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Tyler Durden's picture

Previewing The Dutch Elections





Even in the face of worsening odds of re-election (no sitting government has been returned to power in EU elections since the start of the crisis) one would expect national governments to do what is necessary to maintain current stability. The ultimate arbiter of burden sharing capacity, or whether the Euro will continue on the steady incremental path to integration, is whether regular voters vote for it. Hence the importance of elections, like the Dutch election this week. The anti-austerity Socialist Party (SP) has gained significant ground on the incumbent VVD party - focusing the market's attention on the willingness of the Dutch to meet the 3% of GDP deficit targets in 2013. The two 'extreme' parties look set to gain considerably more seats, and either a very broad coalition would be required, including a tail of small parties, or all four mainstream parties will have to participate in the new government: either way, government stability might be questionable. The scenario troubling markets is the potential for a long government formation process coinciding with the euro area’s need to fight the crisis and progress communal policies - though in the last week or two, support for the SP has declined. With the 2013 budget an immediate test, a 'new' Dutch government faces decisions over Greece, Cyprus, EFSF bond buying, and a common-bank supervisory body - none of which have anything like majority support across the coalitions.

 
Tyler Durden's picture

So Much For The Benefits Of College In America's "New Normal"?





Continuing with the theme of the secular shift in the labor pool (not cyclical, as the Fed still mistakenly believes: it will take it at least one more year to understand it has been wrong about this aspect of the New Normal economy too, just as it was wrong for decades about the Flow vs Stock debate), it is not only men who are fresh out of luck. As a reminder, we observed earlier that the labor force participation rate for men has just dropped to an all time low. It turns out there is another class of workers whose participation rate is at the lowest in series history: that of "25 year olds with a Bachelor's degree and higher", i.e. college grads. At 75.5%, it is the lowest since this data has been kept by the BLS. But not all is abysmal in America's labor force. While the share of workers with a college degree has plunged to all time lows, a bright spot can be found when observing the labor force participation rate of those who never bothered with college, and for whom high school was their last known degree-granting institution. At 59.9%, the participation rate is well of its 2012 lows of 59.0% and steadily rising, in fact, to borrow a term from the housing bulls, it may well have "bottomed". Now there is some truly great news for the future of America's highly educated workforce.

 
Tyler Durden's picture

54% Of Germans Hope Krimson Kardinals Just Say "Nein" To ESM, As Greece Is Once Again On The Edge





There are two key events in the coming week: first, on September 12, is the decision of the German Constitutional Court, aka the Krimson Kardinals of Karlsruhe, whether the ESM, or the ECB's primary market bond monetization program, is legal. A no vote would severely cripple the European "make it up as you go along" bailout and leave Europe's peripheral nations with little recourse, and Spain with even less cash as it faces a wall of bond maturities in both October and 2013. Then, on Thursday, the Federal Reserve will most likely underwhelm the market which is expecting a new substantial round of outright Asset Purchases, aka NEW QE, which however as we explained will almost certainly not occur due to various reason first described here last Friday. A third, and perhaps far more important event, will be the Dutch parliamentary election also on September 12, but more on that in a further post. For now, looking at Germany, and the piecemeal attempt to put back together the European house of monetary cards, we find that in Germany - the country taksed with funding the European implosion - the population has decided, by a 2 to 1 margin - that the constitutional court should just say "nein" to the ESM, and let Europe go on its merry way without German backing (because as a reminder, the primary source of ESM funding is Germany). From Spiegel: "A survey shows that the majority of Germans hope that the judges in Karlsruhe reject the permanent rescue fund ESM. 54% want a reversal of the Bundestag decisions on the ESM and Fiscal Pact, which should be legally halted. Only 25% believe that the court should dismiss the urgent appeals of the Euro-skeptics."

 
Tyler Durden's picture

Suddenly, Nobody In Europe Wants The ECB Bailout





It took the ECB a year of endless behind the scenes Machiavellian scheming to restart the SMP program (which was conceived by Jean-Claude Trichet in May 2010, concurrent with the first Greek bailout). The markets soared with euphoria that this time will be different, and that the program which is a masterclass in central planning paradox, as it is "unlimited" yet "sterilized", while based on "conditions" none of which have been disclosed, and will somehow be pari passu for new bond purchases while it retains seniority for previous purchases of Greek and other PIGS bonds, will work - it won't, and the third time will not be the charm as we showed before. Yet it has been just 48 hours since the "bailout" announcement and already Europe is being Europe: namely, it turns out that nobody wants the bailout.

 
drhousingbubble's picture

Rising home values in the face of stagnant incomes





For the first time since September of 2010, nearly two years ago, has the Case Shiller 20 City Index realized a year-over-year gain. Does this signify a sustainable turning point for the market? 

 
Tyler Durden's picture

Peter Schiff Discovers No Country For Corporate Profits





Peter Schiff pulled an OccupyWallStreet (remember that whole Occupy movement?) at the Democratic National Convention. What he did, was succeed in exposing some very disturbing prevailing beliefs about the government's role in establishing the 'utility' value of the free market as manifested by corporations, namely that according to a broad cross-section of society, it is the government job to "explicitly outlaw profitability."  We wish to remind readers that this has been done on numerous occasions in the past, but most "effectively" in the Soviet Union's centrally planned regime. Until the USSR's failure of course. The premise of eliminating profitability is also quite popular, and even has its own name: nationalization, and its result in a business "manager" who is perfectly ambivalent if the state owned enterprise makes or loses money. After all the wage is determined by a politburo, and is not a function of the profits, or losses, a business may engender. Furthermore, it is probably worth reminding that the primary tenet behind capitalism is the production of goods and services for a profit. Sadly, quite a few of these concepts appear to have not been made clear to not just one or two Americans as the following clip demonstrates.

 
Tyler Durden's picture

The Next (Lack Of) Trading Casualty: Nomura's Brand New $270 Million Trading Floor





Over the past several months (and years) we have been warning that the ongoing collapse in trading volumes, in part due to the lack of faith in capital markets that now have all the integrity of a rigged Vegas casino from the 1960s, in part due to investors' need to monetize assets in a world in which wages simply refuse to keep up with prices, will have not only irreversible implications on the shape of market structure, but also substantial consequences when it comes to the layout of modern banks, and associated up and downstream variables, such a jobs, real estate, support professions, municipal taxes and much more. Nowhere is this more evident (for now at least) than in the massive corporate reorganization taking place at Nomura's American division, which among many other things is about to lose its brand new $270 million trading floor even before a single trader set foot in it.

 
Tyler Durden's picture

Guest Post: Now That The Easy Stuff Has Failed, All That's Left Is The Hard Stuff





The disregard for the future and the fundamentals of fiscal well-being is about to reap consequences. The Powers That Be counted on "time healing all," as if the mere passage of time would magically heal a broken economy and political machine. Time heals all--unless you have an aggressive cancer. The system has been pushed to extremes: the expectations are impossibly high, the promises are impossibly generous and the sums of money demanded by the vested interests "just to stay afloat" are stratospheric. The "run to fail" levers have all been pushed to the maximum, and it is simply too politically painful to make any real-world adjustments that might save the system from imploding. Nobody wants a crisis, yet a crisis is the only thing that can save the system from implosion.

 
Tyler Durden's picture

Guest Post: Does the Iranian Government Have A Right To A Nuclear Bomb?





The heightening tension between the United States government and Iran’s is based off of the fallacious notion that nuclear weapons have a legitimate purpose outside of killing enormous amounts of people.  Yet they have no other real purpose in the end.  Governments possess nuclear weaponry because there is little recourse for state-sanctioned murder.  The millions of innocent lives that stand to be vanquished off the face of the Earth have little meaning to the power-tripping political elite.  So while the Iranian government’s pursuance of nuclear weapons should be condemned, the United States government, the Israeli government, and others capable of waging nuclear war are in no place to criticize.

 
Tyler Durden's picture

Labor Day 2012: The Future Of Work





Both Mitt Romney and Barack Obama will give us happy talk about maintaining entitlement benefits (e.g., Medicare and Medicaid) that cannot possibly be sustained. They will talk about energy self-sufficiency. They will talk about creating jobs. They will tell us that we can somehow ‘grow’ our way out of our economic distress. But neither candidate will admit that technology now destroys more jobs than it creates, because to do so would be to commit political suicide. The fact is that none of the happy talk will ever come true. Instead, the Federal Government, with the tacit approval of both major political parties, continues to run trillion-dollar-plus deficits year after year in a futile attempt to spend our way out of our economic problems and to sustain an economic model that cannot be sustained. Those who believe that bringing manufacturing back to the US will also bring back jobs are trying to fight a war that has already been fought and lost. Why? The answer is technology. It’s actually a fairly simple process now to bring production of many items back to the US, simply because of automation and robotics. A factory filled with robots can operate 24 hours a day, 7 days a week, 52 weeks a year, so long as the raw material inputs keep flowing into the factory. Robots don’t take breaks, don’t make mistakes, don’t call in sick, don’t take vacations, don’t require expensive health insurance, and don’t receive paychecks. A fully automated robotic manufacturing facility might require only 100 workers, while a traditional assembly line facility might utilize 3,000 workers. That’s a huge difference in the number of jobs. The simple fact is that most of the lost manufacturing jobs are never coming back.

 
Tyler Durden's picture

Is 11% This Election's Most Important Number... And If Not, Why Isn't It?





With the US presidential election looming in just two months, there is hardly a state that is as critical to the outcome of who America’s next president will be, as Florida. As Bloomberg vividly summarizes, Florida - and specifically its five swing counties: Hillsborough, Orange, Pinellas, Seminole and Volusia - was the state that determined the president in all of the last 3 elections: set between the Republican-dominated North Florida and the more Democratic southern counties, these suburban communities of middle-class voters are known for their shifting allegiances. In 2008, Obama took four of the five counties to capture Florida. George W. Bush won three of the counties, and the state, in 2004. In 2000, Volusia’s vote count was disputed by Vice President Al Gore. Gore won the county yet lost Florida by 537 votes, giving Bush his first term as president. It is quite fitting then that these five counties are very much indicative of the primary malaise that has plagued the country for the past 4 years: the inability of the housing market to rebound no matter how many trillions in printed dollars are thrown at it. Which brings us to the key number that probably should (but most likely won’t in this age of ultra short-term attention spans and constant redirection and focus shifts): 11% - this is the foreclosure rate in these 5 critical counties, double what it was 4 years ago, and three times higher than the national foreclosure average rate of 3.4%. In other words, if there ever was a time and place when economics, through its sheer failure to restore “household wealth” in this most decisive region, was a key issue, now is the time.

 
Tyler Durden's picture

The Three Charts Of The Corporate Apocalypse (Or Why Aren't Low Rates Working?)





Corporates are in relatively good financial shape and theory says should respond to high profits and cheap debt by investing more. However, while high 'profits' and low cost of debt are reasons for capex and opex to be rising more quickly than they are, these two critical drives of recovery show no signs of responding to these profit/debt incentives - and so as Citigroup notes "recovering is not booming". Top-down, compared to history, capex is low, following P/E's sentiment - especially in Europe (indicating a lack of confidence in the future). However, at the sector level this reverses: high capex has been given a low PE, while low capex has a high PE. The market is effectively encouraging companies to invest less and return more money. Longer term the consequences for economic growth, inflation and earnings growth are negative - as we trade (once again) short-term equity gain for long-term sustainable economic gain.

 
Reggie Middleton's picture

Many Don't Understand The Google/Apple/Microsoft Business Model Dynamic Nor How Dangerous This Apple Legal Win Can Be For Consum





In continuing my rant on the Apple v. Samsung verdict, I wish to make clear once again that the vast majority of consumers of Google's and Apple's products are absolutely oblivious to the business model of Google, the business practices of Apple and the shadowy aggressive survival tactics of the behemoth that is Microsoft. If I am correct in this assertion then the potential ramifications of Apple actually defeating Samsung in the patent case decided last week is also lost on most.

 
Tyler Durden's picture

Hilsenrath Sets Off To Preserve Bernanke's "Legacy"





Yesterday, when the market was plunging (by less than a whopping 1%, yet magically defending the 13K "retirement off" threshold in the DJIA), we wondered: where is the Fed's favorite messageboard: WSJ "journalist" Jon Hilsenrath. We found out at 3 am, when instead of releasing another soon to be refuted rumor of more easing, we discovered that the scribe was busy doing something very different: discussing the pros and cons of the Chairsatan's legacy.

 
Tyler Durden's picture

The Election: It's The Food-Stamps, Stupid!





In November 2008, President Barack Obama won the popular election for President by 9.5 million votes.  A burgeoning financial crisis and weakening economy helped his candidacy at the time, but four years on the sluggish pace of economic recovery is a headwind to his re-election.  Consider, for example, that there are currently 12.8 million people unemployed in the U.S., or that an estimated 8 million adults entered the SNAP (Food Stamp) program since November 2008 (total increase in enrollment: 15.6 million).  Presidential elections are won in the Electoral College, of course, so in today’s note ConvergEx's Nick Colas parses out this employment/food security economic stress for the key “Battleground” states.

Seven of the 8 swing states this election year are more economically stressed than the national average in terms of unemployment and/or food stamps, while 2 of the 3 states “leaning” toward Obama are worse off than the national average.  Romney, behind in the electoral vote count by most analysts’ figures, theoretically stands to gain from a weak national economy, but he’ll have to earn the vote of an estimated 4 million Americans in 14 key battleground states to have a shot at the White House.

 
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