There are many headwinds to deflation-monster-fighting Abe's plans to bring Japan back from the ledge but perhaps the biggest one is the demographic disaster. As Japan News reports, the decline in Japan's population set another record in 2012 with the number of deaths exceeding births for the sixth year in a row. Records were broken everywhere. The number of babies born in the nation in 2012 fell by 13,705 from the previous year to hit a new low of 1,037,101 and while a total fertility rate of 2.0 children per woman will maintain the population at a stable level. Japan’s rate has continued to fall since dropping below 2.0 in 1975. Meanwhile, the number of deaths in 2012 hit a record high of 1,256,254, increasing by 3,188 from the previous year. The greying of Japan continues and worse still, the young, for many reasons, are not having children as the number of women in their 20s who had a child in 2012 decreased by 16,200. Will the fourth arrow of Abenomics be a state-sponsored unprotected sex-a-thon?
Volatility is back - though the averge joe-sixpack would hardly know it as stocks see their second best day of the year. The Dow Jones Industrial Average saw its widest weekly range in 2013 - 460 points low-to-high; even as it closes green. The Nikkei the same (with another ugly week). The USD saw its worst week in 19 months (as JPY carry unwinds hit) but the commodity complex was very dispersed. Oil prices surged 4.6% on the week (so no tax cut there then!) while Silver prices plunged 3%. US Treasury prices close down for the sixth week in a row (for the first time since May 2009). The ramp in the late day today - which held us nicely green on the week in stocks - was absolutely ignored by credit markets which ended the week notably wider.
It should be as plain as day at this point. Yet some people still have a hard time understanding that they’re living under an oppressive, destructive, unaccountable government. Most other cultures get it. If you go to Argentina, Vietnam, Italy, or China, people there have absolutely no trust or confidence in their governments. It’s something that’s 'almost' uniquely American - a lifetime of steady, bombastic propaganda that inculcates a deep belief that our system is the ‘best’. And, even in the face of such overwhelming evidence, it’s still hard for people to break from this programming and acknowledge that their government is just as corrupt as Mexico’s... albeit slightly more sophisticated. The politicians running the nation are sociopathic criminals, plain and simple.
It used to be called the "New Paradigm", it is now the "New Normal" - aside from that everything else is still the same, Ben Bernanke's aspirations to overturn math, economics and the business cycle notwithstanding. The only question is where on the red valuation line is the global market currently located, and how much longer can the central bankers reject the inevitable arrival of the first denial, then fear , then all other increasingly more unpleasant phases.
In the latest month of data, April, the Fed just disclosed that of the $11.1 billion in crease in total consumer credit, only 6% was in revolving credit. The balance, or $10.4 billion, was non-revolving, and thus was used to pay for that new Chevy Impala and/or "Keynesian Shamanomics 101 for Dummies." And of course, all was funded by the US government.
Over the past three weeks, there have been numerous headlines insinuating that a freefall in oil prices is underway. Last week we read that the various causes were a slowdown in China’s economy, OPEC’s decision not to cut production, and America’s growing oil production. Based on the headlines, one might suspect that we were right in the middle of a major bear market for oil. Just how far had the price of West Texas Intermediate (WTI) fallen? Before the last couple of day's surge to over $96 a barrel, all the way to $92 a barrel. Keep in mind that WTI opened 2013 at $93.14 a barrel. Since then it has traded between $98/bbl and $86/bbl - so despite the bearish headlines, WTI is still trading above the average over the past 12 months. So is the 'crash' coming?
The schizophrenic good-is-good, "we dont need no stinking Taper" market action earlier seems to be hitting a small road-bump. Interestingly, homebuilders and high-yield credit was flashing some early-warning signals... with S&P 500 futures hovering back at VWAP, the noise from the rest of the risk-asset complex suggest there is some more downside for stocks here.
This morning's illiquidty explosion in pre-open equity, commodity, and bond futures markets suggest the so-called 'tape' is indeed broken; but just over a month ago, the 'taper' word broke the relationship between bonds and stocks. For the previous five months, both Treasuries and credit spreads had rallied in almost perfect tandem with stocks as the 'flow' from the Fed (and Japan) floated all clean-shirty US assets. And then, with the mention of one little word, Bernanke and his team sent the bond market scurrying (it wasn't growth concerns as we noted here as spreads rose) but left stocks only bruised. Today, it appears, the world has taken a breath and flip-flopped once again - a better-than-expected payrolls print (which suggests we are closer to a Taper) is now bullish for stocks and bearish for bonds (but as we noted before this cannot last since the cost of credit increasing bites into EPS estimates as the credit cycle turns). With the FOMC meeting in less than two weeks, it seems if you truly do not believe in the Taper you buy bonds (Treasuries or high-yield credit if you are brave) not stocks... if not, you know what to do...
It is immeasurably easier to digitally create claims on real-world assets than it is to create real-world assets. The Fed can digitally print a trillion dollars at no cost, but that doesn't mean the money flows into the real economy. Once again we are compelled to ask: cui bono, to whose benefit?
The last few weeks have seen some modest volatility return to the US equity markets (a 5% high-to-low correction) sparking 'markets-in-turmoil' discussions as Fed Taper and Abenomics-Anxiety makes the headlines. But with today's payroll print and a comfort-blanket of stock-and-options quote-stuffing, fed-liquidity-providing momentum, today's rally will allow us all to sleep well over the weekend. However, one look at the following charts should suggest that things have changed... the most successful (momo-driven) trades around the world are coming undone in a hurry as the fear of a slowing of the global liquidity 'flow' rises - and the US equity investor is not immune...
Here Is Today's 482 Millisecond NFP Leak, The Subsequent Gold Slam And Trading Halts In Treasurys And ESSubmitted by Tyler Durden on 06/07/2013 11:46 -0400
On Monday we brought to you proof of a 15 millisecond frontrunning of the Mfg ISM number by what turned out to be HFT clients of Reuters which admitted subsequently it had "inadvertently" leaked the number to select clients. However, that was child's play compared to the absolute market farce that happened today which we can visualize courtesy of Nanex, and which impacted gold, ES, and Treasury Futures altogether.
As with pretty much everything in the current Schrodinger world in which we live, ObamaCare seems to both save and cost us more at the same time. We are sure Obama's address will explain the fair-and-balanced perspective on it, add some sugar on the payrolls report spin, and the Q&A (which surely our press will ask a little on NSA-related issues) and this should be fun...