To get a sense of the momentous volatility in Japan, consider that the Nikkei225 is more or less in the same numeric ballpark as the Dow Jones, and that each and every day now it continues to have intraday swings of more than 500 points! Last night was no different following swing from 13100 on the high side to 12548 on the low, or nearly 600 points, with all this ridiculous vol culminating in a close that was just red however for a simple reason that the rumor of the Japanese Pension Fund reallocation taking place hit shortly before the close sending the USDJPY higher by 200 pips... only for the news to emerge as an epic disappointment when it was revealed that the GPIF would raise its target allocation to domestic equities from 11% to... 12%. So much for the "Great Japanese Rotation."
In November, NYU Professor Nouriel Roubini stated, “gold at $1,500 is utter nonsense.” In less than two years, gold was above $1,900. This week, the mad professor is back with his swiss-cheese logic and anti-gold rants.
After everything that Barack Obama, the U.S. Congress and the Federal Reserve have tried to do, there has been no real economic recovery and now the U.S. economy is suddenly behaving as if it is 2009 all over again. A whole host of recent surveys indicate that the American people are starting to feel a bit better about the economy, but the underlying economic numbers tell an entirely different story. If we were going to have an "economic recovery", it should have happened in 2010, 2011 and 2012. Now we are rapidly approaching another major economic downturn.
Some are surprised that inflation has failed to take off despite massive amounts of quantitative easing. The explanation, ECRI explains, is simple: recession kills inflation. For all the talk of the wealth effect, demand is falling and deflation is closer than at any time since 2009. The 'r' word is seldom heard on the lips of the mainstream media - "how absurd" - but as SocGen's Albert Edwards notes, if anyone is waiting for the ISM to tell them that a recession has started in the US, they are looking at the wrong data. Much more importantly, Edwards explains, we may well be in for a double dose of bad news - both falling revenues and falling margins. History suggests this as good a leading indicator as any other for whether the US economy will endogenously fall back into recession. Unfortunately at the height of a recovery most commentators forget profit margins mean-revert as they become intoxicated by the equity market's prior stellar performance and tend to continue to price the market off analysts' forward earnings - which inevitably always forecast further healthy gains ahead.
America may be a service economy but for the sake of tomorrow's NFP let's pretend it isn't. Because if the employment component of the Non-manufacturing (i.e., Services) ISM, which at least in the pre-centrally planned times correlated with the NFP number with an R2 of about 0.9, is indicative of what to expect, one can kiss any hopes of a recovery goodbye. Which, of course, is great news! It means the Fed will never pull out and never realize that it is the Fed's central planning and market manipulation that is responsible for the every deeper global economic depression which benefits only stock holders (and traders).
Another day, another sell off in Japan. The Nikkei index closed down 0.9%, just off its lows and less than 1% away from officially entering a bear market, but not before another vomit-inducing volatile session, which saw the high to low swing at nearly 400 points. Hopes that a USDJPY short-covering squeeze would push the Nikkei, and thus the S&P futures higher did not materialize. And while the weakness in Japan is well-known and tracked by all, what may come as a surprise is that the Chinese equities are down for the 6th consecutive session marking the longest declining run in a year. Elsewhere in macro land, the Aussie Dollar continues to get pounded on China derivative weakness, tumbling to multi-year lows of just above 94 as Druckenmiller, who called the AUDUSD short nearly a month ago at parity shows he still has it.
How Another Housing Bubble Was Blown … And Why
Non-Manufacturing ISM Comes In Line, Factory Orders Miss: Inventory To Sales Highest Since October 2009Submitted by Tyler Durden on 06/05/2013 09:14 -0500
Despite market bull hopes for a collapse in the non-manufacturing ISM (remember: bad news is good news for momentum chasers and the Mandarins of Marriner Eccles) and a repeat of the sub-50 Manufacturing ISM fiasco, moments ago the Institute for Supply Management released the June Non-manufacturing ISM which printed at 53.7, just above expectations of a 53.5 print, and above last month's disappointing 53.1. The New Orders index rose from 54.5 to 56.0 and the Business Activity also rising from 55.0 to 56.5, offset by a drop in inventories from 56.0 to 51.5, a collapse in Imports from 58.5 to 49.5 and, troublingly, an ADP validating decling in the employment index from 52.0 to just above contraction at 50.1. Perhaps the most informative respondent comment was the following: "Healthcare reform and sequestration are having a strong negative impact on business." (Health Care & Social Assistance). Oh well, a mixed report that is neither overly bullish or bearish, so those hoping for bad news will have to look at the Factory Orders release which posted its second miss in a row, printing at 1.0% on expectations of a 1.5% rise.
Global Risk Off: Nikkei Plunges 700 Points From Intraday Highs, Whisper Away From 20% Bear Market CorrectionSubmitted by Tyler Durden on 06/05/2013 05:50 -0500
Anyone expecting Abe to announce definitive, material growth reform instead of vague promises to slay a "deflation monster" last night was sorely disappointed. The country's PM, who may once again be reaching for the Immodium more and more frequently, said the government aims for 3% average growth over the next decade and 2% real growth, raising per capita income by JPY 1.5 million. The market laughed outright in the face of this IMF-type silly vagueness (as well as the amusing assumption that Abe will be still around in 7 years), which left untouched the most critical aspect of Abenomics: energy, and nuclear energy to be specific, and sent the USDJPY plummeting well below the 100 support line, printing 99.55 at last check. But more importantly, after surging briefly at the opening of the second half of trading to mask a feeble attempt at telegraphing the "all is well", it rolled over with a savage ferocity plunging 700 points from an intraday high of 13,711 to just above 13,000 at the lows: yet another 5% intraday swing in a market which is now flatly laughing at the BOJ's "price stability" mandate. Tonight's drop has extended the plunge from May 23 to 18.4% meaning just 1.6% lower and Japan officially enters a bear market.
Housing Bubble Pop Alert: Colony Pulls IPO On "Market Conditions", Blue Mountain Rushes To Cash Out Of Own-To-RentSubmitted by Tyler Durden on 06/04/2013 22:08 -0500
Here is a simple way to test if the last year of housing market gains have been due to a real, fundamental, consumer-led recovery, or nothing but the latest iteration of the Fed's money bubble machine manifesting itself in the place of least du jour resistance - houses: Assume rising interest rates.
The airwaves are full of stories of economic recovery. One trumpeted recently has been the rapid recovery in housing, at least as measured in prices. The problem is, a good portion of the rebound in house prices in many markets has less to do with renewed optimism, new jobs, and rising wages, and more to do with big money investors fueled by the ultra-cheap money policies of the Fed. It seems entirely wrong that the Fed bailed out big banks and made money excessively cheap for institutions, and that this is being used to price ordinary people out of the housing market. Said another way, the Fed prints fake money out of thin air, and some companies use that same money to buy real things like houses and then rent them out to real people trying to live real lives. At the same time, we are also beginning to see the very same hedge funds that have re-inflated these prices slink out of the market now that the party is kicking into higher gear – all while new buyers are increasingly having to abandon prudence to buy into markets where the fundamentals simply aren't there to merit it. Didn't we just learn a few short years ago how this all ends?
While it isn't news to regular readers, the fact that one of the key pillars of the "housing recovery" (the other three being foreign oligarchs parking cash in the US courtesy of an Anti Money Laundering regulation-exempt NAR, foreclosure stuffing and, of course, the Fed's $40 billion in monthly MBS purchases) have been the very biggest Wall Street firms (many of whom had to be bailed out the last time the housing bubble burst) who have also become the biggest institutional landlords "using other people's very cheap money" to buy up tens of thousands of properties, appears to still be lost on the larger population. Intuitively this is to be expected: in a world in which the restoration of confidence that a New Normal, in which everything is centrally-planned, is somehow comparable to life as it used to be before Bernanke, is critical to Ben's (and the administration's) reflationary succession planning. As such perpetuating the myth of a housing recovery has been absolutely essential. Which is why we were surprised to see an article in the very much mainstream, and pro-administration policies NYT, exposing just this facet of the new housing bubble, reflated by those with access to cheap credit, and which has seen the vast majority of the population completely locked out.
Technology, technology, and more technology—this is what has driven the American oil and gas boom starting in the Bakken and now being played out in the Gulf of Mexico revival, and new advances are coming online constantly. It’s enough to rival the Saudis, if the Kingdom allows it to happen. Along with this boom come both promise and fear and a fast-paced regulatory environment that still needs to find the proper balance. In an exclusive interview with Oilprice.com, Chris Faulkner, CEO of Breitling Energy Companies - a key player in Bakken with a penchant for leading the new technology charge—discusses: How Bakken has turned the US into an economic powerhouse; What the next milestone is for Three Forks; What Wall Street thinks of the key Bakken companies; Where the next Bakken could be; What to expect from the next Gulf of Mexico lease auction; What the intriguing new 4D seismic possibilities will unleash; What the linchpin new technology is for explorers; How the US can compete with Saudi Arabia; Why fossil fuel subsidies aren’t subsidies; How natural gas is the bridge to US energy independence; Why fossil fuels shouldn’t foot the bill for renewable energy; Why Keystone XL is important; Why the US WILL become a net natural gas exporter
The latest ISM reading came in at 49. Any reading below 50 is considered recessionary. And an ISM of 49 is the worst in four years.
- Whale of a Trade Revealed at Biggest U.S. Bank With Best Control (BBG)
- ECB backs away from use of ‘big bazooka’ to boost credit (FT)
- Turkish unions join fierce protests in which two have died (Reuters)
- Europe Floods Wreak Havoc (WSJ)
- Beheadings by Syrian Rebels Add to Atrocities, UN Says (BBG)
- RBA Sees Further Rate-Cut Scope as Aussie Remains High (BBG)
- China’s ‘great power’ call to the US could stir friction (FT)
- J.C. Penney Continuing Ron Johnson’s Vision on the Cheap (BBG)