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The Market Isn't Prepared For This
Submitted by Bill Blain via Mint Partners,
Y'day was another less than convincing session. Indices off recent tops and Europe weaker. Treasuries tumbled then rallied part way back on less than stellar retail sales report. It rather feels like we are going through the motions with little conviction one way or another (even with today's mini-melt-up). Markets crave direction. So I'm reading the news and reports and waiting for the buy or sell signal.
What I'd like to see is the JGB curve bull-flatten to restore faith in Global easing and the asset grabathon. Don’t fight Kuroda – it will happen.. but when? That's the macro-trade. But the short-term trade may be to hedge some risk, like the Nikkei's recent gains (looks over-bought on RSIs), and think about how to hedge bursting bubble risks in the credit markets. (We're working with a number of funds at present on hedge ideas for hi-yield books and have found some particularly interesting ideas we'd be happy to share. Like all good things they are essentially simple approaches... and not too expensive!)
Or is there something bigger going-on just behind the horizon? A "No-See-Em" that is about to confirm a particular market direction? After all... the global economy is either growing, is set for growth, or this recession is becoming a long-term depression. Even the hordes of first year investment banking 101s know depression means long term low yields!
So let’s take a look at what's going on for signs of the hidden menace.. (if you can't be bothered with all the usual cynicism about new issues, Yoorp, banks and whatever, cut to the bottom paragraphs and tag the threat-line..)
First up is the new issue market, which goes on and on and on like a Duracell bunny. Even Petrobras launching an 11 bln deal failed to ignite much excitement - and don't call it emerging market debt.... its well and truly emerged. Much demand flowed from the fact index followers have to play the bonds rather than the usual factors driving new issues at the moment - yield at any cost! Belief in the credit? Please… that is so yesterday. When the new issue spigot turns off... widening new bonds will trigger wider spreads across all sectors. Pop.
(Most readers will be familiar with the Ukrainian Chicken Farm Moment theory of the new issue market... we have more signs it has arrived. Thanks to readers for informing me about S&P holding a conference on the Ukrainian credit markets in Kiev or the more serious news Chicken exports to former Russian states have been stopped to check for salmonella and listeriosus after complaints.. (I shall be doing Mastermind later this year with my specialist subject of the Ukrainian agribusiness sector..hey.. it’s a hobby...!))
Second: perhaps the menace comes from the financial sector..? How many other European banks are vulnerable to a Co-Op style collapse? The UK's venerable mutual bank finds itself short-capital to the tune of GBP 2 bln and relying on asset sales to raise the dosh. Oh dear. Confidence is truly buried on that one. The bank's secondary sub capital deals have gone stratospheric in yield terms, but who wants to buy 18% yielding 5-yr paper when the threat of subordinated bail-in is so apparent. With the Europhobic UK press telling us Spain is effectively equally bust... I ask again.. how many other banks are in a similar mess? And how easy for them to find capital in the face of a gridlocked European decision process? Pop.
Third: which neatly leads us to the hope Yoorp will pony up more dosh to recapitalise banks. Get real. It’s a national responsibility. Or maybe the threat comes from the the Euro minister gab-fest as tensions twixt Germany and France on treaties, austerity and bailouts reach a crescendo later this week. Fish slapping dance anyone? Nope.. I suspect we will have the usual lots of talk, less listening and the Eurocrats behind the scenes papering over the cracks.. Pop.
Unfortunately there are really IMPORTANT things to worry about...
I mentioned China exports a few times last week and got a deluge of "angry letters" from analysts across the street complaining they have been focused on the apparent inconsistencies in the data between China and Hong Kong for months. Our own macro-tactics strategist, the redoubtable Patrick Perret-Green, points out the trade statistics across the rest of China (ie excluding Hong Kong) show an equally disturbing picture... Even after smoothing the data to account for the New Year holiday, growth has barely touched 6.4% over last 6 months.
Patrick is not the only analyst who has long suspected Chinese numbers are like a take-away dinner.. leaves you hungry 30 mins later. He guesses that after stripping out the "inconsistencies", the brutal truth may be Chinese growth is as low as 5%... which highlights just how critical it is Japan acts a regional and global growth driver. The alternative will be one hell of mess. POP!
Patrick makes the point the market isn’t prepared for this..
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Are you prepared for this?
http://www.prisonplanet.com/syria-civil-war-cannibal-commander-abu-sakka...
http://www.youtube.com/v/Z9IRn5b0aik?hl=en_GB&version=3
Those same mercenaries will be sent to the USA when needed.
all the “market” commentary you will ever need:
http://www.youtube.com/watch?v=9UrKcfh43zM
that fucking guy was lip synching...
Dude, at least the chinese oven roast their babies before eating
The CIA trained him well.
What 'the market isn't prepared for' is trying to make sense out of a crapped out FUNDAMENTAL ANALYSIS article, in a rigged market, whose sugar daddy prints $85 billion CheesePope bucks a month to artificially keep asset prices from crashing to earth... [Not to mention the neat little Ponzi scheme they have going for themselves]...
Funny how they keep attempting to relate some kind of 'fun-da-mentals' to this 100% rigged Ponzi crap market.
Markets? LOL
all your markets are belong to us ...
the one beer to have if you're having more than one...
no offense but what is this article trying to say? am i missing something?>
Looks like he's trying to throw so much in that something's bound to hit thereby enabling him to claim predictive prowess. Everything from Ukrainian chickens to UK bank recaps.
I think that's what I was trying to say above... [the beer comments were a bonus]...
OT
the TIP drops like a stone.
YEN drops like a stone too.
Stock prices still keep going up ... If you keep putting money into it, the prices just keep getting inflated. There is no down until they stop creating money and shoving itinto stocks.
at which point the commodity curves go haywire and the shelves go bare
The Fed is going a mighty fine job of bubblizing the markets beyond what it was in 1929. It will be there in a few months at this rate. The NY Fed will keep pumping stocks until we reach the .DOT COM levels.
With the Fed being unable to lower rates when it comes tumbling down and all the QE money gone it will paint itself into a horrific corner.
It will be powerless to do anything to get out of the bind.
So what DOW level is the top? 20,000? 30,000? 36,000? I want to know when to sell everything and go short. Maybe the clue will be oil prices. The Bernanke Bubble keeps inflating until oil kills it.
Vassal Japan emerging as growth engine? Is this guy shitting serious? TPP is a US power play on China/pivot/ASEAN FTA.
Xi is going on his first overseas trip: India, Pakistan, Germany and Switzerland. Telling
TURBO TUESDAY POMO BITCHEZ
aapl heading downwards this afternoon, down 2 percent. fuck aapl, especially because david tepper owns it, i hope he loses his shirt from aapl, dirty scumbag
Growth? Net of total debt we haven't had growth in decades. Does the author think debt can rise faster than growth in perpetuity?
More fun to trade equities than bonds in this enviro. Japan up 10.8 bps in yield today.
http://money.cnn.com/data/fear-and-greed/?iid=EL
The collapse will happen very soon, not because Wall Street will want it to happen, but because the entire economy will come to a grinding halt. You can only cut labor costs so far before you have to cut quality. Soon you won;t be able to buy a product that doesn't break while you take it out of the box. Some vendors I work with are up to 40% defective shipments.
The relentless drive for record corporate profits has squeezed vendor's margin. If the retail can't budge, and Walmart asks for 10% more, you have to find that 10% somewhere. Even worse is that component and input costs are still rising. So you cut wall thickness from 1mm to .5mm. You use lower grade plastic. You stop coating parts. All things that lead to a sub standard product.
The consumer purchases something for $100 that lasts three days. It isn't the fault of where it's made. You can make world class products in China. It is the fault of what it is made from.
You have $6 manufacturing cost coffee makers selling for $120 retail. Is it any wonder the thing is a piece of shit?
Don't get me started on SodaStream dispensers. The thing it literally a $3 plastic enclosure housing a $.50 valve to dispense carbon dioxide. $20 retail for a SodaStream machine is a bad deal.
I bought a box of nails from Home Depot for $10. The nails literally shattered when I hit them with a hammer. The heads popped off, they split in half. After ten nails I took them back to the store and returned them as defective merchandise. Fucking Crown Bolt garbage.
Stocks are overvalued as never before and everything you buy is overvalued as never before. 60% minimum up to 80% of the retail price is nothing but margin to the retailer. Think about that the next time you buy something for $100. Most likely it was bought for less than $30. Probably manufactured for less than $10. When you complain about "Made in China" instead think about how long a $10 product should last.
I value your operative hands-on information equally with that of John Williams’ of Shadowstats, adr. Together with ZH, as a trio, you fairly well paint the picture of Americans’ economic decline. Would you agree that particularly mixed in with all that declining quality and drive for profits is the price of gasoline and other commodities?
As the Jewish-owned media* 24/7 regurgitates Ben Bernanke’s central bank propaganda that he is “watching closely for any signs of inflation” whilst the Fed is most “concerned about falling prices,” Americans must live out the dire reality of underemployment, joblessness, inflation and loss of purchasing power. It reminds me of how Stalin treated the party line and reality as one when he ushered in the Kremlin’s notorious era of purge and terror and starvation in the mid-1930s with the slogan:
“Life is better, comrades, life is gayer.”
Not only must a growing number of Americans be subjected to economic rape but they also must be subjected to psychological punishment – or torture and mine control – by the government, i.e., Life is better, comrades, life is gayer, as their standard of living plunges.
You reveal the results of inflation and the drive for profits showing up as inferior product; Michael Sivy in March reveals on Time Business & Money: If There’s No Inflation, Why Are Prices Up So Much?
Here’s some of the data:
“The Reuters CRB Commodity Index, which tracks the prices of coffee, cocoa, copper, and cotton, as well as energy, is up 38% over four years, or 8.6% at a compound annual rate.
It may well be that these increases in the cost of raw materials aren’t translating into broader inflation because the economy is so weak. For sustained inflation to get going, workers have to be able to demand higher pay to make up for increases in their cost of living. And today, whatever inflation is caused by the rising cost of raw materials is being offset by below-normal increases in wages…
The price of gasoline has gone up from $2.60 a gallon when the recession ended to $3.68 today. That’s a 41% increase in four years, or an annualized rate of 9%. Taxes have gone up almost as much. Federal, State and Local income taxes and social charges (Social Security payroll taxes, for instance) have risen 35% over four years, an annualized rate of 7.8%.
Perhaps the most telling indicator – albeit a slightly facetious one – is the Big Mac index, popularized by the Economist magazine. McDonalds hamburgers are available in many countries and their prices reflect the cost of food, fuel, commercial real estate, and basic labor. The price of a Big Mac, therefore, can be used to compare the economies of different countries – or serve as a bellwether of inflation in a single country. Since the recession ended, the cost of a Big Mac in the U.S. has risen from an average of $3.57 to $4.37, or 5.2% a year.
So why haven’t these more rapid increases shown up in the Consumer Price Index? One reason is that the index itself has been modified in a variety of ways over the past 35 years. Fluctuations in home prices have been smoothed out, for example (I, however, do not believe you can liken a "busted" bubble to deflation). And the index has been adjusted periodically to reflect changes in what people buy, particularly if they shift from more expensive items to cheaper ones. Such revisions to the CPI have tended to reduce the official inflation rate, on balance. Various estimates of what the annual rate would have been over the past four years if earlier methods of calculation had been continued come up with numbers in the 5%-to-10% range.
Several conclusions can be drawn from all this. First, there is no absolute and objective gauge of inflation. Any particular measure is simply one way of making the calculation, based on a host of assumptions. Second, a number of the costs that middle-class households face are going up considerably faster than the CPI. Printer-ink cartridges may be a particularly obnoxious example, but they’re not the only case where prices are rising more than official statistics indicate. At the moment, these trends aren’t highly visible because the economy is so sluggish. But as the recovery continues, there’s every reason to think that they will become more widespread.
Read more: http://business.time.com/2013/03/12/if-theres-no-inflation-why-are-prices-up-so-much/#ixzz2TIKYT4fY
*“Let’s be honest with ourselves, here, fellow Jews. We do control the media.” –Manny Friedman, “Jews DO control the media” (July 1, 2012) http://blogs.timesofisrael.com/jews-do-control-the-media/
An updated paradigm is that partisan Democrats control the Media. And the rate of intermarriage between the MSM and the Democrat office-holders is so high that they are becoming a unified entity.
Planned obsolescence and value engineering in an inflationary environment.
I think the bubble will go on longer than most rational people expect. Most bubbles do. They eventually pop, but it takes a loooong time.
Energizer bunny is the one that goes on and on. Duracell is the copper top.
The markets can't go on when people finally figure out how badly the are getting fucked by the banksters and their lackeys, the peoples supposed representatives and revolt.
well where are you going to put your money? Tbills are getting monkey hammered, and will continue to do so. Put it in the euro or yen, dats funny....... so the US stock market which has actually become the worlds reserve currency.
Put it into $100 bills. Don't keep them anywhere near a bank where you can be "Cypressed", and protect the stash with a S&W security system.
double bounce
Agreed, not many were ready for the bond market pop.
Ok SLOW DOWN ON SHORTING TREASURIES BITCHEZ