Category: zerohedge

If ever there was a symptom of the instant gratification meme of the new normal (why wait when you can have it all now?), it is ‘vice’. That is why Southbay Research’s Vice Index (composed of prices paid, volume, and frequency of sales in liquor sales, gambling, and prostitution) is so worrisome, as WSJ reports, “it’s signalling that consumer spending growth is about to drop and stay subdued for a few months.” Southbay’s Zatlin notes that measuring this kind of discretionary spending provides a window into the true state of the economy – which fits with recent macro data on retail sales (and forecasts for the holiday season as hope of the ‘second-half’ recovery fade quietly into next year.

 

 

Via WSJ,

Looks like it’s not going to be such a hot holiday season for liquor companies, casinos, and prostitutes – at least according to the latest reading of the “Vice Index.”

 

The index – a concoction from SouthBay Research’s Andrew Zatlin measures actual spending levels – yes, on vices – and uses the numbers to show where the economy is headed.

 

…

 

“It’s signalling that consumer spending growth is about to drop and stay subdued for a few months,” he wrote in a note to clients.

 

The index measures spending on things like prostitution, liquor sales, and gambling; it measures prices paid, the volume and frequency of sales (Mr. Zatlin doesn’t disclose exactly how he tracks these). Measuring this kind of discretionary spending, he says, provides a window into the true state of the economy.

 

…

 

The vice index seems to jibe with recent government data. The September retail sales report from the Census Bureau showed spending had slipped from August, and was up about 3% from a year ago. Along with recent reports on business spending, it all points to a pretty languid economy, and certainly not the “second-half recovery” that had been bandied about back in the spring.

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

Venezuelan President Maduro is on the wires confirming that all is well in the nation – nothing to see here…

• *VENEZUELA’S MADURO ANNOUNCES ‘NEW PHASE’ TO STABALIZE ECONOMY
• *VENEZUELA’S MADURO SAYS HE’LL MAKE ECONOMIC ANNOUNCEMENTS
• *BLACK MARKET FX RATE IS HARMING VENEZUELA ECONOMY: MADURO
• *VENEZUELA TO START OPERATION AGAINST SPECULATION, MADURO SAYS

Yep, so after a 475% rise in the Caracas Stock Index YTD, he sees ‘speculation’ and will announce some ‘economic fixes’… this should be good…

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/5NiW-j2iW2k/story01.htm Tyler Durden

Venezuelan President Maduro is on the wires confirming that all is well in the nation – nothing to see here…

• *VENEZUELA’S MADURO ANNOUNCES ‘NEW PHASE’ TO STABALIZE ECONOMY
• *VENEZUELA’S MADURO SAYS HE’LL MAKE ECONOMIC ANNOUNCEMENTS
• *BLACK MARKET FX RATE IS HARMING VENEZUELA ECONOMY: MADURO
• *VENEZUELA TO START OPERATION AGAINST SPECULATION, MADURO SAYS

Yep, so after a 475% rise in the Caracas Stock Index YTD, he sees ‘speculation’ and will announce some ‘economic fixes’… this should be good…

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/5NiW-j2iW2k/story01.htm Tyler Durden

Over the past year there has been some confusion about whether Ben Bernanke has managed to not only completely break the stock market (which, if one harkens back to hallowed antiquity used to discount good or bad news in the future, and “trade” accordingly), but also invert it fully. The chart below from Guggenheim will once and for all put any such confusion to rest.

As Guggenheim’s Scott Minderd points out “The 52-week correlation between S&P 500 returns and the change in the Citigroup Economic Surprise Index has plunged from 0.45 to -0.13 over the past 12 months. A negative correlation indicates that weak U.S. economic data tends to push equity prices higher, while strong economic data tends to send them lower.”

What’s the explanation?

In a similar manner to 2005, when the Federal Reserve raised interest rates by 200 basis points in a year, the current plunge in this correlation indicates that the expectation of continued monetary accommodation has trumped economic fundamentals to become the main factor determining the near-term outlook for U.S. equities.

In short: a broken, inverted market, driven purely and entirely by hopes of an even bigger liquidity bubble, and even more greater fools to offload to.

And that, in a nutshell, is your “market.”

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

With only 3 of 70 economists surveyed by Bloomberg expecting a rate cut at tomorrow's ECB press conference, Credit Agricole's Frederik Ducorzet suggests seven signals to watch for from Draghi that could signal ECB easing ahead. Crucially, as BofAML puts it, "further euro appreciation is a problem, particularly for the periphery," and with empirical Phillips curves in hand, there is little room for further compensation via wage reduction. In other words, if Draghi stands pat (or doesn't offer up some sacrificial forward guidance hint of easing being likely), the drumbeat of social unrest in the periphery will grow ever louder.

 

These 7 signals should be watched for carefully, according to Credit Agricole's Frederik Ducrozet, as hints that further ECB easing is on its way…

For ECB refinancing rate cut to be delivered in December, following conditions need to be met:

1. Explicit hint about rate cut discussion if asked whether decision was unanimous

 

2. Signal may be conditional on Dec. staff forecasts

 

3. Hint toward likely shift in balance of risks to price stability/reference to FX and oil prices on inflation

 

4. Keeping deposit rate at zero

Draghi may become more explicit on ECB’s liquidity plans:

5. Explicit reference to LTRO, reduction in reserve requirements or suspension of SMP sterilization may have greatest market impact

 

6. Market may be disappointed if ECB says it remains attentive to money market conditions without more details

 

7. Easy solution would be extension of fixed-rate full allotment regime in 2015

 

Which is crucial, for a s BofAML notes, while the euro is not overvalued, it is close to the upper end of its equilibrium range. Therefore, the euro area can afford a stronger euro, but not a much stronger euro. However, their evidence suggests a much lower euro threshold for the periphery, with little room to compensate with wage reductions.

 

 

 

Our estimates suggest that a further euro appreciation by about 3% in real effective terms would bring the currency to the early stages of an overvalued territory.

Moreover, the strength of the euro this year has already started offsetting the periphery's competitiveness gains, which the region achieved during a painful adjustment in recent years.

The chart above shows equilibrium estimates for the euro area and selective member countries, using the IMF's CGER methodology, which combines a number of equilibrium measures. According to our estimates, the euro is currently overvalued by about 7%.

However, our estimates also suggest that the euro could soon become overvalued if it continues appreciating. Moreover, the euro is already overvalued (beyond the ±10% range) from the point of view of Greece, Ireland and Spain. And PPP estimates suggest that the euro is overvalued by 20% against the USD.

The periphery cannot afford a much stronger euro

The strength of the euro is partly offsetting the competitiveness improvements that the periphery has achieved in recent years. Our estimates suggest that the euro is already too strong for Greece, Ireland and Spain, but within the equilibrium range for Italy and Portugal.

The Phillips Curve for euro-area economies has flattened substantially, which could make rebalancing more difficult, as countries require much higher unemployment (or output gaps) to achieve the same price adjustments. As wages are less reactive than before, peripheral countries need persistently high levels of unemployment to achieve rebalancing through wages.

 

 

 

In our view, there is little room to keep pushing through that route in countries with overleveraged households.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/qY0wxb1_Dcw/story01.htm Tyler Durden

With only 3 of 70 economists surveyed by Bloomberg expecting a rate cut at tomorrow's ECB press conference, Credit Agricole's Frederik Ducorzet suggests seven signals to watch for from Draghi that could signal ECB easing ahead. Crucially, as BofAML puts it, "further euro appreciation is a problem, particularly for the periphery," and with empirical Phillips curves in hand, there is little room for further compensation via wage reduction. In other words, if Draghi stands pat (or doesn't offer up some sacrificial forward guidance hint of easing being likely), the drumbeat of social unrest in the periphery will grow ever louder.

 

These 7 signals should be watched for carefully, according to Credit Agricole's Frederik Ducrozet, as hints that further ECB easing is on its way…

For ECB refinancing rate cut to be delivered in December, following conditions need to be met:

1. Explicit hint about rate cut discussion if asked whether decision was unanimous

 

2. Signal may be conditional on Dec. staff forecasts

 

3. Hint toward likely shift in balance of risks to price stability/reference to FX and oil prices on inflation

 

4. Keeping deposit rate at zero

Draghi may become more explicit on ECB’s liquidity plans:

5. Explicit reference to LTRO, reduction in reserve requirements or suspension of SMP sterilization may have greatest market impact

 

6. Market may be disappointed if ECB says it remains attentive to money market conditions without more details

 

7. Easy solution would be extension of fixed-rate full allotment regime in 2015

 

Which is crucial, for a s BofAML notes, while the euro is not overvalued, it is close to the upper end of its equilibrium range. Therefore, the euro area can afford a stronger euro, but not a much stronger euro. However, their evidence suggests a much lower euro threshold for the periphery, with little room to compensate with wage reductions.

 

 

 

Our estimates suggest that a further euro appreciation by about 3% in real effective terms would bring the currency to the early stages of an overvalued territory.

Moreover, the strength of the euro this year has already started offsetting the periphery's competitiveness gains, which the region achieved during a painful adjustment in recent years.

The chart above shows equilibrium estimates for the euro area and selective member countries, using the IMF's CGER methodology, which combines a number of equilibrium measures. According to our estimates, the euro is currently overvalued by about 7%.

However, our estimates also suggest that the euro could soon become overvalued if it continues appreciating. Moreover, the euro is already overvalued (beyond the ±10% range) from the point of view of Greece, Ireland and Spain. And PPP estimates suggest that the euro is overvalued by 20% against the USD.

The periphery cannot afford a much stronger euro

The strength of the euro is partly offsetting the competitiveness improvements that the periphery has achieved in recent years. Our estimates suggest that the euro is already too strong for Greece, Ireland and Spain, but within the equilibrium range for Italy and Portugal.

The Phillips Curve for euro-area economies has flattened substantially, which could make rebalancing more difficult, as countries require much higher unemployment (or output gaps) to achieve the same price adjustments. As wages are less reactive than before, peripheral countries need persistently high levels of unemployment to achieve rebalancing through wages.

 

 

 

In our view, there is little room to keep pushing through that route in countries with overleveraged households.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/qY0wxb1_Dcw/story01.htm Tyler Durden

Crash Course creator Chris Martenson explains why it’s easier to start than to stop quantitative easing: “A lot of what we hear is the Fed’s exit strategy … what most people don’t know is that this thing doesn’t work in reverse very well at all.” In this excellent interview with RT, Martenson explains why Bernanke & Co. found it relatively simple to start their money printing, but why they will have a hell of a time getting off the runaway QE train.

This interview was conducted at the Casey Research Summit held in October (more here).

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/HRvV4PwZDK4/story01.htm Tyler Durden

The Big Boys Manipulate EVERY Market … While Would Obamacare Be Any Different?

The following exchanges are being widely manipulated by big banks, hedge funds and other players:

• Currency

• Interest rates

• Oil (and see this)

• Energy

• Gold and silver

• Derivatives

• Carbon (i.e. “cap and trade”)

• Virtually all other commodities

• Basically all exchanges

Why do you think Obamacare will be different?

The leverage which huge pots of cash, insider information and high-frequency trading give to the big banks and other big players makes exchanges an easy target.

The big boys play dirty.

And the Obama administration is allegedly exempting the Obamacare exchanges from anti-fraud standards

As the New York Times notes:

Billions could flow from Washington to Wall Street, indeed.

Postscript:  True progressives such as Eric Zeusse and Yves Smith have long warned that Obamacare is nothing but a giant giveaway to big health insurance companies.

But it is also a new opportunity for Wall Street to extract huge sums by manipulating a new market.

Bonus: 

• 10 Years Before Edward Snowden, High-Level NSA Whistleblower Warned Congress About Mass Surveillance by the NSA Against Americans

• Majority of Americans Oppose Spying On Foreign Leaders

• Japan Is Being Destroyed By Criminal Corporate Cronyism (Like the Rest of the World)

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/4kNPAP72Tbs/story01.htm George Washington

Applications for mortgages for the purchase of a home plunged at nearly the fastest pace in 9 months this week, dropping to their lowest since the Christmas week 2012 – and lowest since February 2012. Now down over 20% from their May highs, the plunge is a problem – since as BofA’s CEO noted earlier:

• *MOYNIHAN SAYS HOME PURCHASES, NOT REFI, BOOST THE ECONOMY

So just another indicator that all is not well in the ‘economy’.

 

What is perhaps most worrisome is that this is the lowest level of mortgage purchase activity for this time of year in a decade.

 

Chart: Bloomberg

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

Wondering who you will flip your IPO allocation to? Meet 56-year-old admin assistant, Deborah Watkins… “I messed up by not buying any Facebook, so I want to get some Twitter.”

 

AS WSJ reports,

On her Tuesday lunch break, Deborah Watkins walked through gray drizzle from her office to the TD Ameritrade… The receptionist just inside the front door told her trading at the so-called IPO price – available to large investors and certain brokerage customers before the shares begin trading publicly – wasn’t available to her.

 

Ms. Watkins said she’d buy the shares once they begin trading, expected Thursday.

 

“They think little money is no money,” she said of Ameritrade

 

…

 

Ms. Watkins said she plans to buy about 50 shares… She said she’s not worried about price increases; she just wants to stick to her purchasing plan and buy the shares immediately, though she hasn’t ruled out selling them quickly if there’s a sharp bump.

 

…

 

Ms. Watkins said she’s interested in the hyped stock because of her economics-major nephew and because she knows what happened with Apple Inc. and Facebook Inc. prices and doesn’t want to miss out,

 

…

“I’m just buying because everybody’s talking about Twitter,” she said. “I’m just gonna take a chance.”

 

And there it is… the new normal  – immediate gratification, take a chance, over-hyped investment opportunities… What could possibly go wrong?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/2Arpt7zF-KU/story01.htm Tyler Durden