Category: zerohedge

Japan growth cut in half, Europe growth cut by more than half, but none of that matters: today it will be all about the coronation of QEeen Yellen, who testifies before the Senate Banking Committee at 10am. Not even Japanese finance minister Aso’s return to outright currency intervention warnings (in addition to the BOJ’s QE monetary base dilution), when he said that Japan must always be ready to send signal to markets to curb excessive and one sided FX moves and it is important that Japan has intervention as FX policy option, which sent the USDJPY back up to 100 for the first time since September 11 made much of an impact on futures trading which after surging early in the session following the release of Yellen’s prepared remarks, have now “tapered” virtually all gains. Certainly, the follow up from Europe doing the same and also warning it too may engage in QE, has been lost. Which is odd considering the entire developed world is now on the verge of engaging in the most furious open monetization of virtually everything in history.

Key events on the US docket

• US: Initial jobless claims, cons 330k (8:30)
• US: Yellen testifies to Senate banking committee (10:00)

Market Re-Cap

Stocks traded higher in Europe, after the positive sentiment which saw the Nikkei 225 index finish up over 2% carried over into the European trading session. The move higher by the Nikkei 225 index, which moved into bull market territory was itself driven by a weaker JPY after Japanese finance minister said that it is important that Japan has intervention as FX policy option. As a result, broad based JPY weakness saw the spot rate move back above 100.00 level for the first time since early September, which in turn erased DNT barrier level and prompted profit taking as delta hedge positions were unwound. In spite of the risk on sentiment, dovish comments by Fed’s Yellen who said that the economy and jobs are performing far short of potential ensured that Bunds and USTs also traded higher. Looking elsewhere, GBP underperformed EUR this morning, after the ONS said that UK retail sales volumes fell 0.7% in October, with mild weather affecting sales of winter clothing. Going forward, market participants will get to digest the release of the weekly jobs report from the US and the weekly DoE data. Also, the US Treasury will auction off USD 16bln in 30y Bonds.

Overnight news bulleting from Bloomberg and RanSquawk:

• Japanese Finance Minister Aso said Japan must always be ready to send signal to markets to curb excessive and one sided FX moves and it is important that Japan has intervention as FX policy option. The Nikkei 225 closed up 2.12% at 14876.41, after rallying in the session to enter into bull territory amid a weaker JPY.
• Fed’s Yellen says economy and jobs performing far short of potential. Yellen said unemployment is too high, inflation short of 2% goal, and Fed has made significant progress towards goals but has more work to do.
• UK Retail Sales Ex Auto (Oct) M/M -0.6% vs. Exp. -0.1% (Prev. 0.7%, Rev. to 0.8%) – According to ONS, declining motor fuels sales led to fall in sales in October
• Treasuries steady before week’s refunding auctions conclude with $16b 30Y, Yellen testimony before Senate Banking Committee today.
• Yellen, in prepared remarks released yesterday, signaled she will continue continue with stimulus until she sees improvement in the economy.
• 30Y notes to be sold today yield 3.805% in WI trading; drew 3.758% at October auction and 3.820% in Sept., which was highest since August 2011
• 10Ys sold yesterday stopped at 2.750%, about 0.4bp below WI yield at 1pm bidding deadline; first 10Y refunding to stop through since May 2012, according to Stone & McCarthy
• The euro area’s recovery came close to a halt in the 3Q as German growth slowed, France’s economy unexpectedly shrank and Italy extended its record-long recession
• The Obama administration yesterday indicated it was willing to consider Democratic legislation to halt some of the hundreds of thousands of insurance cancellations that have raised alarm among voters and lawmakers
• Only 26,794 sign-ups for private plans were made through the federal marketplace since its Oct. 1 launch; figures reflect people who have selected a plan without necessarily paying their first premium, the final step in enrollment. The administration had projected 495,000 enrollees
• U.K. retail sales unexpectedly fell in October as consumers reduced spending on household appliances, clothing and automotive fuel
• Bruce Berkowitz’s Fairholme Capital Management LLC is seeking to buy two businesses that insure MBS from Fannie Mae and Freddie Mac and support them with $52b  in equity
• Sovereign yields lower, EU peripheral spreads tighten. Asian and European stocks, U.S. equity-index futures higher. WTI crude and copper lower; gold lower

 

Asian Headlines

Japanese Finance Minister Aso said Japan must always be ready to send signal to markets to curb excessive and one sided FX moves and it is important that Japan has intervention as FX policy option.

Japanese GDP Annualized SA (Q3 P) Q/Q 1.9% vs. Exp. 1.7% (Prev. 3.8%); GDP SA (Q3 P) Q/Q 0.5% vs. Exp. 0.4% (Prev. 0.9%).

EU & UK Headlines

European GDP SA (Q3 A) Q/Q 0.1% vs Exp. 0.1% (Prev. 0.3%)
German GDP SA (Q3 P) Q/Q 0.3% vs. Exp. 0.3% (Prev. 0.7%)
French GDP (Q3 P) Q/Q -0.1% vs. Exp. 0.0% (Prev. 0.5%)
Italian GDP WDA (Q3 P) Q/Q -0.1% vs Exp. -0.1% (Prev. -0.3%)
Dutch GDP (Q3 P) Q/Q 0.1% vs Exp. 0.1% (Prev. -0.1%, Rev. 0.0%)
UK Retail Sales Ex Auto (Oct) M/M -0.6% vs. Exp. -0.1% (Prev. 0.7%, Rev. to 0.8%) – According to ONS, declining motor fuels sales led to fall in sales in October.
BoE’s Mark Carney “would be prepared to raise interest rates before an election if this was necessary”. While BoE’s Fisher said timing of rate rise is very uncertain; BoE wont raise rates anytime soon.

US Headlines

Fed’s Yellen says economy and jobs performing far short of potential. Yellen said unemployment is too high, inflation short of 2% goal, and Fed has made significant progress towards goals but has more work to do. These comments from Yellen came out earlier than expected as she is testifying to the Senate Banking Committee today.

Fed’s Bernanke said Fed missing on it’s jobs and inflation mandates adding that Fed credibility on inflation ‘very strong’. Bernanke said sooner rather than later US employment rate will be back in 5-6% range and Inflation expectations have been quite stable around 2%. He added Fed will be able to normalize monetary policy once economy has been restored.

Equities

Stocks in Europe failed to maintain the momentum which was observed at the open and came off the best levels as market participants digested comments from Fed’s Yellen and also Japanese Finance Minister Aso, which led to broad based JPY weakness overnight but in turn saw the USD index advance 0.5%. Of note, Spanish IBEX 35 and the FTSE MIB underperformed, where share placement of CaixaBank weighed on the Spanish index and less than impressive earnings from Tod’s in Italy saw shares slide over 7%.

Cisco shares are seen down 11% ahead of the cash open after the company reported Q1 Adj. EPS USD 0.53 vs. Exp. USD 0.51 and also warned its revenues could fall as much as 10% in the current quarter.

FX

USD/JPY trended higher throughout the session, erasing touted 100.00 DNT option barrier level in the process after Japanese Finance Minister Aso said it is important that Japan has intervention as FX policy option. He added that Japan must always be ready to send signal to markets to curb excessive and one sided FX moves. As a result, USD ind
ex advanced almost 0.5% and in turn weighed on both EUR/USD and GBP/USD. The release of weaker than expected retail sales report from the UK briefly resulted in GBP under performing EUR, however the fact that the BoE is perceived to be in a more hawkish mode than the ECB meant that EUR/GBP resumed the downward trend.

Commodities

The IEA said that demand for oil products is on the verge of a seasonal increase and refineries should steeply raise the amount of oil they process in November and December.

An Iraqi oil official says there has been no reduction in oil production or exports from violence at Souther Rumaila Oilfield.

China’s Oct crude oil output up 0.24% Y/Y at 18.07mln tonnes. Further from China, the nation is to cut fuel prices by less than 2%.

China set to cut gasoline price by CNY 160/t from tomorrow.

US API Crude Oil Inventories (Nov 8) W/W 599k vs. Prev. 871k
– Cushing Crude Inventory (Nov 8) W/W 1700k vs. Prev. 999k
– Gasoline Inventories (Nov 8) W/W 1700k vs. Prev. -4300k
– Distillate Inventory (Nov 8) W/W 606k vs. Prev. -27

Israeli PM Netanyahu yesterday warned that a ‘bad deal’ with Iran on its nuclear programme could lead to war and his aides challenged US assertions to have offered Tehran only ‘modest’ relief from sanctions.

China was the world’s top gold consumer in the third quarter, extending a demand gap against India, which is usually the No. 1 consumer of the precious metal, World Gold Council data showed Thursday. Indian demand was undermined by a slide in the rupee’s value and import curbs, which pushed domestic prices to near-record levels.

SocGen’s views on the key macro catalysts:

Fed chair nominee Janet Yellen will take centre stage today, testifying to the US Senate banking committee. Backed by strong support from Senate Democrats, her confirmation for the top post is thought to be a foregone conclusion though she is likely to grilled by certain Republicans. So what is the fuss all about? Republicans have been strong critics of the bond buying stimulus programme and so they will scrutinise Ms Yellen about her take on the programme and the path to stimulus exit. It is doubtful however that she will provide clues on when tapering will start and may instead present her thoughts on the labour market and threshold conditionality for raising rates. Her plans to improve transparency and communication will also be a source of scrutiny. Will Yellen inspire participants to further short the Treasury market (higher yields) and add to long USD positions?

In the eurozone, the advance GDP estimate for France shows that the economy contracted by 0.1% q/q in Q3. The German economy grew by 0.3%, a touch slower than the strong 0.7% q/q increase in Q2. We forecast Italy to report a 0.6% qoq contraction and consequently the eurozone average to come in flat q/q. A negative surprise will add to speculation of further policy easing in the New Year even if inflation risks are now thought to be balanced by the ECB after last week’s 25bp rate cut. Weak data and the fact that the ECB chief economist has openly put “asset purchases” on the table as a policy tool supports the widening in US/EU swap spreads, and our outlook for lower EUR/USD.

The pound strengthened but cable gains were capped yesterday at 1.6000. UK 10y swaps edged higher after the BoE quarterly inflation report upgraded the outlook for GDP growth for this and next year to 1.6% and 2.8% (from the previous 1.4% and 2.5%) respectively, and brought forward its forecast of unemployment reaching the 7% threshold by 18 months to Q3 2015 from late 2016. The BoE emphasis on a market rate based set of projections for unemployment implies a 25bp rate hike by Q2/Q3 2015. The press is rife this morning with talk of a first hike earlier than that (late 2014) but we see no move before H2 2015, though we forecast inflation rising to around 3.5% within the next 2 years.

Within emerging markets RBI Governor Raghuram Rajan tried to calm nerves after the recent INR depreciation through an emergency press conference. The aim was to allay market fears of renewed stress on the rupee. Rajan reiterated that the current account shortfall is improving and is expected to fall to less than 3% of GDP this fiscal year. Today the ball will be back in the court of the USD with EM investors bracing for fresh turmoil.

 

DB’s Jim Reid concludes the overnight recap:

The initial chatter, second guessing and eventual release of Yellen’s confirmation testimony saw the S&P 500 add more than 1.2% or 21 points from the early lows as equities powered through to the close. The S&P 500 managed to close 0.8% higher as cyclical sectors such as consumer goods (+1.2%), tech (+1.1%) and banks (+1%) led the list of outperformers yesterday. Retail posted a 1.3% gain after Macy’s Inc provided an upbeat holiday sales outlook. 10yr UST yields firmed 7bp yesterday, including a sharp 5-6bp rally in the final minutes of trading, capping a turnaround for fixed income across most DM and EM markets. Gold (+1.1%) enjoyed a much needed rally after fears of a December tapering led to a 6% drop in the precious metal over the past two weeks.

Looking at markets this morning, S&P 500 futures are up a further 0.15% and Asian equities are up around 1-2% across most major indices. The dovish sentiment has been bolstered by Bernanke who commented at a townhall event that the Fed is missing on its jobs and inflation mandates. And while we’re on the topic of central bank stimulus, the ECB’s Praet was on the newswires again overnight. He again suggested that the ECB can go into negative deposit rates and take a number of measures, including presumably outright purchases as he mentioned yesterday. EURUSD is down 0.10% this morning. Praet also said that the disagreement among council members was on the timing of the recent rate cuts. So within the space of the last 12 hours we’ve had three senior central bank officials (including arguably the two most powerful in the monetary policy world) make dovish statements to the market.

Yellen’s testimony has provided some respite for EM Asian names such as Indonesia. Indonesian stocks are up 1.6% as we type, erasing much of yesterday’s losses and the lower UST yield is prompting better buying across in the Indonesian bond curve. 5yr Indonesian CDS is quoted around 8-9bp tighter on the day. Chinese stocks opened up weaker as the plenum disappointment continues to cascade through A-shares, and they are still lagging somewhat this morning (Shanghai Comp +0.2%). In Japan, Q3 GDP growth was reported at 1.9% QoQ which is better than the 1.7% rate of growth expected but is half of last quarter’s 3.8%. Some analysts have noted a slowdown in external export demand. Japanese finance minster Aso commented that it is important that Japan has intervention as a FX policy option. The Nikkei is up by a region leading +2.5%. The USD is steady against major currencies amid relatively light flows after cheapening yesterday, and gold is up a further 0.23%. Coming back to the Fed, the WSJ’s Hilsenrath wrote overnight that in addition to weighing up a lowering of the central bank’s employment threshold to 6% from 6.5%, other potential changes to forward guidance are being floated. One idea is that the Fed could signal that it won’t hike rates if inflation falls below a threshold like 1.5%. Another idea being floated is to somehow strengthen the Fed’s commitment that rate hikes would come slowly even after the 6.5% employment threshold is crossed.

Looking at the day ahead, all eyes will on the Q&A session of Yellen’s testimony before the Senate Banking Committee. The hearing starts at 3pm London time. We also get an important data point in the form of Q3 GDP numbers for the euro area (consensus is +0.1% QoQ vs 0.3% last quarter) as well as the individual growth numbers for Italy, France and Germany. UK retail sales data are also due today. In the U
S, jobless claims and the September trade balance are the main data releases.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/jXo5zC8J2nM/story01.htm Tyler Durden

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

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/tYzad_lULyU/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

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

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

Just in case anyone thought the entire world’s wasn’t going to the tenth, centrally-planned circle of hell in a handbasket, here comes the head of the Indian FBI to disabuse everyone out of such childish sentiments, thanks to a comment that not even the PR brain trust behind #AskJPM could have conceived. To wit: “India’s top police official was under fire Wednesday for saying, “If you can’t prevent rape, you might as well enjoy it.” And scene.

From AP:

Central Bureau of Investigation chief Ranjit Sinha made the comment Tuesday during a conference about illegal sports betting and the need to legalize gambling. The CBI, the country’s premier investigative agency, is India’s equivalent of the FBI.

 

Sinha said that if the state could not stop gambling it could at least make some revenue by legalizing it. His remarks about rape were in this context.

 

The remarks have caused outrage across India, which in the past year has been roiled by widespread protests following the fatal gang rape of a 23-year-old woman on a bus in New Delhi.

 

Sinha said Wednesday that his comments were taken out of context and were misinterpreted, but angry activists called for his resignation.

 

The New Delhi attack on the young woman last December caused nationwide outrage and forced the government to change rape laws and create fast-track courts for rape cases.

And now back to your perfectly normal, regularly scheduled all night “market” meltup.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/qXVhh2SgKDw/story01.htm Tyler Durden