Much has been made recently of the 'implicit' tax cut that a sliding gas price is providing for the beaten-down, confidence-sapped, credit-using consumer. Sure enough, gas prices are at their lows of the year. But, unfortunately, recency bias is our enemy once again since the price of regular gas is still 8.5% above its average since the crisis began - and that with miles-driven still slumping. Not quite as 'tax-cut'-inspiring when viewed that way...
"I can only say: I'm sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed's first plunge into the bond-buying experiment known as quantitative easing.... We were working feverishly to preserve the impression that the Fed knew what it was doing... The central bank continues to spin QE as a tool for helping Main Street. But I've come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time.... Having racked up hundreds of billions of dollars in opaque Fed subsidies, U.S. banks have seen their collective stock price triple since March 2009. The biggest ones have only become more of a cartel: 0.2% of them now control more than 70% of the U.S. bank assets. As for the rest of America, good luck..... The implication is that the Fed is dutifully compensating for the rest of Washington's dysfunction. But the Fed is at the center of that dysfunction. Case in point: It has allowed QE to become Wall Street's new "too big to fail" policy."
In the Chinese bastion of capitalism, where there is demand, there will be supply. And in this case, the supply of gold storage is to be found in the Shanghai Free Trade Zone, where the physical gold ends up in custodial limbo as it is not considered "imported" by China. In fact, the gold is theoretically in no man's land and as such can be reexported out of China, or sent deeper into the mainland, to China's banks or private buyers, on a whim. Of course, all that is on paper. If and when the Communist Party says "enough" all the gold in the FTZ would be "reappropriated." Bloomberg reports, that a gold vault that can store 2,000 metric tons, double China’s projected consumption this year, opened in Shanghai this month as owner Malca-Amit Global Ltd. seeks to benefit from rising demand in Asia’s largest economy.
For many in the US, as WSJ reports based on the bifurcated 'recovery' in the US, the recession never ended, "we're still in it... it feels like like we're still in it and it's getting worse." Simply out, America's jobs recovery is proceeding on two separate tracks - a pattern that is persisting far longer than after past economic rebounds and lately has been growing worse. For those with decent jobs, wages are rising, albeit slowly, and job security is the strongest it has been since before the recession. But many others - the young, the less educated and particularly the unemployed - are experiencing hardly any recovery at all. As we have vociferously explained, hiring remains weak, and the jobs that are available are disproportionately low-paying and often part-time.
Have you ever cried yourself to sleep because you had no idea how you were going to pay the bills even though you were working as hard as you possibly could? You are about to hear from a single mother that has been there. Her name is Yolanda Vestal and she is another victim of Obama's "economic recovery". Yes, things have never been better for the top 0.01 percent of ultra-wealthy Americans that have got millions of dollars invested in the stock market. But for most of the rest of the country, things are very hard right now.
This morning has seen a plague of talking-head-based soundbites propagated through the mainstream media as 'fact' and actionable. One that caught our eye, from none other than "largest asset manager in the world" Larry Fink of Blackrock, simply beggared belief:
- *FINK SAYS JAPANESE INVESTORS QUESTIONING INVESTING IN U.S. DEBT
As we recently noted, the Japanese bond market is now dead (for all intent and purpose) but a glance at the following chart of credit reality suggests those Japanese investors might stop to reflect a little on their own reality...
As we have pointed out previously, in the context of corporations that have given up on growing the top line (as virtually all free cash goes into stock buybacks and dividends and none into growth capex), and in pursuit of a rising bottom line, employee wages are the one variable cost that corporations will touch last of all. But what's worse, these same unionized employees have zero negotiating leverage. Perhaps nowhere is this more visible than in the recent strategy of smoothie retailer Jamba Juice, which in order to battle a 4% drop in Q3 same store sales has decided to radically transform its entire retailing strategy by getting rid of labor, cheap, part-time or otherwise, altogether. Presenting the biggest threat to minimum-wage restaurant workers everywhere: the JambaGo self-serve machine that just made the vast majority of Jamba's employees obsolete. Coming soon to a fast-food retailer near you.
The Nasdaq and Trannies closed green, Dow and S&P red (the latter pinned to VWAP thanks to some late-day JPY ignition dragging it off the lows). Volume was 'average and into the close VIX was bid as stocks clung to VWAP. Treasury yields limped higher from yesterday's small rise (30Y +1bps on the week, 5Y +4bps). The USD index would suggest a quiet day (practically unch of the week) but dispersion with EUR strength and AUD and JPY weakness was notable. Credit markets continued to slide notably. The biggest moves of the day were in commodity land with silver -3.5% on the week and gold and oil pinned to each other (petrogold?) -1.5% on the week, and copper -1% on the week. Today was all about POMO (as usual) and dueling Fed speak (Lockhart talked us down and Kocherlakota saved the day).
With Ben Bernanke's tenure closing, many financial TV pundits delight in touting the stellar performance of Ben Bernanke as Federal Reserve Chairman with just a couple months left in his term. Before the re-writers of history begin spinning performance, we thought why not compare Mr. Bernanke against all the other Federal Reserve Chairman to determine which Chairman deserves recognition. Bernanke's overall score across all factors was the lowest (let the spin begin counterfactualists). The data suggests that Mr. Bernanke ranks last in performance between the two mandates since 1948. Quite an accomplishment considering what events transpired during the last 60+ years; Korea & Vietnam, Oil Shock, high interest rates, etc...
With Kill-Bill body-double Chilton fading poetically into the dark, and Gensler gone, President Obama is set to nominate Timothy Massad to the Chairmanship of the CFTC. We can't wait to hear how the man who was responsible for bailing out the banks at any cost, will now make sure these same banks don't do anything bad again. And he will also, somehow, "supervise" America's $234 trillion in derivatives and make sure nothing bad ever happens there too?
Over the weekend, in "Venezuela Government "Occupies" Electronics Retail Chain, Enforces "Fair" Prices", we reported that unpopular president Nicolas Maduro ordered the "occupation" of a chain of electronic goods stores in a crackdown on what the socialist government views as price-gouging hobbling the country's economy. Various managers of the five-store, 500-employee Daka chain - the local equivalent of Best Buy - have been arrested, and the company would be forced to sell products at "fair prices." Since then things have escalated rapidly. Because as we queried, and many wondered, the first question that arose is how would Maduro i) assure that prices were indeed kept at their "fair values" and ii) how would the cool, calm and orderly social order be preserved when suddenly everyone scrambles to buy all those flatscreens (which may have certain operational problems once the socialist paradise is hit with daily electric brown and blackouts very soon) they have been dreaming of for years. Now we know: with the help of the army.
The establishment would have us believe that a world without central banks would be 'like all the worst parts of the bible', but as Professor Lawrence White notes, as failures among central banking systems mount, it is time to reconsider the alternative of free banking. Private banks would have better incentives than the federal government to ensure their currency retained its value, because if it didn't, people would bank elsewhere. By contrast, White notes, central banks controlled by the government are able to devalue currency as they see fit and can even quit redeeming notes for coins of real value if they want to do so. It sounds like social-science fiction, but there are numerous real-world examples in history of successful free-banking systems.
Many have likened the ETF structure of today to the CDO structure of the last bubble as the potential catalyst for accelerating moves in risk markets. If that is the case, then the collapse in the shares outstanding of the massively popular and liquid Russell 2000 ETF IWM will likley make some ask WTF?
It would appear that the National Instant Criminal Background Check System (NICS) website - required when purchasing a gun or explosive - is capable of handling large volumes of users...