Futures Unable To Ramp Higher Despite Cornucopia Of Disappointing Macro News

In addition to the bevy of ugly European unemployment and inflation news just reported, the overnight session had a dollop of more ugly macro data for the algos to kneejerkingly react to and ramp stocks to fresh time highs on. First it was China, where the PBOC did another reverse repo, however this time at a fixed 4.3% rate, 0.2% higher than the Monday iteration and well above the 3%-handle from early October, indicating that China is truly intent on tightening its monetary conditions. Then Japan confirmed that despite the soaring imported food and energy inflation, wages just refuse to rise, and have declined now for nearly 1.5 years. Then, adding core insult to peripheral injury, Germany reported retail sales that missed expectations of a +0.4% print wildly, declining -0.4% from a prior downward revised 0.5% to -0.2%. And so on: more below. However, as usual what does matter is how the market digests the FOMC news, and for now the sense is that the risk of a December taper has risen based on the FOMC statement language, whether warranted or not, which as a result is pushing futures modestly lower following an epic move higher in the month of October on nothing but pure balance sheet and multiple expansion.

The big data week in the US rolls on with the highlights being the Chicago PMI and initial jobless claims, which are expected to print their first accurate, non-impaired reading since August.

On today’s US docket:

US: Initial jobless claims, cons 339K (13:30)
US: Chicago PMI, cons 55.0 (14:45)

Overnight news bulletin from Bloomberg and RanSquawk:

  • Treasuries higher, erasing losses seen after the FOMC yesterday kept asset purchases at a pace of $85b/month and said it needs to see more evidence that the economy will continue to improve.
    Euro-area inflation cooled to 0.7% in Oct., the slowest in almost four years, moving further away from the ECB’s goal
  • Very likely that ECB members will discuss a rate cut at Nov. 7 meeting following data: Market Securities
  • The Bank of Japan maintained its commitment to unprecedented monetary easing and reiterated its forecast that inflation will almost match its 2% target in the year starting April 2015
  • Japan should lower its effective corporate tax rate to Germany’s level, around 29%, to help bolster growth, according to one of Abe’s top economic aides
  • G-7 central banks said emergency currency-swap lines established during the global financial crisis will be made permanent, providing backstops to safeguard against future turbulence
  • China’s top four banks posted their biggest increase in soured loans since at least 2010 as a five-year credit spree left companies with excess manufacturing capacity and slower profit growth amid a cooling economy
  • The U.S. reiterated its complaints that China’s yuan hasn’t strengthened as fast as needed and criticized Germany for its current-account surplus in a report yesterday
  • Obama defended his health-care law, saying the flawed online insurance exchange will get fixed, people being thrown off the plans that don’t meet the law’s standards will be getting better insurance and “a fraction” of higher income Americans will pay more for plans that are better than they had
  • Sovereign yields mostly higher, EU peripheral spreads little changed. Nikkei -1.2%, leading Asian equities lower; European stocks mixed, U.S. equity-index futures fall. WTI crude little changed, gold and copper lower

Market Recap from RanSquawk

Even though stocks traded lower this morning in reaction to the removal of language around tightening financial conditions by the Fed yesterday, which in turn prompted market participants to speculate over potential Fed taper in December, financials led the move higher in Europe following comments from ECB’s Nowotny who said that there will be further liquidity provisions. The sector also benefited from an encouraging set of earnings from BNP Paribas, which led the way in France. Combination of comments from Nowotny, together with the move by the ECB to announce that emergency swap lines with other central banks will be made  permanent, ensured that despite the risk averse sentiment, money market rates actually declined. Nevertheless, Bunds grinded higher, supported by coupon & redemption flows from Italy and Spain, as well as general month-end extensions.

Prices received another boost following the release of softer Eurozone CPI estimate and higher than expected Eurozone Unemployment Rate. Going forward, market participants will get to digest another round of earnings (Exxon, Conoco), as well as the weekly jobs data, Chicago PMI and also GDP report from Canada.

Asian Headlines

The Bank of Japan kept monetary policy on hold, alongside expectations, in a unanimous vote. BoJ 2014 Monetary Base Target (JPY)(Oct 31) 270trl vs. Exp. 270trl (Prev. 270trl).

Japanese Manufacturing PMI (Oct) M/M 54.2 (Prev. 52.5) – highest in over 3 years.

The PBoC injected CNY 16bln via 14 day reverse repos today, which was part of a net CNY 29.1bln injection this week vs. a CNY 58bln drain the previous week.

EU & UK Headlines

ECB’s Nowotny said that there will be further liquidity provision, adding that he wants to avoid sudden effects and must avoid falling off cliff as LTRO comes to an end. Nowotny suggested that the LTRO will be more tailored to countries perceived to have funding requirements.

The ECB has said it’s standing swap lines agreements with the BoE, Federal Reserve, BoJ, SNB and BoC are to become permanent facilities and may adjust the frequency and maturity on changing market conditions.

Eurozone Unemployment Rate (Sep) M/M 12.2% vs. Exp. 12.0% (Prev. 12.0%, Rev. 12.2%)
Eurozone CPI Estimate (Oct) Y/Y 0.7% vs. Exp. 1.1% (Prev. 1.1%)

CPI Core (Oct A) Y/Y 0.8% vs. Exp. 1.0% (Prev. 1.0%) – growth rate is a low for the series, matching early 2010 low.

Barclays month-end extension: Euro Agg +0.08y
Barclays month-end extension: Sterling Agg +0.02y

US Headlines

As a reminder, following the FOMC statement yesterday Hilserath said that the Fed is still looking at tapering and there is no sign of taking action, adding that the Fed still has taper on table at the December FOMC meeting.

Republican Senators McCain and Graham seek to delay confirmation of Fed chair nominee Yellen over Benghazi attacks, with Senator Graham vowing to block appointments without more info on Benghazi.

According to reports, Senator McCain is attempting to leverage Senate approval of an Obama nominee to the Fed, in order to collect more information on the 2012 attack on US facilities in Benghazi, Libya, that killed four Americans.

Barclays month-end extension: Treasury +0.07y

Equities

Equities traded mixed in Europe, as market participants reacted to somewhat less dovish than expected FOMC statement late yesterday, though financials outperformed following comments by Nowotny who stated that there will be further liquidity provision. Consensus beating earnings from BNP Paribas, which led the way in France, also supported investor demand for financials in Europe.

As a reminder, after the closing bell on Wall Street yesterday, Facebook reported Q4 Adj. EPS USD 0.25 vs. Exp. USD 0.19 and Q3 revenue USD 2.02bln vs. Exp. USD 1.91bln. Separately, Visa reported Q4 EPS USD 1.85 vs. Exp. USD 1.85 and reaffirmed forecast for year rev. and EPS growth.

FX

The risk averse sentiment also translated into lower trending EUR/CHF and USD/JPY, with USD/JPY also driven lower by option related flow. Good sized strikes are said to
be placed between 98.00-50 level. With that in mind, 1m implied fell to its lowest level since Dec 2012, while the spread above realised vol is around 1.0 level.

RBNZ Official Cash Rate (Oct 31) 2.50% vs. Exp. 2.50% (Prev. 2.50%) – Governor Wheeler said that currency gains provide flexibility that rate increases and that a rate increase will likely be needed in 2014.

The US Treasury’s FX report said that Germany’s weak demand and export dependence create deflationary bias for Euro area and world economy. The US Treasury also commented that China’s currency is not rising as fast as needed and that China cannot be labelled a currency manipulator at this time.

Commodities

Libya’s oil exports are currently around 150,000-200,000bpd according to a government official. Furthermore for Libya, a government official has said that the Sharara oil field may restart in 10 days.

US Secretary of Energy Moniz has said the US would like to coordinate with China on any use of strategic petroleum reserves, with discussions to take place over the next 12 months.

According to the OPCW Syria have destroyed their chemical weapons production and mixing facilities. Analysts at ANZ expect the slowing of physical gold demand and the decline in Shanghai premiums will mean gold prices will have to fall further before sparking any strong end-user demand.

 

SocGen’s summary of the key macro events:

No surprises this time around – the Fed keeps its US$85bn monthly bond buying programme intact. Slight disappointment however was from the optimistic sounding Fed vs. dovish expectations, which led to almost 8bps jump in the US 10y swaps immediately after FOMC announcement. G10 FX barring Aussie and yen are trading weaker against the greenback in Asia as shorts get squeezed. No change to unemployment and inflation target, but Fed dropped the notion that financial conditions have tightened, also there was no guidance of when they would start tapering. So what lies next? If the recent economic data is any indication, the momentum that the US economy has gathered since the beginning of the year has ebbed since the Fed last met. Our money is now on tapering to start in March 2014, meaning that it would be the next Fed chairman (likely Yellen) and not Bernanke who would be at the helm when we get to hear of the Fed actually starting to taper. The reasons for this are obvious, in that it would give the FOMC members sufficient data points to assess the housing and employment situation, which is expected to be back on track by then. Uncertainty from the budget impasse should also have subsided by then. However, with Fed’s optimistic tone, a taper start earlier than March is not completely out of reckoning.

In the context of emerging markets, a delayed start to Fed tapering should now be music to EM investors’ ears. We see the Fed’s decision as a green signal for carry trade investors as it gives a free hand to investors as well as giving the emerging markets sufficient time to show improvements in economic growth, which has been scaring investors away amid fears of an end to easy money.

US initial claims (SG forecast 330K) and the Chicago PMI (57.0) will be in focus today. We believe any positive surprises on the US economic front will gradually but eventually add to paying interest, helping yields to back up further by the year end. Additionally, on the European economic agenda, we have the unemployment and CPI data to look for, where there is a risk of the euro HICP inflation rate coming in lower than our earlier forecast of 1.0% y/y (which has now been revised to 0.9%), following the German state and Spanish national inflation data.

As usual, we conclude with Jim Reid’s overnight event recap

Risk assets including equities (S&P 500 -0.49%) and credit (CDX IG +2bp) traded weaker going into the FOMC and the tone after the event left things pretty much unchanged. This has come after the S&P 500 recorded a 7% gain since the October 8th, so the market can be forgiven for pausing for breath yesterday. In terms of the data, the ADP employment survey was worse than most estimates. The gain in private nonfarm payrolls came in at just +130k for October, 20k lower than the median 150k estimate. The vendor responsible for compiling the report (Moody’s) commented that the government shutdown hurt an already softening job market in October but did not quantify the effect.

Elsewhere September CPI suggested that inflationary pressures remain benign as the latest print showed only modest gains for both the headline (+0.2%) and core (+0.1%). Outside of the data flow, Republican Senator John McCain made some headlines threatening to delay Yellen’s confirmation, in an effort to obtain information from the White House about attacks on US assets in Benghazi, Libya. In Europe, DB’s economists interpreted the latest ECB lending survey as suggesting a moderate improvement in credit standards in Q3 2013 and an outright easing of credit standards in Q4 – indicating a stronger credit impulse going forward.

On the micro side, there were a few interesting snippets to highlight. Facebook’s after-market earnings beat was well liked and the market responded by bidding its shares up more than 10% for a brief period in afterhours trading before fading back to unchanged. Facebook disclosed that more than 40% of Q3 sales came from mobile-derived sources, up from 14% the same quarter last year – but on its conference call it suggested that mobile ad growth may slow. General Motors reported adjusted earnings that beat analyst estimates and its shares traded up 3%. The management commentary sounded broadly similar to that of Ford who reported last week. Encouragingly, GM reported solid demand coming out of North America and revenues in Europe rose on a YoY basis for the first time in two years. On a less positive note, a bankruptcy filing from Brazilian oil company OGX, a former market darling controlled by ex-billionaire Eike Batista raised a few eyebrows. The company had a one-time market cap of US$45bn but had only barely passed the start-up phase and had produced almost no crude oil, according to Reuters. The company failed to reach a restructuring agreement with bondholders. Bond markets are seeing this as a test of Brazil’s 8 year old bankruptcy laws, which are reportedly similar to US Chapter 11 proceedings (Reuters).

Turning to overnight markets, Asian equities are tracking lower following the lead of Wall St. The major Chinese banks reported earnings yesterday which have mostly disappointed the markets. Indeed, three of the four major Chinese bank’s stocks are down more than 1% today, underperforming the Hang Seng (-0.5%) and Hang Seng China Enterprises Index (-0.5%). Reported earnings growth among the banks continued to be solid (+10.8% for the quarter) but this was the slowest pace in seven quarters. There is also concern over the growing balance of non-performing loans among the majors which increased 3.5% in the third quarter to a combined total of RMB330bn (US$54bn). The average bad-loan ratio widened to 1.02% (Bloomberg). The four major banks have set aside an average 279% of the value of their bad debt as provisions, up from 272% at the end of June according to Bloomberg data. Outside of China, the BoJ kept its policy unchanged in its meeting today. AUDUSD spiked higher after a strong building approvals number (+14.4% MoM vs 2.8% expected) – recent price increases in the Australian property market appear to have spurred building activity.

Turning to the day ahead, consumer spending and retail sales in France and Germany, together with Eurozone unemployment and CPI are the major data releases today in Europe. The big data week in the US rolls on with the highlights being initial jobless claims and the Chicago PMI.



    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/zvWMu0WjEW4/story01.htm Tyler Durden

Europe Stuns With “Surprising” Record High Unemployment Print, Inflation At 4 Year Low; Euro Tumbles

Those following the Euro FX pairs saw a plunge at 6 am Eastern, when Eurostat released the latest Eurozone unemployment and inflation statistics. They were, in a word, abysmal. After the August unemployment data finally saw a modest drop forcing many to announce the end of the European depression, not only did the the September number revise the August print from 12.0% to 12.2%, a new record high as 73,000 thousand people became unemployed, but more importantly made the September unemployment rate 12.2% as well following another 60,000 Eurozoneans losing their jobs, effectively meaning that for all the talk of a European recovery, its unemployment rate keeps hitting new all time record highs every single month.

Broken down by country:

And yes, that sudden housing mecca for all rental condo flippers, Spain, was just found to also have a record high unemployment rate of 26.6%. So much for that.

But the worst print for Europe is not in any of the above charts or tables, but is and has always been its youth unemployment, as an entire generation is unable to find a productive life. In this case, the EA17 Under 25 unemployment just rose to a new record high 24.1%, from 24.0% in August, driven by Spain at 56.5%, Cyprus 43.9% (was 28.0% a year ago – thanks template), Portugal at 36.9%, and Greece somewhere in the 58% ballpark.

 

Finally, rounding out the abysmal picture was the Euro area’s just reported October CPI, which tumbled to 0.7%Y/Y, down from 1.1% in September and below the 1.1% expected. This was the weakest annual inflation print in the continent since 2009, and is a bright red flag for Draghi that everything he has done so far has failed to stimulate inflation, but at least his precious EUR is at 2 year highs against the dollar. Alas, not for much longer as the time to reprice the European currency has arrived.

 

End result of all of the above:

And going much lower.


    



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

Europe Stuns With "Surprising" Record High Unemployment Print, Inflation At 4 Year Low; Euro Tumbles

Those following the Euro FX pairs saw a plunge at 6 am Eastern, when Eurostat released the latest Eurozone unemployment and inflation statistics. They were, in a word, abysmal. After the August unemployment data finally saw a modest drop forcing many to announce the end of the European depression, not only did the the September number revise the August print from 12.0% to 12.2%, a new record high as 73,000 thousand people became unemployed, but more importantly made the September unemployment rate 12.2% as well following another 60,000 Eurozoneans losing their jobs, effectively meaning that for all the talk of a European recovery, its unemployment rate keeps hitting new all time record highs every single month.

Broken down by country:

And yes, that sudden housing mecca for all rental condo flippers, Spain, was just found to also have a record high unemployment rate of 26.6%. So much for that.

But the worst print for Europe is not in any of the above charts or tables, but is and has always been its youth unemployment, as an entire generation is unable to find a productive life. In this case, the EA17 Under 25 unemployment just rose to a new record high 24.1%, from 24.0% in August, driven by Spain at 56.5%, Cyprus 43.9% (was 28.0% a year ago – thanks template), Portugal at 36.9%, and Greece somewhere in the 58% ballpark.

 

Finally, rounding out the abysmal picture was the Euro area’s just reported October CPI, which tumbled to 0.7%Y/Y, down from 1.1% in September and below the 1.1% expected. This was the weakest annual inflation print in the continent since 2009, and is a bright red flag for Draghi that everything he has done so far has failed to stimulate inflation, but at least his precious EUR is at 2 year highs against the dollar. Alas, not for much longer as the time to reprice the European currency has arrived.

 

End result of all of the above:

And going much lower.


    



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

Obama Approval Rating Drops To Record Low

It seems like it was an eternity ago that Obama was doing his post-government shutdown gloating media tour, when day after day the world was bombarded with news of the GOP’s record low popularity rating, paradoxically following their attempt to do what even the president is now desperate to achieve: delay Obamacare. Well, the tables have turned and now that the government shutdown is history, at least until January, and the public focus has shifted to where it should have been in the first place – namely the embarrassing ponzi scheme experiment that is Obamacare, and the epic failure surrounding its rushed rollout – it is Obama’s turn to suffer a record low rating, which is precisely what happened according to a just concluded WSJ/NBC News poll.

The WSJ reports that “the popular discontent that engulfed Republicans amid the partial government shutdown has now washed over President Barack Obama, whose job approval rating has sunk to an all-time low. Americans just weeks ago heaped scorn largely on congressional Republicans over the dysfunction in Washington. But the new poll found a sharp turn against Mr. Obama, during a month in which lawmakers tiptoed up to a potential debt default and the White House fumbled the rollout of its signature health-care law.

Specifically:

Mr. Obama’s job approval fell to 42%, with 51% of respondents disapproving of his performance as president. That marked a drop in his approval rating from 47% in early October and 53% at the end of 2012.

 

At the same time, more Americans now view Mr. Obama negatively than positively, for the first time since he emerged as a national political candidate.

 

In all, the poll of 800 Americans captured an extraordinarily deep and widespread public distaste for the two political parties, those parties’ leaders and the state of politics in the nation’s capital.

Elsewhere, it appears that Americans just have given up on the government system, whose increasing corruption and cooption by moneyed interests is now obvious to everyone:

Optimism about the U.S. system of government, at 30%, was at the lowest ebb in 40 years. Just 29% said their congressional representative deserved re-election—a new low—while nearly three-quarters said Congress was contributing to the problems in Washington instead of working to solve them.

 

House Speaker John Boehner and Senate Minority Leader Mitch McConnell, both Republicans, hit their highest negative ratings, as did Senate Majority Leader Harry Reid, a Democrat.

 

“Americans are voicing their frustration at a Congress that cannot keep the government open for business and an administration that cannot get health care open for enrollment,” Mr. Hart said.

 

Republican pollster Bill McInturff, who conducts the survey along with Democrat Fred Yang, described the findings as a “shock wave” that showed the depth of “anger and frustration with everybody in Washington.”

Frustration… and yet nobody will dare to change anything for fear of losing their precious entitlements, which are unsustainable as is and like in Detroit will end up with pennies on the dollar, or for fear of infringing on their Dancing with the Stars TV time.

Visually:


    



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

The Obama Administration is Forcing Insurance Companies To Keep Quiet About Obamacare Problems

Submitted by Michael Krieger of Liberty Blitzkrieg blog,

Just when you think the Obama Administration can’t stoop any lower they immediately come in and surprise you. In this incredible clip from CNN, we learn that insurance company executives are being threatened with retribution if they publicly criticize the rollout of ObamaCare, or inform the public about some of the most pressing issues with the disastrous healthcare plan.

In the most powerful part of the clip, Robert Laszewski, the President of Health Policy and Strategy Associates, LLC claims that healthcare executives warned the Obama Administration about severe problems with the rollout ahead of time, and that they were completely ignored. Our government in an inept mafia. Nothing more, nothing less.

 

 

I highlighted some of the issues with the plan back in June of last year in the piece: Thoughts on Obamacare from a Surgeon and Friend.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Bm0ZzhtiHdY/story01.htm Tyler Durden

First Glimpse Of China’s Nuclear Submarine Fleet

Following Japan’s scrambling of fighter jets for the 3rd day in a row, China has revealed that its first fleet of nuclear submarines has started sea patrols, in the latest sign of its military’s growing confidence which has raised concerns in the region. As The FT reports, Xinhua, China’s official news agency, released photographs of what appeared to be Xia-class vessels – China’s first generation of nuclear-armed submarines, which are several decades old – saying they were being “declassified” for the first time, adding with supremely colorful language that, the subs would “gallop to the depths of the ocean, serving as mysterious forces igniting the sound of thunder in the deep sea”, and be an “assassin’s mace that would make adversaries tremble”.

 

 

Via The FT,

 

While the submarines displayed on Sunday were the older generation of nuclear vessels that are part of China’s northern fleet – and not the more advanced Jin-class based at the southern Chinese island of Hainan – the display in the domestic media nonetheless reflects the Chinese military’s growing confidence.

 

It is still the first time that the Xia class has been discussed in such detail in China’s state-run media,” said Taylor Fravel, an expert on Chinese security at the Massachusetts Institute of Technology in the US. “As China’s military modernisation continues to advance, the PLA has become more willing to discuss its capabilities.”

 

 

In recent years, the People’s Liberation Army Navy has become increasingly active in the Pacific, particularly in staking Chinese claims to disputed maritime territory in the South China Sea.

 

Chinese ships and aircraft have also become more aggressive in challenging Japanese control of the Senkaku Islands – which China calls the Diaoyu – in the East China Sea. Japan has administered the uninhabited group for decades, but China and Taiwan both claim sovereignty.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/GZRzr6_P9eI/story01.htm Tyler Durden

First Glimpse Of China's Nuclear Submarine Fleet

Following Japan’s scrambling of fighter jets for the 3rd day in a row, China has revealed that its first fleet of nuclear submarines has started sea patrols, in the latest sign of its military’s growing confidence which has raised concerns in the region. As The FT reports, Xinhua, China’s official news agency, released photographs of what appeared to be Xia-class vessels – China’s first generation of nuclear-armed submarines, which are several decades old – saying they were being “declassified” for the first time, adding with supremely colorful language that, the subs would “gallop to the depths of the ocean, serving as mysterious forces igniting the sound of thunder in the deep sea”, and be an “assassin’s mace that would make adversaries tremble”.

 

 

Via The FT,

 

While the submarines displayed on Sunday were the older generation of nuclear vessels that are part of China’s northern fleet – and not the more advanced Jin-class based at the southern Chinese island of Hainan – the display in the domestic media nonetheless reflects the Chinese military’s growing confidence.

 

It is still the first time that the Xia class has been discussed in such detail in China’s state-run media,” said Taylor Fravel, an expert on Chinese security at the Massachusetts Institute of Technology in the US. “As China’s military modernisation continues to advance, the PLA has become more willing to discuss its capabilities.”

 

 

In recent years, the People’s Liberation Army Navy has become increasingly active in the Pacific, particularly in staking Chinese claims to disputed maritime territory in the South China Sea.

 

Chinese ships and aircraft have also become more aggressive in challenging Japanese control of the Senkaku Islands – which China calls the Diaoyu – in the East China Sea. Japan has administered the uninhabited group for decades, but China and Taiwan both claim sovereignty.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/GZRzr6_P9eI/story01.htm Tyler Durden

Where Is The US Labor Market Heading?

When will the U.S. labor market start to accelerate?  That is the single most critical question for global capital markets, for it speaks directly to both economic growth and Federal Reserve monetary policy.  But, as ConvergEx’s Nick Colas notes, just as important, however, is the question “Where do people actually want to work?”

Via ConvergEx’s Nick Colas,

In today’s note we address both topics with a range of Google Trends analysis, looking at what both employers and prospective employees plug into the ubiquitous online search engine.  Key conclusions: there is no evidence of any faster pace of hiring, and the trend of hiring part time labor over full time is both strong (a 3:1 ratio) and accelerating.  As far as where online interest in available jobs runs deepest, Google outpaces Facebook and Apple by over 2:1, but interest in working at Twitter just surpassed searches for “Work at Microsoft”.  Stock markets clearly guide how a society allocates its intellectual capital, perhaps more than historical experience would indicate.

The good times in U.S. equities – and many other global stock markets – are undeniable, but it will be time to worry again soon enough.  Rallies – such as the one we’re seeing at the moment – create future obligations.  In this case, the +23% return for 2013, plus whatever we tack on between now and the end of the year, is essentially a promise of good news to come.  Markets discount the prevailing view for growth in the economy and corporate earnings.  And right now, the market weatherman is calling for sunny skies and fair weather for 2014.

The linchpin issue for global stock returns in 2014 centers on one group of people: the 11.3 million unemployed workers in the United States.  That isn’t to dismiss those suffering from unemployment in Europe, for example, or elsewhere in the world.  That 4.5% of the U.S. adult non-institutionalized population does, however play a critical role in the future returns for stocks globally.  Here is why:

U.S. labor markets have been stuck in first gear since 2011, generating an average of only 170-180,000 jobs over the past 12 months.  After natural population growth (100,000/month) that means only 70-80,000 jobs added, or 0.05% of the population.

 

The Federal Reserve has tried to juice the economy with Quantitative Easing, pushing capital into the financial system by buying Treasury and mortgage backed bonds.  That has kept interest rates low, spurred the purchase of autos and homes, and helped give the U.S. the limited employment growth we mentioned above.

 

The ebbs and flows of the Fed’s commentary regarding QE – its ongoing duration and amount – have become heavily correlated with global equity returns.  You don’t have to look any further than the June Fed press conference or the last FOMC meeting to prove that.  Chatter about “Tapering” the QE program causes a pullback, while confidence that it will continue lifts risk assets higher.  I am sure you can find academics or market watchers who will tell you this is just ‘Correlation’ and not ‘causation’.  Feel free to listen to them, but don’t invest with them.  Ever.

 

Given the anemic October employment report, the recent government shutdown, and concerns over the U.S. consumer, it seems unlikely the Federal Reserve will reduce its bond buying until 2014.  That leaves stocks to rally into the end of the year.  Easy peasy, right?

 

But then what?  The U.S. economy and public companies will have to deliver on the implicit promise of record high stock prices with a combination of faster economic growth and better earnings.  The connective tissue between those aspirations is incremental domestic job growth.

 

Can’t the Fed just keep lifting stocks higher with more QE, regardless of where the U.S. economy ends up?  They can try, but there has been enough reporting on the opinions of the members of the Federal Open Market Committee for us to know that the Fed is growing concerned over the chance for a bubble in risk assets, including stocks.  The world gives the U.S. a lot of collective slack because of its reserve currency status, but everything has a limit.  As the Fed approaches a $4 trillion balance sheet ($3.8 trillion as of October 13, or 24% of GDP), policymakers know they are closer to the end of QE than the beginning.

 

That might all sound like bad news – QE is coming to an end, watch out below! – but it also makes U.S. stocks essentially a one-decision asset class.  Job growth here simply has to get better.  Maybe not today, maybe not tomorrow, but soon, and for the rest of our lives (spurious Casablanca quote there).

With that in mind, we turned to Google’s Trends product to give us a sense of where the U.S. labor market is heading.  This free service allows you to see how many people have searched for a given phrase back to 2005 and also compare those search tallies with other phrases.  With a global search market share of 67%, Google is as clear a window onto the soul of society as you will likely ever find.  And, therefore, a good window into the soul of employer and employee alike.

Here’s what we found:

Search terms: “Hire workers” and “Fire workers”.  Figuring that employers would search terms like “Hire” and “Fire” more than workers, we started with these simply keywords.  More “Hires”
than “Fires” entered into the Google search box would be a good sign of hiring to come.

 

The Trends data supports that the U.S. jobs market is improving – “Hire workers” gets more searches than “Fire workers” and has since the beginning of 2011.  The two still move closely together, however, indicating that there is little momentum in American labor markets.

 

Search terms: “Hiring part time” and “Hiring full time”.  As of the most recent Jobs Report, 7.9 million Americans are stuck working part time when they would prefer to have full time employment.  Department of Labor statistics show that the increasing reason for this “Part time recovery” is that these individuals could only find part time work, rather than being put on a part time schedule by their employer due to slack demand.

 

The Google Trends data shows the magnitude of the problem: searches for the phrase “Hiring part time” outnumber “Hiring full time” by 3:1.  Google Trends allows you to see which U.S. states have the greatest number of searches for each term.  The best states for “Full time hiring”: Texas, Missouri, North Carolina, and Georgia.  “Hiring part time” is popular in South Carolina, Kentucky, and Alabama.

 

Simply put, there is a lot more interest on the part of employers to advertise part time jobs than full time employment, and the gap between the two is growing.  Part time employment may serve to reduce the unemployment rate, but it will do less to improve consumer spending or confidence.

 

Search term: “Jobs for seniors”.  If you want to see growth in the U.S. labor market, just focus on the AARP set.  Those workers 55 and older have roped in the lion’s share of the jobs in the last year – 962,000 of th
e 1.3 million total positions added since September 2013.

 

Older Americans were early to the employment party in the current anemic economic recover, knowing that they would need to work even as they hit their golden years.  The Trends data for “Jobs for Seniors” shows a distinct pickup in 2009 and has stayed at these elevated levels since then.  Top states for the senior job search set?   Ohio, Arizona, and (of course) Florida.

 

Search terms: “Jobs at Microsoft” and “Jobs at Twitter”.  The Google Trends data is also useful for examining where people want to work.  Microsoft, for example, has been a popular employment search-related query on Google since 2005, when the data begins.  Twitter’s impending IPO has, for the moment, made the social media company a hotter employment ticket, however.    The ratio of searches for employment at Twitter as compared to Microsoft was 75:60 last month.

 

Search terms: “Jobs at Google”, “Jobs at Facebook” and “Jobs at Apple.”  Between these three, the number of queries by people search employment at landmark tech companies skews heavily to Google.  Interestingly, this is not a new phenomenon.  All the way back to 2005, the search engine company received multiple more interest in employment opportunities than either Facebook or Apple.  The ratio even now is still healthily in Google’s favor: a Trends score of 71 for Google, versus 24 for Facebook and 21 for Apple.

In summary, we see two trends in this data:

U.S. stocks are getting a free pass as we close out 2013, lifted by performance chasing at the end of a strong year and little threat of Federal Reserve tapering.  At the same time, 2014 is going to have to deliver some actual employment growth to support elevated stock prices.  We don’t see any sign of that in the Google data.

 

As far as where people want to work, stock market chatter does seem to have an impact.  It is easy to say that this is just performance chasing as well, with the hopes of easy millions from options and stock grants.  Still, it also shows that equity markets influence where a society’s intellectual capital chooses to hang its collective hat. 


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/hfBZqBLv5fM/story01.htm Tyler Durden

QuoTH THe RaVeN…

QUOTH THE RAVEN
.

 

THE RAVEN (Debts No More)
(Edgar Allen Poe, The Raven)
WilliamBanzai7

Once upon a midnight dreary, while insolvent weak and weary,
O’r a balance sheet covered in a cloud of debts galore,
While I nodded, nearly napping, suddenly there came a tapping,
As of some one gently rapping, rapping at my chamber door.
`’Tis some visitor,’ I muttered, `tapping at my chamber door –
Only this, and nothing more.’

Ah, distinctly I remember it was bleak as Lehman’s September,
And each despicable creditor wrought its ghost upon the floor.
Eagerly I wished the morrow; – vainly I sought more to borrow
From my books surcease of sorrow – sorrow for the abundant days of yore –
And the rare and hidden debts of toxic bailout whores –
Nameless here for evermore.

And the silken sad uncertain rustling of each indentured debt just
Thrilled me – thrilled me with fantastic plastic Sino-crap never bought before;
So that now, to still the beating of my heart, I stood repeating
‘Tis some banksta entreating entrance at my chamber door –
My late payments entreating his entrance at my chamber door; –
This it is, and nothing more,’

Presently my soul grew stronger; hesitating then no longer,
`Sir,’ said I, `or Madam, truly your debt forgiveness I implore;
But the fact is I was napping, and so gently you came rapping,
And so faintly you came tapping, tapping at my chamber door,
That I scarce was sure I heard you’ – here I opened wide the door; –
Darkness there, and nothing more.

Deep into that darkness peering, long I stood there wondering, fearing,
Doubting, dreaming dreams no debt bloated mortal ever dared to dream before;
But the silence was unbroken, and the darkness gave no token,
And the only word there spoken was the whispered word, `Debts No More!’
This I whispered, and an echo murmured back the word, `Debts No More!’
Merely this and nothing more.

Back into the chamber turning, my bankrupt soul within me burning,
Soon again I heard a tapping somewhat louder than before.
`Surely,’ said I, `surely that is something at my window lattice;
Let me see then, what thereat is, and this mystery explore –
Let my heart be still a moment and this mystery explore; –
‘Tis the wind of regretted debts and nothing more!’

Open here I flung the shutter, when, with many a flirt and flutter,
In there stepped a stately raven of the saintly solvent days of yore.
Not the least obeisance made he; not a minute stopped or stayed he;
But, with mien of lord or lady, perched above my chamber door –
Perched upon a bust of Subprime Croesus just above my chamber door –
Perched, and sat, and nothing more.

Then this ebony bird beguiling my sad fancy into smiling,
By the grave and stern decorum of the counterclaim it wore,
`Though thy crest be shorn and shaven, thou,’ I said, `art sure no Wall Street schemer.
Ghastly grim and ancient raven wandering in my open chamber –
Tell me what unlordly crime now comes from those Wall Street whores!’
Quoth the raven, `Debts No More!’

Much I marvelled this ungainly fowl to hear discourse so plainly,
Though its answer little meaning – little relevancy bore;
For we cannot help agreeing that no insolvent human being
Ever yet was blessed with seeing bird above his chamber door –
Bird or beast above the sculptured bust above his chamber door,
With such name as `Debts No More.’

But the raven, sitting lonely on the placid bust, spoke only,
Those simple words, as if his soul in that one phrase he did outpour.
Nothing further then he uttered – not a feather then he fluttered –
Till I scarcely more than muttered `Other friends have drowned in debt before –
On the morrow he will leave me, as my hopes have flown before.’
Then again the bird said, `Debts No More.’

Startled at the stillness broken by reply so aptly spoken,
`Doubtless,’ said I, `what it utters is its only stock and store,
Caught from some unhappy master whom financial disaster
Followed fast and followed faster till his songs one burden bore –
Till the dirges of his hope that melancholy burden bore
Of “Debts No More.”‘

But the raven still beguiling all my bankrupt soul to smiling,
Straight I wheeled a cushioned seat in front of bird and bust and door;
Then, upon the velvet sinking, I betook myself to linking
Fancy unto fancy, thinking what this ominous bird of yore –
What this grim, ungainly, ghastly, gaunt, and ominous bird of yore
Meant in croaking `Debts No More.’

Thus I sat engaged in guessing, but no syllable expressing
To the fowl whose fiery eyes now burned into my bankrupt core;
This and more I sat divining, with my head at ease reclining
On the cushion’s velvet lining that the lamp-light gloated o’er,
But whose velvet violet lining with the lamp-light gloating o’er,
He shall press, ah, Debts N
o More!

Then, methought, the air grew denser, perfumed from an unseen censer
Swung by the House of Greenspans’s sacred liens whose foot-falls tinkled on the subprime floor.
`Wretch,’ I cried, `thy God hath lent thee – by these angels he has sent thee
Respite – respite and nepenthe from thy proposition of Debts No More!
Quaff, oh quaff this kind nepenthe, and forget this silliness of Debts No More!’
Quoth the raven, `Debts No More.’

`Prophet!’ said I, `thing of evil! – prophet still, if bird or devil! –
Whether tempter sent, or whether tempest tossed thee here ashore,
Desolate yet all undaunted, on this debt spoiled land all fraudclosure haunted –
On this subprime home by horror haunted – tell me truly, I implore –
Is there – is there a cancer in the Bernanks brain? – tell me – tell me, I implore!’
Quoth the raven, `Debts No More.’

`Prophet!’ said I, `thing of evil! – prophet still, if bird or devil!
By that Heaven that bends above us – by that God we both adore –
Tell this lost soul with unpaid debts laden if, within the distant Eden,
It shall clasp a sainted maiden whom the angels named Debts No More –
Clasp a rare and radiant maiden, whom the angels named Debts No More?’
Quoth the raven, `Debts No More.’

`Be that word our sign of parting, bird or fiend!’ I shrieked upstarting –
`Get thee back into the tempest and the usurious shore!
Leave fraudclosure doom as a token of the words thy soul hath spoken!
Leave my credit score unbroken! – quit the bust above my door!
Take thy beak from out my wallet, and take thy form from off my door!’
Quoth the raven, `Debts No More.’

And the raven, never flitting, still is sitting, still is sitting
On the pallid bust of Subprime Croesus just above my chamber door;
And his eyes have all the seeming of a demon’s that is screaming,
And the lamp-light o’er him streaming throws his shadow on the floor;
And my net worth from out that debtless shadow that lies floating on the floor
Shall be lifted, nevermore!

 

.

DEBTS NO MORE


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/dGSTjhJKA5g/story01.htm williambanzai7

Understanding Europe’s Delusion, Dilemma, And Endgame In Under 9 Minutes

If one watches (or reads) any of the mainstream media, it might seem ‘obvious’ that Europe is doing well; it’s recovering; and the crisis is over (almost over..). However, as Punk Economic‘s David McWilliams explains in this excellent overview of the European delusion and Merkel’s dilemma, there is a “wedge” of unreality between the so-called “markets” and the reality of economic progress. From playing with Germany’s money to moar bailouts, and from Merkel’s enabling of Draghi’s excess to the reality that nothing has changed across the European region, in under 9 minutes, McWilliams brief tour-de-force is a must-watch before you ‘chase’ more performance with the herd. McWilliams concludes, however, with a darker edge of the inevitable endgame of a “slow trudge” to federalization (and loss of sovereignty) that will likely see Nigel Farage (and many others) apoplectic.

 


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/b6_NEZJJb3s/story01.htm Tyler Durden