Two-Thirds Of Chinese Consumers No Longer Trust Western Fast-Food As "Meat Scandal" Spreads Across AsiaSubmitted by Tyler Durden on 07/23/2014 11:12 -0400
As if the Chinese meat scandal was not a big enough concern for Western fast-food firms, The WSJ reports that the crisis is spreading across Asia as Yum Brands and McDonalds sever links with US-owned Shanghai Husi Food Company, which is accused of selling expired beef and chicken, pulling supplies of chicken from restaurants in Japan. Perhaps even more worrisome for American fast-food companies who have expanded aggressively and over-hyped the growth opportunities in China, a second Sina survey started yesterday, featuring 25,000 respondents, found 77% believed the restaurant brands affected had been aware of Husi’s faulty practices, while 69% said they would no longer dine at the restaurants run by the Western companies.
Professor Krugman is at it again - conjuring fairy tales about a benign long-term fiscal outlook. Notwithstanding that the public debt has surged from 40% to 75% of GDP during the six short years since 2008, he claims there is no reason to fret and that there is no debt spiral anywhere in the future. In part that’s because the Keynesian priesthood has declared that interest rates have down-shifted on a permanent basis. Under a regime of even modest monetary normalization over the next quarter century, current fiscal policy will lead to interest rates that are far higher, not lower, than the growth rate of nominal income. So its time to put Greece right back into the front and center of the US fiscal picture.
?Economics is like a Monet painting. Stand too close and all you see is a bunch of seemingly random paint strokes. Back up a few steps and an image emerges. The painting of bubblenomics started with the Plaza Accord, September 1985, where five nations agreed to manipulate the dominant currencies at the time. Japan enjoyed a 50% devaluation of the US$ vs the yen, artificially enriching its citizens so they could travel the world in busloads with eighty pounds of cameras around their necks. The consequences of that bubble have yet to be corrected. Based on healthy guidelines, the price of real estate is far too expensive today, or, more precisely, the cost of housing is too high but we may need another crisis before the market will wake up to the needed changes. In the meantime, money printing and hype will continue.
History is replete with the total failure of Central Planning. Whether one look to China or the USSR or the US today, Central Planning has never successfully worked. It creates the illusion of stability in the short-term, but eventually the truth comes out: that it is a TERRIBLE means of deploying capital (both human or monetary).
- 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)
Following the overnight ramp in various JPY crosses (dragging equity futures higher, and the Nikkei up 0.8%) it is as if the market is desperate to put all of last week's geopolitical events in the rearview mirror, and while yesterday there were no economic events of note, today's CPI and existing home prints should provide at least some distraction from the relentless barrage of one-line updates on Ukraine and Gaza. Still, that is precisely where the biggest risk remains, with an emphasis on the possibility of more Russian sanctions, this time by Europe.
Bank of England officials led by Mark Carney, the Bank of England governor, are attempting to bridge sharp differences among leading G20 countries as they prepare a landmark set of proposals aimed bringing in the new bail-in regime. The issue is of major consequence also to depositors who could see their savings confiscated as happened in Cyprus. Bail-ins are coming to banks in the western world with consequences for depositors.
A leading Vietnamese military officer said July 16 that China’s decision to remove a huge oil rig from waters claimed by both countries shows that it is backing down in a dispute that has raged since May. Luong dismissed a suggestion by the Voice of Vietnam, a state run news agency, that the rig was being moved to protect it from the approaching Typhoon Rammasun. The general called that “just an excuse." With majorities in nine of the 11 major Asian countries fearing military conflict, “It could be a face-saving way to end the over two-month-long standoff with Vietnam," one analyst noted.
China has had enough with diplomacy. Shortly after China's president Xi Jinping warned that "a conflict between China and United States will definitely be a disaster for the two countries and the world" a seemingly tone-deaf US responded by unleashing even more military forces in China's back yard, and announcing it was developing new military tactics to deter China’s slow but steady territorial advances in the South China Sea, including more aggressive use of surveillance aircraft and naval operations near contested areas. The message was clear: pleasantries are great, but immediately halt any territorial ambitions which impact American allies in the region. Well, China responded, but not in the way that the US may have wanted. According to Bloomberg, China sent a surveillance vessel to waters off Hawaii even as the country participated for the first time in the world’s largest international naval exercise led by the U.S.
- Fighting erupts in Ukraine as crash investigators arrive (Reuters)
- Russian Billionaires in ‘Horror’ as Putin Risks Isolation (BBG)
- Israel kills militants entering from Gaza, death toll tops 500 (Reuters)
- The other Gaza: In violent weekend, at least 40 people shot in Chicago (Reuters)
- Barclays Dark Pool Drew Early Alarms (WSJ)
- Finance Industry Bonus Hit in Poll as Revenue Disappoints (BBG)
- Severstal to Sell North American Units (WSJ)
- Yum, McDonald's apologize as new China food scandal brews (Reuters)
- Yellen Wage Gauges Blurred by Boomer-Millennial Workforce Shift (BBG)
- Ukraine Offers to Hand Over Malaysia Airlines Probe to Dutch (WSJ)
In the absence of any major economic events, it will be another day tracking geopolitical headlines out of Ukraine (lots of accusations, propaganda and fingerpointing on both sides, zero actual evidence and facts - expect more European sanctions to be announced today to match last week's latest US-led round ) and Israel (where the death toll has now risen over 500, almost entirely on the Gaza side), and then promptly spinning any bad news as great news. For now, however, futures are modestly lower from the Friday close pushed down by the AUDJPY which has rebased around 95.00. We expect the momentum ignition correlation algos will promptly take of that as soon as the US market opens, a market which has now been described as bubbly by the BIS, the Fed and the IMF.
Furious money printing by the world’s major central banks is not generating real growth and prosperity - but professional economists never seem to get the word.
A dispassionate look at the issues and events shaping the investment climate in the week ahead.
Benzinga noted on June 27, 2014 “The demand created by Abenomics, along with the demand rush prior to a hike in consumption tax, is viewed as fleeting by corporations”
With U.S. rates higher than those of major foreign markets, investors are provided with an additional reason to look favorably on increased investments in the long end of the U.S. treasury market. Additionally, with nominal growth slowing in response to low saving and higher debt we expect that over the next several years U.S. thirty-year bond yields could decline into the range of 1.7% to 2.3%, which is where the thirty-year yields in the Japanese and German economies, respectively, currently stand.