If the Federal Reserve is trying to force feed us prosperity then the inevitable blowback will be adversity. If the Fed is trying to compel the most dramatic economic recovery in history, then the blowback may well be the deepest depression in history. If the Fed is trying to enforce confidence and optimism then the blowback will be fear and despair. If the Fed is trying to force consumers to spend then the blowback will be a collapse in consumer confidence.
"Sooner or later everyone sits down to a banquet of consequences." - Robert Louis Stevenson
We sincerely hope that we are completely wrong here, that we are missing something, that there is a flaw in our logic. However until we can locate such a flaw we must trust the technical case for treating this Fed force-fed rally in the stock market as something that will end badly.
Being poor is like a game of poker where if you lose, the other players get to screw you. And if you win, the dealer screws you. A bunch of you reading this are among the 45 million “working poor” in America, and if you’re not, you know somebody who is. People are quick to tell you to pick yourself up by your bootstraps and just stop being poor. What they don’t understand is the series of intricate financial traps that makes that incredibly difficult...
- Two weeks ago here: The Latest Greek "Bailout" In A Nutshell: AAA-Rated Euro Countries To Fund Massive Hedge Fund Profits... and now on Bloomberg: "Hedge Funds Win as Europe Will Pay More for Greek Bonds" (BBG)
- Oracle sends shareholders cash as tax uncertainty looms (Reuters)
- GOP Makes Counteroffer In Cliff Talks (WSJ)
- Iran says captures U.S. drone in its airspace (Reuters)
- IMF drops opposition to capital controls (FT)
- Vogue Editor Wintour Said to Be Possible Appointee as U.K. Envoy (BBG)
- Juncker Stepping Down French Finance Minister to Head Euro Group? (Spiegel)
- Australia cuts rates to three-year low (FT)
- Europe’s banking union ambitions under strain (Reuters)
- EU Nations Eye New ECB Bank Supervisor Amid German Doubts (BBG)
- Frankfurt's Ambitions Get Cut Back (WSJ)
- House Republicans Propose $2.2 Trillion Fiscal-Cliff Plan (BBG)
In a letter focusing on what has been well known to Zero Hedge readers for about two years now, Bill Gross' latest investment outlook does the usual attack of Beltway stupidity (as if Congress is in any way competent of making math-related decisions - they do what Wall Street - that's you Bill! - tell them to do, and you know it), emphasizing the impossible math of total US entitlement liabilities (on a net present value basis), which Gross estimates at $75 trillion. That Gross conclusion is predetermined from the onset is not surprising: "Unless entitlements are substantially reformed, I
am confident that this country will default on its debt; not in
conventional ways, but by picking the pocket of savers via a combination
of less observable, yet historically verifiable policies – inflation,
currency devaluation and low to negative real interest rates." Then again, that America is bankrupt is not really news to anyone. Neither is it news, that Gross, as we first reported, no longer has any US bonds to dispose of. What will be news is the inflection point at which Gross starts purchasing Treasuries once again. And after all with $220 billion in AUM in the Total Return Fund, what else will he do: hold on to cash? Buy Netflix? Then the only question will be how Gross spins the inevitable capitulation of the re-hypocrisy trade, validating that he, in a narrow sense, and PIMCO in a broad one, is perhaps the biggest cog in the very system that Bill spends so many hours writing letters about and complaining against. But yes, even that won't be all that surprising to us. After all, in this bizarro world absolutely everything is now priced in.
The electric battery gets its first real makeover in 152 years. Immense amounts of money are being made with the new battery technologies. Electric cars will take over 15% of the global car market, or 7.5 million units by 2020. At stake is nothing less than the viability of two economic systems. Will the operating instructions will come in English—or Mandarin. (BYDDF), (SQM), (XIDE)
Suddenly your world is out of control and you’re desperate for money. What do you do? Zero Hedge’s Cougar_w presents us with this fictional situation, only this time with an interesting twist. What would happen if two extraordinary creatures trying to coexist in a world of ordinary humans are overcome by money madness and walk into a bank to rob it? In this humorous, thought provoking and poignant excerpt of a larger story, we find out who has more humanity when put to the test.
As Automotive News points out in its expose on better than expected volume and top line results at GM and Chrysler, "Reports of robust post-bankruptcy sales at General Motors Co. and Chrysler Group need an asterisk." The reason, based on internal documents obtained by the publication: digging behind the headlines indicates that retail sales, or those that actually matter and are indicative of a vibrant end consumer (with or without rebates), are actually down year to date: 1% at GM, and 19% at Chrysler. "Essentially, GM and Chrysler regained the fleet business they lost during their troubled 2009 trip through bankruptcy. Counting fleet of all types and retail sales, GM is up 13 percent this year, and Chrysler is up 11 percent. That's close to the industry's 15 percent gain." So basically if one were to strip away the rental companies, all of which themselves were on the verge of bankruptcy in early 2009, and have recently found themselves in a position of strength, courtesy of cheap floorplan financing and various cheap ABS conduits, the two bankrupt auto companies are doing worse off YTD than they did in 2009. If this is not indicative of the "strength" of the US consumer when it comes to medium-ticket purchases, little else is.
Last year General Motors said it was reading the last rights to some 1,100 of it's 6,000 dealer/franchise network- in a response to the decline in sales, part of a restructuring plan designed to save the troubled auto giant.
I guess with all the muck they've thrown at Toyota, General Motors figures that's good enough to save 600 dealerships?
Either that, or they just don't want the hassle.
I have a friend in the car business who loved Pontiacs- in the days before mainstream, popular imports, you were either a General Motors, Ford or Chrysler man; and specifically GM patrons had their own specific preferences to go along with their favorite brands of cigarettes- Chevrolet, Pontiac, Buick- you get the picture. My friend still loves Pontiacs, to this day, reminiscing of the days when he was eighteen, gas was 25 cents a gallon and his ’65 Pontiac GTO “Goat” cost $3,500 out the door. But, those days are over and if you’re a Pontiac man, well, you can just about smell the formaldehyde and see the undertaker coming, leaving nothing but memories and $7,000.
- Asia commodity stocks, metals gain on China demand; Japan bank shares drop.
- Beaten by cable and the Web, broadcast TV looks to build a new business model.
- Build America Bond subsidy shift to fuel $130 billion in sales.
- Dollar trades at almost two-month high versus Yen on US recovery outlook.
- Fed proposed selling interest-bearing term deposits to banks, to drain some of the liquidity.
- Gold declines, snapping four-day gain as dollar rise saps investor demand.
- Oil closes in on $79 a barrel in Asia after US cold-snap drives energy futures higher.
"The S&P 500 future has broken the overlap around 1,037/38 and is now well established below the trendline joining the lows. After attempting to retest the 1.6165 break out of the H&S neckline 2 days ago at 1.6125 and failing, GBPUSD is back down below 1.60. The Nikkei, after a failing to breakout higher out the wedge around the tops and also failing to fill the gap left open in October, is plunging quite abruptly. The Nasdaq future fell short of challenging the overlap with the lows of July 2008 at 1762, and came back to test 1670 this morning. This last level is quite pivotal, and we would use that as a good guidance for further acceleration lower or conversely a hold could mean we reached downside potential. Personally I remain convinced that medium term we are going a lot lower in equities, a break of 1670 would only make my view nearer term than I originally thought." - Nic Lenoir
- ADP said the U.S. lost 254,000 private-sector jobs in September.
- Asian stock markets were mixed Thursday in cautious trade after mild losses on Wall Street.
- Bank of Japan holds key interest rate unchanged, upgrades economic assessment.
- Baucus health overhaul would spare insurers gov't competition, cost less for others.
- British retail sales unexpectedly flat in August, annual rate of increase moderates.
- Chicago Purchasing Managers' Index unexpectedly fell to 46.1 in September.
"Saturn makes cars people want to buy?!?" The likable car salesman on the commercial proclaims. Yeah, but not for long. Roger Penske, in a deal that made the mega-buck car magnate look like a once knight in shining reorganization, walks away amid supply and production concerns.
- Initial Unemployment claims in US decrease, signal worst of slump ending.
- Oil climbs higher in Asia, nearing $70 a barrel ahead of US jobs report.
- ABM Industries beats by $0.05; posts Q2 EPS of $0.32. Revs fell 5.6% to $855.7M.
- AIG may raise $988M selling portion of Transatlantic Holdings stake.
- Abercrombie & Fitch's May same-store sales drops 28%.
- American Apparel's May same store sales at -10% vs. cons est.