- Portuguese bond yields soar amid political turmoil (FT)
- Portugal Resignation Rocks European Markets (WSJ)
- Portugal, Greece risk reawakening euro zone beast (Reuters)
- Egypt’s military chiefs hold crisis meeting as Mursi snubs ultimatum (Al Arabiya)
- Egypt Crisis Deepens as Mursi Refuses to Step Down (BBG)
- Hidden microphone found in London embassy: Ecuador (AFP)
- Health Law Penalties Delayed (WSJ)
- Rise in mortgage rates cut into homebuyer demand last week (Reuters)
- Bolivia angered by search of president's plane, no sign of Snowden (Reuters)
- Olympus ex-chairman gets suspended sentence (FT)
This piece is timely as markets spit up the punch from Bernanke's bowl
- Whale of a Trade Revealed at Biggest U.S. Bank With Best Control (BBG)
- ECB backs away from use of ‘big bazooka’ to boost credit (FT)
- Turkish unions join fierce protests in which two have died (Reuters)
- Europe Floods Wreak Havoc (WSJ)
- Beheadings by Syrian Rebels Add to Atrocities, UN Says (BBG)
- RBA Sees Further Rate-Cut Scope as Aussie Remains High (BBG)
- China’s ‘great power’ call to the US could stir friction (FT)
- J.C. Penney Continuing Ron Johnson’s Vision on the Cheap (BBG)
The problem with trying to solve all our structural problems by injecting "free money" liquidity into financial Elites is that all the money sloshing around seeks a high-yield home, and in doing so it inflates bubbles that inevitably pop with devastating consequences. As noted yesterday, the Grand Narrative of the U.S. economy is a global empire that has substituted financialization for sustainable economic expansion. In shorthand, those people with access to near-zero-cost central bank-issued credit can take advantage of the many asset bubbles financialization inflates. Those people who do not have capital or access to credit become poorer. That is the harsh reality of neofeudal, neocolonial financialization. It is widely accepted as self-evident that all these bubbles will not pop because the central banks won't let them pop. That's nice, but if this were the case, then why did stocks crater in 2000-2001 and 2008-2009, and why did the housing bubble implode in 2008-2011? Did they change their minds for some reason? No; they assured us right up to the moment of implosion that everything was fine, there was no bubble, etc. The only logical conclusion is that bubbles pop even though central banks resist the popping with all their might.
Preview of tomorrow's Bernanke testimony and FOMC minutes.
The overnight macroeconomic news started early with China where the second, HSBC Manufacturing PMI declined from 51.6 to 50.4, below estimates of 50.5, yet another signal of a slowdown in the country (where one can argue the collapse in copper prices is having a far greater impact), and where the Composite closed down 0.17% after its Mayday holiday. China wasn't the only one: India dropped to 51.0 from 52.0 in March, and Taiwan dipped to 50.7 from 51.2, offset however by the bounce in South Korean PMI from 52.0 to 52.6, the best in two years (a number set to tumble as Abenomics steal SK's export thunder). The focus then shifted to Europe, where virtually everyone was once again in contraction mode, as German Mfg PMI declined from 49.0 to 48.1, the lowest since December, if a slight beat to expectations (while VDMA industry body said March Machine orders dropped 15% Y/Y so little optimism on the horizon), France rose modestly to 44.4 from already depressed levels of 44.0, Spain PMI also rose from 44.2 to 44.7, Italy PMI at 45.5 from 44.5, Poland at 46.9 from 48.0, a 45-month low. At least Greece seems to be doing "better" with the Mfg PMI "rising" to 45.0 from 42.1. Across the reports, the biggest decline was in input prices following the recent clobbering in commodities, which in turn is translating into price deflation.
The Fed Engaging In Quantitative Easing Until Unemployment Falls Is Like a Medieval Doctor Bleeding a Patient with Leeches ...Submitted by George Washington on 05/01/2013 18:19 -0500
Macro perspective of this week's events. Hint: the ECB meeting may be the most interesting.
Manipulation and carefully crafted distortion erode trust, not just in the individuals employed to repeat the lies but in the institutions that issue them. The ruthless pursuit of self-interest is now the norm; truth is a terribly risky disruptor that must be hidden, masked or countered with plausible lies. There can be no trust if there is no truth. How can we trust people who lie to us constantly, who issue one self-serving justification after another for their own parasitic predation? We cannot. The premium in America has shifted from truth to self-serving distortion, and from trust to manipulation. This spiritual and moral rot will end gloriously, have no doubt, for the stock market's permanent ascendancy dissolves all other narratives.
Futures green? Check. Overnight ramp in either the EURUSD or USDJPY carry funding pair? Check? Lack of good economic news and plethora of economic misses? Check. In short, all the ingredients for continued New Normal record highs, driven only by the central bank liquidity tsunami are here. The weakness started with Australia's stunning unemployment jump overnight which saw a 36,100 drop in jobs on just 7,500 expected. A miss in Chinese auto sales was next, with 1.59MM cars sole in March, below the 1.596 expected, and even despite the surge in M2 and loan data, the Shanghai Composite closed down once again, dropping 0.29% to 2219.6. Nikkei continued its deranged liquidity-fueled ways, rising 1.96% even as Kuroda is starting to become quite concerned about the rapid move in the Yen, saying he "may adjust policy before the 2% target is reached if the economy and other indicators are growing rapidly." They aren't, and won't be, but if the Nikkei225 is confused for the economy, he just may push on the breaks which would send the only reason for the latest rally, the USDJPY tumbling. Finally, looking at Europe, Italy sold well less than the maximum €6 billion targeted in 2016, 2017 and 2028 bonds, which dented some of the enthusiasm for Italian paper although with Japanese money desperate to be parked somewhere, it will continue going into European and all other fixed income, distorting market signals for a long time. In short, expect the central-bank risk levitation to continue as all the deteriorating fundamentals and reality are ignored once more, and hopium and P/E multiple expansion are the only story in town.
The overtly inflationary policy stance of the FOMC is especially significant when you consider that Fed Chairman Ben Bernanke is no longer in control of monetary policy.
- Cyprus leader invites family firm probe (FT)
- How the Fed fueled an explosion in subprime auto loans (Reuters)
- Wal-Mart Customers Complain Bare Shelves Are Widespread (BBG)
- JC Penney CEO gets no bonus, stock award after dismal year (Reuters)
- New Bird Flu Virus Kills 2 in China, Sparking WHO Probe (BBG)
- Algorithms Play Matchmaker to Fight 7.7% U.S. Unemployment (BBG)
- Fed hawk Lacker and dove Evans face off over inflation (Reuters)
- Infamous silver market "cornerer" WH Hunt Becomes Billionaire on Bakken Oil After Bankruptcy (BBG)
- Japan Auto Sales Fall on Subsidy End as Korea Extends Drop (BBG)
- Black Hawks Near North Korea Show Risk in U.S. Command Shift (BBG)
- SEC Embraces Social Media (WSJ)
- Tesla Touts ‘True Out of Pocket’ Financing for Model S (BBG)
- U.K. Banks Try to Dodge Bonus Caps by Defining Risk-Taker (BBG)
One of the hallmarks of the ongoing European economic depression has been the complete implosion in the continent's automotive sales (here and here) and as Reuters summarized last week, there is little hope of a rebound for a long, long time. Curiously, where Europe has seen complete devastation, the US has been surprisingly resilient, and even when factoring in for such traditional gimmicks as channel stuffing, performed most notoriously by GM, which in March had the second highest amount of cars parked on dealer lots in its post-bankruptcy history, car sales have been rather brisk which in turn has allowed the US to report manufacturing numbers which, until the recent PMI and ISM data, were better than expected. One does, wonder, however, how much of a factor for this has been the forward demand-pull impact of Hurricane Sandy in late 2012, when as a result of tens of thousands of cars being totaled in tri-state area flooding, consumers scrambled to car lots to buy new autos. Well, we may have found the reason for the recent disappointing performance in both the Chicago PMI and the Manufacturing ISM - the positive effect from Sandy is finally fading, as today's domestic car sales show, which posted a surprising decline in March, especially in non-Trucks which dipped to the lowest since October 2013, and the first miss in total light vehicle sales SAAR since October.
Overview of the major central bank meetings and data preview as well as the latest from Cyprus and Italy.