. Unfortunately, any system based on debt is going to break down eventually, and there are signs that it is starting to happen once again.
We have never, ever, seen the long- and short-end of the Treasury yield curve so anti-correlated.
At some point, maybe sooner than later, the US economy will re-enter recession. Historically, that's the time when the Fed would lower interest rates in attempt to spur economic growth. But today, interest rates are already at 0%. That's what's so dangerous for the Fed about its current ZIRP policy -- it leaves no gunpowder left in the low-interest-rate bazooka. The Fed will enter its next battle defenseless. This is clearly a situation the Fed wants to avoid, so raising rates - soon - is an urgent priority. But... practically, can the Fed (and other central banks) really raise rates now without killing the already-moribund global economy?
Did WalMart Close A California Store To Punish Employees Who Protested Wages And Working Conditions?Submitted by Tyler Durden on 04/17/2015 20:10 -0400
Presenting the history of the Pico Rivera WalMart store which was closed as part of the company's mysterious, nationwide "plumbing" problem. Could the closure be related to the location's history of protests against low wages, poor working conditions, and retaliation? Read and decide for yourself...
Central bankers in the U.S., Europe and Asia have created another massive bubble. This time it is a bubble in stocks, bonds and real estate simultaneously. There is no place to hide. But we’d put my money on war, chaos, and revolution. There will be no impunity for our gambling.
The economic data has continued to disappoint on virtually all fronts, earnings are weak and markets are grossly extended. Yet, investors are more bullish than ever...
- 2010: The first full year of the recovery was a growth recession with a collapse in inventories (after the restocking was complete), and continued private sector deleveraging.
- 2011: There were a series of events, including the Japanese tsunami, spike in oil prices and US debt downgrade by S&P.
- 2012: The crisis in the Eurozone intensified with concerns over a Greek exit and a breakup of the Eurozone. The policy response abroad was lackluster and there were concerns of another financial crisis.
- 2013: The combination of the sequester, debt ceiling fight and government shutdown created an environment of heightened uncertainty and fiscal restraint.
- 2014: The polar vortex delayed economic activity and led to a permanent loss of growth.
- 2015: Rapid appreciation of the dollar and heightened uncertainty about the winners and losers from plunging oil prices has hurt growth. A small part of the weakness may be related to the weather and the dock strike.
Update: SCHAEUBLE: GREECE FREE TO SEEK RUSSIAN AID, MAY NOT GET MUCH
As Greeks take to the streets, Varoufakis calls predictions about Grexit reverberations delusional, and Bloomberg proposes a list of Greek default scenarios. Meanwhile, central banks move to ringfence Greek exposure and analysts scramble to outline the risk of bank runs, capital controls, and contagion.
Over the past several weeks we have heard repeated comments that you should ignore the recent retail sales weakness for a variety of reasons such as cold winter weather, consumers don't believe the drop in gas prices, etc. Putting aside the fact that cold weather almost always occurs during winter (which is why the data is seasonally adjusted to begin with), or that more than 70% of Americans are living paycheck-to-paycheck, should we dismiss the data entirely?
After crashing from November to January (oh that's just weather), the Philly Fed factory index has failed to do anything but limp higher in the last 3 months. Printing at 7.5 in April (slightly better than the expected 6.0, Philly Fed continues to hover around 1 year lows. The post-weather rebound is entirely missing as New Orders plunged to 2 year lows (though employment surged) with more firms reporting price decreases than reporting price increases.