Recession

Markets Set To Surge On Global Manufacturing PMI Bloodbath

If last week's disappointing global economic data, that saw Brazil added to the list of countries returning to outright recession as Europe Hamletically debates whether to be or not to be in a triple-dip, was enough to push the S&P solidly above 2000, even if on a few hundreds ES contracts (traded almost exclusively between central banks), then the overnight massacre of global manufacturing PMIs - when not one but both Chinese PMIs missed spurring calls for "more easing" and pushing the SHCOMP up 0.83% to 2,235.5 - should see the S&P cross Goldman's revised year end target of 2050 (up from 1900) sometime by Thursday (on another few hundreds ES contracts).

Does France Need A 21st Century Revolution?

France is its own worst enemy. It believes in old virtues and ideas from a time gone by. Dirigisme, the French version of socialist capitalism, has failed. It’s time for a 21st century revolution in France.

French President Says "There Is Risk Of War" As Europe Plans Additional Russia Sanctions

Confirming Europe's realization just how serious events are, and how far down the rabbit hole Europe's bureaucrats have gone, French President Francois Hollande, while stressing that a failure by Russia to reverse a flow of weapons and troops into eastern Ukraine would force the bloc to impose new economic measures i.e., nothing new, it is what he said just after that indicated a dramatic change in rhetoric: "Are we going to let the situation worsen, until it leads to war?" Hollande said at a news conference. "Because that's the risk today. There is no time to waste."

If Consumers Are So Confident, Then Why Aren't They Spending?

The sheep have been told their confidence is at a 7 year high by the propaganda peddlers working at the behest of the oligarchy. The sheep are also told that 10 million jobs have been added since the GOTUS played his first round back in 2009. The sheep have been told the record highs in the stock market prove that all is well. If the .1% are doing fantastic, some of the wealth must be trickling down. The sheep are told that QE and ZIRP were really to save Main Street and not the bonuses of Wall Street (at record highs by the way). The sheep are told to fear ISIS, Iran, Assad, Putin, and China. The sheep are told U.S. energy independence is just around the corner and to ignore the fact that gas prices have tripled since in the last ten years. The sheep are told drones will keep them safe and the DHS militarizing the police is just for their safety and security. The sheep are told guns are dangerous in their hands, but not in the hands of the government. The sheep passively eat their iGadgets and barely bleat while being led to the slaughter house.

Dear Future American Generations, You Are Screwed

Faith that the future will be better than the present is slipping, as despite President Obama's demands that Americans not be "cynics," a new report shows there is a major lack of confidence that the next generation will have it better than the last one. As WSJ reports, most strikingly, only 16% of respondents agree that job and career opportunities will be better for the next generation than for their own – a drop from the 56% who were optimistic about this measure in 1999 and down even from the 40% who agreed in November 2009, well into the recession.

Employers Aren't Just Whining: The "Skills Gap" Is Real

What is hard to measure is often hard to manage. Employers using new technologies need to base hiring decisions not just on education, but also on the non-cognitive skills that allow some people to excel at learning on the job; they need to design pay structures to retain workers who do learn, yet not to encumber employee mobility and knowledge sharing, which are often key to informal learning; and they need to design business models that enable workers to learn effectively on the job (see this example). Policy makers also need to think differently about skills, encouraging, for example, industry certification programs for new skills and partnerships between community colleges and local employers. Although it is difficult for workers and employers to develop these new skills, this difficulty creates opportunity. Those workers who acquire the latest skills earn good pay; those employers who hire the right workers and train them well can realize the competitive advantages that come with new technologies.

The "Real" Retail Story: The Consumer Economy Remains At A Recessionary Level

Earlier this month, Retail Sales missed expectations for the 3rd month in a row, essentially flat on the month. As Doug Short rhetorically asks 'how much insight into the US economy does the nominal retail sales report offer?' With the release of the CPI data, we can judge this in 'real' terms (adjusted for inflation and against the backdrop of our growing population)... and the picture is anything but healthy.

Can A National Quasi-Religion (Pro Sports) Go Broke?

Attending costly games is on the margins of the household budget. When the credit card gets maxed out, attending is no longer an option. We're not suggesting professional sports isn't the greatest thing since sliced bread: we're simply asking if attending pro sports games has become unaffordable to the average American.

I Blame The Central Banks

The current bubbles in financial assets -- in equities and bonds of all grades and quality -- raging in every major market across the globe are no accident. They are a deliberate creation. The intentional results of policy. Therefore, when they burst, we shouldn't regard the resulting damage as some freak act of nature or other such outcome outside of our control. To reiterate, the carnage will be the very predictable result of some terribly shortsighted decision-making and defective logic.

"The Buyback Party Is Over" - Albert Edwards Warns The "Market Is Now Running On Fumes"

"two landmark firsts have occurred only recently, with the S&P500 breaking above 2,000 and the 10y bund yield breaking below 1%. Our Ice Age thesis has long called for sub-1% bond yields and I see this extending to the US and UK in due course. It is the equity markets where I have been consistently surprised. QE has been an essential driver for the equity market, providing the fuel for the heavy corporate bond issuance being used for share buybacks. Companies themselves have been the only substantive buyers of equity, but the most recent data suggests that this party is over and as profits also stall out, the equity market is now running on fumes." - Albert Edwards

Frontrunning: August 28

  • Clearly it's time to bomb Assad (on Qatar instructions): Islamic State executes dozens of Syrian army soldiers (Reuters)
  • Ukraine Declares Russian Invasion as Sanctions Threat Raised (BBG)
  • Ukraine Reports Russian Invasion on a New Front (NYT)
  • German Unemployment Rises as Risks to Economy Build (BBG)
  • Ebola spreads to Nigeria oil hub Port Harcourt (BBC)
  • FBI Probes Possible Hacking Incident at J.P. Morgan (WSJ)
  • FBI, Secret Service investigate reports of cyber attacks on U.S. banks (Reuters)
  • If you like your Venezuela, you can stay in Venezuela: Airlines Abandon Fliers Amid Currency Dispute (WSJ)
  • Boomer Wealth Dented by Mortgages Poses U.S. Risk (BBG)
  • People Aren't Buying Guns (BusinessWeek)

4 Years Until The Next Recession? Not Likely!

David Rosenberg, in one of his recent missives, wrote: "...based on the current trend in the LEI and the level of the diffusion index, history suggests that the next recession is at least four years away." While anything is certainly possible, it is highly unlikely that the current economic environment is supportive of another four years of a "struggle along" economy. Given the artificial supports during recent years, the extreme extension in assets prices, record levels of margin debt and the chase for yield in "junk credits," it is highly possible that the next recessionary decline could be much larger than the historical average.

Ebola Devastates West Africa: Revenues Down; Markets Not Functioning; Projects Canceled; GDP Plunges 4%

The market, in its infinitely rigged wisdom, has concluded that the worst Ebola outbreak in history is a non-event, even though it has put virtually all of western Africa on indefinite lockdown, and as Reuters reports, is "causing enormous damage to West African economies and  draining budgetary resources." In fact the damage from Ebola to Africa is already so acute, it is expected that economic growth in the region will plunge by up to 4 percent as foreign businessmen leave and projects are canceled, according to the African Development Bank president said. Revenues are down, foreign exchange levels are down, markets are not functioning, airlines are not coming in, projects are being canceled, business people have left - that is very, very damaging," African Development Bank (AfDB) chief Donald Kaberuka said in an interview late on Tuesday.

Saxo Bank CIO Warns "It's Time To Be Defensive... Very Defensive"

"Germany will flirt with recession by Q4 of this year," warns Saxo Bank's Chief Economist Steen Jakobsen, adding that "the US is in worse shape than most people believe." It's important to underline, he notes, that major US investment houses, and certainly every single sales person we talk to, believe US is about to accelerate in growth not slow down. Jakobsen warns though that Q3 could be ok but the real damage will come in Q4 as the lead-lag factor of geopolitical risk, lack of reforms and excess global supply leads to low inflation. His conclusion, "it’s time to be defensive... very defensive."