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Following the second quarter 0.3% rise in Eurozone GDP, which ended a multi year European recession (and who can possibly forget all those “strong” PMI numbers that helped launch a thousand clickbait slideshows), the proclamations for an imminent European golden age came hot and heavy. This was before the imploding European inflation print was announced and certainly before the ECB had no choice but to cut rates and even hint at QE, shattering all hopes of European growth. And just over an hour ago, the latest validation that just as we expected Europe is on the verge of a triple dip recession, came out of Eurostat (which may or may not get back to the issue of Spanish data integrity eventually), which reported that just like in Japan, the sequential growth rate in Europe is once again not only stalling but was dangerously close to once again contracting in the third quarter when it printed by the smallest possible positive quantum of 0.1%.

 

The WSJ map below conveniently shows that while Germany grew 0.3% in Q3, even if said growth is precarious, and Spain had a laughable 0.1% growth despite nearly 30% unemployment, it was France and Italy, both contracting at a 0.1% rate, that was the marginal source of disappointment.

 

The full breakdown by Euro area nation:

WSJ has a detailed breakdown:

Euro-zone GDP expanded 0.1% from the previous quarter, or 0.4% at an annualized rate, the European Union’s statistics agency Eurostat said Thursday. That is down sharply from roughly 1.2% annualized growth in the second quarter. The euro-zone economy contracted for six-straight quarters from late 2011 through the first three months of this year.

 

Germany’s GDP increased 1.3% in the third quarter from the preceding period on an annualized basis, according to calculations by J.P. Morgan matching economists’ forecasts. That marked a significant slowdown from the second quarter, when German GDP swelled 2.9% annualized, buoyed by a rebound in construction and other production after a harsh winter.

 

France’s GDP unexpectedly contracted by 0.6%, at an annualized rate, in the third quarter. Household spending increased slightly, but not enough to offset steep slides in investment and net trade.

 

Analysts see little evidence of a quick turnaround in France. “Private consumption will remain hampered by high unemployment while a strong export-led recovery will remain unlikely before further efforts are made to increase the country’s attractiveness,” said Julien Manceaux, economist at ING Bank, in a research note.

 

Italy’s economy shrank slightly, its ninth-straight quarterly contraction.

 

Germany, France and Italy combine for two-thirds of euro-zone GDP.

 

…

Yet even if the euro zone is, technically speaking, no longer in recession, by many measures including unemployment, wages and inflation the currency bloc remains stuck in a severe downturn. The jobless rate is at a euro-era high of 12.2%. Annual inflation slowed to a mere 0.7% in October, far below the ECB’s target of slightly below 2% over the medium term.

And considering that it is now the ECB’s primary mission to lower the Euro, since in its view the threat of redenomination is gone and Draghi can afford lower EUR pairs without setting off the sovereign bond sell off timebomb (he is wrong), expect even more such disappointing reports in the future to justify the weaker currency. Sure enough, if yesterday’s warning by the ECB’s Praet of potential QE was not enough to push the EURUSD pair lower, today’s GDP report has once again succeeded in lowering the pair from 1.35 to just above 1.34.

The currency wars are now once again fully back on, and like every time, the scramble to telegraph one’s economy is weaker is of paramount importance.

Source: Eurostat

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Submitted by Michael Krieger of Liberty Blitzkrieg blog,

Of all the screwed up, misallocated parts of the U.S. economy, the housing market continues to be one of the biggest potential train wrecks. While the extent of the insanity in residential real estate should be clear following the article I published yesterday, there are other potential problems just on the horizon.

One of these was written about over the weekend in the LA Times. In a nutshell, the next several years will start to see principal payments added to interest only payments on a large amount of second mortgages taken out during the boom years. The estimate is that $30 billion in home equity lines will reset next year, $53 billion in 2015, and then ultimately soaring to $111 billion in 2018.

From the LA Times:

Some mortgage and credit experts worry that billions of dollars of home equity credit lines that were extended a decade ago during the housing boom could be heading for big trouble soon, creating a new wave of defaults for banks and homeowners.

 

That’s because these credit lines, which are second mortgages with floating rates and flexible withdrawal terms, carry mandatory “resets” requiring borrowers to begin paying both principal and interest on their balances after 10 years. During the initial 10-year draw period, only interest payments are required.

 

But the difference between the interest-only and reset payments on these credit lines can be substantial — $500 to $600 or more per month in some cases.

 

According to federal financial regulators, about $30 billion in home equity lines dating to 2004 are due for resets next year, $53 billion the following year and a staggering $111 billion in 2018. Amy Crews Cutts, chief economist for Equifax, one of the three national credit bureaus, calls this a looming “wave of disaster” because large numbers of borrowers will be unable to handle the higher payments. This will force banks to either foreclose, refinance the borrower or modify their loans.

 

Financial regulators, including the comptroller of the currency, are aware of the coming bulge in high-risk resets and have been urging the biggest banks to set aside extra reserves for possible losses. Last month, Citigroup said it was increasing reserves on its nearly $20 billion in home equity lines and acknowledged that the reset payment shocks for borrowers could be a major challenge.

Full article here.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/svikk5Fvowg/story01.htm Tyler Durden

Submitted by Michael Krieger of Liberty Blitzkrieg blog,

Of all the screwed up, misallocated parts of the U.S. economy, the housing market continues to be one of the biggest potential train wrecks. While the extent of the insanity in residential real estate should be clear following the article I published yesterday, there are other potential problems just on the horizon.

One of these was written about over the weekend in the LA Times. In a nutshell, the next several years will start to see principal payments added to interest only payments on a large amount of second mortgages taken out during the boom years. The estimate is that $30 billion in home equity lines will reset next year, $53 billion in 2015, and then ultimately soaring to $111 billion in 2018.

From the LA Times:

Some mortgage and credit experts worry that billions of dollars of home equity credit lines that were extended a decade ago during the housing boom could be heading for big trouble soon, creating a new wave of defaults for banks and homeowners.

 

That’s because these credit lines, which are second mortgages with floating rates and flexible withdrawal terms, carry mandatory “resets” requiring borrowers to begin paying both principal and interest on their balances after 10 years. During the initial 10-year draw period, only interest payments are required.

 

But the difference between the interest-only and reset payments on these credit lines can be substantial — $500 to $600 or more per month in some cases.

 

According to federal financial regulators, about $30 billion in home equity lines dating to 2004 are due for resets next year, $53 billion the following year and a staggering $111 billion in 2018. Amy Crews Cutts, chief economist for Equifax, one of the three national credit bureaus, calls this a looming “wave of disaster” because large numbers of borrowers will be unable to handle the higher payments. This will force banks to either foreclose, refinance the borrower or modify their loans.

 

Financial regulators, including the comptroller of the currency, are aware of the coming bulge in high-risk resets and have been urging the biggest banks to set aside extra reserves for possible losses. Last month, Citigroup said it was increasing reserves on its nearly $20 billion in home equity lines and acknowledged that the reset payment shocks for borrowers could be a major challenge.

Full article here.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/svikk5Fvowg/story01.htm Tyler Durden

Earlier today we reported that the Japanese cries of “more QE” have not only started but are getting progressively louder, when after a massive initial surge in the first half of the year following an epic currency dilution, the Nikkei’s performance since May has largely been one big dud, which is putting not only the psychological “wealth effect” at risk, but also is tearing Abenomics apart, since perhaps the only key variable for the Prime Minister’s plan of “growth” is the constant increase in the stock market, much the same as in the US. But while the market has gone nowhere fast, it is the economy that is truly starting to crack at the seams, as was confirmed hours ago when Japan reported that in the third quarter its economy grew an annualized 1.9%, following a quarter when the GDP grew at more than double that pace or 4.3%, which in turn succeeded a quarter with 3.8% growth. What’s worse, in nominal terms, the actual third quarter growth was a paltry 0.4%: the lowest in all of 2013 while actual nominal consumption plunged to the lowest level since just after the start of Abenomics.

Paradoxically, and certainly tied to the lack of gains in the market, and lack of losses for the Yen which has stabilized in the upper 90s range, the GDP losses were driven by the two core focal points of Abenomics: exports and consumption. The WSJ reports: “the two growth pillars lost much of their momentum in the reporting period, as exports fell 0.6% from the previous quarter while growth in personal consumption slowed to 0.1%. Exports gained 2.9% and consumption rose 0.6%, in the April-June window. Both figures were also revised Thursday.”

Naturally, like every other Keynesian basket case, Japan was quick to place the blame elsewhere, in this case accusing “slowing growth overseas” as the main culrpit. “Japan’s growth rate halved during the July to September period compared with the first half of this year, as falling demand from emerging markets as well as weaker consumption put the brakes on the economy’s expansion.”

It gets better:

“Weaker exports could become a major threat Mr. Abe’s mission to haul the economy out of its 15-year-long deflationary malaise. Exports have been hit by decreased demand for cars from the U.S. while sales in emerging Asian economies have been hurt by financial market speculation over the Federal Reserve’s plans to downsize its asset-buying program. “

In other words, it was all the US’ fault that Abenomics is now failing. Where it wasn’t the US fault, is in showing the way that when all else fails, only government funded “growth” is the only answer: “Government-funded public works helped prop up the third-quarter growth. Public works spending rose 6.5% from the previous three-month period, mostly as a part of the government’s ¥10.3 trillion stimulus package earlier this year. Ahead of the tax increase, Mr. Abe is compiling another package worth ¥5 trillion.”

Some however saw through the triple: Goldman cautioned that “exports have failed to grow in volume despite expectations they would rise with a time lag following a weakening yen, suggesting there may be a structural problem hurting exporters’ competitiveness and exporting capability.” Well, since the primary beneficiary of a plunging yen is, at least on paper, the export industry, can one just call it a ballgame for Abenomics?

As for that key sticking point, and so far most undisputed failure of Abenomics by far, declining wages, well: they declined. Goldman says that employee compensations, a key focus of overseas investors, came in with a negative growth in both real and nominal terms for the first time in three quarters.

Amusingly, the weakness in consumption is thought to be short-lived: “Concerns over personal spending during the remainder of the fiscal year to the end of March are not so strong, as analysts expect last-minute demand ahead of Japan’s sales tax increase to 8% from 5% in April to prop up consumer spending.”

Remind us to look back at this post in 3 months when instead of the widely predicted economic spending Golden Age supposedly driven by even more taxation in the future, consumption instead craters as the population retrenches in anticipation of more upcoming hardship.

But then again economists, like all hacks, were never good at actually figuring out how common sense works.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/6RfPrQ82DVQ/story01.htm Tyler Durden

By the look of things, we’re in another Tech Craze, similar to the one in 2000.

 

The last two years have seen a number of high profile Tech IPOs for businesses that are barely profitable or have never turned a profit. Indeed, of the tech firms that went public in 2013 so far, 73% have never turned a profit (compare that to just 27% of the tech IPOs that were unprofitable in 1999).

 

Of those companies that are profitable, trouble is brewing. I’m talking about Facebook, Zynga, and the like. All of these businesses have very serious issues with their business models.

 

A final key component of the market’s current bubble concerns profits. As I’ve pointed out before, today corporate profits as measured by earnings or net income are at a record.

 

This has contributed to the market rally in a big way. However, the reality is that these earnings numbers are in fact heavily massaged through various accounting tricks pertaining to taxes.

 

As Citigroup recently noted, if one were to look at operating profit margins (profits before taxes, amortization and depreciation), one would find that profit margins have been flat to down for the last year and a half.

 

My point is that if we look at real earnings instead of those being manipulated by taxes and asset manipulation, the corporate profits picture is not nearly as rosy as the markets imply.

 

All of this points to signs of a major market top forming. This is not to say that there won’t be significant opportunities for investing to the longside in the markets.

 

For a FREE Special Report outlining how to protect your portfolio a market collapse, swing by: http://phoenixcapitalmarketing.com/special-reports.html

 

Best Regards,

 

Phoenix Capital Research

 

 

 

 

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/IjMmJ_LblXI/story01.htm Phoenix Capital Research

Following the FAA’s warning that over 7,500 unmanned drones will be in US Airspace in the next five years, we thought news of yet another domestic drone down was noteworthy. Just a couple fo months ago we reported the crash (and self-destruction) of 2 drones in Florida, and now officials at the 174th Attack Wing suspended all Reaper drone flights in Central New York Tuesday after one of the unmanned aircraft crashed into Lake Ontario about 12 miles from the eastern shore during a routine training flight. As WNYF TV reports, the drone – one of four based at Fort Drum – was operated remotely from near Syracuse. Officials are investigating the crash but added, in some hope of reassurance, “the mission was going as advertised, up to the point where we did lose control of the airplane.”

 

WNYF TV reports:

 

 

The airforce explains itself:

 

The site of the crash – (via Syracuse.com),

A Coast Guard helicopter and search vessel were unable to recover the $4 million drone, which crashed about 1 p.m. Tuesday, and were forced to call off the search late in the afternoon because of bad weather, said Col. Greg Semmel, commander of the 174th Attack Wing of the Air National Guard.

 

Semmel said he did not know what caused the accident.

 

No decision has been made yet on when Reaper training flights will resume, Semmel said. He emphasized that the unmanned combat aircraft, which was introduced by manufacturer General Atomics in 2007, has a good safety record.

 

The drone crashed into the lake about 20 miles northeast of the Port of Oswego, and about 12 miles from the eastern shore, Semmel said.

 

The Reaper that crashed Tuesday was unarmed and had been in the air about three hours when it went down in the lake, Semmel said.

 

Semmel estimated the cost of the lost Reaper at $4 million to $5 million.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/eQkJqKa0Qp4/story01.htm Tyler Durden

Following his inconvenient truthiness yesterday, Andrew Huszar appeared on Bloomberg TV today (having dismissed the comic-book-written discussion he faced in CNBC’s Fast Money yesterday). As usual Bloomberg gave him more time to speak, listened, and challenged some of what he said, but we were struck by the man-who-ran-the-Fed’s-mortgage-book’s points that “we are eerily similar to 2008.” Simply out, he implores, “the structure of our economy has not changed,” and his apology (on behalf of the Fed), is because the Fed “helped squander an opportunity to see change in America.” The fact of the matter, this was folly, “The Fed does not have the ttols to help the economy.”

 

What else could Bernanke have done?

QE1 at the time was defensible… but as we progressed, very quickly we began to see it was not working

So why wasn’t a decision made then to change course?

That’s a very good question and why I felt compelled to write this apology to America…

 

This was a program that was devised to help mortgage lending in America… mortgage lending decreased in that time…

 

Instead what we saw was massive Wall Street earnings

When should the Fed have stopped?

The Fed should have stopped after QE1 – when it was clear it wasn’t working – instead it has bought $2.5 trillion more bonds and put itself in a position where the exit is very uncertain…

 

…

 

Ultimately the tools [the Fed] has at its disposal don’t work, and what it has done instead is enable a “crisis-driven” political system

 

Must-watch follow-up to his Op-Ed… Ensure you listen to the last 60 seconds… “What the US needs is reform and change – not more easy money.”

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/R0Ia86pq1XM/story01.htm Tyler Durden