another site
Because nothing says “safety precautions” like rolled-up sleeves on a HazMat suit…
h/t Kirk B
* * *
And here is a gentleman jet-washing the puke from the pavement outside the Texas Ebola victim’s apartment building…
HD Chopper 8 caught crews cleaning the sidewalk outside the Ivy Apartments where the #Ebola patient stayed. http://ift.tt/1vBIG3D
— WFAA TV (@wfaachannel8) October 2, 2014
via Zero Hedge http://ift.tt/1ra1bqt Tyler Durden
Last week we touched upon the “white elephant” in the room: that the biggest, most important bubble investors should worry about is in bonds, NOT stocks.
Consider the following…
The financial system is based on debt. US Treasuries, the benchmark for an allegedly “risk free” rate of return, is the asset against which all other assets are priced based on their relative riskiness.
This “risk free” rate has been falling steadily for over 25 years.
As a result of this, an entire generation of investors and money managers (anyone under the age of 55) has been investing in an era in which risk has generally gotten cheaper and cheaper.
This, in turn, has driven the rise in leverage in the financial system. As the risk-free rate fell, so did all other rates of return. Thus investors turned to leverage or using borrowed money to try to gain greater rates of return on their capital.
The ultimate example of this is the derivatives market, which is now over $700 trillion in size. This entire mess is backstopped by about $100 trillion (at most) in bonds posted as collateral.
This formula of ever increasing leverage works relatively well when the underlying asset backstopping a trade is rising in value (think of the housing bubble, which worked fine as long as housing prices rose). However, if the asset ever loses value, you very quickly run into trouble because you need to post more as collateral to backstop your trade. If you can’t do this easily, the margin calls start coming and you can find yourself having to unwind a massive position in a hurry.
This is how crashes occur. This is what caused 2008. And it’s what will cause the next crisis as well.
Despite all of the rhetoric, the world has not deleveraged in any meaningful way. The only industrialized country to deleverage since 2008 is Germany.
This is not unique to sovereign nations either. As McKinsey recently noted, there has been no meaningful deleveraging in any sector of the global economy (the best we’ve got is households and financial firms which have basically flat-lined since 2008).
In the simplest of terms, the 2008 collapse occurred because of too much leverage fueled by cheap debt. This worked fine until the assets backstopping the leveraged trades fell in value, which brought about margin calls and a selling panic.
The big problem however is that NO ONE got the message that leverage was a problem. Instead, everyone has become even MORE leveraged than they were in 2008. And they did this against an ever-smaller pool of quality assets (the Fed and other Central Banks’ QE programs have actually removed high grade collateral from the financial markets).
Thus, we now have a financial system that is even more leveraged than in 2007… backstopped by even less high quality collateral. And this time around, most industrialized sovereign nations themselves are bankrupt, meaning that when the bond bubble pops, the selling panic and liquidations will be even more extreme.
The next round of the crisis is coming, and it’s going to make 2008 look like a picnic.
If you’ve yet to take action to prepare for the second round of the financial crisis, we offer a FREE investment report Financial Crisis "Round Two" Survival Guide that outlines easy, simple to follow strategies you can use to not only protect your portfolio from a market downturn, but actually produce profits.
You can pick up a FREE copy at:
Best Regards
Graham Summers
Phoenix Capital Research
via Zero Hedge http://ift.tt/1EhQCMo Phoenix Capital Research
In the "land of the rising sun," Citi FX Technicals group warns, the sun also goes down sometimes. The present set up on the monthly and daily charts on USDJPY suggests it is time to be cautious, with real danger that we could be 'on the cusp' of a material correction lower for the first time in this 3-month rally. A move as low as 105.50 is not out of the question and that is terrible news for Japanese stocks and Abe's approval ratings.
Via Citi FX Technicals,
Given the magnitude and speed of the USDJPY move last month it is worth looking at the long term “log” chart for guidance. When we do, we are a little bit cautious in the near term.
Why?
Our target for the end of 2014 has been around 110.50-111.00 and the speed of the move in the last 3 months has brought us close to that range quicker than we would have expected.
There is major resistance above here on this chart from 110.34-110.66 (76.4% pullback of the 2007-2011 fall, horizontal resistance from the March-August 2008 bounce and trend line off the 2002 and 2007 peaks.)
In addition, as we have surged higher last month there is a real danger that we now see triple momentum divergence on the monthly USDJPY chart which could suggest a material correction.
Add to this the rise in “EM” jitters, “Equity market” jitters , “Newport Beach” jitters and it seems only a matter of time before we hear a crescendo of “risk off” comments- (not traditionally good for USDJPY)
(In August-October 1998… a period we are very focused on historically the 2 prongs of concern were Russian default and LTCM leverage…..history does not repeat but it often rhymes)
It seems to us that it may be a good time to exit JPY short positions and let the “dust settle” for a while”
October 2013- Jan 2014: (Q4,2013)
July 2014- Oct 2014: (Q3, 2014)
This last leg up has not had yield support
Weekly chart is showing an evening star like pattern very similar to that seen as the Nikkei peak at the end of Dec 2013 (Same point that the USDJPY rally was close to an end)
The rise in implied volatility seems to have paused (3 month) 3 weeks ago.
As in 2012-2013 that rise in volatility gave a good signal of a potential break higher in USDJPY
In Feb 2013 as the move up in volatility paused USDJPY initially continued higher before we saw a quick high to low correction of 4.12%. A similar correction this time off the present trend high of 110.09 would take us to 105.55 in USDJPY (The suggested corrective target in the daily chart above comparing this move to Q4, 2013.)
We also saw the rise in implied volatility stall ahead of the 2 Jan 2014 peak in USDJPY
All this suggests that at this point the short JPY trade does not look to have a great “risk versus reward” dynamic
via Zero Hedge http://ift.tt/1vD6gM5 Tyler Durden
As The FT’s Capital Markets Editor mockingly retorts, the next financial apocalypse is imminent because…
Funny – but ironically a grain (or more) of truth here
h/t @RalphAtkins
via Zero Hedge http://ift.tt/1xerXDs Tyler Durden
Submitted by David Stockman via Contra Corner blog,
Another humanitarian catastrophe may be just hours away at Kobani. The latter is the Syrian Kurdish town on the border with Turkey that is now surrounded by ISIS tanks and is being pounded day after day by ISIS heavy artillery. Already this lethal phalanx, which fuses 21st century American technology and equipment with 12th century religious fanaticism, has rolled through dozens of Kurdish villages and towns in the region around Kobani, sending 180,000 refugees fleeing for their lives across the border.
Self-evidently the lightly armed Kurdish militias desperately holding out in Kobani are fighting the right enemy—-that is, the Islamic State. So why has Obama’s grand coalition not been able to relieve the siege? Why haven’t American bombers and cruise missiles, for instance, been able to destroy the American tanks and artillery which a terrifying band of butchers has brought to bear on several hundred thousand innocent Syrian Kurds who have made this enclave their home for more than a century? Why has not NATO ally Turkey, with a 600,000 man military, 3,500 tanks and 1,000 modern aircraft and helicopters, done anything meaningful to help the imperiled Kurds?
Let’s see. The US is making perfunctory air strikes. Yet with no boots on the ground in the context of close urban combat in a city of 50,000 – a major air onslaught would result in massive civilian casualties. Although Obama already has much blood on his hands, he is apparently not ready for a Gaza-on-the-Euphrates.
So then why doesn’t Turkey put some infantry and spotters on the ground – highly trained “boots” that are literally positioned a few kilometers away on its side of the border?
Well, Turkish President Erdogan just explained his government’s reluctance quite succinctly, as reported by Bloomberg on Saturday:
For us, ISIL and the (Kurdish) PKK are the same,” Erdogan said in televised remarks today in Istanbul.
And that’s literally true because from Turkey’s vantage point the Kobani showdown is a case of terrorist-on-terrorist. The Kurdish fighters in Kobani are linked to the Kurdistan Workers’ Party or PKK. The latter has waged a separatist campaign of armed insurrection and terror inside and around Turkey for 30-years and has long been considered Turkey’s top security threat. In fact, Turkey has received untold amounts of US aid, equipment and intelligence over the years to help suppress this uprising. That’s the reason that PKK is officially classified as a “terrorist” group by the U.S. and the government in Ankara.
And, no, the Syrian and Turkish Kurds so classified as terrorists are not some black sheep cousins of the “good guy” Kurds in Erbil and northeastern Iraq that CNN parades every night as America’s heroic ally on the ground. They are all part of the greater Kurdish nation of some 30 million who inhabit southeastern Turkey, northeastern Syria and Iraq and western Iran. Taken together, these Kurdish enclaves comprise the single largest ethnic population in the Middle East that does not have its own state, and which has been a source of irredentist conflict and instability for decades.
In that context, the Bush/neocon destruction of Saddam’s dictatorship in Iraq paved the way for fragmentation of the Sykes-Picot borders and the de facto partition of Iraq, including a rump Kurdish state in the northeast. Then Washington’s foolish delusion that it was spending $25 billion to train and equip an “Iraqi army” added fuel to the fire.
The so-called Iraqi army was never a national military arm of the Iraqi state because the latter had already failed owing to the onslaught of the US “liberation” and occupation. Instead, it was a glorified Shiite militia whose members had no interest in dying to protect or hold Sunni lands in the west and north. So the “Iraqi army’s” American arms, abandoned wholesale and then captured by ISIS, literally created the necessity for the Syrian Kurds to mobilize and arm themselves in self defense. Presently, another rump Kurdish state rose along much of Turkey’s 560-mile Syrian border.
The original trigger for that development had actually been Anderson Cooper’s War to liberate the Syrian people from the brutish but secular regime that ruled them in Damascus. It too set off forces of fragmentation and partition that have now come home to roost in Kobani.
Thus, after the Arab spring uprising in 2011, the US ambassador to Syria pulled the equivalent of what we now call a “Yats” or an organized campaign to overthrow the government to which he was accredited; and in short order the R2P ladies aid society in the White House (Susan Rice and Samantha Powers) made the State Department’s maneuvering to undermine Syria’s constitutionally elected government official policy, proclaiming that Bashar Assad “has to go”.
In no time, the Kurdish enclaves in Syria essentially declared their independence, and reached a modus vivendi with Damascus. Namely, they would keep Assad’s main enemy—the majority Sunni Arabs—-out of the Kurdish enclaves on the central and eastern Syrian border with Turkey in return for being left alone and exempt from visitations by the Syrian air force.
Needless to say, that looked to the Turks like collaboration with Assad – whose removal from power ranks far higher on Ankara’s priority scale than making war on ISIS. On the other hand, Turkey’s proposal to staunch the flood of Kurdish and other Syrian refugees across its border by occupying a 20 mile “buffer zone” inside Syria is seen by the Kurds as a plot against them. As Bloomberg explains,
Kurds say the plan is aimed at crushing their nascent autonomous administration, carved out during Syria’s three-year civil war as Assad’s government lost control of their part of the country. Turkey says the Syrian Kurds are collaborating with Assad and should have been fighting him.
Meanwhile, the modern-day George Washington of the Kurdish peoples, Abdullah Ocalan, who has languished in a Turkish prison on an island outside Istanbul since 1999, warns that if Turkey does not come to the aid of Kobani his negotiations with Erdogan might end and the three decade civil war which had resulted in 40,000 Turkish deaths might resume. Yet as one expert in the region further explained to Bloomberg, coming to the aid of the Kurdish militia affiliated with the PKK would go beyond the pale for Ankara:
It’s “unthinkable” for Turkey to go beyond that and assist PKK-linked groups such as the Syrian Kurds, according to Nihat Ali Ozcan, an analyst at the Economic Policy Research Foundation in Ankara.
“No Turkish politician can explain to the public why the government is aiding the PKK and its affiliated groups after fighting against it for 30 years,” he said by phone.
In short, the region’s logical bulwark against ISIS – the huge, modern, lethal Turkish military – is stymied by a tide of Kurdish irredentism that Washington’s “regime change” policy has elicited all around it and within Turkey’s own borders. In fact, it now has two rump Kurdistan’s on its borders and its huge internal Kurdish population bestirred and mobilized in a pan-Kurdish drama. Rather than progressing toward internal political settlement, the Kurdish political leadership in Ankara—-which has supported Erdogan in return for lavish economic development funds in Kurdish areas—is now openly critical:
“The people of Kobani feel deserted and furious,” Faysal Sariyildiz, another pro-Kurdish legislator, said yesterday.
The current activities of the Turkish military on the border check-by-jowl with the ISIS militants laying siege to Kobani say it all. On the one hand, they are managing the flow of Syrian Kurdish refugees desperately fleeing across the border. At the same time, they are systematically attempting to stop the inflow of native Turkish Kurd fighters streaming toward Kobani to join the defense of their kinsmen. Ankara clearly does not want Turkish Kurds to become battle-trained in urban warfare. So far, however, they have apparently not fired even a single round of artillery at the ISIS-manned American tanks that are within a kilometer of an epic slaughter in Kobani.
Vice-President Biden was right for once. Washington has no real allies in the region because they all have another agenda. Turkey is focused on its near enemy in the Kurdish regions and its far enemy in Damascus, not the ISIS butchers who have laid claim to the Sunni lands of Euphrates valley in parts of what used to be Iraq and Syria. The Qataris want Assad gone and a new government—even one controlled by ISIS—which will grant them a pipeline concession through Syria in order to tap the giant European market for their immense natural gas reserves.
Likewise, the Saudi’s want to destroy the Assad regime because it is allied with their Shiite enemy across the Persian Gulf in Iran and because they fear their own abused Shiite populations which are concentrated in their oilfield regions. Consequently, they see the fight against ISIS as essentially a pretext for escalating their war against Damascus, and are not even interested in bombing the non-ISIS jihadi like the Nusra Front that they see as allies in the campaign against Assad.
At the end of the day, Obama’s air campaign amounts to nothing more than a glorified international air force training exercise. Pilots and air crews from the UK, Denmark, Belgium, France, Australia, Saudi Arabia, the UAE, Jordan etc. will get to run a few live fire sorties at politically correct targets. So the Brits will bomb in Iraq but not Syria; the Saudi’s will bomb ISIS targets close to Assad-held territories, but not Nusra Front positions; and the Qataris will go along for the ride pretending to help, even as they preserve deniability that they ever dropped an actual bomb for that day down the road when they seek to make a pipeline deal with the Islamic State.
Never in recorded history has a fading imperial power conducted a more feckless, pointless, and strategically irrational war. The ISIS beheadings are surely barbaric, but they pose no threat to the security and safety of the American people that can’t be handled by enhanced domestic vigilance and police protection. After all, isn’t it evident after 20 years of the so-called war on terror that somewhere on the planet earth failed states and god-forsaken desert and mountain redoubts will always give rise to radical sects and violent gangs that cannot be exterminated with bombs and drones?
Indeed, the real lesson is that by inserting itself into tribal and sectarian conflicts in these pockets of anarchy Washington only succeeds in generating more of the same. That is exactly what the siege of Kobani is all about.
So maybe Joe Biden could explain this to the big thinkers in the White House. If the Turks are unwilling to stop an easily preventable mass slaughter by ISIS on their own doorstep what kind of fractured and riven coalition has Washington actually assembled? And how will this coalition of the disingenuous, the hypocritical and the politically opportunistic ever succeed in bringing peace and stability to the historic cauldron of tribal and religious conflict in Mesopotamia and the Levant that two decades of Washington’s wars and regime change interventions have only drastically intensified?
via Zero Hedge http://ift.tt/1vCKNCM Tyler Durden
Presented with no comment…
h/t @ConradHackett
via Zero Hedge http://ift.tt/10BVfBe Tyler Durden
The good news – CDC Director Frieden says the Ebola outbreak in Nigeria ‘may’ be over (but can’t yet give “all clear”).
The bad news – the US Ebola patient has taken a turn for the worse; Dallas officials are looking for a missing homeless man who may have Ebola contact; and CDC Director Frieden warned that “in theory, a sneeze or cough could spread the virus from someone experiencing Ebola symptoms.”
The ‘Good’ News…
The ‘Meh’ News…
The ‘Bad News…
And
As CBC reports,
Officials in Texas are looking for a homeless man who may have had contact with an Ebola patient hospitalized in Dallas. The man, who walked away from a health facility Saturday after having his temperature tested, is considered at low risk.
“We have a great place for him to stay and we can attend to his every need. We just need him to be a hero to his community and to come forward,” Clay Lewis Jenkins, Dallas County judge, said at a news conference Sunday.
Jenkins added that police and other public officials are looking for the man.
Health officials say the man, whose name has not been released, may have had contact with Thomas Eric Duncan, the Ebola patient who is now “fighting for his life” after his condition worsened from serious to critical on Saturday.
and – it appears Ebola can spread by more than just direct contact with bodily fluids… (via The Hill)
Frieden acknowledged Thursday that Ebola would pose a risk to the United States until the epidemic stops in West Africa.
“The plain truth is that we can’t make the risk zero until the outbreak is controlled,” he said. ??”What we can do is minimize that risk… by working to ensure that there are no more individuals that will be exposed [here].”
??Frieden also said that, in theory, a sneeze or cough could spread the virus from someone experiencing Ebola symptoms. ??Officials had previously downplayed this possibility, focusing on direct contact with bodily fluids. ??
“There are certainly theoretical situations where someone sneezes… and you touch your eyes or mouth or nose,” and catch the virus from any transmitted particles, he said. “[But] realistically you can say what may be theoretically possible as opposed to what actually happens in the real world,” he added.
* * *
But apart from that – “contained”
* * *
How contagious is Ebola?
Less than you’d think. (NPR) http://ift.tt/1uNbXdL
— ian bremmer (@ianbremmer) October 5, 2014
via Zero Hedge http://ift.tt/1pE7C5C Tyler Durden
The broad economic conditions have been shaped to a large extent by the different policy responses to the Great Financial Crisis. For reasons that need not concern us here, the US and UK policy response was relatively stronger than the eurozone and Japan’s response. This, in turn, has produced a de-synchronized growth cycle.
Admittedly, Japan is a bit more complicated. The first two arrows of Abenomics, namely aggressive fiscal and monetary policy appeared to put the world’s third largest economy on a better path of growth and finally broke deflation’s grip. However, the retail sales tax hike, and fear of next year’s hike (from 8% to 10%) has derailed the economy. The impact has been deeper and longer lasting than Japanese officials had expected.
Most recently, the UK economy appears to have lost some momentum. As expectations of the BOE’s first rate hike get pushed out in time, sterling has weakened. In fact, last week, it under-performed the euro (1-7% for sterling and -1.3% for the euro), even though Draghi’s press conference disappointed many.
We had highlighted the risk of a potential downside surprise of the September employment report, which did not materialize. One of the reasons in our thinking was the clear recent pattern for the consensus forecasts to err on the upside of actual. Important economic reports, such as factory orders and construction spending so missed expectations that many economists shaved Q3 growth forecasts lower. The non-farm payroll growth surprised on the upside. The unemployment rate fell below 6%.
Given this backdrop, the market may be pre-disposed to read the FOMC minutes that will be published on Wednesday hawkishly. The FOMC minutes, like the dot-plot, give greater voice to hawks than actually reflected in policy. There were two dissents as Fisher joined Plosser. Yet, unlike the dissents at the Bank of England, Fisher and Plosser’s dissents are not about raising interest rates, but how the Fed’s forward guidance is characterized. Is quibbling over words too harsh a judgment? Fisher himself said he was inclined to see the first hike in Q1. The consensus seems to be April or June. Is that really the difference between the “hawks” and “doves”, rhetoric aside?
The Fed’s new Labor Market Condition Index and the JOLTS report offer broader views of the labor market. They are more important than in many respects than last week’s employment report in terms of shaping the Troika (Yellen, Dudley, Fischer) assessment of the labor market.
The US corporate earnings season officially kicks-off with Aloca’s report in the middle of the week. Generally speaking, the major investment houses are fairly unanimous in recommending overweight tech and underweight consumer staples and consumer discretionary stocks. In addition, to tech, analysts are mostly bullish financials and healthcare.
The Bank of England, the Bank of Japan and the Reserve Bank of Australia meet in the week ahead. The Bank of England is the least eventful. It will do nothing and say less. A press conference will follow the BOJ meeting, where not change of policy is anticipated. BOJ Governor Kuroda is unlikely to provide any clue that he is thinking about more stimulus. His comments on the exchange rate will be closely watched, as he was last to embrace the yen’s decline.
The Reserve Bank of Australia may be the most interesting of the three major central banks that meet. The Australian dollar has fallen roughly 8% against the US dollar since the RBA met last. Commodity prices have tumbled. World growth has been downgraded. The Chinese government has not ceased its anti-corruption or anti-pollution measures, or its financial liberalization, even though the economy.
Investors should anticipate a dovish central bank. The currency decline is not sufficient in the face of the decline in commodity prices, and give that the OECD’s PPP model still shows the Australian dollar nearly 24% over-valued. It is in third place behind the Swiss franc (~30.5%) and Norwegian krone (almost 28%).
Australian employment employment report (Thursday) has been especially volatile after a change in the sampling methodology. The August rise of 121k was incredible in the sense of not being credible. The market expects a significant unwinding of this outsized gain. It may simply be embraced be the bears as a fresh reason to continue to build the short position. Recall that in the latest Commitment of Traders report (for the week ending September 30), the net speculative position in the futures market swung to favor the shorts for the first time since in six months.
The main economic data are Europe’s industrial production figures. That France likely experienced a contraction is not really news. If the industrial production rose a little in Italy, as the consensus expects after a 1.0% decline in July, so what? The government just revised down its estimate of growth to show another year of contraction.
The more important news will come from Germany and the UK. These were the two relatively robust parts of Europe. German orders and output likely fell in August. The manufacturing PMI warns weakness likely carried into September. A decline in orders will strengthen that expectation. That the UK economy is cooling is clear, how cold it gets, is not.
Every quarter since Q3 2010, the UK has reported one month with a decline in manufacturing. The consensus is for a flat August report after a 0.3% increase in July. An outright decline would likely weigh on sterling, through the expected interest rate channel, more than a stronger than expected report would necessarily help it in a strong dollar environment.
France and Germany report August trade balances. They will underscore the divergence between two, with sustained deficits by the former and large surpluses by the later. At the same time, Germany has sustained a significant trade surplus. The deficits in the periphery have closed or nearly so. The eurozone enjoys a significant current account surplus with the world.
It is not exactly obvious that it needs the weaker euro that is being encouraged by officials, or that a weaker euro will have redistribute economic activity in Europe. The weaker euro will strengthen Germany relative to the periphery, allowing its businesses to be hyper-competitive, and little reason to support a more generous balance of the interests between the creditors and debtors. Similarly, if the recent downturn in Germany is sustained, its interests become more aligned with France and Italy.
Japan reports its August Balance of Payments. There is a heavy seasonal influence. In nine of the past ten years the August current account balance deteriorated from July, which has bettered June for the past eleven years. You get the point. More interestingly will be the country breakdown of the Japanese foreign portfolio flows and in particular, its bond purchases.
There has been a marked shift in Japan’s financial appetite. In the first seven months of 2013, Japanese investors sold about JPY6.54 trillion (~$72 bln) of US bonds. In the first seven months of this year, they bought JPY2.64 trillion (~$2.9 bln). Japanese investors have stepped up their purchases of French bonds and bought more French than US bonds this year. In the Jan-July period, they bought JPY3.15 trillion French bonds, up from JPY860 bln in the year-ago period. Japanese investors switched from selling almost JPY1 trillion of Australian bonds during the first seven month of 2013 to buying JPY571 bln this year.
Some of the new purchases may have been funded by new inflows. Some of these purchases appear to have been funded from the sales of German bunds. Japanese investors have sold JPY4.6 trillion of German bunds in the year through August. In the same year-ago period, they bought JPY2.2 trillion.
Turning away from macro-economics, there are a number of factors that global investors will continue to monitor. Ebola is a human tragedy, but it could also have geopolitical and economic consequences. We are still in the early innings. The stepped up efforts to contain/rollback ISIS/ISIL has created unexpected headlines about the US and its Middle East allies. The impact on the investment climate remains marginal, but this could change rapidly, especially if the battle is brought via terrorism to the US or Europe.
The Umbrella Revolution in Hong Kong has been impressive. Unlike the Occupy movement there is a clear agenda (popular election of the chief executive of Hong Kong) and enjoys widespread support, and arguably even greater sympathy. The real test is yet to come. The holiday period is ending. It is difficult to sustain the level of intensity for long.
Given the holiday, the full market impact is not completely clear. The Hong Kong dollar has been pushed off its ceiling, something that HKMA intervention was having difficulty doing, but it remains well above the floor. In fact, with the dollar just above HKD7.76, its earliar gains have been pealed back. Hong Kong stocks fell 3.6% last week, a bit more than the MSCI Emerging Market equity index (~-2.6%), but in line with the Nikkei and Topix (-3.2% and -3.7% respectively). The MSCI Asian Pacific Index was off a little more than 3% last week.
Note that the new facility allowing Hong Kong accounts access to Shanghai traded stocks (~$3 bln limit per day) is an important liberalization measure that ought not be lost in the excitement over the massive demonstrations in Hong Kong. Yet on another level of analysis, Shanghai is a rapidly growing on-shore financial center that may eventually compete with Hong Kong for such activities.
Lastly, the results of the (first round) of the Brazilian elections are not yet known. Incumbent Dilma has come on strong over the past week, and this is not the scenario many investors had hoped for or anticipated. Yet the dollar staged a downside key reversal before the weekend. It initially made a new high for the move, pushing above BRL2.50, but then sold-off hard, through Thursday’s low and finished just below BRL2.46. Given the costs (interest rate differentials), it is difficult to be short the real if the momentum flags, and that is precisely what the price action warns.
via Zero Hedge http://ift.tt/1pXSoHK Marc To Market
Poverty Report Contradicts GDP Claims
It is amazing how the government manages to continue selling Brooklyn Bridges to a gullible public. Americans buy wars they don’t need and economic recoveries that do not exist.
The best investment in America is a highly leveraged fund that invests only in large cap companies that are buying back their own stocks. Many of the firms repurchasing their stocks are borrowing in order to push up their stock prices, executive “performance bonuses,” and shareholders’ capital gains. The debt incurred will have to be serviced by future earnings. This is not a picture of capitalism that is driving the economy by investment.
Neither is consumer spending driving the economy. The US Census Bureau’s 2013 Income and Poverty Report concludes that in 2013 real median household income was 8 percent below the amount in 2007, the year prior to the 2008 recession and has declined to the level in 1994, two decades ago!
Even though real household income has not regained the pre-recession level and has declined to the level 20 years ago, the government and financial press claim that the economy has been in recovery since June 2009.
Neither is an increase in consumer debt driving the economy. The only growth in personal debt is in student loans.
Real retail sales (corrected with a non-rigged measure of inflation) remain at the level of the bottom of the recession in 2009. Macy’s , J.C. Penny’s, and Sears store closings are further evidence of the lack of retail sales growth, as is the fact that two of the three dollar store chains are in trouble. Walmart’s sales are declining.
The basis of auto sales hype is subprime loans and leases taken by those who cannot qualify for a loan to purchase.
Housing starts remain far below the pre-recession level, which is not surprising when available jobs are part-time with no benefits. Such jobs cannot support the formation of households and purchase of homes.
Where does the government’s second quarter 2014 real GDP growth rate of 4.6 percent come from? It comes from an understated inflation measure and jiggled numbers. It is not a correct figure. Nothing has occurred in the economy to turn it from a first quarter decline of more than 2 percent into a second quarter growth of 4.6 percent.
The 4.6 percent number is pulled out of a hat to set the stage for the November election.
It is extraordinary that economists and the financial media permit the government to get away with its false economic reporting. Of course Wall Street likes good news . . . but fake news that misleads investors and covers up economic policy mistakes?
Clearly, something is wrong with the government’s economic reporting. It is not possible to have real GDP growth when real median family incomes are declining and business investment consists of corporations buying back their own shares. Either the government’s GDP estimate is incorrect or the Census Bureau’s Income and Poverty report is incorrect. Apparently Washington doesn’t understand that if it is going to rig the numbers, it must rig all the numbers.
The rigged inflation measures create illusionary real GDP growth. They also block cost-of-living adjustments to Social Security pensions. Indeed, the main purpose of the rigged inflation measures is to get rid of “socialistic” Social Security by allowing inflation to gradually erode away the real values of “entitlements.” Republicans always want to cut “entitlements” that people have paid for over their working lifetime with the payroll tax. But Republicans never want to cut the payroll tax. They need the revenues in order to bail out the big banks and to pay for never-ending wars.
Washington has been conducting needless wars abroad for 93 percent of the 21st century at a cost of trillions of dollars. More trillions have been wasted bailing out banks that deregulation permitted to become “too big to fail.” During the past seven years, millions of Americans have lost their jobs and their homes, and food stamp rolls have reached record numbers. These hurting Americans have been ignored by policy-makers in Washington.
Clearly, government in America is focused on something different from a healthy economy and the well being of citizens. We call it democracy, but it’s not.
via Zero Hedge http://ift.tt/1vC11vW Tyler Durden
via Zero Hedge http://ift.tt/1vC13Ef williambanzai7