Just when it seemed things were shifting back to the optimists’ camp, Friday’s news about the state of the world threw another spanner in the works. In addition to a very disappointing US nonfarm payrolls report, Italy came into the spotlight in the European crisis. Subsequently, the earliest of the June data releases from China look somewhat of a mixed bunch too. China’s CPI came in at the high end of expectations and there was a notable rise in the trade surplus due to soft imports....I had been pretty strongly in the camp that the US recovery had only temporarily stalled during the past couple of months, and that higher food and energy prices, along with the disruption of the Japanese supply chain, were responsible for the softer data. But if Japan is witnessing a bounce back, it should be seen elsewhere too. I can’t see DATA.
All you need to know by www.thetrader.se
China activity data: Following the June CPI print, which saw inflation rise to 6.4% yoy, in line with our above-consensus forecast, we will be looking for above-consensus activity readings for Q2 GDP and June industrial production. Eurogroup meeting and bank stress tests: This will be an important policy week for Europe. On Friday, the IMF approved its disbursement to Greece under the old EU/IMF program of EUR110 bn agreed in 2010. Discussions at the Eurogroup meeting will center on the financing of a new program, which is supposed to close the financing gap for Greece for 2012 and 2013. The role of private sector involvement remains a key issue. The week also brings a bond auction for Italy on Thursday, for an estimated EUR7 bn. The week ends with the publication of the EU-wide bank stress tests on Friday. Summary results will be published at 6 pm CEST, with bank-by-bank results following thereafter. Bernanke testimony: In his semiannual monetary policy testimony, Fed Chairman Bernanke is likely to repeat the basic message from his recent press conference—namely that labor market performance has been disappointing but that inflation remains too high to combat the weakness with additional monetary easing.
Bill Buckler presents an amusing compendium of facts, let us call them inconvenient truths, in the latest edition of his newsletter, some of which would make for very entertaining anecdotes if presented at the Biden "deficit cutting" talks, which also, and very paradoxically, aim to cut US debt by increasing it.
Systemic Risk: In one of his serio-comic sequences, Charlie Chaplin’s little tramp starts pulling a thread from his crumpled suit. Before long, his whole miserable costume dissolves. Is there that kind of loose thread here?
Enough bullshit, it's time to expose the real unemployment scandal...
The Bernank has already gone too far and there is no turning back. There will be QE to infinity until the point where the system collapses on itself, which is probably not too far off once the next round of official QE is started. What form this may take is anyone’s guess but as I mentioned in a recent email, the whole rate cap idea makes the most sense since it will allow infinite QE to occur without having to announce subsequent iterations. The simple fact that they tried to pretend QE would end and then tried to raid commodities to create the justification for it later on demonstrates to me how much trouble we really are in. If The Bernank had merely gone ahead and continued the program he had a CHANCE of perpetuating Disneyland for a little longer at least. Instead, he is praying that the economy can stand on its own, which of course it can’t and so then when he launches into QE3 after the economy weakens and proves QE1 and QE2 did nothing to create a self-sustaining recovery the entire mindset and understanding going into the next money printing party will be entirely different from a psychological standpoint. QE3 will not lead to confidence or anything even similar to the last rounds. Rather it will be used to basically “keep the lights on.” More than anything it will serve as that proverbial “bell” that will ring and in the minds of the savviest and wealthiest people on the planet to get the hell out of the system while they can. This is inevitable. It is already happening. The stampede is yet to come. But come it will. It is time for everyone to take additional steps whatever that may mean for you personally. I know I am. Don’t get gorged.
Let’s consider this. If you’re a central bank and you actually believe in the value of paper money and your ability to create wealth by printing it…why would you be loading up on Gold? The answer is simple: you see the writing on the wall. These guys know that the financial system is broken. They’ve known it for over a decade (Greenspan even admitted that derivatives could “implode” the market in 1999)
The Only Chart You Need To See From Today's Wholesale Inventories: GM Channel Stuffing Goes Auto Industry-WideSubmitted by Tyler Durden on 07/08/2011 09:24 -0500
Today we got another confirmation that the only "growth" in the economy comes courtesy of inventory stocking for that eventual day when the economy picks up and inventory can be sold at an actual profit, after wholesale inventories printed at 1.8% on expectations of 0.6%, up from 1.1% previously. We get it: economic growth now comes at the assumption that there will be economic growth in the future, thank you I in the GDP calculation. But the only chart that matters, and in keeping with our observations of pervasive channel stuffing at GM, is the following: the inventory to sales ratio for the car industry, which just surged to 1.62, or a level not seen since the summer of 2009. This is a 16.55% rise in the ratio or the biggest ever relative jump in the auto inventory/sales ratio in history. Translated: nobody is buying already built cars. But yes, keep blaming the collapse in auto "production" on Japan.
- IMF Greek Loan Decision May Counter Its Policy Guidelines (WSJ) good thing the IMF's policies are made to be broken
- Murdoch Closing Tabloid Linked to British Hacking (NYT)
- News Corp.’s BSkyB Bid Facing Delay on Review (BBerg)
- High-frequency trading adding risk, Haldane says (FT)
- Countrywide Wages Victorious Tranche Warfare Against Investors (Bloomberg)
- Obama expects "bottom lines" on debt limit on Sunday (RTRS)
- European regulators under fire over stress tests (FT)
- No plans to drop Strauss-Kahn charges, no plea deal (RTRS)
- Eurozone governments warned on bail-outs (FT)
All you need to know by www.thetrader.se
In advance of tomorrow's Bureau of Labor Statistics fireworks, Goldman's Andrew Tilton explains why GS has a prediction of +125,000 for tomorrow's NFP number (and sees the unemployment rate declining to 9.0%), and provides a short perspective on why the market is still bearish on the employment picture. Probably a more fitting question is why the market is not far more bearish on jobs: 13 weeks of 400K+ claims, offset merely by one 0.1 increase in the service ISM employment component (from 54.0 to 54.1). Ah yes, the ADP number. The same ADP number which "surged" in January leading Barclays to come up with the insane NFP prediction of +580,000 (and a 95% confidence in a 450,000 print) only for the final number to be a gross disappointment. But who cares about headfakes: the market is back in its mania phase when good news are doubly accentuated, and bad news are immediately ignored. So anyway, here is Goldman and David Rosenberg. As to what happens tomorrow, only the Obama administration, Congress, Larry Meyer, and virtually every single NFP bank, know what is coming tomorrow.
Is this time different?
As everyone who follows earnings seasons knows all too well, one of the traditional games companies play with sellside research analysts is to push earnings estimates lower just ahead of earnings announcement only to beat by the thinnest of margins, setting off a buying rally in the stock that more than offsets the gradual decline it may have experienced in the preceding run down. This observation is one half of Albert Edwards' note to client from this morning. He says: "It’s that surreal time of the quarter, just ahead of the reporting season, when US companies cajole compliant analysts into reducing their profit forecasts so that on the day the company can record a positive earnings surprise. Companies place so much store on beating analysts’ estimates that they play this ridiculous game of guiding down analysts numbers in the weeks or even days ahead of the announcement, only to beat depressed forecasts by a penny on the day (see chart below). The angle in the press and in analysts’ reports is then that this constitutes ‘good news’ despite, more often than not the outturn undershooting the market estimates of only a few weeks previous. Nuts!" The other half focuses on how this particular earnings season may be different, and why unlike previously, earnings downgrades may be for real this time: "We show that in contrast to expectations of a second half recovery, economic leading indicators are actually signalling the reverse, as is our favoured measure of analyst optimism. Hence the recent spate of profit warnings – which have resulted in a deeper than normal round of downgrades – may be the beginning of something far more undermining to equity prices over the next six months." So is this time, especially in the absence of the artificial boost to everything that is QE, any different? With earning season imminent, we will finally find out just how well the corporate sector (not having represented the actual economy for a long time) can stand on its own in the absence of monetary fiscal and stimulus for the first time in years.
Yesterday I laid out why the Status Quo is financially unsustainable in The Promises That Cannot Be Kept. The unavoidable consequence of that is the the nation will experience a Great Reset in which the promises of the Savior State are relinquished, either voluntarily or involuntarily. As I discussed in July 4, 2011: The Cycle of Dependency and the Atrophy of Self-Reliance, our reliance on the Savior State has sapped our will and confidence, and hollowed out communities that have become dependent on the Savior State and its quasi-private partners, the corporate cartels of banking, defense, healthcare and so on. The Great Reset will thus be a great shock to everyone who has grown dependent on Big Government and global Corporate America. An unprecedented array of interconnected trends are converging that will force a Reset not just in the economy but in the American society and culture.