en Philly Fed's Hawkish President Charles Plosser To Retire In March 2015 <p>Onehawk down, and just as rates are supposedly set to begin rising. Smart.</p> <p><em>Full <a href="">press release</a>:</em></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Philadelphia Fed President Plosser to Retire on March 1, 2015</strong></p> <p>&nbsp;</p> <p>Charles I. Plosser, president and chief executive officer of the Federal Reserve Bank of Philadelphia, today announced that he will retire, effective March 1, 2015. President Plosser has served as the 10th president of the Philadelphia Fed since August 1, 2006.</p> <p>&nbsp;</p> <p>"For more than eight years, I have had the honor to work alongside many talented colleagues here at our Bank and throughout the Federal Reserve System during an extraordinary period in this nation's economic history. After more than three decades of economic research and teaching, this has been a unique opportunity and privilege to serve the nation," said Plosser.</p> <p>&nbsp;</p> <p>"Charles Plosser has been an insightful and dedicated leader and colleague in the Federal Reserve System," said Federal Reserve Chair Janet Yellen. "I am particularly grateful for his vital contributions to the work of the subcommittee on communications. My colleagues and I will miss his keen insights, deep analysis, and good humor."</p> <p>&nbsp;</p> <p>"President Charles Plosser has made significant contributions to the Philadelphia Fed, to the Third District, and to the Federal Reserve System. He has demonstrated exceptional leadership and promoted improved operating performance and governance, especially during his time as chair of the System's Conference of Presidents. He has also provided wise and thoughtful guidance on the direction of monetary policy for our nation," said James E. Nevels, chairman of the Bank's board of directors.</p> <p>&nbsp;</p> <p>Nevels, founder and chairman of The Swarthmore Group, will cochair a search committee with Deputy Chairman Michael J. Angelakis, vice chairman and CFO of Comcast Corporation.</p> <p>&nbsp;</p> <p>"The search committee will look at a broad, diverse group of candidates from inside and outside the Federal Reserve System," said Angelakis. "We will seek individuals who have the economic and leadership experience to be an effective policymaker and the chief executive of the Bank." An executive search firm will assist in identifying potential candidates.</p> </blockquote> <p>And yes, Jeremy Siegel has already submitted his resume.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="365" height="243" alt="" src="" /> </div> </div> </div> Comcast Federal Reserve Federal Reserve Bank Janet Yellen Monetary Policy Philly Fed Mon, 22 Sep 2014 14:10:57 +0000 Tyler Durden 494670 at Existing Home Sales Drop Most Since Jan; Biggest Miss Since Nov 2013 <p>After 4 straight months of bounce-back exuberance that 'confirms' the hope that NAHB sentiment appears to present, <strong>existing home sales dropped 1.1% in August</strong> (against expectations of a 1.0% rise) and previous growth was revised lower. <strong>This is the biggest miss since November 2013</strong>. The South and West saw the biggest drops as inventory fell. <strong>First-time homebuyers remain sidelined with only 29% of total sales</strong>. The National Association of Realtors<strong> blames the drop on "investors stepping away from the market,</strong>" and notes distressed sales are the lowest since October 2008.</p> <p>&nbsp;</p> <p>The trend is at an end...</p> <p><a href=""><img src="" width="600" height="313" /></a></p> <p>&nbsp;</p> <p>as reality is about to hit optimistic sentiment...</p> <p><a href=""><img src="" width="600" height="327" /></a></p> <p>&nbsp;</p> <p><em>Charts: Bloomberg</em></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="963" height="502" alt="" src="" /> </div> </div> </div> NAHB Reality Mon, 22 Sep 2014 14:08:33 +0000 Tyler Durden 494669 at Mario Draghi's Lies Annotated, And A Brief Glimpse At The Truth <p>Moments ago, the Goldmanite in charge of the European Central Bank delivered yet another speech, this time seeking to offset some of the hawkish comments over the weekend from his comrades, all of which suggested that no more easing, or public QE, was coming any time soon. It was, as usual, full of the same lies that have pushed European stocks to highs not seen since Lehman even as Europe's economy is now slumping into a triple-dip recession.</p> <p>A choice selection (the <a href="">full speech can be found here</a>) from Bloomberg:</p> <ul> <li><strong>DRAGHI SAYS EURO-AREA RECOVERY LOSING MOMENTUM </strong>- translation: buy everything</li> <li><strong>DRAGHI SAYS ECB READY TO USE ADDITIONAL MEASURES IF NEEDED </strong>- translation: see above.</li> <li><strong>DRAGHI SAYS UNEMPLOYMENT IS UNACCEPTABLY HIGH </strong>- Europe's unemployed can get a job selling ABS to the ECB</li> <li><strong>DRAGHI SAYS RISKS TO EURO-AREA RECOVERY CLEARLY ON DOWNSIDE </strong>- courtesy of the ECB</li> <li><strong>DRAGHI SAYS ECB HAS REACHED LOWER BOUND ON INTEREST RATES </strong>- and has proceeded lower.</li> <li><strong>DRAGHI SAYS ECB WILL CLOSELY MONITOR RISKS TO PRICE DEVELOPMENT </strong>- as it creates a whole lot more risks</li> <li><strong>DRAGHI SAYS ECB HAS DONE A LOT OVER PAST 3 YEARS </strong>- Sure has; it has jawboned even more.</li> <li><strong>DRAGHI SAYS ECB MEASURES IN SEPT COMPLEMENT JUNE MEASURES </strong>- which compliment the ECB's OMT lies, er, measures</li> <li><strong>DRAGHI SAYS TLTRO TAKE-UP WAS WITHIN ECB EXPECTED RANGE </strong>- even if it was below the lowest Wall Street estimate and was dubbed a <strong>failure </strong>by everyone</li> <li><strong>DRAGHI SAYS TOO EARLY TO PREDICT IMPACT OF TLTROS ON ECONOMY </strong>- but perfect time to predict impact on peripheral bond yields</li> <li><strong>DRAGHI SAYS TLTROS HAVE ALREADY HAD IMPACT ON FINANCIAL MARKET </strong>- Yup: new multi-year highs.</li> <li><strong>DRAGHI: ECB HAS SEEN 'VERY MODEST' SIGNS OF CREDIT IMPROVEMENT </strong>- it is now declining at only 2% Y/Y</li> <li><strong>DRAGHI SAYS FUNDING CONDITIONS ARE ABUNDANT </strong>- or, as JPM says, a record amount of global excess liquidity</li> <li><strong>DRAGHI SAYS THERE IS NO `GREAT BARGAIN' ON ECB EASING </strong>- just a small one</li> <li><strong>DRAGHI SAYS UNDERMINING FISCAL RULES WOULD UNDERMINE CONFIDENCE </strong>- "get to work un-undermining confidence, Mr. Chairman"</li> <li><strong>DRAGHI SAYS THERE IS FLEXIBILITY WITHIN EU FISCAL RULES </strong>- illegal monetization of public debt is actually... legal.</li> <li><strong>DRAGHI: SOME NATIONS SHOULD GIVE PRODUCTIVE INVESTMENT PRIORITY </strong>- like China and the US</li> <li><strong>DRAGHI SAYS AQR, STRESS TESTS MIGHT HAVE CONSTRAINED CREDIT </strong>- you mean the ECB's Stress Test constrained credit?</li> <li><strong>DRAGHI SAYS HELPING GOVERNMENT BUDGETS IS OUTSIDE ECB MANDATE - </strong>so how long until the ECB proceeds to fund sovereign deficits and monetize public debt?</li> </ul> <p>And now the pure idiocy:</p> <ul> <li><strong>DRAGHI: DIRECT INTERVENTION IN ABS MARKET CAN CHANGE DYNAMICS </strong>- with the ECB now the only buyer, what's a "market"?</li> <li><strong>DRAGHI SAYS ABS ELIGIBLE STOCK WILL GROW BECAUSE OF ECB BUYING </strong>- like loan creation will grow because of €1 trillion in LTROs</li> <li><strong>DRAGHI SAYS ASSET PURCHASES WILL SPUR PORTFOLIO REBALANCING </strong>- translation: buy spoos.</li> </ul> <p>It gets better:</p> <ul> <li><strong>ECB WILL ONLY BUY ASSETS ELIGIBLE FOR EUROSYSTEM OPERATIONS</strong></li> </ul> <p>Such as olive tree-backed Greek Government Bonds.</p> <p>Then this:</p> <ul> <li>DRAGHI SAYS SUCCESS OF ECB MEASURES DEPEND ON OTHERS’ ACTIONS</li> </ul> <p>When Goldman's ECB head screws everything up again, it will be up to the Fed to bail it out once again, just like in November 2011. </p> <p>And finally, this which can only be defined as... <strong>epic:</strong></p> <ul> <li><strong>DRAGHI: TAKES TIME FOR CONFIDENCE IN MARKETS TO REACH ECONOMY</strong></li> </ul> <p>No point to even comment on this bullshit.</p> <p>It goes on and on, there is only so many lies even we can take. As for the truth, here is an excerpt from the latest lestter by Diapason's Sean Corrigan, which puts Draghi's predicament in perspective.</p> <p><em><strong>From Material Evidence By Sean Corrigan</strong></em></p> <p>Before the attention of the market was briefly occupied with digging up reasons to trade bonds according to the newly-discovered fissiparous tendencies of several somewhat indebted EU members, the main game in town was - once again – Mario Draghi, he of the surprise (if highly symbolic) rate cut and the gargantuan new bondbuying programme.</p> <p>It almost seem a shame to quibble with a man of such eminence, but we do admit to just a little puzzlement as to the supposed efficacy of the measure (other than as another ‘Whatever it takes’ act of action-free neuro-linguistic programming aimed at pushing both the euro and bond yields lower as his colleague Coene openly admitted a few days later).</p> <p>It goes like this:-</p> <p>So, O Wise one, you will buy €700 billion or so of ABS - but only the good stuff, of course, or else Herrn Weidmann and Stark will again raise their eyebrows. However, this threatens to leave the dreck with the banks you are trying to sanitize (ahead of the upcoming Asset Quality Review, mutter the cynics).</p> <p>But, far more important than that, when you buy the paper, you will credit banks with reserve balances as payment - the same reserve balances you have just imposed a deeper penalty, negative rate of 20bps on, remember?</p> <p>So in a world desperately chasing yield, you hope to strip them of their best paying assets and then charge them for the privilege of holding the reserves for which you intend to swap them. In a Europe allegedly only being held back because banks either will not or cannot lend, you want to reduce their key net interest margin further and so slow down the rate at which they can accumulate the earnings with which either to boost their capital or pay down some of their existing bad and doubtful loans.</p> <p>Just how is this supposed to work again? </p> <p>And why now, in any case? In Spain real M1 is now running at 8.8% p.a., led by a double digit surge in deposit liabilities. In Portugal, the nominal increase in such deposits is motoring ahead at more than 13% yoy – the fastest pace in 12 years; in real terms, there is a 4% CPI difference to subtract, meaning today’s effective rate is even faster than it looks.</p> <p>It may also be remarked that, for first time in a decade, Spanish households have more deposits at the bank than they do loans outstanding, having paid off (or defaulted on) a €1/4 trillion net adverse balance. Spanish Non-financial corporates, meanwhile, have cut this narrow reckoning of net debt in half to €365bln from over €750 bln at the peak, meaning they are now at their most liquid (or least leveraged) since the summer of 2005. As a combination, the non-financial private sector has sweated itself back from being €980 bln in the red when LEH struck to ‘only’ €366 bln offside. Six hard years may have passed but at least private balance sheets are €600 billion better off, a sum equivalent to some €13k per cap and not too dissimilar to a full year’s income.</p> <p>Breaking it up differently, NFCs have paid down 40% of their bank debt or €385bln (accounting for 5/8 of the overall improvement), while Households have shed 14% or €125bln of theirs and meanwhile added 14% or €95bln to their deposits. We are almost getting to the stage, Signor Draghi, where what these people need in order to boost their spending power is an increase in rates, not a drop!</p> <p>Let’s look at this another way, using data from the US to illustrate the point. Between them, the Commerce Department’s QFR tells us, corporations involved in manufacturing, mining, wholesale, retail, information, and the provision of non-legal professional services are currently recording around $13 .6 trillion a year in revenues and making just over $900 billion in after tax profits in the process. Operating costs amount to roughly $12.2 trillion. Interest expense - presumably one of the main ‘stimulus’ targets for an expansive monetary policy - aggregates to $260 billion, hardly a trifle but, you will surely note, a toll equivalent to just under 2% of revenues and just over 2% of costs.</p> <p>Against this, profit tax (which that interest payment helps reduce, of course, hence further reducing its net cost to the borrowing firm) is an almost equal $250 billion while, scaling up from the numbers presented in the BEA’s NIPA table entry for ‘taxes on production and imports less subsidies’ (which are subsumed in the operating&nbsp; cost figure given above), we can see that these typically range from 2 ½ to 3 times the income tax itself, meaning that these firms pay out anything up to four times as much to Leviathan as they do in interest, without even beginning to account for any of the other additions to other financial costs, for the legal hazards, the&nbsp; restrictions on flexibility, the consumption of precious time, or the lowering of the critical entrepreneurial estimate of likely profit that government routinely imposes.</p> <p>Do you just suppose, therefore, that there are much more effective ways for a state solicitous of its citizens’ well-being to give incentives to productive activity and hence to hiring – and ways with fewer toxic side effects, to boot – than by having its buddies over at the print shop screw around with the price of credit and the availability of money?</p> <p>Ask yourself if a French entrepreneur is likely to set aside all his cares and dash out to his ABS-denuded bank in order to borrow the means to start or expand his business just because that bank, now desperate for some sort of earning asset on its books, will offer him a small discount on its previous charges. If it didn’t do much when we cut rates from 400 to 100 bps, or from 100 to 40, do we suppose it will really help if it now goes from 40 to 10?</p> <p>No. But while the ECB – like its military Big Brother – remains another mission prone to undergo a nasty creep (it is exceedingly hard to resist the temptation to invert the word order in that last phrase), that will continue to be the only dead horse there is for anyone to flog. No wonder voters in Germany are stating to warm to the&nbsp; appeal of the AfD, as its stellar showing in the Länder elections showed this weekend.</p> <p>Meanwhile, despite the lowest nominal interest rates in the modern record and real ones two full percentage points below the ex-post mean of the quarter-century before the crash, Italian industrial output has fallen back to the post-LEH lows, back to where it was 25 years ago and not far above what it first briefly hit in 1980. For Spain read record low nominal rates, likewise; rates 1% below the mean in real terms, and IP still where it was last in 1994 and, before that, as long ago as 1987.</p> <p>Too high interest rates (sic) are NOT the solution to this, though too low ones certainly contributed mightily to the problem!</p> <p>Granted, the bigwigs of the ECB - and their illustrious peers elsewhere – do frequently play lip service to the question of ‘structural’ reform though in Draghi’s case this is dangerously entangled with his desire to resurrect some form of Istituto per la Ricostruzione Industriale via the proffer of state guarantees to SMEs, as well as to the banks buying lesser grade ABS in his new wangle, and also via that hoary old chestnut, the promotion of more public infrastructure spending (Europe obviously didn’t build enough roads-tonowhere, half-used velodromes, and cavernous provincial art galleries full of modernist kindergarten offerings over the late cycle of manically increasing indebtedness). For Draghi, it was revealing that this was a programme ‘essential’ – to quote the man himself – ‘to bring inflation where we would want to see it’ – i.e., higher!</p> <p>But in all this, they – the unelected bankers - are either being foolishly naïve or treacherously disingenuous in that the obvious ‘public choice’ outcome is for politicians to do as little as possible of such heavy lifting for as long as the same central bank which is exhorting them so condescendingly to act simultaneously stands ‘ready to take further action if needed’ every time a hamstrung economy threatens to stumble once more in the face of their poltroonery.</p> <p>Europe's current woes are not entirely economic, of course: there is that small difference of opinion on its eastern marches with a nation with which it had been in the habit of conducting some much needed, mutually enriching commerce and which was preparing to play a full part in erecting the New Silk Road to link Europe’s eager consumers and ingenious machinery makers to China’s throbbing industrial heartland, via the teeming natural resources to be exploited between them on the territory of a nation which a jealous hegemon has now deemed must be treated as an existential foe, not a prospective partner in restoring prosperity.</p> <p>So, alas, the craven desire by its leaders to conform to the dictates of the worst elements of the US foreign policy bestiary has set the Union on a collision course with the Russians from which there are likely to emerge few winners, not least among those EU businesses which will lose both short-term sales – and possibly longer-term market share to Asian competitors – at the worst possible time. </p> <p>Once again however, in a sign that the word of the bosses is no longer to be unthinkingly accepted no matter how unremitting the propaganda manufactured to support it, recent rounds of sanctions, coupled with a more sympathetic treatment of the desperate plight of the civilian populations of Donbass and Luhansk has emboldened several continental commentators to give voice to the proposition that this was a wholly unnecessary crisis; one triggered deliberately by the Americans; and one whose impact will only serve to strengthen the 'indispensable' nation's ill-conceived dreams of exercising Full Spectrum Dominance over the rest of us.</p> <p><strong>In this they have not been entirely alone, despite the stridency of the yellow press in its demonization of Vladimir Putin. Stephen Cohen, John Mearsheimer, Jack Matlock, Pat Buchanan, and naturally Ron Paul have been among the American heavyweights to hold their own country to account in this matter, so perhaps we, too, should pause to reflect on the fact that not only is this is decidedly not a comic-book war of our good guys versus their evil ones. </strong>Much less is it a dispute where we should allow some bureaucratic berserker-manqué puff himself up into a nucleararmed Popillius Laenas and start inscribing circles in the sand around his adversary's feet. This is not least because that latter might just feel pressured enough - or simply sufficiently exasperated at what he sees as the blind unamenability of his opponents to the norms of cold, hard Realpolitik, much less to anything as abstract as international law – to the point where he becomes tempted to step defiantly outside the ring without first agreeing to do the New Rome's bidding.</p> <p>Perhaps Signor Draghi should be buying ABM’s not ABS’s and locking them away in the ECB’s vaults, if he really wants to do some good.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="135" height="90" alt="" src="" /> </div> </div> </div> Bond China Cohen CPI European Central Bank Germany Lehman M1 Market Share Monetary Policy Monetization net interest margin Portugal Recession recovery Ron Paul Stress Test Unemployment Vladimir Putin Mon, 22 Sep 2014 13:56:28 +0000 Tyler Durden 494668 at Retailer Tesco Explains How Companies Are "Solidly Beating" Expectations In One Sentence <p>UK supermarket operator Tesco has suspended four executives after discovering a $408 million "serious accounting issue" in its latest financial statements. <a href="">In a reflection of Walgreen's earlier 'forecassting errors'</a>, it appears everyone's optimism is now costing them their jobs as Tesco admits the executives were "<strong>early booking commercial income and delayed booking costs</strong>." And that - in one simple sentence - is the optimistic, we-are-sure-the-income-will-be-there, way to "solidly beat" expectations quarter-after-quarter.</p> <p>&nbsp;</p> <p><a href=""><em>As WSJ reports,</em></a></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Tesco suspended four senior executives and called in outside auditors and legal counsel to investigate a £250 million ($408.8 million) overstatement of the U.K. supermarket operator's forecast first-half profit.</strong></p> <p>&nbsp;</p> <p>Tesco's newly installed chief executive, Dave Lewis, said on Monday that the company has uncovered a "serious" accounting issue.</p> <p>&nbsp;</p> <p>The issue involved the <strong>early booking of commercial income and delayed booking of costs</strong>, the company said, triggering a third profit warning in three months. </p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p><strong>The accounting error puts in the line of fire a board of directors long criticized for lacking retail experience</strong>, and exposes the extent to which previous CEO Philip Clarke had lost control of Tesco before the company announced his dismissal in July.</p> </blockquote> <p>*&nbsp; *&nbsp; *<br />What is perhaps most stunning here is: <strong>4 people were actually held accountable for their mistake.</strong></p> <p>*&nbsp; *&nbsp; *</p> <p>The question is - how many other firms have over-optimistically accounted for futures earnings in the latest quarter?</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="419" height="424" alt="" src="" /> </div> </div> </div> Mon, 22 Sep 2014 13:37:31 +0000 Tyler Durden 494667 at Albert Edwards Presents "The Most Important Chart For Investors" <p>Which incidentally has nothing to do with stocks or bonds, and everything to do with all-important FX (which just happens to drive all correlation and risk pairs around the globe thanks to the far greater embedded leverage in FX, and is why all "modern" traders focus almost entirely on the USDJPY and EURUSD). </p> <p>Specifically, as SocGen's Albert Edwards notes "we show on the front page chart what I believe to be the key chart investors should be focusing on at present. It shows the yen breaking down against the US dollar. This may be more than just a strong dollar story on the back of Fed tightening however, as it seems the yen has now also broken key support levels against the euro. This is a weak yen story. Though there are good fundamental explanations for recent dollar strength vis-à-vis both the yen and the euro, often commentators like to find a fundamental story to fit market events even when price movements have occurred without any clear fundamental explanation ? for we teenage scribblers (as ex-UK Chancellor Nigel Lawson dismissively called us) all have to fill those column inches of commentary."</p> <p><a href=""><img src="" width="600" height="309" /></a></p> <p>Wait, Albert is now a chartist? So it would appear, with a few large caveats:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Sometimes it is very clear to me that instead of fundamentals driving prices, it is the charts or technicals that are important. Hence I have long been an advocate of keeping one eye on the charts to see if a major support or resistance has been broken. The very fact that the markets contain so many followers of technical analysis means that the soothsaying of chartists can actually be self-fulfilling. <strong>Nowhere is this more true than in the world of foreign exchange (FX) trading where fundamentals often play a peripheral role, even in the medium term. And in a world where momentum investing has become more ?fashionable?, FX is the one area where a clear market trend is especially seized upon with relish</strong>.</p> </blockquote> <p>We couldn't agree more, since we ourselves enjoy point out, more often than not, when various algos activate momentum ignition strategies in the USDJPY to push the broader S&amp;P 500 above (never below) key resistance levels. In fact, it was on Zero Hedge where we pointed out last night the extreme oversold level of the Yen. Edwards, however says to ignore this, and instead to focus on what may be historic weakness in the Yen, which in turn will clobber the global economy.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>... if I am right and the yen runs sharply lower from here, then this will spell real trouble for the global economy. (Do not be fooled if there is now a pause in yen weakness or even a partial retracement from these levels, as the rapidity of recent moves means the yen is now extremely oversold against the dollar ? i.e. the daily RSI=88. This should be the pause that reinvigorates the new trend).</p> </blockquote> <p>Why does a rapidly weakening yen spell trouble for the global economy? </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>First, because the Chinese economy will see a further rise in its already strong real exchange rate, especially if other Asian currencies are pulled down with the sliding yen. </strong>This will hurt the Chinese economy which, from August data, appears to be weakening again. The strengthening renminbi will also exacerbate deflationary pressures further. </p> <p>&nbsp;</p> <p><strong>Second, a weak yen spells trouble for the west as a wave of deflation washes in from the rapidly devaluing east. </strong>This reverses a decade long trend. I believe that profits growth is so anaemic in the west that this monetary tightening via strengthening exchange rates could in itself be sufficient to send US and European profits into outright decline and subsequently their economies into recession (via a contraction in the investment spending). That is why this FX technical break is so important</p> </blockquote> <p>That's what <em><strong>could </strong></em>happen. Here is why Edwards believes, it <strong>will </strong>happen.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>We have long believed that investors ignore Japan at their peril. Time and time again, investors have missed major global market trends that have been catalysed by Japan. We have felt for some time that a fragile Chinese economy could be pushed over the edge by a further yen devaluation – in many ways a replay of the Asian crisis of 1997. And just as the Chinese real economy data has taken a turn for the worse in August, the yen has slipped below a key 15-year support level against the dollar. This is probably the most important chart investors should focus on. The next phase of global currency wars may have begun. </p> <p>&nbsp;</p> <p>We have written previously that Japan?s QE and the associated yen weakness could trigger a re-run of the 1997 Asian crisis, only this time sucking in the Chinese renminbi. The yen has just broken below a key long-term support and after a brief technical pull-back, its decline is likely to accelerate. This will trigger a wave of profit-crushing deflation flowing from east to west. Andrew Lapthorne has just written a great note on Japanese equities. <strong>He says yen weakness, not corporate self-help, is the key to Nikkei outperformance, with Germany looking particularly vulnerable. It looks as if yen weakness is what we've now got!</strong></p> <p>&nbsp;</p> <p>Staring long and hard at the Yen/$ chart, I think that, in the current circumstances, the yen/$ will head to 120 pretty quickly ? perhaps after a short reinvigorating retracement. And, if the dollar’s ascent is given extra impetus by the DXY also breaking out, a decline in the yen below Y120 will see an end to its 30-year uptrend – a trend that has relentlessly exported deflation from the west to Japan. Sound far-fetched? One of the few things I have learnt over 30 years in this industry is that when traders decide the yen/US$ starts to move it can jump by Y10 or Y20 very, very quickly indeed.</p> </blockquote> <p>Remember that "<a href="">shocking" CPI print from last week</a>? If the SocGen strategist is right, prepare for many more such "stunners" as Japan makes deflation-exporting its only business model, one which could well crush the economies of Europe, China, and the US... <a href="">and Japan! </a>Case in point: recall what just happened to <a href="">Sony last week</a>. But the all important offset, a rising global stock market, should make it all better at least until the entire economic base is so hollowed out, not even algos can dismisses the record divergence between stock market myth and economic reality.</p> <p>Edwards' bottom line: <strong>"If a clear break in the yen downwards against both the dollar and euro is occurring, not only will this spell trouble for the beleaguered Chinese economy and exacerbate deflation in the west, but it will also break the spell of German economic dominance.</strong>"</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1184" height="610" alt="" src="" /> </div> </div> </div> Albert Edwards China CPI Germany Global Economy Japan Nikkei Reality Recession Renminbi SocGen Technical Analysis Yen Mon, 22 Sep 2014 13:06:18 +0000 Tyler Durden 494666 at This Is How Italy "Fixes" Its Unsustainable Debt Problem <p>Earlier today, Morgan Stanley released a report titled "Debtflation - One Shock Away?", which we will review more in depth shortly, but here is the gist: "Because public (and private) sector leverage is very high in parts of [Europe], this unstable situation is better described as debtflation.&nbsp;With bond yields already very low, when inflation is so subdued the challenge for debt sustainability is whether real growth is enough to cushion any shock. Several euro area economies look vulnerable, we think." </p> <p>Of these, Italy, which recently just returned into economic contraction and hence, a triple-dip recession, is the most vulnerable.&nbsp; To wit:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Italy – debt stock problem… </strong>We expect a primary budget surplus of about 2.3% of GDP this year. Yet, with nominal GDP growth close to zero, this would not be enough to stabilise the debt trajectory. What’s more, 2014 debt/GDP and interest expenses/GDP – which we estimate at over 135% and 5.3%, respectively – are so high that a descending debt trajectory would only be achieved with a primary budget surplus higher than 5% of GDP, which should be maintained over time, thus requiring a permanent austerity drive.</p> <p>&nbsp;</p> <p><strong>…requiring an ambitious combination of real growth and inflation: </strong>Or, alternatively, government debt could come down, assuming an unchanged primary budget surplus (2.3% of GDP) as in the exercise above, if nominal growth were to accelerate to at least 3%Y. <strong>Yet this would require substantially higher inflation, which doesn’t seem to be very likely in the near term, or stronger real growth – which is unlikely to materialise too, unless a long period of political stability and structural reforms were to come through.</strong></p> <p>&nbsp;</p> <p><a href=""><img src="" width="600" height="417" /></a></p> </blockquote> <p>Of course, there is a "hard way" of doing, as in <em><strong>fixing</strong></em>, things and then there is... the European way. </p> <p>Below we show how Italy's debt/GDP for 2013 just <em>was "reduced" by 5% making the country appear far more "sustainable" and attractive to debt investors (the ECB?).</em></p> <p>As Bloomberg reports, <strong>Italy’s 2013 public debt was revised to 127.9% of GDP from a previous estimate of 132.6% of GDP, the country’s statistics agency Istat says in report. </strong><a href="">From the report</a>.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The National Institute of Statistics releases the estimates of Gross Domestic Product (GDP) and General Government debt in accordance with the definitions of the European System of Accounts (ESA2010) and Council Regulation (EC) n. 549/2013. </p> <p>&nbsp;</p> <p>In 2013, GDP at current prices decreased by -0.6% (to 1,618,904 million euro) compared with the previous year. </p> <p>&nbsp;</p> <p>The chain-link volume measure of GDP fell by -1.9%, after a decrease by -2.3% in 2012. </p> <p>&nbsp;</p> <p>The fall in GDP was due to a sharp contraction in Gross fixed capital formation (-5.4%) and in Final consumption expenditure (-2.3%). Imports decreased by -2.7%.</p> <p>&nbsp;</p> <p>General Government net borrowing was -45,358 million euro (-2.8% of GDP), comparing with -3.0% of GDP in the previous year, while General Government debt went up to 2,070,165 million euro (127.9% of GDP).</p> </blockquote> <p>And that's how stuff is done in Europe.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1180" height="820" alt="" src="" /> </div> </div> </div> Bond Capital Formation fixed Gross Domestic Product Italy Morgan Stanley Nominal GDP Recession Mon, 22 Sep 2014 12:42:35 +0000 Tyler Durden 494662 at Key Events In The Coming Week <p>With the snoozer of an FOMC meeting in the rearview mirror, as well as Scotland's predetermined independence referndum, last week's key events: the BABA IPO and the iPhone 6 release, are now history, which means the near-term catalysts are gone and the coming week will be far more relaxed, if hardly boring. Here is what to expect.</p> <p>As DB summarizes, looking at the day ahead and beyond, US existing home sales and euroarea consumer confidence for September are the main release for today although we’ll also pay some attention to any soundbites from the Fed’s Dudley at a Bloomberg summit today. Draghi will also speak before the EU parliament in Brussels at 3pm local time. Then we have PMI Tuesday with the release of the Markit/HSBC PMI manufacturing September readings for China and the Eurozone. The former should provide us with further clues in light of the recent downward momentum in China data flow. On Wednesday, we’ll get US new home sales, Italian consumer confidence, and the German IFO report. The US durable goods data in August will be a highlight on Thursday on top of the usual weekly jobless claims report. We will wrap up the week on Friday with the third revision to the Q2 US GDP data where consensus is looking for a small upward revision. On top of all, this week also sees a handful of Fedspeak (Kocherlakota, Bullard, Powell, George, Mester, Evans and Lockhart) right on the heels of the FOMC meeting last week so we should get more Fed-related news flow in the coming days.</p> <p>Visually:</p> <p><a href=""><img src="" width="600" height="290" /></a></p> <p><em>And a complete breakdown of the week's events from Goldman:</em></p> <p><strong>In DMs, highlights of next week include US GDP and UMichigan Confidence, PMI in Euro area, Japan CPI.</strong></p> <ul> <li>[Monday] US Existing Home Sales.</li> <li>[Tuesday] France GDP, DMs Composite PMI in Euro area (expect 51.8), France and Germany.</li> <li>[Wednesday] Germany IFO Business Climate.</li> <li>[Thursday] US Durable Goods.</li> <li>[Friday] US GDP and UMichigan Confidence, Japan CPI.</li> </ul> <p><strong>In EMs, highlights of next week include MP Decisions in Colombia, Czech Republic, Hungary, Israel, Taiwan and Turkey.</strong></p> <ul> <li>[Monday] Israel MP Decision (expect 10bp cut). </li> <li>[Tuesday] China HSBC Manufacturing PMI, Hungary MP Decision (expect rates on hold). </li> <li>[Wednesday] Argentina GDP, Mexico Economic Activity. </li> <li>[Thursday] MP Decisions in Taiwan, Turkey (expect rates on hold) and Czech Republic (expect rates on hold). </li> <li>[Friday] Colombia MP Decision (expect rates on hold). </li> </ul> <p><strong>FULL CALENDAR</strong></p> <p><em><span style="text-decoration: underline;"><strong>Monday, September 22</strong></span></em></p> <ul> <li><em>Events: Speeches by ECB’s Draghi, Fed’s Dudley, US Council of Economic Advisors’ Furman, FDIC’s Gruenberg and Hoenig, Fed’s Kocherlakota and BoC’s Wilkins, Brazil Quarterly Inflation Report.</em></li> <li>United States | [MAP 2] Existing Home Sales (Aug): Consensus 5.20M, previous 5.15M</li> <li>United States | Chicago Fed Nat Activity Index (Aug): Previous 0.39</li> <li>Hong Kong | CPI Composite YoY (Aug): Previous 4.00%</li> <li>Israel | MP Decision: We expect a 10bp cut (in the Base Rate to 0.15%, below consensus) on the back of the very soft August inflation print, the downward revision to the 2014Q2 GDP print and the preliminary signs of a slowdown in the housing market. Market pricing suggests that there is a 50% probability of a 10bp rate cut over the next three months. The BoI surprised the market last month by cutting rates to an all-time low (0.25%), citing modest growth, a “slow” global recovery and, importantly, the soft inflation environment (e.g., inflation fell to +0.3% yoy in July). Since then, inflation has fallen to +0.0% yoy in August, the 2014Q2 GDP print was revised down to 1.5% (from 1.7%) and house prices have slowed sequentially. Therefore, we expect the ‘dovish’ central bank to surprise the market once again by implementing a modest 10bp rate cut at this month’s meeting (and to cut rates by a total of 20bp in 2014H2; see here for details).</li> <li><em>Also interesting: [DM] Euro area Consumer Confidence; Denmark Consumer Confidence; Italy Industrial Orders; New Zealand Westpac Consumer Confidence [EM] Taiwan Unemployment and Export Orders; Unemployment in Israel and Mexico; Mexico Retail Sales.</em></li> </ul> <p><em><span style="text-decoration: underline;"><strong>Tuesday, September 23</strong></span></em></p> <ul> <li><em>Events: Speeches by Fed’s Bullard, Fed’s George, Sweden Riksbank’s Ekholm, Hungary Central Bank’s Nagy.</em></li> <li>United States | [MAP 1] Richmond Fed Manufact. Index (Sep): Consensus 10, previous 12</li> <li>France | GDP QoQ (2Q F): Previous 0.00% (0.10% yoy)</li> <li>DMs | Markit Composite PMI (Sep P): Euro area (GS 51.8, previous 52.5), France (previous 49.5), Germany (previous 53.7)</li> <li>DMs | Markit Manufacturing PMI (Sep P): US (consensus 58, previous 57.9), Euro area (consensus 50.6, previous 50.7), France (previous 46.9), Germany (consensus 51.4, previous 51.4)</li> <li>DMs | Markit Services PMI (Sep P): Euro area (consensus 53.1, previous 53.1), France (previous 50.3), Germany (consensus 54.8, previous 54.9)</li> <li>China | HSBC China Manufacturing PMI (Sep P): Consensus 50.1, previous 50.2</li> <li>Singapore | CPI NSA MoM (Aug): Consensus 0.80% (1.20% yoy), previous -0.30% (1.20% yoy)</li> <li>Taiwan | [MAP 4] Industrial Production YoY (Aug): Consensus 7.00%, previous 6.08%</li> <li>Hungary | MP Decision: We expect rates on hold (at 2.10%, in line with consensus) for a second month in a row, after the central bank declared an end to a two-year easing cycle in July. Macro outlook and conditions have changed little since the previous MPC meeting. But we continue to see the risk that the MPC may cut rates further this year.</li> <li><em>Also interesting: [DM] US FHFA House Price Index; Canada Retail Sales; France Manufacturing Confidence; UK Public Sector Net Borrowing; Australia Roy Morgan Consumer Confidence [EM] Hungary CA; Poland Unemployment and Retail Sales; Argentina Trade Balance; Mexico Retail Sales.</em></li> </ul> <p><em><span style="text-decoration: underline;"><strong>Wednesday, September 24</strong></span></em></p> <ul> <li><em>Events: Speeches by Fed’s Mester, Fed’s Evans and RBA’s Stevens, RBA’s Financial Stability Review.</em></li> <li>United States | New Home Sales MoM (Aug): GS 2.0%, consensus 4.40%, previous -2.40%</li> <li>Germany | [MAP 3] IFO Business Climate (Sep): Consensus 105.7, previous 106.3</li> <li>Japan | Markit/JMMA Japan Manufacturing PMI (Sep P): Previous 52.2</li> <li>Argentina | [MAP 5] GDP YoY (2Q): GS -0.8%, previous -0.20% </li> <li>Mexico | [MAP 5] Economic Activity IGAE YoY (Jul): GS 2.6%, previous 2.73%</li> <li><em>Also interesting: [DM] US MBA Mortgage Applications; Italy Consumer Confidence; Norway Unemployment; Sweden Economic Tendency Survey; New Zealand Trade Balance [EM] Czech Republic Consumer Confidence; Brazil CA, Foreign Direct Investment and Consumer Confidence.</em></li> </ul> <p><em><span style="text-decoration: underline;"><strong>Thursday, September 25</strong></span></em></p> <ul> <li><em>Events: ---.</em></li> <li>United States | Durable Goods Orders (Aug): GS -16.5%, consensus -17.00%, previous 22.60%</li> <li>United States | Markit US Services PMI (Sep P): Previous 59.5</li> <li>United States | Markit US Composite PMI (Sep P): Previous 59.7</li> <li>Taiwan | MP Decision</li> <li>Turkey | MP Decision: We expect rates on hold (Benchmark Repurchase Rate at 8.25%, in line with consensus; O/N lending rate at 11.25% and O/N borrowing rate at 7.5%). We also do not see any changes to the main parameters of CBRT’s macroprudential tools. Finally, we expect the policy statement to be carefully balanced, signaling some caution in the short term but also leaving the door open to the possibility of further easing, contingent on market conditions and the inflation outlook. In this context, we expect the bank to leave the key phrase unchanged, “…the tight monetary policy stance will be maintained, by keeping a flat yield curve, until there is a significant improvement in the inflation outlook”.</li> <li>Czech Republic | MP Decision: We expect rates on hold (Repurchase Rate at 0.05%, in line with consensus) and for the CNB Board to preserve its current, accommodative policy stance at the upcoming meeting. With this meeting falling between forecast updates, we do not expect the Board to make any strong comments on policy direction.</li> <li><em>Also interesting: [DM] US Initial Jobless and Continuing Claims and Kansas City Fed Manf. Activity; Euro area Money Supply; Italy Retail Sales; PPI in Spain and Sweden; Japan PPI; UK CBI Reported Sales; Australia Job Vacancies [EM] Hong Kong Trade Balance; Philippines Trade Balance; Brazil Unemployment.</em></li> </ul> <p><em><span style="text-decoration: underline;"><strong>Friday, September 26</strong></span></em></p> <ul> <li><em>Events: Speech by RBA’s Richards.</em></li> <li>United States | [MAP 4] GDP Annualized QoQ (2Q T): GS 4.7%, consensus 4.60%, previous 4.20%</li> <li>United States | [MAP 1] Univ. of Michigan Confidence (Sep F): GS 84.6, consensus 85, previous 84.6</li> <li>United States | Personal Consumption (2Q T): GS 3.1%, previous 2.50%</li> <li>Germany | GfK Consumer Confidence (Oct): Consensus 8.5, previous 8.6</li> <li>Japan | Natl CPI Ex Food, Energy YoY (Aug): GS 2.3%, consensus 2.30%, previous 2.30%</li> <li>Singapore | [MAP 5] Industrial Production YoY (Aug): Consensus 3.60% (-1.50% mom sa), previous 3.30% (2.70% mom sa)</li> <li>Argentina | [MAP 5] Economic Activity Index YoY (Jul): GS -0.8% (-0.3% mom), previous 0.00% (0.30% mom)</li> <li>Colombia | MP Decision: We expect rates on hold (Overnight Lending Rate at 4.50%, in line with consensus), pausing the rate normalization cycle after five consecutive hikes. The policy statement is likely to signal that the board remains divided, with a minority of directors voting for yet another increase to the reference rate. The MPC should also deliberate on the extension of the ongoing FX intervention program. We expect the directors to either discontinue the program altogether or to extend it to the 4Q2014 while reduce its purchase ceiling to US$1.0bn from US$2.0 currently.</li> <li><em>Also interesting: [DM] US Core PCE (QoQ); France Consumer Confidence; Italy Business Confidence; Sweden Trade Balance [EM] Philippines Balance of Payments; South Korea Consumer Confidence; Taiwan Leading Index; Hungary Unemployment; Argentina CA; Brazil Bank Lending; Mexico Trade Balance.</em></li> </ul> <p><em>Source: Goldman, Deutsche Bank, Bank of America</em></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="800" height="387" alt="" src="" /> </div> </div> </div> 8.5% Australia Bank of America Bank of America Brazil China Consumer Confidence Continuing Claims CPI Czech Deutsche Bank Eurozone France Germany Hong Kong Housing Market Hungary Israel Italy Japan Market Conditions Markit Mexico Michigan Monetary Policy Money Supply New Home Sales New Zealand Norway Personal Consumption Poland recovery Richmond Fed Trade Balance Turkey Unemployment Yield Curve Mon, 22 Sep 2014 12:42:15 +0000 Tyler Durden 494665 at Despite 'Record' Opening Weekend, Goldman Fears "The iPhone Effect" On Retail Sales May Disappoint <p>The exuberant images this weekend of lines-around-the-block at Apple stores were met with triumphant flashing red headlines this morning when <strong>Apple announced the sale of more than 10 million iPhone 6 and 6 Plus models (more than expected)</strong>. Typically, new product launches do not move the needle on aggregate US economic data. Apple’s iPhone has been the most notable exception, with past launches occasionally having a substantial effect on core retail sales. However, Goldman notes, with the launch of the new iPhone 6/6+ this month, estimates (based on historical data) of a 0.1 to 0.7ppt boost to September core retail sales is highly uncertain due to <strong>seasonal adjustments that have been highly erratic, and could easily take a big bite out of the Apple effect</strong>.</p> <ul> <li><strong>*APPLE HAS SOLD OVER 10M NEW IPHONE 6 AND IPHONE 6 PLUS MODELS</strong></li> <li><strong>*APPLE SAYS SALES FOR IPHONE 6 &amp; IPHONE 6 PLUS EXCEEDED VIEWS</strong></li> <li><strong>*APPLE'S COOK: COULD HAVE SOLD MORE IPHONES W/ GREATER SUPPLY</strong></li> <li>*APPLE SAYS SALES FOR IPHONE 6 &amp; IPHONE 6 PLUS EXCEEDED VIEWS</li> </ul> <p><em>Via Goldman Sachs,</em></p> <p><strong>Typically, new product launches do not move the needle on aggregate US economic data. Apple’s iPhone has been the most notable exception, with past launches occasionally having a substantial effect on core retail sales.</strong> In particular, iPhone sales show up in two categories of the report: electronics stores (representing in-store sales) and "nonstore retailers" (representing online sales). Exhibit 1 shows the behavior of these two categories of retail sales during the release month for the iPhone 4S, iPhone 5, and iPhone 5S/5C, both on an initial print (i.e. as-reported) basis, as well as the final revised estimates. The iPhone 4S and 5 launches showed up clearly, particularly in the initial print data. The iPhone 5S/5C launch did not appear to boost retail sales as notably, perhaps due to (1) the lack of a preorder period for the 5S, and (2) the fact that the 5C was not as popular as initially hoped, with many retailer orders heading into inventory.</p> <p><a href=""><img src="" style="width: 600px; height: 378px;" /></a></p> <p><strong>Preorders for the iPhone 6/6+—which began on September 12—have been record-breaking, at a reported 4 million units in the first 24 hours (up from 2 million for the iPhone 5).</strong> Our IT hardware equity analysts project 8 million units for first weekend sales, which will probably be released on September 22. Exhibit 2 shows how past company sales metrics have mapped into the initial print retail sales data. Because the Census Bureau does not require standardization of how retailers report cell phone sales (by retail price, discounted price with a cellular contract, etc.), it is not possible to directly estimate the retail sales effect with a simple price x quantity calculation. In addition, preorders and opening weekend sales are reported on a global, rather than US-specific, basis. However, using the simple units to sales "translation" from the iPhone 4S and the iPhone 5,<strong> we would expect a boost of about seven-tenths of a percentage point to the September core retail sales figure. On the other end of the spectrum, looking at the experience of the 5S/5C—likely less comparable than the other examples to the 6/6+ rollout—one might expect a small boost of only one-tenth of a percentage point.</strong></p> <p><a href=""><img src="" style="width: 600px; height: 249px;" /></a></p> <p><strong>Of course, once first weekend sales are available, we may be able to refine this figure. </strong>Notably, China will not be included in first weekend sales due to delays with regulatory approval, meaning that any given unit level of sales probably represents more US sales than historical comparisons would suggest. <strong>However, the level of sales reported by Apple is not the only variable in play. The retail sales data are reported on a seasonally-adjusted basis, and the idiosyncrasies of seasonal adjustment can often be a source of volatility.</strong> Specifically, the expected September seasonal for nonstore retail has been highly erratic (Exhibit 3). Although the Census Bureau provides indicative seasonal factors for data not yet released—shown as striped columns at the far right of the exhibit—these are subject to considerable revision at the time the data is reported.</p> <p><a href=""><img src="" style="width: 600px; height: 382px;" /></a></p> <p><span style="text-decoration: underline;"><strong>Nonetheless, the indicative seasonal adjustments provided by Census do look like a tougher hurdle this year than in prior years.</strong></span> This could reflect a number of factors: (1) the tendency for fall product launches from Apple may be starting to be incorporated into "normal" seasonality, (2) the early timing of Labor Day could be a factor, or (3) shifting seasonality in areas completely unrelated to the iPhone could be driving the higher expected seasonal gain. The first possibility would represent the most downside risk to our earlier estimate of a 0.1 to 0.7% boost to September core retail sales. At this point, it is too early to have an explicit forecast for the September retail sales report, and we will refine our estimate of the iPhone effect further in coming weeks, but our early analysis points to September upside relative to the recent trend on core retail sales.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1060" height="674" alt="" src="" /> </div> </div> </div> Apple Census Bureau China ETC Goldman Sachs goldman sachs headlines Volatility Mon, 22 Sep 2014 12:35:58 +0000 Tyler Durden 494664 at G-20 Post Mortem: Hopes, Fears, & Dashed Exepctations <p>We, like Bloomberg&#39;s Richard Breslow, were bemused this weekend by the communiques from the wisest men in the room at the G-20 meeting. On one side of their mouths they warned of<strong> &quot;excessive risk-taking,&quot; in markets noting that there were &quot;mounting economic risks&quot; also</strong>. On the other hand, stories continue to print of <strong>US equity strength implying optimism over global growth</strong> - despite the ongoing collapse in consensus GDP expectations. However, away from this hope and fear, it was the almost coordinated responses of the PBOC (Chinese Finmin Lou Jiwei signaling not to get carried away with stimulus expectations), ECB (Visco saying may not need additional QE step since EUR had dropped &#39;enough&#39;), and finally the BOJ (Iwata saying Abenomics misunderstood, USDJPY 90-100 &#39;fair); all <strong>dashing market expectations of a smooth hand over from a feckless Fed to a free-printing rest-of-the-world</strong>. Stocks (and carry) responded by selling off.</p> <p>&nbsp;</p> <p>As Bloomberg&#39;s Richard Breslow notes,</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>I was amused/bemused this weekend when I saw two stories literally next to each other on my newsfeed.</strong></p> <p>&nbsp;</p> <p><strong>FEARS - The first said &ldquo;global finance chiefs said to warn of mounting economic risks.&rdquo; </strong></p> <p>&nbsp;</p> <p><strong>HOPE - The next story, same dateline: U.S. stocks increase for week over optimism on economic growth.</strong></p> <p>&nbsp;</p> <p><a href=""><img height="332" src="" width="600" /></a></p> <p>&nbsp;</p> <p>&nbsp;</p> <p>Unfortunately,<strong> that&rsquo;s the sort of talking out of both sides of their mouths that&rsquo;s done whenever it suits them, so we need to be careful of the shelf life of these commentaries</strong>, who is speaking in what venue and what is the sound bite meant to satisfy.</p> <p>&nbsp;</p> <p>G-20, we talked at end of last wk on how the G-20 mtg was an opportunity to do something special, but what came out of it was the French and Germans telling everyone to chill, while the Italians said the TLTRO takeup means nothing until we see what happens in December.</p> <p>&nbsp;</p> <p><strong>The overall conclusion was that the ministers agree on many goals, with little agreement on the means to those ends. </strong></p> <p>&nbsp;</p> <p><strong>DASHED EXPECTATIONS</strong> - Probably the most interesting and actionable of the economic comments came from the Chinese Finmin Lou Jiwei, who signaled not to get too carried away with the stimulus China implemented last wk, this isn&rsquo;t the start of a major ongoing program. That comment is what really got equity mkts to swoon over the weekend and people to be a little bit dour.</p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p>Add to that <a href="">ECB&#39;s warning not to expect QE</a>... (<a href="">as Bloomberg reports</a>)</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>The European Central Bank may not need to add stimulus measures after steps in the past three months pushed down the euro, said Governing Council member Ignazio Visco</strong></p> <p>&nbsp;</p> <p>&ldquo;Inflation expectations have to be back where they were,&rdquo; Visco said in an interview in Cairns, Australia, where he is attending a meeting of Group of 20 finance chiefs. <strong>&ldquo;This doesn&rsquo;t mean that there will be a next step. We have been bold enough to reduce interest rates to a level that was unexpected to the market.&rdquo;</strong></p> <p>&nbsp;</p> <p>The single currency has dropped about 6 percent since early June, when the ECB introduced a negative interest rate on excess reserves and presented a four-year lending program to fuel credit. Policy makers reduced borrowing costs further earlier this month and committed to buying asset-backed securities and covered bonds to boost the ECB&rsquo;s balance sheet by as much as 1 trillion euros ($1.3 trillion).</p> <p>&nbsp;</p> <p><a href=""><img src="" style="width: 600px; height: 315px;" /></a></p> <p>&nbsp;</p> <p><strong>The extent of the exchange rate&rsquo;s fall is &ldquo;more or less, given the moves that were done between June and September, the right response,&rdquo; </strong>said Visco, who also heads Italy&rsquo;s central bank. The ECB isn&rsquo;t targeting any exchange-rate level, he said.</p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p>And The BOJ&#39;s warning not to expect more QQE...</p> <ul> <li><strong>*FORMER BOJ DEPUTY GOVERNOR KAZUMASA IWATA SPEAKS IN INTERVIEW</strong></li> <li><strong>*DAMAGE TO JAPAN FROM WEAK YEN MAY OUTWEIGH MERITS: IWATA</strong></li> <li><strong>*WEAK YEN PUTS JAPAN AT RECESSION RISK: EX-BOJ&#39;S IWATA</strong></li> <li><strong>*DOLLAR/YEN AT 90-100 REFLECTS JAPAN FUNDAMENTALS: IWATA</strong></li> <li><strong>*CURRENT YEN WEAKNESS SLIGHTLY EXCESSIVE: IWATA</strong></li> </ul> <p>Are the world&#39;s central banks re-co-ordinating on a tightening path as various bodies from the IMF to BIS warn that they have gone too far?</p> <p>*&nbsp; *&nbsp; *</p> <p>And the markert reacted with risk-off despite the G-20&#39;s best efforts to happy-talk the future.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="963" height="505" alt="" src="" /> </div> </div> </div> Asset-Backed Securities Australia Borrowing Costs Central Banks China European Central Bank Excess Reserves Italy Japan Lou Jiwei Recession Yen Mon, 22 Sep 2014 12:25:08 +0000 Tyler Durden 494663 at Frontrunning: September 22 <ul> <li>Quid pro quo Clarice: Iran seeks give and take on Islamic State militants, nuclear program (<a href="">Reuters</a>)</li> <li>Alibaba’s Banks Said to Boost IPO Size to Record $25 Billion (<a href="">BBG</a>)</li> <li>European Stocks Fall Amid China Concern as Tesco Slides (<a href="">BBG</a>)</li> <li>Tesco Suspends Executives, Probes Error That Triggers New Profit Warning (<a href="">WSJ</a>)</li> <li>Kurds say they have halted Islamic State advance on Syrian town (<a href="">Reuters</a>)</li> <li>Because luck and managing money is genetic: Financial Elite's Offspring Start Their Own Hedge Funds (<a href="">WSJ</a>)</li> <li>Islamic State Onslaught Spurs Mass Exodus of Syrian Kurds (<a href="">BBG</a>)</li> <li>Rockefellers, Heirs to an Oil Fortune, Will Divest Charity From Fossil Fuels (<a href="">NYT</a>)</li> <li>Merck KGaA to Buy Sigma-Aldrich for to Add Chemicals (<a href="">BBG</a>)</li> <li>China's Yahoo: SoftBank Falls After Alibaba Listing Removes Proxy Appeal (<a href="">BBG</a>)</li> <li>Ukraine President Sees Tensions Easing as Truce Tested (<a href="">BBG</a>)</li> <li>Relief over Scotland gives way to 'Great Stagnation' worries (<a href="">Reuters</a>)</li> <li>Sarkozy Says ‘Despair’ in France Reason for Return to Politics (<a href="">BBG</a>)... that and the money </li> <li>Beatles' Ringo Starr Lists Liverpool Estate For US$33 Million (<a href="">Mail</a>)</li> <li>You Too Can Clone Bill Ackman Without Buying His New Fund (<a href="">BBG</a>)</li> <li>Gap Between Manhattan’s Rich and Poor Is Greatest in U.S., Census Finds (<a href="">NYT</a>)</li> </ul> <p>&nbsp;</p> <p><strong>Overnight Media Digest</strong></p> <p><em><span style="text-decoration: underline;">FT</span></em></p> <p>More Phones 4u stores are to be saved as EE and Dixons Carphone Plc agreed to buy parts of the collapsed mobile phone retailer. The deal is expected to be announced on Monday.</p> <p>SNPL pilots' union said on Saturday that it would push the Air France management even more to meet its demands by extending the week-long protest until this Friday.</p> <p>U.S. private equity firm Blackstone Group LP is "giving up on Russia", underscoring that even the well-connected western investors are unwilling to conduct business in the country.</p> <p>French insurance group Axa SA is to partner with IFC, the private investment arm of the World Bank, to encourage developing countries to take up insurance products.</p> <p>Russia's natural gas exporter Gazprom could lose 18 percent of its revenue due to competition from the U.S. liquefied natural gas exports, according to New York-based think-tank Center for Global Energy Policy at Columbia university.</p> <p>&nbsp;</p> <p><em><span style="text-decoration: underline;">NYT</span></em></p> <p>* The market debut of the Alibaba Group, the Chinese Internet titan, hit the stock markets like a meteor last week, and thanks to $500 million in investments made in Alibaba in 2011 and 2012, American investment firm Silver Lake now sits on a stake worth more than $5.1 billion, after having reaped $278.8 million by selling a fraction of its holdings.(<a href="" title=""></a>)</p> <p>* Industrial conglomerate Siemens AG said late on Sunday it would buy U.S. oilfield equipment maker Dresser-Rand Group Inc for $7.6 billion, including the assumption of debt. (<a href="" title=""></a>)</p> <p>* EMC Corp, the computer storage company now facing pressure from a big activist hedge fund, had held discussions with Hewlett-Packard about a merger, though those talks have since ended, a person briefed on the matter said on Sunday. (<a href="" title=""></a>)</p> <p>* Governor Jerry Brown of California has signed several bills to help build the market for electric cars in his state, two days ahead of speaking alongside world leaders at the United Nations this week for a summit meeting on climate change. The legislation is designed to make electric cars more affordable for low-income residents, and the intent is to have at least one million zero-emission and near-zero-emission vehicles on the state's roads by 2023. (<a href="" title=""></a>)</p> <p>* As magazines and newspapers continue to lose print readers, they are scrambling to secure customers for their digital products, and are finding them increasingly through social media. Pinterest has forged close relationships with magazines, especially those focused on women, who make up 71 percent of Pinterest users. It is a leading driver of traffic to certain magazines, and in some cases - like Self - it serves as a bigger source of reader referrals than either Facebook Inc or Twitter Inc. (<a href="" title=""></a>)</p> <p>&nbsp;</p> <p><em><span style="text-decoration: underline;">Canada</span></em></p> <p>THE GLOBE AND MAIL</p> <p>** One of Parliament's most high-profile bills appears set to become law without major changes - as one senator says the committee considering Bill C-36, aimed at reining in the sex trade, is "highly unlikely" to call for changes. (</p> <p>** After hanging up the letters of the alphabet and making sure they have enough desks in their classrooms, British Columbia's public school teachers say they face the difficult task of returning to work after an emotionally bruising five weeks on the picket line. The experience was disheartening for many teachers, and some say they were exposed to heated rhetoric and public scorn daily. (</p> <p>** Prices of some Canadian homes are certainly too high, but there is no immediate catastrophe looming for the country's housing market, the head of Canada Mortgage and Housing Corp suggested in a speech on Friday. (</p> <p>NATIONAL POST</p> <p>** The spokesman for the Islamic State of Iraq and Al-Sham called for attacks on Canadians on Sunday in an apparent attempt to deter members of the military alliance that has formed to challenge the terrorist group. (</p> <p>** Candidates for the leadership of Ontario's Progressive Conservative party have until the end of February to sign up new members before voting is held next May. The party has decided all members will be eligible to cast preferential ballots on May 3 or May 7 and the official results will be unveiled on May 9. (<a href="" title=""></a>)</p> <p>** Canada's finance minister is urging European countries to consider taking quick action to repair their flagging economies by following stimulus programs similar to the one that pulled this country out of recession. (</p> <p>&nbsp;</p> <p><em><span style="text-decoration: underline;">China</span></em></p> <p>CHINA DAILY</p> <p>- Chinese investors complain that they have been largely left out of Alibaba Group Holding's share listing in New York, where the Chinese e-commerce leader surged 38 percent on its first day of trade on Friday, due to government restrictions.</p> <p>CHINA SECURITIES JOURNAL</p> <p>- Chinese banks and capital markets should take more steps to support the country's services sector, Zhou Xiaochuan, Governor of the People's Bank of China, said over the weekend at a meeting of finance ministers and central bank governors from the G20 countries in Australia.</p> <p>- China needs to use a combination of measures to help guide interest rates lower to support corporate financing, in particular by small companies, as it tries to boost the slowing economic growth, the newspaper said in a commentary.</p> <p>SHANGHAI SECURITIES NEWS</p> <p>- The eastern Chinese city of Nanjing has become the latest to ease restrictions on housing purchases as local governments rush to take steps to boost the property market, which has been hit by a slowdown in the world's second-largest economy.</p> <p>- The China Securities Regulatory Commission has issued guidelines to crack down corruption in securities supervisory organisations, in line with an ongoing official anti-corruption campaign in the country.</p> <p>SHANGHAI DAILY</p> <p>- Tropical storm Fund-Wong is set to hit mainland China soon after one man died as the storm pounded Taiwan with torrential downpours and powerful winds on Sunday.</p> <p>People's Daily</p> <p>- China will use various means to improve "socialist democratic politics", President Xi Jinping said at a meeting on political consultancy on Sunday.</p> <p>&nbsp;</p> <p><em><span style="text-decoration: underline;">Britain</span></em></p> <p>The Times</p> <p>STAY IN REFORMED EU TO KEEP ECONOMY ON THE RIGHT ROAD, MANUFACTURERS SAY</p> <p>An overwhelming majority of manufacturers believe it is vital that Britain remains as part of the European Union and that any new government plays "a leading role in Brussels". (<a href="" title=""></a>)</p> <p>BUOYANT CITY BRACED FOR LISTING STAMPEDE Flotations worth about 3 billion pounds ($4.90 billion) are expected to be unveiled this week as London's main market heads towards a record-breaking year. Jimmy Choo Ltd &lt;IPO-JIM.L&gt;, the shoe brand, is expected to lead what could be a bumper week for financial advisers as it unveils plans for an estimated 800 million pound listing. (<a href="" title=""></a>)</p> <p>The Guardian EE AGREES PHONES 4U SHOP DEAL TO SAVE HUNDREDS OF JOBS The administrators of stricken retailer Phones 4u are expected to confirm the sale of about 60 shops to EE in a move that will save hundreds of jobs. The final terms of the deal are still being thrashed out but an announcement is expected around noon on Monday. (<a href="" title=""></a>)</p> <p>CONSTRUCTION COMPETITION: LODHA PLANS 3 BLN STG PUSH INTO LONDON PROPERTY</p> <p>British housebuilders could face aggressive competition in London from Indian developer Lodha Group, which is planning a 3 billion pound push into property in the country's capital city. (<a href="" title=""></a>)</p> <p>The Telegraph</p> <p>JOB CREATION AT RISK UNDER LABOUR'S MINIMUM WAGE PLANS, WARN BUSINESS GROUPS Job creation could take a hammering under the Labour party's plans to increase Britain's minimum wage to 8 pounds an hour by 2020, business groups have warned, as they told party leader Ed Miliband to steer clear of the issue. (<a href="" title=""></a>)</p> <p>COMET BACKERS IN TALK TO FUND MONARCH A secretive vulture fund that backed electricals retailer Comet before its collapse has emerged as a potential saviour for the troubled airline Monarch. Greybull Capital, based in London's West End, is in talks to take a stake in Monarch and potentially avert a cash crunch. (<a href="" title=""></a>)</p> <p>&nbsp;</p> <p><strong>Fly On The Wall Pre-Market Buzz</strong></p> <p>ECONOMIC REPORTS<br />Domestic economic reports scheduled for today include:<br />Chicago Fed national activity index for August at 8:30--consensus 0.33<br />Existing home sales for August at 10:00--consensus up 1% to 5.2M rate</p> <p>ANALYST RESEARCH</p> <p>Upgrades</p> <p>Bill Barrett (BBG) upgraded to Market Perform from Underperform at BMO Capital<br />CenterPoint Energy (CNP) upgraded to Buy from Neutral at SunTrust<br />Dun &amp; Bradstreet (DNB) upgraded to Outperform from Neutral at RW Baird<br />Enerplus (ERF) upgraded to Outperform from Sector Perform at RBC Capital<br />GlaxoSmithKline (GSK) upgraded to Buy from Neutral at Goldman<br />Hologic (HOLX) upgraded to Overweight from Neutral at Piper Jaffray<br />Leggett &amp; Platt (LEG) upgraded to Outperform from Market Perform at Raymond James<br />MasTec (MTZ) upgraded to Buy from Hold at BB&amp;T<br />PolyOne (POL) upgraded to Overweight from Equal Weight at First Analysis<br />Sirona Dental (SIRO) upgraded to Outperform from Neutral at RW Baird<br />Toro Company (TTC) upgraded to Outperform from Market Perform at Raymond James<br />TreeHouse Foods (THS) upgraded to Buy from Neutral at SunTrust</p> <p>Downgrades</p> <p>Actavis (ACT) downgraded to Equal Weight from Overweight at Barclays<br />Auxilium (AUXL) downgraded to Hold from Buy at Stifel<br />Finish Line (FINL) downgraded to Equal Weight from Overweight at Morgan Stanley<br />InvenSense (INVN) downgraded to Neutral from Outperform at RW Baird<br />Outerwall (OUTR) downgraded to Sell from Neutral at B. Riley<br />PSEG (PEG) downgraded to Hold from Buy at Jefferies<br />Realogy (RLGY) downgraded to Underperform from Neutral at Credit Suisse<br />Saba Software (SABA) downgraded to Neutral from Buy at B. Riley<br />Suburban Propane (SPH) downgraded to Market Perform from Outperform at Wells Fargo<br />Walgreen (WAG) downgraded to Equal Weight from Overweight at Barclays<br />Watts Water (WTS) downgraded to Neutral from Buy at Janney Capital</p> <p>Initiations</p> <p>Curtiss-Wright (CW) initiated with a Market Perform at Wells Fargo<br />Eros International (EROS) initiated with an Outperform at Wells Fargo<br />Global Eagle (ENT) initiated with a Market Perform at Wells Fargo<br />Inventure Foods (SNAK) initiated with an Outperform at William Blair<br />Mallinckrodt (MNK) reinstated with an Overweight at Barclays</p> <p>COMPANY NEWS<br />Merck KGaA (MKGAY) to acquire Sigma-Aldrich (SIAL) for $17B<br />Siemens (SIEGY) said it would acquire Dresser-Rand (DRC) for $83 per share, or $7.6B<br />Dresser Rand (DRC) adopted a shareholder rights plan<br />Total (TOT) now sees producing 2.8M boepd in 2017 and looks to reduce operating costs by $2B per year by 2017<br />Tesco (TSCDY) said it overstated 1H profit by an estimated GBP250M<br />Corinthian Colleges (COCO) received grand jury subpoena on September 3. The subpoena seeks documents and records relating to an internal investigation of a former employee’s misconduct at the Everest Brandon campus and the company’s return of Title IV funds as a result of the investigation</p> <p>EARNINGS<br />There are no notable earnings to report.</p> <p>NEWSPAPERS/WEBSITES</p> <p>EMC explores merger, holds talks with HP, Dell, WSJ reports<br />Clorox (CLX) turned down offer to sell or merge with rival, NY Post reports<br />Blackstone (BX) does not renew contracts to its consultants in Russia, FT reports<br />Microsoft (MSFT) delays China launch of its Xbox One console, Reuters reports<br />General Electric (GE) considered deal with Dresser-Rand (DRC), FT reports<br />Iliad (ILIAF) sets mid-October deadline for T-Mobile (TMUS) bid, Reuters reports<br />Google (GOOG) selects HTC to make 9-inch Nexus tablet, WSJ reports<br />Yahoo (YHOO) could have 35% upside, Barron's says<br />Bank of America (BAC) could climb over 50%, Barron's says<br />Vitamin Shoppe (VSI) shares could climb over 20%, Barron's says</p> <p>SYNDICATE<br />CombiMatrix (CBMX) files $85.9M mixed securities shelf<br />Gramercy Property Trust (GPT) files to sell $100M of common stock<br />Limoneira (LMNR) files to sell $75M of common stock<br />Parkway Properties (PKY) files to sell 10M shares of common stock<br />Vital Therapies (VTL) files to sell $46M in common stock</p> Australia B+ BAC Bank of America Bank of America Barclays Capital Markets China Corruption Credit Suisse Dell DRC European Union France General Electric GOOG Google Housing Market Iran Iraq Managing Money Morgan Stanley Natural Gas Newspaper People's Bank Of China Private Equity Raymond James Recession Reuters Twitter Twitter Ukraine Wells Fargo World Bank Mon, 22 Sep 2014 11:37:48 +0000 Tyler Durden 494661 at