With AAPL's share price 'off the lows', hope is re-emerging that the company-that-can-do-no-wrong is back (23% decline aside). However, a funny thing happened on the way to the AAPL store. Digitimes is reporting speculating (via China Times) that the tech giant is preparing for trial production of the iPhone 5S in December with an iPad update shortly after. It would seem to us that Apple is scrambling - how does a three-month upgrade-cycle sync with a two-year non-free upgrade contract from the telecoms providers? It appears clear that few will participate and upgrade-cycle take-up estimates will have to be reduced. Furthermore, following in the footsteps of Bernanke's some-is-good so more-is-better strategem, we wonder whether the public will begin to adjust their behavior and delay purchase in an ever-decreasing sales loop since the iPhone 'n+1' is only a few months away... especially as the marginal improvement approaches its zero-limit.
On this day (-1) in 1918, Pvt. Henry Gunther of Baltimore, Maryland thought he saw a suspicious movement in the German trenches across the way. Fearing that the "Huns" were using the mid-morning sun to get some territorial advantage while the peace talks dragged on, Gunther decided to rush the suspicious area. Henry was fast but unfortunately, not invisible. A single shot from a German rifle struck him in the heart and killed him instantly. The time was 11:01 a.m. just 1 minute after the war officially ended, making Put Henry Gunther the final casualty of World War I.
When we reported yesterday that following "recurring" "provocations" by the Syrian military, which is so very confused who it wants to declare war on first - NATO member Turkey, or best US friend Israel, it is pressing on both fronts, even as it continues to be torn by CIA funded, and Al Qaeda stoked civil war, which saw Israel launch a missile into Syrian territory for the first time since 1973,we said, "It goes without saying that this is merely the first proverbial shot across the bow, or in this case the DMZ. Much more to follow, until finally the UN rules, and the fair and objective media backs it, that the time to invade liberate Syria has come." Sure enough, less than 24 hours later...
ISRAELI MILITARY REPORTS `DIRECT HITS' ON SYRIA TARGETS: AP
The slow data (and holiday) week will likely keep eyes focused on the 'fiscal cliff' supplying a stiff headwind to stocks as it only reminds investors of the peril which looms directly in front of them. One suggestion I could offer both sides of this debate to avoid any further damage is just to be quiet. Stop making stump speeches. We all know your views. We all know how stridently you will defend them, but your incessant reminders that you have dug in your heels does no good regardless of the negotiating tactic. Instead, hold a joint press conference and admit there are ideological differences, but announce that both parties will do their best to hammer out a deal palatable enough for everyone. Alas, this is wishful thinking. As a result, anytime they open of their mouths, most notably Mr. Obama’s, the words they spew will cause damage to share prices. Unfortunately, the President’s drawing a line in the sand on Friday has guaranteed that a countless number of E-Mini bandits will short the futures in front of his speaking which will erode the conviction among managers trying to put money to work. Ironically, it may take an equity market in free fall that ultimately forces compromise.
Whocouldanode? Since August 2011, we have know this painful combination of tax-cut cessations and spending cuts (sequestrations) was due to hit as yet another painful decision 'can' was kicked down the road by the 'super committee'. In February 2012, Bernanke coined the term 'fiscal cliff' for this chaos and since then we have been active in discussing the impact (329 ZeroHedge articles). From pointing out the market's total lack of 'pricing-in' to comprehending the contagion and impact of the 'fiscal cliff' or slope or hill, it would appear the world has been numbed into denial by the monetary policy medicine needed to get an incumbent re-elected. The 'efficient' market is now catching on - as are the 'efficient' headlines as we see searches and news stories surge about this critical event horizon. Between Bloomberg's news story count and Google's search volumes, it would appear the American public is waking up to the reality about to beset them now that re-hope is back.
Another day another sell-off…with equity markets in Europe trending steadily lower after it was reported that the decision on Greek aid will not be taken during the Eurogroup meeting scheduled for November 12. Still, EU official said that there will be no Greek default on November 16th (EUR 4.1bln redemptions) and that this redemption is to be "factored in" decision on disbursement. Separately, analysts at Fitch rating agency noted that while current Spain’s rating is appropriate, further action would more likely than not be to sub-investment grade. Moody’s also commented on the never-ending sovereign debt crisis today, stating that actions taken by the ECB only buying time for Euro region and that a decision on France will be communicated within a few weeks. As a result, bond and credit spreads widen further today, with SP/GE 10s spread at 450 level, which is of particular importance given that this is the level at which the LCH begins to review bonds for margin requirements. Deterioration in Italian paper was linked to next week’s supply. In turn, EUR/USD and GBP/USD trended lower, with the USD index up 0.12% at last check. Going forward, market participants will get to digest the release of the latest U. Michigan Survey (Nov P), as well as macro forecasts from Philadelphia Fed.
With everyone convinced that it is only a matter of time before Larry Fink steps into the office about to be vacated by that walking 1040 disaster, Tim Geithner, thereby allowing the man who many say is the shadow king of Wall Street to define US policy for another 4 years (because Wall Street's complete dominance of US politics since JPMorgan's bailout of the US government is certainly not enough), there is still time to consider alternatives to a position that will make sure the only class to benefit from "four more years" are the uber wealthy (even as entitlement policies keep the uber poor at least content). Today, Bloomberg columnist William Cohan proposes his economic dream team, which far from perfect, will at least, superficially, assure that Wall Street won't come first and foremost when policy considerations are discussed. The names: Treasury Secretary: Erskine Bowles; SEC Chairman: Eliot Spitzer; National economic advisor: Carmen Reinhart.
- Jefferies to be bought by Ian Cumming's Leucadia in an all-stock deal for $3.59 billion or about $17/share (WSJ)
- FBI Scrutinized on Petraeus (WSJ)
- Identity of second woman emerges in Petraeus' downfall (Reuters)
- SEC staffers used government computers for personal use (Reuters)
- Japan edges towards fifth recession in 15 years (FT)
- Europe Finance Chiefs Seek Greek Pact as Economy Gloom Grows (BBG)
- Americans Say Europe Lesson Means Act Now as Austerity Will Fail (BBG) - of course it would be great if Europe had ever implemented austerity...
- Greece battles to avert €5bn default (FT)
- You don't bail out the US government for nothing: No Individual Charges In Probe of J.P. Morgan (WSJ)
- Israel Warns of Painful Response to Fire From Gaza, Syria (BBG)
- Greece's far-right party goes on the offensive (Reuters)
- Don’t fear fiscal cliff, says Democrat (FT)
- Apple Settles HTC Patent Suits Shifting From Jobs’ War (BBG)
- Man Set on Fire in Argentina Over Debt (EFE)
- Iraq cancels $4.2-billion weapons deal with Russia over corruption concerns (Globe and Mail)
- An Honest Guy on Wall Street (Bloomberg)
Chairman of the LBMA David Gornall told the conference, “When comparing China to the U.S., it would seem that in China, gold asset allocation can only go in one direction. The country has only 2% of its reserves in the form of gold compared with the U.S. at 75%.” The People’s Bank of China hasn’t disclosed any changes to its gold holdings since 2009, when it said they had risen a whopping 76% to 1,054 metric tons. While the U.S., Germany, Italy and France keep more than 70% of reserves in gold, China’s share is less than 2%. “Prices have recently been supported by official sector buying,” Gornall said today, without listing any central bank. “Will the gap between the amount of gold held in reserve by the developing markets and that of the developed world close?” Brazil, South Korea and Russia have all added gold reserves this year data from the International Monetary Fund show. Nations bought 254.2 tons in the first six months and may increase to 500 tons this year, the World Gold Council said in August, exceeding the 456 tons added in 2011. China has the world’s largest foreign-exchange reserves, totaling $3.29 trillion in September, according to data by Bloomberg.
The overnight session has so far been marked with one after another economic debacle out of Asia. First Japan announced that its Q3 GDP fell an annualized 3.5% in Q3, more than the 3.4% expected, the worst decline since last year's earthquake. The drivers were sliding exports and a collapse in consumer spending. The announcement brought on a barrage of platitudes by various Japanese officials who are shocked, shocked, that 32 years of Keynesian miracles have resulted in this horrifying outcome. Of course, everyone knows 33 years is the charm for Keynesian miracles. So much for the boosts from Japan's QE 8 aad QE 9: bring on QE 10. The pundits appear surprised now that Japan is back in a solid recession, which to us is quite surprising as well - does this mean that Japan ever exited the depression? Then China came out with an announcement that its credit growth plunged in October with Chinese banks extended CNY 505bn new yuan loans in October, down from CNY 623bn in September and less than the CNY 590 expected. The trifecta of bad news was rounded off by India, whose Industrial Production joined the rest of the world in global recession, when it dropped 0.4% in September on expectations of a 2.8% rise, even as Consumer prices rose 9.75% Y/Y - the global stagflation wave has arrived... For all those wondering why futures have managed to eek out a modest overnight ramp.
If the citizenry cannot dislodge a parasitic, predatory financial Aristocracy via elections, then "democracy" is merely a public-relations facade, a simulacra designed to create the illusion that the citizenry "have a voice" when in fact they are debt-serfs in a neofeudal State. When the Status Quo remains the same no matter who gets elected, democracy is a sham. The U.S. Status Quo is also like an iceberg: the visible 10% is what we're reassured "we" control, but the 90% that is completely out of our control is what matters. There is another dynamic in a facsimile democracy: the Tyranny of the Majority. When the Central State issues enough promises to enough people, the majority concludes that supporting the Status Quo, no matter how corrupt, venal, parasitic, unsustainable and dysfunctional it might be, is in their personal interests. In this facsimile democracy, citizenship has devolved to advocacy for a larger share of Federal government swag. Is Democracy Possible in a Corrupt Society? No, it is not. Our democracy is a PR sham.
There are plenty of analogs for market and economic behavior currently echoing the past - some scary, some terrifying, and some hopeful. Barclays found two interestingly similar election-bound relationships to the current environment but with very different outcomes: Harry Truman's successful 'Fair Deal' 1948 campaign and Jimmy Carter's unsuccessful 1980 re-election effort. In both cases business confidence and capital spending were soft during the election year - just like the current economy; but due to a monetary policy mistake (raising the reserve requirement) Truman III's world slumped into a recession. Unfortunately the current market traded as if this was hope-ridden 1980, but it turns out we could be headed for 'Truman's 3rd term' (evident in the charts below). Clearly, Barclays believes, the risk is a policy mistake – this time fiscal – which could drive another capital spending bust and a shallow recession.
Anyone who may have been concerned by the slowdown in Chinese gold imports in August, when the country imported "only" 53.5 tons of gold from Hong Kong (down from 75.8 in July), can breathe a sigh of relief. According to the Hong Kong Census Bureau, in September Chinese gross imports soared by 30% reverting to the long-term trendline of 65 tons in gross imports per month, and rising to a total of 69.7 tons. Net imports were 40% less, although that excludes organic Chinese gold mining and recirculation, which is why for all intents and purposes the gross number is the apples to apples one. And using that, Year-To-Date China has now imported a whopping 582 tons of gold, more than the official holdings of India at 558 tons, and which through November has certainly surpassed the holdings of the Netherlands, and make China's gross imports in just 2012 nominally the equivalent of Top 10 largest sovereign holder of gold.