While much is being made of the ISM smash this morning and China's 'official' PMI overnight, it seems cognitive dissonance is on the rise as China's 'other' PMI collapsed and US Construction Spending dropped precipitously. It was only a month ago that ISM was sub-50 and that housing (and construction spending) was set to lift us out of the growth-scare. Apparently not. But there is another pillar of this recovery that has been stalwart during the equity market rally - that of US auto sales... until now...
*FORD U.S. VEHICLE SALES UP 11%, EST. UP 17%
*GM JULY U.S. VEHICLE SALES RISE 16%, EST. UP 20%
*CHRYSLER JULY U.S. VEHICLE SALES UP 11%, EST. UP 16%
It seems that all that channel-stuffing, subprime-lending, term-extending has hit its peak as, despite smiles and being 'pleased', US auto companies are underperforming expectations (as Ferrari exceeds).
After a slow start in the week, there is a substantial pick up with announcements from the FOMC, ECB and BOE (as well as monetary policy updates from the RBI, RBA, Israel, and Czech Republic) with the possibility, if not probability, of a Fed update on tapering expectations. On Wednesday we get the much expected wholesale GDP revision which will boost "growth data" all the way back to 1929 and is expected to push current GDP as much as 3% higher, and on Friday is the "most important NFP payroll number" (at least since the last one, and before the next one), where the consensus expects a +183K print, and 7.5% unemployment. All this while earnings season comes to a close.
Dis-passionate discussion of next week's events and data, placed within a somewhat larger context.
A brief discussion of the technical condition of the major currencies going to what is a week packed with fundamental developments.
With the Detroit bankruptcy hearing under way (constitutional crises notwithstanding), we thought it useful to cut through the rhetoric, break-down the mutally-assured-destruction barriers, and peer into the cold-hard facts as the city looks to restructure its $18 billion in debt.
Overview of the investment climate.
"For years, the City has spent more than it takes in and has borrowed and deferred paying certain obligations to make ends meet. The City is insolvent" - Kevin Orr
Some thoughts on why US auto sales are at their strongest pace since prior to the crisis, while EU auto sales are at 20 year lows.
Last week it was JPM just somewhat contradicting Jamie Dimon's "kid gloves" CNBC infomercial, when it slashed its Q1 GDP forecast from 2% to 1% (and about to be revised to sub-stall speed). Today, following the latest retail sales unadjusted disaster, it is Goldman's turn to slash its Q2 GDP tracking estimate from 1.3% to 1.0%. Stall speed has arrived despite everyone's forecasts for the this time it's different glorious US economic renaissance (so far "deferred" each year since 2010).
- Bernanke Supports Continuing Stimulus Amid Debate Over QE (BBG)
- Portugal president wants 'salvation' deal, including opposition (Reuters)
- Egypt has less than two months imported wheat left - ex-minister (Reuters)
- A rise in long-term interest rates is creating challenges and opportunities for the largest U.S. banks. (WSJ)
- BoJ says Japanese economy is ‘recovering’ (FT)
- More Chinese cities likely to curb auto sales (Reuters)
- PC Shipments Fall for 5th Quarter (BBG)
- Property Crushes Hedge Funds in Alternative Markets (BBG)
- New aid gives Greece summer respite before showdown (Reuters)
- Rajoy Punishes Exporters Sustaining Spain’s Economy (BBG)
- 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.