Unemployment

Here's A Great Way To Lose Money...

Nature is full of unpleasant parasites which cause their hosts to engage in irrational, destructive, or even suicidal behavior. Of course, they exist for humans too... especially for investors. In fact probably the number one parasite which affects investors is a very peculiar emotion: fear. Specifically, it’s the fear of missing out that drives so much irrational investment behavior. Nobody wants to miss a big boom, no matter how baseless the fundamentals. Ironically, this fear of missing out is stronger than the fear of loss. Following the crowd is a great way to lose a lot of money.

GMO Market Commentary: Ignore The "Common Sense"

"The "common sense" justifications for these dramatic moves are now well documented. The Federal Reserve (Fed) model, which compares earnings yields on the S&P 500 Index (the inverse of price/earnings) with the Treasury yield, clearly signals to load up on stocks. Common sense also tells us that profit margins are at an all-time high, so clearly it's a good time to be buying stocks. Yellen's dovish background, common sense tells us, is yet further reason to expect continued loose monetary policy and accommodation. And, finally, common sense dictates that recent upward gross domestic product (GOP) revisions, lower unemployment numbers, and a successful holiday retail season, means that of course it's time to load up on stocks. Here's the problem: We don't buy the common sense. And so, like the philosopher boy above, we choose to ignore it. We suggest you do the same, but for good reason."

Americans Still See Government As Their Biggest Problem

While the "economy in general" and "jobs" remain a close second (with the latter rising rapidly despite a plunging - and entirely useless - unemployment rate), Americans polled by Gallup still see the number 1 problem facing the US is "dissatisfation with government; poor leadership and abuse of power." Compared with a year ago, mentions of government are up slightly; but mentions of healthcare, on the other hand, have quadrupled -- from 4% in January 2013 to 16% today!

No Overnight Levitation In Quiet Markets - Full Recap

The positive momentum in equities slowed in Asian trading with losses seen on the Nikkei (-0.4%), and HSCEI , the SCHOMP unchanged and EM indices such as the Nifty (-
0.1%). In Australia, a disappointing December employment report saw a 23k fall in jobs for the month against consensus expectations of rise of 10k. The 10yr Australian government bond has rallied 5bp and the front end is outperforming as a number of investors expect the RBA to continue its easing bias over 2014. AUDUSD has sold off -1.1% to a three year low of 0.881. The ASX200 closed up 1.2% however, boosted by mining-giant Rio Tinto (+2%) who reported better than anticipated Q4 production. Amid recent fears of a Chinese growth deceleration, Rio Tinto reported record levels of production of iron-ore, coal and bauxite. In FX, USDJPY is finding further support in Asia, adding 0.1% to yesterday’s 0.38% gain to trade not too far from the 105 level. Which is also why the S&P futures are trading modestly lower: without a major breakout in the Yen carry, there can't be a sustained ramp in the US stock market which is driven entirely by the value of the Yen, which in turn is a reflection of the expectations of future BOJ easing.

Puerto Rico Default "Likely", FT Reports

The market just hit a fresh all time high today which means another major default must be just around the horizon. Sure enough, the FT reported moments ago that a Puerto Rico default "appears increasingly likely" and is why creditors are meeting with lawyers and bankruptcy specialists (supposedly Jone Day, which means where Corinne Ball is Ken Buckfire, fresh from its recent league table success with the Detroit bankruptcy, can't be far behind) on Thursday in New York.  The FT cited a restructuring advisor, supposedly desperate to sign the engagement letter with creditors and to force the bankruptcy, who said that "the numbers are untenable" and "to issue new debt the yield would have to rise and where they can’t raise new money they will have to stop paying."

ECB Eases European Bank Stress Test By 25%, Lowers Capital Ratio Requirement From 8% to 6%

First the Volcker Rule was defanged when last night the requirement to offload TruPS CDOs was eliminated, and now here comes Europe where the ECB just lowered the capital requirement for its "stringent" bank stress test (the one where Bankia and Dexia won't pass with flying colors we assume) by 25%. From the wires:

  • ECB SAID TO FAVOR 6% CAPITAL REQUIREMENT IN BANK STRESS TEST
  • ECB SAYS DECISION ON CAPITAL REQUIREMENT NOT YET FORMALLY MADE

Why is this notable? Recall from three short months ago: "the ECB confirmed that it will require lenders to have a capital ratio of 8 percent."

Unemployment Rate Set To Plunge As Bill To Restore Jobless Benefits Fails To Pass Senate

Following last week's surprising passage of the preliminary approval to extend emergency unemployment claims, i.e. emergency jobless claims, for 3 months, when six republicans sided with democrats and gave approval to the original $6.4 billion legislation, there was an expectation that up to 1.4 million Americans would get their benefits extended once again (despite the so-called recovery in the economy, and the job market, instead of just all time high S&P500). Moments ago such hopes were dashed, when a Senate plan to restore long-term jobless benefits hit a wall Tuesday after Republicans withdrew their support amid complaints over cost and other issues.

Guest Post: Europe’s Future: Inflation And Wealth Taxes

Tax burdens are so high that it might not be possible to pay off the high levels of indebtedness in most of the Western world. At least, that is the conclusion of a new IMF paper from Carmen Reinhart and Kenneth Rogoff - “The size of the problem suggests that restructurings will be needed, for example, in the periphery of Europe, far beyond anything discussed in public to this point.” The 'not different this time' couple see two facts of life for Europe’s future: financial repression through higher inflation rates and taxes levied on savings and wealth.

Fed's Fisher Says "Investors Have Beer Goggles From Liquidity", Joins Goldman In Stock Correction Warning

"Continuing large-scale asset purchases risks placing us in an untenable position, both from the standpoint of unreasonably inflating the stock, bond and other tradable asset markets and from the perspective of complicating the future conduct of monetary policy," warns the admittedly-hawkish Dallas Fed head. Fisher goes on to confirm Peter Boockvar's "QE puts beer goggles on investors," analogy adding that while he is "not among those who think we are presently in a 'bubble' mode for stocks or bonds; he is reminded of William McChesney Martin comments - the longest-serving Fed chair - "markets for anything tradable overshoot and one must be prepared for adjustments that bring markets back to normal valuations."

The eye of the needle of pulling off a clean exit is narrow; the camel is already too fat. As soon as feasible, we should change tack. We should stop digging. I plan to cast my votes at FOMC meetings accordingly.

Spanish Lending Rates Soar To Highest Since 2008

Despite sovereign bond yields plumbing new record lows and the Prime Minister proclaiming (against Draghi's advice) that the nation has turned the corner and is out of the crisis; Spain's record unemployment and record loan delinquency is showing up in a major credit-creation-crushing way for small businesses. As Bloomberg's Jonathan Tyce reports, Spanish new business lending rates just experienced the largest 2-month surge in over a decade to their highest since 2008. At 4.04%, new business loans trade over 300bps above two-year sovereign debt (and are diverging) as the efforts of Europe's 'whatever it takes' central bank are being entirely wasted in terms of reaching the Keynesian growth-driving economy. We suspect this surge will once again raise talk of a rate-cut (and expose the impotence of the ECB's transmission mechanisms).

The Oversold Cat Bounces: The Full Market Recap

Following yesterday's major market drubbing, in which the sliding market was propped up by the skin of Nomura's (and BOJ, and Fed's) teeth at 103.00 on the USDJPY, it was inevitable that with Japan returning from holiday there would be a dead cat bounce in the Yen carry pair, and sure enough there was, as the USDJPY rose all the way back up to 103.70, and nearly closed the Friday gap, before starting to let off some air. However, now that US traders are coming back online, Japan's attempts to keep markets in the green may falter, especially since it only has a couple of ES ticks to show for its efforts, as for the Nikkei which dropped 3% overnight, it has now lost all US "Taper" gains.

The Number Of Working Age Americans Without A Job Has Risen By Almost 10 Million Under Obama

In January 2009, the number of "officially unemployed" workers plus the number of Americans "not in the labor force" was sitting at a grand total of 92.6 million.  Today, that number has risen to 102.2 million.  That means that the number of working age Americans that are not working has grown by close to 10 million since Barack Obama first took office.  The cold, hard reality of the matter is that there has not been an economic recovery in this nation. Anyone that tries to tell you that is lying to youIf we were going to have a recovery, it would have happened by this point.  In fact, this is all the "recovery" that we are going to experience. From here on out, this is about as good as things are going to get. 

Meet "Smart Restaurant": The Minimum-Wage-Crushing, Burger-Flipping Robot

With a seemingly endless line of talking-heads willing to ignore essentially every study that has been undertaken with regard the effects of raising the minimum-wage; and propose what is merely populist vote-getting 'benefits' for the ever-increasing not-1% who benefitted from Ben Bernnake's bubbles - we thought the following burger-flipping robot was a perfect example of unintended consequences for the fast food industry's workers. With humans needing to take breaks, have at least 4 weekend days off per month, and demanding ever-increasing minimum-wage for a job that was never meant to provide a 'living-wage', Momentum Machines - a San Francisco-based robotics company has unveiled the 'Smart Restaurants' machine which is capable of making ~360 'customized' gourmet burgers per hour without the aid of a human. First Jamba Juice, then Applebees, next McDonalds...