Tag: news

Submitted by Bill Bonner via Acting-Man blog,

Alan Greenspan’s Shock Revelation

“We really can't forecast all that well. We pretend that we can but we can't. And markets do really weird things sometimes because they react to the way people behave, and sometimes people are a little screwy.”

 

– Alan Greenspan, speaking this week on “The Daily Show”

 

“Jobs Report Leaves Fed in Doubt,” was a big headline on Wednesday morning. Later in the day came this: “Dow down 54 on jobs concern.” What is the Fed in doubt about? To taper, or not to taper, that is the question. And why should a jobs report make any difference?

Oh, dear reader, where have you been? Don’t you know everyone now sits on the edge of his seat wondering when and how the Fed will back off from its massive QE program? And don’t you know the future of civilization hangs in the balance? On that point, we have a position… a thought… a reaction. Civilization hangs in the balance, but not in the way you think.

 

Asking for Trouble

 We have been trying to introduce a new way of looking at civilization. In short, we’ve tried to make it more civilized. What is the difference between a civilized community and a barbaric one? We have introduced a simple test. The civilized community relies mostly on cooperation and consent. The uncivilized community depends heavily on force and violence.

A French historian first introduced the word “civilization” less than 300 years ago. Since then there has been much argument about what it means. We enter the fray gingerly, but sure of ourselves. It only makes sense on our terms. A civilized community is peaceful; a barbaric one is not.

“Okay, Bill,” you may be saying to yourself. “I’ll give you that one… I guess. But what the hell difference does it make? What has it got to do with the jobs report?” Good questions. Glad you asked.

We know from bitter experience that trying to force economies to do what you want is a thankless task. Markets are fundamentally based on free exchange, cooperation, trust and trade. Force them in one direction or another and you are just asking for trouble.

As Alan Greenspan described this week, in an interview with John Stewart on “The Daily Show,” people are a little “screwy” from time to time. Which means they don’t necessarily go along with your central planning, no matter how good you think it is.

But still economists insist that, if they are allowed to monkey around with it, they can make an economy better. This is occasionally true. Said occasion is usually when they have already messed it up. By withdrawing some of their planning and programs, they may allow it to recover. Otherwise, there is no example in history where force has been successfully applied to economics.

 

Compounding Errors

But that doesn’t stop the PhDs from trying. The jobs report showed about 60,000 jobs missing – fewer jobs than economists had projected. Now, the erring economists will most likely compound their error by continuing to try to force the economy to do their bidding – force up the rate of consumer price increases and force down the number of Americans out of work.

If they really wanted to increase employment, that would be easy enough. They would encourage the feds to withdraw some of the laws that bully employers (health insurance… EEOC threats… overtime, etc.)… or some of the schemes that make it easy for potential employees to remain unemployed (disability… unemployment benefits… food stamps). As far as we know, those things are not on the table.

What is on the table is more QE. With regards to QE, the poles of possibility are as follows:

1. QE does nothing important. If this were so, there would be no reason to keep it.
2. QE is essential to the economy. If this were so, they couldn’t get rid of it… no matter what the jobs report says.

Most likely, QE lies somewhere in between… perhaps lost in the horse latitudes. It probably has little effect on the real economy. That is why the jobs report is so disappointing. But it probably has a great effect on the financial economy. That’s why the Dow sets new record highs almost every session.

The Fed is probably stuck with QE. Were it to stop, the stock market would likely tumble and the “wealth effect” the PhDs have been aiming for would quickly turn into a poverty effect.

Janet Yellen couldn’t stand it. She believes the Fed should use all its available weapons to force the economy to do what she wants it to do. She won’t be able to stand by, dagger in hand, when the market turns its back on her. Instead, she will stab.

And the Fed, which has lived by the sword of QE, will probably die by it too.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/MhPx3EJl_3E/story01.htm Tyler Durden

First: we are not suggesting Japan’s army is comprised of radioactive mutants – perhaps just those stationed within 10 kilometers of the Fukushima gift that keeps on giving alpha through gamma rays. We are merely saying that if one takes Abe’s latest deluded ramblings that Japan is “ready to counter China’s power” literally instead of merely more nationalistic bluster by a prime minister whose first term ended in the runs (literally), then the demographically crippled island nation that has a soaring food and energy inflation problem, sliding wages and radiation that comes in 100,000+ RDA dosage increments, would be well advised to have a few invincible X-Men in its army’s ranks if indeed it has any intention of taking on China. Because as Walter Sobchak would say, “this is not Man(churia).”

What else did the not so big man, with the very big ego (supposedly because he thinks doing Goldman’s reflationary bidding helps anyone besides Goldman’s year end bonus pool), say? Some very strange things – from the WSJ:”Japanese Prime Minister Shinzo Abe said he envisions a resurgent Japan taking a more assertive leadership role in Asia to counter China’s power, seeking to place Tokyo at the helm of countries in the region nervous about Beijing’s military buildup amid fears of an American pullback.” He added that “many nations were concerned that China was  attempting to use force to change the status quo in Asia, adding that  Tokyo’s role as the region’s leader is to urge Beijing not to follow such a path.“

Uhm, did he say “Tokyo’s role as the region’s leader“? Precisely in what is Tokyo a leader any more? Imported Chinese smog? Unsolicited gamma radiation? Goughing at the pump? Sex doll sales? That pretty much covers Tokyo’s current leadership areas in the region. Sadly, it is this kind of sociopathological self-delusion (and denial) that is the mark of the Japanese government, and why not only was Fukushima a guaranteed outcome (and has now become the worst radioactive catastrophe in history, nearly three years after the explosion), but why day by day, Japan’s society is slowly sinking into the Pacific. Mostly metaphorically, but also literally.

The absolutely hilarious snippets from the sociopath continue:

In an exclusive, wide-ranging interview with The Journal, Mr. Abe also defended his program of economic reforms against growing criticism that the package lacks substance—though he offered few details of new programs, or a timetable, that anxious foreign investors have been seeking.d

What can one say but LOL. But the funniest stuff was naturally reserved for how this feeble, mutagenic David is approaching the Chinese goliath.

“There are concerns that China is attempting to change the status quo by force, rather than by rule of law. But if China opts to take that path, then it won’t be able to emerge peacefully,” he added.

 

“So it shouldn’t take that path, and many nations expect Japan to strongly assert that. And they hope that as a result, China will take responsible action in the international community.”

 

Mr. Abe, whom China has criticized as attempting to whitewash Japan’s wartime actions and beef up its military, also said countries in the region shared concerns over Beijing’s arms buildup.

 

“It’s not just Japan. Many countries have expressed concerns over the increase in China’s military spending which is not transparent,” he said.

Actually it is just Japan, because unlike Japan which still lives in the 80s and thinks it is a superpower, still thinks the Nikkei 30000 is just within reach, still thinks it can restart its 30 or so nukes, still thinks that buying Rock Center was a brilliant idea, and the Walkman and Trinitron are the second coming of the iPod, the other countries in the region know to keep their mouth shut when it’s good for them.

We are far more amused and impressed by China’s resilience to putting Abe in his place. Then again, it is just as easy to bleed Japanese society dry by exchanging China’s massive trade surplus for Japanese labor on ever more-devalued terms.

In retrospect, perhaps it really is not too late for Japan to get that radioactive mutant army, because at the rate things are going that will very soon be its only hope…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/wsXhVB0HtV0/story01.htm Tyler Durden

First: we are not suggesting Japan’s army is comprised of radioactive mutants – perhaps just those stationed within 10 kilometers of the Fukushima gift that keeps on giving alpha through gamma rays. We are merely saying that if one takes Abe’s latest deluded ramblings that Japan is “ready to counter China’s power” literally instead of merely more nationalistic bluster by a prime minister whose first term ended in the runs (literally), then the demographically crippled island nation that has a soaring food and energy inflation problem, sliding wages and radiation that comes in 100,000+ RDA dosage increments, would be well advised to have a few invincible X-Men in its army’s ranks if indeed it has any intention of taking on China. Because as Walter Sobchak would say, “this is not Man(churia).”

What else did the not so big man, with the very big ego (supposedly because he thinks doing Goldman’s reflationary bidding helps anyone besides Goldman’s year end bonus pool), say? Some very strange things – from the WSJ:”Japanese Prime Minister Shinzo Abe said he envisions a resurgent Japan taking a more assertive leadership role in Asia to counter China’s power, seeking to place Tokyo at the helm of countries in the region nervous about Beijing’s military buildup amid fears of an American pullback.” He added that “many nations were concerned that China was  attempting to use force to change the status quo in Asia, adding that  Tokyo’s role as the region’s leader is to urge Beijing not to follow such a path.“

Uhm, did he say “Tokyo’s role as the region’s leader“? Precisely in what is Tokyo a leader any more? Imported Chinese smog? Unsolicited gamma radiation? Goughing at the pump? Sex doll sales? That pretty much covers Tokyo’s current leadership areas in the region. Sadly, it is this kind of sociopathological self-delusion (and denial) that is the mark of the Japanese government, and why not only was Fukushima a guaranteed outcome (and has now become the worst radioactive catastrophe in history, nearly three years after the explosion), but why day by day, Japan’s society is slowly sinking into the Pacific. Mostly metaphorically, but also literally.

The absolutely hilarious snippets from the sociopath continue:

In an exclusive, wide-ranging interview with The Journal, Mr. Abe also defended his program of economic reforms against growing criticism that the package lacks substance—though he offered few details of new programs, or a timetable, that anxious foreign investors have been seeking.d

What can one say but LOL. But the funniest stuff was naturally reserved for how this feeble, mutagenic David is approaching the Chinese goliath.

“There are concerns that China is attempting to change the status quo by force, rather than by rule of law. But if China opts to take that path, then it won’t be able to emerge peacefully,” he added.

 

“So it shouldn’t take that path, and many nations expect Japan to strongly assert that. And they hope that as a result, China will take responsible action in the international community.”

 

Mr. Abe, whom China has criticized as attempting to whitewash Japan’s wartime actions and beef up its military, also said countries in the region shared concerns over Beijing’s arms buildup.

 

“It’s not just Japan. Many countries have expressed concerns over the increase in China’s military spending which is not transparent,” he said.

Actually it is just Japan, because unlike Japan which still lives in the 80s and thinks it is a superpower, still thinks the Nikkei 30000 is just within reach, still thinks it can restart its 30 or so nukes, still thinks that buying Rock Center was a brilliant idea, and the Walkman and Trinitron are the second coming of the iPod, the other countries in the region know to keep their mouth shut when it’s good for them.

We are far more amused and impressed by China’s resilience to putting Abe in his place. Then again, it is just as easy to bleed Japanese society dry by exchanging China’s massive trade surplus for Japanese labor on ever more-devalued terms.

In retrospect, perhaps it really is not too late for Japan to get that radioactive mutant army, because at the rate things are going that will very soon be its only hope…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/wsXhVB0HtV0/story01.htm Tyler Durden

A key challenge for most investors is meeting return bogies, but as Citi notes in the following 6 slides, generating a 10% return in this low-yield environment is still possible (aside from riding short-squeezes in #N/A P/E stocks) as long as you have the intestinal fortitude for the kind of leverage required…

 

How to Earn 10% in a Low Yield Environment?

Although less acute than early in the year, a key challenge for at least some investors is meeting return bogies.

How Much Leverage is Needed to Earn 10%?

We looked at how much financial leverage is needed to earn 10% for select assets. Required leverage is certainly higher than the historical norm, but variations across the markets are extraordinary.

How Risky are Levered Positions?

With respect to what could happen to levered positions in a tail scenario (defined as the single worst monthly performance during the post-Lehman period), we find that the most resilient assets tend to be cash corporates.

We also looked at the likelihood of each asset generating a negative outcome, and again cash corporates tend to fair well.

We also looked at the chance of beating a 10% return bogey (post-Lehman era), and once cash corporates look fairly attractive.

And the Winner Is…

For various risk metrics we rank each asset relative to the overall group (from 1 to 13, with 1 being the best). Using the average score for our overall ranking, we find that corporates are compelling.

So there it is, levered loans is the most 'efficient' way to gain 10% on a risky/levered basis – oh aside from the fact that The Fed, just yesterday,. announced it plans to introduce new loan underwriting standards for just that business…

 

Source: Citi

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

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

As the status quo crumbles, the state responds in the only way it knows: expand control and become increasingly authoritarian.

The Grand Narrative of the 21st century is the legitimization of the authoritarian state. The authoritarian state comes in many ideological flavors, but retains the commonalities of central control. It may label the system it controls communist, socialist or capitalist, but these distinctions are semantic: the authoritarian state controls the system, by one means or another.

Regardless of which version of the 9/11 story you believe or disbelieve, the reality is the same: the U.S. is engaged in an Orwellian global war without end, a war that doesn't just justify monitoring every communication on the planet but actively requires monitoring every communication on the the planet.

The Federal Reserve has extended its control of the U.S. economy, transforming it into a wealth-skimming machine for the top 1/10th of 1% with access to the Fed's credit creation. The Fed claims independence from the U.S. government, but this is also merely semantics: the Fed and U.S. Treasury are simply two facets of the authoritarian state.

We see the same narrative playing out around the world. In socialist France, the central state is extending its control over what little of the economy is still quasi-private; in nominally communist China, any weakening of the economy that can't be papered over with bogus statistics is soon followed by nationalist propaganda hyping one red-button issue or another (Senkaku Islands, etc.) to distract the populace from the increasingly fragile "recovery" in China's asset-bubble-dependent economy.

As the status quo crumbles, the state responds in the only way it knows: expand control and become increasingly authoritarian. This is of course a key dynamic in why things are falling apart: increasing central control only further distorts the mechanisms in the economy that seek equilibrium by self-correcting means.

Why is the authoritarian state illegitimate? Among the many reasons, we can start with three: the authoritarian state is the enemy, always and in all places, of individual liberty and free expression/the free press, and the authoritarian state is intrinsically a failed state, for the mechanisms of centralization and authoritarian control are ontologically destabilizing, regardless of the ideological flavor of the system the state controls.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/8G0N9kvcCno/story01.htm Tyler Durden

Things would sure be a lot easier for NSA boss Keith Alexander if we had a dictatorship. Alexander said:

I think it’s wrong that that newspaper reporters have all these documents, the 50,000—whatever they have and are selling them and giving them out as if these—you know it just doesn’t make sense.

We ought to come up with a way of stopping it. I don’t know how to do that. That’s more of the courts and the policymakers but, from my perspective, it’s wrong to allow this to go on ….

(The quote starts at 21:06. But it’s worth watching this failed propaganda attempt from the beginning, to see the bizarre mix of bold-faced lies, pseudo-sincerity and New Age music.)

There’s a little thing called the “Constitution” … but Alexander doesn’t believe in it.

If you don’t count this as a veiled threat, please read this and this.

BONUS:

Proof that NSA Spying Is Not Very Focused On Terrorism

Prominent Liberal Unearths Evidence of New World Order

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/3KRtbFdoxO0/story01.htm George Washington

While no longer actively engaged in politcs, one of Ron Paul’s crowning achievements while in Congress, was to bring some much needed sunlight to the balance sheet, the activities, and secret bailouts of the Fed, and according to some, was being responsible for the “transaprency, openness, and forward guidance” approach to monetary policy. The paradox here, as the whole Taper – Non Taper shocking episode provied, is that the Fed itself is now caught in a reflexive Catch 22, and no longer can “renormalize” and extricate itself from its policy through “guidance” without in the process destroying everything it has achieved during the prior period of central planniing.

Still, despite Ron Paul’s unsung accomplishments there is much more to be done to expose just how actively the NY Fed’s trading desk participates in the fixing of the S&P500’s closing price day after day. For that, he will need the help of his son, Rand. Which is why as the Sunshine State News reports, “Sen. Rand Paul, R-Ky., is ramping up his opposition to President Barack Obama’s nomination of Janet Yellen to chair the Federal Reserve. Paul is teaming up with the Campaign for Liberty, chaired by his father former U.S. Rep. Ron Paul, R-Texas, to stand in opposition to Yellen and push legislation taking aim at the Fed.”

On Thursday, the Campaign for Liberty announced a video on the subject featuring Sen. Paul and John Tate, the president of the group.

 

“The Senate fight over Barack Obama’s Fed chair nominee is just around the corner,” Norm Singleton, the vice president of policy for the Campaign for Liberty, wrote supporters on Thursday. “And Senator Rand Paul has vowed to block the nomination until Harry Reid brings ‘Audit the Fed’ to the floor for a vote. This will be the fight of our lives — but this is our moment!

Will Paul and Paul succeed in getting some traction in the Democrat governed senate: the same Democrats who loathed the Fed when it was only in the news over how many trillions in bank bailouts it provided, but love it now that it is best known for monetizing the US deficit and funding various insolvent welfare programs? We doubt it, but we wish the luck.

Sadly, it is now far too late to change strategy and direction, and/or focus on anything besides salvage. Which is why it is perhaps best if Yellen et al are allowed unobstructed access to everything they want to engage in: print $100 billion a month? Fine, do it. Print $1 trillion? $1 quadrillion? Go for it!

If anything, encouraging America’s monetary politburo to hit their Weimar endgoal, is now in everyone’s best interest. Frankly, the reset can’t come fast enough.

Full clip

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/jDe0A9JuEns/story01.htm Tyler Durden

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

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

— PIMCO (@PIMCO) October 25, 2013

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

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

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

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

— PIMCO (@PIMCO) October 25, 2013

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

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

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

 

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

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

 

 

 

and the cycle appears to be shifting…

Via Citi,

Is consumer confidence set to turn?

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

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

 

Higher yields do not help confidence…

 

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

 

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

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

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

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

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

 

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

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

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

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