Category: zerohedge

The recent collapse in the forward guidance from Cisco and various other tech and telecom companies has been widely attributed to the world’s – and mostly China’s – anger at the NSA in the aftermath of the Snowden revelations, resulting in a dramatic collapse in both future visibility and orderbooks. This was admitted in a recent WSJ interview with the CEO of Qualcomm, Paul Jacobs, acknowledged U.S. restrictions on Chinese companies and revelations about surveillance by the National Security Agency are impacting its business in the fast-growing country.

“We are definitely seeing increased pressure,” said Mr. Jacobs in an interview with The Wall Street Journal. “All U.S. tech companies are seeing pressure.”

 

Mr. Jacobs stopped short of saying the pressure hurt its sales, but he did say it affected the way the company operated in China.

 

“[You] have to be very cautious,” he said. “We are always very careful with whatever steps we take. How we sell. How we interact.”

 

Qualcomm tries to be a good partner with some local Chinese manufacturers and build some of its computer chipsets in mainland China, he said. The company doesn’t build cutting edge technology there, but it does build some older trailing technologies in China.

 

Mr. Jacobs said it is “very delicate balancing act that goes on. There’s no question there is an impact.” In the fiscal year ended Sept. 29, Qualcomm generated $1 billion in revenue from China.

 

Mr. Jacobs’ remarks come as some big U.S. computer and software companies are reporting a sudden chill in China sales. On Nov. 14, Cisco Systems Inc. reported orders from China fell 18% and said its world-wide revenue would decline 8% to 10% in the current quarter, in part because of continued weakness in China.

 

Cisco executives were the most explicit so far in suggesting that Chinese customers, particularly those with government ties, may be cutting purchases of U.S. tech gear in response to fallout from the NSA revelations and the U.S. government’s de facto ban on telecom gear from China’s Huawei Technologies Co.

Blockback against US companies took a turn for the worse moments ago, when Qualcomm said China’s price regulator, National Development and Reform Commission (NDRC), has started an investigation of the mobile chipmaker under the Chinese Anti-Monopoly Law. According to Reuters, NDRC has advised that the substance of the investigation was confidential, the company said in a statement.

Qualcomm said it was not aware of any violation. Well, maybe not any violation of its own, but it certainly is aware of the NSA exposed violations, which are now impacting US corporations across the globe.

The NDRC is China’s top economic planning body and regulates prices. It has launched nearly 20 pricing-related probes into domestic and foreign firms in the last three years, according to official media reports and research published by law firms.

Qualcomm said it was not aware of any violation. Well, maybe not any violation of its own, but it certainly is aware of the NSA exposed violations, which are now impacting US corporations across the globe. For now, at least, the response has focused on telecom and internet companies, although should domestic pressure increase to punish more US corporations, it is likely that any company doing business in China (coughbloombergcough) will see increasingly more difficulty with staying in compliance, and in generating the kinds of sales and profits they have been used to. Hardly the thing America’s revenue-constrained companies need at this moment, especially with consensus expecting an unprecedented surge in profitability over the next two years to offset the collapse in actual top-line growth.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/mQeAw2x5nz0/story01.htm Tyler Durden

Looking ahead at the week ahead, data watchers will be kept fairly occupied before Thanksgiving. Starting with today, we will see US pending home sales with the Treasury also conducting the first of 3 bond auctions this week starting with a $32 billion 2yr note sale later. We will get more housing data tomorrow with the release of housing starts, home prices as well as US consumer confidence. Durable goods, Chicago PMI, initial jobless claims and the final UofM Consumer Sentiment print for November are Wednesday’s highlights although we will also get the UK GDP report for Q3. US Equity and fixed income markets are closed on Thursday but US aside we will get the BoE financial stability report, German inflation, Spanish GDP and Chinese industrial profit stats. Expect market activity to remain subdued into Friday as it will be a half-day for US stocks and bond markets. As ever Black Friday sales will be carefully monitored for consumer spending trends. So a reasonably busy, holiday-shortened week for markets ahead of what will be another crucial payrolls number the following week.

Monday, Nov 25

• Israel MPC: Consensus has policy rate unchanged at 1.00%.
• Germany Bundesbank’s Weidmann speaks at Harvard University
• US Pending Home Sales (Oct): consensus +2.0%, previous -5.6%
• Mexico CA Balance (Q3): GS USD-2.3bn, previous USD-6.0bn
• Taiwan IP (Oct): previous +1.1%yoy
• Also interesting: France Business Confidence (Nov)

Tuesday, Nov 26

• Hungary MPC: Consensus expects a cut of 20bps in policy rate to 3.20%
• US Consumer Confidence (Nov): Consensus 72.4, previous 71.2
• US Housing Starts (Oct): Consensus 920K, previous 891K
• US Richmond Fed Survey (Nov): consensus 3, previous 1
• South Africa GDP (Q3): Consensus +2.0%yoy, previous +2.0%yoy
• Hong Kong Trade Balance (Oct): consensus HKD-35.6bn yoy, previous HKD-42.0bn yoy
• Also interesting: US FHFA and S&P Case Shiller House Price Indexes (Sep)

Wednesday, Nov 27

• Brazil MPC: Consensus expect a hike of 50bps in policy rate to 10.00%yoy. The market will likely be looking for changes in the usually terse post-meeting policy statement for hints the Copom is getting ready to start to taper the pace of rate hikes to a more moderate 25bp at the January meeting. The odds are better than even that the central bank will keep the post meeting statement unchanged in order to maximize the market and credibility impact of the expected 50bp hike.
• Thailand MPC: Consensus has policy rate unchanged at 2.50%yoy
• US U. of Michigan Consumer Sentiment (Nov, final): Consensus 73.0, previous 72.0
• US Chicago PMI (Oct): Consensus 60.0, previous 65.9
• US Durable Goods Orders (Oct): Consensus -1.9%, previous +3.8%
• US Initial Jobless Claims: consensus 330K, previous 323K
• Japan Retail Sales (Oct): Consensus +2.1%yoy, previous +3.0%yoy
• UK GDP (Q3, rev.): Consensus +1.5%yoy, previous +1.5%yoy
• Mexico Trade Balance (Oct): previous USD+0.66bn
• New Zealand Trade Balance (Oct): Consensus NZD-350mn, previous NZD-1,234mn
• South Korea CA Balance (Oct): previous USD+5.7bn yoy
• Also interesting: Germany GFK Consumer Confidence (Dec)

Thursday, Nov 28

• UK CB issues Financial Stability Report followed by BoE governor Carney speech
• Sweden CB issues Financial Stability Report
• Germany Harmonized CPI (Nov, flash): consensus +1.2%yoy, previous +1.2%yoy
• Spain Harmonized CPI (Nov, flash): consensus +0.1%yoy, previous 0.0%yoy
• Euro Area Consumer Confidence (Nov, final): consensus -15.4, previous -15.4
• Japan Household Survey (Oct)
• Japan Core CPI (Oct): Exp. +0.9%yoy
• Japan IP (Oct): consensus +6.3%yoy, previous +5.1%yoy
• Brazil IGP-M Inflation (Nov): Previous 5.27% yoy
• Canada CA Balance (Q3): consensus USD-14.4bn, previous USD-14.6bn
• Switzerland GDP (Q3): Consensus +1.8%yoy, previous +2.5%yoy
• Philippines GDP (Q3): Consensus +7.1%yoy, previous +7.5%yoy
• Also interesting: Spain GDP (Q3, rev.), Italy Business Confidence (Nov), South Korea IP (Oct)

Friday, Nov 29

• Euro Area Harmonized CPI (Nov, flash): Consensus +0.8%yoy, previous +0.7%yoy
• France Consumer Confidence (Oct)
• UK GFK Consumer Confidence (Nov): consensus -10, previous -11
• Japan Housing Starts (Oct): consensus +5.0%yoy, previous +19.4%yoy
• South Korea IP (Oct): Previous -3.6% yoy
• Turkey Trade Balance (Oct): consensus USD-7.2bn, previous USD-7.5bn
• South Africa Trade Balance (Oct): consensus ZAR-13.5bn, previous ZAR-12.0bn
• Thailand Current Account Balance (Oct): previous USD-534mn
• Canada GDP (Sep): consensus +0.2%mom, previous +0.3%mom
• Sweden GDP (Q3): Consensus +0.4%yoy, previous +0.1%yoy
• Also interesting: India GDP (Q3), Taiwan GDP (Q3, final), UK Mortgage Approvals and Consumer Credit (Oct)

 

Visually, from SocGen:

TOP ISSUES FOR THE WEEK AHEAD

FINALISING A GRAND COALITION DEAL

Chancellor Merkel Friday expressed hope that agreement on the Grand Coalition would be reach over the coming week. As we detailed last week, the  agreement is set to include a minimum wage. Although the sum of proposals under discussion amount to just under 2% of GDP, the Chancellor has already warned that measures must be funded. Once agreed, the 470,000 members of the SPD will then voted on the proposal. Media reports suggest that the result will only be known on 14 December. Our expectation is that the Grand Coalition will receive support from the SPD members, but it is not a foregone conclusion. Moreover, as we have highlighted on several occasions, there is a real risk that a Grand Coalition will not survive the full electoral term.

UK AUTUMN STATEMENT

As we detail inside this edition of the Week Ahead, the OBR is due to provide the next update of its UK public finance projections on 5 December, alongside  the government’s Autumn Statement. Special factors have helped flatter the number and the OBR should confirm its March judgement that while the deficit path is still met, the debt path is not. Gilt issuance should be revised down by £2bn to £153.7bn for the current 2013-14 fiscal year. 2014-15 issuance should be £152.7bn, far lower than the DMO’s previous illustrative projection of £178bn given at the March Budget.

US DURABLE GOODS TO CONTRACT

We look for a decline of 3.2% in October durable goods, erasing the bulk of the 3.8% gain in the previous month. Moreover, this decline will in our opinion not just be limited to the more volatile transportation component. US markets will thus head off for Thanksgiving in the expectation that there is little risk of tapering at the 17-18 December FOMC. The key report will be the employment report due the following week, but we believe the Fed will want more evidence than that provided by just one report to change policy and maintain our call for taper in March.

A FINAL 50BP RATE HIKE FROM BRAZIL

The COPOM is expected to deliver a final 50bp rate hike this week taking the Selic target rate to 10%. We then expect the BCB to pause. Once the Fed
starts to taper, the BCB could again be facing the dilemma of stemming currency depreciation and its inflationary impact and not further dampen an already below trend economy.

Sources: Deutsche, Goldman, SocGen

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/jO4gOq2z5Gg/story01.htm Tyler Durden

• Washington turns bond market upside (FT)
• China Air-Zone Move Expands Field of Islands Spat With Japan (BBG); Japan rejects China claim on airspace over disputed islands (FT)
• ‘Great Satan’ meets ‘Axis of Evil’ and strikes a deal (Reuters)
• Iran Pact Faces Stiff Opposition (WSJ)
• Allies Fear a US Pullback in Mideast (WSJ)
• India to resume paying Iran in Euros (Economic Times)
• At ‘Business Insider,’ it’s time to sell (USA Today)
• Auto and Shipping Firms Among Potential Iran Deal Winners (BBG)
• More ECB currency war jawboning: ECB’s Hansson Says Rate Cut Options Not Fully Exhausted (BBG)
• Spy World Links Plus Obama Ties Stoke Concern About NSA Review (BBG)
• A disunited Europe will struggle even to disintegrate (FT)
• Europe needs new dream to revive fortunes (Reuters)
• Microsoft Says Initial Xbox One Sales Exceed 1 Million (BBG)
• Europe Twin Woes Fester in Draghi Job-to-Inflation Fight (BBG)
• Norway poised to relax rules to fight house price deflation (BBG)
• Bank of America Intern’s 5 A.M. E-Mail Before Death Worried Mom (BBG)

 

Overnight Media Digest

WSJ

* A bitterly divided Senate voted Thursday to eliminate filibusters for most presidential nominees, a momentous and politically risky step that limits the ability of Republicans to block President Obama’s choices for executive-branch and most judicial posts.

* Sales of convertible bonds are booming, as investors seeking to benefit from the roaring U.S. stock rally rush to purchase debt that can convert into shares.

* Charter Communications is nearing an agreement with banks to borrow money for a bid for Time Warner Cable , according to people familiar with the situation.

* The Dow industrials vaulted past another milestone as stocks closed above 16,000 for the first time, extending a record run fueled by optimism for a recovering global economy and continuing low interest rates.

* The U.S. plans to sell its remaining shares in General Motors by year-end, completing the final piece of the government’s controversial bailout of the nation’s largest auto maker.

* The Financial Industry Regulatory Authority is highlighting a fast-track program it began earlier this year to go after what it calls “high-risk brokers.”

* Janet Yellen’s confirmation as the next Federal Reserve chief became a virtual lock Thursday when a Senate committee approved her nomination and Senate Democrats eased the confirmation process for most presidential nominees.

* After 15 months of appeals and an eight-day retrial, a dispute between Apple Inc and Samsung Electronics Ltd over smartphone patents has come nearly full circle.

* UBS AG has reached an immunity deal with European Union antitrust authorities that will spare the giant Swiss bank from further fines for manipulation of benchmark interest rates, according to people familiar with the matter.

 

NYT

* A software engineer from Springfield, Missouri, Lawrence Blankenship is putting his money on PeerCoin, one of the biggest of the virtual currencies that are being promoted as alternatives to bitcoin.

* Carlson, the global hospitality and travel company, said on Friday that it had authorized a review of strategic alternatives including a possible sale of TGI Friday’s restaurants.

* A former top executive at the Credit Suisse Group was sentenced to two and a half years in prison on Friday for inflating the value of mortgage bonds as the housing market collapsed.

* The regulator of accounting firms in the United States said on Friday that Deloitte & Touche, for the second consecutive year, had failed to correct deficiencies in its audit procedures to its satisfaction.

* Skip Hop agreed Friday to sell a majority stake in itself to Fireman Capital Partners, a consumer-focused investment firm. Financial details of the transaction weren’t disclosed, but people briefed on the matter said that the deal was valued at nearly $60 million.

* Activist investor William Ackman said on Friday that he intended to take his high-stakes bet against Herbalife, the nutritional supplements company, “to the end of the earth.”

 

Canada

THE GLOBE AND MAIL

* Canada’s Finance Minister Jim Flaherty is once again asking opposition parties for their best ideas on the upcoming federal budget, but only if they cost the government little or no money, or don’t involve raising taxes.

* Canada’s commitment to NATO is being questioned by the military alliance, says its deputy secretary-general Alexander Vershbow, who suggests Canada is backing away.

* Protesters in Thailand’s capital entered the Finance Ministry compound on Monday in an escalating campaign to topple the government of Prime Minister Yingluck Shinawatra.

Reports in the business section:

* A report on gross domestic product out on Friday is expected to show third-quarter economic activity in Canada quickened to an annual 2.5 percent pace after growth of 1.7 percent and 2.2 percent, respectively, in the previous two quarters.

* The drumbeat of plant closings by manufacturers in Canada continued on Friday as CCL Industries Inc said it will close its aerosol manufacturing plant by the middle of 2015. The plant will begin winding down operations early next year, eliminating 170 jobs in Penetanguishene, Ontario, northwest of Toronto. ()

NATIONAL POST

* A senior Somali government official wants Canadians to pay closer attention to youths to make sure they are not being influenced by radical preachers trying to lure them into taking up arms in his country.

* The long-standing quest to bring an NFL team to Toronto has a new and unexpected ally in the form of New Jersey-b
orn rocker Jon Bon Jovi, who is part of a small group planning to bid for the Buffalo Bills and move them north when the team’s aging owner dies.

FINANCIAL POST

* Investors are going to have to work far harder in 2014 to replicate this year’s bumper gains by turning over more trades or pushing out into riskier investments.

 

China

PEOPLE’S DAILY

– China will focus on its recent campaign against price manipulation in six industries — aviation, daily chemicals, automobiles, telecommunications, medicals and home appliances, officials at the National Development and Reform Commission, the country’s top economic planners, said.

– A commentary by this mouthpiece of the ruling Communist Party of China (CPC) said Japan’s distortion of history to cover its war crimes means it will not be able to keep harmonious relationship with the international society.

CHINA SECURITIES JOURNAL

– Participants at the annual China Fortune Forum over the weekend forecast that 2014 will be the starting point of a new round of sweeping reforms in the country after a crucial CPC central committee plenum mapped out reform plans earlier this month.

– Economists forecast that China’s economy is likely to grow 7.7 percent in 2014, slightly slower than an estimated 7.8 percent for 2013, with the consumer price index (CPI) dropping to 2.7 percent next year from a forecast of 3.2 percent for this year.

SHANGHAI SECURITIES NEWS

– The China Banking Regulatory Commission (CBRC) has submitted new proposals relating to relaxing curbs on the country’s private banks to the State Council, the cabinet, for approval, Chen Sheng, a CBRC official, told a forum in Shanghai.

– The Dalian Commodity Exchange may launch fibreboard and veneer board futures on Dec. 6 after the China Securities Regulatory Commission announced on Friday that it had allowed the exchange to launch the futures.

CHINA DAILY

– Mercedes-Benz marked another step in the rapid expansion of its network of dealerships in China when it opened its latest retail in Shanghai.

 

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Alcoa (AA) upgraded to Buy from Neutral at Goldman
Bloomin’ Brands (BLMN) upgraded to Outperform from Market Perform at Raymond James
CDW Corporation (CDW) upgraded to Overweight from Equal Weight at Barclays
Caterpillar (CAT) upgraded to Buy from Neutral at BofA/Merrill
Finish Line (FINL) upgraded to Neutral from Underperform at Sterne Agee
Green Dot (GDOT) upgraded to Buy from Hold at Jefferies
R.R. Donnelley (RRD) upgraded to Buy from Hold at Benchmark Co.

Downgrades

Brocade (BRCD) downgraded to Neutral from Buy at ISI Group
Campbell Soup (CPB) downgraded to Neutral from Buy at Goldman
Clorox (CLX) downgraded to Sell from Neutral at Goldman
Deere (DE) downgraded to Market Perform from Outperform at BMO Capital
JetBlue (JBLU) downgraded to Underperform from Market Perform at Raymond James
PAA Natural Gas Storage (PNG) downgraded to Neutral from Buy at UBS
Schnitzer Steel (SCHN) downgraded to Underperform from Hold at Jefferies

Initiations

8×8, Inc. (EGHT) initiated with a Buy at Deutsche Bank
8×8, Inc. (EGHT) initiated with an Overweight at Barclays
AmSurg (AMSG) initiated with an Equal Weight at Barclays
Burger King (BKW) initiated with a Buy at Goldman
Church & Dwight (CHD) initiated with a Buy at Goldman
Criteo (CRTO) initiated with a Buy at Deutsche Bank
Criteo (CRTO) initiated with an Outperform at William Blair
Criteo (CRTO) initiated with an Overweight at JPMorgan
Energizer (ENR) initiated with a Neutral at Goldman
Essent Group (ESNT) initiated with an Outperform at Keefe Bruyette
Flowserve (FLS) initiated with a Buy at SunTrust
Navigator Holdings (NVGS) initiated with an Outperform at Imperial Capital
ONEOK (OKE) initiated with an Outperform at RW Baird
Plains All American (PAA) reinstated with a Buy at Goldman
Plains GP Holdings (PAGP) initiated with a Buy at UBS
Plains GP Holdings (PAGP) initiated with a Conviction Buy at Goldman
Plains GP Holdings (PAGP) initiated with a Market Perform at Wells Fargo
Praxair (PX) initiated with a Neutral at UBS
Springleaf (LEAF) initiated with a Buy at Citigroup
Springleaf (LEAF) initiated with an Outperform at Keefe Bruyette
Springleaf (LEAF) initiated with an Overweight at Barclays
Surgical Care Affiliates (SCAI) initiated with a Buy at Citigroup
Surgical Care Affiliates (SCAI) initiated with a Neutral at Goldman
UMB Financial (UMBF) initiated with a Market Perform at Wells Fargo
Zoetis (ZTS) initiated with a Market Perform at William Blair

HOT STOCKS

Microsoft (MSFT) said sold over 1M Xbox One consoles in less than 24 hours
The Centers for Medicare & Medicaid Services to lower 2014 home health care payments less than proposed (AMED, GTIV, LHCG, AFAM)
Pfizer India (PFE), Wyeth India to merge
Giant Interactive (GA) received proposal to be acquired for $11.75 per share
Wi-LAN (WILN), InfoSonics (IFON) signed wireless license, terms confidential

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Qihoo 360 (QIHU), Tower Group (TWGP)

Companies that missed consensus earnings expectations include:
Seadrill (SDRL)

NEWSPAPERS/WEBSITES

• Top JPMorgan Chase (JPM) attorney Stephen Cutler was confrontational with regulators Daniel Stipano of the Office of the Comptroller of the Currency and Deb Morris of the Consumer Financial Protection Bureau at a conference. “At what point does this stop?” he said, referring to record-setting fines for JPMorgan and other large banks. “We should all be concerned,” he added, “because at a certain point people become immune to the numbers,” the Wall Street Journal reports
• Services union Ver.di called for strikes today, over wages and benefits, at two of Amazon.com’s (AMZN) German locations, and threatened further action as the year’s busiest shopping season sets in, the Wall Street Journal reports
• PSA Peugeot Citroen (PEUGY) is interviewing candidates to replace CEO Philippe Varin, after Chinese partner Dongfeng said a deeper alliance under negotiation should be accompanied by management change, sources say, Reuters reports
• Lloyds Banking Group (LYG) will probably sell 30% to 50% of its stake in the 631 bank branches being rebranded as TSB when the new entity floats on the stock market in 2014, according to the Sunday Telegraph reports, Reuters reports
• Dish Network (DISH) shareholders are asking a Nevada judge to exclude the company’s chairman and controlling shareholder, Charlie Ergen, from the bankruptcy court auction of LightSquared, Bloomberg reports
• A breakup of Time Warner Cable (TWC), which Comcast (CMCSA) and Charter Communications (CHTR) are said to be considering as part of a joint bid, would let the industry consolidate while potentially sidestepping regulatory hurdles, Bloomberg reports

BARRON’S

Sirius XM (SIRI) could rise 50%
Home Depot (HD), Coach (COH), others (KSS, BBBY, M, CHS, URBN, DG, DDS) could benefit this holiday season
An acquisition could drive Berkshire Hills Bancorp (BHLB) higher
Qualcomm (QCOM) shares could rise 20%
Investors should wait on Intel (INTC)

SYNDICATE
DHT Holdings (DHT) announces sale of $110M of equity in private placement
Del Frisco’s (DFRG) files to sell 6.2M shares of common stock for holders
HealthSouth (HLS) files to sell 1.12M shares of stock, 5.4M warrants for holders
Taminco (TAM) files to sell $242.7M shares for Apollo Group affiliates

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/fAefXKZ0mNs/story01.htm Tyler Durden

The protesters are taking over:

BREAKING: Thai protesters burst into Foreign Ministry compound after taking over Finance Ministry.

— The Associated Press (@AP) November 25, 2013

And so we have another nation where the people are less than delighted with its government and demand a change. From BBC:

Anti-government protesters forced their way into the finance ministry, as tens of thousands marched on a second day of demonstrations in Bangkok.

 

The protesters, who began their action over the weekend, want the government of Prime Minister Yingluck Shinawatra to step down.

 

After a huge rally on Sunday, crowds marched on Monday to several different locations in the city. The protests have been triggered by a controversial political amnesty bill. The legislation, which the opposition say would have allowed ousted leader Thaksin Shinawatra – the current prime minister’s brother – to return to Thailand without serving a jail sentence for corruption, failed to pass in the Senate earlier this month.

 

But the proposed legislation led to an fresh outbreak of street protests, reigniting simmering political divisions and raising the spectre of renewed political turmoil in the South East Asian nation.

 

On Monday the anti-government protesters, who are led by a former opposition Democratic Party lawmaker, marched to state offices, military headquarters and television stations.

 

Campaign leader Suthep Thaugsuban had said the protest would be peaceful, with crowds “blowing whistles and handing out flowers”.

 

But at the finance ministry, hundreds of people swarmed into the compound.

 

“Tomorrow [Tuesday] we will seize all ministries to show to the Thaksin system that they have no legitimacy to run the country,” AFP news agency quoted Mr Suthep as saying.

 

“We have stood by silently while her [PM Yingluck Shinawatra’s] brother calls the shots and she runs the country into the ground with loss-making policies,” Reuters news agency quoted protester Suwang Ruangchai, 54, as saying.

 

Sunday’s demonstration drew an estimated 100,000 people, who called on the government to step down.

 

 

Protesters marched to places including military HQ in Bangkok on Monday

An estimated 100,000 opposition supporters protested in Bangkok on Sunday

 

Tens of thousands of government supporters also held a rally on Sunday

It seems that the Greek riotcam, which had been permanently removed from Syntagma square as Greeks are now too bored to even stage protests in front of parliament, has found a new, if temporary, home.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/_cEdakwKL20/story01.htm Tyler Durden

The only thing that prevents us from going all in short the S&P following the revelation that Goldman’s first revealed top trade of 2014 is to go long the S&P Dec 2014 futures with a target of 2250 and a close below 1855, is that the reco is not from Tom Stolper but his colleague Noah Weisberger whose muppet wipe out record is not quite as prominent. Still, for Goldman clients to buy S&P futs, Goldman has to sell it to them, and as always – do what Goldman does, not what it says.

Recommended Top Trades for 2014

Longer-term structural views are expressed in our Top Trade recommendations. These are typically managed with a wide stop, and assessed on the basis of whether the fundamentals continue to support the medium-term investment theme.

1) Open long SP 500 Dec 14 Future and (funded out of) short AUD/USD Dec 14 Future, opened at 1986.8 on 25 Nov 2013, with a target of 2250 and a stop on a close below 1855, currently at 1986.8.

More from Goldman’s Weisberger:

1. Top Trade Recommendation #1: Long S&P short AUD for a target of +c13% and a stop loss of –c6.5%

On Friday the US equity market closed on fresh highs, with the S&P 500 climbing to 1804, amidst moderating longer dated US yields. Oil prices moderated a bit, and EM currencies continued to weaken. The Yen continued to weaken too, with last week’s move below 100 still intact. And the USD strengthened against most major crosses. In early action, Asian markets were dominated by further gains in the Nikkei and $/JPY.

Last week, we released our new 2014 economic and market forecasts and list of 2014 Top Ten market themes (see Global Viewpoint 13/05, Nov 20, 2013). And beginning with today’s Global Market Daily, we will be revealing our initial Top Trade Recommendations for 2014, one trade a day for the next several days (interrupted by the US Thanksgiving holiday), much as we did last year. The purpose of the Top Trade Recommendation list is, as always, to connect specific and actionable trade ideas to the set of key market themes that are likely to play out over the course of the year and that we expect to form the backbone of our strategic approach to markets for the year to come. While our initial list will be comprehensive, and connect back to the economic and market forces as we see them currently, we are likely to add to the list of Top Trade Recommendations (along with our usual slate of tactical trade recommendations) as the year progresses, as our views evolve, and as market risks and opportunities shift.

The first Top Trade Recommendation for 2014 is to be long the S&P 500 accompanied by a short AUD position (vs. the USD), for an upside target of +c13% from current levels, and a stop loss of –c6.5%. This reflects what is perhaps the largest overarching theme of our market outlook – a belief that DM equities are well placed as long as US yields do not rise too quickly. The specific implementation of this trade recommendation that we will track is a long position in Dec 2014 S&P 500 futures (BBERG ticker SPZ4, currently at 1774.4), and a corresponding short position in Dec 2014 AUDUSD futures (BBERG ticker ADZ4, currently at 89.31). Given our forecasts for both assets, with an S&P year-end target of 1900, and a year-end AUD target vs. the USD of 0.85, we see scope for both “legs” of the trade to generate potential returns. Combining these assets, S&P Dec futures in AUD terms (also using the Dec 14 future) is currently at 1986.8, with an initial target of 2250, which is about in line with the expected moves in each asset separately, and a stop on a close below 1855.

2. Long the S&P 500: “Earn the DM risk premium…”

This combination trade recommendation captures several elements of our Top Ten market views, as enumerated in the Global Viewpoint: (1) Showtime for the US/DM recovery, (2) forward guidance in an above trend world, (3) earn the DM equity risk premium, hedge the risk and (9) commodity downside risks grow.
Core to both our economic and market views for next year, is that a US growth acceleration will materialize, with real GDP growth expected to reach 3.5% mid-year, and remain there for the duration of 2014. Our 2014 US economic growth views remain meaningfully above consensus, and given the stop-start nature of the recovery so far, the US equity market – despite a strong 2014 – likely still needs convincing that growth, and not merely risk preference, is a viable driver from here.

At the same time, we think the main case for US equities is that the gap between real bond yields and earnings yields remains unusually high, in an environment where recovery should continue to convince investors that the economic backdrop no longer justifies this. The earnings yield on the SPX is around 6.5% even as the real 10-year bond yield is firmly below 1% and – on current forward prices – expected to stay low for at least another two years. Even if growth moves above trend, as we envisage in our forecasts, we do not expected the Fed to hike rates for two more years. And even if they taper their asset purchases (as we expect to occur in early 2014), this will likely be coupled with a heavy dose of guidance, to convince the market that it is committed to easy policy.

Both better US growth views, a favorable policy backdrop, and still attractive risk premia support long exposure to S&P 500, which is also in line with our US strategy team’s end-2014 target of 1900, predicated on stable multiples and expanding earnings. If bond yields do not rise much in the face of better growth, we think the risks are to an earlier and faster climb in equities. We are forecasting higher returns in other DM equity markets – and these may be viable alternatives – but the US story is still the most reliably linked to the part of our economic outlook where we have the most confidence.

3. Offset by a short AUD position: “…Hedge the risk “

As we have stated, the key risk to our upbeat equity market views for 2014 is that, along the way to above trend real US GDP growth, rates respond more dramatically than our baseline path envisages and so the spread of earning yield to bond yield closes from the “other” side. The risk we worry about most is that a gradual rise in ten-year yields to 3.25% by year’s end could be supplanted by a bout(s) of more wrenching moves lower in rates. As we have argued in the past, US assets, and US equities in particular, ought to be able to ultimately weather such a storm, given that the proximate driver of any rate pressures will most likely be better US growth outcomes. Like the “taper tantrum” of 2013, US equities may struggle for a time but in our estimation, EM markets – particularly FX — are most at risk from a sharp US rates sell off.

The ideal hedge against this risk would be a position that: a) is correlated with US/DM equities, b) that we expect to pay off even in our central case, and c) that is likely to perform better under scenarios in which US yields rise more rapidly. While there are several potential implementations for this “earn the risk premia, hedge the risk” notion, a short AUD position generally meets these criteria well. First, AUD is a cyclical currency, and tends to be moderately positively correlated with the S&P 500 and about matches its volatility. Over the last year or so, the AUD has also become increasingly negatively correlated with US rates (more so than other candidate currencies), which is exactly the characteristic that we seek.

In addition, we think the AUD is facing its own headwinds, and from a pure currency perspective, relative to most other G10 currencies and major EMs, it is a currency where we still expect reasonable declines. Despite its typical cyclical characteristics, the AUD is facing structural headwinds from domestic dynamics, hence limiting its upside even in a better growth world, with policy
makers there open a bit to further currency depreciation to help boost prospects at home and we expect another rate cut from the RBA, even as others consider a (slow) shift to monetary tightening.. Second, it is also largely a commodity currency and more levered to China-driven, commodity-driven growth impulses. And central to our economic and market thinking for the year, is that the global growth impulse will be US driven, focused on improving consumer and capex spending, with EM and China stability a function of external DM strength, rather than self-made, with most commodity prices expected to moderate over the course of the year. These factors underscore our FX forecast for AUD at 0.85 by year end.

4. Putting it all together

The long S&P 500/short AUD Top Trade Recommendation captures several key themes in our 2014 outlook, and highlights a broader “philosophy” of how we tend to think about integrating macroeconomic views and market implementations, though we are open to a number of variants on this theme. This “pair” trade gives us access to the upside equity implications of our outlook, while hedging out a key risk to our broader views – a sharp rates sell off – with an asset that we think will also be facing fundamental downward pressures of its own. The volatility of the pair is similar to the volatility of the two individual legs given the positive correlation between AUD and SPX.

We do see several potential stumbling blocks to the first of our 2014 Top Trade Recommendations. First, should growth views disappoint meaningfully, we do not think the AUD leg would provide sufficient protection and equity risk could widen out again, though we do think long equity positions could still do well in a moderate (and below our expectations) growth backdrop. If the market worried about the US growth picture, while relaxing more about the outlook in China (or Australia itself) that would be particularly risky for the pair, though we think that combination is unlikely. In addition, any shift in global preferences for reserve diversification could undermine expected AUD weakness. Lastly, both of these assets have had significant moves already. The S&P 500 has had a stellar 2013, hitting fresh highs only last week, and the AUD has come under pressure in the last few days. So it may be that a somewhat better entry point appears in the near term. Our goal with the Top Trades is to lay out big picture themes that we think have significant return potential, more than to finesse the timing. And we think these moves could well extend, and have set stops and targets accordingly.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/LSw-PakFuk4/story01.htm Tyler Durden

The only thing that prevents us from going all in short the S&P following the revelation that Goldman’s first revealed top trade of 2014 is to go long the S&P Dec 2014 futures with a target of 2250 and a close below 1855, is that the reco is not from Tom Stolper but his colleague Noah Weisberger whose muppet wipe out record is not quite as prominent. Still, for Goldman clients to buy S&P futs, Goldman has to sell it to them, and as always – do what Goldman does, not what it says.

Recommended Top Trades for 2014

Longer-term structural views are expressed in our Top Trade recommendations. These are typically managed with a wide stop, and assessed on the basis of whether the fundamentals continue to support the medium-term investment theme.

1) Open long SP 500 Dec 14 Future and (funded out of) short AUD/USD Dec 14 Future, opened at 1986.8 on 25 Nov 2013, with a target of 2250 and a stop on a close below 1855, currently at 1986.8.

More from Goldman’s Weisberger:

1. Top Trade Recommendation #1: Long S&P short AUD for a target of +c13% and a stop loss of –c6.5%

On Friday the US equity market closed on fresh highs, with the S&P 500 climbing to 1804, amidst moderating longer dated US yields. Oil prices moderated a bit, and EM currencies continued to weaken. The Yen continued to weaken too, with last week’s move below 100 still intact. And the USD strengthened against most major crosses. In early action, Asian markets were dominated by further gains in the Nikkei and $/JPY.

Last week, we released our new 2014 economic and market forecasts and list of 2014 Top Ten market themes (see Global Viewpoint 13/05, Nov 20, 2013). And beginning with today’s Global Market Daily, we will be revealing our initial Top Trade Recommendations for 2014, one trade a day for the next several days (interrupted by the US Thanksgiving holiday), much as we did last year. The purpose of the Top Trade Recommendation list is, as always, to connect specific and actionable trade ideas to the set of key market themes that are likely to play out over the course of the year and that we expect to form the backbone of our strategic approach to markets for the year to come. While our initial list will be comprehensive, and connect back to the economic and market forces as we see them currently, we are likely to add to the list of Top Trade Recommendations (along with our usual slate of tactical trade recommendations) as the year progresses, as our views evolve, and as market risks and opportunities shift.

The first Top Trade Recommendation for 2014 is to be long the S&P 500 accompanied by a short AUD position (vs. the USD), for an upside target of +c13% from current levels, and a stop loss of –c6.5%. This reflects what is perhaps the largest overarching theme of our market outlook – a belief that DM equities are well placed as long as US yields do not rise too quickly. The specific implementation of this trade recommendation that we will track is a long position in Dec 2014 S&P 500 futures (BBERG ticker SPZ4, currently at 1774.4), and a corresponding short position in Dec 2014 AUDUSD futures (BBERG ticker ADZ4, currently at 89.31). Given our forecasts for both assets, with an S&P year-end target of 1900, and a year-end AUD target vs. the USD of 0.85, we see scope for both “legs” of the trade to generate potential returns. Combining these assets, S&P Dec futures in AUD terms (also using the Dec 14 future) is currently at 1986.8, with an initial target of 2250, which is about in line with the expected moves in each asset separately, and a stop on a close below 1855.

2. Long the S&P 500: “Earn the DM risk premium…”

This combination trade recommendation captures several elements of our Top Ten market views, as enumerated in the Global Viewpoint: (1) Showtime for the US/DM recovery, (2) forward guidance in an above trend world, (3) earn the DM equity risk premium, hedge the risk and (9) commodity downside risks grow.
Core to both our economic and market views for next year, is that a US growth acceleration will materialize, with real GDP growth expected to reach 3.5% mid-year, and remain there for the duration of 2014. Our 2014 US economic growth views remain meaningfully above consensus, and given the stop-start nature of the recovery so far, the US equity market – despite a strong 2014 – likely still needs convincing that growth, and not merely risk preference, is a viable driver from here.

At the same time, we think the main case for US equities is that the gap between real bond yields and earnings yields remains unusually high, in an environment where recovery should continue to convince investors that the economic backdrop no longer justifies this. The earnings yield on the SPX is around 6.5% even as the real 10-year bond yield is firmly below 1% and – on current forward prices – expected to stay low for at least another two years. Even if growth moves above trend, as we envisage in our forecasts, we do not expected the Fed to hike rates for two more years. And even if they taper their asset purchases (as we expect to occur in early 2014), this will likely be coupled with a heavy dose of guidance, to convince the market that it is committed to easy policy.

Both better US growth views, a favorable policy backdrop, and still attractive risk premia support long exposure to S&P 500, which is also in line with our US strategy team’s end-2014 target of 1900, predicated on stable multiples and expanding earnings. If bond yields do not rise much in the face of better growth, we think the risks are to an earlier and faster climb in equities. We are forecasting higher returns in other DM equity markets – and these may be viable alternatives – but the US story is still the most reliably linked to the part of our economic outlook where we have the most confidence.

3. Offset by a short AUD position: “…Hedge the risk “

As we have stated, the key risk to our upbeat equity market views for 2014 is that, along the way to above trend real US GDP growth, rates respond more dramatically than our baseline path envisages and so the spread of earning yield to bond yield closes from the “other” side. The risk we worry about most is that a gradual rise in ten-year yields to 3.25% by year’s end could be supplanted by a bout(s) of more wrenching moves lower in rates. As we have argued in the past, US assets, and US equities in particular, ought to be able to ultimately weather such a storm, given that the proximate driver of any rate pressures will most likely be better US growth outcomes. Like the “taper tantrum” of 2013, US equities may struggle for a time but in our estimation, EM markets – particularly FX — are most at risk from a sharp US rates sell off.

The ideal hedge against this risk would be a position that: a) is correlated with US/DM equities, b) that we expect to pay off even in our central case, and c) that is likely to perform better under scenarios in which US yields rise more rapidly. While there are several potential implementations for this “earn the risk premia, hedge the risk” notion, a short AUD position generally meets these criteria well. First, AUD is a cyclical currency, and tends to be moderately positively correlated with the S&P 500 and about matches its volatility. Over the last year or so, the AUD has also become increasingly negatively correlated with US rates (more so than other candidate currencies), which is exactly the characteristic that we seek.

In addition, we think the AUD is facing its own headwinds, and from a pure currency perspective, relative to most other G10 currencies and major EMs, it is a currency where we still expect reasonable declines. Despite its typical cyclical characteristics, the AUD is facing structural headwinds from domestic dynamics, hence limiting its upside even in a better growth world, with policy makers there open a bit to further currency depreciation to help boost prospects at home and we expect another rate cut from the RBA, even as others consider a (slow) shift to monetary tightening.. Second, it is also largely a commodity currency and more levered to China-driven, commodity-driven growth impulses. And central to our economic and market thinking for the year, is that the global growth impulse will be US driven, focused on improving consumer and capex spending, with EM and China stability a function of external DM strength, rather than self-made, with most commodity prices expected to moderate over the course of the year. These factors underscore our FX forecast for AUD at 0.85 by year end.

4. Putting it all together

The long S&P 500/short AUD Top Trade Recommendation captures several key themes in our 2014 outlook, and highlights a broader “philosophy” of how we tend to think about integrating macroeconomic views and market implementations, though we are open to a number of variants on this theme. This “pair” trade gives us access to the upside equity implications of our outlook, while hedging out a key risk to our broader views – a sharp rates sell off – with an asset that we think will also be facing fundamental downward pressures of its own. The volatility of the pair is similar to the volatility of the two individual legs given the positive correlation between AUD and SPX.

We do see several potential stumbling blocks to the first of our 2014 Top Trade Recommendations. First, should growth views disappoint meaningfully, we do not think the AUD leg would provide sufficient protection and equity risk could widen out again, though we do think long equity positions could still do well in a moderate (and below our expectations) growth backdrop. If the market worried about the US growth picture, while relaxing more about the outlook in China (or Australia itself) that would be particularly risky for the pair, though we think that combination is unlikely. In addition, any shift in global preferences for reserve diversification could undermine expected AUD weakness. Lastly, both of these assets have had significant moves already. The S&P 500 has had a stellar 2013, hitting fresh highs only last week, and the AUD has come under pressure in the last few days. So it may be that a somewhat better entry point appears in the near term. Our goal with the Top Trades is to lay out big picture themes that we think have significant return potential, more than to finesse the timing. And we think these moves could well extend, and have set stops and targets accordingly.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/LSw-PakFuk4/story01.htm Tyler Durden

Another day, another carry currency-driven futures melt-up to daily record highs (the all important EURJPY soared overnight on the return of the now standard overnight Japanese jawboning of the JPY which sent the EURJPY just shy of a new 4 year high of 138 overnight), and another attempt by the ECB to have its record high market cake, and eat a lower Euro too (recall DB’s said the “pain threshold” for the EUR/USD exchange rate – the level at which further appreciation impairs competitiveness and economic recovery – is $1.79 for Germany, $1.24 for France, and $1.17 for Italy) this time with ECB’s Hansson repeating the generic talking point that the ECB is technically ready for negative deposit rates. However, with the halflife on such “threats” now measured in the minutes, and soon seconds, the European central bank will have to come up with something more original and creative soon, especially since the EURJPY can’t really rise much more without really crushing European trade further.

On today’s US event docket we will see US pending home sales, the Dallas Fed, with the Treasury also conducting the first of 3 bond auctions this week starting with a $32 billion 2yr note sale later. Most importantly, there will be a $2.75-$3.50 billion POMO to kick off the holiday week and assure a new all time stock high.

Market Re-Cap from RanSquawk:

Stocks traded broadly higher in Europe this morning, supported by unwind in the so-called war-premium, as well as comments by ECB’s Hansson who said that the ECB is ready to cut interest rates further. Despite the apparent risk on sentiment, Bunds also benefited from the comments by an Estonian central  banker, who also stated that the ECB is technically ready for negative deposit rate, which resulted in the Euribor curve paring some of the bear steepening observed earlier in the session. The move higher in Europe was led by airlines and travel & tourism related stocks as market participants reacted to reports that Iran has agreed to limit its nuclear programme in exchange for an easing of sanctions which in turn depressed WTI and Brent Crude prices. Also, European auto makers have been among the biggest beneficiaries, with Peugeot up around 4%. At the same time, Italian banks under performed, weighed on by reports that Monte Paschi’s biggest shareholder favours finding buyers for its stake before bank taps investors for EUR 3bln, while analysts at SocGen stated that Italian banks need calculated a EUR 44bln extra-provision needed to normalise bad loans inventory level. Going forward, market participants will get to digest the release of the latest US Pending Home Sales reports and also the US Treasury will sell USD 32bln in 2y notes.

Key events on US data docket:

• US: Pending home sales, cons 2.0% (10:00)
• US: Dallas Fed mfg. activity, cons n/a (10:30)
• US: sells $32bn 2y notes (13:00)

Overnight news bulletin from Bloomberg and RanSquawk:

• Iran has agreed to limit its nuclear programme in exchange for an easing of tough international sanctions, in a historic deal that follows a decade of on-off negotiations aimed at preventing Tehran from acquiring atomic weapons.
• ECB’s Hansson says ECB is technically ready for negative deposit rate, ready to cut interest rates further and ECB will discuss publishing minutes soon.
• Across the European session, equities are mainly seen higher following solution to talks in Geneva, the consequent dip in oil prices has lead the likes of Lufthansa and IAG to trade with gains this morning.
• Treasury 2/10 and 5/10 curves holding near steepest levels since mid-2011 before holiday- shortened week’s auctions begin with $32b 2Y notes.
• Notes to be sold today yield 0.300% in WI trading; drew 0.323% in Oct., 0.43% in June
• European Central Bank Governing Council member Ardo Hansson said the ECB stands ready to cut borrowing costs further and is technically prepared to make its deposit rate negative
• Obama offered reassurances to Israeli leaders and some Democratic lawmakers critical of the nuclear deal as he sought to tamp down maneuvers in Congress that risk undercutting the accord
• Deal comes as Obama’s standing has been damaged by the troubled Obamacare rollout; any political boost for Obama may still be limited because the accord is temporary and Iran isn’t trusted by the American public
• China traded barbs with the U.S. and Japan over its newly announced air defense zone in the East China Sea as escalating tensions between Asia’s largest economies risked damaging a resurgence in trade
• Sovereign yields mostly lower, EU peripheral spreads widen. Asian stocks mixed, with Nikkei 1.5%, China indexes lower. European stocks, U.S. equity-index futures gain. WTI crude, copper and gold lower

 

Asian Headlines

JPY curve bear-steepened overnight, driven by the weakness in the long-end of the curve ahead of tomorrow’s 40y JGB auction, as well as the better bid USD/JPY. JPY weakness was prompted by comments by BoJ’s governor Kuroda who said that the implication of negative interest rates on the economy and financial markets was unclear and that negative short-term interest rates could be possible. In other Japan specific commentary, analysts at S&P said that Japan’s tax hike and stimulus is positive but that problems remain.

The reform package recently sanctioned by the Communist Party of China will stimulate the economy and help the country sustain annual growth of around 8%, according to China Center for International Economic Exchanges deputy director Zheng Xinli.

EU & UK Headlines

ECB’s Hansson says ECB is technically ready for negative deposit rate, ready to cut interest rates further and ECB will discuss publishing minutes soon.
– ECB’s Asmussen (neutral, executive board) said a negative deposit rate is a theoretical and possible instrument.
– ECB’s Coeure (soft dove, executive board) said ECB are to discuss publishing account of monthly meeting, and interest rates to remain at current or lower levels for extended period of time.

Germany’s SPD and CDU parties will each hold 6 ministerial posts in new government, while the CSU party will have three according to sources.

UK BBA Loans for House Purchase (Oct) M/M 42808 vs Exp. 45000 (Prev. 42990) – Gross Mortgage Lending at GBP 9.9bln, highest since December 2009.
Barclays month-end extensions: Euro Aggr (+0.04y)
Barclays month-end extensions: Sterling Aggr (+0.06y)

US Headlines

US lawmakers are readying budget fallback options Amid taxes Impasse. This follows US budget negotiators only having less than three weeks until their deadline and are yet to break an impasse over revenue, prompting lawmakers to draft plans for USD 19 billion in defense cuts set to start in January.

Leading US banks have warned that they could start charging companies and consumers for deposits if the US Federal Reserve cuts the interest it pays on bank reserves.

Barclays month-end extensions: Treasuries (+0.10y) – Of note, although the avg. is around 0.06y, larger than avg. increase had been expected given the 3y, 10y and 30y refunding auctions last week.

Equities

Across the European session, equities were seen higher following the apparent solution to the Iranian talks in Geneva, the consequent dip in oil prices has lead the likes of Lufthansa and IAG to trade with gains this morning. However, Italian banks have been leading the FTSE MIB lower amid reports that Monte Paschi’s biggest shareholder favours finding buyers for its stake before bank taps investors for EUR 3bln, while analysts at SocGen stated that Italian banks need calculated a EUR 44bln extra-provision needed to normalise bad loans inventory level.

< strong>FX

Despite higher USD/JPY spot rate this morning, 1mth 25D RR is 0.25 JPY puts vs 0.4 early last week, with analysts at IFR pointing out that RKO (reverse knock-out) barriers tied to money vanillas were tripped on spot ascent to leave market shorter downside. More vanilla barrier levels seen at 102.00 level. Comments by ECB’s Hansson which prompted broad based EUR weakness saw the pair move below the key 21DMA line. However losses were capped by EUR/JPY cross, which remained supported by broad based JPY weakness. Of note, EUR/JPY tested touted 138.00 barrier overnight, with more at 139.00 and size 140.00.

According to BofAML USD/JPY may have further upside potential with broad trends continuing to support USD/JPY.

Commodities

Heading into the North American Open, WTI Crude and Brent futures trade in negative territory following reports over the weekend that Iran agreed with the P5+1 to curb some of its nuclear activities in return for about USD 7bln in sanctions relief.

Goldman Sachs says they see a limited impact on oil supply from Iran agreement with ‘the volume of Iranian crude oil available to the international market will largely remain unchanged over at least the next six months’.

Iran has agreed to limit its nuclear programme in exchange for an easing of tough international sanctions, in a historic deal that follows a decade of on-off negotiations aimed at preventing Tehran from acquiring atomic weapons. (FT-More) Iran agreed to curtail its nuclear activities and in return won as easing of certain sanctions on oil, auto parts, gold and precious metals. There were also comments from US President Obama that the accord followed intensive diplomacy and cuts off Iran’s most likely path to a bomb. Obama also reaffirmed US commitment to Israel and told Israel PM Netanyahu that the US will consult Israel on the Iran deal.

Sinopec have said that operations at its Qindgao production complex will be disrupted following Friday’s blast which killed at least 55 people.

DB’s Jim Reid recaps the remainder of overnight data

Following four days of discussions in Geneva, Iran struck a deal in the early hours of Sunday morning to curb its nuclear activities in exchange for about US$7bn in sanctions relief on oil, auto parts, gold and precious metals. According to the statement released by the White House, Iran has agreed to, amongst other things, halting uranium enrichment above 5%, “neutralising” its stockpile of near-20% uranium, and stopping progress on its enrichment capacity by for instance not installing additional centrifuges of any types. Iran has also committed to further transparency and monitoring of its nuclear programme. According to the FT, the Iranian currency Rial rallied against the USD within hours of the deal after having depreciated by about 50% over the last two years.

The sanction relief on oil raises the prospects of supply and is clearly adding negative pressure on crude prices this morning. Brent crude is down 2.2% from Friday’s close to US$108.6/bbl, and looking set for its biggest decline in three weeks.

Away from the oil market, Asian equities are faring pretty well across the board overnight. Our equity screens this morning are mostly in the green with gains paced by the Nikkei (+1.1%) and Nifty (+1.3%). As it was a relatively quiet weekend as far as news is concerned (outside of the Iran story), the market could be just following the positive US lead from Friday as the S&P 500 (+0.5%) closed above the 1800 mark for the first time. In reality, a sustained downward shift in crude prices could also be also a welcome boost for Asia generally given its status as a net energy importer. Credit markets continue to grind tighter with the benchmark IG indices in Australia and Asia both about 3bp tighter as we type. On balance, the market technical for cash credit is also becoming more favourable as the supply pipeline tapers off into the holiday season. Gold prices are softer this morning while the JPY continues to weaken to its lowest level since May this year.

Looking ahead at the week ahead, data watchers will be kept fairly occupied before Thanksgiving. Starting with today, we will see US pending home sales with the Treasury also conducting the first of 3 bond auctions this week starting with a $32 billion 2yr note sale later. We will get more housing data tomorrow with the release of housing starts, home prices as well as US consumer confidence. Durable goods, Chicago PMI, initial jobless claims and the final UofM Consumer Sentiment print for November are Wednesday’s highlights although we will also get the UK GDP report for Q3. US Equity and fixed income markets are closed on Thursday but US aside we will get the BoE financial stability report, German inflation, Spanish GDP and Chinese industrial profit stats. Expect market activity to remain subdued into Friday as it will be a half-day for US stocks and bond markets. As ever Black Friday sales will be carefully monitored for consumer spending trends. So a reasonably busy, holiday-shortened week for markets ahead of what will be another crucial payrolls number the following week.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/C2eZQLmA1jc/story01.htm Tyler Durden

More than 100,000 protesters congregated at Democracy Monument in Bangkok yesterday to protest Thai PM Yingluck Shiniwatra’s consideration of an amnesty bill to pardon her banned brother Thaksin Shiniwatra, the former Thai PM ousted from the country in a 2006 coup.

 

 

 

 

Thai anti-government, anti-corruption protests at Democracy Monument, Sunday, 24 November 2013

Simply explained, the proposed amnesty bill by the current Thai PM is similar in nature to US Presidential pardons, often administered by outgoing US Presidents to pardon their criminal friends.

 

For example, here are just a few of the 150 criminals US President Bill Clinton pardoned during his administration:

 

Amy Ralston Pofahl (drug money laundering, distribution and manufacturing ecstasy)

Norman Lyle Prouse (Former Captain for Northwest Airlines, imprisoned for flying while intoxicated)

Richard Wilson Riley Jr. (Cocaine and marijuana charges, father was Clinton’s Education Secretary)

Dan Rostenkowski (former Democratic Congressman convicted in the Congressional Post Office scandal)

Edward Downe, Jr. (wire fraud, false income tax returns and securities fraud)

Roger Clinton, Jr. (cocaine charges, half-brother of President Bill Clinton)

Mansour Azizkhani (1984 false statements in bank loan applications)

Nicholas M. Altiere (1983 importation of cocaine)

Bernice Ruth Altschul (1992 money laundering conspiracy)

Marc Rich (tax evasion and illegally making oil deals with Iran during the Iran hostage crisis)

 

Here are just a few of the 189 criminals George W. Bush pardoned during his administration:

 

Bruce Louis Bartos (Transportation of a machine gun in foreign commerce)

Michael Robert Moelter (Conducting an illegal gambling business)

Samuel Wattie Guerry (Food Stamp fraud)

Meredith Elizabeth Casares (Embezzlement of US Postal Service Funds)

Joseph William Warner (Arson)

Rusty Lawrence Elliot (Making counterfeit Federal Reserve notes)

Rufus Edward Harris (Conspiracy to deliver 10 or more grams of LSD)

Larry Paul Lenius (Conspiracy to distribute cocaine)

Donald Lee Pendergrass (Armed bank robbery)

Karen Marie Edmonson (Distribution of methamphetamines)

Glanus Terrell Osborne (Possession of a stolen motor vehicle)

Samuel Lewis Whisel (Aiding and abetting the transportation of stolen goods)

Richard James Putney, Jr. (Aiding and abetting the escape of a prisoner)

 

And here are just a few of the 39 criminals Barack Obama has thus far pardoned during his administration (most US Presidential pardons are granted just prior to the end of the sitting President’s term. Thus most of Obama’s pardons will be granted in the future):

 

Edwin Hardy Futch, Jr. (Theft from an interstate shipment)

Jon Christopher Kozeliski (Conspiracy to traffic counterfeit goods)

Michael John Petri (Conspiracy to possess with intent to distribute and distribution of cocaine)

Lynn Marie Stanek (Unlawful use of a communication facility to distribute cocaine)

Dennis George Bulin (Conspiracy to possess with intent to distribute in excess of 1,000 pounds of marijuana)

Thomas Paul Ledford (Conducting and directing an illegal gambling business)

Timothy James Gallagher (Cocaine possession and conspiracy to distribute)

Bobby Gerald Wilson (Aiding and abetting the possession and sale of illegal American alligator hides)

 

From the above, it is blatantly obvious that US Presidents regularly abuse the sanctity of their office to pardon a wide range of offenses committed by their friends, including arson, larceny, drug trafficking, armed robbery, fraud, counterfeit, possession and trafficking of stolen goods and participation in illegal gambling enterprises. If you wonder why banks like Wachovia, HSBC, Citigroup, JP Morgan et al regularly get away with knowingly laundering money for violent drug cartels without a single banker ending up in jail for this criminal behavior, the actions of current and former POTUS clearly illustrates that the War on Drugs is a false war with a real ulterior motive of producing profits for those parties, including bankers and politicians, most heavily involved in it. As I couldn’t find a case of human trafficking pardoned among the several hundred pardons granted by Presidents Clinton, Bush and Obama, perhaps this is the one crime so heinous that even US Presidents are unwilling to pardon it.

 

In light of the above, it is no wonder that Thai citizens are fed up with government corruption that plagues all governments worldwide, and have taken to the streets to protest a proposed amnesty bill that would not only provide amnesty for a list of former PM Thaksin’s “political offenses stretching back to the 2006 coup” according to the Bangkok Post, but would also return Thaksin’s considerable 46 billion baht (USD $1.4 billion) of frozen assets gained through corruption, perhaps with interest. The Bangkok Post also noted that “all government officials, from former prime minister Abhisit Vejjajiva to military commanders, held accountable by the red shirts for the deaths of 92 people in the May 19 crackdown in 2010 will also be absolved of all wrongdoing” as part of the proposed amnesty bill. Furthermore, in a huge conflict of interest, 600 million baht would be returned to the current Prime Minister, Thaksin’s sister, Yingluck Shinawatra. According to Bloomberg, “the amnesty bill angered Thaksin’s opponents, who said it could whitewash crimes he allegedly committed in power, while some of his own supporters criticized the law for protecting opposition leaders who allowed the army to use live ammunition to disperse protesters in 2010 when their Democrat party held power.”

 

In response to this protest, thus far, more than USD $2.1 billion in capital has been withdrawn from the Thai bond and equities market just this month through the 22nd of November, and the Thai baht has now fallen to 31.94 to the USD, its weakest showing since 13 September of this year. As the Bank of Thailand refused to engage in the currency war to the bottom at a time when all major Central Banks were engaging in this war, could further Thai baht devaluation be on the horizon, especially in light of the political instability in Thailand now? Most certainly.

 

Related posts: “The Biggest Disaster in SE Asia Waiting to Happen: Thailand’s Massive Real Estate Bubble”. Follow us on Twitter, subscribe to our YouTube channel, and sign up for our free newsletter here.

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The #AskJPM debacle that JP Morgan cancelled earlier this month due to embarrassment and humiliation regarding the mountain of questions they received in regard to their criminal actions provided a gift to all of us. American Indian tribes did not have jails due to the impracticality of having permanent prisons when their way of life called for a nomadic lifestyle. However, this, by no means, implied that everyone in their tribes acted as angels and committed no wrongdoing. It did however mean that they found another extremely effective solution in dealing with criminal, misanthropic behavior without the threat of imprisonment. For all intents and purposes, Western bankers, having bought out all judges and regulatory and judicial bodies today with their unlimited wallets, have no jails for them today as well, although this clearly is not the case in the East, where a Vietnamese banker faces execution for fraud.

 

However, in looking towards how American Indians handled the problem of criminal behavior within their society effectively without the use of prisons, and given the outcome of the #AskJPM twitter session, I believe that we now have a blueprint to rein in the sociopathic behavior of unrepentant bankers.  I explain further in the video below.

 

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In 'An Open Letter To The FOMC' John Hussman lays out in detail the true state of the world that asset-gatherers and Fed members alike seem blinded to. The intent of his letter is not to criticize, but hopefully to increase the mindfulness of the FOMC as to historical evidence, the strength of various financial and economic relationships, and the potentially grave consequences of further extreme and experimental monetary policy. Crucially, as we have heard numerous times in the last few weeks, the Fed sees no bubble, and so, a courtesy to both the investing public and the gamblers at the Fed, Hussman explains the reason that the Fed does not see an “obvious” stock market bubble (to use a word regularly used by Governor Bullard, as if to imply that misvaluations cannot exist unless they smack their observers with a two-by-four).

 

Excerpted from John Hussman's "Open Letter To The FOMC",

…

 

The reason that the Fed does not see an “obvious” stock market bubble (to use a word regularly used by Governor Bullard, as if to imply that misvaluations cannot exist unless they smack their observers with a two-by-four) is because while price/earnings multiples appear only moderately elevated, those multiples themselves reflect earnings that embed record profit margins that stand about 70% above their historical norms.

We can demonstrate in a century of evidence that a) profit margins are mean-reverting and inversely related to subsequent earnings growth, b) margin fluctuations are largely driven by cyclical variations in the combined savings of households and government, and importantly, c) valuation measures that normalize or otherwise dampen cyclical variation in profit margins are dramatically better correlated with actual subsequent outcomes in the equity markets.

 

[ZH: READ THAT AGAIN!!]

 

A few additional charts will drive this point home. The chart below shows the S&P 500 price/revenue ratio (left scale) versus the actual subsequent 10-year nominal total return of the S&P 500 over the following decade (right scale, inverted). Market valuations on this measure are well above any point prior to the late-1990’s market bubble. Indeed, if one examines the stocks in the S&P 500 individually, the median price/revenue multiple is actually higher today than it was in 2000 (smaller stocks were more reasonably valued in 2000, compared with the present). This is a dangerous situation. In this context, the dismissive view of FOMC officials regarding equity overvaluation appears misplaced, and seems likely to be followed by disruptive financial adjustments.

 

 

One obtains a similar view, with equal historical reliability, from the ratio of nonfinancial equity capitalization to nominal GDP, using Federal Reserve Z.1 Flow of Funds data. On this measure, equities are already beyond their 2007 peak valuations, and are approaching the 2000 extreme. The associated 10-year expected nominal total return for the S&P 500 is negative.

 

 

The unfortunate situation is that while the required financial adjustment may or may not be as brutal for investors as in 2007-2009, or 2000-2002, or 1972-1974, when the stock market lost half of its value from similar or lesser extremes, the consequences of extremely rich valuation cannot be undone by wise monetary policy. The Fed has done enough, and perhaps dangerously more than enough. The prospect of dismal investment returns in equities is an outcome that is largely baked-in-the-cake. The only question is how much worse the outcomes will be as a result of Fed policy that has few economic mechanisms other than to encourage speculative behavior.

And of course this speculative behavior ends with only one feature – bubble risk…

A discussion of bubble risk would be incomplete without defining the term itself. From an economist’s point of view, a bubble is defined in terms of differential equations and a violation of “transversality.” In simpler language, a bubble is a speculative advance where prices rise on the expectation of future advances and become largely detached from properly discounted fundamentals. Put another way, a bubble reflects a widening gap between the increasingly extrapolative expectations of market participants and the prospective returns that can be estimated through present-value relationships linking prices and likely cash flows.

 

As economist Didier Sornette observed in Why Markets Crash, numerous bubbles in securities and other asset markets can be shown to follow a “log periodic” pattern where the general advance becomes increasingly steep, while corrections become both increasingly frequent and gradually shallower. I’ve described this dynamic in terms of investor behavior that reflects increasingly immediate impulses to buy the dip.

 

 

 

Along with this pattern, which has emerged with striking fidelity since 2010, we observe a variety of other features typically associated with dangerous extremes:

• unusually rich valuations on a wide variety of metrics that actually have a reliable correlation with subsequent market returns; margin debt at the highest level in history and representing 2.2% of GDP (eclipsed only briefly at the 2000 and 2007 market extremes);
• a blistering pace of initial public offerings – back to volumes last seen at the 2000 peak – featuring “shooters” that double on the first day of issue;
• confidence in the narrative that “this time is different” (in this case, the presumption of a fail-safe speculative backstop or “put option” from the Federal Reserve); lopsided bullish sentiment as the number of bearish advisors has plunged to just 15% and bulls rush to one side of the boat;
• record issuance of covenant-lite debt in the leveraged loan market (which is now spreading to Europe);
• and a well-defined syndrome of “overvalued, overbought, overbullish, rising-yield” conditions that has appeared exclusively at speculative market peaks – including (exhaustively) 1929, 1972, 1987, 2000, 2007, 2011 (before a market loss of nearly 20% that was truncated by investor faith in a new round of monetary easing), and at three points in 2013: February, May, and today (see A Textbook Pre-Crash Bubble).

Many of us in the financial world know these to be classic features of speculative peaks, but there is career risk in responding to them, so even those who view the situation with revulsion can't seem to tear themselves away.

 

 

While I have no belief that markets follow any mathematical trajectory, the log-periodic pattern is interesting because it coincides with a kind of “signature” of increasing speculative urgency, seen in other market bubbles across history. The chart above spans the period from 2010 to the present. What’s equally unsettling is that this speculative behavior is beginning to appear “fractal” – that is, self-similar at diminishing time-scales. The chart below spans from April 2013 to the present. On this shorter time-scale, Sornette’s “finite time singularity” pulls a bit closer – to December 2013 rather than January 2014, but the fidelity to this pattern is almost creepy. The point of this exercise is emphatically not to lay out an explicit time path for prices, but rather to demonstrate the pattern of increasingly urgent speculation – the willingness to aggressively buy every dip in prices – that the Federal Reserve has provoked.

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