The Canadian economy is rolling over and their recent jobs situation is worse than the US (and it's always cold weather-y up there?!) but the last great pillar of the 'recovery' in Canada is perhaps about to get crushed. As the WSJ noted recently, Canada's housing market is the most expensive in the world (60% over-valued by historical standards) and one simple reason explains it - Canada has been very open to foreign investors, which means that in an age of unprecedented global liquidity cash-rich wealthy individuals who are looking for places to park their excess funds can do so in its housing market. Until now... As SCMP reports, Canada’s government has announced that it is scrapping its controversial investor visa scheme, which has allowed waves of rich Hongkongers and mainland Chinese to immigrate since 1986. Soft landing?
As Deutsche Bank revealed in a note overnight, the GCC may have, quite deliberately, opened a Pandora's Box with its decision which according to Europe's largest bank, and the one whose derivatives exposure makes that of JPM pale by comparison, (i) made it clear it regards OMT as exceeding the competences granted to the ECB by the European Treaty and that (ii) would not consider itself bound by a positive ruling of the European Court of Justice. And while in DB's opinion this action does not have any immediate market consequences, the report's authors think that it "alters substantially the level of insurance we could expect from the ECB against any return of sovereign turmoil."
Imagine the scenario. The company accounts are going to get checked out; the accounts department doesn’t have them ready. There’s a gap in the figures and they don’t tally. Never mind, they may just get through at a pinch and nobody will notice.
After initially sending the all important USDJPY carry pair - and thus all risk assets - into rally mode, the initial euphoria over manipulated Chinese trade data (see China Trade Puzzle Revived as Hong Kong Data Diverge), has all but fizzled and at last check the USDJPY was sliding to its LOD, approaching 102 from the wrong side. That, and a statement by the ECB's Coeure that the ECB is "very seriously" considering a negative deposit rate (and that the OMT is ready to be used even though it obviously isn't following the latest brewhaha from the German top court) have so far defined the overnight session, the latter having sent the EUR sliding across all major pairs.
Today, more than 10,000 Baby Boomers will retire. This is going to happen day after day, month after month, year after year until 2030. It is the greatest demographic tsunami in the history of the United States, and we are woefully unprepared for it. We have made financial promises to the Baby Boomers worth tens of trillions of dollars that we simply are not going to be able to keep. Even if we didn't have all of the other massive economic problems that we are currently dealing with, this retirement crisis would be enough to destroy our economy all by itself. During the first half of this century, the number of senior citizens in the United States is being projected to more than double. As a nation, we are already drowning in debt. So where in the world are we going to get the money to take care of all of these elderly people?
Are fish from the Pacific safe to eat? What about the elevated background radiation readings detected in Japan, and recently in California? Are these harmful levels? Should we be worried? And if so, what should be done about these potential health threats? What steps should we take to protect ourselves? Fukushima-related fears have been both overblown as well as heavily downplayed by parties on each side of the discussion. Much of this stems from ignorance of the underlying science. But some of it, sadly, seems to be purposefully misleading. Again, on both sides. To assess the true risks accurately, you need to know about the difference between radiation and contamination. The distinction is vital and, unfortunately, one of the most glossed-over and misused facets of the reporting on nuclear energy.
Unfortunately many investors, with central banks having slashed deposit rates to de minimis levels, have gone ‘all-in’ with regard to risk assets in the desperate pursuit of yield. Be careful what you wish for. It is quite clear that central banks will do literally anything within their power to attempt to avert deflation – to ensure that “it cannot happen here”. That does not mean they will succeed – but they may end up destroying fiat currencies in the process (one of the reasons we have consistently held gold). It is “quite obvious” what the Fed will ultimately do... Six years into this crisis, and in the words of Lily Tomlin, things are going to get a lot worse before they get worse.
Japan Machine Orders Crumble At Fastest Pace In 22 Years As BOJ Board Member Warns More QE May Not Be ComingSubmitted by Tyler Durden on 02/11/2014 20:13 -0400
If you needed another reason to buy stocks, trust in the growth meme, and have your faith in Abenomics confirmed... look away. Japanese Machine orders for December just printed -15.7% in December - the biggest MoM plunge since 1992. This is the biggest miss to expectations since 2006 and what is considerably more problematic for Abe et al. is that YoY expectations of a core machine order rise of 17.4% was hopelessly missed with a small 6.7% gain (and this is data that excludes more volatile orders). While machine orders are completely irrelevant, even if on their own they portend a recession; what would be far more troubling to the Kool aid addicts is if the BOJ were to announce that just like the Fed, it too is tapering its Open-ended QE ambitions. Considering this is precisely what BOJ board member Kiuchi just did, that relentless USDJPY meltup overnight may not be such a slamdunk...
While January was a bad month for the market, it was certainly one which the majority of hedge funds would also rather forget as we showed yesterday. So with volatility, the lack of a clear daily ramp higher (with the exception of the last 4 days which are straight from the 2013 play book), and, worst of all, that Old Normal staple - risk - back in the picture. what is a collector of 2 and 20 to do (especially since in the post-Steve Cohen world, one must now make their money the old-fashioned way: without access to "expert networks")? For everyone asking this question, here is Deutsche Bank with its take on which will be the best and worst performing strategies of 2014. So without further ado, here is the Deutsche Bank Asset and Wealth Management's forecast of hedge fund performance matrix...
The potential for a golden age of gas comes along with a big “if” regarding environmental and social impact. The International Energy Agency (IEA) - the "global energy authority" - believes that this age of gas can be golden, and that unconventional gas can be produced in an environmentally acceptable way.
A sneaky overnight levitation pushed the Spoos above 1800 thanks to a modest USDJPY run (as we had forecast) despite, or maybe due to, the lack of any newsflow, although today's first official Humphrey Hawkins conference by the new Fed chairman, Janet Yellen, before the House and followed by the first post-mortem to her testimony where several prominent hawks will speak and comprising of John B. Taylor, Mark A. Calabria, Abby M. McCloskey, and Donald Kohn, could promptly put an end to this modest euphoria. Also, keep in mind both today, and Thursday, when Yellens' testimoeny before the Senate takes place, are POMO-free days. So things may get exciting quick, especially since as Goldman's Jan Hatzius opined overnight, the third tapering - down to $55 billion per month - is on deck.
East Asia is becoming, in the language of international relations theory, "bipolar." Until recently, Asia was arguably “multipolar” - there was no one state large enough to dominate and many roughly equal states competed for influence. China’s dramatic rise has unbalanced that rough equity. Until recently, China pursued a “peaceful rise” strategy, one of accommodation and mutual adjustment. This approach sought to forestall an anti-Chinese encircling coalition. Since 2009 however, China has increasingly resorted to bullying and threats. All this then sets up a bipolar contest between China and Japan, in the context of China’s rapid rise toward regional dominance and such goals would broadly fit with what we have seen in the behavior of previous hegemons and a potential Sinic Monroe Doctrine.
How quickly emerging markets’ fortunes have turned. Not long ago, they were touted as the salvation of the world economy – the dynamic engines of growth that would take over as the economies of the United States and Europe sputtered. Economists at Citigroup, McKinsey, PricewaterhouseCoopers, and elsewhere were predicting an era of broad and sustained growth from Asia to Africa. But now the emerging-market blues are back. This is not the first time that developing countries have been hit hard by abrupt mood swings in global financial markets. The surprise is that we are surprised. Economists, in particular, should have learned a few fundamental lessons long ago...
If we strip away obscuring narratives, we can clearly see that the two employment sectors (healthcare and higher education) that have expanded rain or shine for decades have functioned as gigantic make-work projects. However, that growth has started to slow for the simple reason that they've run out of oxygen: we can no longer afford their expansion or their out-of-control costs. Much cheaper and more effective systems are within reach, if only we look past failed models and politically powerful cartels and fiefdoms.
The most notable event in this traditionally quiet post-payrolls week is Janet Yellen's Humphrey Hawkins testimony before Congress set for mid-week. In terms of economic data releases, the US retail sales (Exp. 0.05%) is on Thursday and consumer sentiment survey is on Friday (consensus 80.5). We also have IP numbers from Euro Area countries and the US. Most recent external account statistics are released from Japan, China, India and Turkey. It is also interesting to track CPI data in Germany, Spain and India, given the ECB and RBI currently face diverging inflation challenges and may be forced into further action. Finally, we have Q4 GDP data from the Euro Area economies (Friday).