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China's Housing Bubble Re-Inflates At Fastest In 30 Months

Despite the actions and protestations of the central-planners, Chinese home prices have now risen year-over-year for the sixth month in a row and June (at +6.8%) is the fastest rate since January 2011. As Reuters reports, the incessant rise in property prices across 70 major cities hides the real bubbles in Beijing (+12.9% year-over-year) and Shanghai (+11.9%) which, as we noted in detail previously, reflects the apparently unstoppable exogenous hot money (credit) flows that the rest-of-the-world's-central-bankers are pumping into the markets. China's near four-year-old campaign to temper home prices has also been partly undone by strong demand and short supply, and by a rush of efforts by local Chinese governments to sell land to raise revenues but things could escalate as one analyst notes, "faced with the dilemma of how to lower housing prices without exacerbating the economic slowdown, the Chinese government may assess second-quarter results before introducing tougher measures."

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Dow And S&P At New All-Time Highs

Macro disappointments? Earnings and revenues missing? Outlooks being slashed? No worries, we have Ben... and a Dow that has risen 1000 points in 17 days to just hit a new record intraday high 15,552.70 (and the S&P 500 has risen 8.3% in 17 days to a new rdord high of 1,688.58).

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Philly Fed Surges To Highest Since March 2011, Sends S&P To Record Intraday High

When we reported on the Initial Claims print we said that "we will have to see the Philly Fed today, where we expect either a huge beat or huge miss to both be catalysts for fresh all time market highs." Well, we just got the all time highs, first in the DJIA for moments ago in the S&P cash as well, following news that the Philly Fed soared from 12.5 to 19.8, slamming expectations of a modest decline to 8.0, and despite a drop in New Orders from 16.6 to 10.2, and a crash in Inventories from -6.6 to -21.6, the headline print coming at the highest since March 2011.

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With Recoveries Like These Who Needs Microchips: Intel Posts 4th Consecutive Revenue Drop

As reported previously, the tech bellwethers all missed their topline revenue estimates, a trend that has so far marked the Q2 earnings season in a carbon-copy replica of what happened in Q1. This continued this morning with more misses by the likes of Verizon, Union Pacific, Baxter and Sherwin Williams: a core representative of virtually every key industry. But nothing shows the ongoing deterioration in top-line corporate generation as the following chart showing the annual change in revenues at the tech and industrial giant Intel. And while the consumer's distaste for desktop chips has been long known and duly noted, one would think that the Fed's central planning brains, Ferbus, Edo and Sigma, would need more i7-based processing power than ever to tell Bernanke with 3 significant digit accuracy just what will happen in 2022, offsetting the decline in normal end demand (as is the case with everything else surrounding central planning).

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ECB Eases Collateral Rules Requirements In Bid To Unclog European Lending

As Welt reported overnight, the ECB just announced a change to its collateral framework, changing the haircuts and acceptability rules for ABS and covered bonds in an attempt to boost moribund and stalled European lending. As part of its announcement, the ECB reduced haircuts applicable to ABS rated A- or higher to 10% from 16% and to 22% from 26%. The bank also cut the minimum rating for ABS subject to loan level reporting requirements to 2 "A" ratings from 2 "AAA" ratings as more and more credit in Europe sinks into the quicksand of NPL-ness. Draghi also announced he would tighten risk control measures for covered bonds and that all the announced changes would have an overall neutral effect on amount of collateral available. Will this latest Hail Mary attempt work to boost lending in Europe? Of course not: Europe's issue is not credit supply constraints but a deterioration in asset quality and an explosion in NPLs, which has lead to an acceleration in overall deleveraging at both the bank and consumer level, and which is unlikely to end any time soon and certainly not before more widespread liability liquidations a la Cyprus.

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Adjusted Initial Claims Drop, Unadjusted Rise; Continuing Claims Spike: Taper On And Off

In a world where bad news is good, the last thing stocks needed to put a dent in the latest spin that the September taper may be moved to December, was an improvement in claims - which is what they got moments ago when the DOL reported a big claims drop from a downward revised 358K (so it does happen) to only 334K, beating consensus of a 345K print. So Taper back on right? Not so fast. The pre-spun narrative is that July data is very "liquid" with car makers and factories either laying off (or not) workers more (or less) compared to historical seasonal patters. Indeed, the unadjusted claims number rose from 383K to 409K signifying that the only improvement was in the eye of the X-12-ARIMA seasonal adjustment bemodeler. And furthering the No-Taper cause were continuing claims which soared to 3.114 million, up 91K from the prior week, the largest 1 week jump since November, and up from the 2.953 million two weeks ago: the biggest 2 week jump since February 2009. Judging by the stock market reaction, where futures have jumped on the news, the GETCO algos have shifted back into good news is good news mode. For confirmation, we will have to see the Philly Fed today, where we expect either a huge beat or huge miss to both be catalysts for fresh all time market highs.

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Steam Rising Again From Fukushima Reactor

As Japan's infatuation with the great nominal stock market experiment continues, the government wishes nothing more than to put the Fukushima nuclear disaster in the past, so it can restart its nuclear power plants: the critical, decisive factor if Abenomics has any chance of succeeding, as the country's economy will never recover if it has to rely on foreign sources of energy. Alas, for the time being this looks improbable and following the latest news out of Fukushima, it may be downright impossible. According to the BBC, the Fukushima nuclear power plant has been emitting steam from its destroyed reactor, confirming that while one can bury radioactive garbage under the rug, it continues to emit gamma rays and is likely to get much worse before it gets better.

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Russian Stock Market Slides Following Conviction Of Prominent Dissident Navalny

A few hours ago, in a somewhat ironic development, Russia's most prominent opposition campaigner - whom some have likened to the US' own Edward Snowden in terms of his whistleblowing aspirations - was found guilty of embezzlement and sentenced to five years in prison, some 19 months after leading the biggest protests to challenge the Kremlin's rule since the Soviet Union's collapse. This immediately hit none other than the local "wealth effect" with RIA reporting that "Russia's stock market fell sharply on Thursday according to Moscow Exchange data, after investors took in the news that opposition blogger Alexei Navalny had been found guilty in a controversial fraud trial and sentenced to five years in jail."

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Frontrunning: July 18

  • MSM always "ahead" of the curve: Fed’s Messages Raise Volatility in Threat to Profits (BBG)
  • Bernanke Plays Down Link Between Jobless Rate, Fed Moves (WSJ)
  • Draghi to Carney Face Test Backing Guidance on Rates (BBG)
  • House Republicans Vote to Delay Obamcare Mandates (Reuters)
  • China media accuses Japan PM of dangerous politics (Reuters)
  • China will replace America as the leading superpower, global attitudes survey finds (SCMP)
  • Nonqualified mortgages make up as much as $1.5 trillion of the $10 trillion home-loan market (BBG)
  • Dell $24.4 Billion Buyout Plan Is a Nail-Biter as Vote Looms (BBG)
  • Republicans could see more bruising Senate primaries (Reuters)
  • GM delays Chevy Cruze debut by a year (Reuters)
  • Peltz needs support for PepsiCo restructuring dealsa (FT)
  • Sweaty Wall Streeters Skip Booze for Spin-Class Meetings (BBG)
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Somnolent Market Summary Ahead Of Bernanke's Repeat Performance

Stocks in Europe recovered from a cautious start to the trading session and gradually edged back into positive territory, though the DAX index in Germany under performed following less than impressive earnings by SAP. Company’s shares fell around 3% after the company trimmed its outlook for 2013 software revenue, blaming slowing economic growth in China. Elsewhere, Akzo Nobel shares fell 5% in early trade after the company said that its Q2 net profit almost doubled from the same period last year thanks to the sale of its North American paints division and a tax gain. Going forward, market participants will get to digest the release of the weekly jobs report, Philadelphia Fed survey for the month of July and earnings report releases from Morgan Stanley, Verizon, BlackRock and Google. Finally, today is the second day of Bernanke's semi-annual testimony.

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Savers And The 'Real' $10.8 Trillion Cost Of ZIRP

The bad news 'reality' of the Bernanke-aided Main-Street 'recovery' is that savers have missed out on a whopping $10.8 trillion in earned interest usage. The good news behind the bottom 85% of close-to-retiree status Baby Boomers that participate in the “markets” via sub $50,000 retirement money is that at some point, the voters might actually get smart and get mad at how much money has been siphoned from them.

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Eric Sprott On Central Banks, Bullion Banks and the Physical Gold Market Conundrum

The recent decline in gold prices and the drain from physical ETFs have been interpreted by the media as signaling the end of the gold bull market. However, our analysis of the supply and demand dynamics underlying the gold market does not support this thesis. In our view, the bullion banks’ fractional gold deposit system is testing its limits. Too much paper gold exists for the amount of physical gold available. Demand from emerging markets, who do not settle for paper gold, has perturbed the status quo. Thus, our recommendation to investors is the following: empty unallocated gold accounts and redeem your gold in physical form (while you still can).

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Q. "Are You Printing Money?" A. "Not Literally"

The following brief exchange between a congressman and Ben Bernanke pretty much wins today's Humphrey Hawkins farce.

  • Q: Are You Printing Money?
  • Bernanke: Not Literally

And a FTW follow up from the Chairman:

  • If the Fed were to tighten policy, the economy "would tank"

And there you have it. Everyone can go home now.

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Prozac World: These Are The Most Stressed Out Countries

While anti-depressant use is surging in Sweden (up 1000% since 1980), bursting in Britain (up 495% since 1991), and up an astounding 400% since 1994 in the USA (with 1 in 10 on some kind of 'prozac'), it is the poor-old Nigerians that should really be complaining. Based on seven variables, Bloomberg has scored 74 nations around the world for their "stressed-out" factor and finds the USA to be 54th (so stop whining and suck it up), Norway the least stressed-out of all and El Salvador and South Africa at the top with Nigeria (with the roiling Egyptians ranking 15th).

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Japan's Nuclear Options

Several companies applied to Japan's Nuclear Regulation Authority on July 8 for permission to restart a total of 10 nuclear reactors in the country. Despite widespread apprehension in Japan about nuclear power following the Fukushima disaster in 2011 that led to the shutdown of all of the country's 54 nuclear reactors, the plan to restart the reactors may succeed for a few reasons.


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