The old 'new normal' precious metals smackdown has made a few appearances since the Cyprus debacle started but this morning's drop is impressive (given the lack of movement elsewhere) as gold drops back below pre-Cyprus levels. There is one 'currency' that is surgung in value though - Bitcoin is now trading at $107.36, up from $46 pre-Cyprus...
While immigration was pretty far down on the priority list at this time last year, recently the topic has taken a front seat in lawmakers’ chambers down in Washington. ConvergEs's Nick Colas notes that policymakers on both sides of ideological spectrum are establishing positions and recommendations for reform, and are familiarizing themselves with some of the lesser-known facts about immigration. In a nutshell, he explains: immigration is not all about border crossings from Mexico and undocumented workers. There are many more figures – and costs – associated with immigration, most of which have palpable and measurable impacts on the US economy. From GDP growth to the health of the housing market, immigration’s influences may not be widely known, but should be in order for policymakers and investors to make informed decisions.
As per rumors first reported in the overnight summary article, the Cypriot finance minister has joined the other rats dumping the sinking island:
CYPRUS FINANCE MINISTER SARRIS SAYS HE RESIGNS
SARRIS SAYS RESIGNS DUE TO ONGOING INVESTIGATION IN CYPRUS
SARRIS SAYS CYPRUS PRESIDENT ACCEPTED RESIGNATION
Investigation? Did he also funnel cash into London ahead of Confiscation Day?
It appears like the New Normal is merely a phrase used to describe daily records in virtually everything: the Dow Jones, the S&P, US foodstamps, sovereign bailouts, US total debt, and, today, Euro Area unemployment, which just rose to a fresh all time high 12%. From Bloomberg brief: "Euro-area unemployment rose to a record 12 percent in February and January’s figure was revised up to the same level from 11.9 percent estimated earlier, the European Union’s statistics office said. Jobless rates in January ranged between 4.9 percent in Austria and 27 percent in Greece. While rates in the euro area have risen by 1.1 percent point in the past year, unemployment has fallen by 0.6 percentage point to 7.7 percent during the same period in the U.S." Or said otherwise, European unemployment has now been rising constantly for 22 consecutive months - the longest period for deteriorating unemployment since the early 1990s, which, however, is to be expected for a continent which as we showed yesterday, has now reverted to 19th century growth rates.
- The revolving door continues: Mary Schapiro joins Promontory Financial (WSJ)
- First Peek at Health-Law Cost (WSJ)
- Abe warns over Japan inflation target: warns 2% inflation target may not be reached within two years (FT)
- BoJ's Kuroda tested by divided board (Reuters)
- Nanjing poultry butcher fourth person infected with H7N9 bird flu (SCMP)
- What time do top CEOs wake up? (Guardian)
- Cyprus Seeks More Time to Meet Targets in Talks With Troika (BBG)
- Investors Ignore Negativity at Their Peril (WSJ)
- Apple bows to Chinese pressure (FT)
- One can only laugh: North Korea to restart nuclear reactor in weapons bid (Reuters)
- Visa Demand Jumps (WSJ)
- Bloomberg's refutation of Stockman: yes, yes but... look over there, stocks are up! (BBG)
The driver of today's episode of "make the futures levitate" is not so much a rise in the EURUSD as Europe reopens - a very unhappy Europe where Italy's Monte Paschi was already halted down once on news from this weekend it was the first peripheral bank to suffer a depositor "run" - but curiously the USDJPY which after tumbling to under 93 and pushing the Nikkei 225 down by another 1% to just over 12,000 has been ramping gradually all morning to end well above the start of Japanese trading and was back to 93.25 at last check. It certainly is not the European economic news which continue to be about depressionary and getting worse: fresh unemployment record at 12%, final manufacturing PMIs well into contraction and getting worse especially for the doomed PIIGS: Italian PMI dumping even more to 44.5 vs Flash 45.4 and down from 45.8 last, Spain PMI crashing to 44.2, vs flash 46.2 and 46.8 last, UK 48.3 vs Flash 48.7, Germany 49.0 vs Flash 48.9 down from 50.3; France 44.0 vs Flash 43.9 and so on, rumors that the Cypriot Finance Minister is about to be sacked, and most disturbingly, the Slovenia central bank vice-governor Fabijan said that "Slovenia must start credible measures to avoid aid." Where was the last place we heard this.... Oh, yes, Cyprus. The same Cyprus, which paradoxically, is presented by some as the reason for the overnight "rally", with pundits attributing the Troika's "easing" of MOU terms by pushing back the fiscal target from 2016 to 2017 as reported yesterday. How that is even remotely news is shocking since none of the actual austerity measures themselves have been eased. But any goal seeked narrative is fair in the central banks' intervention in the farce formerly known as the "market."
It is a rhetorical question but what was Goldman doing as AAPL was tumbling from $700 to $428 yesterday? Well, it was telling its clients to buy. And not just buy, but buy with conviction, which of course means Goldman's internal prop flow desk was selling with the same feeling. Today, after AAPL's long suffering momentum chasers have been impaled on a nearly 52 week low, the firm finally cuts AAPL "Conviction Buy" target, dropping it to just Buy, and reducing its price target from $660 to $575. If anyone needed an upside stock catalyst, however brief, Goldman finally ending its conviction selling to the muppets may just be it.
With every passing day, it becomes clearer and clearer the Cyprus deposit confiscation "news" was the most unsurprising outcome for the nation's financial system and was known by virtually everyone on the ground days and weeks in advance: first it was disclosed that Russians had been pulling their money, then it was suggested the president himself had made sure some €21 million of his family's money was parked safely in London, then we showed a massive surge in Cyprus deposit outflows in February, and now the latest news is that a list of 132 companies and individuals has emerged who withdrew their €-denominated deposits in the two weeks from March 1 to March 15, among which the previously noted company Loutsios & Sons which is alleged to have ties with the current Cypriot president Anastasiadis.
The past 10 days have seen the Japanese Yen strengthen 3% against the USD - its largest such move in two years - with today's rally prompting a rather painful 'crash' in the Nikkei 225 at the open and envoking the anger of Abe:
- *ABE SAYS CURRENCY CORRECTION HELPING EXPORTERS COMPETITIVENESS (except that there is no evidence of this in any macro data at all)
- *ABE SAYS IT'S POSSIBLE BOJ WILL FAIL TO REACH INFLATION TARGET (like for the last two decades)
- *ABE SAYS ECONOMY SUBJECT TO UNFORSEEN CIRCUMSTANCES (unpossible)
- *ABE SAYS BOJ MUST EXPLAIN IF IT FAILS TO REACH INFLATION TARGET (not my fault!)
It seems that perhaps the wise investing public is waking up to the fact that words do not speak louder than actions, that macro fundamentals are bad and getting worse, and that 36,000 target for the Nikkei may be a stretch goal here.
According to some economist PhDs, the end of the gold standard era marked by the arrival of the Federal Reserve one century ago ushered in the era of stability, prosperity and virtually unlimited growth (just ignore the two world wars and millions of casualties immediately following). While that is an amusing way of describing a financial system that is now daily on the brink of a financial apocalypse courtesy of a few good central banks propping up a $1 quadrillion house of derivatives cards, whose collapse would mean an immediate "game over", and where (rapidly evaporating) confidence in a failing status quo, must be preserved at all costs, the question of post-Fed induced stability is an interesting one, especially when measured in terms of intangible value (in this case the most basic of indicators - the Dow Jones), compared to thousands of years of a real tangible, store of wealth: gold. In the chart below, courtesy of Cambridge House, we ask readers: in which period was there a more stable relationship between tangible and intangible values, and a less exuberant irrationality vis-a-vis that which is purely based on confidence, if not so much reality.
What is the meaning of the markets hitting new all-time highs. The general consensus of the analysts and economists is that the rise in capital markets, given weak current economic data and a resurgence of the Eurozone crisis, is clearly a sign of economic strength; and, combined with rising corporate profitability, makes stocks the only investment worth having. There is, however, a more pragmatic perspective. Suppressed wage growth, layoffs, cost-cutting, productivity increases, accounting gimmickry and stock buybacks have been the primary factors in surging profitability. However, these actions are finite in nature and inevitably it will come down to topline revenue growth. However, since consumer incomes have been cannibalized by suppressed wages and interest rates - there is nowhere left to generate further sales gains from in excess of population growth. The reality is that all the stimulus and financial support available from the Fed, and the government, can't put a broken financial transmission system back together again. Eventually, the current disconnect between the economy and the markets will merge. Our bet is that such a convergence is not likely to be a pleasant one.
Companies have been guiding the Street lower and managing expectations for earnings. The ratio of negative-to-positive guidance is now at all-time highs. For every one instance of positive guidance we have seen more than three instances of negative guidance versus consensus. From a slow-and-steady top-line growth trajectory that entirely ignores a global slowdown and the possibility of declining revenue to the sharp contraction in Q1 2013 expectations (and implicitly even more hockey-stick-like recovery in the second half), these six charts should provide some compelling evidence of the miracle-like consensus 'hope' priced into these markets (unless of course we rely on every asset-gatherers fall-back - multiple expansion - as we noted earlier).
If the suffering, yet docile, Cypriot serfs thought deposit confiscation would be the end of their problems under the European feudal system, they are about to be shocked. Because as part of their banking sector bailout, the country is set to get a "loan" from the Troika, a loan which comes with a Memorandum of Understanding, aka a "blueprint for austerity", with dictates terms for government revenue increases and spending cuts (of the variety that nearly caused America's leader to blow a gasket when he was describing the untold devastation that would result if the rate of acceleration in US budget spending dared to be slowed down even by a tiny bit). Today, a draft of the revised Cypriot MOU being prepared by the head of the IMF mission to the island nation, Delia Velculescu, leaked and can be found in its 24 page entirety here. However, for the benefit of our Cypriot readers, here is the important part: the listing of the anticipated austerity tsunami coming, not to mention healthcare system, "pension reform" changes and other proposals the ECB and the IMF are imposing on Cyprus as part of their generosity to keep the recently insolvent country as a well-behaving serf in the Eurozone.
"Soon, whether via Bitcoin or whatever comes next, it will be possible to strip banking away from bankers, and money away from governments." From a recent article in the Spectator titled “How Bitcoin Could Destroy the State”. Support for Bitcoin amongst Austrian economists is growing by they day and in this interview, the highly admired and respected Tom Woods, discusses Bitcoin with Erik Voorhees of Bitinstant (a popular, rapid way of converting fiat into BTC). This interview very poignantly addresses many of the layperson’s concerns about it that I have heard over the past several months. Remember, despite the price rise, Ben Bernanke is still creating the equivalent of 75 Bitcoin markets every month with his money printing.