While the decline in initial jobless claims from a historical perspective should be a positive for economic growth in the future - it is likely to only be the case if employers began to convert part-time employees to full-time hires. This has been the hope since the end of the "Great Recession" yet subpar economic growth, increased productivity and weak consumer demand has kept businesses on the defensive to maintain profitability. The disappointment, from an economic standpoint, is that jobless claims could well hit much lower levels without a translation into stronger economic growth or significantly increased incomes.
This is how the corporate state rolls. They remove all the important stuff at the last minute, you know, like provisions that might actually protect constitutional rights. This is exactly what they just did with the NDAA. Repeat after me: Your Government Loves You. Now go back to sleep.
A month ago, we showed something disturbing: the weekly increase in savings deposits held at Commercial banks soared by a record $132 billion, more than the comparable surge during the Lehman Failure, the First Debt Ceiling Fiasco (not to be confused with the upcoming second one), and the First Greek Insolvency. And while there were certainly macro factors behind the move which usually indicates a spike in risk-aversion (and at least in the old days was accompanied by a plunge in stocks), a large reason for the surge was the unexpected rotation of some $70 billion in savings deposits at Thrift institutions leading to a combined increase in Savings accounts of some $60 billion. Moments ago the Fed released its weekly H.6 update where we find that while the relentless increase in savings accounts at commercial banks has continued, rising by another $70 billion in the past week, this time there was no offsetting drop in Savings deposits at Thrift Institutions, which also increased by $10.0 billion. The end result: an increase of $79.3 billion in total saving deposits at both commercial banks and thrifts, or an amount that is only the third largest weekly jump ever following the $102 billion surge following Lehman and the $92.4 billion rotation into savings following the first US debt ceiling debacle and US downgrade in August 2011.
The common feature of the transformative technologies of the 20th and 21st centuries is that they were one-offs that cannot be duplicated. What if the engines of global growth that worked for 65 years (since 1945) have not just stalled but broken down? The primary "engines" have been productivity gains from industrialization, real estate development and expansion of consumption based on the continual expansion of debt and leverage--in short-hand, financialization. Doing more of what has failed will only set up a grander failure as returns on all our debt-based "investments" become ever more marginal and the return on increasing complexity drops into negative territory. Once complexity yields negative returns, the systems that depend on complexity quickly destabilize and implode.
UPDATE: ES -7 after-hours from closing highs (McConnell-Off)
Equity markets started the day off slowly but with confidence disappointing and Harry Reid's name-calling, not even the arrival of the chosen one was enough to juice anything but a minimal bounce in stocks. It looked like S&P 500 futures (ES) were going to retest the flash-crash lows from last week but thanks to a well-timed piece of news that Boehner will be in session on Sunday night (though no accompanying notes on exactly what magical book of crap they will sign off - or not - on) was enough to spur Johhny-5 and his friends into algo-asm action. The initial jerk was perfectly to VWAP and the second jerk took AAPL up to yesterday's closing VWAP. This strength dragged ES higher - reconnecting with a less excited risk-asset market that had remained flat from the day-session open. FX and vol were the main levers to the upside with Treasuries less enamored - though HYG was lifted to fill Monday's gap. Mitch McConnell spoiled the party a little into the unchanged close.
It appears that our expectation for a 3:35 pm rumor was some 45 minutes too late. No sooner than headlines crossed the wires that:
- *U.S. HOUSE SAID TO PLAN 6:30 P.M. SESSION ON DEC. 30
- *REPUBLICAN AIDE REPORTS FROM HOUSE MEMBERS' CONFERENCE CALL
then stocks ramped instantly to their VWAPs and beyond... efficient markets? whocouldanode? This way at least, when nothing happens on Sunday night, as nothing will (as it comes three days before Boehner's reelection), the flashbacks to the TARP 1 vote will be front and center, but the good news is that the downside will be limited by the limit down barrier in ES.
A Canadian Summarizes America's Collapse: "Everyone Takes, Nobody Makes, Money Is Free, And Money Is Worthless"Submitted by Tyler Durden on 12/26/2012 14:55 -0400
On this lackluster Boxing Day dominated by illiquid moves in every asset class, we thought a few succinct minutes spent comprehending the US and European government policies of social welfare and their outcomes was time well spent. Canadian MP Pierre Poilievre delivers a rather epic speech destroying the myths of US and European 'wealth' noting that "Once the US citizen is in debt, the US government encourages them to stay in debt," noting that "the US government encouraged millions of Americans to spend money they did not have on homes they could not afford using loans they could never repay and then gave them a tax incentive never to repay it." His message, delivered seamlessly, notes the inordinate rise in the cost of all this borrowing, adding that "through debt interest alone, soon the US taxpayer will be funding 100% of the Chinese Military complex." From Dependence to Debt to the Welfare State and back to Dependence, this presentation puts incredible context on the false hope so many believe in the US and Europe. Everyone takes, nobody makes, work doesn't pay, indulgence doesn't cost, money is free, and money is worthless. Must watch.
Today's anecdote from Art Cashin has nothing to do with the fiscal cliff, the stock market, the economy, geopolitics or even the fermentation committee. Instead it is a deep tangent from all things financial: an amusing anecdote focusing on the life and more notably, death anniversary of one Rasputin, narrated in the way only Art can do. So while we await the inevitable 3:35 pm rumor that a Fiscal Cliff resolution is imminent, just like all those other 99 rumors in the past few weeks, which sent the market soaring before they popped, what better way to kill the time until the next algo driven buying frenzy than with stories of possessed, mad monks in tsarist, WWI Russia.
Those who read our article on this topic at this time last week should already know the answer to this rhetorical question. Everyone else may be a little surprised to learn that at a time when every Primary Dealer's sales desk has been pushing what little is left of gullible investors into stocks because the "Great rotation out of bonds and into stocks is our Top trade of 2013" (source: [every sellside strategist]), just as these seem poised to tumble in a recreation of the August 2011 debt ceiling fiasco (as we have been warning for months), their holdings of these same boring old Treasurys once again rose in the latest week ending December 19, increasing by another $10 billion, and hit a fresh all time gross high of $146 billion. Judging by what is increasingly a rotation out of stocks and into bonds, the smart money - correction the only money remaining - appears positioned correctly once again.
Remember: always do what they do, not what they say.
Year-to-date, the EuroStoxx 50 (Europe's Dow) is the best performing of the major asset classes of the developed world - besting the S&P 500 by over 300bps now. What is perhaps more interesting than this apparent dirty/clean shirt bet is that the S&P 500 was outperforming Gold by more than 850bps last week. It appears that since reaching that 2-sigma 'richness' that stocks and gold have begun to converge back to a more normal 'average' spread for the year. Gold remains +6.4% for the year versus 12% for the S&P (with recent historical vol considerably higher in stocks than gold) but the question is - is the long Gold, short Stocks pair due for a renaissance?
For those who prefer to trade by looking the rear-view mirror, December was looking like a bias-confirming 'Santa-Claus-Rally' month until just a few days ago. For the past 15 years, S&P 500 futures have averaged a rather consistent trend 2% gain in December and in the week leading up to Christmas, the S&P was holding up that plan at +2.6%; but now, sadly, the S&P is down for the month (underperforming the average by around 250bps). Oh, well, we hear there is a January effect to trade soon?
Two interesting infographics were published recently that make it so easy to see the decline of the West, even a caveman can do it. Both of these infographics point to the same conclusion: the west is living far beyond its means and is struggling with pitifully anemic growth. This is a long-term trend, and one that is only going to accelerate. Yet as obvious as the indicators may be, few people will actually do anything about it.
They said it could never happen again, but it just did. Millions of retiring boomers were just silenced (and sent back to work) by the slump (down triple digits) in the Dow Jones Industrial Average back below its magical 13,000 level. WWBBD?
Arguing semantics over cuts here, taxes there, "we are close", etc. misses the entire premise of the entire political debacle that is now replaying in Washington. The simple fact of the matter is that our politicians will not cross the aisle, will not compromise, will not 'come together', will not 'rise above', will not 'think of the children' - until the market (that critical arbiter of everything that appears relevant to the elites) forces their hand. The following three charts should help clarify that for all market savants.
Comparisons of the failure of the TARP vote and the fiscal cliff were summarily dismissed early in this clip - though CNBC's Rick Santelli does note, as we have vociferously stated that a market correction is the only impetus to get something done in Washington. Having abandoned his channel's "Rise Above" meme in the face of this "childish nonsense", Santelli agrees that politicians "can show incompetence at very critical moments." Then, sparked by the anchor's comment that "the markets would know if [the cliff] was going be a horrific thing", Santelli goes 'off-script' with an epic take-down of all things CNBC: "the stock market is an immediate gratification for investors to make money;" and asks the key question "Why do we look to the Dow Jones Industrial Average to handicap if this country is going to go down the sewer in a couple of years? It doesn't give us a glimpse into the future." He adds that the market is not discounting $100 trillion of unfunded liabilities in our future and then slams the door shut with what will likely become the new meme: "The Fed doesn't have a clue, neither does the President, neither does Congress."