http://www.zerohedge.com/fullrss2.xml/article/article/%3Ca%20href%3D en This Is How Caterpillar Just Blew Away Q3 Earnings http://www.zerohedge.com/news/2014-10-23/how-caterpillar-just-blew-away-q3-earnings <p>Those who have been following Caterpillar actual top-line performance know that things for the industrial bellwether have been going from bad to worse, with not only retail sales declining across the globe, as documented here previously, but with the current stretch of <a href="http://www.zerohedge.com/news/2014-09-19/caterpillar-posts-record-21-consecutive-months-declining-global-retail-sales-worse-f">declining global retail sales </a>now longer than during what was seen during the Great Recession.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/10/CAT%20retail%20sales%20Sept.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/10/CAT%20retail%20sales%20Sept_0.jpg" width="600" height="397" /></a></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/10/CAT%20Retail%20sales%20comp%20vs%20Lehman.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/10/CAT%20Retail%20sales%20comp%20vs%20Lehman_0.jpg" width="600" height="355" /></a></p> <p>&nbsp;</p> <p>And yet, moments ago, CAT, which is a major DJIA component, just reported blowaway EPS of $1.72, far above the $1.35 expected. How did it achieve this stunning number which has pushed equity futures by at least half a percent? </p> <p>Simple: first there was the usual exclusions, with "restructuring costs" adding back some $0.09 to the bottom line number. </p> <p>But the punchline was this: "In addition to the profit improvement, we have a strong balance sheet and through the first nine months of the year, we've had good cash flow.&nbsp; So far this year, <strong>we've returned value to our stockholders by repurchasing $4.2 billion of Caterpillar stock and raising our quarterly dividend by 17 percent," </strong>Oberhelman said."</p> <p>And here is just how the surge in buyback activity looked in comparison to Q3 2013...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/10/Cat%20Q3%20components.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/10/Cat%20Q3%20components_0.jpg" width="600" height="401" /></a></p> <p>... and since the start of 2013:</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/10/Cat%20CapEx%20Buybacks%202013-2014.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/10/Cat%20CapEx%20Buybacks%202013-2014_0.jpg" width="600" height="389" /></a></p> <p>One can only assume the collapse in CapEx spending is because the company is so enthused about its global growth prospects.</p> <p>But wait, there's more, because another reason why the stock is soaring is because CAT actually boosted EPS guidance despite the ongoing retail sales collapse. To be sure, CAT did not boost revenue guidance, and "The company now expects 2014 sales and revenues to be about $55 billion, the middle of the previous outlook range of $54 to $56 billion."</p> <p>What it did do was say that "with sales and revenues at $55 billion, the revised profit outlook is $6.00 per share, <strong>or $6.50 per share excluding $450 million of restructuring costs." </strong>This is an increase to the previous pro forma guidance of $6.20.</p> <p>So how will CAT achieve this? </p> <p>Simple: "As previously announced, the company repurchased $2.5 billion of Caterpillar common stock during the third quarter of 2014.&nbsp; <strong>This repurchase is part of the $10 billion stock repurchase authorization approved by the Board of Directors in the first quarter of 2014.</strong>"</p> <p>In other words, expect about $2.5 billion of stock buybacks per quarter, reducing the company's outstanding share count, and thus boosting its Earnings <strong>Per Share </strong>number.</p> <p>Because in the new normal, if you can't grow, you just buy your way to growth. On margin...</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="716" height="478" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/Cat%20Q3%20components.jpg?1414065414" /> </div> </div> </div> http://www.zerohedge.com/news/2014-10-23/how-caterpillar-just-blew-away-q3-earnings#comments New Normal Recession Thu, 23 Oct 2014 11:58:13 +0000 Tyler Durden 496085 at http://www.zerohedge.com Frontrunning: October 23 http://www.zerohedge.com/news/2014-10-23/frontrunning-october-23 <ul> <li>Canada PM vows crackdown after capital shocked by fatal attacks (<a href="http://www.reuters.com/article/2014/10/23/us-canada-attacks-shooting-idUSKCN0IB1PY20141023">Reuters</a>)</li> <li>Canada Gunman Was Convert to Islam With Criminal Record (<a href="http://www.bloomberg.com/news/2014-10-23/canada-gunman-was-convert-to-islam-with-criminal-record.html">BBG</a>)</li> <li>Some U.S. hospitals weigh withholding care to Ebola patients (<a href="http://www.reuters.com/article/2014/10/22/us-health-ebola-usa-interventions-idUSKCN0IB2OM20141022">Reuters</a>)</li> <li>But... Great rotation... Bond funds stock up on Treasuries in prep for market shock (<a href="http://www.reuters.com/article/2014/10/23/us-bonds-funds-allocation-analysis-idUSKCN0IC0BI20141023">Reuters</a>)</li> <li>Saudis at War With Islamic State Confront Echo of Kingdom’s Past (<a href="http://www.bloomberg.com/news/2014-10-22/saudis-at-war-with-islamic-state-confront-echo-of-kingdom-s-past.html">BBG</a>)</li> <li>EU’s Top Banker Warns of Rule Fixation ‘Going Beyond Reason (<a href="http://www.bloomberg.com/news/2014-10-23/eu-s-top-banker-warns-of-rule-fixation-going-beyond-reason-1-.html">BBG</a>)</li> <li>U.S.-led air strikes killed 521 fighters, 32 civilians in Syria (<a href="http://www.reuters.com/article/2014/10/23/us-mideast-crisis-syria-deaths-idUSKCN0IC0IG20141023">Reuters</a>)</li> <li>Growing Kurdish Unity Helps West, Worries Turkey (<a href="http://online.wsj.com/articles/iraqs-kurdish-regional-government-set-to-approve-kobani-reinforcement-plan-1413978673?mod=WSJ_hp_RightTopStories">WSJ</a>)</li> <li>Don’t Be Distracted by the Pass Rate in ECB’s Bank Exams (<a href="http://www.bloomberg.com/news/2014-10-22/don-t-be-distracted-by-the-pass-rate-in-ecb-s-bank-exams.html">BBG</a>)</li> <li>Hedge Funds Add to Venture-Capital Bounty (<a href="http://online.wsj.com/articles/hedge-funds-add-to-venture-capital-bounty-1414021436?mod=WSJ_hp_LEFTWhatsNewsCollection">WSJ</a>)</li> <li>Speed-of-Light Trading Grows in Europe With McKay Network (<a href="http://www.bloomberg.com/news/2014-10-22/speed-of-light-trading-grows-in-europe-with-mckay-network.html">BBG</a>)</li> <li>Buffett copycats risk a pounding as Berkshire portfolio suffers (<a href="http://www.reuters.com/article/2014/10/23/us-usa-buffett-portfolio-idUSKCN0IC0CL20141023">Reuters</a>)</li> <li>Shale Boom’s Allure to Wall Street Tested by Bear Market (<a href="http://www.bloomberg.com/news/2014-10-23/shale-boom-s-allure-to-wall-street-tested-by-bear-market.html">BBG</a>)</li> <li>Athletes took fake classes at University of North Carolina (<a href="http://www.reuters.com/article/2014/10/22/us-usa-unc-fraud-idUSKCN0IB2D520141022">Reuters</a>)</li> <li>Credit Suisse Profit More Than Doubles as Trading Rises (<a href="http://www.bloomberg.com/news/2014-10-23/credit-suisse-profit-more-than-doubles-as-trading-rises.html">BBG</a>)</li> <li>In Ebola-Afflicted Liberia, Orphanages Make a Tragic Comeback (<a href="http://online.wsj.com/articles/in-ebola-afflicted-liberia-orphanages-make-a-tragic-comeback-1413993974?mod=WSJ_hp_RightTopStories">WSJ</a>)</li> <li>UBS Hunts for Millionaires in Hong Kong’s Nine Dragons (<a href="http://www.bloomberg.com/news/2014-10-23/ubs-hunts-for-millionaires-in-hong-kong-s-nine-dragons.html">BBG</a>)</li> <li>Alabama man gets $1,000 in police settlement, his lawyers get $459,000 (<a href="http://www.reuters.com/article/2014/10/23/us-usa-alabama-police-idUSKCN0IC05720141023">Reuters</a>)</li> <li>Tesco Chairman to Leave as Accounting Missteps Hit Profit (<a href="http://www.bloomberg.com/news/2014-10-23/tesco-chairman-prepares-exit-as-grocer-quantifies-overstatement.html">BBG</a>)</li> <li>Lloyds Said to Cut 9,000 Jobs Amid Online Banking Shift (<a href="http://www.bloomberg.com/news/2014-10-22/lloyds-said-to-cut-9-000-jobs-amid-online-banking-shift.html">BBG</a>)</li> </ul> <p>&nbsp;</p> <p><strong>Overnight Media Digest</strong></p> <p><em><span style="text-decoration: underline;">WSJ</span></em></p> <p>* The Manhattan U.S. attorney's office is investigating whether air bag supplier Takata Corp made misleading statements about the safety of its air bags to U.S. regulators, people familiar with the matter said. The probe is at a preliminary stage and could end without any charges filed. (<a href="http://on.wsj.com/1uHz4kS" title="http://on.wsj.com/1uHz4kS">http://on.wsj.com/1uHz4kS</a>)</p> <p>* Several executives at JPMorgan Chase &amp; Co in New York were warned of potential problems related to the bank's hiring practices in China more than a year before the program came under scrutiny by the U.S. government, according to people familiar with the matter and documents reviewed by The Wall Street Journal. (<a href="http://on.wsj.com/1thx2ew" title="http://on.wsj.com/1thx2ew">http://on.wsj.com/1thx2ew</a>)</p> <p>* Maverick Capital Ltd, one of the oldest hedge-fund firms, plans to launch its first venture-capital fund on Jan. 1, according to investors, with hopes of raising $400 million to take stakes in young companies. (<a href="http://on.wsj.com/1wdmbEQ" title="http://on.wsj.com/1wdmbEQ">http://on.wsj.com/1wdmbEQ</a>)</p> <p>* Procter &amp; Gamble Co shook up its senior management ranks, naming new leaders for key businesses and narrowing the field of potential successors to Chief Executive A.G. Lafley. Melanie Healey, currently P&amp;G's head of its North America business and once considered a potential successor to Lafley, will leave the company next year, according to an internal memo distributed to employees Wednesday. (<a href="http://on.wsj.com/1xafS1J" title="http://on.wsj.com/1xafS1J">http://on.wsj.com/1xafS1J</a>)</p> <p>* The asset-management industry suffered a setback when regulators rejected a proposal by BlackRock Inc to launch an exchange-traded fund, that would have kept its holdings hidden from investors. The product, known as a "nontransparent ETF", is a key part of the industry's attempt to broaden its customer base beyond traditional index-tracking investments by selling more funds that are actively managed. (<a href="http://on.wsj.com/1owlQuN" title="http://on.wsj.com/1owlQuN">http://on.wsj.com/1owlQuN</a>)</p> <p>* Luxottica Group SpA named Procter &amp; Gamble Co veteran Adil Mehboob-Khan as a co-chief executive on Wednesday, seeking to put an end to a month of turmoil caused by the return of founder Leonardo Del Vecchio to active management of the world's largest eyewear group. (<a href="http://on.wsj.com/1wqjV9S" title="http://on.wsj.com/1wqjV9S">http://on.wsj.com/1wqjV9S</a>)</p> <p>* Nickel prices have sunk to their lowest level since March, as slowing economies in Europe and China rattle investors, while a financing scandal in China has prompted companies to dump tons of nickel and other metals on the market. (<a href="http://on.wsj.com/1FGujRd" title="http://on.wsj.com/1FGujRd">http://on.wsj.com/1FGujRd</a>)</p> <p>&nbsp;</p> <p><em><span style="text-decoration: underline;">FT</span></em></p> <p>Lloyds Banking Group Plc is set to unveil its plans to cut 9,000 jobs next week, which comprise 10 percent of its workforce. The move is part of its new three-year strategy to create digital, marketing and customer development function to focus on developing new and improved products. The Co-operative Bank's failed bid for hundreds of Lloyds Banking Group Plc's branches should have been stopped much earlier, a group of British Members of Parliaments said. A report from the Treasury committee, published on Thursday, blames the failed deal on the Co-operative Bank's managers, its regulators and auditors at KPMG.</p> <p>GlaxoSmithKline Plc has launched a multi-billion-pound restructuring plan that includes a potential floatation of its HIV drugs unit. The move is aimed at winning back shareholder support after the drugmaker faced corruption allegations and faltering sales. HSBC Holdings Plc and a unit of Allied Irish Banks Plc have been publicly reprimanded by Britain's antitrust watchdog for breaching competition rules by pushing small and medium-sized companies to open current accounts when taking out loans. </p> <p>&nbsp;</p> <p><em><span style="text-decoration: underline;">NYT</span></em></p> <p>* Financial regulators, trying to increase access to home loans, have relaxed many rules designed to prevent a repeat of the 2008 subprime crisis. Some six years after the financial crisis, thousands of apparently creditworthy borrowers are being shut out of the housing market because they cannot get mortgages. (<a href="http://nyti.ms/1wujbCA" title="http://nyti.ms/1wujbCA">http://nyti.ms/1wujbCA</a>)</p> <p>* Capitol Hill increased pressure on the Japanese auto supplier Takata Corp and federal safety regulators on Wednesday as two senators demanded wider recalls to fix millions of defective airbags and a House committee said it wanted a fuller accounting of how the recalls were handled. (<a href="http://nyti.ms/1sRObdr" title="http://nyti.ms/1sRObdr">http://nyti.ms/1sRObdr</a>)</p> <p>* Concern over the safety of guardrails manufactured by Trinity Industries Inc spread further on Wednesday as two more states said they would ban the use of the company's ET-Plus rail head, which is thought to have a dangerous defect. (<a href="http://nyti.ms/ZOpELY" title="http://nyti.ms/ZOpELY">http://nyti.ms/ZOpELY</a>)</p> <p>* Total SA, the French oil giant, on Wednesday appointed two insiders to lead the company, moving swiftly to replace Christophe de Margerie, its chairman and chief executive, who died Monday in an airplane accident. (<a href="http://nyti.ms/1rr2DoM" title="http://nyti.ms/1rr2DoM">http://nyti.ms/1rr2DoM</a>)</p> <p>* A group of Washington investors with high-level political backing and a $5 billion commitment from the Japanese government is pressing ahead with its vision of a high-speed train that could whisk passengers between New York and Washington in about an hour. (<a href="http://nyti.ms/1owbued" title="http://nyti.ms/1owbued">http://nyti.ms/1owbued</a>)</p> <p>&nbsp;</p> <p><em><span style="text-decoration: underline;">China</span></em></p> <p>- Several commercial banks are expected to issue preference shares within one month and the Agricultural Bank of China LTd could be among the first batch, industry insiders said.</p> <p>- Seven regulators, including the National Development Reform Commission and Ministry of Industry and Information Techonology of China, have launched a plan to promote wider adoption of green vehicles for public transportation. The regulations will promote the use of a total of 20,222 green buses from 2014 to 2015 in the Beijing-Tianjin-Hebei Region.</p> <p>CHINA DAILY</p> <p>- China will launch an experimental spacecraft this weekend to test a technology seen as crucial to a future lunar probe that will return to Earth with soil samples.</p> <p>- Guangdong province plans to tighten rules preventing officials who have spouses and children living overseas from attaining leadership positions in government, public institutions and state-backed enterprises.</p> <p>SHANGHAI SECURITIES NEWS</p> <p>- China's insurance regulator has released new investment rules which include barring insurance firms from putting more than 30 percent of their total assets in related companies.</p> <p>SHANGHAI DAILY</p> <p>U.S. insurer American International Group plans to expand its operations from China's coastal areas to the inland and it looks to support overseas expansion of Chinese companies.</p> <p></p> <p><em><span style="text-decoration: underline;">Britain</span></em></p> <p>The Times </p> <p>RATES HELD DUE TO FEARS OVER GLOBAL ECONOMY </p> <p>The downturn in Europe is posing a risk to Britain's economic recovery, which appears already to have begun to slow, the Bank of England has warned. The minutes to this month's rate setting meeting said there were signs in the UK "of a slight loss in momentum" and that "the pace of growth was beginning to ease". Pessimism about the global economic outlook was blamed, drawing particular attention to the Eurozone. (<a href="http://thetim.es/12dB3GR" title="http://thetim.es/12dB3GR">http://thetim.es/12dB3GR</a>)</p> <p>EE SPEEDS AHEAD AS EUROPE'S LARGEST 4G NETWORK</p> <p>EE has laid claim to the title of Europe's largest 4G network after the launch of the iPhone 6 pushed its customer base for the faster network well beyond the 5 million mark. (<a href="http://thetim.es/1CXjW7e" title="http://thetim.es/1CXjW7e">http://thetim.es/1CXjW7e</a>) HOMEBASE TO CLOSE A QUARTER OF ITS STORES Roughly a quarter of Homebase Group Ltd stores are to close by 2018, leading to job losses, as the DIY chain undergoes a three-year turnaround plan. Home Retail Group Plc, which owns Homebase and Argos, said that after conducting a review of the DIY chain, it had found "several challenges", including inconsistent standards across its stores, as well as larges stores with low sales. (<a href="http://thetim.es/1t5t0pW" title="http://thetim.es/1t5t0pW">http://thetim.es/1t5t0pW</a>)</p> <p>The Guardian </p> <p>GLAXOSMITHKLINE TO FLOAT MINORITY STAKE OF HIV TREATMENT COMPANY </p> <p>The British drugs group GlaxoSmithKline Plc is planning to create a new 15 billion pound ($24.07 billion) FTSE 100 company by spinning out a subsidiary focused on treating HIV. The pharmaceuticals group is looking to float a minority stake of ViiV Healthcare, a division in which it owns a near-80 percent stake and which raked in pre-tax profits of 880 millio pound last year. US rival Pfizer Inc and Japanese drugs group Shionogi &amp; Co Ltd hold the rest of the shares. (<a href="http://bit.ly/10oOK5h" title="http://bit.ly/10oOK5h">http://bit.ly/10oOK5h</a>)</p> <p>The Telegraph </p> <p>LLOYDS TO CUT AROUND 9,000 JOBS </p> <p>Lloyds Banking Group Plc plans to cut around 9,000 jobs, roughly a tenth of its entire workforce, over the next three years as the taxpayer-backed bank's staff are replaced by digital technology. (<a href="http://bit.ly/ZHg4KC" title="http://bit.ly/ZHg4KC">http://bit.ly/ZHg4KC</a>)</p> <p>EE CHIEF POURS COLD WATER ON RENEWED TALK OF 10 BLN STG SELL-OFF </p> <p>Olaf Swantee, chief executive of EE, has said there is "no rush" to sell off Britain's biggest mobile operator after it emerged its owners, the French and German telecoms giants Orange and Deutsche Telekom, had reopened talks on the future of the business. (<a href="http://bit.ly/1s9xQgd" title="http://bit.ly/1s9xQgd">http://bit.ly/1s9xQgd</a>)</p> <p>The Independent</p> <p>BRITISH COMPETITION WATCHDOG BLASTS BANKS OVER SME LOANS </p> <p>The British competition watchdog has criticised a group of banks, including HSBC Holdings Plc, Barclays Plc and Royal Bank of Scotland Group Plc, over its small and medium-sized businesses lending practices. The Competition and Markets Authority said HSBC and the Northern Irish bank, First Trust, had breached an undertaking not to force businesses to open a current account with them when they offered them a loan. (<a href="http://ind.pn/ZHhAMU" title="http://ind.pn/ZHhAMU">http://ind.pn/ZHhAMU</a>)</p> <p></p> <p>&nbsp;</p> <p><strong>Fly On The Wall Pre-Market Buzz</strong></p> <p>ECONOMIC REPORTS</p> <p>Domestic economic reports scheduled for today include:<br />Jobless claims for week of October 18 at 8:30--consensus 285K<br />FHFA house price index for August 9:00--consensus up 0.3%<br />Markit manufacturing PMI for October at 9:45--consensus 57.0<br />Leading indicators for September at 10:00--consensus up 0.6%</p> <p>ANALYST RESEARCH</p> <p>Upgrades</p> <p>AbbVie (ABBV) resumed with an Overweight from Neutral at JPMorgan<br />Boston Scientific (BSX) upgraded to Neutral from Sell at Goldman<br />Dow Chemical (DOW) upgraded to Buy from Hold at Deutsche Bank<br />Fifth Third Bancorp (FITB) upgraded to Buy from Neutral at Goldman<br />GlaxoSmithKline (GSK) upgraded to Overweight from Equal Weight at Barclays<br />Tesoro Logistics (TLLP) upgraded to Outperform from Sector Perform at RBC Capital<br />Tractor Supply (TSCO) upgraded to Strong Buy from Market Perform at Raymond James<br />UniFirst (UNF) upgraded to Outperform from Neutral at RW Baird<br />Union Bankshares (UBSH) upgraded to Outperform from Neutral at RW Baird<br />Yelp (YELP) upgraded to Buy from Neutral at B. Riley</p> <p>Downgrades</p> <p>3D Systems (DDD) downgraded to Hold from Buy at Brean Capital<br />Angie's List (ANGI) downgraded to Hold from Buy at Wunderlich<br />Angie's List (ANGI) downgraded to Neutral from Overweight at Piper Jaffray<br />Angie's List (ANGI) downgraded to Underperform from Market Perform at Raymond James<br />Avalon Rare Metals (AVL) downgraded to Neutral from Buy at Citigroup<br />Axiall (AXLL) downgraded to Market Perform from Outperform at Cowen<br />BB&amp;T (BBT) downgraded to Neutral from Buy at Goldman<br />Boeing (BA) downgraded to Neutral from Outperform at Credit Suisse<br />Boulder Brands (BDBD) downgraded to Hold from Buy at Canaccord<br />Citrix (CTXS) downgraded to Neutral from Buy at BofA/Merrill<br />DTS, Inc. (DTSI) downgraded to Underweight from Neutral at JPMorgan<br />GulfMark Offshore (GLF) downgraded to Market Perform from Outperform at Cowen<br />ICON plc (ICLR) downgraded to Equal Weight from Overweight at First Analysis<br />IPC The Hospitalist Co. (IPCM) downgraded to Market Perform at Wells Fargo<br />Mercer (MERC) downgraded to Neutral from Outperform at Credit Suisse<br />Owens Corning (OC) downgraded to Neutral from Overweight at JPMorgan<br />Regency Energy Partners (RGP) downgraded to Neutral from Buy at BofA/Merrill<br />The Medicines Co. (MDCO) downgraded to Neutral from Buy at BofA/Merrill<br />Tupperware Brands (TUP) downgraded to Neutral from Overweight at JPMorgan<br />Union Bankshares (UBSH) downgraded at RW Baird<br />VOC Energy Trust (VOC) downgraded to Underperform from Sector Perform at RBC Capital<br />Yelp (YELP) downgraded to Hold from Buy at Stifel</p> <p>Initiations</p> <p>Alibaba (BABA) initiated with an Overweight at Barclays<br />Elephant Talk (ETAK) initiated with a Speculative Buy at Taglich<br />Endo (ENDP) initiated with a Buy at Guggenheim<br />Gulfport Energy (GPOR) initiated with a Positive at Susquehanna<br />Netgear (NTGR) initiated with a Neutral at Buckingham<br />Southwestern Energy (SWN) initiated with a Positive at Susquehanna<br />Whiting Petroleum (WLL) initiated with a Positive at Susquehanna</p> <p>COMPANY NEWS</p> <p>EU to boost Ebola research with EUR 24.4M (PPHM, TKMR, SRPT, BCRX, CMRX, NLNK, LAKE, APT, SMED)<br />Rio Tinto (RIO) extended tenure of CEO Sam Walsh, CFO Chris Lynch<br />CarMax (KMX) raised share repurchase authorization by $2B<br />Select Comfort (SCSSS) increased share repurchase authorization to $250M<br />GFI Group (GFIG) special committee to review tender offer from BGC Partners (BGCP). The Board has not changed its recommendation with respect to, and continues to support, the pending transaction with CME Group (CME)<br />AT&amp;T (T) reported Q3 net increase in total wireless subscribers of 2M</p> <p>EARNINGS</p> <p>Companies that beat consensus earnings expectations last night and today include:</p> <p>Alexion (ALXN), Arctic Cat (ACAT), Cenovus Energy (CVE), NorthWestern (NWE), Carter's (CRI), Lazard (LAZ), WESCO (WCC), Cash America (CSH), Cenovus Energy (CVE), Silicon Laboratories (SLAB), Cabot Microelectronics (CCMP), Dunkin' Brands (DNKN), JAKKS Pacific (JAKK), Check Point (CHKP), Volaris (VLRS), Logitech (LOGI), Northfield Bancorp (NFBK), Farmers Capital Bank (FFKT), NXP Semiconductors (NXPI), Euronet (EEFT), Core Laboratories (CLB), IBERIABANK (IBKC), Core Laboratories (CLB), MSA Safety (MSA), Teradyne (TER), Pacific Continental (PCBK), Old Second Bancorp (OSBC), Albemarle (ALB), TAL International (TAL), Mellanox (MLNX), Orrstown Financial (ORRF), TriState Capital (TSC), Oritani Financial (ORIT), MKS Instruments (MKSI), O'Reilly Automotive (ORLY), NVE Corp. (NVEC), CoreLogic (CLGX), Exponent (EXPO), Tyler Technologies (TYL), Deltic Timber (DEL), Equifax (EFX), ServiceNow (NOW), Infinera (INFN), Financial Institutions (FISI), Marketo (MKTO), Fortinet (FTNT), Leggett &amp; Platt (LEG), Graco (GGG), Lam Research (LRCX), Everest Re (RE), Covanta (CVA), Digimarc (DMRC), C.R. Bard (BCR), 8x8, Inc. (EGHT), Clearwater Paper (CLW), Polycom (PLCM), Monarch Casino (MCRI), Citrix (CTXS), Yelp (YELP), Skechers (SKX), Open Text (OTEX), CA Technologies (CA), Sangamo (SGMO), Select Comfort (SCSS), Tractor Supply (TSCO), Banner Corp. (BANR), Acacia Research (ACTG)</p> <p>Companies that missed consensus earnings expectations include:</p> <p>AT&amp;T (T), Invacare (IVC), Eli Lilly (LLY), Alamos Gold (AGI), Patterson-UTI (PTEN), Diamond Offshore (DO), Colfax (CFX), Potash (POT), Sequans (SQNS), Proto Labs (PRLB), Quality Systems (QSII), Precision Castparts (PCP), Weatherford (WFT), Sun Bancorp (SNBC), Horizon Bancorp (HBNC), Susquehanna (SUSQ), United Stationers (USTR), Morningstar (MORN), Horace Mann (HMN), Allied World (AWH), A. Schulman (SHLM), Varian Medical (VAR), United Financial (UBNK), Cheesecake Factory (CAKE), IPC The Hospitalist Co. (IPCM), Torchmark (TMK), Plexus (PLXS), La Quinta (LQ), Allegiant Travel (ALGT)</p> <p>Companies that matched consensus earnings expectations include:</p> <p>United Community Banks (UCBI), QCR Holdings (QCRH), CVB Financial (CVBF), Sallie Mae (SLM), Interface (TILE)</p> <p>NEWSPAPERS/WEBSITES</p> <p>Procter &amp; Gamble (PG) narrows potential CEO successors to four, WSJ reports<br />PetSmart (PETM) attracts interest from KKR (KKR), NY Post reports<br />Credit Suisse (CS) head detects no tangible worries in forex probe, Reuters says<br />Apple (AAPL) to increase Apple-brand retail stores in China to 40, WSJ reports<br />Government relaxing mortgage regulations, NY Times says (BAC, C, GS, JPM, MS, USB, WFC)</p> <p>SYNDICATE</p> <p>AmSurg (AMSG) files to sell common stock for holders<br />FreeSeas (FREE) files to sell 17.5M shares for holders<br />New Mountain Finance (NMFC) files to sell 5M shares of common stock<br />Pointer Telocation (PNTR) files to sell 2.33M ordinary shares for holders<br />WidePoint (WYY) files automatic common stock shelf</p> http://www.zerohedge.com/news/2014-10-23/frontrunning-october-23#comments American International Group Apple B+ BAC Bank of England Barclays Bear Market Blackrock Boeing Bond China Citigroup Corruption Credit Suisse Deutsche Bank Eurozone Global Economy Housing Market JPMorgan Chase KKR Lazard Lloyds Markit Merrill Morningstar Raymond James recovery Reuters Royal Bank of Scotland Sallie Mae Tender Offer Turkey Wall Street Journal Wells Fargo Whiting Petroleum Thu, 23 Oct 2014 11:32:08 +0000 Tyler Durden 496084 at http://www.zerohedge.com Futures Bounce On Stronger Europe Headline PMIs Despite Markit's Warning Of "Darker Picture" In "Anaemic" Internals http://www.zerohedge.com/news/2014-10-23/futures-bounce-stronger-europe-headline-pmis-despite-markits-warning-darker-picture- <p>Perhaps the most interesting question from late yesterday is just <em>how did the Chinese PMI rebound from 50.4 to 50.2, when the bulk of its most important forward-looking components, New Orders, Output, New Export Orders...&nbsp;</em></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/10/China%20PMI%20Oct.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/10/China%20PMI%20Oct.jpg" width="399" height="298" /></a></p> <p><em>... <a href="http://www.markiteconomics.com/Survey/PressRelease.mvc/6bd34263066f4ea29f01687f726c91d1">posted a material deterioration</a></em>? When asked, not even Markit could provide <a href="https://twitter.com/WilliamsonChris/status/525192661494685696">an explanation </a>that seemed remotely reasonable so we can only assume the headline was goalseeked purely for the kneejerk reaction benefit of various algos that only focus on the headline and nothing else. Luckily, we didn't have much time to ponder this quandary as a few hours later we got the latest batch of Eurozone PMI numbers. </p> <p>The reason the PMI "soft-data" surveys are relevant, if mostly again for the benefit of kneejerk reacting algos, is because as Deutsche Bank said, "These real time numbers are clearly going to be important at the moment with many fearing an inflexion point in the global data." So what better way to instill some confidence in a triple-dipping Europe, if only on actual "hard" data, than by providing cherry-picked, seasonally adjusted survey responses. </p> <p>And sure enough, Markit did not disappoint when following an ugly French PMI number (because as we have shown before, <a href="http://www.zerohedge.com/news/2014-10-16/sorry-france-bond-market-has-spoken-you-are-not-core-anymore">France is long gone from anyone's idea of Europe's core</a>), which printed at 47.3 for Manufacturing, down from 48.8 in September, and below the 48.5 expected, and a Services print of 48.1, down from 48.4 and below the 48.3 expected, we got yet another magical turnaround in Europe, driven once again by Germany, whose Mfg PMI printed at a whopping 51.8, far above the contractionary 49.5 which was expected, and up from the 49.9 contraction Markit reported a month ago. This was the highest reading since July 2014, and up from the 51.7 reported a year ago. It was high enough to offset the tiny decline in the Services PMI which dipped from 55.7 to 54.8 below the 55 expected. This in turn helped boost the composite European PMI to 52.2, from 52.0, above the 51.1 expected, driven by a rise in manufacturing from 50.3 to 50.7, below the contractionary print of 49.9 expected, even as Services remained flat at 52.4. </p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/10/Eurozone%20PMI%201.gif" width="420" height="320" /><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/10/Eurozone%20PMI%202.gif" width="388" height="320" /></p> <p>Ironically, just like in China, new orders were flat but the forward-looking orders-to-stock difference fell 0.8pt! But as long as the headline number picked up all is well, and judging by the violent reaction in USDJPY and futures, Markit achieved its mission for the day.</p> <p>This is how Goldman summarized Europe's Deus Ex PMI data:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>The Euro area composite PMI edged up by 0.2pt to 52.2 in October, against consensus expectations of a contraction (Cons: 51.5, GS: 51.2). The rebound in the composite PMI was driven by a 0.4pt increase in the manufacturing component to 50.7, while the services PMI was flat at 52.4. The level of PMIs continues to point to small positive growth rates in Q3 and now early Q4.</strong></p> <p>&nbsp;</p> <p>1. The manufacturing PMI increased marginally from 50.3 to 50.7 in October, after five months of consecutive declines. The services PMI was unchanged at 52.4 (Exhibit 1). The consensus expectation was for small declines in both the manufacturing and services PMI.</p> <p>&nbsp;</p> <p>2. The breakdown generally showed a mixed picture. <strong>New orders were flat but the forward-looking orders-to-stock difference fell 0.8pt. </strong>Other subcomponents of the manufacturing PMI were more positive, with output rising 0.9pt and employment rising 0.5pt. The forward-looking subcomponents (which are not part of the headline services PMI figure) were weak: 'business expectations' fell 3.1pt and 'incoming new business' fell 1.1pt.</p> <p>&nbsp;</p> <p>3. In addition to the Euro area aggregate, Flash PMIs were released for Germany and France. The German composite PMI edged up 0.2pt to 54.3, against consensus expectations of a 0.5pt decline (Cons: 53.6). <strong>This was driven by a strong 1.9pt increase in the German manufacturing PMI (while the German services PMI eased 0.9pt). In contrast, the French composite PMI printed at 48.0 in September, 0.4pt below the previous month's reading, against consensus expectations of a small increase (Cons: 48.7). </strong>The French PMI decline was driven by weakness in the manufacturing sector. In a separate release, the French INSEE manufacturing confidence survey sent a diverging signal, posting a small 1pt increase to 97. Overall, the German/French PMI gap widened by 0.6pt in October and is now greater than 6pt (Exhibit 2). </p> </blockquote> <p>So what does the latest PMI print imply for GDP? Goldman said that "based on historical correlations, a reading of 52.2 is associated with +0.2%qoq GDP growth. In the same vein, our CAI points to similar growth in October (+0.2%), in line with the September reading." Well, it <strong>is </strong>positive...</p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/10/Eurozone%20PMI%203.gif" width="374" height="320" /></p> <p>But the best indication of just how ridiculous the headline prints were came from Markit itself, which clearly did not believe the numbers it had reported: This is what <a href="http://www.markiteconomics.com/Survey/PressRelease.mvc/a5c261d7858a41d591de69935243b5e3">Markit's Chris Williamson said</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>“The Eurozone PMI rose in October but anyone just watching the headline number misses the darker picture painted by the survey’s other indices, which show&nbsp; the region teetering on the verge of another downturn.&nbsp; </strong></p> <p>&nbsp;</p> <p>“Growth of new orders slowed closer to stagnation and backlogs of work fell at a faster rate, causing employment to be cut for the first time in nearly a year. </p> <p>&nbsp;</p> <p>“Business confidence in the service sector also slid to the lowest for over a year and prices charged fell at the fastest rate since the height of the global financial crisis, adding to an increasingly downbeat assessment of business conditions.&nbsp; </p> <p>&nbsp;</p> <p>“<strong>While the survey suggests the euro area has so far avoided a slide back into recession this year, a renewed downturn cannot be ruled out. Growth is so anaemic that increasing numbers of companies are being forced into laying off staff and slashing prices in an attempt to cut costs and boost sales through discounting."</strong></p> </blockquote> <p>The message is clear: we needed a stronger headline number, but weak enough to prompt the ECB to do something. Good luck.</p> <p>In other news, Asian equities traded on a sombre note following suit from yesterday’s negative Wall Street close, led by weakness in energy shares amid a sharp drop in oil prices. Hang Seng (-0.3%) and Shanghai Comp (-1.0%) traded lower, shrugging off a better than expected Chinese HSBC manufacturing PMI (50.4 vs. Exp. 50.2), as new orders and output (50.7 vs. Prev. 51.3) metrics fell, the latter printing at the lowest since May’14. The Nikkei 225 (-0.37%) finished the session in the red in a continuation of the negative US close while also tracking the move lower in USD/JPY overnight. </p> <p>Despite opening in the red in a continuation of the move lower seen on Wall St. and overnight, European equities enter the North American open in a sea of green with the exception of the FTSE 100. Despite a lower than expected French PMI release, with all three components falling short of expectations which initially placed further weight on equities, attention instead turned towards the strong German and Eurozone PMI releases. With the data points going against the grain of recent lacklustre Eurozone releases, European equities emerged back into the green with the DAX moving higher by a total of 150 points, which subsequently dragged fixed income products lower as Bunds moved back below 150.50. On a sector specific basis, telecommunication names lead the way following strong earnings updates from the likes of Nokia, Orange and Tele2. </p> <p>Looking forward, we will get initial jobless claims (expected in at 281k vs +264k previously). We will also get earnings reports from the likes of Credit Suisse, Daimler and Tesco in Europe, and American Airlines, GM, Microsoft and Amazon in the US.</p> <p><strong>Bulletin Headline Summary from Bloomberg and RanSquawk</strong></p> <ul> <li>European equities shrug off lacklustre French and Chinese PMI releases as attention turns towards better than expected German and Eurozone figures, while the FTSE 100 remains firmly in the red.</li> <li>UK retail sales (Ex Auto M/M -0.3% vs. Exp. 0.0%), provide a further source of concern for the UK economy, which subsequently saw GBP/USD briefly break below 1.6000.</li> <li>Looking ahead, attention turns towards the release of the weekly US jobs data, US manufacturing PMI as well as a host of large cap. US earnings including the likes of Microsoft, Comcast, Caterpillar, Eli Lilly, GM and Amazon.</li> <li>Treasuries steady, 10Y and 30Y yields at highest since early October as market focus begins shifting to next week’s Fed meeting.</li> <li>Fed is slated to complete $10b of UST purchases in October next week; those will be the final events of QE3 “if the FOMC decides to end its current program of asset purchases at the next meeting,” schedule says</li> <li>A China manufacturing gauge rose in October, with HSBC/Markit’s PMI rising to 50.4 from 50.2 the previous month </li> <li>Markit’s euro-area manufacturing PMI rose to 50.7 in October from 50.3; in Germany, factories rebounded from a slump in September while in France both services and manufacturing shrank more than forecast</li> <li>ECB has purchased more than EU800m of covered bonds in the first three days of its asset-purchase program, according to estimates from three traders</li> <li>U.K. retail sales fell 0.3% in September, more than forecst, with clothing and footwear sales dropping 7.8%, the most since April 2012, the Office for National Statistics said in London today</li> <li>Terror reached Canada this week when a “radicalized” convert to Islam on Monday ran down and killed a soldier with a car and a gunman yesterday invaded the capital and murdered a soldier at a war memorial before entering Ottawa’s parliament building where he was shot to death</li> <li>The attack may add fuel to a more than decade-long debate over the country’s participation in U.S.-led military operations in the Middle East that has divided political parties and public opinio</li> <li>Heightened U.S. regulatory scrutiny of leveraged lending is leading the biggest banks to back away from funding some takeovers financed by debt, creating an opportunity for smaller competitors to step in</li> <li>Goldman Sachs Asset Management used the recent selloff in U.S. high yield bonds as an opportunity to add to its position, betting that a strengthening of the world’s largest economy will keep defaults low</li> <li>Sovereign yields mostly higher. Asian stocks decline, European stocks mixed, U.S. equity-index futures gain. Brent crude gains, copper and gold fall</li> </ul> <p><strong>US Event Calendar</strong></p> <ul> <li>8:30am: Chicago Fed National Activity Index, Sept., est. 0.15 (prior -0.21)</li> <li>8:30am: Initial Jobless Claims, Oct. 18, est. 281k (prior 264k) <ul> <li>Continuing Claims, Oct. 11, est. 2.380m (prior 2.389m)</li> </ul> </li> <li>9:00am: FHFA House Price Index m/m, Aug., est. 0.3% (prior 0.1%)</li> <li>9:45am: Markit US Manufacturing PMI, Oct. preliminary, est. 57 (prior 57.5)</li> <li>9:45am: Bloomberg Consumer Comfort, Oct. 19 (prior 36.2)</li> <li>10:00am: Leading Index, Sept., est. 0.7% (prior 0.2%)</li> <li>11:00am: Kansas City Fed Manufacturing Activity, Oct., est. 6 (prior 6)</li> <li>11:00am: Fed to purchase $1.35b-$1.65b notes in 2020-2021 sector</li> <li>11:00am: U.S. to announce plans to auction 2Y/5Y/7Y notes, 2Y FRN</li> <li>1:00pm: U.S. to auction $7b 30Y TIPS in reopening</li> </ul> <p><strong>ASIA</strong></p> <p>JGBs traded up 3 ticks at 146.32 after tracking overnight gains in USTs and further underpinned by earlier weakness in Japanese stocks. Asian equities traded on a sombre note following suit from yesterday’s negative Wall Street close, led by weakness in energy shares amid a sharp drop in oil prices. Hang Seng (-0.3%) and Shanghai Comp (-1.0%) traded lower, shrugging off a better than expected Chinese HSBC manufacturing PMI (50.4 vs. Exp. 50.2), as new orders and output (50.7 vs. Prev. 51.3) metrics fell, the latter printing at the lowest since May’14. The Nikkei 225 (-0.37%) finished the session in the red in a continuation of the negative US close while also tracking the move lower in USD/JPY overnight. </p> <p><strong>FIXED INCOME &amp; EQUITIES </strong></p> <p>Despite opening in the red in a continuation of the move lower seen on Wall St. and overnight, European equities enter the North American open in a sea of green with the exception of the FTSE 100. Despite a lower than expected French PMI release, with all three components falling short of expectations which initially placed further weight on equities, attention instead turned towards the strong German and Eurozone PMI releases. With the data points going against the grain of recent lacklustre Eurozone releases, European equities emerged back into the green with the DAX moving higher by a total of 150 points, which subsequently dragged fixed income products lower as Bunds moved back below 150.50. On a sector specific basis, telecommunication names lead the way following strong earnings updates from the likes of Nokia, Orange and Tele2. </p> <p>However, to the downside, the FTSE 100 has underperformed throughout the session following Tesco’s (down as much as 7%) pre-market update which revealed a larger than expected overstatement and scrapping of guidance. Further negative sentiment from the UK has also stemmed from UK property seller Foxtons (-15%) who noted a fall in home sales volumes. </p> <p>Prelim Barclays month end extension for US treasuries +0.08yrs, Pan Euro Agg month-end extensions +0.08yrs (Prev. +0.09yrs), 12-month average +0.08yrs, Prelim Barclays Sterling Agg month-end extensions +0.06yrs</p> <p><strong>FX</strong></p> <p>In FX markets, USD/JPY has been one of the notable movers during the European session after breaking above Monday's and last week's highs alongside the move lower in fixed income products as USD/JPY gained amid favourable interest differential flows. The move to the upside was also exacerbated by the pair tripping stops through 107.55 and talk of leveraged names on the bid which also saw the pair break above an option expiry at 107.50. Elsewhere, GBP/USD has been weighed on by a disappointing UK retail sales release (Ex Auto M/M -0.3% vs. Exp. 0.0%), which saw the pair briefly break below 1.6000 to the downside, with the ONS noting that the fall in clothing sales volumes is the biggest since April 2012. NZD was a notable mover overnight, with NZD/USD falling just shy of a point, weighed on by NZ CPI (1.0% vs. Exp. 1.2%) which printed at its lowest level since June 2013, prompting several large investment banks incl. Barclays and JP Morgan, to push back their forecast for next RBNZ OCR hike.</p> <p><strong>COMMODITIES</strong></p> <p>Heading into the North American open, WTI and Brent crude futures trade in relatively neutral territory in a modest recovery of yesterday’s DoE inspired losses which saw WTI hit its lowest level in two years, with a lack of further newsflow to dictate price action. Precious metals markets also trade in relatively neutral territory, while residing modestly below yesterday’s lows. However, copper prices have been provided some reprieve following the Chinese manufacturing PMI release, although the move to the upside was capped as attention turned towards the output component of the release. Elsewhere, Anglo American have lifted their annual output targets for all its major commodities with the exception of platinum.</p> <p>* * * </p> <p><strong>DB's Jim Reid concludes the overnight recap</strong></p> <p>Kicking off this morning we’ve already had the flash PMI print in China with the 50.4 reading modestly better than market expectations of 50.2. The benign reading has done little to spark any sort of confidence in investors following the GDP print earlier in the week with the local benchmark unchanged at the time of writing. We’ve also had PMI out of Japan which surprised to the upside, the 52.8 print up from 51.7 in September. Markets in the region are trading mostly in the red. The Nikkei, Hang-Seng and Kospi are -0.2%, -0.3% and -0.3% down whilst in credit iTraxx Asia is +3 bps wider. </p> <p>These real time numbers are clearly going to be important at the moment with many fearing an inflexion point in the global data. To help take stock this morning we resurrect our simple grid looking at the relationship between manufacturing PMIs and equity markets (using YoY % change). This analysis looks at the correlation between these two variables across a selection of key countries over time and which allows us create a simple regression to see whether any anomalies currently exist. </p> <p>Of our 8 sample countries plus the Eurozone, seven currently see manufacturing PMIs between 48.8 (France) and 51.7 (Japan). Depending on the country and based on these numbers, our regressions suggest that these equity markets should generally be flat to slightly higher than 12 months ago. In actuality they're slightly lower suggesting that the market expects PMIs to edge lower or that equities are cheap if they don't. The biggest exception is in the US where the last PMI was 56.6 which corresponds to a 18% YoY gain rather than the 11% we actually have. So the US is 'cheap' if the PMIs don't decline from current levels. </p> <p>We've used this measure less over the last couple of years as central banks have increasingly distorted the relationship between fundamentals and valuation. However all-in-all the relationship looks pretty appropriate over the last 12 months. Those equity markets with lower domestic PMIs are generally the ones struggling and vice-versa. The results are in today's pdf but remember that we always treated this as a back of the envelope guide to value rather than anything more substantial. So treat with care.</p> <p>In terms of what's expected today, for Europe consensus is for a general slip in the PMI’s, with the euro area composite, manufacturing and services PMI dropping to 49.9, 52 and 51.5 respectively. We will also get the French and German numbers with the market expecting the French composite to rise slightly (to 48.7) whilst the German composite is expected to fall (to 53.6).</p> <p>Across the Atlantic, we will get the flash US manufacturing PMI which is also expected to fall (though only to 57). </p> <p>Market performance was mixed yesterday as European assets were broadly up whilst the US struggled. In Europe, the Stoxx 600 closed the day up +0.7% whilst in credit markets iTraxx Xover tightened -6bps. EURUSD fell another -0.4%. After opening on a positive note US equities closed at their lows. The index fell -0.7% whilst credit also struggled with CDX HY widening by +5bps. Markets drifted lower as energy stocks took suffered following an EIA report that showed the US is stockpiling oil reserves at surprisingly high levels for this time of year, WTI sold off 1.9% to trade at close to $80/barrel. The weaker sentiment was further compounded by a mixed batch of earnings releases. Towards the end of the day, news emerged in Ottawa that a gunman had fatally killed a soldier and opened fired inside the parliament building close to the Canadian PM Stephen Harper (BBC). We are yet to hear any confirmation on whether or not the gunman was linked to a known terrorist group. </p> <p>The main macro release of the day was US September CPI which came in slightly ahead of expectations at +0.1% MoM and +1.7% YoY, whilst estimates of core CPI came in at expectation (at +0.1% MoM and +1.7% YoY). In other headlines the ECB entered its third day of asset purchases, with Bloomberg News reporting it had bought Spanish covered bonds, whilst it is also adding to its French and Portuguese purchases. In other ECB news, ECB Governing Council Member Luc Coene said in an interview with Les Echos that “we could extend our interventions to other instruments such as corporate bonds” but that, “there is no concrete proposal on the table at the moment.” In the UK, the BoE minutes saw sterling fall as the minutes showed that whilst 2 members continued to vote for a hike, 7 opted to keep rates unchanged, with the minutes also showing increased pessimism about the global economy.</p> <p>Looking ahead European banks will this evening get the results from the AQR, before the full results are released on Sunday. It’s likely that leaks about the results will intensify in this interim period. Data wise, beyond the PMI’s we will get French confidence numbers and UK September retail sales, whilst in the US we will get initial jobless claims (expected in at 281k vs +264k previously). We will also get earnings reports from the likes of Credit Suisse, Daimler and Tesco in Europe, and American Airlines, GM, Microsoft and Amazon in the US.</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="388" height="320" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/Eurozone%20PMI%202.gif?1414061948" /> </div> </div> </div> http://www.zerohedge.com/news/2014-10-23/futures-bounce-stronger-europe-headline-pmis-despite-markits-warning-darker-picture-#comments Barclays Bloomberg News BOE Central Banks China Comcast Continuing Claims Copper Core CPI CPI Credit Suisse Crude Daimler Deutsche Bank Equity Markets Eurozone fixed France Germany Global Economy headlines High Yield Initial Jobless Claims Japan Jim Reid Markit Middle East Nikkei Precious Metals Price Action Recession recovery Thu, 23 Oct 2014 10:59:44 +0000 Tyler Durden 496083 at http://www.zerohedge.com Russia is de-dollarizing http://www.zerohedge.com/news/2014-10-23/russia-de-dollarizing <p><img src="http://www.zerohedge.com/sites/default/files/images/user134468/imageroot/2014/10/ruble.png" alt="ruble" title="ruble" /></p> <p>&nbsp;</p> <p class="MsoNormal">The ruble and other currencies do not compete against the dollar. They are dollar derivatives.</p> <p class="MsoNormal">The dollar is headed to ruin, but that doesn’t mean that any other paper currency can replace it. The others will fail first.</p> <p><!--[if gte mso 9]><xml> <o:DocumentProperties> <o:Subject>[See LCCN: 13001206 at catalog.loc.gov]. Library of Congress. Preservation Reformatting Division. </o:Subject> <o:Author>Morgan</o:Author> <o:Keywords> Untermyer, Samuel, 1858-1940.Uniited States. Congress. House. 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QFormat="true" Name="TOC Heading" /> </w:LatentStyles> </xml><![endif]--><!--[if gte mso 10]> <mce:style><! /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:12.0pt; font-family:Cambria; mso-ascii-font-family:Cambria; mso-ascii-theme-font:minor-latin; mso-hansi-font-family:Cambria; mso-hansi-theme-font:minor-latin;} --><!--[if gte mso 10]> <mce:style><! /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:12.0pt; font-family:Cambria; mso-ascii-font-family:Cambria; mso-ascii-theme-font:minor-latin; mso-hansi-font-family:Cambria; mso-hansi-theme-font:minor-latin;} --><!--[endif] --><!--[endif] --><!--StartFragment--><!--StartFragment--><!--EndFragment--><!--EndFragment--></p> <p class="MsoNormal">The dollar will fail last.</p> <p class="MsoNormal">&nbsp;</p> <p class="MsoNormal"><em>The failure of the dollar, and the transition to gold happens to be the theme of an event <a href="http://goldstandardinstitute.us/?page_id=737">The Gold Standard: Both Good and Necessary</a>, in New York on Nov 1. There hasn’t been a real recovery from the crisis of 2008, and there won’t be until we return to the use of gold as money. Please come to this event to hear Andy Bernstein present the moral case for capitalism, and Keith Weiner present the case against the dollar and for the gold standard.</em></p> http://www.zerohedge.com/news/2014-10-23/russia-de-dollarizing#comments Fail recovery Thu, 23 Oct 2014 06:11:45 +0000 Gold Standard Institute 496082 at http://www.zerohedge.com How The Federal Reserve Is Purposely Attacking Savers http://www.zerohedge.com/news/2014-10-22/how-federal-reserve-purposely-attacking-savers <p><em>Submitted by <a href="http://www.peakprosperity.com/blog/88227/how-federal-reserve-purposely-attacking-savers">Chris Martenson via Peak Prosperity</a>,</em></p> <p>There&#39;s something we &#39;regular&#39; citizens wrestle with that the elites never seem to: <em>a sense of moral duty</em>.</p> <p>For example, following the collapse of the housing bubble, many people struggled with mortgages they could no longer afford to pay, fearing the shame of default. Many believed defaulting was wrong somehow; that it was their moral obligation to pay their mortgages, no matter how dire their personal situation. And of course, the mortgages lenders did their utmost to reinforce this perception.</p> <p>In a perfect world, we <em>would</em> honor our debts and obligations, every one of us. But the world is an imperfect place ,and moral obligation is something that almost never enters into the decision matrix of our society&#39;s richest. Or the banking industry.</p> <p>For them, the number one (and two, and three...) rule is that whatever is expedient and makes the most money is the right thing to do.</p> <p>For the bottom 99%, it&rsquo;s like playing with a stricter set of rules than your opponent: you&rsquo;re not allowed to hit below the belt, and they&rsquo;ve brought a baseball bat into the ring.</p> <p>Note how this guy had to fight through his middle class conditioning before coming to a sense of peace over his decision to enter into a short sale on his house:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><a href="http://www.salon.com/2014/09/29/the_big_middle_class_rip_off_how_a_short_sale_taught_me_rich_peoples_ethics/" target="_blank">How a short sale taught me rich people&rsquo;s ethics</a></p> <p>Sep 29, 2014</p> <p>&nbsp;</p> <p><strong>The closest I ever came to acting like a rich person was two years ago when I short-sold my primary residence.</strong> I might have been able to keep it but strategic default made life easier. I owed about $400,000 on a house that short-sold for $150K. The bank lost more than a quarter of a million dollars, and I lost at least $80K in down payment and property improvements.</p> <p>&nbsp;</p> <p><strong>I was taught growing up to &ldquo;keep my word&rdquo; and that your handshake &ldquo;meant something.&rdquo;</strong> Yet businessmen and individual wealthy people make decisions that are far less moral than a short sale. People &ldquo;incorporate&rdquo; so they can avoid legal responsibility for individual actions.</p> <p>&nbsp;</p> <p><strong>It works great. You can stiff creditors, declare bankruptcy, pollute daily and raid pensions to enrich individual executives.</strong> If it all goes wrong, like it has so often for Donald Trump, you can keep your mansions and individual fortunes.</p> <p>&nbsp;</p> <p>I entered the shark-infested waters of high finance with a short sale. <strong>It was the worst ethical decision, but the finest, most profitable business moment, of my adult life.</strong> It was an informative, even transformative, experience.</p> <p>&nbsp;</p> <p>(<a href="http://www.salon.com/2014/09/29/the_big_middle_class_rip_off_how_a_short_sale_taught_me_rich_peoples_ethics/" target="_blank">Source</a>)</p> </blockquote> <p>This poor guy has a very bad case of &lsquo;middle class morality&rsquo;. It&#39;s a very real phenomenon. All our lives, we are all taught (programmed?) to stay within the true and narrow groove of middle class life, pay our bills, and be on the hook should things go awry.</p> <p>Not everybody holds that view, however. As he continues in the piece, the author discovers something important along the way:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>I always knew business was getting over on me, but I had no idea the extent until I started looking to short-sell. I first learned all I could about<em>private</em>home financing. I called up some shady investment groups around town and questioned them at length. I didn&rsquo;t end up using them, but they were frank, informative and unashamed.</p> <p>&nbsp;</p> <p><strong>&ldquo;Who would pay 11 percent on a home loan?&rdquo;</strong> I asked.</p> <p>&nbsp;</p> <p><strong>&ldquo;Rich people,&rdquo;</strong> said &ldquo;Bill&rdquo; from the legal loan-sharking company. <strong>&ldquo;The rich have terrible credit.&rdquo;</strong></p> <p>&nbsp;</p> <p><strong>Rich people = bad credit: Just let that sink in.</strong></p> <p>&nbsp;</p> <p><strong>Bill told me in roundabout ways that rich people never pay a bill if there is any way around it.</strong> If something goes wrong in an investment or a business, they always preserve their own assets first.</p> </blockquote> <p>Rich people have terrible credit. They know that there&rsquo;s a system and it has rules. And, for them, these rules can (and should) be optimized for their own benefit. So they do anything and everything that works to their advantage.</p> <p>There&rsquo;s a reason and a logic to that which I can appreciate, but it makes me wonder where the rest of us obtained our deep-seeded beliefs about duty and responsibility towards debts.</p> <p>Similar to rich people, banks do not have any entangling moral restrictions on their behaviors. That absence allows them to get away with extraordinary misdeeds, none more obvious and damaging than those that the Federal Reserve has perpetrated on the nation, specifically, and the world, more broadly.</p> <p>To understand why, we first have to discuss something called Financial Repression.</p> <h2><u>Financial Repression</u></h2> <p>In my recent <a href="http://www.peakprosperity.com/podcast/88132/dan-amerman-will-our-private-savings-sacrificed-pay-down-public-debt">interview with Daniel Amerman</a>, to whom I will credit much of the concise thinking and for unearthing the sources that I will weave throughout the remainder of this piece (please read his excellent article on <a href="http://danielamerman.com/va/Repression.html">Financial Repression here</a>), the truly immoral intent of the Fed&#39;s policies really sank in.</p> <p>In response to the <a href="http://www.peakprosperity.com/blog/88158/fuzzy-numbers-crash-course-chapter-18">Fuzzy Numbers chapter (18) of the Crash Course</a>, reader JBarney pondered the following:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Thanks for putting this update together. I think one of the problems is there are so many moving parts, so many manipulated numbers it is difficult to get a clear picture. The way it is organized here is helpful.</p> <p>&nbsp;</p> <p>However,<strong>I can&#39;t help but wonder about all of the implications of these numbers for the real economy and people&#39;s lives.</strong><strong> One of the sections which really hits home was the impact inflation has on all of this. If these are the numbers now, what will it be like when things really start to change?</strong></p> </blockquote> <p>The answer is that while inflation always steals from savers, it really does its dirty work when the central bank and government conspire to create a condition of pervasive and unavoidable<strong> negative real interest rates.</strong></p> <p>This is the heart of Financial Repression: an environment in which you literally cannot save money without paying a penalty.</p> <p>The main takeaway of Chapter 18 on Fuzzy Numbers is not that the government fibs a little now and then (okay,<em>all </em>the time) merely because that&#39;s politically expedient, but it does so in service to a larger and more pernicious aim: forcing people to accept an inflation rate that is higher than either their income growth and/or the market&#39;s safe rate of return.</p> <p>As soon as you are locked into a negative interest rate regime, your capital is losing purchasing power. But simple accounting rules dictate that loss of wealth had to go <em>somewhere</em>. So where did it go? To somebody else.</p> <p>Negative real interest rates transfer money <strong>from</strong> every saver <strong>to</strong> every over-extended borrower. This is especially true with the government (largely because of its special revolving door relationship with the Fed, which both issues the money out of thin air and then buys government debt forcing rates into negative territory).</p> <p>It&#39;s really that simple. The Fed has openly and actively suppressed rates -- not to help the credit markets, as they claim, but to engineer a condition of Financial Repression. Because that&#39;s what the government needs to stealthily take your wealth to pay down the prior debts it accumulated.</p> <p>Thus &#39;negative real rates&#39; are <strong><em>the</em></strong> essential component of transferring wealth from the many to the few, with the &#39;few&#39; being defined as the government, Wall Street, and others who exploit leverage and liabilities at sufficient scale to be on the right side of that wealth transfer.</p> <p>This well-known phenomenon is <em>a thoroughly accepted and well-described practice of governments and central banks everywhere. </em>One of the better descriptions of it comes to us courtesy of the BIS in <a href="http://www.imf.org/external/np/seminars/eng/2011/res2/pdf/crbs.pdf" target="_blank">this working paper </a>published in 2011.</p> <p>From the abstract:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Historically, periods of high indebtedness have been associated with a rising incidence of default or restructuring of public and private debts.</p> <p>&nbsp;</p> <p><strong>A subtle type of debt restructuring takes the form of &ldquo;financial repression.&rdquo;</strong></p> <p>&nbsp;</p> <p><strong>Financial repression includes directed lending to government by captive domestic audiences (such as pension funds), explicit or implicit caps on interest rates, regulation of cross-border capital movements, and (generally) a tighter connection between government and banks.</strong></p> <p>&nbsp;</p> <p>In the heavily regulated financial markets of the Bretton Woods system, several restrictions facilitated a sharp and rapid reduction in public debt/GDP ratios from the late 1940s to the 1970s.</p> <p>&nbsp;</p> <p><strong>Low nominal interest rates help reduce debt servicing costs while a high incidence of negative real interest rates liquidates or erodes the real value of government debt.</strong></p> <p><strong>Thus, financial repression is most successful in liquidating debts when accompanied by a steady dose of inflation.</strong></p> <p>&nbsp;</p> <p>Inflation need not take market participants entirely by surprise and, in effect,<strong>it need not be very high</strong>(by historic standards).</p> <p>&nbsp;</p> <p>For the advanced economies in our sample, real interest rates were negative roughly &frac12; of the time during 1945-1980. For the United States and the United Kingdom our estimates of <strong>the annual liquidation of debt via negative real interest rates amounted on average from 2 to 3 percent of GDP a year.</strong></p> <p>(<a href="http://www.imf.org/external/np/seminars/eng/2011/res2/pdf/crbs.pdf" target="_blank">Source</a>)</p> </blockquote> <p>Let me decode that.</p> <ul> <li><strong>Step 1:&nbsp;</strong>Governments get into trouble by borrowing too much.</li> <li><strong>Step 2:&nbsp;</strong>Rather than pay this down honestly via cutting spending (unpopular) or by defaulting (even more unpopular), the government conspires with the central bank to slowly liquidate the stack of obligations by forcing negative real interest rates on everyone.</li> <li><strong>Step</strong><strong>2b</strong><strong>:&nbsp;</strong>Hang on one second...it wouldn&rsquo;t work if people could <em>dodge</em> the Financial Repression, so a ring fence has to be built out of capital controls and explicit rate caps on and across the whole spectrum of interest-bearing securities.</li> <li><strong>Step 3:&nbsp;</strong>Sit back and wait for everyone with savings to contribute their purchasing power to those who issued the debts, be those public or private entities.</li> </ul> <p>And this is exactly what has happened. <u><strong>All of the talk about the Fed focusing on unemployment or inflation or <em>whatever</em> are red herrings. What the Fed is really trying to do is to create a set of macro conditions that will allow the federal government to slowly crawl out from under a pile of debt and entitlement obligations that it literally can not pay by honest, above board means.</strong></u></p> <p>I guess if we were to imagine a &quot;Step 4&quot; in the above process, it would be to wait for the head of the central bank to come out and deliver a speech in which she expresses a grandmotherly concern for the wealth gap that naturally results from all this, but to deflect attention away from this being a direct and understood consequence of the Fed&#39;s intentional goal of financial repression and towards some failure on the part of those who have been targeted to donate to the cause of bailing out the profligate and rewarding the borrowers.</p> <p>Oh, wait. That did just happen. Here it is, Step 4, courtesy of Janet Yellen last week:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><a href="http://www.washingtonpost.com/blogs/wonkblog/wp/2014/10/17/yellen-depth-and-breadth-of-u-s-inequality-greatly-concern-me/" target="_blank">Why Fed Chair JanetYellenis &ldquo;greatly&rdquo; concerned about growing inequality</a></p> <p>&nbsp;</p> <p>Federal Reserve Chair Janet Yellen on Friday <strong>expressed deep concern over widening economic inequality </strong>in the country and called for tackling issues such as <strong>early childhood education and encouraging entrepreneurship to help narrow the gap.</strong></p> <p>&nbsp;</p> <p><strong><em>[Comment:</em></strong><em>Oh boy...must contain my emotions...did she really just deflect the consequences of the Fed&#39;s policy of financial repression towards &#39;early childhood education? Yep. That&#39;s like a burglar saying that we need to invest in better metallurgical processes as the means of preventing doors from being kicked in so easily.]</em></p> <p>&nbsp;</p> <p>In a speech at the Federal Reserve Bank of Boston, Yellen said steady growth in inequality over the past several decades represents the most sustained rise since the19thcentury.<strong>Living standards for most Americans have been &ldquo;stagnant,&rdquo; while those at the very top have enjoyed significant wealth and income gains, she said.</strong></p> <p>&nbsp;</p> <p><strong><em>[Comment:</em></strong><em> Glad the Fed finally noticed that those at the very top have been making out like bandits! This was something I said explicitly would happen as a consequence of future Fed printing back in 2008 in the Crash Course, before the printing even started. How is it that I knew that this would happen back in 2008 and the Fed is just now noticing this observationally? Is my research department better than theirs? In fact this is a very well known and easy to understand process. That the Fed is feigning ignorance speaks volumes about how ignorant they believe we all are. This is a sure sign that we are trapped in a dysfunctional relationship with an abusive partner.]</em></p> <p>&nbsp;</p> <p><strong>&ldquo;I think it is appropriate to ask whether this trend is compatible with values rooted in our nation&rsquo;s history,</strong>among them the high value Americans have traditionally placed on equality of opportunity,&rdquo; Yellen said in prepared remarks.</p> <p>&nbsp;</p> <p><strong><em>[Comment:</em></strong><em> Once we accept that the Fed is openly and specifically creating the wealth gap as a matter of active and ongoing policy, which it is, then it&#39;s actually more appropriate to ask if the Federal Reserve is compatible with values rooted in our nation&#39;s history. The answer, obviously, is &quot;no.&quot;]</em></p> <p>&nbsp;</p> <p>The problem of inequality is an unusual topic for the leader of the Fed, if only <strong>because the central bank&rsquo;s ability to address the issue is limited.</strong></p> <p>&nbsp;</p> <p><em><strong>[Comment</strong>: Stop right there Washington Post! You&#39;ve just inserted an assertion that might as well have come straight from a PR press release from the Fed. I, for one, refuse that claim and reject it completely right here and on grounds that hardly have to be substantiated, but I will just for fun. When the Fed buys &#39;assets&#39; (really debt instruments) from major financial firms using freshly printed money they are,</em><strong><em>by definition</em></strong><em>, buying those assets at steadily increasing prices which means that those who hold the largest amounts of these assets get the richest. When the Fed secondarily targets the stock market as something to &#39;go up&#39; and the </em><strong>top 5% own 82% of all stocks</strong><em>, then the Fed&#39;s role is anything but &#39;limited.&#39; It is direct and proportional and they are 100% responsible for any and all gains that accrue to the top via the &#39;miracle&#39; of asset inflation. Period. End of story. See also any of the innumerable charts plotting the S&amp;P 500&#39;s rise along with the growth in the Fed balance sheet for further confirmation. Sorry Washington post, assertion denied!!]</em></p> <p>&nbsp;</p> <p><strong>Yellen&nbsp;</strong><strong>listed four factors that can influence economic opportunity: investing in education for young children, making college more affordable, encouraging entrepreneurship and building inheritance.</strong></p> <p>&nbsp;</p> <p><strong><em>[Comment:</em></strong><em>OMG. She just blamed the victims and did it in a very let them eat cake kind of way. How aggravating(!). According to Yellen, if people are finding themselves getting poorer what they need to do is stop scrimping on their kids, become an entrepreneur and then somehow go back in time and have rich parents. This statement of hers calls for pitchforks and torches. Literally. Without a shred of decency, she has shifted all blame from the Fed to the victims. How corrupt or morally adrift does someone have to be to blame their victims? In a criminal case this would be used as evidence of sociopathic if not psychopathic behavior and used by a prosecutor to call for a maximum sentence to prevent a dangerous&nbsp;individual from running loose in society. And rightly so. Such individuals are poor prospects for rehabilitation.]</em></p> <p>&nbsp;</p> <p><strong>Yellen </strong><strong>did not address in her prepared text whether the Fed has contributed to inequality.</strong></p> <p>&nbsp;</p> <p><strong><em>[Comment:</em></strong><em>No surprise there. Ted Bundy never acknowledged the harm he caused either.]</em></p> <p>(<a href="http://www.washingtonpost.com/blogs/wonkblog/wp/2014/10/17/yellen-depth-and-breadth-of-u-s-inequality-greatly-concern-me/" target="_blank">Source</a>)</p> </blockquote> <p>At this point, based on Yellen&#39;s testimony, I think it&#39;s time to say what everybody is already thinking: the Fed Chairwoman is literally displaying psychopathic tendencies by blaming her victims. I&#39;m serious: if the Fed were an individual, we&rsquo;d have no problem identifying its behaviors in psychologically pathological terms.</p> <p>I understand that some, or perhaps many, will excuse this last point by saying that the Fed cannot possibly state the truth because doing so would create loss of confidence or public anger. But I submit that the so-called &quot;white lie&quot; defense is utter nonsense.</p> <p><strong>A greater harm is done by lying than by telling the truth.</strong> You can get away with small lies for a while, but they never actually go away, they just sit there corrosively undermining the very foundation of trust upon which civilized society rests. Large lies just do more damage over a shorter period of time, and that&rsquo;s exactly where we are today. This explains much in terms of people&rsquo;s general sense of unease despite an apparently reasonable economy and awesome living standards (by any historical measure).</p> <p>Here&#39;s what truth would sound like if I were to re-write Yellen&#39;s speech:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>My fellow Americans. Decades of poor fiscal restraint and accommodative monetary polices have brought us to an uncomfortable juncture.</p> <p>&nbsp;</p> <p>My intention today is not to cast blame &ndash; there will be plenty of time for that later &ndash; but to take stock of where we are so that we can all decide on the best course forward, openly and honestly, as should be the case in a democracy.</p> <p>&nbsp;</p> <p>There are no easy choices at this point, only a rather poor range of options spanning from somewhat unpleasant to potentially catastrophic.</p> <p>&nbsp;</p> <p>The heart of the matter is simply this: the US government has built up an extraordinary amount of public debt, and an even larger pile of unfunded liabilities.</p> <p>&nbsp;</p> <p>There&rsquo;s simply no way for those to all be paid back under current terms. And given recent trajectories in play with respect to economic growth and deficit spending patterns, those debts and liabilities are only growing larger with time.</p> <p>&nbsp;</p> <p>Quite simply our choices are these:</p> <ol> <li><strong>Pay down the debt by taking in more revenue than expenses.</strong> This is also known as austerity and given the size of the debts and other obligations, several decades of severe belt tightening would be required. This program would be extremely painful for nearly everybody and would require massive tax hikes coupled to major spending cuts.</li> <li><strong>Default on the debts and obligations.</strong> This simply means not paying people, investors, institutions and countries what we have promised to pay. Down this path lies the potential for massive destruction of our financial and political systems, so we have chosen to not entertain this path any further than to mention it exists.</li> <li><strong>Do nothing and wait for a fiscal and monetary accident to happen. </strong>This is a guaranteed disaster that could result in the sudden and permanent decline of opportunity in this country that would be so painful we cannot even predict the possible outcomes.</li> <li><strong>Engineer conditions where negative real rates of interest slowly allow the government&rsquo;s obligations to fall relative to inflation.</strong> Over the span of decades this is the least painful route and our country has been down this path before.</li> </ol> <p>We&rsquo;ve selected path #4 as the least bad option. Since 2009 our policies have been geared towards #4 and we see no alternative besides staying on that path for as long as necessary. The alternative is the literal bankruptcy of our nation and we cannot and will not allow that to happen. Not on our watch.</p> <p>&nbsp;</p> <p>While path #4 is the least objectionable of them all, it comes with its own share of unfortunate consequences and injustices. At its heart, negative real interest rates are an effective tax on savers and those whose incomes fail to keep pace with the inflation we are creating as an overt act of policy. This generalized and widespread loss of purchasing power takes a little bit from everyone, rather than a lot from a few systemically important institutions such as your federal government, which spreads the pain widely, and therefore causes the least disruptions to our daily lives.</p> <p>&nbsp;</p> <p>Path #4 has a name: Financial Repression. This policy combines negative real interest rates with various forms of capital controls and tax policy to assure that nobody can evade it.</p> <p>&nbsp;</p> <p>Obviously this is not fair, nor is it in alignment with our national narrative of prudence and hard work being rewarded because, truth be told, it rewards the profligate and those who produce nothing of real value but can play the game of high finance well. Yet here we are without any better options before us, and so we reluctantly chose Financial Repression.</p> <p>&nbsp;</p> <p>One other distasteful &lsquo;feature&rsquo; of the program of financial repression we&rsquo;ve been putting you all through is that the rich get richer. Until or unless there is a massive change to the taxation and wealth re-distribution programs of the federal government, the Federal Reserve&rsquo;s program of Financial Repression will continue to deliver an ever-larger gap between the wealthy and everyone else.</p> <p>&nbsp;</p> <p>Such is the nature of the compounding function combined with the inequity of who gets first access to the newly created funds we make available in order to drive the interest rate curve into negative territory.</p> <p>&nbsp;</p> <p>Are there any risks to this program? Well, the largest of them really needs to be discussed. Financial Repression has worked in the past, but it has only worked because we experienced both inflation and economic growth in equal measures.</p> <p>&nbsp;</p> <p>Today, for reasons that we are still studying, neither the wage growth necessary to incite the sort of inflation we need nor economic growth have arrived as we thought they would.</p> <p>&nbsp;</p> <p>If economic growth <em>does not </em>return, then the entire program of financial repression could well fail, and fail spectacularly. Everything depends on a return of economic growth sufficient to service the vast increases in debts that will result from the program.</p> <p>&nbsp;</p> <p>But if that growth does not materialize? If the world is now stuck in a &lsquo;New Mediocre&rsquo; of low growth then one risk is the possibility of a crisis that will be rooted in a permanent loss of confidence in debts of all forms, but government debt specifically. Down that road lie currency crises, and a wide variety of related financial upheavals the final result of which is what most will experience as a massive destruction of wealth.</p> <p>&nbsp;</p> <p>We are working hard to assure that these risks are well contained, but you should be aware that they exist</p> <p>&nbsp;</p> <p>After all, this is all of our futures that we are experimenting with and we do not have a playbook that we can follow here in 2014. We are in wholly uncharted territory. The exact arrangement of conditions we see across the global landscape is brand new.</p> <p>&nbsp;</p> <p>We&rsquo;re sorry to have to be in the position of engineering Financial Repression, but we felt there were no other options before us and we hope that you agree that a slight yearly discomfort to almost everyone is preferable to a major disruption to our way of life, our political system, and the possibility of worse things.</p> <p>&nbsp;</p> <p>Is this fair? No. Was it avoidable? Yes. Is there anything we can be doing differently today? Not that we are aware of. The choices are between bad, worse and utterly terrible. We&#39;re choosing the bad path, and we hope you&rsquo;ll agree that this is the best we can do at this point.</p> <p>&nbsp;</p> <p>But you deserve the truth because it&rsquo;s already completely obvious and available for anybody with access to a computer. Since we are all in this together and we&rsquo;re all being asked to sacrifice in some way, it&#39;s much better that we all agree on the treatment plan.</p> <p>&nbsp;</p> <p>It&rsquo;s not a perfect plan, far from it. But considering the alternatives, this is the best one on the table.</p> <p>&nbsp;</p> <p>If you want to make it more fair, more equitable, and with an eye towards building to a future in which we can all share some hope, you&rsquo;ll need to turn to your policy makers and ask them to work from the fiscal side to correct what they can. Without a profound realignment of priorities, we&rsquo;ll just get more of the same and, truth be told, eventually more of the same turns into a fiscal and monetary disaster about which nothing can be done except absorb the pain and loss that it will bring.</p> </blockquote> <h2><u>Conclusion</u></h2> <p>Context is everything. The growing gap between the very wealthy and everyone else is a consequence of Fed policy.</p> <p>Whether you decide to be shocked, angry, or scared by Janet Yellen&rsquo;s recent speech is up to you. Personally, I&#39;m pissed off at being lectured to that falling further behind the super wealthy is my fault for not investing enough in my kids, not being entrepreneurial enough, and not having wealthy parents.</p> <p>That level of &lsquo;blame the victim&rsquo; is psychopathic, utterly appalling, and I reject it on every level. Worse, the level of trust destruction that happens with such a tone-deaf speech stains our entire national leadership. It is the modern version of <em>Let them eat cake</em>.</p> <p>Once an institution, be it royalty of old or the Fed today, gets so far off the rails that they cannot locate their own role in the misery they see around them, it&rsquo;s a sign of a huge problem for that society.</p> <p>Ms. Yellen should not be allowed by anyone to get away with such a patently and provably false set of arguments. She should have been soundly booed off the stage and the President should be asking for her resignation immediately.</p> <p>But we&rsquo;re so far down the rabbit hole that almost nobody blinked an eye at the speech, and thought it perfectly normal.</p> <p>For you personally, you need to be aware that the debts, deficits and liabilities across the entire OECD world are continuing to grow at a far faster pace than GDP, and far faster than oil production and discoveries of low-cost oil reservoirs (those schooled in net energy understand this to be the <em>real</em> issue), and that the most likely outcome, someday, will be an extraordinary financial accident.</p> <p>It will be called something else -- a period of wealth destruction -- but for those who can see it coming, it will actually be period of massive wealth <em>transfer</em>.</p> <p>And we&#39;ll keep up our efforts on how to see clearly amidst the intentional obfuscation, to help those aware to the situation avoid ending up on the wrong side of that transfer.</p> <p>[/rant]</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="278" height="191" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20141022_fed.jpg?1414014939" /> </div> </div> </div> http://www.zerohedge.com/news/2014-10-22/how-federal-reserve-purposely-attacking-savers#comments Central Banks Chris Martenson Creditors default Deficit Spending Donald Trump Fail Federal Reserve Federal Reserve Bank Federal Reserve Bank Of Boston Housing Bubble Janet Yellen None Purchasing Power Real Interest Rates Testimony Unemployment United Kingdom Thu, 23 Oct 2014 03:24:37 +0000 Tyler Durden 496072 at http://www.zerohedge.com It’s Not Just Spying – How The NSA Has Turned Into A Giant Profit Center For Corrupt Insiders http://www.zerohedge.com/news/2014-10-22/it%E2%80%99s-not-just-spying-%E2%80%93-how-nsa-has-turned-giant-profit-center-corrupt-insiders <p><em>Submitted by <a href="http://libertyblitzkrieg.com/2014/10/20/its-not-just-spying-how-the-nsa-has-turned-into-a-giant-profit-center-for-corrupt-insiders/">Mike Krieger via Liberty Blitzkrieg blog</a>,</em></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong><em>Dear NSA Employees, You Now Have a&nbsp;Green Light to Loot and Pillage. It&rsquo;s&nbsp;Time to&nbsp;Get Paid:</em></strong></p> <p>&nbsp;</p> <p><em>Are you&nbsp;just another one of those frustrated NSA employees who feels that&nbsp;unconstitutionally spying on your fellow citizenry under false pretenses&nbsp;isn&rsquo;t giving you same thrill&nbsp;it once did? If so, have no&nbsp;fear.</em></p> <p>&nbsp;</p> <p><em>Are you are sick and tired of&nbsp;having to spilt your precious working hours&nbsp;defending the&nbsp;destruction of our&nbsp;nation&rsquo;s founding document to those pesky terroristic&nbsp;media&nbsp;dinosaurs who still think investigative journalism belongs&nbsp;in Amerika? If so, have I got a solution for you. </em></p> <p>&nbsp;</p> <p><em>While it may sound too good to be true, trust me it&rsquo;s not. You see, in recent years almost all&nbsp;crony-capitalist criminal activities have been deemed legal in the land of the free (to pillage). This incredible opportunity allows you to directly&nbsp;leverage your intelligence skill-set to&nbsp;earn the big bucks you know you&rsquo;ve always deserved. You can now do just that by working in the private sector without having to give up that cushy government day job! I mean if we&rsquo;re going to have this banana republic thing going we may as well GET PAID.&nbsp;Am I right?</em></p> <p>&nbsp;</p> <p><em>Keep at it patriots,</em><br /><em>Michael Krieger</em></p> </blockquote> <p>If the above sounds like a joke, unfortunately it is not. Last week, two very important stories came out; one from Reuters and the other&nbsp;from Buzzfeed. They both zero in on how current NSA employees are using their expertise and connections to make big money in the private sector while still working at the NSA. Let&rsquo;s start with the Reuters story, which covers former NSA-head Keith Alexander&rsquo;s business relationship with the NSA&rsquo;s current&nbsp;Chief Technical Officer, Patrick Dowd.</p> <p>Before we get into the meat of this story, I want to set the stage with a little background. In case you forgot, Keith Alexander launched his own cyber-security firm,&nbsp;IronNet Cybersecurity Inc., earlier this year. I highlighted this development in the post,<a href="http://libertyblitzkrieg.com/2014/06/20/ex-nsa-chief-keith-alexander-is-now-pimping-advice-to-wall-street-banks-for-1-million-a-month/">&nbsp;</a><strong><a href="http://libertyblitzkrieg.com/2014/06/20/ex-nsa-chief-keith-alexander-is-now-pimping-advice-to-wall-street-banks-for-1-million-a-month/">Ex-NSA Chief Keith Alexander is Now Pimping Advice to Wall Street Banks for $1 Million a Month</a></strong>, in which I noted:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>So what&rsquo;s a Peeping Tom, anti-democratic, Constitution-trampling intelligence crony to do after leaving decades of &ldquo;public service?&rdquo; Move into the private sector and collect a fat&nbsp;paycheck from Wall Street, naturally. Following in the footsteps of some of the other top tier public sector cronies looking to cash out after doing their best to destroy the Republic, such as Banana&nbsp;<a href="http://libertyblitzkrieg.com/2014/03/04/bernankes-not-wasting-any-time-he-will-earn-250000-for-a-speech-in-abu-dhabi/">Ben Bernanke collecting $250,000 per speech</a>&nbsp;and Turbo Tax&nbsp;<a href="http://libertyblitzkrieg.com/2014/06/05/matt-stoller-destroys-timothy-geithner-in-his-epic-review-of-stress-test/">Timmy Geithner hopping over to private equity giant</a>&nbsp;Warburg Pincus, Mr. Alexander is in good crooked company.</em></p> <p>&nbsp;</p> <p><em>So what is Mr. Alexander charging for his expertise? He&rsquo;s looking for $1 million per month. Yes, you read that right. That&rsquo;s the rate that his firm,&nbsp;IronNet Cybersecurity Inc., pitched to Wall Street&rsquo;s largest lobbying group the Securities Industry and Financial Markets Association (SIFMA), which ultimately negotiated it&nbsp;down to a mere $600,000 a month.</em></p> </blockquote> <p>As if Mr. Alexander plowing right through the revolving door to earn $1 million per month from Wall Street less than a year after being at the center of perhaps the most expansive government violation of the Constitution in U.S. history wasn&rsquo;t bad enough, he is now hiring top people still working at the NSA to concurrently work at his cyber-security firm. I wish I was making this up.</p> <p><a href="http://www.reuters.com/article/2014/10/17/us-usa-intelligence-nsa-idUSKCN0I624Y20141017"><em>Reuters</em> reports</a>&nbsp;that:</p> <div> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div> <p><em>(Reuters) &ndash; The U.S. National Security Agency has launched an internal review of a senior official&rsquo;s part-time work for a private venture started by former NSA director Keith Alexander that raises questions over the blurring of lines between government and business.</em></p> <p>&nbsp;</p> <p><strong><em>Under the arrangement, which was confirmed by Alexander and current intelligence officials, NSA&rsquo;s Chief Technical Officer, Patrick Dowd, is allowed to work up to 20 hours a week at IronNet Cybersecurity Inc, the private firm led by Alexander, a retired Army general and his former boss.</em></strong></p> <p>&nbsp;</p> <p><em>The arrangement was approved by top NSA managers, current and former officials said. It does not appear to break any laws and it could not be determined whether Dowd has actually begun working for Alexander, who retired from the NSA in March.</em></p> <p>&nbsp;</p> <p><strong><em>Current and former U.S. intelligence officials, some of whom requested anonymity to discuss personnel matters, said they could not recall a previous instance in which a high-ranking U.S. intelligence official was allowed to concurrently work for a private-sector firm.</em></strong></p> <div> <p>&nbsp;</p> <p><em>Alexander, who was the eavesdropping and code-breaking agency&rsquo;s longest-serving director, confirmed the arrangement with Dowd in an interview with Reuters. He said he understood it had been approved by all the necessary government authorities, and that IronNet Cybersecurity, not the government, would pay for Dowd&rsquo;s time spent with the firm.</em></p> </div> </blockquote> <div> <p>As if the entity paying Dowd for his time spent at the firm is the issue. Alexander is the definition of&nbsp;the word creep.</p> </div> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>Dowd, he said, wanted to join IronNet, and the deal was devised as a way to keep Dowd&rsquo;s technological expertise at least partly within the U.S. government, rather than losing him permanently to the private sector.</em></p> </blockquote> </div> <div> <p>Oh I get it now. America has become so hopelessly&nbsp;corrupt, that the revolving door itself is becoming too much of a headache. So the solution is to just get rid of it completely.</p> </div> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>&ldquo;I wanted Pat to stay at NSA. He wanted to come on board,&rdquo; Alexander said.</em></p> <p>&nbsp;</p> <p><em>Alexander and Dowd have jointly filed patents based on technology they developed while at the NSA. </em></p> <p>&nbsp;</p> <p><em><strong>&ldquo;If it isn&rsquo;t structured very carefully, this runs the risk of conflict of interest and disclosure of national secrets,&rdquo;</strong> Rothstein said. &ldquo;It is a situation that in the interests of good government should be avoided unless there&rsquo;s some very strong reason to do it.&rdquo;</em></p> </blockquote> <p>So Americans aren&rsquo;t entitled to any privacy because of a&nbsp;trumped up terrorist threat, yet top NSA employees can moonlight for private businesses involved in the same areas as the NSA with apparently no threat to national security. <strong>America has gone completely&nbsp;insane.</strong></p> <p>Unsurprisingly, this is just the tip of the crony-capitalist fraud that the NSA has become. In fact, Buzzfeed broke a related story recently. It reports how one of the most powerful individuals at the NSA,&nbsp;Teresa H. Shea., has several intelligence related businesses run from her home. She is the registered agent for one of them, her husband holds that position for the other.</p> <p>Teresa Shea is the&nbsp;director of Signals Intelligence, or SIGINT, which&nbsp;refers to all electronic eavesdropping and interception, including the controversial domestic surveillance program that collects information about Americans&rsquo; phone use. Naturally, no one is commenting.</p> <p><a href="http://www.buzzfeed.com/aramroston/second-business-at-home-of-nsa-official#395ryro">From Buzzfeed</a>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>On a quiet street in Ellicott City, Maryland, a blue-grey two-story clapboard house, set back from the road, is shaded by two sycamores and a towering maple. It&rsquo;s the unassuming home of one of the National Security Agency&rsquo;s most powerful officials, Teresa H. Shea.</em></p> <p>&nbsp;</p> <p><strong><em>In September, BuzzFeed News disclosed a potential conflict of interest involving Shea, the director of Signals Intelligence. Called SIGINT in espionage jargon, it refers to all electronic eavesdropping and interception, including the controversial domestic surveillance program that collects information about Americans&rsquo; phone use.</em></strong></p> <p>&nbsp;</p> <p><em><strong>As BuzzFeed News reported,&nbsp;<a href="http://www.buzzfeed.com/aramroston/exclusive-family-business-at-the-national-security-agency#2f5p3i1">there&rsquo;s a private SIGINT consulting and contracting business based at Shea&rsquo;s home</a>&nbsp;in that quiet neighborhood. Shea&rsquo;s husband, a business executive in the small but profitable SIGINT industry, is the resident agent for the firm, Telic Networks.</strong></em></p> <p>&nbsp;</p> <p><strong><em>In addition, James Shea also works for a major SIGINT contracting firm, DRS Signal Solutions Inc., which appears to do SIGINT business with the NSA.</em></strong></p> <p>&nbsp;</p> <p><em>DRS declined to comment, and the NSA declined to answer questions related to the Sheas, Telic Networks, or DRS.</em></p> <p>&nbsp;</p> <p><em><strong>Now there&rsquo;s a new wrinkle, which the NSA has also declined to discuss:</strong> <strong>Yet another company, apparently focused on the office and electronics business, is based at the Shea residence on that well-tended lot.</strong></em></p> <p>&nbsp;</p> <p><em>This company is called Oplnet LLC.</em></p> <p>&nbsp;</p> <p><em><strong>Teresa Shea, who has been at the NSA since 1984, is the company&rsquo;s resident agent.</strong> The&nbsp;<a href="https://www.documentcloud.org/documents/1312029-epson001.html">company&rsquo;s articles of organization, signed by Teresa Shea,</a>&nbsp;show that the firm was established in 1999 primarily &ldquo;to buy, sell, rent and lease office and electronic equipment and related goods and services.&rdquo; An attorney who also signed the document, Alan Engel, said he couldn&rsquo;t comment on client matters.</em></p> <p>&nbsp;</p> <p><em>Records show Oplnet does own a six-seat airplane, as well a condominium property with an assessed value of $275,000 in the resort town of Hilton Head, South Carolina.</em></p> <p>&nbsp;</p> <p><strong><em>This summer the NSA turned down a Freedom of Information Act request for Shea&rsquo;s public financial disclosure form. The agency said that, unlike every other federal agency, it could withhold the disclosure because of a sweeping 1959 law that allows it to keep almost everything secret.</em></strong></p> </blockquote> <p>Go ahead and read that twice. Read it three times. Still think we live in a free country?</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>Financial disclosure forms are central to public monitoring of ethics and potential conflicts of interests by federal officials. Without that form, journalists or concerned citizens must comb through corporate incorporations, property records, UCC filings, and court records to learn about an official&rsquo;s financial interests outside of office. Often, these documents are not online and are in offices scattered across different states.</em></p> <p>&nbsp;</p> <p><em>Teresa Shea, as head of SIGINT, has defended the program in declarations in two federal court cases.</em></p> <p>&nbsp;</p> <p><em>Her husband has been involved in SIGINT as a private contractor and engineer since at least 1990, when he set up a company called Sigtek Inc., which would get hundreds of thousands of dollars in contracts with the federal government, according to a federal contracting database. On his&nbsp;<a href="https://www.linkedin.com/pub/james-shea/1b/391/193">LinkedIn page</a>, James Shea says the company&rsquo;s key markets included &ldquo;Defense SIGINT.&rdquo;</em></p> <p>&nbsp;</p> <p><strong><em>In 2010, Teresa Shea was appointed the director of all SIGINT at the NSA, after a period working in London. The same year, James Shea became vice president at a major SIGINT contracting firm, DRS Signal Solutions, a subsidiary of DRS Technologies.</em></strong></p> <p>&nbsp;</p> <p><em>As BuzzFeed reported in its first story on the Sheas, neither the NSA nor DRS will comment on whether the company has contracts with Teresa Shea&rsquo;s directorate.</em></p> <p>&nbsp;</p> <p><em>Asked if there was a conflict of interest, DRS spokesman Michael Mount said &ldquo;I understand your story, and we&rsquo;ll still decline to comment.&rdquo; He said that when responding to BuzzFeed News about questions concerning James Shea, the company has coordinated with the NSA.</em></p> <p>&nbsp;</p> <p><em>Matthew Aid, who has written a book about the NSA,&nbsp;<a href="http://www.amazon.com/dp/1596915153/?tag=buzz0f-20">The Secret Sentry</a>, said it would be difficult to understand why Oplnet, this second home-based business, was set up by Ms. Shea, without knowing more.</em></p> <p>&nbsp;</p> <p><em>But he adds that the fact that Shea&rsquo;s husband works for a SIGINT contractor, and has a SIGINT related company at the couple&rsquo;s home, is confounding.</em></p> <p>&nbsp;</p> <p><em>&ldquo;From a purely financial point of view, there&rsquo;s so much potential of conflict of interest.&rdquo;</em></p> <p>&nbsp;</p> <p><strong><em>&ldquo;The fact that the NSA will not respond to your request raises in my mind a host of questions. If there was nothing there, they could have come back to you and said, &lsquo;She&rsquo;d been diligent. She&rsquo;s in compliance.&rsquo; Then there&rsquo;s no story. But they&rsquo;ve said nothing. That to me is what could potential signal some problems.&rdquo;</em></strong></p> </blockquote> <p>Welcome to the American Dream in 2014. Looks a lot like the Soviet Dream.</p> <p>Utterly shameless.</p> <p>&nbsp;</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="218" height="165" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20141022_NSA.jpg?1414026685" /> </div> </div> </div> http://www.zerohedge.com/news/2014-10-22/it%E2%80%99s-not-just-spying-%E2%80%93-how-nsa-has-turned-giant-profit-center-corrupt-insiders#comments Ben Bernanke Ben Bernanke Freedom of Information Act national security Private Equity Reuters Securities Industry and Financial Markets Association SIFMA South Carolina Thu, 23 Oct 2014 02:57:37 +0000 Tyler Durden 496081 at http://www.zerohedge.com United States Of China: In Which States Is Your Landlord Most Likely To Be Chinese http://www.zerohedge.com/news/2014-10-22/united-states-china-which-states-your-landlord-most-likely-be-chinese <p>America's #1 landlord may be private equity giant Blackstone, but closing in rapidly is none other than America's very own arch nemesis and ascendent superpower, China. But while until recently China's grand ambitions on US multi-family housing had largely flown under the radar, the recent sale of the Waldorf Astoria to a Chinese company has finally put the US on "China is coming" alert... and reincarnated a lot of the same jokes that swept the country by storm in the mid-80s when it appeared Japan, itself nursing a massive asset bubble, would run over Manhattan (everyone knows how that ended). </p> <p>As the <a href="http://blogs.wsj.com/chinarealtime/2014/10/22/the-top-10-u-s-states-where-chinese-are-investing-in-real-estate/">WSJ reports</a>, "big institutional Chinese investors who want global real-estate portfolios typically look for trophy projects in cities like New York, Los Angeles and London. Just this month, Hilton Worldwide agreed to sell its flagship Waldorf Astoria hotel in New York City to a Chinese insurance company for $1.95 billion—the steepest price tag ever for a U.S. hotel, brokers say, although it isn’t the highest on a per-room basis."</p> <p>However, it isn't just New York: "Chinese investors with smaller war chests want to be seen as international property players too, and they have their eyes on other cities. Over the past two years, more have sought to invest in offices and hotels in inland cities such as Chicago and Houston in the U.S., and Madrid and Frankfurt in Europe, according to a recent report by property consultancy Cushman &amp; Wakefield."</p> <p>“Chinese investors are distributing their investments across the whole country, not only focusing on selecting assets in prime locations…but also paying more attention to cities with lower prices and greater potential,” said James Shepherd, Cushman &amp; Wakefield’s head of research for Greater China.</p> <p>Too bad for China, the opportunities that are left for it by Wall Street are those that by now are virtually assured a negative IRR. But then again it was never about the profit: for Chinese institutions, US real estate, just like for Chinese retail buyers of luxury properties, is all about laundering hot money and parking it in a place that is relatively amicable towards Chinese funds. Which the US is. For now. </p> <p>So which states are most likely to see an influx of Chinese landlords in the coming months? </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The consultancy compiled a list of the top 10 U.S. states for Chinese investment. Though the top spots are no surprise—New York, which claims the top spot with more than $6.7 billion in investment, has a lead of more than $5 billion over runner-up California—others are less obvious. Texas, which comes in at No. 4, benefits from Houston, which has become more familiar to Chinese investors in recent years. The country’s state-owned behemoth China Petrochemical Corp., known as Sinopec, has operations there, and the city gained recognition with Chinese investors with the help of former Chinese basketball star Yao Ming, who played for the Houston Rockets.</p> </blockquote> <p>And visually:</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/10/US%20states%20China%20investments.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/10/US%20states%20China%20investments.jpg" width="553" height="434" /></a></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="547" height="404" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20141022_chinare.jpg?1414026342" /> </div> </div> </div> http://www.zerohedge.com/news/2014-10-22/united-states-china-which-states-your-landlord-most-likely-be-chinese#comments China Japan New York City None Private Equity Real estate Thu, 23 Oct 2014 02:28:23 +0000 Tyler Durden 496080 at http://www.zerohedge.com The "China-And-Japan-PMI-Beat-So-Things-Must-Be-OK" Meme In 2 Simple Charts http://www.zerohedge.com/news/2014-10-22/china-and-japan-pmi-beat-so-things-must-be-ok-meme-2-simple-charts <p>The reactions in USDJPY, Nikkei 225, S&amp;P futures, Gold, Treasury futures, and oil (in a word - none!) tells you all you need to know about the <strong>market&#39;s total loss of faith in the soft-survey-based PMI data</strong> from around the world (and in particular China and Japan). Despite dramatic weakness in a slew of hard-date economic indicators for both nations, the PMIs rose and beat. Japan&#39;s to 7-month highs (so much for moar QQE?) but <strong>New orders and Output tumbled</strong>. China rose and beat but <strong>all key components dropped</strong>. As the two charts below suggest... things in PMI data production-land need some better &quot;adjustments&quot; if they are to keep the dream alive...</p> <p>&nbsp;</p> <p>Just two simple charts...Soft-Survey-based PMI vs hard-data-based Industrial Production</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/10-overflow/20141022_PMI2.jpg"><img height="315" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/10-overflow/20141022_PMI2_0.jpg" width="600" /></a></p> <p>&nbsp;</p> <p>China nailed it!</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/10-overflow/20141022_PMI3.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/10-overflow/20141022_PMI3_0.jpg" style="width: 600px; height: 432px;" /></a></p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/10-overflow/20141022_PMI1.jpg"><img height="314" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/10-overflow/20141022_PMI1_0.jpg" width="600" /></a></p> <p>&nbsp;</p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/news/2013-09-08/good-it-gets">And as a gentle reminder - here is BofA on the uselessness of soft-survey-based PMI data...</a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>By some accounts, these data are better indicators than the hard numbers that come out of the government</strong>. After all, they are released very early, they are raw unfiltered data (other than seasonal adjustment), they are never revised and they are simple to interpret. <span style="text-decoration: underline;"><strong>We disagree</strong></span>. In our view, they are useful as a rough and ready early read on the economy. However, once the corresponding official data are released, we put very little weight on these surveys.</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>It is important to understand how crude these surveys are.</strong></span> Each month, a few hundred purchasing managers are asked if a variety of activity variables are up, down, or the same relative to the prior month. Their responses are then converted into diffusion indexes: the sum of the number managers reporting activity is &ldquo;increasing&rdquo; and half of those reporting &ldquo;the same.&rdquo; Note that there is some guesswork involved: the survey is taken before the month is over and some of the questions cover areas of the firm that are difficult for a purchasing manager to get a timely read on. For example, a purchasing manager may not have a very precise idea of what is happening to hiring in a large, diverse firm. Moreover, since they don&rsquo;t gather specific numbers for each series, they may have to make a rough guess, particularly if the trend is slightly up or down.</p> <p>&nbsp;</p> <p><strong>Fans of the two indexes point out that they are relatively stable, easy to interpret and never revised. However, in our view, the simplicity of the data is a drawback, not an advantage.</strong> It means no attempt is made to correct misreporting or to include late respondents. Moreover, the sample they use is not representative of the overall economy. They represent a broad cross-section of industries, but they <strong>oversample big firms</strong> and they make no attempt to adjust for the birth and death of firms.</p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p>Of course - what really matters is the narrative is alive... (from HSBC/Markit)</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;The HSBC China Manufacturing PMI improved to 50.4 in the flash reading for October, up from 50.2 in the final reading for September. Domestic as well as external demand showed some signs of slowing although both remained in expansion territory. Disinflationary pressures intensified, as both the input and output price indices declined further. Meanwhile both employment and inventory indices improved. <u><strong>While the manufacturing sector likely stabilized in October, the economy continues to show signs of insufficient effective demand. This warrants further policy easing and we expect more easing measures on both the monetary as well as fiscal fronts in the months ahead.&quot;</strong></u></p> </blockquote> <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="958" height="501" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20141022_PMI1.jpg?1414029289" /> </div> </div> </div> http://www.zerohedge.com/news/2014-10-22/china-and-japan-pmi-beat-so-things-must-be-ok-meme-2-simple-charts#comments China Crude Japan Markit Nikkei None Thu, 23 Oct 2014 02:03:23 +0000 Tyler Durden 496079 at http://www.zerohedge.com Meanwhile, This Is Who Is Quietly Buying All The Cheap Oil http://www.zerohedge.com/news/2014-10-22/meanwhile-who-quietly-buying-all-cheap-oil <p>With the US Shale Oil industry up in arms, Venezuela screaming, and Russia awkwardly quiet <em>(as the Ruble slides with the falling oil price stabilizing domestic inflows)</em>, <a href="http://www.zerohedge.com/news/2014-10-10/why-oil-plunging-other-part-secret-deal-between-us-and-saudi-arabia">the 'secret' Saudi-US oil deal</a> that pressured prices for crude down to $80 <em>(18-month lows today)</em> has 'hurt' a lot of the world's producer nations. However, as <a href="http://www.bloomberg.com/news/2014-10-17/oil-tankers-to-china-jump-to-nine-month-high-amid-crude-rout-1-.html">Bloomberg reports,</a> there is one nation that is very grateful. <strong>The number of supertankers sailing toward China’s ports surged to a nine-month high as over 80 very large crude carriers (VLCCs)</strong> - the industry’s biggest ships - sail toward the Asian country’s ports. At an average of 2 million barrels each, the <strong>160 million barrels will help refill China's <a href="http://www.zerohedge.com/news/us-contemplates-releasing-crude-strategic-reserve-china-resumes-building-emergency-inventory">727 million barrel SPR</a></strong><a href="http://www.zerohedge.com/news/us-contemplates-releasing-crude-strategic-reserve-china-resumes-building-emergency-inventory"> which it started in 2012</a>.</p> <p>&nbsp;</p> <p>There are 89 tankers sailing for Chinese ports, 80 of which are VLCCs - the highest since January 3rd.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/10-overflow/20141022_China.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/10-overflow/20141022_China_0.jpg" width="600" height="317" /></a></p> <p>&nbsp;</p> <p><a href="http://www.bloomberg.com/news/2014-10-17/oil-tankers-to-china-jump-to-nine-month-high-amid-crude-rout-1-.html"><em>As Bloomberg reports,</em></a></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>The number of supertankers sailing toward China’s ports surged to a nine-month high </strong>amid speculation an oil-price slump is encouraging the world’s second-biggest crude importer to accelerate purchases.</p> <p>&nbsp;</p> <p><strong>There are 80 very large crude carriers, the industry’s biggest ships, sailing toward the Asian country’s ports,</strong> according to IHS Fairplay vessel-tracking signals compiled by Bloomberg at about 10 a.m. today. That’s the <strong>highest since Jan. 3. Average shipments are 2 million barrels.</strong></p> <p>&nbsp;</p> <p>Brent crude, the global benchmark, plunged to a four-year low yesterday amid speculation Saudi Arabia, Kuwait and other nations in the Organization of Petroleum Exporting Countries won’t curb production. The slump is likely encouraging buying to fill China’s strategic stocks, according to Energy Aspects Ltd., a London-based consultant.</p> <p>&nbsp;</p> <p><strong>“There’s a lot of bargain hunting going on,”</strong> Richard Mallinson, an analyst at Energy Aspects, said by phone. “Whilst prices are low <strong>we think there’ll be buying for Strategic Petroleum Reserve filling</strong> and also just trying to capture these discounted crudes.”</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p><strong>The 80 bound for China compare with an average of 63 for the past two years and match a record in data that started in October 2011. </strong></p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p>In summary, just like Chinese gold imports rise when the price of gold drops; so China does the logical thing with other commodities, (i.e. oil) <strong>when prices tumble and instead of selling into the paper rout, it buys all the physical it can get its hands on</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="952" height="503" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20141022_China.jpg?1414027056" /> </div> </div> </div> http://www.zerohedge.com/news/2014-10-22/meanwhile-who-quietly-buying-all-cheap-oil#comments China Crude Kuwait Saudi Arabia Thu, 23 Oct 2014 01:30:45 +0000 Tyler Durden 496078 at http://www.zerohedge.com It Will Take 398,879,561 Years To Pay Off The US Government's Debt http://www.zerohedge.com/news/2014-10-22/it-will-take-398879561-years-pay-us-governments-debt <p><em>Submitted by <a href="http://www.sovereignman.com/trends/new-data-shows-it-will-take-398879561-years-to-pay-off-the-debt-15309/">Simon Black of Sovereign Man blog</a>,</em></p> <p><strong>The US government&rsquo;s debt is getting close to reaching another round number&mdash;$18 trillion. It currently stands at more than $17.9 trillion.</strong></p> <p>But what does that really mean? It&rsquo;s such an abstract number that it&rsquo;s hard to imagine it. Can you genuinely understand it beyond just being a ridiculously large number?</p> <p>Just like humans find it really hard to comprehend the vastness of the universe. <strong>We know it&rsquo;s huge, but what does that mean?</strong> It&rsquo;s so many times greater than anything we know or have experienced.</p> <p>German astronomer and mathematician Friedrich Bessel managed to successfully measure the distance from Earth to a star other than our sun in the 19<sup>th</sup>&nbsp;century. But he realized that his measurements meant nothing to people as they were. They were too abstract.</p> <p>So he came up with the idea of a &ldquo;light-year&rdquo; to help people get a better understanding of just how far it really is. And rather than using a measurement of distance, he chose to use one of time.</p> <p>The idea was that since we&mdash;or at least scientists&mdash;know what the speed of light is, by representing the distance in terms of how long it would take for light to travel that distance, we might be able to comprehend that distance.</p> <p>Ultimately using a metric we are familiar with to understand one with which we aren&rsquo;t.</p> <p><strong>Why don&rsquo;t we try to do the same with another thing in the universe that&rsquo;s incomprehensibly large today&mdash;the debt of the US government?</strong></p> <p>Even more incredible than the debt owed right now is what&rsquo;s owed down the line from all the promises politicians have been making decade after decade. These unfunded liabilities come to an astonishing $116.2 trillion.</p> <p>These numbers are so big in fact, I think we might need to follow Bessel&rsquo;s lead and come up with an entire new measurement to grasp them.</p> <p>Like light-years, we could try to understand these amounts in terms of how long it would take to pay them off. We can even call them &ldquo;work-years&rdquo;.</p> <p><strong>So let&rsquo;s see&mdash;the Social Security Administration just released data for the average yearly salary in the US in fiscal year that just ended. It stands at $44,888.16.</strong></p> <p><strong>The current debt level of over $17.9 trillion would thus take more than 398 million years of working at the average wage to pay off.</strong></p> <p>This means that even if&nbsp;<strong>every man, woman and child in the United States</strong>&nbsp;would work for one year just to help pay off the debt the government has piled on in their name,&nbsp;<strong>it still wouldn&rsquo;t be enough</strong>.</p> <p>Mind you that this means contributing&nbsp;<strong>everything</strong>&nbsp;you earn, without taking anything for your basic needs&mdash;which equates to slavery.</p> <p>Now, rather than saying that the national debt is reaching $18 trillion, which means nothing to most people, you could say that the debt would currently take almost 400 million work-years to pay off. Wow.</p> <p>When accounting for unfunded liabilities, the work-years necessary to pay off the debt amount to astonishing 2.38 BILLION work-years&hellip;</p> <p>And the years of slavery required are only growing.</p> <p>As an amount alone the debt is meaningless, but in terms of your future enslavement it can be better understood.</p> <p>To put this in perspective even further&mdash;what was the situation like previously?</p> <p><strong>At the end of the year 2000, the national debt was at $5.7 trillion, while the average yearly income was $32,154. That&rsquo;s 177 million work-years.</strong></p> <p><strong>Again&mdash;wow.</strong></p> <p>So just from the turn of the century, we&rsquo;ve seen the time it would take to pay off the national debt more than double. That means that more than&nbsp;<strong>twice as many future generations have been indebted to the system in just 14 years</strong>.</p> <p>It sounds terrible, and it is. But remember, your future generations will only be indebted if you let them be.</p> <p>What the US government does may affect everyone, but it&rsquo;s up to you whether or not you and your children are directly enslaved and tied to the system.</p> <p>Break your chains while you can and set yourself and your offspring free.</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="592" height="272" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20141022_debt.jpg?1414006061" /> </div> </div> </div> http://www.zerohedge.com/news/2014-10-22/it-will-take-398879561-years-pay-us-governments-debt#comments National Debt Thu, 23 Oct 2014 01:03:10 +0000 Tyler Durden 496077 at http://www.zerohedge.com