The global monetary system is diverging and fraying. Central bank post-crisis quasi-coordination has broken down. Initially, foreign central banks unhappily followed the Fed in cutting rates toward zero; or else risked an appreciating currency affecting competitiveness. As domestic challenges developed and the Fed initiated ‘tapering’, many central banks pushed rates back up. Developed world economies have grown from around 30% of global GDP 20 years ago to 50% today. This improvement has helped motivate the unfolding of a new international economic order between developed and developing world economies.
German Handelsblatt Releases Stunning Anti-West Op-Ed, Asks If "West Rabble-Rousers Are On The Payroll Of The KGB"Submitted by Tyler Durden on 08/08/2014 23:57 -0400
Up until this point Angela Merkel, and German media in general, had been staunchly on the side of the west when it comes to dealing with Russia, Putin and realpolitik in broader terms. That changed dramatically today when Gabor Steingart, the chief editor of Handelsblatt, Germany's leading economic newspaper, came out with a stunning op-ed, in German, English and Russian, titled simply that "The West on the wrong path" in which the editor comes out very vocally against the autopilot mode German media has been on for the past several months and calls for an end to a strategy of sanctions and Russian confrontation that ultimately "harms German interests" and is a dead end.
If you are getting a strong sense of déjà vu from current news flow, well, join the club. Everything feels so… familiar. And not necessarily in a good way. When we hear phrases like “Bubble markets”, “M&A cycle”, “historically low yields”, and “retail investor buying”, our minds automatically flash back to prior periods of history when those phrases last dominated the headlines. It isn’t hard to come up with a “Top 10” list of phrases with strong historical - and emotional - antecedents. So, today we did just that. Fair warning, however: just because a tune sounds familiar doesn’t mean you actually know the song. It could just be what the kids today call a “Sample” – a snippet of a song put in another song. Yep, what we’ve got here is something out of hip hop, not rock. Don’t especially like rap? Too bad, homey.
- So that's what Obama meant by "costs" - Italy Recession, German Orders Signal Euro-Area Struggle (BBG)
- Russia worries, weak German data weigh on Europe (Reuters)
- Hedge Funds Betting Against Banco Espírito Santo in Line for Big Gains (WSJ)
- Bankers Called Up for Ukraine War as Rolls-Royce for Sale (BBG)
- Double Punch for 'Inversion' Deals (WSJ)
- Statist Strongmen Putin-Xi See History’s Capitalism Clash (BBG)
- China bans beards, veils from Xinjiang city's buses (Reuters)
- BATS to Settle High-Speed Trading Case (WSJ)
- Second Ebola patient wheeled into Atlanta hospital for treatment (Reuters)
- As we predicted yesterday, the "big" Gaza ceasefire lasted all of a few hours (Reuters)
- To Lift Sales, G.M. Turns to Discounts (NYT)
- Espirito Santo Family’s Swift Fall From Grace Jolts Portugal (BBG)
- Argentine Debt Feud Finds Much Fault, Few Fixes (WSJ)
- Fiat Says Ciao to Italy as Merger With Chrysler Ends Era (BBG)
- Euro zone factory growth eases in July as inflation fades away (Reuters)
- CIA concedes it spied on U.S. Senate investigators, apologizes (Reuters)
- Ukraine Reports Losses After Pro-Russian Ambush Near Malaysia Airlines Flight 17 Crash Area (WSJ)
- U.S. says India refusal on WTO deal a wrong signal (Reuters)
- Why Putin Has 2006 Flash Before His Eyes After Sanctions (BBG)
- Here come the gates which we predicted in 2010: SEC Is Set to Approve Money-Fund Rules (WSJ)
- Dick's cuts 400 jobs as golf now less popular (MW)
- Kerry arrives in Israel, pushes for peace (Reuters)
- Pay Penalty Haunts Recession Grads as U.S. Economy Mends (BBG)
- Appeals Courts Issue Conflicting Rulings on Health-Law Subsidies (WSJ)
- Rebel Stronghold Donetsk Holds Breath as Shellfire Mounts (BBG)
- Business executive wins Georgia Republican runoff in U.S. Senate race (Reuters)
- Five held in China food scandal probe, including head of Shanghai Husi Food (Reuters)
- Jobs Hold Sway Over Yellen-Carney as Central Banks Splinter (BBG)
The good news about this particular banana republic: everything else may be imploding, but at least still has bananas.
- EU Works to Punish Russia as MH17 Bodies Leave Rebel Area (BBG)
- Bodies From Malaysia Airlines Flight Begin Long Trip to Netherlands (WSJ)
- Israel pounds Gaza as Kerry arrives (Reuters)
- U.S. judge dismisses Republican lawsuit over Obamacare subsidy for Congress (Reuters)
- Israel Soldier Missing Amid Assault on Hamas in Gaza (WSJ)
- Detroit Retirees Vote in Favor of Pension Cuts (WSJ)
- Russia Axes 1st Bond Sale in 3 Months as Ukraine Drives Up Yield (BBG)
- Wall Street Cut From Guest List for Jackson Hole Fed Meeting (BBG)
- Credit Suisse to Exit Commodities, Posts Big Quarter Loss (BBG)
- Draghi Cedes Euro Control to Yellen on Fed Rate Wagers (BBG)
The Fed and its policies have warped the culture of capitalism to the point that we now exist in a Centrally-Planned nightmare in which a handful of academics influence the economy and world reserve currency with every speech and verbal statement.
- Obama Decries Big Bonuses at Bank Trading Desks as Risky (BBG)
- India central bank seeks to swap gold to improve reserves quality (Reuters)
- There goes Q3 GDP: Arthur Strengthens to Become First Atlantic Hurricane (BBG)
- Airports Serving U.S. Tighten Checks on Stealth-Bomb Threat (BBG)
- Fear, cash shortages hinder fight against Ebola outbreak (Reuters)
- Brent Declines as Libya Rebels Say Ports Are Open (BBG)
- Shiites Train for Battle in Iraqi Holy City (WSJ)
- Dimon’s Cancer Has 90% Cure Rate With Demanding Therapy (BBG)
- Goldman says client data leaked, wants Google to delete email (Reuters)
- ECB Watchers in the Dark Look to Draghi for Illumination (BBG)
We could focus on whatever events took place in the overnight session or the seasonally-adjusted economic data avalanche that will dominate US newsflow over the next two days (ADP, ISM New York, Factory Orders, Services ISM, Yellen Speaking, and of course Nonfarm payrolls tomorrow), or we could ignore all of that as it is absolutely meaningless and all very much bullish, and use a phrase from Standard Chartered which said that "the dollars Yellen is removing could be compensated for by cheap euros from the ECB; result may be enough cash sloshing around to underpin this year’s run-up in risk assets even if the Fed begins mulling higher interest rates too." In other words, the bubble will go on, as the Fed passes the baton to the ECB, if not so much the BOJ which is drowning in its own imported inflation. Case in point: two of the three HY deals priced yesterday were PIK, and the $1 billion in proceeds was quickly used to pay back equity sponsors. The credit bubble has never been bigger.
- Must be an early winter: Housing Falters as Forecasters See U.S. Sales Dropping (BBG)
- China Property Failures Seen as $33 Billion in Trusts Due (BBG)
- Polish Prime Minister Says Recording Scandal May Trigger Early Election (WSJ)
- Iraqi forces ready push after Obama offers advisers (Reuters)
- Priorities: U.S. cuts aid to Uganda, cancels military exercise over anti-gay law (Reuters)
- Kurds' Takeover of Iraqi City of Kirkuk Strengthens Their Hand (WSJ)
- U.S. says government lab workers possibly exposed to anthrax (Reuters)
- Netflix Up 21% With Tesla: The best U.S. stocks this month are ones that just a few months ago were the biggest losers (BBG)
- Architects of Iraq Invasion Return to Blame Obama (BBG)
- Nato claims Moscow funding anti-fracking groups (FT)
- Lawmakers Skeptical GM Bosses Were Unaware of Defect (WSJ)
- Corinthian Colleges Warns of Possible Shutdown (WSJ)
- Taiwan's Quanta to start mass production of Apple's smartwatch in July (Reuters)
Here is a verbal account of precisely what happens when domestic car-makers overestimate the purchasing power of the US, and clog channels to an epic extent. In this case, we refer to the recently launched GM Cadillac ELR, launched to much aplomb just five months ago as a competitor to the Tesla Model S for a $76,000 price point (above Tesla's $70,000), has been a complete disaster. And how is GM dealing with this latest sales disappointment (which struck even before all the recent recall scandals had hit)? Why by jamming dealers with an unprecedented 725-day supply, or exactly two years worth of cars!
Unions have been the real plague of society. There is not much they have not really destroyed... The problem is that the only way to pay these unions is to raise taxes. This is the poison pill that will destroy Western Society. This hunt for taxes will destroy the economy and will not save the day in the end game. Just do the math.
The "Shiller P/E" is much in the news of late, and, as ConvergEx's Nick Colas suggests, with good reason. It shows that U.S. equity valuations are pushing towards crash-worthy levels. This measure of long term earnings power to current price is currently at 25.3x, or close to 2 standard deviations away from its long run median of 15.9x. As Colas concludes, the writing is on the wall and we must all read it. Future returns are likely going to be lower. Competition for investor capital will get even tougher. That’s what the Shiller P/E says, and it is worth listening.