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Just two weeks ago we discussed the dismal smog that had closed roads and ariports around Beijing during the recent holiday. The situation has got worse, far worse, since then. As Reuters reports (and the stunning images below show), choking smog all but shut down one of northeastern China’s largest cities on Monday, forcing schools to suspend classes, snarling traffic and closing the airport in the country’s first major air pollution crisis of the winter. An index measuring PM2.5, or particulate matter with a diameter of 2.5 micrometers (PM2.5), reached a reading of 1,000 in some parts of Harbin, the gritty capital of northeastern Heilongjiang province and home to some 11 million people. A level above 300 is considered hazardous! China’s leadership is concerned about air quality because it is a constant source of public anger.

 

Via Reuters,

Users of China’s popular Twitter-like Sina Weibo microblogging site reacted with both anger and bitter sarcasm over Harbin’s air pollution.

 

“After years of effort, the wise and hard-working people of Harbin have finally managed to skip both the middle-class society and the communist society stages, and have now entered a fairyland society!” wrote one user.

 

Other parts of northeastern China also experienced severe smog, including Tangshan, two hours east of Beijing, and Changchun, the capital of Jilin province which borders Heilongjiang.

Via EuroNews,

The World Health Organisation recommends daily levels of particulate matter with a diameter of 2.5 micrometers to be no more than twenty. Anything above 300 is considered dangerous. Levels around 1,000 were recorded in some parts of Harbin. All schools were shut and the airport was closed.

 

Harbin is home to some 11 million people and lies in the northeastern Heilongjiang province of China. Other parts of northeastern China also experienced severe smog.

 

Visibility has reduced to only around 10 metres causing traffic jams.

 

China’s leadership is concerned about air quality because it is a constant source of public anger.

 

The smog is expected to continue for the next 24 hours.

 

This is the freeway… (spot the cars)

 

Via CTV,

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/b8Yy6TEmqbk/story01.htm Tyler Durden

Thanks to a considerable downward revision of the magical NAR numbers, the existing home sales MoM ‘beat’ expectations for September but the two-month average shows the largest drop in sales since June 2012. From the “cylical peak” in July, of course extrapolated by any and all apologists as confirming the voyage to the moon, it seems, just as we noted, that “affordability” – long shunned by the bulls (because, like you know, interest rates are still low compare to the 1970s…) – has collapsed to five-year lows; worse, in fact, than we expected. With 33% of all transactions cash, it is little surprise that affordability has fallen to a five-year low as home price increases easily outpaced income growth.

 

 

 

From the NAR statement:

Affordability has fallen to a five-year low as home price increases easily outpaced income growth

 

…

 

Expected rising mortgage interest rates will further lower affordability in upcoming months.  Next month we may see some delays associated with the government shutdown.”

Just as we warned in June:

It also means that a buyer who could previously afford a $506K house with a $2,000 monthly budget at an interest rate of 2.5% will be able to afford only $316K if and when the average 30 Year fixed hits 6.5%: a 40% drop in affordability based on just a 4% increase in interest rates!

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/PRWRvmNRyl8/story01.htm Tyler Durden

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

What we can expect to happen generally happens, as the causal chain cannot be disrupted by wishful thinking.

If I go to Las Vegas and gamble with abandon, what do I expect to happen? If I wander alone through a tough part of town waving my iPhone around, what do I expect to happen? If I insist on hiking up a muddy rain forest trail in street clothes in the pouring rain, what do I expect to happen?

We all know what is likely to happen: In Las Vegas, we will lose our stake; in the tough part of town, our iPhone will be stolen, and on the tropical trail, we will get soaking wet.

These consequences are easily predictable. What we can expect to happen generally happens, as the causal chain cannot be disrupted by wishful thinking.

Yet when we re-elect the same politicos who have failed miserably for years, we somehow expect they will magically succeed in providing leadership the next time around. When we eat visibly unhealthy packaged junk food that is engineered to trigger our reward centers with massive doses of fat, salt and sugar, we somehow expect there will be no consequences of eating this "food."

We sit in front of digital devices all day and eliminate physical fitness from our schools, yet we expect there will be no consequences from this inactivity.

We create trillions of dollars from thin air and borrow trillions of additional dollars into existence, yet we expect there will be no consequences from this unprecedented monetary and credit expansion.

We borrow a third of all government expenditures, yet we expect there will be no consequences from this monumental dependence on public debt to maintain the Status Quo.

We buy the cheapest quality goods, yet complain about the poor quality.

We pursue a plan of borrowing our way to prosperity, yet we are flummoxed that prosperity is elusive.

We push everyone with any assets into risky asset bubbles with zero-interest rates, yet we are surprised when asset bubbles pop.

What do you expect to happen? The causal chain cannot be disrupted by wishful thinking. Bubbles will pop, and increasingly leveraged, fragile systems will crash. Hoping causal consequences will magically vanish is a strategy doomed to catastrophe.
 

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

That the US is set to have its third consecutive quarter with revenue declines (followed by the fourth in a few months, when all the misses will be blamed on – what else – the Tea Party), is by now well-known and greeted by stocks which have given up on any fundamentals (that this happens even as “one-time” restructuring charges which actually recur every quarter, such as JPM’s most recent $9 billion in fees, are added back to non-GAAP EPS, and make EPS increase is just as well-known). But it is not so much the US we focus on in this blurb, but Europe, where for some mindboggling reason the consensus has rapidly shifted in recent months, toward a prevailing sentiment of recovery. So here is a quick datapoint from Deutsche putting the European “recovery” in context.

You read that right: of 17 companies on the DJStoxx600 reporting so far in Q3, 13 have missed.

Welcome to the [European] recovery, indeed.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/4XhyU0vUINM/story01.htm Tyler Durden

That the US is set to have its third consecutive quarter with revenue declines (followed by the fourth in a few months, when all the misses will be blamed on – what else – the Tea Party), is by now well-known and greeted by stocks which have given up on any fundamentals (that this happens even as “one-time” restructuring charges which actually recur every quarter, such as JPM’s most recent $9 billion in fees, are added back to non-GAAP EPS, and make EPS increase is just as well-known). But it is not so much the US we focus on in this blurb, but Europe, where for some mindboggling reason the consensus has rapidly shifted in recent months, toward a prevailing sentiment of recovery. So here is a quick datapoint from Deutsche putting the European “recovery” in context.

You read that right: of 17 companies on the DJStoxx600 reporting so far in Q3, 13 have missed.

Welcome to the [European] recovery, indeed.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/4XhyU0vUINM/story01.htm Tyler Durden

Last week, the main area of focus was the political situation in the US where Democrats and Republicans finally agreed upon a short term fix to reopen the government and extend the debt ceiling. The conclusion of this saw equity markets rally to all time highs in Europe and the US, with the USD continuing to slide as markets turn their attention to the Fed’s QE programme and push back expectations of when the central bank will begin to pull back on asset purchases.

With the government now reopen, attention will turn to the numerous data releases that were delayed but will now take place over the next two weeks, including the jobs report which is due on Tuesday. The release of this report will once again be used to help predict when the Fed will begin to taper QE however, recent comments from Fed members have suggested that October is likely to be too soon trim bond buying due to the lack of key macroeconomic data and the unknown economic impact as a result of the government closing for 16 days. Most recently, Fed’s Evans suggested it is not yet time to remove monetary accommodation and said he sees tapering postponed after the shutdown. Expectations on Tuesday are for an increase of 180K jobs for the month of September and the number will be used to evaluate the momentum of the economy prior to the shutdown of the government.

However next month’s report could be perceived as more important as it appears tapering is off the table this month, and the report will be an assessment of the damage done from the closure of numerous government departments.

Elsewhere next week, approximately 25% of companies in the S&P 500 are due to report their earnings, including McDonald’s, Microsoft, Caterpillar, Amazon and the best performing company in the index this year, Netflix. Subscriber additions will be one of the key figures for Netflix, with growth expected from Q2 due to seasonality, however there is not expected to be large growth from the same quarter in 2012. As a guide, of the approximately 100 companies in the S&P 500 to have reported this quarter, 69% have topped earnings expectations while only 53% have beaten revenue expectations, compared to four-year averages of 73% and 59% respectively.

In fixed income markets, supply dries up in the Eurozone this week following last week’s EUR 14.4bln of mostly shortdated supply, with only a EUR 2bln German Buxl auction on Wednesday. Not only is supply notably lower in the Eurozone but there are also numerous payments as France pays EUR 37bln in coupons and principals at the end of the week and Austria is due to pay out over EUR 13bln on Monday, which could support core fixed-income throughout the week. Furthermore, there is also a lack of conventional supply out of the US although the US Treasury is to issue USD 7bln in 30y TIPS on Thursday, as well as detailing next week’s supply in 2-, 5- and 7-year notes.

Monday, Oct 21

• US Existing Home Sales (Sep): consensus -3.3%mom, previous +1.7%mom
• Japan Trade Balance (Sep): consensus JPY-918.6bn, previous JPY-962.8bn
• Mexico Retail Sales (Aug): previous +1.3%yoy
• Also interesting: Taiwan Export Orders (Sep), Hong Kong CPI (Sep)

Tuesday, Oct 22

• US Non-Farm Payrolls (Sep): Consensus 180K, previous 169K
• US Unemployment Rate (Sep): Consensus 7.3%, previous 7.3%
• US Richmond Survey (Oct): previous flat
• Switzerland Trade Balance (Sep): previous CHF+1.86bn
• Argentina Trade Balance (Sep): Consensus $+800mn, previous $+568mn

Wednesday, Oct 23

• Canada MPC: consensus has policy rate unchanged at 1%.The BoC’s policy stance should remain very much on hold.
• UK MPC minutes (Oct)
• Euro Area Consumer Confidence (Oct, Flash): consensus -14.5, previous -14.9
• US FHFA House Price Index (Aug): consensus +0.8%mom, previous +1.0%mom
• South Africa CPI (Sep): Consensus +5.90%yoy, previous +6.40%yoy
• Australia CPI (Q3): Consensus +1.8%yoy, previous +2.4%yoy
• Taiwan IP (Sep): consensus +0.1%yoy, previous -0.7%yoy
• Also interesting: Singapore CPI (Sep), New Zealand Trade Balance (Sep)

Thursday, Oct 24

• Sweden MPC: Consensus have policy rate unchanged at 1%
• Norway MPC: Consensus have deposit rate unchanged at 1.50%
• Philippines MPC: Consensus have policy rate unchanged at 3.50%yoy
• UK CB Carney speaks in London
• Euro Area PMIs (Oct, Flash)
• US Initial Jobless Claims (Oct 18): consensus 340K, previous 358K
• US New Home Sales (Sep): Consensus 1.0%mom, previous +7.9%mom
• US Kansas Fed Survey (Oct)
• Mexico Real GDP (Aug): Previous +1.69%yoy
• Also interesting: Spain Unemployment Rate (Q3), Honk Kong Trade Balance (Sep), Mexico Inflation (15 Oct)

Friday, Oct 25

• Mexico MPC: Consensus expects a cut of 25bps in policy rate to 3.50%yoy. In addition, there is a probability of a more assertive 50bps cut-and-hold particularly if Thursday’s 1H October inflation prints significantly below expectations
• Euro Area ECB Asmussen speaks in Milan
• US Core Capital Goods Orders (Sep): consensus +0.7%, previous +1.5%
• US Durable Goods Orders (Sep): consensus +2.0%, previous +0.1%
• US Michigan Consumer Sentiment (Oct, final): consensus 75.0, previous 75.2
• Japan core CPI (Sep): consensus +0.7%yoy, previous +0.8%yoy. Together with a series of food price hikes from October, we expect inflation to creep up further in the coming months.
• Germany IFO Business Survey (Oct): consensus 108.0, previous 107.7
• UK GDP (Q3): previous +0.7%qoq
• Brazil CA Balance (Sep): Consensus $-2.9bn, previous $-5.5bn
• Mexico Trade Balance (Sep): previous $-0.23bn
• Also interesting: Philippines Trade Balance (Aug), Thailand Trade Balance (18 Oct), South Korea GDP (Q3), Singapore IP (Sep), Sweden Business and Consumer Surveys (Oct), Brazil FDI Inflows (Sep)

Key Issues in the Week Ahead:

TOP ISSUES FOR THE WEEK AHEAD US DATA OUT OF SHUTDOWN

On Tuesday, we finally get the long-awaited update on the US employment situation in September. We expect a strong reading of
240,000 net new jobs, well above the 148,000 average posted over the June-August period and consensus (180,000). We also expect the unemployment rate to fall to 7.1%. Such strong readings would again ignite a debate on an imminent start of US tapering, but given that the full impact of the recent shutdown may take some further time to emerge, we continue to see tapering in Q1 next year.

FLASH PMIS TO SUGGEST WEAK RECOVERY

PMIs have recently shown mixed results, with some weakness apparent in manufacturing. This week’s flash PMIs in Germany, France and the euro area (out Wednesday) are likely to show similarly mixed results. For manufacturing, we expect onlya marginal improvement in line with consensus, while for services we expect a slight drop, in contrast to consensus which sees unchanged conditions. Overall, this should be in line with the expectations for a weak, uneven and fragile recovery in the euro area.

Source: Goldman, RanSquawk, SocGen

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/VWiG10Nug8o/story01.htm Tyler Durden

All those who claim there is no inflation, and a tsunami of hot central-bank money flooding the world, are advised to check out the housing numbers reported overnight by UK’s property website Rightmove, according to which asking prices in London saw an “unsustainable” 10% month-on-month increase in October. This sent the typical asking prices in the capital to £544,232, a new record high surpassing the previous high set in July by more than £28,000.

Who is to blame, in addition to central banks injecting nearly $150 billion in fresh liquidity in the market every month? Why Europe’s Cyprus template of course:  according to Rightmove, the “frenzy” of activity in parts of prime inner London is due to overseas investors who are looking for a safe haven to place their cash, which is “leaving the shelves bare.” It also means anyone who is not a robber baron, oligarch, money launderer, or otherwise has criminal access to billions, is fresh out of luck and priced out until the next housing crash.

The berserk chasing of ultra-luxury properties can be seen on the chart below, which compares the transactions in the top price band between 2013 and 2012. One term can describe the shift: whoosh, as transactions on the most expensive property class have nearly become the single most active bucket in all of London!.

The Evening Standard has more:

A major property website has seen London house sellers’ asking prices soar to a new high this month, beating their previous record by nearly £30,000 and fuelling fears that the capital is overheating.

 

Across England and Wales, asking prices rose more gently by 2.8% month-on-month, following two months of falls, to reach £252,418 on average.

 

Prices across the country are 3.8% higher than they were a year ago, although in London they have shot up by 13.8% over this period, Rightmove said.

 

Despite the overall upward march in prices, Rightmove said that “a bubble seems a long way off in the majority of regions”. The patchy state of the housing market was still shown, as four areas recorded year-on-year falls in house values – Wales, the North, the North West and the West Midlands.

 

The North recorded the biggest year-on-year drop, with asking prices falling by 2.2% to reach £145,094 on average. Sellers in Wales have dropped their asking prices by the second biggest amount over the last year, with prices falling by 1.4% annually to typically reach £165,708. After London, the East Midlands saw the second biggest annual increase in house prices, with a 6.0% annual uplift taking them to £171,913 on average.

 

The findings come after the Council of Mortgage Lenders (CML) reported last week that lending activity is at its strongest in five years and the Office for National Statistics (ONS) said that UK house prices reached an all-time high of £247,000 in August, surpassing a previous 2008 peak.

 

Housing market activity among people with low deposits who have previously struggled to get on the property ladder is expected to increase further in the coming months, as a new phase of the Government’s flagship Help to Buy scheme is fully fired into action.

Of course, since only those armed with copius loans can afford anything anymore, there are naturally banks – and in this case even the UK government – willing to provide it for them, in exchange for just 5% money down: a recipe for absolute taxpayer-funded devastation and bailouts down the line.

Royal Bank of Scotland (RBS), NatWest, Halifax and Bank of Scotland started offering state-backed loans to people with deposits as low as 5% under the scheme this month and the lenders have reported strong interest so far.

 

Lenders including HSBC, Santander and Barclays have also confirmed they plan to come on board and start offering loans under the scheme.

 

The City of Westminster was named by Rightmove as London’s strongest-performing house price area in October. Prices there have soared by 11.9% month-on-month to reach £1.6 million typically. Kensington and Chelsea and Hammersmith and Fulham also recorded increases of 11.8% in sellers’ asking prices over the month.

 

Sellers are now typically asking £2.4 million for a home in Kensington and Chelsea and £1.1 million for a home in Hammersmith and Fulham.

Buyers, however, oblivious of the prices, keep pouring in:

Rightmove said that wealthy overseas buyers are continuing to snap up properties in prime central London as they are seen as “safe” investments amid the troubles of the eurozone.

 

Rightmove director Miles Shipside said that while this is happening and developers can achieve sales at premium prices, this “eats up a much-needed source of fresh supply and drags up existing property prices at an even faster rate”.

 

He said: “Although not sustainable in the longer term, some agents currently report there is a buying frenzy in parts of prime inner London, with available stock so low that their shelves are now bare.”

Lol: the longer run. Who cares about that. Certainly not China. Because if you thought a 10% increase in one month was bad, what is the proper adjective to describe a 12% increase in home prices in… one week!?

As Bloomberg reports, the average Shanghai new home price rose 12% on the week. Shanghai’s average new home price rose to 26,527 yuan/square meter in the week ended Oct. 20 from the previous week, property consultant Shanghai Uwin Real Estate Information Services Co. said in an e-mailed note today.

In short – what is going on in the global housing market is no longer a bubble: we don’t know however how to describe it. What comes after a bubble?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/4WaRyfHCnA0/story01.htm Tyler Durden

All those who claim there is no inflation, and a tsunami of hot central-bank money flooding the world, are advised to check out the housing numbers reported overnight by UK’s property website Rightmove, according to which asking prices in London saw an “unsustainable” 10% month-on-month increase in October. This sent the typical asking prices in the capital to £544,232, a new record high surpassing the previous high set in July by more than £28,000.

Who is to blame, in addition to central banks injecting nearly $150 billion in fresh liquidity in the market every month? Why Europe’s Cyprus template of course:  according to Rightmove, the “frenzy” of activity in parts of prime inner London is due to overseas investors who are looking for a safe haven to place their cash, which is “leaving the shelves bare.” It also means anyone who is not a robber baron, oligarch, money launderer, or otherwise has criminal access to billions, is fresh out of luck and priced out until the next housing crash.

The berserk chasing of ultra-luxury properties can be seen on the chart below, which compares the transactions in the top price band between 2013 and 2012. One term can describe the shift: whoosh, as transactions on the most expensive property class have nearly become the single most active bucket in all of London!.

The Evening Standard has more:

A major property website has seen London house sellers’ asking prices soar to a new high this month, beating their previous record by nearly £30,000 and fuelling fears that the capital is overheating.

 

Across England and Wales, asking prices rose more gently by 2.8% month-on-month, following two months of falls, to reach £252,418 on average.

 

Prices across the country are 3.8% higher than they were a year ago, although in London they have shot up by 13.8% over this period, Rightmove said.

 

Despite the overall upward march in prices, Rightmove said that “a bubble seems a long way off in the majority of regions”. The patchy state of the housing market was still shown, as four areas recorded year-on-year falls in house values – Wales, the North, the North West and the West Midlands.

 

The North recorded the biggest year-on-year drop, with asking prices falling by 2.2% to reach £145,094 on average. Sellers in Wales have dropped their asking prices by the second biggest amount over the last year, with prices falling by 1.4% annually to typically reach £165,708. After London, the East Midlands saw the second biggest annual increase in house prices, with a 6.0% annual uplift taking them to £171,913 on average.

 

The findings come after the Council of Mortgage Lenders (CML) reported last week that lending activity is at its strongest in five years and the Office for National Statistics (ONS) said that UK house prices reached an all-time high of £247,000 in August, surpassing a previous 2008 peak.

 

Housing market activity among people with low deposits who have previously struggled to get on the property ladder is expected to increase further in the coming months, as a new phase of the Government’s flagship Help to Buy scheme is fully fired into action.

Of course, since only those armed with copius loans can afford anything anymore, there are naturally banks – and in this case even the UK government – willing to provide it for them, in exchange for just 5% money down: a recipe for absolute taxpayer-funded devastation and bailouts down the line.

Royal Bank of Scotland (RBS), NatWest, Halifax and Bank of Scotland started offering state-backed loans to people with deposits as low as 5% under the scheme this month and the lenders have reported strong interest so far.

 

Lenders including HSBC, Santander and Barclays have also confirmed they plan to come on board and start offering loans under the scheme.

 

The City of Westminster was named by Rightmove as London’s strongest-performing house price area in October. Prices there have soared by 11.9% month-on-month to reach £1.6 million typically. Kensington and Chelsea and Hammersmith and Fulham also recorded increases of 11.8% in sellers’ asking prices over the month.

 

Sellers are now typically asking £2.4 million for a home in Kensington and Chelsea and £1.1 million for a home in Hammersmith and Fulham.

Buyers, however, oblivious of the prices, keep pouring in:

Rightmove said that wealthy overseas buyers are continuing to snap up properties in prime central London as they are seen as “safe” investments amid the troubles of the eurozone.

 

Rightmove director Miles Shipside said that while this is happening and developers can achieve sales at premium prices, this “eats up a much-needed source of fresh supply and drags up existing property prices at an even faster rate”.

 

He said: “Although not sustainable in the longer term, some agents currently report there is a buying frenzy in parts of prime inner London, with available stock so low that their shelves are now bare.”

Lol: the longer run. Who cares about that. Certainly not China. Because if you thought a 10% increase in one month was bad, what is the proper adjective to describe a 12% increase in home prices in… one week!?

As Bloomberg reports, the average Shanghai new home price rose 12% on the week. Shanghai’s average new home price rose to 26,527 yuan/square meter in the week ended Oct. 20 from the previous week, property consultant Shanghai Uwin Real Estate Information Services Co. said in an e-mailed note today.

In short – what is going on in the global housing market is no longer a bubble: we don’t know however how to describe it. What comes after a bubble?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/4WaRyfHCnA0/story01.htm Tyler Durden

By now, and certainly in the aftermath of the embarrassing US government shutdown, it has become clear to everyone that fiscal policy is terminally broken as a process through which to reform and fine-tune the economy. But far from affecting only the US, fiscal policy has failed miserably to encourage structural reform in virtually all broken European states, the bulk of which reside in the periphery but increasingly more France and also Germany. Why? A very simple reason: the Fed’s shotgun monetary policy, which is rising the stock market to such unprecedented heights, it allows politicians the loophole they need to justify their irrelevance, and impotence. After all, if stocks are up who cares if the US doesn’t have a budget for over 4 years. or if the Italian debt/GDP ratio is rising at a record pace, or if Spanish bad debt is accumulating at breakneck speeds, or if Greek youth unemployment is 60%+. Hey, look over there stocks, are up.

In short: if you want to blame someone for the complete breakdown in fiscal policy and the political negotiation process, blame the Fed. That much we made clear back in 2011 when instead of forcing Europe to deal with its issues on a fiscal basis, the ECB stepped in with the LTRO bazooka (and subsequently with Draghi’s “whatever it takes” uberbluff) and made any structural reform unnecessary. The same has since happened in the US with QE3 and in Japan with QE Bazooko Circus.

But for now, while this decision-making hijacking process by the central banks, was largely implied, it was never explicit. Never, that, until this Friday when Italy’s Prime Minister Enrico Letta came under fire from all sides Friday over his 2014 budget proposal, which critics say has failed to attack deep-seated problems such as Italy’s suffocating tax rates and lack of growth. In other words, yet another example of fiscal reform failing to promote long-term economic policies. The WSJ has more on the latest Italian budgetary failure:

Fresh from winning a confidence vote that many believed would strengthen his government, Mr. Letta was attacked by both Italy’s business lobby and its unions, while former Prime Minister Mario Monti resigned as head of a small, centrist party that supports his government.

 

Mr. Monti criticized the budget’s “timidity” in cutting taxes, a complaint echoed by business leaders.

 

Labor unions complained that the budget failed to extend unemployment benefits for the hundreds of thousands of workers who have been laid off during the downturn or may be next year. “Trying not to displease everybody doesn’t mean pursuing the national interest,” Susanna Camusso, head of CGIL, Italy’s largest labor union, said.

 

Italian businesses pay an effective tax rate of about 68%, according to accountancy PricewaterhouseCoopers, when payroll taxes are included. Such taxes, which are almost as high for wages, produce a lose-lose situation in which companies are loath to hire and the net pay that employees earn is quite low.

 

The budget would cut overall business taxes by €2.7 billion ($3.7 billion). About €1.5 billion of that would go to workers in the form of lower payroll costs. But the monthly impact on the average wage earner would be worth little more than the cost of a pizza.

But however bad the proposed Itlaian budget may be, and no matter how bad, it is still orders of magnitude better than the US, which is simply unable to pass a budget, let alone one which balances, that is not the punchline. This is:

Economy Minister Fabrizio Saccomanni, a former deputy governor of the Bank of Italy, acknowledged that “more could have been done.” He said political squabbling had complicated the government’s work, but pointed out that that the budget keeps Italy’s deficit below 3% of gross domestic product, as European Union rules require.

 

“Everybody hates this budget, but the stock market is up and the spread is down,” Mr. Saccomanni noted.

And there you have it: no matter how bad, or non-existent a budget, a political compromise, a political proposal, a government shutdown, or a debt default threat… the market is up.

Why is the market up? Because between the Fed and the BOJ alone, some $160 billion in liquidity is created de novo each month, pushing assets to record prices around the fungible globe. Which simply means that since there is no feedback loop anymore to inform politicians that their decision-making process is just a broken, there is no impetus for any change.

And the biggest paradox is that it is the Fed whose various presidents, complain almost daily how they would promptly taper if only Washington would get its act in order, in the process proving the Fed has zero understanding of how a reflexive market process works. Because it is not Washington that is to blame that it is broken, it is the Fed… and the ECB… and the BOJ, whose monetary flood has made fiscal policy irrelevant, meaningless and moot.

The problem, obviously, is that once the Fed has no choice but to start easing off the Koolaid, whether that means S&P at 2000, 5000, 10,000 or much more, only then will the market finally awake to years of pent up fiscal policy mistakes but courtesy of the inflationary inferno that the very same central bankers will have created, there will be nobody to run to.

But that’s in the future. For now, all that matters as Mr. Sack-O-Money put it, is “that the stock market is up.” Nothing else matters.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/h9Z8e4W8dP0/story01.htm Tyler Durden

• FHFA Is Said to Seek at Least $6 Billion From BofA for MBS Sales (BBG)
• Record Pact Is on the Table, But J.P. Morgan Faces Fight (WSJ)
• Magnetar Goes Long Ohio Town While Shorting Its Tax Base (BBG)
• Mini-Wall Street’ Rises in Hamptons (WSJ)
• Obama to call healthcare website glitches ‘unacceptable’ as fix sought (Reuters)
• Starbucks Charges Higher Prices in China, State Media Says (WSJ)
• Cruz Is Unapologetic as Republicans Criticize Shutdown (BBG)
• Berlusconi struggles to keep party united after revolt (Reuters)
• SAC Defections Accelerate as Cohen Approaches Settlement (BBG)
• Some Liberal Groups, Lawmakers Worry About Cuts to Social Security, Other Entitlements (WSJ)
• McConnell: Shutdown Bad Idea, Won’t Happen Again (WSJ)
• US asks top court not to take case on NSA cyber-snooping (AP)

 

Overnight Media Digest

WSJ

* JPMorgan Chase & Co reached a tentative deal this weekend to pay $13 billion to end a number of civil investigations into its sale of mortgage securities before the 2008 financial crisis, but a separate and potentially more serious criminal probe into the bank and its executives will continue.

* Cracks are showing in the Democratic coalition as the next round of budget talks gets under way, hurting the chances for progress toward a broad deal that changes the tax code and significantly narrows future deficits.

* U.S. candy makers are expanding production in other countries as federal price supports and a global glut of the sweet stuff give an ever-greater advantage to foreign rivals.

* Sotheby’s and Christie’s are invading the turf of high-end art galleries, as a boom in the contemporary art market and pressures in the auction business disrupt what had long been a symbiotic relationship.

* Despite the market disruptions Washington’s mess caused over the past few weeks, analysts who have studied past market behavior say that the current backdrop – moderate economic growth with low inflation and strong central bank backing – is excellent for stocks.

* As rivals scale back their research-and-development spending to appease investors, Chief Executive John Lechleiter says Eli Lilly & Co is staying the course, despite the drug maker’s relatively large R&D budget.

* Raoul Weill, the former No. 3 official at UBS, has been arrested in Italy based on an Interpol notice requested by U.S. authorities, according to a U.S. official. The United States plans to seek his extradition from Italy to face charges of helping conceal billions of dollars from U.S. tax authorities.

* Manufacturing of new business jets isn’t likely to recover to pre-recession levels for at least another decade, according to a closely watched forecast that trimmed the number of aircraft deliveries over the next 10 years by about 8 percent from the year-earlier projection.

* In the next few weeks, the Chinese government is expected to release the results of an ambitious effort to calculate a seemingly simple figure: just how much the country’s local governments have borrowed from banks and investors in the past few years.

* The planned merger of Office Depot Inc and OfficeMax Inc is on track to receive antitrust clearance from the Federal Trade Commission after a lengthy government review, according to people familiar with the matter.

* AT&T Inc plans to lease a portfolio of cell towers, and sell some others, to Crown Castle International Corp for about $4.85 billion as the telecom giant cashes in on consolidation among tower operators and seeks to spend its money elsewhere.

* Level 3 Communications Inc said it fixed an Internet service outage that left users from Brooklyn to Philadelphia with slow to nonexistent service for nearly 24 hours Saturday after equipment at a New York-area network hub broke down.

 

FT

Overview

U.S. housing regulators are looking to fine Bank of America more than $6 billion for its role in misleading mortgage agencies during the housing boom, compared with the $4 billion to be paid by JPMorgan Chase & Co.

Opinions are divided in the U.S. regarding the $13 billion settlement JPMorgan Chase has agreed to pay to state and federal authorities.

Aluminum producer Alcoa has attacked the London Metal Exchange as “short-sighted and misguided” and called on the UK Financial Conduct Authority and the U.S. Commodity Futures Trading Commission to intervene in a row about metals warehousing.

AT&T said it would lease the rights to about 9,100 of its wireless network towers to Crown Castle International and sell another 600 towers to the tower operator for about $4.9 billion.

Terra Firma, the buyout group run by dealmaker Guy Hands, is set to launch a 1 billion pound ($1.62 billion) float of Infinis, a British wind power company, on Monday in a comeback signal to prospective new investors.

 

NYT

* A tentative $13 billion settlement between JPMorgan and the Justice Department was a result of extensive personal negotiations involving Attorney General Eric Holder and Jamie Dimon, the bank’s chief executive.

* Mounting legal problems have so far left Jamie Dimon unscathed at the helm of JPMorgan Chase. On Sunday, several JPMorgan executives said, as they have for months, that the bank’s board remains firmly behind Dimon, who is both chairman and chief executive.

* Norway’s sovereign wealth fund is preparing to raise its voice on a sensitive topic: the increasing computerization of the stock markets and the costs it has imposed on big long-term investors. “The U.S. market has gone through a lot of changes and has become quite complicated – and this complexity of the market creates a lot of challenges for a large investor like us,” said Oyvind Schanke, the global head of stock trading for the fund, Norges Bank Investment Management.

* Crown Castle International Co will buy the rights to run 9,100 towers for an average lease of 28 years, with the right to acquire the towers outright from AT&T Inc in the future for about $4.2 billion. Crown Castle will also buy about 600 towers outright.

* The producer Jason Blum’s winning movie formula relies on profit-sharing, and he’s thinking about applying it to television. Over the last five years, for production costs totaling a mere $27 million, his company, Blumhouse Productions, has ch
urned out eight hit horror films – including “Paranormal Activity”, “Sinister” and “The Purge” – that have taken in $1.1 billion at the worldwide box office.

* Genetic engineering to produce products that now come from rare plants holds great promise, but critics warn of harm to small farmers, among others.

* Experts involved in fixing the online health insurance marketplace say the technological problems are extensive.

* The intense competition in the market for tablets will be highlighted on Tuesday, as Apple Inc, Nokia and Microsoft Corp each introduce new devices.

* Ignazio Angeloni, a top European Central Bank official, has a leading role in reviewing euro zone banks to determine which are sound and which are not.

* Music industry’s total digital sales are down almost 1 percent so far this year, and some in the industry cite the rise of streaming music services like Spotify and Pandora Media Inc .

 

Canada

THE GLOBE AND MAIL

* Native leaders are warning that the violent clash between Royal Canadian Mounted Police and the Elsipogtog First Nation – which last week saw police vehicles torched, rubber bullets fired and rocks thrown – is just the tip of the iceberg.

The protest against shale-gas exploration near the village of Rexton, New Brunswick, took place as some aboriginal groups across the country are expressing frustration over being excluded from consultations, especially when it comes to resource development.

* The Conservative government is seeking to give victims of crime a more active role in the legal process. A bill will be put forward this fall that extends victim involvement “from the time of the offence to the final disposition of the sentence,” Justice Minister Peter MacKay told The Globe and Mail.

* The Canadian Food Inspection Agency has issued an alert over another beef product because of possible E. coli contamination. The federal food safety watchdog is warning the public not to consume uncooked lean ground beef from Belmont Meats of Toronto, distributed at Loblaw stores.

Reports in the business section:

* Corporate Canada is expected to raise spending in 2014 to take advantage of a global economic recovery. CIBC World Markets Inc Deputy Chief Economist Benjamin Tal said Canadian companies are well-positioned to increase capital expenditures, particularly if the U.S. economy gets rolling.

* Canadian National Railway Co and Canadian Pacific Railway Ltd both experienced weak grain shipments in the third quarter, although shipments are expected to rise in the fourth quarter due to a bumper crop in Canada.

NATIONAL POST

* A free trade deal linking Canada and Europe, even in the absence of a final text, is a historic win for the federal Conservative party and for Prime Minister Stephen Harper personally. It could not have come at a better time, from a Tory political perspective.

* A probe by the auditor general into spending in the Senate has prompted senators and the chamber’s administration to start creating paper trails for decisions that previously weren’t documented.

FINANCIAL POST

* Even amid a slowdown in hiring across Canada, small businesses continue to face difficulties recruiting and keeping the best employees.

* Northwest Territories village Inuvik’s untapped resources, and non-existent infrastructure to develop or deliver them is becoming a metaphor for Canada itself. The latest, most egregious example of this problem revolves around the lack of strategy, politics and recurring media flashpoints concerning pipelines and, to a lesser extent, power generation infrastructure.

 

China

CHINA SECURITIES JOURNAL

– The People’s Bank of China is likely to keep monetary policy neutral or even make it slightly tighter in the fourth quarter, Song Guoqing, an adviser to the Chinese central bank forecast.

– The China Securities Regulatory Commission recently said that it will support the Shanghai Pilot Free Trade Zone in launching an international crude oil futures trading platform, heralding a new stage for the rapid expansion of China’s commodity futures market.

SHANGHAI SECURITIES NEWS

– E-Fund 120 ETF, the first exchange-traded fund (ETF) to invest in stocks dual listed on mainland Chinese and Hong Kong bourses, will be listed on the Hong Kong stock exchange on Monday.

– The slowdown of China’s growth due to the country’s efforts to adjust and improve its economic structure will help end a decade-long bull run in global commodity prices, economists participating in a seminar in the eastern Chinese city of Wuxi on Sunday forecast.

CHINA DAILY

– A report citing a senior security official said China sees an extradition treaty with the United States as “essential to capture and repatriate economic fugitives,” including corrupt officials. The official blamed U.S. lack of understanding of Chinese human rights protections as a barrier to progress.

PEOPLE’S DAILY

– China will continue to use Marxist theory as the key guideline to boost efforts to build a socialist society with Chinese characteristics, the newspaper, the mouthpiece of the Chinese Communist Party, said in a commentary.

 

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Apple (AAPL) upgraded to Buy from Hold at Societe Generale
ArcelorMittal (MT) upgraded to Buy from Hold at Deutsche Bank
Archer Daniels (ADM) upgraded to Buy from Underperform at BofA/Merrill
Bunge (BG) upgraded to Buy from Neutral at BofA/Merrill
Dean Foods (DF) upgraded to Outperform from Market Perform at BMO Capital
Delek US (DK) upgraded to Buy from Neutral at Goldman
Horizon Pharma (HZNP) upgraded to Overweight from Neutral at Piper Jaffray
Mead Johnson (MJN) upgraded to Buy from Neutral at Citigroup
ProAssurance (PRA) upgraded to Buy from Neutral at Janney Capital
Salesforce.com (CRM) upgraded to Strong Buy from Outperform at Raymond James

Downgrades

ARIAD (ARIA) downgraded to Perform from Outperform at Oppenheimer
Capital Bank (CBF) downgraded to Neutral from Buy at Compass Point
Celestica (CLS) downgraded to Hold from Buy at Canaccord
Empresas ICA (ICA) downgraded to Neutral from Buy at BofA/Merrill
First Horizon (FHN) downgraded to Neutral from Overweight at JPMorgan
First Horizon (FHN) downgraded to Sector Perform from Outperform at RBC Capital
General Mills (GIS) downgraded to Neutral from Buy at BofA/Merrill
Goodyear Tire (GT) downgraded to Hold from Buy at Deutsche Bank
Kaiser Aluminum (KALU) downgraded to Hold from Buy at KeyBanc
Kellogg (K) downgraded to Underperform from Buy at BofA/Merrill
Luxottica (LUX) downgraded to Sell from Neutral at Goldman
Magna (MGA) downgraded to Hold from Buy at Canaccord
Myriad Genetics (MYGN) downgraded to Underperform from Neutral at Credit Suisse
Reinsurance Group (RGA) downgraded to Market Perform at Keefe Bruyette
Senomyx (SNMX) downgraded to Neutral from Buy at Roth Capital
U.S. Silica (SLCA) downgraded to Market Perform from Outperform at Wells Fargo
VimpelCom (VIP) downgraded to Hold from Buy at Deutsche Bank

Initiations

Activision Blizzard (ATVI) initiated with an Overweight at Barclays
Applied Optoelectronics (AAOI) initiated with an Outperform at Cowen
Applied Optoelectronics (AAOI) initiated with an Overweight at Piper Jaffray
ArrowHead Research (ARWR) initiated with an Overweight at Piper Jaffray
Capitala Finance (CPTA) initiated with a Buy at Deutsche Bank
Capitala Finance (CPTA) initiated with an Overweight at Barclays
Covisint (COVS) initiated with an Outperform at Credit Suisse
Foundation Medicine (FMI) initiated with a Neutral at Goldman
Foundation Medicine (FMI) init
iated with a Neutral at JPMorgan
Foundation Medicine (FMI) initiated with an Outperform at Leerink
Montage Technology (MONT) initiated with a Buy at Deutsche Bank
Montage Technology (MONT) initiated with an Outperform at Wells Fargo
Montage Technology (MONT) initiated with an Overweight at Barclays
Norwegian Cruise Line (NCLH) initiated with an Outperform at Credit Suisse
Ophthotech (OPHT) initiated with an Outperform at Leerink
Premier (PINC) initiated with a Buy at BofA/Merrill
Premier (PINC) initiated with a Neutral at Piper Jaffray
Premier (PINC) initiated with an Outperform at Raymond James
Premier (PINC) initiated with an Overweight at JPMorgan
Xoom (XOOM) initiated with a Buy at SunTrust

HOT STOCKS

Goldman Sachs Asset Management (GS) to acquire RBS’ (RBS) money market funds
NTS, Inc. (NTS) to be acquired by Tower Three Partners for $2.00 per share
Crown Castle (CCI) announced $4.85B AT&T (T) tower transaction
Prudential (PRU) won’t seek to rescind designation as non-bank systemically important financial institution by Financial Stability Oversight Council
U.S. Steel (X) to take $1.8B goodwill impairment charge in Q3
Teradata (TDC) signed multi-year agreement with Procter & Gamble (PG)
Hasbro (HAS) targets $100M in annual savings by 2015

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Hasbro (HAS), Check Point (CHKP), Celanese (CE), MetroCorp (MCBI)

Companies that missed consensus earnings expectations include:
Crown Castle (CCI), Republic First Bancorp (FRBK)

NEWSPAPERS/WEBSITES

• The five largest U.S. defense contractors (LMT, GD, RTN, COL, UTX) release Q3 earnings this week, in what’s likely to be an even more pivotal period for sector sentiment than a year ago, the Wall Street Journal reports
• As his competitors scale back their R&D spending to appease investors, Eli Lilly (LLY) CEO John Lechleiter says the company is staying the course, despite the drug maker’s relatively hefty R&D budget, the Wall Street Journal reports
• Global shares hovered at five-year highs this morning while the dollar edged up against the yen as investors looked to U.S. data for clues on when the Fed will begin scaling back its stimulus. Many in the markets think the Fed will be wary of trimming its  bond-buying program until the economic impact of a 16-day partial U.S. government shutdown becomes clearer, Reuters reports
• Starbucks (SBUX) has been charging customers in China higher prices than other markets, helping the company realize thick profit margins, a report by the official China Central Television said, Reuters reports
• JPMorgan Chase’s (JPM) tentative agreement to pay a record $13B to end civil claims over its sales of mortgage bonds, a deal that won’t absolve the bank of potential criminal liaability, hasn’t shaken some investors’ faith in Chairman and CEO Jamie Dimon, Bloomberg reports
• Netflix (NFLX) is poised to pass HBO (TWX) in paid U.S. subscribers, showing CEO Reed Hastings is making progress toward a goal of transforming the streaming service to a Web-based television network, Bloomberg reports

BARRON’S

AT&T (T) could rise to around $40
Accenture (ACN), Aetna (AET), Western Union (WU), Raytheon (RTN) have regular buybacks
Jana Partners could bring more capital returns to Outerwall’s (OUTR) holders
Questcor (QCOR) could be trouble for investors
Uncertainty about Amazon’s (AMZN) Kindle sales a risk to investors
Amazon’s (AMZN) new Kindle Paperwhite is nearly perfect for reader

SYNDICATE

Luna Innovations (LUNA) files to sell 2.64M shares for holders
Mazor Robotics (MZOR) offers to sell 2M American depositary shares

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/_7xQOnqyZAs/story01.htm Tyler Durden