The US and world economies are frauds that are coming unraveled. The Greek bailout is the most recent example of “kick the can down the road” solutions. The US housing bubble was an attempt to cover up/recover from the dot-com bust. Now the US is in a financial bubble engineered to recover from the housing bubble debacle. Soon this bubble will burst. Only the date is unknown.
UPDATE: At the end of the morning session there is more blood on the streets as The PPT never turned up... Chinese stocks are now down 10-12% since Monday's close.
Following yesterday's massive CNY120bn liquidity injection - the largest since Jan 2014 - and the notable absence of the plunge protection team in the afternoon rout ("we're only here for emergencies"), we note that margin debt fell for the first time in 8 days as Chinese farmers and grandmas realized once again that the stock market is not a free-ride to nirvana. Chinese stock futures indicate the losses will be extended at the open (SHCOMP -2.7%) as the Yuan fix is held unchanged.
Until recently, the "socialization" of New York under newish mayor Bill DeBlasio mostly involved snowfall snafus, exploding manhole covers, giant sinkholes in the middle of the city, and boycotting NYPD cops. The rest was mostly still on auto pilot, and as a result, worked. However, slowly but surely, even the mecca of crony capitalism where at least 1% of the population has never had it better, is starting to succumb to the general economic malaise of the second great depression. Case in point, crime in Central Park is up 26% this year, which at a time of record wealth, gentrification and all time high stock prices, should be unheard of. It also confirms that not all is well with the "recovery" propaganda.
The robo machines pushed their snouts through 2100 on the S&P index again yesterday. This was the 13th time since, well, February 13th that this line has been re-penetrated from below. But don’t call it an omen of bad luck; its more like monetary rigor mortis. The bull market is dead, but the robo-machines and talking heads of bubble vision just don’t know it yet.
It is not enough to issue proclamations such as “it is time to get tough” or “It is time to make America great again”. These are the buzz words of a man that is reaching out to tap the rich vein of popular appeal. Perhaps that is what all politicians strive to do, especially when the field of candidates is rather crowded. However, what is clear is that a well-crafted economic strategy is not present, nor are staffers that would have the temerity to disagree with Mr T.
After 3 months of exploding building permits - driven almost exclusively by the Northeast region (due to expiration of property tax breaks in NYC) - reality bit in July as permits plunged 16.3% to the lowest since March (biggest drop since June 2008). This was the biggest miss on record for permits. Housing Starts rose less than expected but thanks to a dramatic upward revision are stable at around 1.2 million units SAAR (driven by a rise in single-family units trumping multi-family units).
China Stocks Crash, More Than Half Of Market Halted Limit Down; PBOC Loss Of Control Spooks Global AssetsSubmitted by Tyler Durden on 08/18/2015 08:09 -0400
Just hours after the PBOC announced a modestly "revalued" fixing in the CNY, which curiously led to weaker trading in the onshore Yuan for most of the day before a forceful last minute intervention by the central bank pushed it back down to 6.39 it was the local stock market spinning plate - which had been relatively stable during the entire FX devaluation process - that China lost control over, and after 7 days of margin debt increases the Shanghai Composite plunged by 6.2% in late trade, tumbling 245 points to 3748, just 240 points above its recent trough on July 8, a closing level some 27% off its June peak.
PBoC Injection Shows China Worries About Outflows- WSJ
Earlier today an EU official was reported as saying that Greek banks will exclude all depositors from losses until the EU’s Bank Recovery and Resolution Directive rules go into effect on Jan. 1, 2016. Needless to say this was vastly different to Dijsselbloem's blanket guarantee statement from Friday, and suggests that depositors will indeed be bailed-in, but not right now: only after BRRD rules come in place on the first day of 2016.
The Fed is too scared to raise interest rates in the middle of an already weak recovery and risk sending the U.S. economy back into recession, or worse... The Fed chief "does not want to be responsible for the depression that I think we’ve been in the midst of all along," Paul added, "everything is vulnerable, so we’re living in very dangerous times."
The dance of the zombies goes on... During the 10 years between 2005 and 2014, these four retailers spent $34 billion on stock buybacks and dividends. But, alas, their cumulative net income during the period was only $13 billion. So they pumped 2.6X more into the casino than they earned! Last week’s tepid retail reports were not only a reminder that QE and ZIRP have by-passed main street entirely. The faltering department store sector is also a reminder that the monumental amount of Fed confected cash pooling-up in the canyons of Wall Street is breeding debt-laden zombies throughout the length and breadth of the land.
The downturn in China is “our” downturn. All the recent happy talk, due to unsuitable extrapolation and nothing more, has melted away yet again. In short, the same trend dating back almost four years now is quite expectedly unaltered by whatever any central bank does or does not do. “Stimulus” is just noise against all that, at best; at worst it actively contributes to the instability of the decline.
Is Saudi Arabia on the verge of winning the war on US Shale firms? It appears the spigot of malinvestment-subsidizing liquidity that kept numerous zombie energy firms alive has been shut off almost entirely. As oil prices return to cycle lows, so credit risk has spiked to record highs and issuance of life-giving bonds has collapsed. As Reuters reports, this has opened up opportunities for deep-pocketed private equity firms to push for restructuring or buy assets as many oil companies need cash to replenish banks' slimmed-down lending facilities, service their bonds and finance drilling of new wells to keep pumping oil and sustain cash flow. But hope is fading as one private equity form CEO warns "I would say, this is a good time to be careful when it comes to investing in energy."
It appears faith in The Fed is falling. A disastrous Empire Fed print (following weak Japan growth overnight) has led to a decidedly risk off move this morning. The move seems to signal like a "QE4"-on trade (USD down, bonds bid, PMs up) but the equity market weakness suggests trust that the recovery hope The Fed keeps spewing just is not there... in other words - for stocks, "bad" news is no longer good news as the narrative begins to break...
Perhaps at the margin, weak Japanese GDP - as it heads for a quintuple-dip recession - could be today's catalyst but both crude and copper prices are re-tumbling this morning, pressing cycle lows. The USDollar is drifting higher and dos not appear a major driver today. However, broadly speaking malinvestment-driven overcapacity and the collapse of fake credit-fueled demand continue to provide the backdrop for commodity carnage...