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According to DoubleLine’s Jeff Gundlach, this is his favorite chart – backing his persepctive that equity markets have “2% upside and 20% downside) from here.
In his words: “These lines will converge…”
Chart: Bloomberg
It should be pretty clear what drove the divergence, and unless (and maybe if) The Fed unleashes another round of money-printing (or worse), one can’t help but agree with Gundlach’s ominous call.
via Zero Hedge http://ift.tt/1W9J6u8 Tyler Durden
Submitted by Raul Ilargi Meijer via The Automatic Earth blog,
“Those are my principles, and if you don’t like them… well, I have others.”
– Groucho Marx
What is perhaps most remarkable about the deal the EU is trying to seal with Turkey to push back ALL refugees who come to Greece is that the driving force behind it turns out to be Angela Merkel. Reports say that she and temp EU chairman Dutch PM Mark Rutte ‘pushed back’ the entire EU delegation that had been working on the case, including Juncker and Tusk, and came with proposals that go much further than even Brussels had in mind.
Why? Angela has elections this weekend she’s afraid to lose.
It’s also remarkable that the deal with the devil they came up with is fraught with so many legal uncertainties -it not outright impossibilities- that it’s highly unlikely the deal will ever be closed, let alone implemented. One thing they will have achieved is that refugees will arrive in much larger numbers over the next ten days, before a sequel meeting will be held, afraid as they will be to be pushed back after that date.
They may not have to be so scared of that, because anything remotely like what was agreed on will face so many legal challenges it may be DOA. Moreover, in the one-for-one format that is on the table, Europe would be forced to accept as many refugees from Turkey as it pushes back to that country. Have Merkel and Rutte realized this? Or do they think they can refuse that later, or slow it down?
Under the deal, Turkey seems to have little incentive to prevent refugees from sailing to Greece. Because for every one who sails and returns, Turkey can send one to Europe. What if that comes to a million, or two, three? The numbers of refugees in Turkey will remain the same, while the number in Europe will keep growing ad infinitum.
* * *
Sweet Jesus, Angela, we understand you have problems with the refugee situation, and that you have elections coming up this weekend, but what made you think the answer can be found in playing fast and loose with the law? And what, for that matter, do you expect to gain from negotiating a Faustian deal with the devil? Surely you know that makes you lose your soul?
You said yesterday that history won’t look kindly on the EU if it fails on refugees, but how do you think history will look on you for trying to sign a deal that violates various international laws, including the Geneva Conventions? You have this aura of being kinder than most of Europe to the refugees, but then you go and sell them out to a guy who aids ISIS, massacres Kurds, shuts down all the media he doesn’t like and makes a killing smuggling refugees to Greece?
Or are we getting this backwards, and are you shrewdly aware that the elections come before the next meeting with Turkey, and are you already planning to ditch the entire deal once the elections are done, or have your legal team assured you that there’s no way it will pass the court challenges it will inevitably provoke?
It would be smart if that’s the case, but it’s also quite dark: we are still talking about human beings here, of which hundreds of thousands have already died in the countries the living are fleeing, or during their flight (and we don’t mean by plane), and tens of thousands -and counting, fast- are already stuck in Greece, with one country after the other closing their borders after the -potential- deal became public knowledge.
So now Greece has to accommodate ever more refugees because all borders close, something Greece cannot afford since the bailout talks left it incapable of even looking after its own people, while over the next ten days it can expect a surge of ‘new’ refugees to arrive from Turkey, afraid they’ll be stuck there after a deal is done. Greece will become a “holding pen”, and the refugees will be the livestock. A warehouse of souls, a concentration camp.
The circumstances under which these human beings have been forced to flee their homes, to travel thousands of miles, and now to try and stay alive in Greece, are already way below morally acceptable. Just look at Idomeni! You should do all you can to improve their conditions, not to risk making them worse. Where and how you do that is another matter, but the principle should stand.
You should be in Greece right now, Angela, asking Tsipras how you can help him with this unfolding mayhem, how much money he needs and what other resources you can offer. Instead, Athens today hosts the Troika and Victoria “F**k the EU” Nuland. That is so completely insane it can’t escape the protagonists themselves either.
* * *
Refugees from war -torn countries are per definition not ‘illegal’. What is illegal, on the other hand, is to refuse them asylum. So all the talk about ‘illegal migrants’ emanating from shills like Donald Tusk is at best highly questionable. The freshly introduced term ‘irregular migrants’ is beyond the moral pale.
As is the emphasis on using the term ‘migrant’ versus ‘refugee’ that both European politicians and the international press are increasingly exhibiting, because it is nothing but a cheap attempt to influence public opinion while at the same time throwing desperate people’s legal status into doubt.
What their status is must be decided by appropriate legal entities, not by reporters or politicians seeking to use the confusion of the terms for their own personal benefit. And numbers show time and again that most of the people (93% in February GRAPH) arriving in Greece come from Syria, Iraq and Afghanistan, all war-torn, and must therefore be defined as ‘refugees’ under international law. It is really that simple. Anything else is hot air. Trying to redefine the terminology on the fly is immoral.
In that same terminology vein, the idea that Turkey is a ‘safe third country’, as the EU so desperately wants to claim, is downright crazy. That is not for the EU to decide, if only because it has -again, immoral- skin in the game.
All this terminology manipulation, ironically, plays into the hands of the very right wing movements that Angela Merkel fears losing this weekend’s elections to. They create a false picture and atmosphere incumbent ‘leaders’ try to use to hold on to power, but it will end up making them lose that power.
* * *
The funniest, though also potentially most disruptive, consequence of the proposed deal may well be that the visa requirements for the 75 million Turks to travel to Europe are to be abandoned in June, just 3 months away, giving them full Schengen privileges. Funny, because that raises the option of millions of Turkish people fleeing the Erdogan regime travelling to Europe as refugees, and doing it in a way that no-one can call illegal.
There may be as many as 20 million Kurds living in Turkey, and Erdogan has for all intents and purposes declared war on all of them. How about if half of them decide to start a new life in Europe? Can’t very well send them back to ‘safe third country’ Turkey.
Be careful what you wish for, Angela.
via Zero Hedge http://ift.tt/1XdheFU Tyler Durden
They don’t call it a “currency war” for nothing.
Moments ago, the RBNZ cut rates by 25 bps to 2.25% in the latest shot across the bow in what is now a years-long race to the bottom.
Here are the bullets:
Cue the kiwi plunge:
RBNZ governor Graeme Wheeler apparently made up his mind last week:
But someone forgot to tell the PhD’s because 15 out of 17 economists surveyed by Bloomberg expected New Zealand to stand pat.
We don’t blame them. After all, who could have foreseen competitive easing in this environment?
via Zero Hedge http://ift.tt/1QHIprK Tyler Durden
One week ago, when looking at the latest BofA client flow trend monitor, we noticed something strange: despite the S&P’s surge higher due to either a record short squeeze or because it is merely another bear market rally, the smart money was selling.
In fact, as BofA’s Jill Hall calculated, the three groups that make up the so-called “smart money” basket, hedge funds, BofA’s institutional clients as well its private clients, had been selling aggressively every week for the prior five. As she explained on March 1, “last week, during which the S&P 500 climbed 1.6%, BofAML clients were net sellers of US stocks for the fifth consecutive week, in the amount of $1.5bn. This was the biggest weekly outflow since mid-December.” Someone clearly was very grateful for the selling opportunity that this squeeze was providing.
Well, we can now add one more week to the total: in BofA’s latest note, “last week, during which the S&P 500 rallied 2.7%, BofAML clients were net sellers of US stocks for the sixth week.”
She explains that “similar to the prior week, hedge funds, institutional clients, and private clients were all net sellers, though sales last week were led by private clients (vs. hedge funds the week prior). Our hedge fund clients remain the biggest net sellers of US stocks year-to-date.”
The full breakdown below:
Clients were net sellers of stocks in five of the ten sectors last week and net buyers of the remaining five, as well as ETFs. Tech and the commodity-oriented sectors of Industrials and Materials saw the largest net sales, while Financials and Utilities saw the largest net buying… All three client groups sold stocks last week, led by private clients.”
So, like last week, we again know who is selling but what about the other side: was it just shorts covering who are providing the bid? The answer is no: “buybacks by corporate clients accelerated last week to their highest level since August, and are tracking above levels we saw this time last year, though below levels we observed in 2014 (see chart below). Clients sold both large and small caps last week, but continued to buy mid-caps—which have seen the most persistent buying by our clients over the last several years despite being crowded and expensive.“
In retrospect, this makes a lot of sense: with the debt market for all but the moost pristine issuers jammed up, corporations who have relied on debt-funded buybacks to push their price higher have had to step on the accelerator in their buyback activity, to give the impression that the market is back to stable, which in turn could thaw the frozen debt market, allowing them to issue even more debt, whose proceeds they would then use to buy back even more stock. Indeed, the lower the market dropped, the greater the buyback activity had to be to offset the natural selling by the smart money.
This is what we said one week ago:
In other words, buybacks are on pace to surpass buyback records, and since the debt issuance pipeline has to be unclogged or else risk the failure of hundreds of billions in bond bond refinancings in the coming months not to mention the collapse of the bond-buyback pathway, companies have scrambled to put a “risk on” mood on the market by repurchasing their stock, so that these same companies can issue more debt, so that they can buyback even more debt in the future.
Since then absolutely nothing has changed, and here we are now: 6 weeks of consecutive derisking and selling by hedge funds, institutions and private clients soaked up by what is now a record short squeeze, as well as a near record buyback spree to mask the fact that the “smart money” is bailing.
We leave it up to readers to decide just how healthy is this “rally” if the smart money has been selling for nearly 2 months, and where the two primary buying groups are corporations themselves, and shorts squeezed into covering positions.
via Zero Hedge http://ift.tt/1TtpAuX Tyler Durden
Submitted by Adam Johnson via CommonDreams.org,
In what has to be some kind of record, the Washington Post ran 16 negative stories on Bernie Sanders in 16 hours, between roughly 10:20 PM EST Sunday, March 6, to 3:54 PM EST Monday, March 7—a window that includes the crucial Democratic debate in Flint, Michigan, and the next morning’s spin:
All of these posts paint his candidacy in a negative light, mainly by advancing the narrative that he’s a clueless white man incapable of winning over people of color or speaking to women. Even the one article about Sanders beating Trump implies this is somehow a surprise—despite the fact that Sanders consistently out-polls Hillary Clinton against the New York businessman.
There were two posts in this time frame that one could consider neutral: “These Academics Say Bernie Sanders’ College Plan Will Be a Boon for African-American Students, Will It?” and “Democratic Debate: Clinton, Sanders Spar Over Fracking, Gun Control, Trade and Jobs.” None could be read as positive.
While the headlines don’t necessarily reflect all the nuances of the text, as I’ve noted before, only 40 percent of the public reads past the headlines, so how a story is labeled is just as important, if not more so, than the substance of the story itself.
The Washington Post was sold in 2013 to libertarian Amazon CEO Jeff Bezos, who is worth approximately $49.8 billion.
Despite being ideologically opposed to the Democratic Party (at least in principle), Bezos has enjoyed friendly ties with both the Obama administration and the CIA. As Michael Oman-Reagan notes, Amazon was awarded a $16.5 million contract with the State Department the last year Clinton ran it. Amazon also has over $600 million in contracts with the Central Intelligence Agency, an organization Sanders said he wanted to abolish in 1974, and still says he “had a lot of problems with.” FAIR has previously criticized the Washington Post for failing to disclose, when reporting on tech giant Uber, that Bezos also owns more than $1 billion in Uber stock.
The Washington Post’s editorial stance has been staunchly anti-Sanders, though the paper contends that its editorial board is entirely independent of both Bezos and the paper’s news reporting.
via Zero Hedge http://ift.tt/1TM53Cc Tyler Durden
Even as US crude oil inventories just hit a fresh record high for another week, both in Cushing and across all other regions, a more curious accumulation of excess oil inventory has emerged: according to the IEA, global oil production exceeded consumption by just over 1 billion barrels in 2014 and 2015.
As Reuters reports, crude oil production exceeded consumption by an average of 0.9 million barrels per day in 2014 and 2.0 million bpd in 2015. Of this 1 billion barrels which the IEA believes was produced but not consumer, some 420 million are said to be stored on land in OECD member countries and another 75 million can be found stored at sea or in transit by tanker somewhere from the oil fields to the refineries. This means that as of this moment, about 550 million “missing barrels” are unaccounted for “apparently produced but not consumed and not visible in the inventory statistics.”
As John Kemp writes, like most “plugs”, the missing barrels are recorded in the “miscellaneous to balance” line of the IEA’s monthly Oil Market Report as the difference between production, consumption and reported stock changes. The miscellaneous item reflects errors in data from OECD countries, errors in the agency’s estimates for supply and demand in non-OECD countries, and stockpile changes outside the OECD that go unrecorded.
The current IEA data reveals that there is a miscellaneous to balance item of 0.5 million barrels per day in 2014 and 1.0 million barrels per day in 2015.
This is not new: missing barrels have been a feature of IEA statistics since the 1970s, and as Reuters adds over time, errors have occurred in both directions, and have ranged up to 1 million or even 2 million barrels per day.
And as Reuters adds, while most of the time, the oil market ignores the miscellaneous to balance item, but it tends to become controversial when it becomes very large, either positive or negative. Such as now. Furthermore, the situation is additionally compounded by the massive documented inventory glut not only in the US but around the globe, and certainly in China which, as reported yesterday, reported a record amount of oil in January even as demand is said to have been declining.
This is what happened the last time there was an implied glut on par with the current one:
The last time the miscellaneous to balance item was this large and positive (implying an oversupplied market) was in 1997/98 when the issue triggered fierce criticism of the IEA’s statistics.
Critics accused the IEA of over-estimating supply, under-estimating demand, contributing to perception of a glut, depressing prices, and causing unnecessary hardship to the oil industry. Senator Pete Domenici, chairman of the U.S. Senate Budget Committee, asked the General Accounting Office to investigate the IEA’s statistics and the question of missing barrels. In a report published in May 1999, GAO concluded “missing barrels are not a new condition, and the amount and direction of missing barrels have fluctuated over time”.
“At any point in time, the historical oil supply and demand as well as the stock data reported by IEA could be overstated or understated by an unknown magnitude.”
That it true, although the error item it may also indicate just how much over (or under) supply there is. The GAO concluded then that it was not possible to “quantify how much of the missing barrels are due to statistical limitations and how much are the result of physical oil storage in unreported stocks”.
Some other comparisons:
In 1997/98, the market was oversupplied by 2.1 million barrels per day compared with total demand of around 74 million barrels per day, according to the IEA.
In 2015, the oil market was also oversupplied by 2.0 million barrels per day but consumption was running at more than 94 million barrels per day, around 25 percent higher.
To be sure, episodes of massive imbalance usually even out, and following the 1997/98 episode, the missing barrels that accumulated in unreported non-OECD storage were drawn down in 1999, according to the IEA (“Oil Market Report”, IEA, Dec 1999). In December 1999, the IEA wrote: “The weight of (the) evidence is that the missing barrels did exist and that they have now returned to the market.“
What helped the 1998 glut was that by the end of 1999, the oil market was seeing excess demand and prices were rising. But the rapid recovery depended on very strong economic growth in North America and Asia (after the East Asian financial crisis in 1997/98).
Another critical factor was the substantial production cuts by OPEC in conjunction with production restraint from non-OPEC countries. And it was both heralded and caused by a shift in the forward price curve from contango to a state of backwardation.
As Reuters concludes, the events of 1999 illustrate the factors needed to clear an inherited glut of oil (strong demand, production restraint and a shift in the shape of the forward price curve).
There are two major problems: this time around demand is declining – especially in trade-dependent distillate demand – while debt across the entire world is at record highs, and makes a fiscal stimulus improbable. Worse, following the November 2014 OPEC fiasco, the cartel effectively no longer exists. Furthermore, major oil exporting countries have not so far agreed to cut production, unlike 1998/99, and in fact Saudi Arabia has openly rejected the idea. And finally, futures prices remain resolutely in contango, which is both a symptom of excess stockpiles and creates a financial incentive to continue holding them. As Reuters observes, there is no sign of the market moving into backwardation yet, which would indicate the supply-demand balance was shifting and would also create a financial incentive to release oil from storage.
Kemp’s conclusion:
Several key OPEC and non-OPEC producers have announced a provisional production freeze which could speed up the rebalancing, assuming it is implemented.
But it might not be enough to eliminate the glut quickly; outright production cuts may be needed to accelerate the process, depending on what happens to demand and production from other countries.
This is also why Goldman yesterday released its latest bearish report on oil, in which it said the “commodity rally is not sustainable” and worse, “the force of their reversal has created a new trend in market positioning that could run further. However, the longer they run, the more destabilizing they become to the nascent rebalancing they are trying to price.”
In other words, the sharp, brief rebound in prices, means that a long-term sustainable rebound in prices becomes that much less probable.
The bottom line is that the IEA’s calculations are likely correct, and end markets are merely misreporting due to commercial interests: “In 1997/98 episode, the IEA concluded most of the missing barrels went into non-OECD storage and uncounted OECD inventories . In the current episode, it is also very likely some of the 550 million barrels unaccounted for in 2014/15 have gone into unreported storage outside the OECD.”
Places like China. China’s government is known to have been filling its Strategic Petroleum Reserve. More barrels are likely to have gone into commercial storage in China and in other countries outside the OECD.
The question then is how much longer can all this excess production be stored quietly away from the public’s eye. We already know that Cushing is denying some storage requests, and that as a result the US is storing oil in cargo trains, and exporting it to Europe, in effect making the entire world a series of communication oil vessels. Still, absent some dramatic supply cut in the near term, or just as dramatic rebound in demand, what happens when not just Cushing but the entire world’s inventory capacity is used up?
That is the true fundamental bearish case, one which every daily short squeeze in oil makes increasingly more probable.
via Zero Hedge http://ift.tt/1UT2Sf3 Tyler Durden
You may have already seen the following video, but if you haven’t, it’s an absolute must watch. It personalizes the pain and frustration being felt across these United States as executives throw people on the street in order to boost earnings per share by a couple of cents. It also explains why both Donald Trump and Bernie Sanders continue to perform so well in the primaries, and why the populist revolt in America is just getting started.
from Liberty Blitzkrieg http://ift.tt/1TtoRd8
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Human beings have come up with some crazy ideas for money and finance over the years.
Conch shells. Beads. Animal skins. Salt. Rice. All of these were used as a form of money at one time or another.
But the strangest by far has got to be the Rai Stones of Yap Island.
Yap is a tiny speck in the western Pacific, a few hours by plane from the Philippines and Guam.
Long ago, islanders began using gigantic limestone discs called Rai Stones as a form of money
Rai Stones were large– the size of a mid-sized car– so they were seldom moved.
And they could be anywhere… at the bottom of the ocean, in the middle of the jungle.
So rather than roll your Rai Stones down to a local bank, or pile them up in the back yard, everyone on the island just sort of knew who owned which Rai Stones.
And whenever there was a transaction, word got around that ownership of a particular Rai Stone had changed hands.
It was crude, but it worked.
This is the hallmark of any well-functioning financial system: the ability to properly account for private property ownership.
Think about it– when you buy a house, there’s a deed that’s recorded in the local clerk’s office. When you buy a car, a certificate of title is issued.
This makes the chain of ownership very clear and unmistakable. You know with 100% certainty that whatever you buy is exclusively yours.
But strangely enough, this isn’t the way it works when you buy stocks in the Land of the Free.
There’s a concept in the US financial system called “Street Name Registration”.
This means that when you open a brokerage account and buy shares of Apple, your broker registers those shares in THEIR name, not yours.
In other words, your broker officially owns the shares.
On their internal books, the broker maintains a liability that they owe you the shares. But the Apple stock isn’t your asset. It’s the broker’s.
The reason they do this is convenience. It’s easier for them to buy and sell stock on your behalf if the shares are held in their name.
This strikes me as totally ludicrous.
Imagine if when you buy a new car the dealer registered the title in HIS name instead of yours; or if your home was held in the name of your real estate broker.
This makes no sense. Financial securities should work like any other asset: when you buy it, it’s yours. Simple.
That’s how it works here in Australia, where they have a system of direct ownership; it’s called the Clearing House Electronic Sub-register System, or CHESS.
That’s a fancy way of saying that, in Australia, when you buy or sell stocks, ownership of the shares passes to you directly.
The database is maintained electronically, and brokers have no control over these records.
This ensures there is no feckless intermediary standing between you and your assets.
It’s such an easy concept– to actually own the stocks that you buy. But that’s not the way the financial system is set up in the US.
The even bigger issue is that Street Name Registration in the US leads to serious problems whenever there’s financial turmoil.
Banks and brokers have a bad habit of ‘borrowing’ from their customers. They call it ‘hypothecation’ and ‘re-hypothecation’.
Essentially, brokers routinely take the shares that they’ve purchased on your behalf (and registered in their own name) and pledge them as collateral in other deals over and over again to boost their profits.
Assuming everything else goes OK, problems seldom arise.
But as soon as the financial system hits a speed bump (like it did in 2008), it can get very bloody for the original investor who put up the money.
Bottom line, you might not own what you think you own.
And given all the serious challenges facing the financial system, it makes sense to pay attention to how your investments are registered.
It may be worth checking with your broker to see if you can do ‘direct name registration’, whereby they re-title the investments in your own name.
This would help ensure that if your broker ever ran into trouble down the road, you would still have control of your assets.
You might also want to consider investing in better jurisdictions like Australia where you can have a lot more certainty over the assets that you own.
Besides, there are plenty of great investment opportunities down here.
The Australian dollar is at a multi-year low against the absurdly overvalued US dollar. So assets are already quite cheap.
Besides, the commodity recession has pushed valuations so low that many Australian companies are trading for less than the amount of cash they have in the bank.
This has been a winning investment strategy for us (and premium members), with returns in excess of 30%. More on this another time.
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Submitted by Jeffrey Snider via Alhambra Investment Partners,
The fiscal year for retailers ended in January with nothing like what it was supposed to be. Still, as always, the suggestions remained that a rebound in consumerism would be before too long. If it wasn’t to be evident right away in February, the start of the 2016 fiscal year was at least supposed to be back in the plus column. Last week, Thomson Reuters noted the starting weakness and all the hoped for blizzard implications.
The American retail shopper still isn’t in a free-spending mood. The Thomson Reuters Same Store Sales (SSS) Index forecast for February 2016 indicates a small gain of 0.5%. Excluding the drug store sector, the SSS growth rate is expected to fall to an estimate 0.3%.
A year ago, the final February SSS index registered a much healthier gain of 1.2% and the ex-drug indicator was up 0.6%. However, a 3.0% increase is considered a sign of a robust retail economy.
At least the SSS index is expected to be in positive territory, compared to January’s negative results, partly thanks to an improvement in winter weather. [emphasis added]
Among the many prominent victims of the “unexpected” weakness was Macy’s. Not only have same store comps declined four straight quarters, it has left the company with enormous inventory stocks – historically so.
Although the retailer beat its earnings estimate, the most worrisome metric from this iconic company is inventory days. During the fourth quarter ended Jan. 31, this key figure went from 172 to 192 days, its highest level since we started tracking this metric in 1991. It’s also much higher than the industry average median of 114.1, which means that a lot of Macy’s merchandise is sitting on the shelves. The retailer also reported a Q4 same store sales (SSS) result of -4.3% — the fourth straight quarter of negative SSS.
In other words, retailers are stuck at almost a contradiction. They want robust sales growth, and analysts are expecting that to come in relatively short order, but in order for the retail sector to get there it will need to clear inventory likely at significant (further) discounts in order to rebalance. And they need consumers to cooperate by being especially interested in all this discounted merchandise.
Consumers were already absent in January:
January is usually clearance month for retailers seeking to attract shoppers again after the busy holiday season. This year, it looks like weakness in the December scene carried over into the New Year. The Thomson Reuters Same Store Sales Index forecast for January 2016 is for 0.2% growth overall and for 0.0% growth excluding the drug store sector. Both figures are significantly lower than the January 2015 actual retail growth rate of 1.5% overall and 0.6% ex-drug.
We are seeing that slow holiday sales added more clearance merchandise to January’s inventory. In addition, when cold weather finally arrived in the northeastern U.S. (along with a huge blizzard), it kept shoppers at home and hurt mall traffic in January, particularly at brick-and-mortar retailers.
January same store sales did not grow at all, instead declining rather sharply by 1.1%!
Instead of +0.5% same store growth in February (which would have been, again, atrocious) the nearly final tally for retailers shows flat in February. In other words, after seriously shrinking sales in January there was no rebound at all in February discounts or not. Retailers are in trouble, and it seems as if the difficulties are only lingering and increasing (NOTE: the chart below was from March 1 and includes the +0.5% SSSI estimate for February rather than the current update of 0.00%).
Since 2005, 44% of retailers, on average, beat their same store estimates each month. In February, only 14.3% did. Instead, 71.4% missed compared to the historical average of 54.5%. The weather may have improved, at least so far as an absence of big storms and snow-blown excuses, but shopping did not. That means that the retail environment, as far as sales are concerned, is worse than first believed and showed no improvement at all December to January to February.
In short, as with the Census Bureau’s version of overall retail sales, there is a clear consumer problem with implications spread across not just the US economy but overseas (China) perhaps more so. Despite all that, however, the BLS somehow suggests US retailers are hiring at maybe an historic pace and even accelerated hiring greatly in February. The discrepancy is so large as to be mutually exclusive. It is all the more so given that robust hiring in general always leads to more spending, so if there is no spending growth then that already suggests something else about hiring. There is no spending growth.
via Zero Hedge http://ift.tt/1Uff5dq Tyler Durden
As the world came to depend increasingly on China for growth in the wake of the financial crisis, scrutiny around the economic numbers emanating from Beijing began to build.
Despite the contention from the NBS that Chinese data “reflect the real situation,” virtually no one trusts the numbers and as we’ve documented extensively, it’s not even clear, when it comes to GDP at least, that the misleading numbers are all China’s fault. Estimating the deflator in an economy of that size in the absence of robust statistical systems is a virtual impossibility, which, in layman’s terms, means that when input prices are tumbling, GDP is overstated.
In any event, handicapping Chinese economic data has become something of a sport for analysts, pundits, and commentators even as everyone, on paper anyway, pretends to believe the “official” numbers.
As WSJ reports, the blurry line between what’s real and what isn’t in China isn’t confined to the macro level. Even microeconomic data may be wholly fabricated or, to use an apt metaphor, a “Hollywood” illusion.
Box office ticket sales in China topped $1 billion last month, easily besting North American sales which came in more than 25% lower. But how much of the total is “real” is up for debate. For instance, “Ip Man 3”, starring Mike Tyson as a corrupt real estate developer somehow raked in $72 million in its opening weekend. That reportedly prompted Chinese regulators to “investigate whether the distributor tried to boost the movie’s box office by buying tickets for ‘ghost screenings,’” WSJ writes.
“Ticket buying in bulk to create buzz around a movie is a marketing strategy widely used in China, according to interviews with nearly two dozen industry insiders,” The Journal goes on to note, before adding that “bulk buying has been an under-the-radar practice by Chinese companies to get a leg up” for years.
Hollywood, whose share of the market in China declined from 44% in 2010 to just 38% last year, isn’t happy about the perceived manipulation. “The opaqueness is an extra challenge for Hollywood as its market share in China drops,” Rob Cain, a film producer and entertainment industry consultant to Hollywood studios operating in China told The Journal. “It’s impossible to know what the exact box office numbers are.”
Right. Which sounds precisely like something an economist would say about the country’s macro data.
In any event, Chinese regulators are set to crack down in the wake of what apparently was an egregious example of ticket sales inflation with “Ip Man 3”.
“On Monday, in a rare move, China’s movie regulator asked to see ticketing contracts between ‘Ip Man 3’ distributor Dayinmu Film Distribution and online ticket sellers,” The Journal reports. “The move came after local media posted screenshots of film-ticketing sites purporting to show that some theaters had sold-out screenings every 10 minutes after midnight in the same theater—an impossibility for a movie that lasts 105 minutes.”
Yes, and an “impossibility” for a move starring Mike Tyson as a property tycoon. But it gets still more amusing: “…tickets had sold for as much as $31 a seat, several times the price of tickets at other showtimes, with such prices helping to drive up the total box office.”
So “Ip Man 3”, a film that is over an hour-and-a-half long, is not only selling out for multiple screenings that start 10 minutes apart in the very same theatre, but seats for this Tyson extravaganza are going for $31 each.
And you can see why:
Apparently, the numbers for this film are so farcical that even Beijing can’t stomach them. “Bankrolled in part by a flamboyant Shanghai mogul with an estimated net worth of $780 million, the Donnie Yen-Mike Tyson flick supposedly took in $72.3 million in its first three days in theaters, even though early March is typically a slow moviegoing period,” The LA Times writes. “Officials with the State Administration of Press, Publications, Radio, Film and Television on Monday launched an investigation into four online ticket sellers to determine whether sales figures were manipulated and hyped.”
Allow us to save the Politburo some time and effort: yes, the sales figures are manipulated. The idea that a martial arts film starring Mike Tyson brought in $72 million in 72 hours at the Chinese box office is laughable.
The big picture (no pun intended) takeaway is that just like China’s now famous “ghost cities,” the country’s theaters are rife with “ghost screenings,” and although Beijing may disavow any connection, it’s all part of the same ruse: to make China appear as though it is a bastion of growth and prosperity in a sea of global economic turmoil.
As for what this means at the micro level, well… don’t bet the house on Shifang Holdings…
via Zero Hedge http://ift.tt/223lwD3 Tyler Durden
