Category: zerohedge

Having fired a shot across Carl iCahn’s bow yesterday, PIMCO’s Bill Gross has a new target – once again talking his book…

Gross: By the way, I should spend more TIME like Bill Gates too — we all should. He and Melinda are great paragons.

— PIMCO (@PIMCO) October 25, 2013

Perhaps more Americans should spend more time that way… instead of watching every tick in AMZN and dreaming of retirement…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/EJU5yR2bHDw/story01.htm Tyler Durden

Following record UMich misses, Gallup's economic confidence collapse, the slump in the conference board's measure of confidence, and Bloomberg's index of consumer comfort signaling major concerns among rich and poor in this country (in spite of record highs in stocks), today's Consumer Confidence data from UMich continues to confirm a problem for all those 'hoping' for moar multiple expansion. Falling for the 3rd month in a row, and missing expectations for the 2nd month in a row, this is the lowest confidence print in 2013. Perhaps even more worrisome for the 'hope and change' crowd is that the 12-month economic outlook has collapsed to its lowest since Nov 2011. It would seem that all that free money flooding our 'markets' has reached peak efficacy in terms of confidence inspiration, and as Citi notes, when this cycle has played out in the past, equity market corrections are often quick to follow…

 

As we have noted previously – this move in confidence is key…

But, it's all about confidence… investors will not be willing to pay increasing multiples unless they are confident that the future streams of earnings are sustainable and forecastable… And simply put, the current levels of Consumer Sentiment need to almost double for the US equity market tp approach historical multiple valuation levels…

 

 

 

and the cycle appears to be shifting…

Via Citi,

Is consumer confidence set to turn?

Consumer Confidence is once again following a dynamic where we see it move higher for 4 years and 4 months before beginning to collapse

• Moves higher from 1996-2000 with a smaller dip halfway through in October 1998
• Moves higher from 2003-2007 with a smaller dip hallway through in October 2005
• Moves higher and so far tops out in June 2013. Also sees a small dip halfway through in October 2011.

 

Higher yields do not help confidence…

 

A sharp rise in mortgage rates has a negative feedback loop to consumer confidence. For those families and individuals that were now looking/able to enter the housing market, the recent spike in rates acts as a headwind.

 

In addition to the economic backdrop, there is plenty of tail risk as we head into the end of the year. Oil prices have been rising since the summer began (and in reality since the Summer of 2012), partially due to geopolitical risks which are very much “top of mind.” A bigger spike due to a supply shock would choke the economic recovery.(In our view)

In the US, the appointment of a new Fed Chairman and the upcoming budget/debt ceiling debates are likely to bring added volatility. Tapering itself can also induce concern as the “Bernanke put” is being removed from markets.

In Europe, many of the structural problems related to the single currency union have not actually been addressed and the peripheral countries could still create turmoil going forward (see Fixed Income section focusing on Italy in particular for more on this). There has also been little concern with both the German elections and the German Court decision on the constitutionality of the OMT program. A surprise in either of these could be cause for concern.

Emerging Markets are still not out of the woods yet as growth has been weak relative to expectations and countries with current account deficits are beginning to feel pressure in their FX and Bond markets. This is an issue we believe is only starting to develop which we will continue to expand on at later dates.(We have also looked at this in our EM FX section this week)

Overall, the weak economic backdrop, poor housing recovery and potential for tail risk events over the next few months suggest that we have topped out in Consumer Confidence, a warning sign for equity markets.

 

The relationship between Consumer Confidence is clear, and IF June did mark the high and Confidence continues to decline, then we would expect to see that translate to weakness in the equity markets. The removal of the “Bernanke put” only adds to this concern.

A major turn has taken place in equity markets on average four months after Consumer Confidence turns, which would point to a decline beginning around September-October. As we have previously expressed, we remain of the bias that a correction in equity markets on the order of 20%+ is likely this year/ into 2014 and the current dynamics support such a move.

Should we see a decline of that magnitude, it is almost certain that yields would move lower in a rush to safe assets.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/bHOF49_vOG8/story01.htm Tyler Durden

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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/pjKmzgkmaLs/story01.htm williambanzai7

Submitted by John Rubino of The Dollar Collapse blog,

The US equity markets are back in record territory, at least in nominal terms.

The last two times they spiked this way, the following year was pretty brutal. See the next chart, which tracks the S&P 500 and margin debt, the amount of money investors are borrowing against their shares of stock to buy more stock. The chart seems to show that when investors are optimistic enough to use leverage to invest in already-risky stocks, then the good times have pretty much run their course and something nasty is imminent. If recent history is our guide, it is now time to either take some money off the table or short the hell out of the big indexes – or whatever else you like to do when the market looks overbought.

But this conclusion is only valid if we’re in the same stage of the credit bubble as during those two previous sentiment peaks. In 2000 and 2007, to take just one measure of financial stability, the federal government’s debt was $6 trillion and $8 trillion, respectively, versus $17 trillion today. Plenty of other leverage metrics are also way up, indicating that the US is much further down the path of currency debasement than it was just a few years ago. So the question becomes: at what point does a quantitative difference become qualitative? When does the phase change occur? The next chart shows why this question is more than academic. In the early stages of Zimbabwe’s epic hyperinflation its stock market rose from 2,000 to over 40,000 in one year. Presumably a lot of indicators similar to margin debt were by then pointing to a blow-off top and screaming “sell” to students of history.

 

 

Then the market proceeded to run up to 4,000,000. What happened? The country ran its printing press flat-out and inflated away its currency, so the price of pretty much every tangible asset, when measured in Zimbabwean dollars, went parabolic. Since equities represent part ownership of companies, and most non-financial companies own tangible assets, their value went up as well. Not enough to increase in real terms (versus gold, for instance) but enough to make shorting that market a really bad idea.

So are we 2007 America or 2006 Zimbabwe? A lot is riding on the answer.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/5idBs8UmrW8/story01.htm Tyler Durden

As the 'diplomatic' debacle continues to rage between the US and Europe (most loudly France and Germany) over the Obama administration's ongoing eavesdropping on its allies' cell phones, Reuters reports that (state-backed) Deutsche Telekom is calling for German comms companies to cooperate to shield local internet traffic from foreign intelligence services. "It is internationally without precedent that the internet traffic of a developed country bypasses the servers of another country," notes one academic, warning that if more countries wall themselves off, it could lead to a troubling "Balkanisation" of the Internet, crippling the openness and efficiency that have made the web a source of economic growth. Despite Obama's denials, the situation is not fading away, and Germany and France continue to demand a "no spying" agreement.

 

Via Reuters,

As a diplomatic row rages between the United States and Europe over spying accusations, state-backed Deutsche Telekom wants German communications companies to cooperate to shield local internet traffic from foreign intelligence services.

 

…

 

More fundamentally, the initiative runs counter to how the Internet works today – global traffic is passed from network to network under free or paid-for agreements with no thought for national borders.

 

If more countries wall themselves off, it could lead to a troubling "Balkanisation" of the Internet, crippling the openness and efficiency that have made the web a source of economic growth, said Dan Kaminsky, a U.S. security researcher.

 

Controls over internet traffic are more commonly seen in countries such as China and Iran where governments seek to limit the content their people can access by erecting firewalls and blocking Facebook and Twitter.

 

"It is internationally without precedent that the internet traffic of a developed country bypasses the servers of another country," said Torsten Gerpott, a professor of business and telecoms at the University of Duisburg-Essen.

 

"The push of Deutsche Telekom is laudable, but it's also a public relations move."

 

…

 

Government snooping is a sensitive subject in Germany, which has among the strictest privacy laws in the world, since it dredges up memories of eavesdropping by the Stasi secret police in the former East Germany, where Merkel grew up.

 

The issue dominated discussions at a European summit on Thursday, prompting Merkel to demand that the U.S. strike a "no-spying" agreement with Berlin and Paris by the end of the year.

 

…

 

Brazil's President Dilma Rousseff, angered by reports that the U.S. spied on her and other Brazilians, is pushing legislation that would force Google, Facebook and other internet companies to store locally gathered or user-generated data inside the country.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/6ia7M3CZSss/story01.htm Tyler Durden

The headline September Durable Goods number was great: rising at 3.7%, this was well above the August revised 0.2% increase and far above expectations of a 2.3% increase. However, a quick glance into the reasons shows why the reality is – once again – far uglier. Actually, the reason is just one: Boeing, which reported 127 plane orders in September compared to just 16 in August. This translated into a 57.5% monthly increase in non-defense aircraft orders in September (and Syria’s contribution can’t be denied either, leading to a 15.2% increase in defense airplane orders). So what does the US capital spending climate look like when stripped away from very volatile (and very cancelable) Boeing orders? In a word ugly: Durable Goods ex transports actually declined by -0.1, on expectations of a rebound to 0.5%, following an even more downward revised August print of -0.4%.

But aside from the broader durable goods, and focusing on pure CapEx, in the form of Capital Goods Orders non-Defense Shipments (not so much order which too can be canceled), it is here that we get yet another validation of our thesis from early 2012, namely that the Fed has killed all corporate CapEx-driven growth. Cap Goods orders declined -1.1%, from a sharply downward revised 0.4% (was 1.5%) in August and wildly missing expectations of a 1.0% increase: this was the third consecutive miss in a row in this series. As for the shipments: at -0.2%, sliding from a downward revised 1.1%, and also missing expectations, this was the 6th miss in the Shipments category in the past 7 months. So much for any hopes of a recovery.

But wait until we get the October print when the government was “shut down” for more than half the month: it is here that the real plunge in Corporate CapEx will arguably be felt and the chart below will look like it suddenly had a downward facing heart attack.

Summarizing the above: with such horrible news, it is impossible for the S&P to not hit a fresh record high today. After all: not only is the Noctaper guaranteed, but the scenario of an increase in QE is becoming ever more likely…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/p-vlxf0X6vw/story01.htm Tyler Durden

There are people in the world that go to work every day to end up stating the damn obvious. Oh! They get paid for doing that too. Heaven forbid that they should do that for free. They get paid for saying what we have all been shouting from the roof-tops for years and that has been complacently ignored, pooh-poohed, laughed at, lambasted and pulled apart. Well, now it’s our turn to do the same to the German Central Bank, the Bundesbank for stating the obvious in a report on Monday in which it has been admitted that the German housing market is ready to bust its bubble since housing is overvalued by 20%. Dankeschön Bundesbank!

What is worth celebrating is only that at last someone from a central bank has actually admitted what the rest of the world has been harping on about and griping over for years now. Do people that get appointed to central banks come from planets where they can’t see properly or where they at least see the world from that rose-colored spectacle point of view? Do they have some perception of the world that is entirely different from our own one? Up until now, it may well have been what they have been making us believe.

In a report published yesterday the Bundesbank states that house rises: “are difficult to justify based on fundamental factors”. We all saw that coming in a bis-repetita placent fashion. One housing bubble is never ever enough. It’s like a double shot of vermouth. It might hurt the next morning, but it’s a damn good feeling as it slips down the throat and then we forget and hot the bottle again when the headache has somewhat subsided. That’s what’s been happening for months now around the world in our economies; and the headache still hasn’t gone. Banks are still being injected with drip-fed cash propping them up from all sides in the hope (against hope) that the economy will be rescued and revamped.

• The bank went on to state that housing prices have increased in the entire country by an average of 8.25% over the past three years.
• But, that figure reveals in no way the reality of the growing bubble that is at last recognized by the German central bank.
• Urban areas have increased by sometimes up to 25%, while rural areas have remained relatively low, thus bringing down the overall increase in percentage terms.

According to some analysts, there’s yet again no need to worry and any alarm bells that are sounding are the pure fantasizing of alarmist plot theories of a growing bubble issue on the housing market. Germany isn’t in any danger according to some of an explosion since:

• Mortgage growth is limited
• The lending rates that are offered in Germany are usually fixed rather than variable.
• Loans have also stood at about 80% of the value of the properties being bought.

But, that won’t stop the bubble growing since there is a lack of available housing in German cities as well as in other major places in the world as migrationary workers and increases in population size outstrip the availability of space and building projects. In the short-term there will be a further increase in housing prices in these cities. Limited supply coupled with reduced interest rates will inevitable make demand greater than supply and prices will in back-to-basic economics increase. There should be the ‘housing bubble for dummies’ coming out in the very near future. But, even then, someone will turn around and say that they never saw it coming.

It’s not just Germany it’s all over the world from Shanghai to New York. In the UK two financial schemes set up by the government (Help to Buy and Funding for Lending) have already caused reminiscent memories of the US mortgage guarantee programs and a disguised subprime set-up. No matter. We shall just end up with the same bricks and mortar on our faces as the banks and the investors rake in the money and then end up getting propped up and injected with more greenbacks (still).

• The average price of a house in the UK is set to increase by 25% over the next five years
• The average house in London will cost £566, 000.
• That means a 43.5% increase in prices between now and 2018.
• That’s a record level.
• The number of mortgages granted in the UK has hit record levels recently that haven’t been seen for the past 5years.

There are those out there who are still saying that the word bubble is only premature and let’s not put the cart before the horse. Only trouble is: the horse went to the knacker’s yard long ago and there really won’t be any point in bolting the financial (un-)stable door when it all happens again.

The growing bubble will explode and what’s bad enough is that the countries we live in haven’t even got governments that have been able to admit and recognize the economically blatantly obvious situation that we have been preparing for now for the past five years. Even when they have admitted it, they turn round and just like the Bundesbank say that there is no ‘macroeconomic risk to financial stability’.

Here we go again for another round of financial roller-coaster strife.  But, that is stating the obvious too. So, no prizes there either!

hould we get rid of the rating agencies? Rate them yourself!

Originally posted: Blatant Housing-Bubble: Stating the Obvious

 

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Technical Analysis: Bear Expanding Triangle | Bull Expanding Triangle | Bull Falling Wedge | Bear Rising Wedge | High & Tight Flag

 

 

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/EnSJKcW1DPk/story01.htm Pivotfarm

As frequent readers will recall, one of our favorite series of posts describing the “Walking Dead” monetary zombie-infested continent that is Europe is the one showing the abysmal state Europe’s credit creation machinery, operated by none other than the Bank of Italy’s, Goldman’s ECB’s Mario Draghi, finds itself in. As a reminder, it was as recently as September when we found that “Mario Draghi’s Nightmare Gets Worse” because “European Loans Declined At Record Rate.” To our complete lack of surprise, when a few hours ago the ECB released the latest monetary and credit creation update for the month of September, it showed… no change. Or rather, while loans to the private sector are at all time record lows, that other metric which Draghi at least has some direct control over (since he obviously can’t control the amount of confidence in the system aside from threats of brute force), M3, just had its lowest pace of increase since January 2012.

But here’s the kicker: while the US at least has the Fed to step in and forcefully push credit into the private sector void as it has been doing every day since Lehman, in Europe, with the ECB’s balance sheet actively declining, the continent is well, on its own to fend against the monetary zombies horde shown below.

SocGen agrees:

The European Central Bank reported that money supply growth (M3) in the euro area decelerated further in September, dropping to an annual rate of 2.1% – the slowest pace of increase since January 2012 – well below the ECB’s 4.5% target. Looking at credit, the picture is once again one of fragmentation. While the French corporate sector proved rather resilient to credit crunch, the total amount of credit to corporates plunged by 4.9%yoy in Italy, 7% in Portugal, and an alarming 19.9% in Spain. Undoubtedly, this weakness in monetary and credit developments will add pressure on the ECB, which could decide to ease financial conditions further. But this will not be sufficient.

 

Our view is that a rate cut would require an additional weakening in either the growth or the inflation outlook.

The combination of currency in circulation and overnight deposits (M1) increased by only €6bn in September, after the average €38bn jumps recorded over the  July/August time span. On an annual basis, the growth of M1 continued to slow. Indeed, the closely-followed aggregate stood 6.6% above year-ago levels in September, after 6.8% in August and 7.1% in July.

 

On that matter, the ECB recently communicated on the fact that the solid increase in the M1 aggregate seen since the beginning of the year would ultimately foster a recovery in credit – and Investment – even though the overall money supply growth (M3) was decelerating.

 

Yet, it is not clear to us how a movement in overnight deposits would be such as to stimulate investment. What we rather believe is that the flow of credit remains negative, which suggests that the strong recovery in investment everyone expects is unlikely to happen for, at least, six to nine more months.

Not only is it not clear to SocGen, worst of all it is not clear to Mario Draghi, which is why his nightmares will only get worse and worse, as loan creation collapses further, as non-performing loans accumulate, and as Europe’s credit-money zombies finally escape their cages and start biting chunks of meat off of (Europe’s unemployed) people.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/uS-EygqJ6SU/story01.htm Tyler Durden

As frequent readers will recall, one of our favorite series of posts describing the “Walking Dead” monetary zombie-infested continent that is Europe is the one showing the abysmal state Europe’s credit creation machinery, operated by none other than the Bank of Italy’s, Goldman’s ECB’s Mario Draghi, finds itself in. As a reminder, it was as recently as September when we found that “Mario Draghi’s Nightmare Gets Worse” because “European Loans Declined At Record Rate.” To our complete lack of surprise, when a few hours ago the ECB released the latest monetary and credit creation update for the month of September, it showed… no change. Or rather, while loans to the private sector are at all time record lows, that other metric which Draghi at least has some direct control over (since he obviously can’t control the amount of confidence in the system aside from threats of brute force), M3, just had its lowest pace of increase since January 2012.

But here’s the kicker: while the US at least has the Fed to step in and forcefully push credit into the private sector void as it has been doing every day since Lehman, in Europe, with the ECB’s balance sheet actively declining, the continent is well, on its own to fend against the monetary zombies horde shown below.

SocGen agrees:

The European Central Bank reported that money supply growth (M3) in the euro area decelerated further in September, dropping to an annual rate of 2.1% – the slowest pace of increase since January 2012 – well below the ECB’s 4.5% target. Looking at credit, the picture is once again one of fragmentation. While the French corporate sector proved rather resilient to credit crunch, the total amount of credit to corporates plunged by 4.9%yoy in Italy, 7% in Portugal, and an alarming 19.9% in Spain. Undoubtedly, this weakness in monetary and credit developments will add pressure on the ECB, which could decide to ease financial conditions further. But this will not be sufficient.

 

Our view is that a rate cut would require an additional weakening in either the growth or the inflation outlook.

The combination of currency in circulation and overnight deposits (M1) increased by only €6bn in September, after the average €38bn jumps recorded over the  July/August time span. On an annual basis, the growth of M1 continued to slow. Indeed, the closely-followed aggregate stood 6.6% above year-ago levels in September, after 6.8% in August and 7.1% in July.

 

On that matter, the ECB recently communicated on the fact that the solid increase in the M1 aggregate seen since the beginning of the year would ultimately foster a recovery in credit – and Investment – even though the overall money supply growth (M3) was decelerating.

 

Yet, it is not clear to us how a movement in overnight deposits would be such as to stimulate investment. What we rather believe is that the flow of credit remains negative, which suggests that the strong recovery in investment everyone expects is unlikely to happen for, at least, six to nine more months.

Not only is it not clear to SocGen, worst of all it is not clear to Mario Draghi, which is why his nightmares will only get worse and worse, as loan creation collapses further, as non-performing loans accumulate, and as Europe’s credit-money zombies finally escape their cages and start biting chunks of meat off of (Europe’s unemployed) people.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/uS-EygqJ6SU/story01.htm Tyler Durden

Two days after Spain reported its first positive sequential GDP print (unclear just how adjusted the definition of GDP was to get to this watershed moment after 9 quarters of declines) and a day after it unemployment supposedly dropped more than expected (what was left unsaid is that the Spanish working age population dropped 85,200 in Q3 and -279,000 YoY and that of the 39,500 “jump” in Q3 employed people, virtually all were self-employed or temps while employees on permanent contracts were down by 146,300), the 5 second attention span investing herd is now convinced the housing market in Spain has dropped. This was “formalized” after billionaire Bill Gates invested $155 million, also known as pocket change, in Spain’s infrastructure group Fomento de Construcciones & Contratas. Surely, if anyone knows how to time housing market turns it is the guy who brought us MS-DOS 3.1.

Unfortunately, the mythical housing bottom may have been just that – mythical – following news that Spain’s bad bank (oh yeah – lest we forget, Spain has a wonderful rug under which it can hide all insolvent bank NPLs)  failed to attract high enough bids in its first sale of commercial real estate and will cut the size of the portfolio being offered to make it easier to sell, according to Bloomberg which cited three people familiar with the matter.

Bloomberg reports why rumors of the Spanish housing market’s resurrection, may have been exagerated:

The bad bank, known as Sareb, received more than 30 offers for the portfolio that were lower than it expected, said one of the people, who declined to be named because the information isn’t public. It will reduce the number of buildings in the package known as Corona to four from seven, the person said. A spokeswoman for Madrid-based Sareb declined to comment.

 

Spain created Sareb last year to absorb 50 billion euros ($69 billion) of real-estate assets from lenders including Bankia group that took aid as part of the nation’s European bailout. Its failure to attract high enough bids may undermine growing optimism in Spain as the stock market has surged 21 percent this year and foreign investors including Microsoft Corp. founder Bill Gates buy into Spanish companies.

 

In August Sareb agreed to sell a majority stake in a group of almost 1,000 homes known as Project Bull to private-equity firm H.I.G. Capital LLC. It also sold loans advanced to Inmobiliaria Colonial SA with a nominal value of 245 million euros to Burlington Loan Management Ltd.

Also known as two greatest fools. So far, all alone.

On the bright side, this only means that the Fed will need to send out some more memos to banks (and hedge funds) warning about lax lending practices, which will remain unread until the next crash, in the meantime the same banks, and hedge funds, will scramble to pick up whatever carry trades are left in the global fungible  market – if it means ultimately rushing into whatever dregs the Sareb has to sell to the greater fool, so be it.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Gxwqucf9DHs/story01.htm Tyler Durden