This past Friday the Bureau of Labor Statistics released the November jobs report which sent the mainstream analysts and economists into an ecstatic state as the numbers were substantially stronger than estimates. However, in reality, the employment report continues to show that employment is being driven almost entirely by population growth rather than real economic strength. The long term implications of these secular shifts are crucially important to the future of everything from investing, to living and the future of our economy. It is not too late to change our future, but it eventually will be if we do not begin to make changes soon.
Despite misses on stocks and gold, Citi FX Technicals' excellent "12 Charts of Christmas" performed well in 2013 directionally across FX, bonds, and commodities. This year, Tom Fitzpatrick and his team unveil 2014's most important charts - establishing a starting point for their outlook in the year ahead. From a slowing housing market to expectations of a strong USD; and from a "roll-over" in Consumer Confidence to strength in gold, they see the "repair process" continuing albeit at a slow pace but worry that the stock markets are looking more and more like 2000.
Given this lack of warning, depositors need to plan in advance for the day when ATMs do not work and they cannot access cash in their bank accounts. Customers could only withdraw a maximum of €300 per day from branches and ATMs, and could only carry a maximum of €3,000 while travelling out of the country
Given this lack of warning, depositors need to plan in advance for the day when ATMs do not work and they cannot access cash in their bank accounts. Customers could only withdraw a maximum of €300 per day from branches and ATMs, and could only carry a maximum of €3,000 while travelling out of the country.
Despite hope (and talk) that Greece is on the path back to recovery, our recent discussion of the record deflation the nation is undergoing (and record unemployment) suggests Stournaras propaganda is just that. As Bloomberg's David Powell writes, the embattled nation continues to push further into depression and a state of insolvency and appears highly unlikely to be able to reduce the domestic price level in order to restore competiveness and simultaneously avoid a second restructuring of its sovereign debt. Perhaps that is why Troika delayed its appearance in Athens as it is easier to ignore the truth that way? Especially as beggars, once again, will become choosers in the "grexit" debate.
BlackRock said there is a 20% risk that world events could go badly wrong, either because the eurozone acts too late to head off deflation or because of a chain reaction as the Fed starts to wind down stimulus in earnest. As The Telegraph notes, BlackRock’s risk indicator is almost as high as it was just before the dotcom bust. "The ratio of the two is the key. High valuations combined with low volatility can make for a lethal mix. This market gauge sounded the alarm well before the Great Financial Crisis." Furthermore, the largest asset manager in the world warns, "troubling trends of growing inequality and weak wage growth, bring into question the sustainability of profit margins." What is good for investors is corrosive for societies, hardly tenable equilibrium.
Investors all over the world are confronted by markets that have been dressed up for the amusement of the crew in charge of the ship, and nobody seems to recognize what they are looking at. Sure, they look like markets, but at the same time there is an unfamiliarity that is extremely unnerving to at least a few in the gathering crowd. The majority of the mob, however, have decided that they look enough like markets to charge in blindly in the expectation that all will be as it should. Things are not as they should be. Far from it.
In “Why the Fed Won’t Taper in December,” we pretended to write the first paragraph of the Federal Open Market Committee’s (FOMC) statement for next week’s meeting. By thinking about the likely mix of upgrades and downgrades to its assessment of the economy, which is the crux of that paragraph, we argued that we can find clues to policy decisions. Our results tell us to expect a deferral of the committee’s tentative plans to taper its securities purchase program. You may suggest, though, that economic data doesn’t always tell you what the FOMC will do. Because we agree, we’ve also taken a different approach: listening to Fedspeak and working through the math on the committee’s consensus view. This, too, leads us to think there won’t be a taper this month. Here’s our math, starting with the biggest QE supporters and ending with Chairman Bernanke...
There has been quite a bit of discussion lately over the rapid reduction in the government's budget deficit as it relates to economic growth going forward. There are 3 issues that will likely impede further progress on the deficit reduction in the months ahead; 1) lower rates of tax revenue, 2) weaker economic growth and 3) greater levels of spending. The good news for stock market bulls is that deepening budget deficits increase the amount of bonds that the Treasury will need to issue to cover the shortfall in spending. This will give the Federal Reserve more room to continue their current monetary interventions which have inflated asset prices sharply over the last year. Creating financial instability to gain economic stability has been an elusive dream of the Federal Reserve since the turn of the century; yet someday it is hoped that they may just be able to "catch their own tail."
"We think that something structurally has changed since the GFC, a change that seems destined to continue to hold back growth in the near-term and more worryingly has lowered the longer-term trend rate of growth. In the absence of structural reforms, a lack of appetite for debt restructuring and no ability to pursue more aggressive fiscal policy, the temptation will be strong globally to continue to throw liquidity at the problem which is likely to continue to have more impact on asset prices than the actual economy. Bubbles could easily form which could ultimately be the catalyst for the imbalances that will likely lead to the next recession or crisis... Our base case is that the world needs low yields and high liquidity given the huge amount of outstanding debt that we’re still left with post the leverage bubble and the GFC. There’s still too much leverage for us to believe that accidents won’t happen with the removal of too much stimulus. If we’re correct, we may see a reaction somewhere to tapering and this in turn may force the Fed into a much slower tapering path than it wants."
Despite the ratings agencies (Moody's Dec 5th and S&P Nov 22nd) seemingly premature raising of the outlook for the nation's sovereign credit rating (from negative to stable), economic hardship in Spain looks likely to continue as loan defaults surge and the unemployment rate remains the second highest in the EU.
“The only thing we have to fear is fear itself.”
Yesterday, we pointed out that according to the latest Bloomberg survey of economists, roughly 70% of respondents now believe that a taper is coming in either December or January, further accentuated by the recent flipflopping of Fed "bellwether" James Bullard who after holding out for a much delayed reduction in the Fed's monthly flow, admitted that the "probability of a taper had risen ". Today, some additional thoughts on what now seems the consensus from Credit Suisse: "With the labor market looking to be on a more sustained recovery trend following a late summer set-back we think tapering is now virtually inevitable with the decision between a Dec or Jan taper a virtual toss-up that may come down to Fed perceptions of market liquidity in the latter part of December." And just to add fuel to the flame here comes CNBC's own staff "Fed expert" Steve Liesman with "get ready, here it comes: A December taper."