University Of Michigan
Of course, why not. University of Michigan Consumer Confidence jumped from 75.1 to a preliminary 82.5 beating expectations by the most on record. While we remain below the July 2013 highs, current conditions soared to the highest since May and the economic outlook spiked to the highest since August. This is the biggest absolute improvement in current conditions since December 2008.... and that ended well eh?
While moderate recovery in growth and inflation is BofAML's rates team's base case, there are numerous risks to that forecast. The risk of tapering is already quite well known and they suspect it may not result in the significant market-moving event many expect when it actually happens; however, the following downside and upside risks threaten BofAML's central scenarios for 2014 as well.
The best silver lining Goldman Sachs found when faced with the total and utter collapse in their global leading indicator swirlogram was - (probably) stabilizing. The only improving factor across all their global economic components was the US initial jobless claims (and that has been a farce wrapped in a debacle for 2 months of 'glitches'). Having led global industrial production for a few months, it seems the indicator is crashing back to reality as the summer's hopefulness is exsanguinated from hard and soft data around the world.
All bets are off.
Despite stock (not bond) euphoria yesterday that a DC debt ceiling deal was sealed leading to the second largest risk ramp of 2013, last night was spent diffusing the excitement as one after another politician talked back the success of a "non-deal" that Obama rejected, at least according to the NYT. As a result, with both retail sales data and the PPI not being released (and the only data of note the always leaked UMichigan consumer confidence) markets will again be at the behest of developments on Capitol Hill, with some talk from Republicans suggesting a deal as early as today could be possible in an effort to reopen government on Monday. It is entirely possible that talks could continue over the weekend though, which would ensure a gappy open to Asian markets on Monday.
Following yesterday's modest bounce in equities punctuated by the traditional last minute spike, sentiment has reverted lower once again, driven by the uncertainty surrounding debt ceiling talks in the US, where lawmakers have until next Tuesday to agree to a spending bill, or much of the government will shut down. The Senate will vote on a spending bill later today, which will then be sent back to the House putting republicans in a quandary (Politico explains the complications surrounding the GOP's "Plan C"). It was reported that US House leaders are considering postponing action on a bill to extend the US government's borrowing power, with the leadership discussing a change of strategy to complete action on the stopgap spending bill before debating the debt-limit debate. In FX, GBP strengthened across the board this morning after BoE’s Carney said he does not see a case for more quantitative easing.
Following the FOMC surprise, no less than twelve Fed speeches will provide some "clarifications" on where the Fed now stands. It is very likely that this subject will continue to dominate the discussions of market participants. At the same time, US data will get scrutinized after the recent weakening and to see how warranted the Fed's concerns were. Two US consumer sentiment surveys, durable goods orders, and the third reading of Q2 GDP are important. In addition, monthly consumption and income data for August provide more information on the third quarter and of course there will be interest in the latest weekly claims numbers after some distortions in recent readings.
Not just “softness in the female business”
Overnight asset classes got a jolt following a report by Nikkei that Obama was moving toward naming Summers the next Fed chairman, citing “several close US sources,” pushing stocks modestly lower in Europe, with bond yields higher. According to the report, Obama is to name Summers as next Fed chairman as early as late next week, after the Federal Open Market Committee meeting. Otherwise, risk is still digesting the news of the confidential Twitter IPO, as it is becoming quite clear that some of the largest names (Hilton also announced yesterday) are seeking to cash out in the public markets. Is this the top?
- Obama Holds Fire on Syria, Waits on Russia Plan (WSJ)
- China Shadow Banking Returns as Growth Rebound Adds Risk (Reuters)
- Not one but two: Greece May Need Two More Aid Packages Says ECB’s Coene (WSJ)
- BoJ insider warns of need for wage rises (FT) ... as we have been warning since November, and as has not been happening
- California city backs plan to seize negative equity mortgages (Reuters)
- Home Depot Is Accused of Shaking Down Suspected Shoplifters (BBG)
- Most-Connected Man at Deutsche Bank Favors Lightest Touch (BBG)
- Norway Pledges to Limit Oil Spending (BBG)
- China Shadow Banking Returns as Growth Rebound Adds Risk (BBG)
- Gundlach Says Fed Is Mistaken in How It's Ending Easing (BBG)
As Detroit begins to sort through the ill-begotten public liabilities that have driven it to bankruptcy, an important opportunity is at hand to revitalize the city that was once the epicenter of American entrepreneurship and manufacturing, while setting an example for other municipal governments that appear to be headed toward a similar fate. Here is an “Austrian moment” in the making, a potential libertarian awakening guided by the market-oriented, non-interventionist principles of the Austrian school of economics. For years, Detroit’s expenditures vastly exceeded its revenues. But, as long as investors were willing to purchase risky bonds, neither politicians nor unions would admit how unsustainable Detroit’s situation was. Detroit’s bankruptcy is thus exactly what the financial system needs.
If you want to frighten Baby Boomers, just show them the list of statistics in this article. The United States is headed for a retirement crisis of unprecedented magnitude, and people are woefully unprepared for it. At this point, more than 10,000 Baby Boomers are reaching the age of 65 every single day, and this will continue to happen for almost the next 20 years. The number of senior citizens in America is projected to more than double during the first half of this century, and some absolutely enormous financial promises have been made to them. So will we be able to keep those promises to the hordes of American workers that are rapidly approaching retirement? Of course not. The pension nightmare that is at the heart of the horrific financial crisis in Detroit is just the tip of the iceberg of the coming retirement crisis that will shake America to the core.
It's good to see that as more of the US spirals into chaos, someone still has a sarcastic sense of humor. For those who missed it, in the Kevyn Odd statement listing the primary reason for the bankruptcy of Detroit, this was the punchline: "For years, the City has spent more than it takes in and has borrowed and deferred paying certain obligations to make ends meet. The City is insolvent." In other words, a pure pyramid scheme whose final can kicking day has finally come. Which perhaps explains why the just appointed Judge to preside over the largest municipal bankruptcy in US history is none other than Judge Steven Rhodes, 64, who just happens to be the co-author of "The Ponzi Book: A Legal Resource for Unraveling Ponzi Schemes." In other words, if there is anyone qualified to oversee the biggest Ponzi scheme collapse to date in US public sector history, it would be Judge Rhodes. We can only hope, however, that he leaves some time in his busy schedule over the next several years, for that other, biggest of all Ponzi schemes, the United States of America.
- India Joins Brazil to China in Efforts to Tighten Liquidity (BBG)
- Seven dead as police and protesters clash in Egypt (Reuters)
- U.S. senators fail to cut deal, head for showdown on filibuster (Reuters)
- Gasoline Tankers Beating Crude for First Time on Record (BBG)
- Smithfield's China bidders plan Hong Kong IPO after deal (Reuters)
- Bitcoin ETF plan struggles to find support (FT)
- Big Home Builders Gobble Up Rivals Starved for Cash (WSJ)
- Putin wants Snowden to go, but asylum not ruled out (Reuters)
- Zimmerman's lawyer calls prosecutors 'disgrace' to profession (Reuters)
- McDonald’s to bring Big Mac to Vietnam (FT)
- Korean Pilots Avoided Manual Flying, Former Trainers Say (BBG)
- Summers Said to Show Interest in Fed Chairmanship After Bernanke (BBG)
- Obama Tells Chinese He’s Disappointed Over Snowden Case (BBG)
- Texas Threat to Abortion Clinics Dodged at Flea Markets (BBG)
- A Peek at Trucking Data, and Then the Stock Surged (WSJ)
- China cuts growth target… or does it? (FT) - yes, it does, net of goal seeked Random () of course
- China Official Suggests Tolerance for Lower Growth (WSJ)
- Disney Says Wristband Boosts Sales in Disney World Test (BBG) - next up: implanted RFID chips
- Spain Prepares Cuts in Renewable-Energy Subsidies (WSJ)
- Bernanke Departure With Duke Heralds Cascade of Fed Appointments (BBG)