Thursday, October 11, 2012

Data Massaging Continues: Initial Claims Tumble To 339K Lowest Since 2008, Far Below Lowest Expectation

This is just getting stupid. After expectations of a rebound in initial claims from 367K last week (naturally revised higher to 369K), to 370K (with the lowest of all sellside expectations at 355K), the past week mysteriously, yet so very unsurprisingly in the aftermath of the fudged BLS unemployment number, saw claims tumble to a number that is so ridiculous not even CNBC's Steve Liesman bothered defending it, or 339K. Ironically, not even the Labor Department is defending it: it said that "one large state didn't report some quarterly figures." Great, but what was reported was a headline grabbing number that is just stunning for reelection purposes. This was the lowest number since 2008. The only point to have this print? For 2-3 bulletin talking points at the Vice Presidential debate tonight. Everything else is now noise. It is also sad that the US "economy" has devolved to such trivial data fudging on a week by week basis, which makes even the Chinese Department of Truth appear amateurish by comparison. Needless to say, Not Seasonally Adjusted initial claims jumped by 26K to 327K in the past week but who's counting. Finally, what is the reason for ongoing QEternity if the employment situation is now back to normal. Finally, in completely ignored news, because who needs global trade when you have toner cartridge, and generally ink, the US trade deficit in August rose by 4.1% to $44.2 billion, on expectations of a deterioration to $44.0 billion. Then again nobody talks about the US trade deficit during presidential debates so all good here.

Food Inflation To Surge, Goldman Warns

We have been very active in our discussions of the impact of the pending rise in food prices around the world (from central bank largesse to weather-related chaos). As Goldman notes, food inflation has been one of the most significant sources of headline inflation variation in emerging markets (EM) over the past few years. Since June, international prices for agricultural commodities have risen almost 30%, increasing the risk of fresh, food-related increases to EM headline inflation. We, like Goldman, expect EM headline inflation to start to reflect the relevant pressures more broadly in the October prints at the latest. While the effects, for now, are expected to be less extreme than the 2010-2011 episode, the timing as the US enters its fiscal-cliff-prone malaise, could mean a further round of easing will reignite this critical inflationary concern.

The Bump In The Night

We know it is sometimes difficult. Europe puts out the numbers which many assume are real. Then they talk about the data as if it was real. Then they point to the numbers time and time again as if they were real and finally people make decisions and act upon the figures thinking they are real and then the train begins to go bump in the night and derailment is possible on the next track and people wonder how it happened. We are at that point where “bump” is about to happen because there is nothing left that can happen. The dream is about over. Soon everyone will be waking up. It will not be a good morning.

The Collapse Continues: Greek Unemployment Rises For 35th Consecutive Month, Passes 25%

When we reported on the 34th consecutive month of Greek unemployment increases, following the June number hitting a record high 24.4%, the only good news was that the May number had been revised higher from 23.1% to 23.5%, making the monthly jump seem just under 1%. Well, that revision was re-revised, with Greek Statistic Service ELSTAT reporting that the original 24.4% number has now been revised to 24.8%, meaning in June unemployment rose officially by 1.3%. That's in one month! ELSTAT also reported the July number, and at 25.1% (pre-revision higher next month), it just hit a new all time high, increasing for the 35th month in a row. More than one quarter of those eligible for work in Greece (not many), are working. THis means labor related taxes are now being levied on a record low percentage of the population. Indicatively, Greek unemployment at the end of 2011 was "only" 21.2%. It also means that in order to restore even a tiny iota of confidence, the Greek labor department needs to hire a BLS consultant or two, or least license an old version of the ARIMA goalseek software, to find a seasonally adjusted decimal comma in there somewhere, and report that the jobless rate is really only 2.5%, which would be on par in credibility with everything else out of Europe these days. Finally, our question is at what point does anyone finally admit the Greek situation is not only a depression but outright economic death and the merciful thing to do at this point is to just pull the plug?

Imitation jewellery sales rise as gold prices soar

Eric De Groot at Eric De Groot - 2 hours ago
From politics to keeping up with the Jones next door, form over substance has become the standard for many generations of Americans. This trend also suggests that the public will be holding a lot of copper-plated trinkets when panic to buy emerges and the price of gold soars. Headline: Imitation jewellery sales rise as gold prices soar With gold prices constantly... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

Standards Of Living Will Continue To Decline In Europe

Admin at Marc Faber Blog - 3 hours ago
Over the next five years or so, we will witness slow growth or no-growth in Europe, coupled with continuing drop in the standard of living, both in the US and Europe. - *in Business Standard * *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.* 

Games States Play with Underfunded Pensions

Eric De Groot at Eric De Groot - 4 hours ago
The problem of under funded pensions swept under the rug for years through various forms of accounting flexibility will see the light of day after 2015. This means even more taxpayer bailouts, currency devaluation, and pensioners getting the short end of the stick of fiduciary responsibility. Headline: Games States Play with Underfunded Pensions Public pension funds across... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

US Treasury Bonds Not Dead

Eric De Groot at Eric De Groot - 4 hours ago
Volume contracting at support suggests waning downside force (chart 1) Invisible hand continues to accumulate weakness (chart 2) Conclusion Contracting volume and accumulation of weakness by the invisible hand sugget a rally for bonds and trouble for the risk-on trade in 2013-2014. Chart 1: iShares Lehman 20+ Treasury Bonds (TLT) Chart 2: US Treasury Bond 20YR+... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]

A Look At The Presidential Candidates

Admin at Marc Faber Blog - 15 hours ago
"Because if I look at the presidential candidates today, if Obama is elected, I think the Dow Jones should be negative-13,473, and if Romney gets elected, it should be minus 6,000." - *in CNBC * *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.*

The Pursuit Of Happiness And The Sociopathology Of Prosperity

The notion that increased consumption leads to increased happiness is self-evidently false, yet consumption remains the focus of our economy and society. The appeal of consumption is understandable once we grasp that it is the only empowering act in a neofeudal society where we are essentially powerless. In the mindset of the consumerist economy, purchasing something feels empowering because the act of consuming is experienced as renewing our sense of identity and social status. But since that identity is inauthentic, the sense of euphoric renewal is short-lived and soon defaults to the base state of insecurity. Since the consumer is only empowered by buying and displaying status signifiers, the balance of their lives is experienced as powerless – that is, a chronic state of social defeat. In the act of consuming, the only feature that continues on after the initial euphoria fades is the debt taken on to make the purchase.

Apple Slide Halts Yet Another Rumor-Driven Risk Rally

Yesterday even as the broader market slid materially, much to the dismay of permabulls everywhere, taking out post QE3 lows, one stock that obstinately refused to join the trend was Apple, which as we have noted before is the vanguard of the index known as NASDAAPL, and whichever way the NASDAAPL goes, so go America's hedge funds, all of which have decided to piggyback on the stock in hope of catching up to the market performance and avoid being redeemed to death. Today, we get a mirror image of yesterday, when after opening at its highs, AAPL has since tumbled 2.5% from its highs, following news that an Apples court has allowed sales of Samsung Galaxy to continue. Finally, the broader market, which ramped early on hope that the intolerable Basel III requirements would be delayed by 1 year (they will be eventually as they demand that banks sell trillions in assets: something they can't do), is about to slide not only with AAPL as the catalyst but following news from Dow Jones that the "EU Trialogue Didn't Discuss Basel III Delay Thursday." In other words, we ramped on a completely bogus rumor originating in Europe once again. What else is new?

Visualizing Central Bank Mal-Investment-Driven Excess

One of the most egregious aspects of the Great Moderation was the issuance (and thus demand for) of large amounts of grossly mispriced extremely 'junky' debt at the peak as investors stymied by the lack of spread (return) pushed further and further out the credit risk spectrum. The driver at the time was the liquidity flood triggered by large-scale securitizations (and that ended well eh?); this time it is central banks providing the fuel for investors to seek yield through leverage (either through fundamental leverage in riskier firms or technical leverage through riskier instruments). To wit, the last few weeks have seen a resurgence of issuance of PIK-Toggle bonds.

The Mathematicization Of Economics

Economics would benefit from self-restraint in regard to the usage of mathematics. Alfred Marshall made some useful suggestions:
  1.  Use mathematics as shorthand language, rather than as an engine of inquiry.
  2.  Keep to them till you have done.
  3. Translate into English.
  4. Then illustrate by examples that are important in real life
  5. Burn the mathematics.
  6. If you can’t succeed in 4, burn 3. This I do often.
I hope the blowout growth in mathematics in economics is a bubble that soon bursts.

New Sheen In Gulf Of Mexico Linked To Macondo Spill By Coastguard

Just when we all thought the Macondo disaster could be put behind us and TV ads proclaim the Gulf's recovery, a sheen of oil has reappeared and the coastguard confirms it is directly linked to the Macondo well. According to WDSU, the sheen is a light oil and would be difficult to clean up. "The exact source of the sheen is uncertain at this time but could be residual oil associated with wreckage and/or debris left on the seabed from the Deepwater Horizon incident in 2010," the agency said in a release Wednesday night.

Charting The 'Housing Recovery' Subsidy: Foreclosures Slide To Five Year Lows

A month ago, when RealtyTrac posted their latest US foreclosure numbers for the month of August, we presented what we called was the "Foreclosure Stuffing" thesis, explaining the explicit subsidy by the banks for the housing market, whereby the entire foreclosure process has now ground to a halt, and in doing so removing millions in inventory flow from the distressed end market, forcing limited buyers to chase what supply there is, and in the process boosting prices of existing inventory higher. In other words a traditional inventory removal-based subsidy. It is therefore not surprising that today RealtyTrac reported the latest foreclosure data, and lo and behold, just as we expected, the great foreclosure collapse has taken another leg lower, with the total number of foreclosures for the month of September sliding to 180.4K, a decrease of 7 percent from the previous month and down 16 percent from September 2011, and the lowest in five years!

S&P Will Downgrade France And Italy Next, CDS Implies

With government bond markets increasingly manipulated directly via central-bank intervention - and becoming increasingly illiquid - the odd situation we find ourselves in once again is that CDS markets perhaps provide a 'cleaner' picture of where credit risk is actually being traded between market participants (hedgers or speculators). To wit, Bloomberg's ever-insightful Michael McDonough has noticed a significant divergence between market-implied perceptions of risk (CDS) and ratings-agencies perceptions among several nations. Most notably France and Italy (with Belgium close behind) appear considerably 'over-rated'. Italy's implied rating is equivalent to BB+ at S&P - well below its average rating of BBB+ and France's implied rating of A is around four notches below its composite rating. Spain also appears set for more pain as its market price implies a sub-investment grade rating is imminent.

Frontrunning: October 11

  • Global easing deluge resumes: Bank of Korea Slashes Policy Rate (WSJ)
  • And Brazil: Brazil cuts Selic rate to new record low of 7.25 pct (Reuters)
  • With Tapes, Authorities Build Criminal Cases Over JPMorgan Loss (NYT) Just don't hold your breath
  • IMF snub reveals China’s political priorities (FT)
  • Add a dash of trade wars: Revised Duties Imposed by U.S. on Chinese Solar Equipment (Bloomberg)
  • IMF calls for action as euro zone crisis festers (Reuters)
  • Dubai Losing Billions as Insecure Expats Send Money Abroad (BBG)
  • Softbank in Advanced Talks to Acquire Sprint Nextel (WSJ)
  • Lagarde calls for brake on austerity (FT)
  • EU lambasts Turkey over freedoms (FT)
  • Race Tightens in Two States (WSJ)

Is Ireland Really The Poster-Child Of Europe's Austerity Plans?

Ireland's total real economic debt runs at a staggering 524% of our GDP and 650% of our GNP. At 4.5% per annum cost of funding overall debt, the Irish economy interest-rate bill on the above levels of real economic indebtedness runs at circa 29.2% of our GNP. Do the comparison here - Ireland's interest-rate bill is equivalent to the total annual output of the Irish Industry (that's right - all of Ireland's Industrial output in 2011 amounted to less than 29.3% of our GNP). This is deemed to be 'long-term sustainable'... right... Ireland's real economic debt is 14.4% ahead of that of Japan!

Today’s Items:

IMF Sees Global Slump
The thieves and liars at the International Monetary Fund are urging European puppets err… policymakers to deepen ties to the fiscal anchor, or the euro, as they project the world economy only growing 3.3% this year.    This is the slowest since 2009 and these hoodlums are saying that there could be a steeper slowdown.   In fact, the IMF may even be recommending capital controls for Spain because it is all but dead.   This is evident by the fact that Spain has been down graded to BBB-, or to one level above junk by S&P.

Why Are Indians Suddenly Buying Diamonds?
Known for buying gold, Indians are now suddenly buying diamonds.    One possible main reason is that price of gold has made gold go beyond the reach for many Indians.    With that said, if one thinks that there is gold price manipulation, that is nothing compared to the manipulation on the price of diamonds.

Central Banks Dumping Bonds For Stocks
Because of horrible returns and negative yields available from top-rated sovereign bonds, Central Banks around the world are buying stocks.    At $10.5 trillion, stocks may still be only a fraction of overall foreign exchange reserves, but they are growing.    So, when a massive market crash comes, central banks may count, as part of their assets, Facebook stock.

Food Unrest
The term ‘food unrest’ reflects the imbalance between the supply of food and demand for food globally. A growing population and dwindling food supplies due to drought or ethanol production is causing this to become worse.     It’s just another inconvenient truth.   The situation is getting so bad that millions of families in the world plan food-less days.   Meanwhile, Americans are having an obesity problem and those in the UK are being introduced to candy bars with GPS tracking devices.

Is This The End of The Petro-dollar?
Without going into the history of the petro-dollar and how it has allowed U.S. Dollar to stay as the world’s reserve currency, China, with huge amounts of physical gold, massive use of oil, and an economy that is still growing faster than the US’s, has 11 bilateral currency-swap agreements that do not include the dollar.    Saudi Arabia, the protector of the petro-dollar for 38 years, is now partnered with China to build a gigantic new oil refinery to be operational in 2014.    In short, good-bye Petro-dollar!

Good Questions That The Mainstream Media Should Be Asking
Here are a few…
1. Why is Switzerland preparing for “major civil unrest” throughout Europe?
2. Is Turkey about to drag the rest of NATO, and the US, into a war with Syria?
3. Will the U.S. dollar soon lose its status as the primary reserve currency of the world?
4. Why is the UN pushing to have the authority to impose “global taxes” on all of us?
Will they ask?     Hell No!

Finally, please prepare now for the escalating economic and social unrest.    Good Day!

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