Yuan

Crashing luxury sales in China is a hard-to-swallow concept for the industry.

There is a considerable amount of debate in alternative economic circles as to whether a federal government shutdown would be a “good thing” or a “bad thing”. Sadly, a government shutdown is sizable threat to the American financial system, and few people seem to get it.  Perhaps because the expectation is that any shutdown would only be a short term concern.  And, this assumption might be correct.  But, if a shutdown takes place, and, if “gridlock” continues for an extended period of time, We have little doubt that the U.S economy will experience renewed crisis.  Here's why...

Dispassionate overview of the key factors shaping the investment climate in the week ahead.  

• House GOP banking on Plan C (Politico)
• Pimco shook hands with the Fed - and made a killing (Reuters)
• BlackBerry's Torsten Heins has a $55 Million golden parachute (Reuters)
• JPMorgan Urged to Pay More in Mortgage Deal (NYT)
• Soros Adviser Turned Lawmaker Sees Crisis by 2020 (BBG)
• U.N. Members Agree on Syria Disarmament (WSJ)
• U.N. Says Humans Are 'Extremely Likely' Behind Global Warming (WSJ)
• The non-falsifiable threats emerge: Shutdown Would Shave Fourth-Quarter U.S. Growth as Much as 1.4% (BBG)
• Swaps Rules Worry Industry: Coming Regulations Have Market Players Concerned About Possible Disruption (WSJ)

There's growing speculation that China will soon announce an overhaul of its financial system to address increasing risks from escalating debt.

• The new normal name of a broken market: glitches - NYSE, Nasdaq Consider Cooperating to Address Glitches (WSJ)
• Early Thursday Humor: Abe Tells Wall Street Japan’s Economy Is Exceptionally Good (BBG)
• Rising Rates Seen Squeezing Swaps Income at Biggest Banks (BBG)
• JPMorgan Mortgage Talks Said to Discuss $11 Billion Deal (BBG)
• Can't make this up: HFT firm "finds" Fed did not leak data early to benefit HFT firms (FT)
• Hertz Cuts Full-Year Forecast on Weak U.S. Airport Rentals (BBG)
• Greece does not need third bailout, seeks debt 'reprofiling' - deputy PM (Reuters) - right, it needs a fourth and fifth
• Hezbollah gambles all in Syria (Reuters)
• Twitter Adds J.P. Morgan and Morgan Stanley as Bankers on IPO (WSJ)
• Messi in Court Shows Tax Collectors Set to Pursue Star Athletes (BBG)

• JPMorgan eyes $4bn ‘pay for peace’ deal (FT)
• Prosecutors Pursue Big SAC Settlement (WSJ) - in the US if you are rich enough, no crime is bad enough
• Cruz's Defiant Stand Is Also a Lonely One (WSJ); Texas senator speaks for more than 14 hours (FT)
• Iran Applies Brakes to U.S. Mideast Plans (WSJ)
• Americans in Poll Doubt Economy Rebound in Defiance of Forecasts (BBG)
• Big Banks Cut Basel III Shortfall by $112 Billion at End of 2012 (BBG) - the equivalent of 10 bridges to the Kalahari desert
• Obama’s Jabs at Russia on Syria Shows Diplomacy Tensions (BBG)
• ICAP Staff Face Criminal Charges Tied to Libor  (WSJ)
• Alibaba Is Said to Shift Target for I.P.O. to U.S. From Hong Kong (NYT)
• Home gold rush is over (Reuters)
• Conoco in landmark Alaska drone flight (FT)

• Iran Icebreaker Set at U.N.  (WSJ)
• Chrysler Feud Triggers IPO Filing  (WSJ)
• JPMorgan Chase, 12 More Banks Said to Be Sued Over Libor (BBG)
• Regulator sues Morgan Stanley, eight others over faulty securities (Reuters)
• Monte Paschi Seen Boosting Cost Goals to Meet EU Demands (BBG)
• Here we go again - "not enough funds": CFTC chair Gary Gensler warns on fund cuts to police derivatives (FT)
• Congress Fuels Private Jails Detaining 34,000 Immigrants (BBG)
• KKR, Sycamore looking to buy Jones Group this week (NYPost) - take with lots of salt
• Fiat rethinks alliance with Chrysler after IPO filing (Reuters)
• Young Invincibles Caught in Crossfire Over Obamacare Cost (BBG)
• Mayfair Office Squeeze Spawns New London Real Estate Hubs (BBG)

Many well-meaning commentators look back on the era of strong private-sector unions and robust U.S. trade surpluses with longing. The trade surpluses vanished for two reasons: global competition and to protect the dollar as the world's reserve currency. It is impossible for the U.S. to maintain the reserve currency and run trade surpluses. It's Hobson's Choice: if you run trade surpluses, you cannot supply the global economy with the currency flows it needs for trade, reserves, payment of debt denominated in the reserve currency and credit expansion. If you don't possess the reserve currency, you can't print money and have it accepted as payment. In other words, the U.S. must "export" U.S. dollars by running a trade deficit to supply the world with dollars to hold as reserves and to use to pay debt denominated in dollars. Other nations need U.S. dollars in reserve to back their own credit creation.

• Triumph Confirms 'Era of Merkelism' (Spiegel)
• Merkel must reach out to leftist rivals after poll triumph (Reuters)
• Norwegian Air says both its Dreamliners hit by technical issues (Reuters)
• Chinese court gives Bo Xilai life sentence (CBS)
• Social Dems Deflect Talk of Merkel Alliance (Spiegel)
• Blasts shake Nairobi mall, smoke pours from building (Reuters)
• Open-Government Laws Fuel Hedge-Fund Profits (WSJ)
• Forbes Calls Goldman CEO Holier Than Mother Teresa (Matt Taibbi)
• BlackBerry move away from consumers unlikely to stem decline (Reuters)
• And another Greek strike: Greek teachers, civil servants to strike against layoffs (Reuters)

Dispassionate macro overview.

• Bernanke Resets Policy by Doing Nothing as Markets Soar (BBG)
• Stocks Jump to Five-Year High as Metals Rally on Fed (BBG)
• Centre-left bigwig says hard to stay allied with Berlusconi (ANSA)
• J.P. Morgan 'Whale' Fine Put at Over $900 Million (WSJ)
• Banks’ $10 Billion Sweet Spot Sets Off Buying Spree for Lenders (BBG)
• Time to taper? Not if you look at bank loans (Reuters)
• Mortgage Lending Reaches 5-Year High (WSJ) ... and then plunges as Fed gives "all clear" for a few months
• Yellen Chances Grow as Obama Aides Test Senate Support (BBG)

• Fed likely to reduce bond buying, pass policy milestone (Reuters)
• Fall in Home Loans Pushing Fed Away From Taper in Mortgage Bonds (BBG)
• Russia says U.N. report on Syria attack preconceived, political (Reuters)
• China House Price Surge Raises Prospect of Steps to Cool Market (FT)
• Cyprus Plans to Complete End of All Capital Controls... some time in 2014 (FT)
• GOP Reworks Budget Terms (WSJ)
• U.S. Navy was warned that Washington shooter 'heard voices' (Reuters)
• Berlusconi Impeachment Vote Looms (WSJ)
• Ageing could weaken central banks, spur rate volatility (Reuters)

While Chinese stocks are underperforming their Japanese neighbors', the decision of which Asian language to learn (in order to potentially better your future) is clear. As Hurun Research notes, half of the richest women in the world (with assets in excess of $1 billion) are from China - including 3 from the Top 5 and 6 of the Top 10. Asia was home to the highest number of billionaires this year with most of them operating in real estate sector.  The total wealth of the 1453 billionaires amounted to a staggering US$5.5 trillion, the equivalent of China’s GDP and the so-called 'Ten-Zero-Club' - individuals with over USD10bn - grew by 25 to 108 people. The USA still ranks #1 (exceptionally) for the country with the most billionaires - at 409!

It is tough to see the exact catalyst for the collapse in AAPL's share price in recent days (though it is clear that no China Mobile news is not good news) - but then aside from Carl Icahn's tweets it was hard to see what the exuberance in August was. Now a month later, AAPL has retraced all Icahn's gains and then some and is trading at 5 week lows. Today's weakness - in the face of a surging broad market - is being pinned on talk of Chinese telecoms firms cutting subsidies - not exactly strategically in line with AAPL's growth goals. Add toi that Wal_mart is already slashing prices on the iPhone 5C - considerably earlier than normal - and it suggest more of the same from AAPL is not beingmet by exuberant demand.