Tag: news

If, as we are constantly told by the mainstream media, equity market performance is all that matters in the real world, then the following chart from The Economist should provide much food for thought for those praying at the altar of the elites in Davos. Despite hanging on their every word as if handed down by The Oracle herself, ‘companies that regularly attend Davos’ have dramatically underperformed the broad market… so, in the modern parlance of ‘stocks are all that matters’ – Davos attendees are less smart than the average business manager (and perhaps less smart given the costs of attendance for this lack of edge).

 

 

Source: The Economist

via Zero Hedge http://ift.tt/1hrwAlN Tyler Durden

Spain’s unemployment rate hit 26% again this week. Despite Rajoy’s please for people to believe things are getting better, that the crisis is over (even as Draghi proclaims it otherwise and Axel Weber warns it is still festering), Spanish local ex-pat newspaper “The Local” has uncovered seven statistics that will help you understand just how serious the situation is. What is perhaps even more surreal is that in a year in which the economy supposedly grew, they depleted their pension reserve fund by 15%…

• *SPAIN WITHDREW EU11.6B FROM PENSION RESERVE FUND IN 2013
• Spain pension reserve fund ends 2013 With EU53.7 bln

So apart from that, here is how bad it really is in Spain…

Via The Local,

New unemployment figures from Spain’s National Statistic Institute (INE) show that recent macroeconomic improvements in Spain are yet to create new jobs.

While Spain has now clocked up two consecutive quarters of fragile growth, the INE data — based on a quarterly survey of 65,000 homes nationwide known as the EPA — shows the country’s unemployment climbed back up to 26.03 percent at the end of 2013, up from 25.98 percent three months earlier.

Here The Local provides seven statistics that highlight the extent of Spain’s unemployment problem.

1) Spain has now seen six straight years of job destruction. Some 198,900 jobs disappeared in Spain last year, and 3.5 million have vanished since the country’s crisis began in 2008.

 

2) There are 1,832,300 households in Spain where nobody has a job. That is 1.36 percent more than a year earlier.

 

3) Some 686,600 households in Spain have now income at all — not even social security. That is twice the figure seen in 2007, or before the crisis struck.

 

4) More than 3.5 million in Spain have been out of work for at least a year — that 61 percent of all people who currently find themselves without work in the country.

 

Some 2.3 million people have been out of work for at least two years.

 

5) Spain’s new jobs are of poor quality. The number of ongoing positions in Spain fell by 269,000 in 2013 while the number of temporary contracts rose by 81,300.

 

6) Some 69,000 found work in 2013, but unemployment actually rose in the final three months of the year.

 

This is because the number of ‘active’ people in Spain — those working, or seeking employment — actually fell by 267,900 last year, leaving a smaller pool of people fighting for the same jobs.

 

Many people — especially those in the 16–35 age group — have simply given up looking for work, or have left the country to look for work elsewhere. They are therefore no longer included in the official figures.

 

7) Working Spaniards put in 5.86 million hours of overtime every week from October to December, up 18.4 percent on a year earlier.

 

A total of 57.7 percent of those hours, or 3.38 million a week are unpaid. This is equivalent to 146,500 new jobs, says Spain’s La Voz de Galicia newspaper.   

Of course, the emerging market contagion spreads quickly from Latin America to Spain and is alreeady impacting their banks…

via Zero Hedge http://ift.tt/1hrwyKF Tyler Durden

Spain’s unemployment rate hit 26% again this week. Despite Rajoy’s please for people to believe things are getting better, that the crisis is over (even as Draghi proclaims it otherwise and Axel Weber warns it is still festering), Spanish local ex-pat newspaper “The Local” has uncovered seven statistics that will help you understand just how serious the situation is. What is perhaps even more surreal is that in a year in which the economy supposedly grew, they depleted their pension reserve fund by 15%…

• *SPAIN WITHDREW EU11.6B FROM PENSION RESERVE FUND IN 2013
• Spain pension reserve fund ends 2013 With EU53.7 bln

So apart from that, here is how bad it really is in Spain…

Via The Local,

New unemployment figures from Spain’s National Statistic Institute (INE) show that recent macroeconomic improvements in Spain are yet to create new jobs.

While Spain has now clocked up two consecutive quarters of fragile growth, the INE data — based on a quarterly survey of 65,000 homes nationwide known as the EPA — shows the country’s unemployment climbed back up to 26.03 percent at the end of 2013, up from 25.98 percent three months earlier.

Here The Local provides seven statistics that highlight the extent of Spain’s unemployment problem.

1) Spain has now seen six straight years of job destruction. Some 198,900 jobs disappeared in Spain last year, and 3.5 million have vanished since the country’s crisis began in 2008.

 

2) There are 1,832,300 households in Spain where nobody has a job. That is 1.36 percent more than a year earlier.

 

3) Some 686,600 households in Spain have now income at all — not even social security. That is twice the figure seen in 2007, or before the crisis struck.

 

4) More than 3.5 million in Spain have been out of work for at least a year — that 61 percent of all people who currently find themselves without work in the country.

 

Some 2.3 million people have been out of work for at least two years.

 

5) Spain’s new jobs are of poor quality. The number of ongoing positions in Spain fell by 269,000 in 2013 while the number of temporary contracts rose by 81,300.

 

6) Some 69,000 found work in 2013, but unemployment actually rose in the final three months of the year.

 

This is because the number of ‘active’ people in Spain — those working, or seeking employment — actually fell by 267,900 last year, leaving a smaller pool of people fighting for the same jobs.

 

Many people — especially those in the 16–35 age group — have simply given up looking for work, or have left the country to look for work elsewhere. They are therefore no longer included in the official figures.

 

7) Working Spaniards put in 5.86 million hours of overtime every week from October to December, up 18.4 percent on a year earlier.

 

A total of 57.7 percent of those hours, or 3.38 million a week are unpaid. This is equivalent to 146,500 new jobs, says Spain’s La Voz de Galicia newspaper.   

Of course, the emerging market contagion spreads quickly from Latin America to Spain and is alreeady impacting their banks…

via Zero Hedge http://ift.tt/1hrwyKF Tyler Durden

After escalating higher and higher in the last few days as the rest of the market slipped further into the red for 2014, the Dow Transports has collapsed 3.25% at this morning’s open – its biggest drop in 9 months. This, along with the plunge in the NASDAQ and Russell has dragged every major US equity index into the red once again for 2014… VIX has spiked to 15.4% – its highest since pre-Taper as JPY carry unwinds drag US equities lower once again… Credit markets have no retraced all post-Taper gains (and stocks are rapidly catching down).

 

 

Of course, the driver of the weakness is JPY carry unwinds…

 

Credit has led the way and now eradicated all gains post-Taper…

 

 

Charts:Bloomberg

via Zero Hedge http://ift.tt/1mCaqOS Tyler Durden

On the heels of Shinzo Abe’s seeming hyprocrisy in Davos, commenting that “if peace and stability were shaken in Asia, the knock-on effect for the entire world would be enormous,” while he raises military budget, antagonizes China, and inflames the militaristic fervor in his own nation with war-crime shrine visits, the Chinese have struck back specifically at Abe’s comparison of China and Japan’s present tensions to Germany and Britain’s in 1914… Foreign Minister Wang Yi – writing from the Chinese Embassy in the US, warned:

• *CHINA’S WANG CALLS ABE’S STATEMENT ON WW1 ‘ANACHRONISTIC’
• *CHINA HAPPY TO REVIEW WORLD HISTORY WITH ABE: WANG YI
• *CHINA WANTS ABE TO RETHINK OWN COMMENTS, ACTIONS: WANG YI

Adding that, as we warned last night (and described in great detail here), China and the US need to show mutual respect and avoid conflict and confrontation on the matter of Japan.

Yi warns…

• *CHINA SAYS ABE ‘SHOULDN’T GO DOWN WRONG PATH’: WANG YI
• *JAPAN REFUSES TO ADMIT THERE’S DISPUTE OVER ISLANDS: WANG YI
• *CHINA WILL NEVER ALLOW FASCIST, MILITARIST IDEAS TO REVIVE: FM
• *CHINA TO RESOLVE DISPUTES THROUGH DIALOG: WANG YI

 

Abe stokes the fire further with comparisons to WW1 at Davos… (via NY Times)

Historians and columnists have made comparisons between Britain and a rising Germany in 1914 and the current tensions between Japan and China; a hot topic at the start of the centenary year of World War I.

 

Prime Minister Shinzo Abe of Japan, in his appearance Wednesday at the World Economic Forum in Davos, Switzerland, raised the bar when he agreed with the thesis, saying that he saw a “similar situation” between now and then.

 

During a discussion with journalists, Mr. Abe said that the strong trade relations between Germany and Britain in 1914 were not unlike the economic interdependence today between Japan and China.

 

In 1914, economic self-interest failed to put a brake on the strategic rivalry that led to the outbreak of war, Mr. Abe said. He criticized the annual double-digit growth in China’s defense budget, calling it a source of instability in the Pacific region, an implicit comparison to Germany’s rapid build-up of arms before World War I. 

And China responds…

Wang Yi: Promote the Settlement of Hot-Spot Issues in the Chinese Way

 

On January 22, 2014, Foreign Minister Wang Yi, at attendance to the Geneva II Conference on the Syrian issue in Montreux, Switzerland, talked to media about promoting the settlement of hot-spot issues in the “Chinese Way”.

 

Wang Yi said, as a permanent member of the UN Security Council, China shoulders responsibilities and obligations in maintaining world peace and stability, and is willing to play a constructive and responsible role in resolving regional hot spot issues. China has always adhered to the following principles in promoting the settlement of the Syrian issue and other hot-spot issues:

 

First, to firmly uphold the tenet of the UN Charter and the basic norms governing international relations, especially the principle of noninterference in internal affairs.

 

Second, to insist on promoting the settlement of the regional hot-spot issues under the framework of the UN, including on the basis of the relevant UN resolutions.

 

Third, to insist on resolving disputes through peaceful means. We oppose the use of force, and disapprove the overturning of legitimate government through illegal approach.

 

Fourth, to decide China’s position based on the rights and wrongs of things themselves, uphold justice, be objective and balanced, and never take advantage of the hot-spot issues for self interest.

 

Fifth, to respect the will of the people concerned, and try to guide for settlement acceptable to all parties involved.

 

The practice of China has its own characteristics. We care more about sustainability, doing things step by step, and fundamentally resolving problems.

 

This can be called the “Chinese way”.

And indeed – as we warned last night – it seems rhetoric has reached the US…

• *CHINA, U.S. NEED TO SHOW MUTUAL RESPECT, COOPERATE
• *CHINA, U.S. NEED TO AVOID CONFLICT, CONFRONTATION

via Zero Hedge http://ift.tt/1mQy4Kt Tyler Durden

On the heels of Shinzo Abe’s seeming hyprocrisy in Davos, commenting that “if peace and stability were shaken in Asia, the knock-on effect for the entire world would be enormous,” while he raises military budget, antagonizes China, and inflames the militaristic fervor in his own nation with war-crime shrine visits, the Chinese have struck back specifically at Abe’s comparison of China and Japan’s present tensions to Germany and Britain’s in 1914… Foreign Minister Wang Yi – writing from the Chinese Embassy in the US, warned:

• *CHINA’S WANG CALLS ABE’S STATEMENT ON WW1 ‘ANACHRONISTIC’
• *CHINA HAPPY TO REVIEW WORLD HISTORY WITH ABE: WANG YI
• *CHINA WANTS ABE TO RETHINK OWN COMMENTS, ACTIONS: WANG YI

Adding that, as we warned last night (and described in great detail here), China and the US need to show mutual respect and avoid conflict and confrontation on the matter of Japan.

Yi warns…

• *CHINA SAYS ABE ‘SHOULDN’T GO DOWN WRONG PATH’: WANG YI
• *JAPAN REFUSES TO ADMIT THERE’S DISPUTE OVER ISLANDS: WANG YI
• *CHINA WILL NEVER ALLOW FASCIST, MILITARIST IDEAS TO REVIVE: FM
• *CHINA TO RESOLVE DISPUTES THROUGH DIALOG: WANG YI

 

Abe stokes the fire further with comparisons to WW1 at Davos… (via NY Times)

Historians and columnists have made comparisons between Britain and a rising Germany in 1914 and the current tensions between Japan and China; a hot topic at the start of the centenary year of World War I.

 

Prime Minister Shinzo Abe of Japan, in his appearance Wednesday at the World Economic Forum in Davos, Switzerland, raised the bar when he agreed with the thesis, saying that he saw a “similar situation” between now and then.

 

During a discussion with journalists, Mr. Abe said that the strong trade relations between Germany and Britain in 1914 were not unlike the economic interdependence today between Japan and China.

 

In 1914, economic self-interest failed to put a brake on the strategic rivalry that led to the outbreak of war, Mr. Abe said. He criticized the annual double-digit growth in China’s defense budget, calling it a source of instability in the Pacific region, an implicit comparison to Germany’s rapid build-up of arms before World War I. 

And China responds…

Wang Yi: Promote the Settlement of Hot-Spot Issues in the Chinese Way

 

On January 22, 2014, Foreign Minister Wang Yi, at attendance to the Geneva II Conference on the Syrian issue in Montreux, Switzerland, talked to media about promoting the settlement of hot-spot issues in the “Chinese Way”.

 

Wang Yi said, as a permanent member of the UN Security Council, China shoulders responsibilities and obligations in maintaining world peace and stability, and is willing to play a constructive and responsible role in resolving regional hot spot issues. China has always adhered to the following principles in promoting the settlement of the Syrian issue and other hot-spot issues:

 

First, to firmly uphold the tenet of the UN Charter and the basic norms governing international relations, especially the principle of noninterference in internal affairs.

 

Second, to insist on promoting the settlement of the regional hot-spot issues under the framework of the UN, including on the basis of the relevant UN resolutions.

 

Third, to insist on resolving disputes through peaceful means. We oppose the use of force, and disapprove the overturning of legitimate government through illegal approach.

 

Fourth, to decide China’s position based on the rights and wrongs of things themselves, uphold justice, be objective and balanced, and never take advantage of the hot-spot issues for self interest.

 

Fifth, to respect the will of the people concerned, and try to guide for settlement acceptable to all parties involved.

 

The practice of China has its own characteristics. We care more about sustainability, doing things step by step, and fundamentally resolving problems.

 

This can be called the “Chinese way”.

And indeed – as we warned last night – it seems rhetoric has reached the US…

• *CHINA, U.S. NEED TO SHOW MUTUAL RESPECT, COOPERATE
• *CHINA, U.S. NEED TO AVOID CONFLICT, CONFRONTATION

via Zero Hedge http://ift.tt/1mQy4Kt Tyler Durden

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The elimination of low-risk interest income in favor of risky speculative credit/asset bubbles has led to a monumental misallocation of capital and the institutionalization of perverse and highly corrosive incentives.

The stagnation afflicting advanced economies has several fundamental causes.

1. The dynamic between rising productivity, higher labor costs and technology replacing human labor has shifted decisively in favor of labor-saving technology: the low-risk, high-yield way to increase productivity and profitability is to replace high-cost human labor with software, automation and robots.

This is true whether the labor being replaced costs $10 a day or $100 a day: the machine can produce the output faster, better and cheaper.

This leads to a conclusion that undermines all existing capitalist/socialist models:wages are no longer a practical means of distributing the surplus generated by the economy.

2. Another is the tectonic shift of energy costs: as the cheap, easily accessible oil is depleted, it costs more to extract and refine substitute fuels from unconventional sources. That pushes the cost of energy to consumers higher for structural reasons. The more a household has to spend on energy, the less disposable income is available to spend on other goods and services.

3. The decades-long postwar rise in prosperity naturally led to more demands for government services and income security. These demands are essentially open-ended–there can never be enough money spent on health, education, old age income security, public security, etc.

Since taxes are levied on income, the stagnation of wages means there are limits on how much more income can be diverted to taxes without negatively impacting household disposable income.

The Powers That Be conjured up a solution to these limitations: debt. The central state filled the gap between tax revenues and spending with borrowed money. Companies and households were encouraged to borrow money (i.e. borrow from future income) to spend in the present.

This credit/debt boom was fueled by financialization, a term for the broadening commoditization of debt and debt instruments. Financialization took off in the early 1980s, with the relaxing of restrictions on credit and credit instruments. It was no accident that the stock and real estate markets quickly reached escape velocity as debt filled the coffers of government, corporations and households with cash.

The essence of financialization is turning debt into a tradeable security that can be leveraged into speculative pyramids. If I loan you $100,000 to buy a house, that loan is called a mortgage. The collateral for the mortgage is the property. In the pre-financialization era, I held the mortgage to maturity (30 years) and collected the interest and principal. This trickle of earnings from interest was the entire yield on the loan.

In the securitized economy, I divide the loan into tranches that are sold to investors like stocks and bonds. I can "cash out" my entire gain in the present, and then sell derivatives on the securitized debt as a form of "portfolio insurance" to other buyers.

Clever financiers can pyramid security on security and debt on debt, all collateralized by debt on one property.

This enables the generation of vast profits not from producing goods and services but from financial churning. The more debt I underwrite, the more I can securitize and the more debt instruments I can conjure out of thin air.

The key ontological (inherent) dynamic of speculative financialization is that pyramiding credit expansions lead to bubbles which eventually pop, wiping out the phantom wealth created by the bubble.

In effect, the central state's (the Treasury, regulatory agencies and the Federal Reserve) policies of low interest rates, easy money and limitless liquidity sought to compensate for the decline of real income by generating speculative income on a vast scale.

The problem is that speculative financialization only benefits speculators with access to nearly free money and the securitization markets–Wall Street financiers, corporate raiders, hedge funds and other financial Elites. These Elites pocketed immense fortunes but very little of this wealth trickled down to households for the simple reason that there is no mechanism for such a transfer except taxes–and this mechanism is controlled by the central state, which is easily influenced by wealth (campaign contributions, lobbying, etc.)

The Federal Reserve and Federal agencies' solution to stagnating household income was to make every homeowner into a speculator. The Great Housing Bubble of the 2000s was the perfection of this strategy: as every home in the nation was floating higher in valuation as the result of an enormous credit/financialization bubble, homeowners were granted a form of "free income" via home equity lines of credit (HELOCs) and second mortgages.

That this increase in home equity was a form of phantom wealth that would necessarily vanish was not advertised as being an intrinsic feature of the solution.

In the wake of the implosion of the housing bubble, the Fed and other central state agencies acted to repeat the exact same strategy of inflating speculative bubbles in widely held assets: stocks, bonds and real estate.

The problem with these current bubbles is that the assets are no longer widely held enough to compensate for stagnant household income. Few households directly own enough stocks and bonds to push the needle of income higher, and the Fed's policy of zero interest rates (ZIRP) has actually deprived middle-income households with savings of hundreds of billions of dollars in interest that once flowed into household coffers.

This elimination of low-risk interest income in favor of risky speculative credit/asset bubbles has led to a monumental misallocation of capital and the institutionalization of perverse and highly corrosive incentives. The policy of incentivizing speculation as the mechanism to compensate for stagnating earned income has been a disaster for households and the nation.

Needless to say, the current bubbles in stocks, bonds and real estate will implode, and the phantom wealth that the bubbles temporarily generated will vanish.

via Zero Hedge http://ift.tt/1eXRg33 Tyler Durden

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The elimination of low-risk interest income in favor of risky speculative credit/asset bubbles has led to a monumental misallocation of capital and the institutionalization of perverse and highly corrosive incentives.

The stagnation afflicting advanced economies has several fundamental causes.

1. The dynamic between rising productivity, higher labor costs and technology replacing human labor has shifted decisively in favor of labor-saving technology: the low-risk, high-yield way to increase productivity and profitability is to replace high-cost human labor with software, automation and robots.

This is true whether the labor being replaced costs $10 a day or $100 a day: the machine can produce the output faster, better and cheaper.

This leads to a conclusion that undermines all existing capitalist/socialist models:wages are no longer a practical means of distributing the surplus generated by the economy.

2. Another is the tectonic shift of energy costs: as the cheap, easily accessible oil is depleted, it costs more to extract and refine substitute fuels from unconventional sources. That pushes the cost of energy to consumers higher for structural reasons. The more a household has to spend on energy, the less disposable income is available to spend on other goods and services.

3. The decades-long postwar rise in prosperity naturally led to more demands for government services and income security. These demands are essentially open-ended–there can never be enough money spent on health, education, old age income security, public security, etc.

Since taxes are levied on income, the stagnation of wages means there are limits on how much more income can be diverted to taxes without negatively impacting household disposable income.

The Powers That Be conjured up a solution to these limitations: debt. The central state filled the gap between tax revenues and spending with borrowed money. Companies and households were encouraged to borrow money (i.e. borrow from future income) to spend in the present.

This credit/debt boom was fueled by financialization, a term for the broadening commoditization of debt and debt instruments. Financialization took off in the early 1980s, with the relaxing of restrictions on credit and credit instruments. It was no accident that the stock and real estate markets quickly reached escape velocity as debt filled the coffers of government, corporations and households with cash.

The essence of financialization is turning debt into a tradeable security that can be leveraged into speculative pyramids. If I loan you $100,000 to buy a house, that loan is called a mortgage. The collateral for the mortgage is the property. In the pre-financialization era, I held the mortgage to maturity (30 years) and collected the interest and principal. This trickle of earnings from interest was the entire yield on the loan.

In the securitized economy, I divide the loan into tranches that are sold to investors like stocks and bonds. I can "cash out" my entire gain in the present, and then sell derivatives on the securitized debt as a form of "portfolio insurance" to other buyers.

Clever financiers can pyramid security on security and debt on debt, all collateralized by debt on one property.

This enables the generation of vast profits not from producing goods and services but from financial churning. The more debt I underwrite, the more I can securitize and the more debt instruments I can conjure out of thin air.

The key ontological (inherent) dynamic of speculative financialization is that pyramiding credit expansions lead to bubbles which eventually pop, wiping out the phantom wealth created by the bubble.

In effect, the central state's (the Treasury, regulatory agencies and the Federal Reserve) policies of low interest rates, easy money and limitless liquidity sought to compensate for the decline of real income by generating speculative income on a vast scale.

The problem is that speculative financialization only benefits speculators with access to nearly free money and the securitization markets–Wall Street financiers, corporate raiders, hedge funds and other financial Elites. These Elites pocketed immense fortunes but very little of this wealth trickled down to households for the simple reason that there is no mechanism for such a transfer except taxes–and this mechanism is controlled by the central state, which is easily influenced by wealth (campaign contributions, lobbying, etc.)

The Federal Reserve and Federal agencies' solution to stagnating household income was to make every homeowner into a speculator. The Great Housing Bubble of the 2000s was the perfection of this strategy: as every home in the nation was floating higher in valuation as the result of an enormous credit/financialization bubble, homeowners were granted a form of "free income" via home equity lines of credit (HELOCs) and second mortgages.

That this increase in home equity was a form of phantom wealth that would necessarily vanish was not advertised as being an intrinsic feature of the solution.

In the wake of the implosion of the housing bubble, the Fed and other central state agencies acted to repeat the exact same strategy of inflating speculative bubbles in widely held assets: stocks, bonds and real estate.

The problem with these current bubbles is that the assets are no longer widely held enough to compensate for stagnant household income. Few households directly own enough stocks and bonds to push the needle of income higher, and the Fed's policy of zero interest rates (ZIRP) has actually deprived middle-income households with savings of hundreds of billions of dollars in interest that once flowed into household coffers.

This elimination of low-risk interest income in favor of risky speculative credit/asset bubbles has led to a monumental misallocation of capital and the institutionalization of perverse and highly corrosive incentives. The policy of incentivizing speculation as the mechanism to compensate for stagnating earned income has been a disaster for households and the nation.

Needless to say, the current bubbles in stocks, bonds and real estate will im
plode, and the phantom wealth that the bubbles temporarily generated will vanish.

via Zero Hedge http://ift.tt/1eXRg33 Tyler Durden