Moments ago The Hill reported that what many thought was absolutely impossible, may in fact become a reality: President Obama is considering issuing an executive order (#394,039,993,837?) to raise the minimum wage for Federal Workers... and in the process - with the help of that other central planner par excellence Bern-ellen - lap all those other Banana republics that everyone so enjoys making fun of.
While manufacturing and services PMIs disappointed, the big problem in big China remains that of an out-of-control credit creation process that is blowing up. As we previously noted, instead of crushing credit creation, the PBOC's liquidity rationing has forced distressed companies into high-interest-cost products in the shadow-banking world. Investors on the other side of "troubled shadow banking products" had assumed that 'someone' would bail them out but this evening Reuters reports that ICBC has confirmed that it will not rescue holders of the "Credit Equals Gold #1 Collective Trust Product", due to mature Jan 31st with $492 million outstanding. The anxiety from contagion concerns of the first shadow-banking default has pushed the Shanghai Composite back near 2,000 for the first time since July - and to its narrowest spread to the S&P 500 in almost 8 years.
With the Q4 earnings season beginning, ConvergEx's Nick Colas reminds that the top of the income statement matters more than the bottom line if we expect further upside to domestic equities in 2014. Revenue growth has been in short supply over the last four quarters, with the companies of the Dow only able to average a 0.6% top line growth rate over the last year. If 2013 was all about multiple expansion in equity markets, then, Colas warns this will be the year when revenue growth must fulfill the promise of a U.S. stock market so near all-time highs. Analysts have been perennial over-optimists on revenues every month since early 2012. Maybe they finally have it right, but that is purely a matter of faith at this point; their track record on this count is not good.
Yesterday, when the Treasury released its TIC data early by mistake, the update that China's holdings rose to a record $1.317 trillion caused a stir. This was confusing, since while China, which as we reported yesterday, now has a record $3.8 trillion in reserves having grown by $500 billion in 2013, has barely invested in US paper, and in fact going back to 2010, its holdings were a solid $1.2 trillion. In other words, its Treasury holdings have increased by a modest $100 billion in three years. Hardly anything to write home about. And certainly nothing to write home about when one considers the soaring Treasury held by the largest holder of US paper... everyone knows who that is. For those few who don't, and for everyone else too, here is the most recent breakdown of the top holders of US paper.
People often ask me about the inefficient markets of tomorrow. Think about it: that’s an oxymoron. It’s like asking, “What is there that hasn’t been discovered yet?” The markets are greatly changed from 25, 35 or 45 years ago. The bottom line today is that there’s little that people don’t know about, understand and embrace. How, then, do I expect to find inefficiency? My answer is that while few markets demonstrate great structural inefficiency today, many exhibit a great deal of cyclical inefficiency from time to time. Just five years ago, there were lots of things people wouldn’t touch with a ten-foot pole, and as a result they offered absurdly high returns. Most of those opportunities are gone today, but I’m sure they’ll be back the next time investors turn tail and run. Markets will be permanently efficient when investors are permanently objective and unemotional. In other words, never. Unless that unlikely day comes, skill and luck will both continue to play very important roles.
The infamous 'scourge on insider-traders everywhere' Preet Bharara has taken a day off from Wall Street duties to focus on what could be considerably more of a concern. The NY Attorney General just disclosed that Daniel Wilson - the Chemistry Manager at the Indian Point Nuclear Power plant - falsified and fabricated test results for diesel fuel contamination used to power emergency generators.. in order that the plant would not have to be shut down. Have no fear though US public... especially those who live near White Plains, Bharara's punishment for this potentially disastrous 'deliberate misconduct' - a $500 fine and 18 months probation. Well that will teach him, eh?
You really can't make this shit up. From the funniest person on financial comedy TV (whose most memorable TV appearance will always be roaring that Bear Stearns is fine days before its collapse), here is his "opinion" on Best Sell Buy, entirely in his own words.
The theme of both the robot-ization of the global workforce and the populist desire for a hike in the minimum wage have been popular and ongoing ones here at Zero Hedge. However, never has it been more clear just where the future lies than this chart from BofAML's Michael Hartnett... As he says, "we are long robots, and short human beings."