The investment game is becoming more suspect and dangerous as asset price levels continue to ignore economic weakness and the lack of necessary political reform. Instead, many investors (not just in the EU) have become conditioned like B.F. Skinner rats to bid up financial risk assets whenever a central banker makes a promise about accommodation or further stimulus; this even occurs when data disappoints, because investors expect ‘the promise’ to soon follow. Fear of missing the upside and underperforming peers and benchmarks is what makes this reflexivity work. This is actually a sad state of affairs and an ever-more dangerous and epic game of chicken. This conditional response pattern is unsustainable. Indebtedness and market speculation continue to soar. In the end, printing is a not a solution, but a source of long-term harm to markets and national economies.
Today's Market-Boosting Disappointing Economic News Brought To Your Courtesy Of Euroarea's Service PMIsSubmitted by Tyler Durden on 12/03/2014 08:11 -0400
Those wondering why European stocks are higher but off earlier highs, the answer is simple: the latest Service ISM was bad but it wasn't a complete disaster. And while RanSquawk notes that "the particularly disappointing slew of Eurozone Service PMI’s from France and Spain capped any potential upside seen across the European indices" stocks are clearly green on hopes Europe's ongoing economic devastation accelerates enough for the ECB to finally start buying Stoxx 600 and various other penny stocks. This is what happened, in Goldman's words: the November Euro area final composite PMI came in at 51.1, 0.3pt below the flash (and Consensus) estimate. Relative to October, the composite PMI fell by 0.9pt. The weaker final composite PMI was driven by flash/final downward revisions to the German manufacturing PMI and the French services PMI. Today’s data also showed some improvement in the Italian services PMI, and a deterioration in its Spanish counterpart.
The vice will close on some cities and states sooner than others, but it will eventually squeeze every city and state with declining revenues and rising fixed costs into default.
- Banks to Pay $3.3 Billion in FX-Manipulation Probe (BBG)
- Symbolic being the key word: U.S., China sign symbolic emissions plan, play down rivalry (Reuters)
- Europe (so really Russian sanctions) is the new "snow in the winter" - Carney Sees Europe Stagnation Impact as Growth Outlook Cut (BBG)
- Eurozone Industrial Output Points to Weak Third Quarter Growth (WSJ)
- Not everyone around Abe is insane: Kuroda Ally Flags Warning on Delaying Sales-Tax Increase (BBG)
- Hong Kong to scrap daily yuan conversion limit to boost stock investment (Reuters)
- Barclays Falls After FX Settlement Delay Reduces Discount (BBG)
- Some unhappy Yahoo investors asking AOL for rescue (Reuters)
Prepare to once again hear the word "decoupling" a whole lot more.
What if there was some degrees of freedom in the centrally planned capital markets that rational, non-emotional and non-ideologically-laden thinking could shed light on ? Here is such an attempt
- The total balance of auto loans outstanding in August is $924.2 billion, an all-time high and an increase of 10.8% from same time a year ago
- The total number of auto loans outstanding stands at more than 65 million, a record high and an increase of more than 6% from the same time last year;
- The total number of new loans originated year-to-date through June for subprime borrowers, defined as consumers with Equifax Risk Scores of 640 or lower, is 3.9 million, representing 31.2% of all auto loans originated this year.
- Similarly, the total balance of newly originated subprime auto loans is $70.7 billion, an eight-year high and representing 27.8% of the total balance of new auto loans
It is amazing how the government manages to continue selling Brooklyn Bridges to a gullible public. Americans buy wars they don’t need and economic recoveries that do not exist. Government in America is focused on something different from a healthy economy and the well being of citizens. We call it democracy, but it’s not.
Every quarter we take a break from all the standard economic indicators to look at a range of alternative data. The purpose here is to pose the question: “Does the consensus view of the U.S. economy square with what real people do in their day to day lives?” Overall, the news from “Off the Grid” challenges the notion that the U.S. economy is on solid ground and accelerating. Inching forward, yes... But not much more.
Straight forward discussion of the key events next week. Weak on bluster. Strong on analysis. You've been warned.
When you see the headlines touting strong retail sales, you need to consider what you are actually seeing in the real world. RadioShack will be filing for bankruptcy within months. Wet Seal will follow. Sears is about two years from a bankruptcy filing. JC Penney’s turnaround is a sham. They continue to lose hundreds of millions every quarter and will be filing for bankruptcy within the next couple years. Target and Wal-Mart continue to post awful sales results and have stopped expanding. And as you drive around in your leased BMW, you see more Space Available signs than operating outlets in every strip center in America.
Retail Sales rose 0.6% in August - precisely as expected - with July revised from 0.0% to +0.3% but Ex-Autos the +0.3% growth, which matched the revised July number, was the slowest since January's "harsh weather" impact. The 'control group' (ex food, auto dealers, and building materials) missed expectations at +0.4% vs +0.5% exp slipping to its slowest growth in 3 months. Under the surface it appears the gains in sales are driven mostly by a 1.5% rise in auto sales - as more subprime credit is loaded onto the US consumer.
Straight-forward discussion about the investment climate and the week ahead. Light on hyperbole, heavy on analysis.
Heading into the North American open, the bulk of the morning’s price action has been provided by news that Ukrainian President Poroshenko said that he reached an agreement with Russia's Putin on a "permanent cease fire" in Eastern Ukraine's Donbass region. This saw an immediate spike higher in European equities with the DAX future rallying and breaking above its 100DMA seen at 9644.50, thus extending earlier gains that stemmed from the strong performance in Asia-Pacific equities, while the e-mini S&P once again printed a fresh record high. However, these moves staged a partial reversal amid comments from Russia’s Putin that he denied that such an agreement had been reached as Russia is not a party to the Ukraine conflict. In stock specific news, Russian exposed Raiffeisen Bank outperforms Europe (+7%) in reaction to the geopolitical developments, while Hugo Boss have underperformed throughout the session following a share placement which came in at the lower end (-5.3%).