The coming week will be busy in terms of data releases in the US; highlights include an improvement in consumer confidence, anemic 1Q GDP growth, and solid non-farm payrolls (consensus expects 215K). Wednesday brings advanced 1Q GDP - consensus expected a pathetic 1.1% qoq, on the back of what Goldman scapegoats as "weather distortions and an inventory investment drag", personal consumption (consensus 1.9%), and FOMC (the meeting is not associated with economic projections or a press conference). Thursday brings PCE Core (consensus 0.20%). Friday brings non-farm payrolls (consensus of 215K) and unemployment (6.6%). Other indicators for the week include pending home sales, S&P/Case Shiller home price index, Chicago PMI, ADP employment, personal income/spending, and hourly earnings.
While the news that Pfizer has been sniffing around AstraZeneca has been around for a while, it is the confirmation this morning from Pfizer that it is considering a cash and stock offer for AZN that has been the catalyst to push futures off their early trading levels, on yet another instance of the Pharma M&A bubble which we have been chronicling here in recent weeks. Needless to say, a Pfizer-AstraZeneca combination valued at roughly $100 billion would create the largest healthcare company by revenue and likely serve as the pharma bubble "peak "indicator very much like the Blackstone IPO marked the financial top in 2007.
The US State Department announced the launch of its third annual "Free the Press" campaign today, which will purportedly highlight "journalists or media outlets that are censored, attacked, threatened, or otherwise oppressed because of their reporting." A noble mission for sure. But maybe they should kick off the campaign by criticizing their own Justice Department, which on the very same day, has asked the Supreme Court to help them force Pulitzer Prize winning New York Times reporter James Risen into jail.
Distilling an economy's success in delivering "prosperity" to a single number has outlived its purpose. Political authorities knew exactly what was happening: they realized that their own credibility could be boosted by a rigged GDP number. Thus we have the central government of China issuing blatantly bogus claims of 7+% annual GDP, as anything less will severely erode their claim of managerial brilliance. In our own propaganda-dependent state, GDP is almost always positive, much like corporate earnings always beat expectations by a penny. But we should be paying attention to an even deeper critique of GDP: that prosperity no longer depends of the "growth" of consumption, financialization, etc. but on the Degrowth of narcissistic consumerism and more efficient use of resources and capital.
Having warned just 6 weeks ago that high-yield credit and small high-tech firms may be in a bubble, Fed Governor Tarullo, ironically speaking at the Hyman Minsky Financial Instability Conference, suggested that the recuction in share of national income for "workers" (i.e. income inequality) is troubling. Furthermore, he added, "changes reflect serious challenges not only to the functioning of the American economy over the coming decades, but also to some of the ideals that undergird the nation's democratic heritage." His speech, below, adds that since there has been only slow growth so far, expectations for a growth spurt are misplaced and that the Fed-policy-driven recovery has "benefited high-earners disproportionately."
- Russia's Gazprom says Ukraine did not pay for gas on time (Reuters)
- Ukraine Moves to Keep Control in East (BBG)
- Banks Set to Report Lower Earnings as Debt Trading Slumps (BBG)
- More DeGeners and Obama selfies needed: Samsung's lower first-quarter estimate highlights smartphone challenges (Reuters)
- Citi Is Bracing to Miss a Profit Target (WSJ)
- Another slam from GM? Safety group calls for U.S. probe of Chevy Impala air bags (Reuters)
- Japan drugmaker Takeda to fight $6 billion damages imposed by U.S. jury (Reuters)
- EU court rules against requirement to keep data of telecom users (Reuters)
- White House may ban selfies with president after Ortiz-Obama photo promotes Samsung (Syracuse)
There is a reasonably quiet start to the week before we head into the highlights of the week including the start of US reporting season tomorrow, FOMC minutes on Wednesday and IMF meetings in Washington on Friday. On the schedule for today central bank officials from the ECB including Mersch, Weidmann and Constancio will be speaking. The Fed’s Bullard speaks today, and no doubt there will be interest in his comments from last week suggesting that the Fed will hike rates in early 2015.
It appears the U.S. government is doing its best to ensure that nobody anywhere in any corner of planet earth will ever trust American technology again (or U.S. aid for that matter). This process of distrust first really got going with the Edward Snowden revelations, which demonstrated that essentially all major U.S. tech firms are mere wards of the state with little to no privacy protections, and absolutely zero backbone. This story of the U.S. government covertly creating a “Cuban Twitter” called ZunZuneo in order to overthrow the regime there has enormous long-term ramifications on many, many levels, which we will address below...
- Russia says expects answers on NATO troops in eastern Europe (Reuters)
- Dealers say GM customer anxiety rising, sales may take hit (Reuters)
- China Unveils Mini-Stimulus Measure (WSJ)
- Londoners Priced Out of Housing Blame Foreigners (BBG)
- New earthquake in Chile prompts tsunami alerts (Reuters)
- Ukrainian Billionaire Charged by U.S. With Bribe Scheme (BBG)
- Chinese Investments in U.S. Commercial Real Estate Surges (BBG)
- Old Math Casts Doubt on Accuracy of Oil Reserve Estimates (BBG)
- US secretly created 'Cuban Twitter' to stir unrest (AP)
Since the early twentieth century, Saudi Arabia has enjoyed a close relationship with the United States. From the development of the Saudi oil fields,to the First Gulf War, this relationship has been an uneasy cooperation—each side received something out of the alliance while nervously watching the other. So recently we have the first open break between the two powers culminating in the Saudi’s refusing a seat on the U.N Security Council due to anger with U.S. Middle Eastern policies. It is foolish for America to offend and promote distrust with another ally in a long list of broken long-standing relationships. These include Poland, United Kingdom, Israel, Egypt, etc. One wonders whether the results of American diplomacy stems from extreme incompetence or is evidence of a much darker agenda.
As is widely known, Ukraine's acting post-coup PM Arseniy Yatsenuk is currently in the US and holding heating talks with president Obama on just how to define the "costs" to Russia should Putin conclude his annexation of the Crimea this weekend in a way that the Russian leader will finally pay attention. As was less known, after his meeting, at 8 pm tonight, the PM was supposed to hold a press conference at the National Press Club. As of moments ago, this propaganda meet and greet has been cancelled.
- DUE TO A SCHEDULING CHANGE, THE PRIME MINISTER HAS CANCELED THIS EVENT
Scheduling change? Really? Did Yatsenyuk ask Obama, in passing, to show him where the Ukraine gold, which as we reported a few days ago was rumored to have been airlifted to the NY Fed, which resulted in a less than pleasant response by the US president?
"In the future, no matter how the situation is resolved in Crimea, we need a much stronger Ukraine," warned Pavlo Rizanenko, a member of the Ukrainian parliament, adding that "If you have nuclear weapons people don't invade you." It would seem tough for the West (and their START Treaty) to get behind a nation that, as USA Today reports, believes it may have to arm itself with nuclear weapons to enforce a security pact to reverse the Moscow-based takeover of Crimea. "We gave up nuclear weapons," (inherited from the Soviet Union) because of the 1991 agreement that The United States, Great Britain and Russia would "assure Ukraine's territorial integrity" but Rizanenko told his government today, "now there's a strong sentiment in Ukraine that we made a big mistake."
While the US may be rejoicing its daily stock market all time highs day after day, it may come as a surprise to many that global equity capitalization has hardly performed as impressively compared to its previous records set in mid-2007. In fact, between the last bubble peak, and mid-2013, there has been a $3.86 trillion decline in the value of equities to $53.8 trillion over this six year time period, according to data compiled by Bloomberg. Alas, in a world in which there is no longer even hope for growth without massive debt expansion, there is a cost to keeping global equities stable (and US stocks at record highs): that cost is $30 trillion, or nearly double the GDP of the United States, which is by how much global debt has risen over the same period. Specifically, total global debt has exploded by 40% in just 6 short years from 2007 to 2013, from "only" $70 trillion to over $100 trillion as of mid-2013, according to the BIS' just-released quarterly review.
General Keith Alexander, who has furiously denounced the Snowden revelations, said at a Tuesday cybersecurity panel that unspecified “headway” on what he termed “media leaks” was forthcoming in the next several weeks, possibly to include “media leaks legislation.” Alexander genuinely thinks that intelligence officials know best, and should not be subject to any sort of accountability. You don’t need to be a card-carrying member of the ACLU to see how dangerous this perspective is. To endorse this notion that “journalists have no standing when it comes to national security issues,” is to effectively make illegal one of the most important free speech rights in any democracy. This sort of attitude represents the antithesis of American values.
Russia’s seizure of Crimea is the most naked example of peacetime aggression that Europe has witnessed since Nazi Germany invaded the Sudetenland in 1938. It may be fashionable to belittle the “lessons of Munich,” when Neville Chamberlain and Édouard Daladier appeased Hitler, deferring to his claims on Czechoslovakia. But if the West acquiesces to Crimea’s annexation – the second time Russian President Vladimir Putin has stolen territory from a sovereign state, following Russia’s seizure of Georgia’s Abkhazia and South Ossetia regions in 2008 – today’s democratic leaders will surely regret their inaction. When Chamberlain returned from Munich, Winston Churchill said, “You were given the choice between war and dishonor. You chose dishonor and you will have war.” Obama and other Western leaders face a similar choice. And if they choose dishonor, one can be certain that an undeterred Putin will eventually give them more war.