Even before the new myRA program was announced, there had been whispers about the need for the US government to assume some risk for US retirement accounts. That's code for forced conversion of private retirement assets into government bonds. As bad as it is to deceive naïve Americans into trading their hard-earned retirement savings for garbage (i.e., Treasury securities), the myRA program potentially represents something far worse... the first step toward the nationalization of existing private retirement accounts.
- Goldman to Fidelity Call for Calm After Global Stock Wipeout (BBG)
- Turnabout on Global Outlook Darkens Investor Mood (Hilsenrath)
- EU Said to Weigh Extending Greek Loans to 50 Years (BBG)
- Second Storm Hitting Northeast Halts Planes, Schools (BBG)
- Small Banks Face TARP Hit (WSJ)
- As Sony prepares PCs exit, pressure mounts for reboot on TVs (Reuters)
- IBM Uses Dutch Tax Haven to Boost Profits as Sales Slide (BBG)
- ECB faces dilemma with inflation drop (FT)
- London Subway Strike Snarls Traffic as Union Opposes Cuts (BBG)
In order to understand what solutions to our energy predicament will or won’t work, it is necessary to understand the true nature of our energy predicament. Most solutions fail because analysts assume that the nature of our energy problem is quite different from what it really is. Analysts assume that our problem is a slowly developing long-term problem, when in fact, it is a problem that is at our door step right now.
A story that won't go away: The German central bank 'proposing' an emergency "capital levy" in "conditions of extraordinary national crisis."
It's not all ponies and unicorns in Davos today. Paul Singer's dismal views on financial fragility were followed up by a panel, as The Telegraph's Ambrose Evans-Pritchard reports, that poured cold water on the claims that the European crisis is over. Harvard professor Kenneth Rogoff said the launch of the euro had been a "giant historic mistake, done to soon" but EMU leaders are still refusing to take the necessary steps, and is squandering the "scarce resource" of its youth, badly needed to fortify an aging society as the demographic crunch sets in. But it is ex-Buba head Axel Weber that unleashed the ugly truth: "Markets are currently disregarding risks, particularly in the periphery...Europe is under threat. I am still really concerned."
"The latest review shows how the seeds of the current divergence were already sown in the early years of the euro, as unbalanced growth in some Member States, based on accumulating debt fuelled by low interest rates and strong capital inflows, was often associated with disappointing productivity developments and competitiveness issues. In the absence of the currency devaluation option, euro area countries attempting to regain cost competitiveness have to rely on internal devaluation (wage and price containment). This policy, however, has its limitations and downsides not least in terms of increased unemployment and social hardship, and its effectiveness depends on many factors such as the openness of the economy, the strength of external demand, and the presence of policies and investments enhancing non-cost competitiveness." - European Commission
Markets have started the week on the back foot, despite a brief rally following a better-than-expected Q4 GDP print in China. Indeed, Asian equities recorded a small pop following the GDP report, but the gains were shortlived as the general negativity on China’s growth trajectory continues to weigh on Asian markets. In terms of the data itself, China’s Q4 GDP (7.7% YoY) was slightly ahead of expectations of 7.6% but it was slower than Q3’s 7.8%. DB’s China economist Jun Ma maintains his view that economic growth will likely accelerate in 2014 on stronger external demand and the benefits from deregulation. The slight slowdown was also evident in China’s December industrial production (9.7% YoY vs 10% previous), fixed asset investment (19.6% YoY vs 19.9% previous) and retail sales (13.6% vs 13.7% previous) data which were all released overnight. Gains in Chinese growth assets were quickly pared and as we type the Shanghai Composite (-0.8%), HSCEI (-1.1%) and AUDUSD (-0.1%) are all trading weaker on the day. On a more positive note, the stocks of mining companies BHP (+0.29%) and Rio Tinto (+0.26%) are trading flat to slightly firmer and LME copper is up 0.1%. Across the region, equities are generally trading lower paced by the Nikkei (-0.5%) and the Hang Seng (-0.7%). Staying in China, the 7 day repo rate is another 50bp higher to a three month high of 9.0% with many investors continuing to focus on the Chinese shadow banking system following the looming restructuring of a $500m trust product that was sold to ICBC’s customers.
Overview of the major forces shaping the investment climate.
Weak results from Intel, American Express and Capital One, not to mention Goldman and Citi? No problem: there's is overnight USDJPY levitation for that, which has pushed S&P futures firmly into the green after early overnight weakness: because while the components of the market may have such trivial indicators as multiples and earnings, the USDJPY to which the Emini is tethered has unlimited upside. And now that the market is back into "good news is good, bad news is better" mode, today's avalanche of macro data which includes December housing starts and building permits, industrial production, UofMichigan consumer confidence and JOLTs job openings, not to mention the up to $3 billion POMO, should make sure the week closes off in style: after all can't have the tapped out consumer enter the weekend looking at a red number on their E-trade account: they might just not spend as much (money they don't have).
With no major macro news on today's docket, it is a day of continuing reflection of Friday's abysmal jobs report, which for now has hammered the USDJPY carry first and foremost, a pair which is now down 170 pips from the 105 level seen on Friday, which in turn is putting pressure on global equities. As DB summarizes, everyone "knows" that Friday's US December employment report had a sizeable weather impact but no-one can quite grasp how much or why it didn't show up in other reports. Given that parts of the US were colder than Mars last week one would have to think a few people might have struggled to get to work this month too. So we could be in for another difficult to decipher report at the start of February. Will the Fed look through the distortions? It’s fair to say that equities just about saw the report as good news (S&P 500 +0.23%) probably due to it increasing the possibility in a pause in tapering at the end of the month. However if the equity market was content the bond market was ecstatic with 10 year USTs rallying 11bps. The price action suggests the market was looking for a pretty strong print.
With over 1,000 new merchants adopting Bitcoin every week, it is perhaps not surprising that, as NY Post reports, the first Bitcoin ATM is about to debut in New York City. Following success in Canada and Europe, Brooklyn native Willard Ling, 30, is set to introduce the first bitcoin ATM to New York City at the East Village bubble tea shop 'Just Sweet'. State regulators with the Department of Financial Services are expected to hold hearings later this month to discuss how the digital currency should be regulated; and until then, Ling’s bitcoin ATM will sit in his apartment.
Even Draghi proclaimed anyone calling the crisis over as 'premature' but that was ignored by the fast-money momo chasers looking for where to rotate their cash on the sidelines as US momentum fades. Greece, Portugal, and Spain stocks literally exploded higher this week:
Greece +7.7% - best week in 8 months
Portugal +4.7% - best week in 9 months
Spain +4.98% - best week in 16 months
Sounds right?! Efficient markets, indeed...
Risks surrounding the looming release of the latest jobs report by the BLS later on in the session failed to weigh on sentiment and heading into the North American open, stocks in Europe are seen higher across the board. The SMI index in Switzerland outperformed its peers since the get-go, with Swatch Group trading up over 3% after the company said that it expects good results for 2013 at operating profit and net income level. At the same time, in spite of stocks trading in the green, Bunds remained better bid, with peripheral bond yield spreads wider as market participants booked profits following the aggressive tightening observed earlier in the week amid solid Spanish bond auctions, as well as syndications by Ireland and Portugal. Fake Chinese trade data failed to boost Chinese stocks, which dropped anoter 0.7% and is just 13 points above 2000 as Shanghai remains one of the world's worst performing markets since the financial crisis. The yoyoing Nikkei was largely unchanged. All eyes today will be fixed on the headline streamer at 8:30 when the latest nonfarm payrolls report is released.
If you are anxiously awaiting the arrival of the "economic collapse", just open up your eyes and look at what is happening in Europe. The entire continent is a giant economic mess right now. Unemployment and poverty levels are setting record highs, car sales are setting record lows, and there is an ocean of bad loans and red ink everywhere you look. Over the past several years, most of the attention has been on the economic struggles of Greece, Spain and Portugal and without a doubt things continue to get even worse in those nations. But in 2014 and 2015, Italy and France will start to take center stage. France has the 5th largest economy on the planet, and Italy has the 9th largest economy on the planet, and at this point both of those economies are rapidly falling to pieces. Expect both France and Italy to make major headlines throughout the rest of 2014. The following are just a few of the statistics that show that an "economic collapse" is happening in Europe right now...