China Gives Up On Europe, Will Target Africa Instead
That China has finally given up on Europe is no news (granted, however, it will make it more complicated for various European newspaper to make up articles alleging China will bail out Europe now that this is no longer the case): after all even the Norwegian sovereign wealth fund has finally learned its lesson, and having been burned enough times, has made it quite clear it will have nothing to do with Europe's insolvent periphery. China, which has already lost enough money on Europe, has now decided to do the same. From Bloomberg: "China Investment Corp. has stopped buying European government debt because of an economic crisis on the continent, though it continues to look for new investments there, said CIC President Gao Xiqing. “What is happening in Europe right now is of course of concern,” Gao said yesterday in an interview in Addis Ababa, Ethiopia, during the World Economic Forum on Africa. “We still have our people looking at opportunities in Europe, even though we don’t want to buy any government bonds.” Sorry Europe: you had your chance. As for where China will invest its capital in the future? Why the one continent so far untouched by globalization, and which has the most debt capacity of all...
Consumer Comfort Plummets Most Since Feb 2008 As Personal Finance Confidence Crashes
Having
staggered along the bottom, mired in misery and reality, for over 3
years, the Bloomberg Consumer Comfort Index finally signaled
depression-fatigue in January of this year and started to break out -
albeit to historically still low levels. This was then heralded in
self-fulfilling style as an indication that everything was good again in
the world, money would come off the sidelines, consumers would buy
more iPads and American cars, and all would be well in the world. Well
the sad reality is that the last 3 weeks - as stocks have begun to lag,
economic data has begun to reflect an un-warmed winter reality, and
Europe's conflagration reignites - have seen the largest collapse in consumer comfort in over 3 years and has fallen to 3-month lows. Digging into the detail is even more worrisome as in the last 3 weeks the comfort with personal finances has fallen by the most ever and back to six-month lows.Italian Economic Deterioration Accelerates: Q2 GDP Forecast To Drop More Than 1%
Overnight
we got some good news on Italian industrial production. Well, get
ready to scrap them as according to Italian Trade Union Confindustria,
and validating the collapse as predicted by PMI indicators, Italy's Q2 GDP is now expected to shrink more than 1% in Q2: the worst print since 2009, cementing the country's "double dip", and
that real-time industrial output in April, now that LTRO has fizzled,
is expected to fall 0.6%. None of this should come as a surprise to
anyone: after all the only way the periphery can rise is if it crashes
hard enough to force the ECB to intervene again. Finally, the country
that is next in line after Spain to nationalize its banks, need some
pretext after all. Complete economic collapse will surely make
stockholders, of other countries' banks at least, happy, as their
Italian counterparty risk will soon be footed by the Italian taxpayers
themselves.Today’s Items:
Just weeks ago, the idea that Greece
would leave the euro zone was almost unthinkable to many. Now, after the
election, Merkel – to save her own backside, is not handing but
throwing the Greeks the proverbial hat and coat. Of course, right after
Greece is the much larger problem of Spain and Italy with far greater
consequences. It increasingly appears that the only viable solution for
Merkel to have a small amount of pain now, as opposed to continued pain,
is to bring back the Deutschmark super fast.
Bill Gross and Jan Hatzius of Goldman
Sachs are both saying to get ready for that QE3 announcement. Yes folks,
as the paper manipulation plays temporary havoc with the price of
commodities, look for the proverbial printing press to engage the warp
drive as the U.S. economy continues its death spiral. That announcement
could come when the Fed meets on June 19 and 20th.
With Social Security revenues of 510
billion and expenditures at 1.055 trillion, the system is failing. In
fact, just the expenditures to honest retired workers alone is $520
billion. Disabled Workers, food stamps, medicaid and extended
unemployment benefits make up most of the rest of the expenditures. But,
do not worry, there are those private 401K’s and IRA’s that the
government can confiscate to cover this.
Capital controls are getting more
frustrating for Americans who want to diversify their wealth abroad. In
fact, many foreign banks will not open accounts for Americans period
because of the Foreign Account Tax Compliance Act that comes into being
in 2013. With all that money, just sitting around, it sounds like they
could just buy a bunch of physical gold and silver and let it gain value
as the dollar collapses.
Here are a few of these feel-good facts.
1. 36 percent of all Americans are obese.
2. Americans take more prescription drugs than anyone else on the planet.
3. The United States has the highest teen pregnancy rate.
4. Consumer debt in America has increased by a staggering 1700% since 1971.
1. 36 percent of all Americans are obese.
2. Americans take more prescription drugs than anyone else on the planet.
3. The United States has the highest teen pregnancy rate.
4. Consumer debt in America has increased by a staggering 1700% since 1971.
Army Public Affairs director Tiffany Wood
stated that the manual, for Concentration Camps for Americans, was not
intended for public release. The manual, from 2010, also makes clear
that the internment facility is not only a re-education camp but also a
forced labor camp. The manual also details how prisoners will be
identified by their “social security number.” Things just get worse
folks.
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China: I Am Leaning Towards A Meaningful Slowdown
Admin at Marc Faber Blog - 6 minutes ago
It's very difficult to know exactly what is happening in China. However,
because I think China has a credit bubble, I am leaning towards a
meaningful slowdown.
They have a lot of bad loans that will have to be written off. There is a
glut of property. And the Chinese economy is essentially a
capital-spending-driven economy, which has, of course, a much larger
cyclicality than a consumption-driven economy. And so we could have a more
meaningful slowdown. - *in HAI *
*Marc Faber is an international investor known for his uncanny predictions
of the stock market and futures markets aro... more »
All Agricultural Commodities Are Going To Go Much Higher
Admin at Jim Rogers Blog - 31 minutes ago
All agricultural commodities are going to go much higher. We have serious
problems developing in agriculture. The average age of farmers in America
is 58, 66 in Japan, and 58 in Australia. The world is running out of
farmers so unless price goes much higher we are going to have significant
shortages in agriculture. So prices are going to go a lot higher because of
the serious fundamental shortages that are developing. - *in Economic Times
*
*
*
Related, John Deere (DE), Mosaic (MOS), Potash (POT)
*Jim Rogers is an author, financial commentator and successful
international investor. ... more »
HUI holds Critical Support - Upside Reversal
Trader Dan at Trader Dan's Market Views - 8 hours ago
In yesterday's post I mentioned that if the HUI was going to bottom, it was
going to do so right now and right then. See the link here...
http://traderdannorcini.blogspot.com/2012/05/hui-chart-and-comments.html
If not, it was going to drop down towards the 340 region on a final washout.
In today's session, apparently the buyers showed up in a very large way at
this key techical level. The index put in what is called in technical
analysis terms, an outside day bullish reversal. This basically occurs
AFTER A MARKET HAS BEEN IN A SUSTAINED DOWNTREND, goes on to make a new low
for the m... more »
What's with 1350 on the S&P 500
Trader Dan at Trader Dan's Market Views - 10 hours ago
Note that for Friday of last week, Monday of this week and Tuesday, the S&P
has crashed through the 1350 level only to keep rebounding back up through
this level. I have watched it trade throughout the entire session and have
noticed that it keeps getting sizeable bids coming in to take it back up
but once that buying dissipates, the sellers come back in and use the rally
to pound it lower. Then back up it goes. It appears that someone of large
size is attempting to defend this level.
I remember writing back in February how stubborn this level was on the way
UP and how it could not ... more »
What Happened The Last Time IBEX Jumped This Much?
It
appears that today's +3.5% jump in IBEX (from decade-lows) is being
heralded as some kind of indication of a bottom or turning point in
stress in Spain. By way of context though, Spanish 10Y bond yields
remain above 6% (and spreads at 450bps near record wides), Spanish 5Y
CDS are unchanged at record wides over 500bps, and the banking bailout
remains woefully small relative to the size of the hole they are trying
to fill (and all of that is funded by a sovereign that only retains
access to the public debt markets thanks to its circular banking
system's bid). To be more clear, the last time IBEX increased by
+3 sigma marked the very top last July before Europe fell apart and
IBEX plummeted 23% in just 2 weeks. Anchoring bias can be a dangerous thing and dead cat bounces are often misleading when selling-fatigue is all around."Turning Point In European Monetary Policy" - Is Germany About To Embrace Inflation?
When we presented the latest chart of the Bundesbank's record TARGET2 imbalance last night we had one simple message: we hope Germany is prepared for the rout its central bank will soon experience once the Eurozone's members start dropping like flies. Today it appears that Germany has decided to go with the flow, and in what Spiegel classifies as a "turning point in monetary policy" notes that Germany, in an abrupt shift to its Weimar-impacted history, is getting ready to embrace inflation. What this likely means is that the ECB is about to set off on its most aggressive monetization experiment ever, which also explains why all of Europe is trading diggy limit up this morning: it is not on the latest batch of horrible news - it is on the return of speculation that the ECB is, with the Bundesbank's blessing, baaaack.On Greece's Systemic Risk Impact
The
implications of a nation leaving the Euro (and its contagion effects)
are becoming clearer but are by no means discounted by the market. The
risk of an interruption in the Greek adjustment program has increased
significantly - and as Goldman notes - is the most likely eventual
outcome for Greece and fears of the missed interest payment in June
continue to concern many. The tough decision and dilemma for
the international community remains between a rock (of acquiescence and
just funding a belligerent member state) and had place (ECB deciding
to let Greek banks go) with an odd middle ground seemingly the most
likely given Europe's tendency for avoiding the hard decisions. There is no doubt that the near
term implications from such an unfortunate turn of events would be
profound for markets; fiscal risk premia would widen, the EUR would
decline in value and European equities would underperform. The
true question though, is how much lasting damage such a situation can
do and whether, in the long run, systemic risks can be contained. In
principle, to the extent that no other country chooses to go down the
same path as Greece, there is no political or practical hurdle for the
ECB to crucially safeguard the stability of the Euro area with unlimited
liquidity provisions. A liquidity driven crisis can be averted in that
sense. Whether risk premia stay on a higher tangent after such an
event is a separate and complicated question but game-theoretically it
strengthens the renegotiating position of Ireland, Portugal, and
obviously Spain with the ECB (and implicitly the Bundesbank) being
dragged towards the unmitigated print-fest cliff.Same Trick Different Week: "Initial Claims Decline Following Revision"; Deficit Surge Pushes Q1 GDP To 1.5%
Stop us when this sounds familiar. Last week's 365K number has been revised to 368K, which is where the expectations for this week's print were. Instead, we got 367K claims this week, a 1K beat to expectations, which will be a 2K miss next week of course, but at least the pre-election propaganda media has their headline: "Initial Claims improve by 1,000." And scene. Naturally, the same thing happened for continuing claims, which beat expectations of 3275K, printing at 3229K, with the last week's print revised to 3290K from 3276K. The more disturbing form an end demand standpoint data, is that yet another 40K dropped off extended claims and EUCs. Finally in what is the best new for the market, and worst for the Economy, is that the March trade deficit soared to $51.8 billion, on expectations of -$50 billion, which was the biggest trade balance drop in 10 months. What this means is that Q1 GDP which already is tracking at 1.9%, just got lobbed to 1.5%. Yes: the Q1 GDP first revision will likely show the 2.2% number is now in the low to mid 1% range.Bankia: The Failed Bank In The Coalmine
The Immortal Bard must have been referencing Madrid when penning these lines or, if not, would likely approve of their application this morning. The nationalization of Bankia, the third largest bank in Spain, is not some isolated event that is singular and alone in nature regardless of the expected dampening and muted words and phrases issued by the Spanish government. The cancer has been identified but not isolated and you may be assured that it remains in the lymph nodes of the two major banks in Spain. Fortunately, during America’s financial crisis, many of the sub-prime mortgages were securitized and no longer resided on the balance sheets of the American banks. In the case of Spain we find not only the majority of the mortgages resident at the Spanish banks but we find an added dimension which is a huge amount of money lent to Real Estate developers which is impaired and still on the books of the Spanish banks. Further, in my opinion, none of these loans have been accurately accounted for and they are being carried at whimsical valuations by the banks or pledged as collateral at the ECB where the Spanish bank funding jumped 50% in one month and now stands at $294 billion. Following the bouncing ball; there is now so much encumbrance of assets between pledged collateral and covered bond sales that the actual worth of the two major Spanish banks is now someplace between “not much” and “De minimis” should the situation deteriorate to the point of impairment.Daily US Opening News And Market Re-Cap: May 10
European equities continue the downward trend throughout the morning, despite opening slightly higher. Similarly to yesterday the moves are not data-driven, however the ECB have revised their forecasts for Euroarea growth downwards to -0.2% this year from -0.1% and have revised their inflation outlook upwards to 2.3% from 1.9%. The focus remains on Greece as the PASOK leader Venizelos grabs the baton and now attempts to form a stable coalition. Commentary from Greece so far has not been revelatory; Venizelos has reiterated that he wishes to remain within the Eurozone and affirmed that his party has not changed its policy with respect to the bailout. Flight to quality is observed throughout the markets, with the German Bund already testing yesterday’s highs several times and the major cash equities seen lower throughout the continent.Frontrunning: May 10
- Game Changer: China Starts Drilling It Own Rig Wells (China Daily)
- Cisco says customers delay tech purchases (FT)
- Greeks May Hold $510 Billion Trump Card in Renegotiation (Bloomberg)
- Liquid heroin addicts heart Chairsatan: Bernanke Gets 75% Approval From Investors in Global Poll (Bloomberg)
- How a Radical Greek Rescue Plan Fell Short (WSJ)
- Spain takes 45% stake in Bankia (FT)
- Facebook admits to mobile weakness (WSJ)
- FDIC Would Seize Parent, Allow Units to Operate While Mess Is Cleaned Up (WSJ) - Good luck
- AT&T Fast Network a Work in Progress in Race With Verizon (BBG)
- Pointed Spat Over World Trade Spire (WSJ)
Goldman Sees “Currency of Last Resort” Up 15% At $1,840/oz In 6 Months
Goldman maintains “constructive” 6-month forecast, says case for higher prices remains in place. Goldman stands by its forecast for a rally in gold this year, saying that the precious metal will advance to $1,840/oz over six months as the U.S. central bank embarks on a third round of stimulus in June. The precious metal remains the “currency of last resort,” according to analysts led by Jeffrey Currie in a report released yesterday. Goldman’s gold forecast implies a 15% return in 6 months. “In early 2009, we suggested that gold had become the currency of last resort, overtaking the U.S. dollar’s status due the rising risk of sovereign default and debasement concerns,” Currie wrote in the report. Even as the U.S. currency advanced and gold fell on the European crisis in recent months, “it is too early for the dollar to reclaim this status,” they wrote. “The case for higher gold prices remains in place,” the analysts wrote. “U.S. economic and employment data has now disappointed for several weeks, European election results point to further stress in the euro area, while anecdotal data suggests that physical gold demand remains resilient.”Overnight Sentiment: Oversold Bounce Overdue
There was no good news overnight: CSCO (a rather prominent DJIA member) imploded on global demand weakness, China posted a larger than expected trade surplus which however was due to a greater than expected drop in imports, European industrial production was slightly better in Italy but offset by worse than expected news out of France (as for Greece - forget it), while all the attention continues to be focus on how the Greek endgame plays out, and now Spain too. Still, futures are on the cusp of greenness simply because following 6 days of declines stocks are oversold, and will desperately try to rally into any good news: such as initial claims later today, which will once again be spun as "declining" following a bigger upward revision to last week's number, making this week's appear to drop... at least until next week. As usual be on the watch for any erroneous headlines based on spurious rumors out of Greek developments: these tend to more the EURUSD, and thus ES, quite violently.Greece's Jobless Soar By 42% As Unemployment Rises To Record, Industrial Collapse Accelerates
As noted earlier this week, while the theater of Greek elections serves as a convenient distraction from the epic depression the country of 10 million is undergoing, the reality is that very soon it won't matter at all who is left to govern this ruined country. Because if previously we demonstrated the collapse in two primary drivers of government tax revenue, namely tourism and commerce, today we show the logical follow through to economic flatlining: jobs and industries. Sadly, both are getting trounced. As Reuters reports, "Greece's jobless rate hit a new record in February, underscoring the pain austerity policies required by the EU and IMF have inflicted on the debt-laden country which is struggling to form a government. More than one in five Greeks and one in two youths are out of a job, statistics service ELSTAT data showed on Thursday. The unemployment rate hit 21.7 percent from a revised 21.3 percent in January. In the 15-24 age group, joblessness stood at a record 54 percent." It also appears that Greece has been getting ideas from the BLS: an 11 million population, and a pool of employed at a record low 3.87 million! "Nearly 1.1 million people were without a job, 42 percent more than in the same month last year, the data showed. The number of those in work declined by 8 percent over the same period to a record low 3.87 million." In other words, less than 4 million people are working to pay off the country's bailout package and debt which at last check was about 200% of GDP? At least of all indicators, the GDP is collapsing the fastest. Very soon Greece will be treated to a merciful #Div/0 when attempting to calculate its debt to GDP ratio. We can't wait to see the IMF's face then.Please support our efforts to keep you informed...
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