If the worst retail sales number in 12 months doesn't send the S&P to 1,700 nothing will. Because that is precisely the data point we got moments ago when the Census bureau reported June retail sales growth of 0.4%, missing expectations of a 0.8% print and down from a downward revised 0.5%. However, the only growth in the headline number was thanks to auto and gas sales. Ex autos retail sales were unchanged on expectations of a 0.5% increase, while ex autos and gas the print was down -0.1%, crushing hopes of a +0.4% increase. Any minute now, however, the Fed's S&P500 trickle down wil, with a 4 year delay, hit the end consumer: the entire Princeton economics department pinky swears.
The last time a big financial firm rushed into buying rental exposure (just as others were quietly leaving the sector in droves and when the ingenious Wall Street was coming up with such derivatives as Rent-Backed Securities to dump their exposure to dumb yield-starved Germans and Asians), it had a very unhappy ending for the buyer. That transaction of course was Lehman Brothers' rushed acquisition of landlord Archstone, which as many have noted over the years, was a big contributor to the Lehman bankruptcy once the rental payments dried up. But then again, as others have pointed out, Lehman was so deep in its real estate exposure by then it really had no choice but to keep doubling down all the way to the bitter end. Which may explain why while most other brand name hedge funds and P/E firms are now cashing out of the US housing market whose second bubble may already have peaked (only last night Goldman said that "On house prices, we have started to see the first signs of deceleration and expect a slowdown"), Blackstone, which is now the US' largest landlord, is digging in its heels and is not letting go. In fact, it is adding to its exposure - as the WSJ reported overnight, Blackstone has invested another $1 billion to purchase GE's stake in 80 apartment complexes amounting to 30,000 apartment units, located in Dallas, Atlanta and other parts of Texas and the Southeast.
- U.S. Regulator Subpoenas Banks Over Long Warehouse Queues (BBG)
- Apple Said to Prepare Holiday Refresh of IPhones to IPads (BBG)
- Fed's Yellen Says Stance on Banks Hardened (WSJ)
- Mexico opens up its energy sector (FT)
- Spin: Greek GDP marks gradual deceleration of recession (FT) ... spin aside, it dropped 4.6%, and in reality, probably over 10%
- Made-in-Canada Solution For BlackBerry Avoids Nortel Fate (BBG)
- America's Farm-Labor Pool Is Graying (WSJ)
- Video of 'lame' cattle stirs new concern over growth drugs (Reuters)
- Paulson Bid for Steinway Trumps Kohlberg Offer (WSJ)
- Egyptian government yet to decide on pro-Mursi vigils (Reuters)
It's only fitting that in a bizarro new normal, the news that passes for positive is either conflicting, reflexive or, well, simply bizarre. Last night was no exception as the "good" news came in the form of speculation that in order to promote its consumption tax hike, the Abe government would consider a corporate tax cut. How that helps the country with the 1 quadrillion yen in debt is not exactly clear, or how it makes consumer tax hikes any more palatable in a nation in which more people than anywhere in the world are retired and elderly, and thus removed from the corporate lifecycle, is just as nebulous. But the market liked it. Just as it liked the good ole' European cop out, of posting a surge in consumer confidence, or relying on reflexive indicators to represent an improvement in the economy, when in reality the only thing "improving" is the stock market. This happened when the German ZEW Economic Sentiment survey soared from 36.3 to 42.0 on expectations of a 39.9 print. So one must buy futures, or that's what the GETCO algo programming says.
First it was the JCPetanic, then the JCPanic, then it became the JCPandemonium, and moments ago, the situation at the doomed retailer was downgraded once again, this time simply to JCPathetic, as the cash-burning, slow motion circus crash lurches from farce to farce, the latest news being that in a long overdue move, Bill Ackman has thrown in the towel on JCPenney and has resigned from the board. Does this mean Ackman will next be offloading his nearly 40 million JCP shares next, and just who will buy them if that is the case, we shall find out shortly. Also, maybe the company can provide an update on what is really important: its nearly (or maybe it is now more than) $2 million per day cash burn rate.
The next day, following a shut out by HSBC, JPM had no choice but to go to the second largest vault, that of Scotia Mocatta and get more than triple times that, or just over 20k ounces.
Today, the Comex gold crunch has gotten so confusing, nothing short of a color-coded schematic can do it justice.
A question arises: how does one know they are living in an unmitigated disaster of a banana republic where not even an attempt at hiding the crime and corruption takes place? Well, we are not absolutely certain, but we have a distinct feeling that when the president appoints as his impartial "reviewer" of the ultra top secret NSA's policies and capabilities the one man who was caught and exposed and subsequently apologized for lying to Congress, that may be a pretty damn good sign. Sadly, that is precisely what just happened.
Are we going to see more leaks?
"Yes. A lot [of Anonymous members] are mid- to high-rank NCOs. They are well-respected, have connections, and overly large security clearances. A lot of people who are part of the [Anonymous] culture are just dying at this point for something to come across their table that isn’t already out there."
When the people within your own military don’t even trust you, you have a serious problem.
Most Americans are probably unaware that over the past two weeks the US has launched at least eight drone attacks in Yemen, in which dozens have been killed. It is the largest US escalation of attacks on Yemen in more than a decade. The US claims that everyone killed was a “suspected militant,” but Yemeni citizens have for a long time been outraged over the number of civilians killed in such strikes. The media has reported that of all those killed in these recent US strikes, only one of the dead was on the terrorist “most wanted” list. Far from solving the problem of extremists in Yemen, however, this US presence in the country seems to be creating more extremism. This cycle of intervention producing problems that require more intervention to “solve” impoverishes us and makes us more, not less, vulnerable. There is an alternative. It is called non-interventionism. We should try it. First step would be pulling out of Yemen.
Following this period of extraordinary monetary policy accommodation, Barclays Barry Knapp notes it stands to reason that, although there is some room for additional risk premium contraction (the aggregate measure for the S&P 500 remains above the long-term mean), the equity market on a stand-alone basis can hardly be considered cheap. In fact, looking across a broad range of balance sheet and income statement metrics over a period we would characterize as representative (albeit with a somewhat large dispersion of 1973-present), the equity market is above the long-term mean on every measure. But it gets better. There is little doubt that liquidity will prove challenged in coming weeks but market participants appear to be far too relaxed about events as equity market risk measures are close to the low risk point of their post-crisis range. So expensive valuations and risk complacency - BTFATH?
Renowned economist John Taylor believes children's author Richard Scarry brings basic economics - money, exchange, gains from trade, production, investment, saving, productivity, circular flow - into his stories in a way even preschoolers can understand. However, as Taylor notes, Scarry misses one important thing...
The subject of ghost cities and real estate bubbles in China is not a new one (as we have discussed here, here and here). However, as this brief but devastatingly insightful clip from CBS 60 Minutes shows, "if you go to China, it's easy to see why there's all the talk of a bubble. We discovered that the most populated nation on Earth is building houses, districts and cities with no one in them - no residents, desolate condos and vacant subdivisions uninhabited for miles, and miles, and miles, and miles of empty apartments." But... "they've all been sold" to foreign liquidity and more worryingly, to the domestic Chinese middle class who have been 'repressed' into this speculation. The government's greatest fear remains - social unrest.
This one is too ridiculous to not pass along. I’ve long written that desperate governments try to ‘control’ everything as they slide into insolvency. They impose capital controls, exchange controls, wage and price controls, gun controls, border controls, and more. But the government of Argentina has really taken this to another level. Their latest stunt? Manufacturing Viagra at a state-owned pharmaceuticals company... and giving it out for free to the people. It’s the ultimate reminder of how absurd government control can be when things get really desperate. They reach a certain point where, after capital controls, gun controls, wage and price controls, etc., the only controls left to implement are people controls.
While there are a fair-share of descriptive statistics that show the USA is no longer the "Number 1" that so many believe it to be; Pando Daily put together the following infographic that reveals the Top Ten nations and Top Twenty states that serve up the most illicit content... and the winner is U-S-A! 66% of the pron hosted in the US comes from California and interestingly only 0.62% of all porn sites use the ".xxx" domain name. Of course, hard numbers are tough to come by, but as ExtremeTech illustrates, Xvideos - the largest porn site on the web - gets a stunning 4.4 billion page-views per month - 3x the size of CNN or ESPN. Ironically, the biggest difference is 'duration' - typical news sites are visited for 3 to 6 minutes; while the average time spent on a porn site is between 15 and 20 minutes... Overall, porn websites are estimated to receive a whopping 30% of total internet traffic around the world.