Unemployment

Bill Gross On The Fog That's Yet To Lift... Or Doctor Populist And Mister P&L

Bill Gross, of PIMCO and serious bond duration pain, finally comes clean: the man who has been criticizing the Fed for years for one after another misguided policy (all of which ultimately culminate with the New York Fed's markets desk going "wave it in" this or that) to the point where he began sounding like a Zero Hedge broken record, opines on the taper. And it is here that Bill's colors truly shine through: "We agree that QE must end. It has distorted incentives and inflated asset prices to artificial levels. But we think the Fed’s plan may be too hasty." In other words, please let me have my Fed and central-planning criticizing cake (but don't actually enact my free market suggestions) and let me eat my management fees too (and no monthly redemptions please). And there you have it: populist critic by day, pandering P&L defender by night.

Rumor Ex Machina Sticksaves Futures

It was shaping up to be another bloodbathed session, with the futures down 10 points around the time Shanghai started crashing for the second night in a row, and threatening to take out key SPX support levels, when the previously noted rumor of an imminent PBOC liquidity injection appeared ex machina and sent the Shanghai composite soaring by 5% to barely unchanged, but more importantly for the all important US wealth effect, the Emini moved nearly 20 points higher from the overnight lows triggering momentum ignition algos that had no idea why they are buying only knowing others are buying. The rumor was promptly squashed when the PBOC did indeed take the mic, but contrary to expectations, announced that liquidity was quite "ample" and no new measures were forthcoming. However, by then the upward momentum was all that mattered and the fact that the underlying catalyst was a lie, was promptly forgotten. End result: futures now at the highs for absolutely no reason.

The Secret Sauce Of Iceland's Success Story: Debt Liquidation?

That Iceland is so far the only success story in the continent of Europe, which continues sliding into an ever deeper depressionary black hole, as a result of the complete destruction of its financial sector and its subsequent rise from the ashes, is by known to most. What is still not exactly clear is what conditions have allowed success and growth to flourish in a barren wasteland where 60% youth unemployment is increasingly the norm, and where economic "outperformance" is measured in shades of red. As it turns out, perhaps the biggest jolt to Icelandic economic growth is what we said was the correct prescription for resolving not only the US but global growth malaise that struck in 2008: debt liquidation.

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China’s central bank issued a statement that the Chinese banking system had liquidity levels that were “reasonable” today. There by hangs a tale. ‘Reasonable’ is that which may fairy and properly be required of an individual (a case of prudent action observed under a set of given circumstances).

US Traders Walk In To Another Bloodbath

Lots of sellside squeals this morning following the epic bloodbath in China, where in addition to what we already covered hours ago, has seen at least five companies  (China Development Bank, Shanghai ShenTong Metro, China Three Gorges Corp., Doosan Infracore China Co. and Chongqing Shipping Construction Development) delay or cancel bond offerings as the PBOC's admission of capital "misallocation" is slowly but surely freezing both bond and stock markets. And while the plunge was contained first to China, then to Asia, then to Europe (where the Spanish 10 Year once again surpassed 5% as expected following the carry trade unwind), with the arrival of bleary-eyed US traders the contagion is finally coming home. In a redux of last week, 10 Year yields are shooting up, hitting as high as 2.63% a few hours ago, while equity futures are now at the lows of the session. It could turn very ugly, very fast, especially if the Hamptons crowd were to actually read the stunning BIS annual report released on Sunday, which not even Hilsenrath explaining "what the BIS really meant" will do much to change the fact that the days of monetary Koolaid are ending.

David Stockman's Non-Recovery Part 5: Peak Debt And The Wages Of Keynesian Sin

In the final section of this five-part series (Part 1, Part 2, Part 3, and Part 4) on the dismal reality behind the non-recovery, David Stockman explains what lies ahead. He details in his new book 'The Great Deformation', that the mainstream notion that there is a choice between fiscal austerity and fiscal stimulus is wishful thinking. It does not recognize that owing to the triumph of crony capitalism and printing-press money America has become a failed state fiscally. What lies ahead is a continuous, mad-cap cycling back and forth - virtually on an odd-even day basis - between deficit cutting and fiscal stimulus to the GDP. As Stockman notes, the proximate cause of this recession waiting to happen is the federal government’s unfolding encounter with Peak Debt. The latter is not a magical statistical point such as a federal debt ratio of 100 percent of GDP, but a condition of permanent crisis - "no viable economy can survive on chronic fiscal deficits nor can it fail to save at a sufficient rate to fund a healthy level of investment in productive capital assets. The blithe assumption to the contrary which animates current policy rests on self-serving clichés such as “deficits don’t matter” and the Chinese savings glut." So the American economy faces a long twilight of no growth, rising taxes, and brutally intensifying fiscal conflict. These are the wages of five decades of Keynesian sin - the price of abandoning financial discipline.

Neil Howe: "The Fourth Turning Has Arrived"

In 1996, demographers William Strauss and Neil Howe published the book The Fourth Turning. This study of generational cycles ("turnings") in America revealed predictable social trends that recur throughout history, and warned of a coming crisis (a "fourth turning") based on this research. Fourth turnings are defined by disorder and great changes brought on by a breakdown of the systems and operating principles that dominated the prior three turnings. "We cannot possibly afford the government we have promised ourselves. And, that will be a painful process of deleveraging, and it is not just deleveraging the explicit debt that we have already actually formally borrowed, it is all the implicit debt... No one simply solves a terrible problem on a sunny day when they can afford at least for the time being to look the other way. Problems like that are faced when people have no other choice, and it is a really grim day."

The Biggest Prospective Housing Bubble Cities In The US

Housing price gains are outpacing fundamentals, as the median new home sale price relative to real disposable income has recent reached all-time high levels (higher than than the admitted bubble of the mid 2000s), and there are several regions around the US that are seeing simply stunning levels of exuberance with regard price changes. That leaves us asking - just which cities are the most bubble-prone? In order to answer that, Bloomberg has quantified the US cities with the most rapid growth in unemployment (not exactly supportive of home price excesses) coupled with the fastest rising prices. The answer - Yuma, Arizona (followed closely by Elmira, NY) is the most housing-bubble-prone city in the US.

Bernankespeak, Translated

Until now, we have refrained from trying to explain Fedspeak to the masses. The truth is it's not opaque. It's not indecipherable. It's simple. Or at least you can choose to believe it is, as we have. At last week’s press conference, Federal Reserve Chairman Ben Bernanke fielded questions from reporters employed by some of the world's most esteemed news organizations. Here is a summary, translated from Fedspeak into ordinary American English and heavily condensed for easy tweeting.

This Is An Extraordinary Time

It's as if we have two economies: the simulacrum one of stocks rising dramatically in a few months, and the real one of household earnings (down) and hours worked (down). It is difficult to justify the feeling that we are living in an extraordinary moment in time, for the fundamental reason that it's impossible to accurately assess the present in a historical context. Extraordinary moments are most easily marked by dramatic events such as declarations of war or election results; lacking such a visible demarcation, what sets this month of 2013 apart from any other month since the Lehman Brothers' collapse in 2008? It seems to me that the ordinariness of June 2013 is masking its true nature as a turning point. Humans soon habituate to whatever conditions they inhabit, and this adaptive trait robs us of the ability to discern just how extraordinary the situation has become.

Fact Or Fiction: Financial Sector Thinks It’s About Ready To Ruin World Again

Claiming that enough time had surely passed since they last caused a global economic meltdown, top executives from the U.S. financial sector told reporters Monday that they are just about ready to completely destroy the world again. Representatives from all major banking and investment institutions cited recent increases in consumer spending, rebounding home prices, and a stabilizing unemployment rate as confirmation that the time had once again come to inflict another round of catastrophic financial losses on individuals and businesses worldwide.  “It’s been about five or six years since we last crippled every major market on the planet, so it seems like the time is right for us to get back out there and start ruining the lives of billions of people again,” said Goldman Sachs CEO Lloyd Blankfein. “We gave it some time and let everyone get a little comfortable, and now we’re looking to get back on the old horse, shatter some consumer confidence, and flat-out kill any optimism for a stable global economy for years to come.”

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European DisasterZone

Europe is a disaster-zone. Here’s the round-up of what’s going wrong right now. The longest day? It would have been a long day, whatever happened, so you might as well enjoy it.

The Waste List: 66 Ways The U.S. Government Is Blowing Your Hard-Earned Money

Why did the U.S. government spend 2.6 million dollars to train Chinese prostitutes to drink responsibly?  Why did the U.S. government spend $175,587 "to determine if cocaine makes Japanese quail engage in sexually risky behavior"?  Why did the U.S. government spend nearly a million dollars on a new soccer field for detainees being held at Guantanamo Bay?  This week when we saw that the IRS was about to pay out 70 million dollars in bonuses to their employees and that the U.S. government was going to be leaving 7 billion dollars worth of military equipment behind in Afghanistan, it caused us to reflect on all of the other crazy ways that the government has been wasting our money in recent years.  So we decided to go back through my previous articles and put together a list.  We call it "The Waste List".