Today's FOMC announcement may be one of the more anticlimatic (if long-winded) in a long time: consensus largely expects the taper to continue by another $10 billion, and the Fed will, erroneously, suggest that the economy is growing at a "modest" pace (if only one ignores such things as a complete collapse in US GDP growth due to harsh weather: who knew that all it takes to stop a $17 trillion juggernaut economy was cold winter weather), but it doesn't mean there can't be surprises. Courtesy of Bloomberg, here is a list of the key things to look for in today's statement.
For all the talk that imminent, inevitable, "any second now" CapEx spending renaissance is getting, we can only assume we are looking at a wrong chart of the change in quarterly fixed income spending that plugs straight into the US GDP calculation. There is no other possible explanation.
The debate over Thomas Piketty’s new book Capital in the Twenty-First Century is as dumb as every other issue-set in the public arena these days - a product of failed mental models, historical blindness, hubris, and wishful thinking... We doubt that the Warren Buffets and Jamie Dimons of the world will see their wealth confiscated via some new policy of the Internal Revenue Service - e.g. the proposed “tax on wealth.” Rather, its more likely that they’ll be strung up on lampposts or dragged over three miles of pavement behind their own limousines. After all, the second leading delusion in our culture these days, after the wish for a something-for-nothing magic energy rescue remedy, is the idea that we can politically organize our way out of the epochal predicament of civilization that we face. Piketty just feeds that secondary delusion.
Remember CDOs? Murky, illiquid investments, backed by bulge-bracket firms that offered lots of yield over similar-rated corporates - just don't ask questions. As SCMP's Shirley Yam reports, China's so-called "trust" products, promise high returns with big-name backing, but a scheme touted at Ping An Bank highlights just how murky the world of mainland investment offerings is. After reading this, we suspect, that last trace of faith that the PBOC has the Chinese shadow banking system under control (and a growth renaissance is due any moment) will be eviscerated.
Today’s nonfarm payrolls release is expected to show a "spring" renaissance of labor market activity that was weighed on by "adverse weather" during the winter months (Exp. 200K, range low 150K - high 275K, Prev. 175K). Markets have been fairly lackluster overnight ahead of non-farm payrolls with volumes generally on the low side. The USD and USTs are fairly steady and there are some subdued moves the Nikkei (-0.1%) and HSCEI (+0.1%). S&P500 futures are up modestly, just over 0.1%, courtesy of the traditional overnight, low volume levitation. In China, the banking regulator is reported to have issued a guideline in March to commercial banks, requiring them to better manage outstanding non-performing loans this year. Peripheral EU bonds continued to benefit from dovish ECB threats at the expense of core EU paper, with Bunds under pressure since the open, while stocks in Europe advanced on prospect of more easing (Eurostoxx 50 +0.14%). And in a confirmation how broken centrally-planned markets are, Italian 2 Year bonds high a record low yield, while Spanish 5 Year bonds yield dropped below US for the first time since 2007... or the last time the credit risk was priced to perfection.
Being a kleptocratic crook in China is now becoming a higher risk proposition.
Analysis suggests that commentators and policymakers need to better distinguish between the ways in which the US shale gas boom constitutes a ‘revolution’ and the ways in which it does not. The US unconventional energy boom has reversed the decline of domestic production, significantly lowered oil and gas imports, reduced gas costs for consumers, and created a political space for tougher regulations on coal-fired power plants. But it is not a panacea. Even if current estimates of production turn out to be accurate, the benefits to the US economy in the long run are relatively small, and the benefits to manufacturing competitiveness in most sectors are even smaller.
We have an economy that is weaker than the headline numbers claim with inflation that is higher than the headline numbers claim.
With US manufacturing jobs down almost 40% from their 1980s peak, proclaiming the last few years marginal increase a "manufacturing renaissance" is more statistical noise, smoke, and mirrors than fact. That is a problem for an administration (and entire genre of Keynesian dreamers) that rely on this sector to prove how effective they have been with stimulus (and not just pulling demand so colossally forward that the future is bleak). How to fix this apparent dilemma between policy talking points and factual data? Easy - as WSJ reports, change the definition of "manufacturing."
Where The Jobs Are: More Than Half Of All February Job Gains Are In Education, Leisure, Temp Help And GovernmentSubmitted by Tyler Durden on 03/07/2014 10:50 -0400
As we showed moments ago, the scariest chart of today's nonfarm payroll report was the plunge in average weekly earnings. For those curious why US workers are unable to make any headway in obtaining higher wages, the following breakdown of just where the 175,000 (seasonally adjusted, because apparently now seasonal adjustments work again) February job gains were should provide some color. Unfortunately, as has been the case for the past several months, well over half the total job gains in February were in industries that pay the least.
When civilians launched a suicidal attack on an armed force in Kyiv on February 20, their sense of representing “the nation” far outweighed their concern with their individual mortality. The result was to swing a deeply divided society from the verge of civil war to an unprecedented sense of unity. Whether that unity endures will depend on how Europe responds. We hope and trust that Europe under German leadership will rise to the occasion. We must, however, end with a word of caution. A replay of the Cold War would cause immense damage to both Russia and Europe, and most of all to Ukraine, which is situated between them.
Much as the 3rd grade Markit US Manufacturing PMI 'beat' was blamed for the furious rally last Thursday in stocks, it appears bad news in the form of today's 3rd grade Markit Services PMI 'miss' is (rightly) completely ignored by the market. While the Services segment of the economy is vastly larger and more important for 'guessers', it seems USDJPY would not provide the juice this morning as this is the weakest services performance in 4 months. Of course, "weather" is blamed and optimism for the future remains but what was odd to us is that economists claim that in February manufacturing returned to normal... but clearly services did not.
With inventories of unsold cars at or near record highs and the Big 3 up to their old tricks of channel-stuffing (as we have vociferously exposed), it seems time has run out for the US manufacturing renaissance. The 'if we build cars, they will come and buy them' mentality has hit a literal wall as not only are dealers bloated with stock, the buyers have dried up. As the following chart shows, the average number of days it takes to sell a car in the US has surged recently after 9 months of improvement. This is the worst (slowest) pace of sales since August 2009. Not what the 'recovery' faithful wanted to hear...
Our entire monetary system requires that we all trust the high priests of central banking and economics. Those that stray from the state’s message and spread economic heresy are cast down and vilified. Recall the case of Harvard professors Ken Rogoff and Carmen Reinhart who wrote the seminal work: 'This Time is Different: Eight Centuries of Financial Folly' highlighting dozens of shocking historical patterns where once powerful nations accumulated too much debt and entered into terminal decline. The premise of their book was very simple: debt is bad. And when nations rack up too much of it, they get into serious trouble. This message was not terribly convenient for governments that have racked up unprecedented levels of debt. Not to worry, though, the IMF has now stepped up with a work of its own to fill the void. Translation: Keep racking up that debt, boys and girls, it’s nothing but smooth sailing ahead.