Saks

Whether it is algos looking for a better entry point for the inevitable green close, a market reacting to Saks disappointment, or a realization (ahead of Bernanke tomorrow) that the hawkish jawboning recently is an attempt at a soft-landing is unclear. One thing is becoming clear: the Dow Jones track record of being up 19 out of 19 consecutive weekly Tuesdays is suddenly in jeopardy...

So much for the "transformational" CEO, poached from AAPL and credited with creating the AAPL retail mystique. As per CNBC, he now effectively "out":

J.C. PENNEY TO OUST RON JOHNSON AS CEO: CNBC
J.C. PENNEY'S CEO JOHNSON `IS OUT': CNBC

At least he lasted just a bit longer than the former JCP president Mike Francis, who came, saw, collected $10 million, and quit nine months later.

The breakdown of sound money has now finally generated a cruel endgame. The fiscal and central banking branches of the state have endlessly bludgeoned the free market, eviscerating its capacity to generate wealth and growth. This growing economic failure, in turn, generates political demands for state action to stimulate recovery and jobs. But the machinery of the state has been hijacked by the various Keynesian doctrines of demand stimulus, tax cutting, and money printing. These are all variations of buy now and pay later - a dangerous maneuver when the state has run out of balance sheet runway in both its fiscal and monetary branches. Nevertheless, these futile stimulus actions are demanded and promoted by the crony capitalist lobbies which slipstream on whatever dispensations as can be mustered. At the end of the day, the state labors mightily, yet only produces recovery for the 1 percent.

All Capitalist Systems Have Some Inequality.  We Don’t Want To Prevent All Inequality … Just Economy-Wrecking Levels

• Obama Administration Said Set to Release Corporate Tax-Rate Plan Today (Bloomberg, WSJ)
• Greece races to meet bail-out demands (FT)
• IAEA ‘disappointed’ in Iran nuclear talks (FT)
• Hilsenrath: Fed Writes Sweeping Rules From Behind Closed Doors (WSJ)
• Fannie-Freddie Plan, Sweden FSA, Trader Suspects, CDO Lawsuit: Compliance (Bloomberg)
• Bank of England’s Bean Says Greek Deal Doesn’t End Disorderly Outcome Risk (Bloomberg)
• Greece Second Bailout Plan an ‘Important Step,’ Treasury’s Brainard Says (Bloomberg)
• Shanghai Eases Home Purchase Restrictions (Bloomberg)

We have now entered the fifth year of this Fourth Turning Crisis. George Washington and his troops were barely holding on at Valley Forge during the fifth year of the American Revolution Fourth Turning. By year five of the Civil War Fourth Turning 700,000 Americans were dead, the South left in ruins, a President assassinated and a military victory attained that felt like defeat. By the fifth year of the Great Depression/World War II Fourth Turning, FDR’s New Deal was in place and Adolf Hitler had been democratically elected and was formulating big plans for his Third Reich. The insight from prior Fourth Turnings that applies to 2012 is that things will not improve. They call it a Crisis because the risk of calamity is constant. There is zero percent chance that 2012 will result in a recovery and return to normalcy. Not one of the issues that caused our economic collapse has been solved. The “solutions” implemented since 2008 have exacerbated the problems of debt, civic decay and global disorder. The choices we make as a nation in 2012 will determine the future course of this Fourth Turning. If we fail in our duty, this Fourth Turning could go catastrophically wrong. I pray we choose wisely. Have a great 2012.

Even the most die-hard bear or those who simply believe QE2 did more harm than good, have to resign themselves to the fact that this Fed will enact QE3 at its earliest possible convenience.  While I remain convinced that some current 5th grader will eventually be awarded a PhD in economics (not from Princeton) for their work on the folly of the QE programs, it is time to prepare for QE3.  Those of us who had hoped the dissent from the August FOMC meeting was a sign that the Fed was wavering on its “print and print some more” philosophy, have seen those hopes dashed against the rocks.  The doves have come out in full force.  The minutes show that some members think we should have already started QE3 and now one of the dissenters has backtracked.

What do Hu Jintao, David Cameron, Warren Buffett, Dominique Strauss-Kahn, Alan Greenspan, Robert Shiller, Joseph Stiglitz, Robert Reich and Mark Thoma - and both conservatives and liberals - all agree on?

In today's edition of Bloomberg Brief, the firm's economist Richard Yamarone looks at one of the more unpleasant consequences of Federal monetary policy: the increasing schism in wealth distribution between the wealthiest percentile and everyone else. While the Fed's third mandate is by now all too clear: push the Russell 2000 to the highest possible level, one can now suggest that the 4th mandate is one that would make Robin Hood spin in his grave: "To the extent that Federal Reserve policy is driving equity prices higher, it is also likely widening the gap between the haves and the have-nots....The disparity between the net worth of those on the top rung of the income ladder and those on lower rungs has been growing. According to the latest data from the Federal Reserve’s Survey of Consumer Finances, the total wealth of the top 10 percent income bracket is larger in 2009 than it was in 1995. Those further down have on average barely made any gains. It is likely that data for 2010 and 2011 will reveal an even higher percentage going to the top earners, given recent increases in stocks." Alas, this is nothing new, and merely confirms speculation that the Fed is arguably the most efficient wealth redistibution, or rather focusing, mechanism available to the status quo. This is best summarized in the chart below comparing net worth by income distribution for various percentiles among the population, based on the Fed's own data. In short: the richest 20% have gotten richer in the past 14 years, entirely at the expense of everyone else.

Indeed, this 2009-2011 recovery and cyclical bull market has been as artificial as the 2003-07 expansion. That last one was fuelled by financial engineering in the financial sector. This one is being underpinned by unprecedented government intrusion in the credit markets. As of this quarter, your government has replaced the private sector as the largest source of outstanding mortgage market and consumer-related credit (see front page of the Investor's Business Daily). So not only is the U.S.A. turning Japanese in many respects, it is also now resembling China where the government also redirects the flow of private sector credit. When we said capitalism went on a sabbatical three years ago, we didn't expect this to be a permanent vacation.

• Al Qaeda names Egyptian militant Adel as interim chief - Al Jazeera (Reuters)
• Geithner: U.S. must deal with budget woes or pay more (Reuters)
• Pressure mounts on Strauss-Kahn to quit (FT)
• IMF issues stark warning to Greece on fiscal goals (Reuters)
• Europe Aims to Keep IMF Job After Strauss-Kahn (Bloomberg)
• The eurozone after Strauss-Kahn (Martin Wolf, FT)
• U.S. mulls White House aide Lipton for IMF No. 2 job (Reuters)
• Could Greece be the next Lehman Brothers? Yes – and potentially even worse (Guardian)
• Moody's Cuts Rating of Four Major Australian Banks (WSJ)
• Fed seeks annual US bank stress tests (FT)
• Mideast peace bid needed more than ever (Reuters)
• World Bank sees end to dollar’s hegemony (FT)

• Asian stocks rebound as commodities climb, China government acts on prices.
• BoE plans to adopt a less-intrusive approach to overseeing U.K. banks.
• Euro climbs versus Yen, Dollar on optimism Ireland aid to calm debt market.
• IMF warns of Hong Kong housing-bubble risks.
• Irish talks turn to government bailout as EU officials join IMF in Dublin.
• Moscow approves $32B sale of state assets; disposals to help cover budget deficit.

• Oil falls below $75 a barrel in Asia ahead of US employment report.
• Russia said it would extend its ban on wheat exports into late 2011.
• Russia to double gas imports from Azerbaijan in a fresh blow to EU-touted pipeline project.
• US Pending sales of existing houses unexpectedly climbed in July from a record low.
• US Retail sales in August top estimates on tax holidays, discounts.
• 3Par determines revised HP proposal, for $33/share, is superior. Dell pulls out of race.

• Asian stocks rise on China manufacturing, Australia's growth; Yen weakens.
• Australian economic growth accelerates more than estimates; Currency gains.
• China's manufacturing expands at faster pace in Aug - rises to 51.7 from 51.2.
• Currency trading tops $4 trillion a day as dollar's share drops, BIS says.
• FDIC finds more than a tenth of U.S. banks - 829 - at risk.
• Pennsylvania's capital of Harrisburg to skip a $3.29M payment on its debt.
• Treasuries decline as Asian stocks advance, US to announce auction size.
• US consumer confidence rose just 2.5 points in August, to 53.5.

• Asia stocks rise for fourth day, bond risk drops on US output; Yen gains.
• China doubles Korean bond holdings as Central Bank switches from US debt.
• Germany's Q2 GDP growth unlikely to continue : ZEW survey.
• US govt will likely continue to play a role in guaranteeing mortgages: Geithner.
• Vietnam devalues currency by 2.1% to boost exports as stocks approach bear market.
• Wholesale costs in the U.S. increased in July - first time in four months.
• Vestas Wind Sys swings to Q2 loss of €119M, as revs fall fell 17%. Cuts 2010 outlook.

Economic Calendar: Data on Crude Inventories to be released today.