In the upcoming week, the key event is the US FOMC, though we and the consensus do not expect any key decisions to be taken. Though a strengthening of forward guidance is still possible, virtually nobody expects anything of import to be announced until the Dec meeting. In the upcoming week we also have five more central bank meetings in addition to the FOMC: Japan, New Zealand, India, Hungary and Israel. In Hungary we, in line with consensus, expect a 20bps cut to 3.40% in the policy rate. In India consensus expects a 25bps hike in the repo rate to 7.75%. On the data front, US IP, retail sales and pending home sales are worth a look, but the key release will be the ISM survey at the end of the week, together with manufacturing PMIs around the world. US consumer confidence is worth a look, given the potential impact from the recent fiscal tensions.
Just as it is easy being a weatherman in San Diego ("the weather will be... nice. Back to you"), so the same inductive analysis can be applied to another week of stocks in Bernanke's centrally planned market: "stocks will be... up." Sure enough, as we enter October's last week where the key events will be the conclusion of the S&P earnings season and the October FOMC announcement (not much prop bets on a surprise tapering announcement this time), overnight futures have experienced the latest off the gates, JPY momentum ignition driven melt up.
"Since September 2011's $1921 peak, gold has been in correction mode," Mark Faber tells Barrons in this brief clip, but the overhwleminly bearish sentiment combined with the major accumulation (most notably by China) means "gold prices have probably bottomed," and some gold mining stocks are well positioned. While Faber has recently expressed concern at the potential for a major correction in stocks, he notes that there are pockets of value worth investigating including European Telcos and Indo-China travel-related stocks. However, the Gloom, Boom & Doom report writer warns that "stocks could be dead money for a while."
Supermarkets, healthcare and education are next in line for technological upheaval. We look at the best ways to profit from upcoming changes.
Hypocrisy as a Weapon
Once the economy's capital structure is distorted beyond a certain threshold, it won't matter anymore how much more monetary pumping the central bank engages in – instead of creating a temporary illusion of prosperity, the negative effects of the policy will begin to predominate almost immediately. Given that we have evidence that the distortion is already at quite a 'ripe' stage, it should be expected that the economy will perform far worse in the near to medium term than was hitherto widely believed. This also means that monetary pumping will likely continue at full blast, as central bankers continue to erroneously assume that the policy is 'helping' the economy to recover.
While Eike Batista's collapse from grace may be the poster child for the country, this deep dive into the Latin American economy concludes Brazil’s flaws are clear. Commodity prices have been volatile; global growth has been weak and inconsistent. Brazil can no longer depend on these factors for growth. A closer look reveals that internal conditions are progressively becoming Brazil’s main economic foe. Ironically this is good news as the country is increasingly in a position to take control of its destiny. What is needed is decisive leadership and effective solutions to the long-term problems plaguing the country. Short-term stimulus measures and even supply-side measures such as reduced taxes have clearly not stimulated the economy. Brazil must invest in its own future.
Already, the Chinese have stopped accumulating dollars - preferring safer currencies, infrastructure, hard assets and commodities and of course gold. Even a small amount of Chinese selling could lead to substantial dollar weakness and much higher bond yields plummeting the U.S. into another recession.
First: we are not suggesting Japan's army is comprised of radioactive mutants - perhaps just those stationed within 10 kilometers of the Fukushima gift that keeps on giving alpha through gamma rays. We are merely saying that if one takes Abe's latest deluded ramblings that Japan is "ready to counter China's power" literally instead of merely more nationalistic bluster by a prime minister whose first term ended in the runs (literally), then the demographically crippled island nation that has a soaring food and energy inflation problem, sliding wages and radiation that comes in 100,000+ RDA dosage increments, would be well advised to have a few invincible X-Men in its army's ranks if indeed it has any intention of taking on China. Because as Walter Sobchak would say, "this is not Man(churia)."
As the status quo crumbles, the state responds in the only way it knows: expand control and become increasingly authoritarian.
As the 'diplomatic' debacle continues to rage between the US and Europe (most loudly France and Germany) over the Obama administration's ongoing eavesdropping on its allies' cell phones, Reuters reports that (state-backed) Deutsche Telekom is calling for German comms companies to cooperate to shield local internet traffic from foreign intelligence services. "It is internationally without precedent that the internet traffic of a developed country bypasses the servers of another country," notes one academic, warning that if more countries wall themselves off, it could lead to a troubling "Balkanisation" of the Internet, crippling the openness and efficiency that have made the web a source of economic growth. Despite Obama's denials, the situation is not fading away, and Germany and France continue to demand a "no spying" agreement.
There are people in the world that go to work every day to end up stating the damn obvious.
- Contractors describe scant pre-launch testing of U.S. healthcare site (Reuters)
- Carney Says BOE Revamp Offers Wider Access to Cheaper Funds (BBG)
- Help wanted in Fukushima: Low pay, high risks and gangsters (Reuters)
- Merkel and Hollande to change intelligence ties with US (FT)
- Twitter IPO pegs valuation at modest $11 billion (Reuters)
- NSA monitored calls of 35 world leaders after US official handed over contacts (Guardian)
- Officials alert foreign services that Snowden has documents on their cooperation with U.S. (WaPo)
- Scottish Nationalists Lose Vote After Plant Threatened With Axe (BBG)
- Fernández contemplates a train wreck in Argentine elections (FT)
- Irish Government will consider ‘best options’ for bailout exit (Irish Times)
Busy, Lackluster Overnight Session Means More Delayed Taper Talk, More "Getting To Work" For Mr YellenSubmitted by Tyler Durden on 10/25/2013 07:00 -0400
It has been a busy overnight session starting off with stronger than expected food and energy inflation in Japan even though the trend is now one of decline while non-food, non-energy and certainly wage inflation is nowhere to be found (leading to a nearly 3% drop in the Nikkei225), another SHIBOR spike in China (leading to a 1.5% drop in the SHCOMP) coupled with the announcement of a new prime lending rate (a form a Chinese LIBOR equivalent which one knows will have a happy ending), even more weaker than expected corporate earnings out of Europe (leading to red markets across Europe), together with a German IFO Business Confidence miss and drop for the first time in 6 months, as well as the latest M3 and loan creation data out of the ECB which showed that Europe remains stuck in a lending vacuum in which banks refuse to give out loans, a UK GDP print which came in line with expectations of 0.8%, where however news that Goldman tentacle Mark Carney is finally starting to flex and is preparing to unleash a loan roll out collateralized by "assets" worse than Gree Feta and oilve oil. Of course, none of the above matters: only thing that drives markets is if AMZN burned enough cash in the quarter to send its stock up by another 10%, and, naturally, if today's Durable Goods data will be horrible enough to guarantee not only a delay of the taper through mid-2014, but potentially lend credence to the SocGen idea that the Yellen-Fed may even announce an increase in QE as recently as next week.
Japan Drowns In Food, Energy Inflation; China's Liquidity Tinkering Continues As Does SHIBOR Blow OutSubmitted by Tyler Durden on 10/25/2013 06:03 -0400
Nearly one year into the Japan's grandest ever monetization experiment, the "wealth effect" engine is starting to sputter: after soaring into the triple digits due to the BOJ's massive monetary base expansion, the USDJPY has been flatlining at best, and in reality declining, which has also dragged the Nikkei lower dropping nearly 3% overnight and is well off its all time USDJPY defined highs. But aside for the wealth effect for the richest 1%, it is not exactly fair to say that the BOJ has done nothing for the vast majority of the population. Indeed, as the overnight CPI data confirmed, food and energy inflation continues to soar "thanks" to the far weaker yen, even if inflation for non-energy and food items rose by exactly 0.0% in September. Oh, it has done something else too: that most important "inflation", so critical to ultimately success for Abenomics - wages - is not only non-existant, in reality wages continue to decline: Japanese labor compensation has been sliding for nearly one and a half years!