recovery

China In The Golden Age Of Central Bankers - "Whatever It Takes"

In a QE dominated world - in the Golden Age of the Central Banker - renminbi strengthening has been an unmitigated disaster. Chinese political stability depends on the actual production of actual things by actual people working in actual factories, and the prospects for that real economic growth are made significantly worse the longer the West persists in favoring financial asset inflation and the ossification of a low-growth status quo. While the West may be able to accept, even celebrate, unlimited private wealth – China cannot. Not if it wants to remain a politically unified Great Power. We think this is just the start of a multi-year weakening of the renminbi, a sea change in Chinese monetary policy that will inevitably create broad political tensions with the US and make Japan’s devaluation/inflation course infinitely more difficult to achieve.

17 Facts That Prove That The Quality Of Jobs In America Is Going Down The Drain

Over the past decade, the long-term trends that are destroying jobs in America have accelerated. We have seen countless numbers of jobs shipped overseas, we have seen countless numbers of jobs replaced by technology, we have seen countless numbers of jobs taken by immigrants and we have seen countless numbers of jobs lost to the overall decline of the once great U.S. economy. Unfortunately, even though we can all see this happening, our “leaders” have failed to come up with any solutions. Needless to say, all of this is absolutely eviscerating the middle class. The following are 17 facts that prove that the quality of jobs in America is going down the drain...

The Other Side Of Hanauer: A Plutocrat For Poverty

Last week, Nick Hanauer explained how the pitchforks were out for him and his 'zillionaire' friends' he was right; but his 'solution' is far from correct..."If Hanauer really wants to test out his theory, I propose this to him: shed your billions of dollars and give the money directly to your employees. Drain your bank accounts and give the proceeds to the spend-happy middle class. If consumer demand truly grows the economy, then the profits will come roaring back. Hanauer is right that economic inequality can create resentment. But he doesn’t see the real culprit: a government that insists in meddling in the marketplace. His solutions don’t fix the problem; only exacerbate it."

The Fed's Inflation Survey That The Fed Would Rather Not Hear

U.S. consumers think one-year domestic price inflation will run 50-100% higher than the current headline Consumer Price Index that Wall Street uses to value financial assets. That surprising finding doesn’t come from the fringe "Inflation is nigh, repent!" camp; as ConvergEx's NBick Colas points out, it is the central observation of the New York Federal Reserve’s Survey of Consumer Expectations. This relatively new but rigorously designed monthly dataset polls 1,200 American households on a range of financial questions, from inflation expectations to household finances and labor market conditions. The news The Fed is hearing from the survey must be a bit tough to hear. Inflation expectations are significantly higher than their "Target" of 2% already, meaning any acceleration in prices will "Feel" higher than the central bank’s notional goals.

Where Disposable Income Goes To Die: Since 1990 Real Rents Are Up 15% While Median Incomes Are Unchanged

To the Fed's Janet Yellen, runaway inflation - at least that which can not be "hedonised" away by the BLS like iPad and LCD TV prices - may be simply "noise", which probably explains why she doesn't rent. But for the record number of Americans who are forced to rent as house prices are too high for the vast majority of the population while mortgage origination has tumbled to record lows (as banks can generate far higher returns on reserve by buying stocks than lending out said money), inflation is going from bad to worse. Case in point: as the WSJ shows, since 1990 asking rents - in real terms i.e., adjusted for inflation - have increased a whopping 15%. The change in median income over the same period? 0%.

Factory Orders Drop Most Since Jan; Inventories Surge Most Since Oct 2011

The post-weather rebound is over. Factory Orders, which were expected to fall modestly, dropped 0.5% - the biggest drop and biggest miss since January. Notably defense-spending dropped 30% as it seems we didn't need 10 new submarines in May (and this is with Ex-Im bank still funding growth). On the flip side, if you were wondering where the recent data (survey) exuberance has come from, wonder no more - inventories in May rose 0.8% - the biggest rise since Oct 2011. More malinvestment-driven exuberance - if only wages were up? Surely subprime credit is soaring so that will take care of it.

ADP Employment Surges To Best Since Nov 2012

Today's epic catch-up in ADP jobs data (nicely extrapolated off the back of last month's NFP) is the biggest beat since Dec 2012 and biggest gain in jobs since Nov 2012, printing at 281K, up from 179K, and smashing expectations of 205K - in fact the number came above the highest estimate of 250K. While ISMs and PMIs are missing expectations - and notably small businesses in those surveys saying they are not seeing benefits - ADP claims that small businesses gained the most jobs. Of course, we assume the seasonal adjustments had nothing to do with that: from biggest miss in 4 months to biggest beat in 21 months, which is supposedly, normal.

Frontrunning: July 2

  • France's Sarkozy faces corruption probe in blow to comeback hopes (Reuters)
  • Ukraine Says Military Offensive Against Rebels Yielding Results (WSJ)
  • JPMorgan Investors Show Support for Dimon in Cancer Fight (BBG)
  • World’s ATM Moves to Frankfurt as Yellen’s Fed Slows Cash (BBG)
  • Argentina Seen Backtracking on Fernandez Vows as Legacy at Risk (BBG)
  • Palestinian teen killed in possible revenge attack (Reuters)
  • The Bill and Hillary Clinton Money Machine Taps Corporate Cash (WSJ)
  • London House Prices Surge the Most Since 1987, Nationwide Says (BBG)
  • Last Jew in Afghanistan faces ruin as kebabs fail to sell (Reuters)

Futures Prepare To Take Out Dow Jones 17,000

We could focus on whatever events took place in the overnight session or the seasonally-adjusted economic data avalanche that will dominate US newsflow over the next two days (ADP, ISM New York, Factory Orders, Services ISM, Yellen Speaking, and of course Nonfarm payrolls tomorrow), or we could ignore all of that as it is absolutely meaningless and all very much bullish, and use a phrase from Standard Chartered which said that "the dollars Yellen is removing could be compensated for by cheap euros from the ECB; result may be enough cash sloshing around to underpin this year’s run-up in risk assets even if  the Fed begins mulling higher interest rates too." In other words, the bubble will go on, as the Fed passes the baton to the ECB, if not so much the BOJ which is drowning in its own imported inflation. Case in point: two of the three HY deals priced yesterday were PIK, and the $1 billion in proceeds was quickly used to pay back equity sponsors. The credit bubble has never been bigger.

Jamie Dimon Diagnosed With Throat Cancer, To Start Radiation And Chemotherapy

He may be "richer than you", but when it comes to cancer everyone is equal. Moments ago, Dow Jones and Bloomberg broke news that JPMorgan CEO Jamie Dimon has been diagnosed with throat cancer.

  •  J.P. Morgan JPM Chairman, CEO Jamie Dimon Tells Employees, Shareholders He Has Been Diagnosed With Throat Cancer, Condition Curable—J.P. Morgan
  • Dimon Says Prognosis "Excellent," Cancer "Caught Quickly"—J.P. Morgan
  • Dimon Says Cancer Confined, No Evidence Elsewhere—J.P. Morgan
  • Dimon to start Radiation and Chemotherapy Treatment at Memorial Sloan Kettering, treatment to last 8 weeks
  • Dimon advised able to continue to be actively involved in the business

And now the best healthcare that money can buy will be promptly put to use. We wish him a speedy recovery as it would be far more equitable for the JPM CEO to answer for his actions in full health before a jury of his peers, where guilt can not be "admitted or denied" away.

The Sham Boom

What last week’s figures tell us is there is no real recovery. Just a sham boom created by easy money. We’ve now got two months of figures for the second quarter. They tell us the same thing the first quarter’s numbers told us. Consumers aren’t spending like it was 2007. They’re spending like it was 2009... or 2010... or 2011. In other words, they’re spending as though they were reasonable people who have realized how the system works. The Fed creates a world where its friends and cronies can borrow at below the rate of consumer price inflation. The 1% gets richer. The other 99% struggles to keep up with the bills. Six years of “stimulating” the economy by giving it more of what it least needed has produced no real recovery... just more debt. It has also produced a corrupt money system in which almost every race is fixed. The 1% wins every time. The consumer is barely able to limp around the track.

Frontrunning: July 1

  • Ceasefire over, Ukraine forces attack rebel positions (Reuters)
  • No Good Iraq Options for Obama as Russia, Iran Jump In (BBG)
  • Japan’s Cabinet Agrees to Allow Military to Help Defend Allies (BBG)
  • Obama says to reform immigration on his own, bypassing Congress (Reuters)
  • South Stream Pipeline Project in Bulgaria Is Delayed (NYT)
  • Foreign Banks Still in the Dark About Missing Metals in China (WSJ)
  • Quelle indignity: several bankers at French bank BNP Paribas will face demotions and cuts to their pay and bonuses (FT)
  • Symantec Warns of Hacker Threat Against Energy Companies (BBG)
  • Shrinking Office Spaces Slow Recovery (WSJ)
  • Rand Paul Slams ‘Fat Cats’ With Hedge Fund in Top Donors (BBG)