World Markets Weekend Review: The End of a Bad 3rd Quarter
by Chart School - September 30th, 2011 11:35 pm
Courtesy of Doug Short.
The 3rd quarter saw wretched performances in all of the world markets in this series. The best quarterly performer, the Nikkei 225, lost 10.3% of its value, followed by the SENSEX, which was down 11%. At the other extreme the DAX, CAC 40 and Hang Seng all lost about 25% of their value. The middle ground was occupied by the Shanghai, FTSE and S&P 500, which lost 14%, 14.4% and 15.9% respectively. Let’s hope next month sees some improvement. Certainly a bounce is due. But the ongoing stresses in Euro land, the nasty bear market in China, and ECRI recession call in the U.S. suggest a cautious outlook.
The tables below provide a concise overview of performance comparisons over the past four weeks for these seven major indexes. I’ve also included the average for each week so that we can evaluate the performance of a specific index relative to the overall mean and better understand weekly volatility. The colors for each index name help us visualize the comparative performance over time.
The chart below illustrates the comparative performance of World Markets since March 9, 2009. The start date is arbitrary: The S&P 500, CAC 40 and BSE SENSEX hit their lows on March 9th, the Nikkei 225 on March 10th, the DAX on March 6th, the FTSE on March 3rd, the Shanghai Composite on November 4, 2008, and the Hang Seng even earlier on October 27, 2008. However, by aligning on the same day and measuring the percent change, we get a better sense of the relative performance than if we align the lows.
A Longer Look Back
Here is the same chart starting from the turn of 21st century. The relative over-performance of the emerging markets (Shanghai, Mumbai, Hang Seng) is readily apparent.
Check back next weekend for a new update.
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Weekly Bull/Bear Recap: September 26-30, 2011
by Zero Hedge - September 30th, 2011 11:01 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
Submitted by Rodrigo Serrano of Rational Capitalist Speculator
Weekly Bull/Bear Recap: September 26-30, 2011
Bull
+ Progress continues to be made on the Eurozone front. Merkel is successful in rounding up her coalition and passing legislation to expand the EFSF’s firepower from 250 to 440 Billion Euros. Despite fears of decreasing political will, we see that Eurozone officials are united in passing the proper reforms to eliminate this headwind. Political Will remains solid as the Euro experiment is of extreme economic importance to Germany.
+ Jobless Claims plunge by 37,000 down to 391,000. The job market is better than many expect. Looking at unadjusted claims, we can see a clear falling YoY trend. There’s nothing to suggest that firings have increased and that the job market is deteriorating, in fact, past revisions show that it was stronger than expected.
+ While the headline for Durable Goods Orders seemed weak, a look under the hood shows that the damage wasn’t as bad. Business investment, a good measure of private spending, actually rose for the month. ”Most of the decline was centered on autos and large defense products excluding aircraft, but those orders often swing sharply from one month to the next, and they are not viewed as good indicators of future trends.”
+ Another example of the resilient manufacturing sector comes from the Chicago PMI index which showed strengthening in September. This is important in that this reading is post the financial shock in August due to increasing Eurozone sovereign debt worries. It clearly shows a manufacturing sector that is stronger than most think and is able to absorb these shocks.
+ Record-low mortgage rates are sparking a large refi wave. Re-financing into lower rates will result in more discretionary income to support consumption.
Bear
- The Eurozone situation isn’t getting better, it’s actually getting worse. The suspense among politicians and the investment community just to pass an enhanced version of the EFSF (see bullish tidbit) doesn’t bode well when “reading between the lines”. Political will is weaker than the bulls think. The market already wants more in the form of a “leveraged EFSF”. Germany, on the other hand, has staunchly opposed…
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Deflation In Japan And Its Chances In The U.S.
by Zero Hedge - September 30th, 2011 10:00 pm
Courtesy of ZeroHedge. View original post here.
Submitted by testosteronepit.
By Wolf Richter www.testosteronepit.com
Deflation phobia has broken out again. James Bullard, president of the Federal Reserve Bank of St. Louis, grumbled in San Diego about inflation expectations being too low and threatened to print more money, while pro-QEx commentators are once again pointing at the Japanese “deflation spiral” as a horrid event that we have to avoid at all cost.
In 1996, seven years after the Japanese bubble burst, I arrived in Tokyo for the first time and saw a shockingly expensive country (though the exchange rate was good, $1 = ¥110). It wasn’t just me. One day, I was looking at Italian wines at a department store. The bottle of Chianti Classico in my hand was a global brand that sold for $8 in the U.S. In Tokyo, it was $53. I sucked in air and put it back down. As I drifted away, another gaijin wandered along and picked up the same bottle. He grunted in Italian. We started talking. Turns out, that Chianti cost less than $4 in Rome.
Item after item. Plain white T-shirts made in Japan, $30. Rent for a dingy 200 sq. ft. apartment in a lousy area, $1,500 a month (plus 3 months key money, plus 2 months deposit, plus 1 month rent up front, for a total upfront payment of $9,000). Public transportation, food, fuel, hotels (except love hotels), coffee, you name it. Everything was shockingly expensive.
There were reasons. During the bubble, pricing didn’t matter. The more expensive an item was, the better it sold. The insular Japanese market was protected by insurmountable administrative barriers. When a company was actually able to import something, it wasn’t to offer a better deal, but to offer a prestige product at a premium. A jungle of regulations, restrictions, knotty transportation issues, inefficiencies, and other hurdles made doing business expensive. But during the bubble, it didn’t matter because everyone was making money, and everything kept going up.
In 1989, the hot air began to hiss out of real estate and equities. A lot of money went up in smoke. Buyers lost their exuberance. Attitudes changed. People began to look for cheaper alternatives. Some businesses figured out that they could gain market share by lowering prices. Price competition started. Import restrictions were softened. Certain aspects of the economy were…
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4 Market Signs Signaling a Recession
by Zero Hedge - September 30th, 2011 9:43 pm
Courtesy of ZeroHedge. View original post here.
Submitted by EconMatters.
By EconMatters
We at EconMatters expected the QE2 froth to come out of markets once the fed experiment of artificially inflating asset prices was over, and for the most part this is exactly where we are today at the crossroads.
Are we going to just trudge along with a slow growth economy until the world finally works its way out of the housing inventory overhang, and the next building phase takes hold and there is a strong surge in the labor markets from the bottom up, or are we going to take the next leg down and head back into a recessionary environmen?
Remember, the official definition for a recession is two consecutive quarters of negative GDP growth, and is determined after the fact. However, there are some market signs which in real time can give us a clue as to which course the economy seems to be taking.
Crude Oil
The First is the price of Oil which is a barometer for economic growth and future expectations for demand. I know that is the analyst approach for the benchmark, the more cynical side of me believes the price of Oil trades more in line with the S&P 500, and is really more of an asset class investment vehicle than any true economic indicator of strong future demand for the commodity.
But in either case if WTI falls below $70 and stays there than I would say this is a pretty good sign that the US is likely experiencing at least one quarter of negative GDP growth, and pretty near recessionary levels. In regards to Brent, there is approximately a $22 premium over WTI right now, and any significant tightening of this spread would also be something to pay attention to for recessionary concerns.
An overall price level for Brent potentially signaling a recession would be the $85 level, if Brent trades below this level for any significant amount of time this not only indicates that things are pretty bad in the US and Europe, but that China is experiencing a substantial slowdown as well.
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Anadarko Scores Major Legal Victory in Spill Suit
by Insider Scoop - September 30th, 2011 8:53 pm
Courtesy of Benzinga.
Anadarko Petroleum (NYSE: APC), which held a 25% non-operating interest in the ill-fated Macondo well project, scored a major legal victory on Friday when the company was dismissed from claims related to exposure to oil and other chemicals following the largest oil spill in U.S. history. The story was originally reported by Bloomberg News just after 8PM Eastern time.
BP (NYSE: BP), Europe’s second-largest oil company, was the primary operator of the Macondo well and the Deepwater Horizon rig. The British oil giant has been seeking $1 billion in cleanup costs from Anadarko, but the Texas-based company has thus far refused to pay, alleging BP is primarily responsible for the spill.
Since the Gulf of Mexico oil spill on 2010, shares of Anadarko, the second-largest U.S. independent oil and natural gas producer, have been vulnerable to bad news related to spill legal proceedings and have been known to move higher on positive news.
Anadarko CEO Jim Hackett has previously said his company would entertain settlement talks with BP, but only under the right circumstances.
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BP’s Argentina Asset Sale to Cnooc Could Collapse – Bloomberg
by Insider Scoop - September 30th, 2011 8:32 pm
Courtesy of Benzinga.
BP’s (NYSE: BP) effort to sell its 60% stake in Argentine oil producer Pan American Energy LLC to a company owned by China’s Cnooc (NYSE: CEO) for $7.1 billion could be on the brink of collapse, Bloomberg News reported, citing a source familiar with the matter.
BP, Europe’s second-largest oil company, agreed to sell the stake to Bridas Corp, which is part-owned by Cnooc in November 2010 as part of its plan to raise $30 billion in cash through asset sales to pay for expenses tied to the 2010 Gulf of Mexico oil spill.
The agreement between BP and Cnooc, China’s largest offshore oil explorer, lapses in November. Political and regulatory snafus have led to delays in finalizing the deal and BP is prepared to continue as a partner in the oil production partnership, Bloomberg reported.
If completed, Cnooc’s acquisition of the Pan American stake would be the largest this year by a Chinese energy company. Chinese oil producers have been actively looking for global deals to meet rising domestic demand.
Thus far, BP has raised about $25 billion through asset sales, but that figure includes the $7.1 billion for Pan American.
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Friedrich Hayek Joins Ayn Rand as a Hypocritical User of Medicare
by ilene - September 30th, 2011 8:03 pm
Courtesy of Yves Smith of Naked Captialism
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We’ve been a bit hard on the left of late, so we figured we’d take some steps to balance our programming. Mark Ames, who has been doggedly on the trail of the Koch brothers, found a delicious failure to live up to his oft-repeated standard of conduct by a god in the libertarian pantheon, Friedrich Hayek. And this fall from grace was encouraged one of the chief promoters of extreme right wing ideas in the US, Charles Koch.
Bear in mind that Charles Koch has not merely promoted libertarian ideas generally but in particular founded the Cato Institute, which has done more than any other single organization to wage war on Social Security. Koch wanted Hayek to come to the US in 1973 to become a “distinguished senior scholar” at the Institute for Human Studies, which Koch quickly made into a libertarian citadel. Hayek initially turned the opportunity down, saying he had just had an operation, which made him particularly aware of the dangers of falling ill abroad. Austria had close to universal health care; Hayek’s comment strongly suggests he took advantage of it.
Per Yasha Levine and Ames in the Nation:
IHS vice president George Pearson (who later became a top Koch Industries executive) responded three weeks later, conceding that it was all but impossible to arrange affordable private medical insurance for Hayek in the United States. However, thanks to research by Yale Brozen, a libertarian economist at the University of Chicago, Pearson happily reported that “social security was passed at the University of Chicago while you [Hayek] were there in 1951. You had an option of being in the program. If you so elected at that time, you may be entitled to coverage now.”
A few weeks later, the institute reported the good news: Professor Hayek had indeed opted into Social Security while he was teaching at Chicago and had paid into the program for ten years. He was eligible for benefits. On August 10, 1973, Koch wrote a letter appealing to Hayek to accept a shorter stay
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Shilling Sees Evidence of Deflation in 5 of 7 Key Areas; Bernanke Begs Congress for Fiscal Stimulus, Admits Fed is Out of Bullets
by ilene - September 30th, 2011 7:13 pm
Courtesy of Mish
Shilling Sees Evidence of Deflation in Financial Assets, Tangible Assets, Median Income, Commodities, Currencies.
Shilling says "Forces of deleveraging and deflation are greater than the Fed can handle."
I certainly agree and have been saying the same thing (correctly I might add) for several years. All the Fed has ever managed to do is slow the deflationary outcome and that is in spite of $trillions in both monetary stimulus from the Fed and fiscal stimulus from Congress.
Once again, if you mistakenly think inflation and deflation are about consumer prices instead of vastly more important credit, you will come to a different conclusion.
For further discussion as to what deflation is all about, please see
- Yes Virginia, U.S. Back in Deflation; Inflation Scare Ends; Hyperinflationists Wrong Twice Over
- Bizarro World Inflation; About that 2011 Hyperinflation Call …
Fed Out of Bullets
In spite of what the Fed says and wants everyone to believe the Fed is Out of Bullets
Let’s Twist Again (and Not Much More) as I expected
There were a lot of expectations regarding numerous options the Fed might take today. I did not expect the Fed would risk trying them.
See Six Things the Fed May Announce Tomorrow (But Likely Won’t); Would Any of Them Matter? Gaming the Reaction for details.
The Fed said "Let’s Twist Again" and not much more other than throwing a bone at mortgages. Neither will work and the Fed is out of bullets.
Bernanke Begs Congress for Fiscal Stimulus
In a question session following Bernanke’s speech Lessons from Emerging Market Economies on the Sources of Sustained Growth (in which Bernanke proves he does not really understand what is really happening in China), Bernanke begged Congress for help and admitted the Fed is out of bullets.
Yahoo Finance reports Bernanke: Long-term unemployment a national crisis
Federal Reserve Chairman Ben Bernanke said Wednesday that long-term unemployment is a "national crisis" and suggested that Congress should take further action to combat it. He also said lawmakers should provide more help to the battered housing industry.
Bernanke said the government needs to provide support to help the long-term unemployed retrain for jobs and find work. And he suggested that Congress should take more responsibility.
In the question-and-answer period, Bernanke cautioned U.S. lawmakers against cutting deficits too quickly to reduce budget deficits. He has
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Real Disposable Personal Income Drops Second Consecutive Month; Drop is Highly Deflationary
by ilene - September 30th, 2011 7:03 pm
Courtesy of Mish
Inquiring minds are digging into the just released Personal Income and Outlays Report for August 2011.
Personal Income
Personal income decreased $7.3 billion, or 0.1 percent, and disposable personal income (DPI) decreased $5.0 billion, or less than 0.1 percent, in August, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $22.7 billion, or 0.2 percent. In July, personal income increased $17.1 billion, or 0.1 percent, DPI increased $14.4 billion, or 0.1 percent, and PCE increased $76.6 billion, or 0.7 percent, based on revised estimates.
Real disposable income decreased 0.3 percent in August, compared with a decrease of 0.2 percent in July. Real PCE decreased less than 0.1 percent, in contrast to an increase of 0.4 percent.
Wages and Salaries
Private wage and salary disbursements decreased $12.2 billion in August, in contrast to an increase of $23.8 billion in July. Goods-producing industries’ payrolls decreased $1.3 billion, in contrast to an increase of $6.3 billion; manufacturing payrolls decreased $2.9 billion, in contrast to an increase of $5.8 billion. Services-producing industries’ payrolls decreased $10.9 billion, in contrast to an increase of $17.5 billion. Government wage and salary disbursements increased $0.4 billion, in contrast to a decrease of $1.8 billion.
Real DPI, real PCE and price index
Real DPI — DPI adjusted to remove price changes — decreased 0.3 percent in August, compared with a decrease of 0.2 percent in July.
Real PCE — PCE adjusted to remove price changes — decreased less than 0.1 percent in August, in contrast to an increase of 0.4 percent in July. Purchases of durable goods increased 0.1 percent, compared with an increase of 2.2 percent. Purchases of nondurable goods decreased 0.4 percent, compared with a decrease of 0.5 percent. Purchases of services increased 0.1 percent, compared with an increase of 0.4 percent.
PCE price index — The price index for PCE increased 0.2 percent in August,compared with an increase of 0.4 percent in July. The PCE price index, excluding food and energy, increased 0.1 percent, compared with an increase of 0.2 percent.
Some charts will help put these numbers onto perspective.
Real Disposable Personal Income Since 1969
Real Disposable Personal Income Since 1989
Real Disposable Personal Income % Change from Year Ago
The second chart is the same as the first except the time period is smaller to better show the decline in the last recession.…
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Guest Post: Looking Back To the Late ’80s For ‘Contagion’ Guidance
by Zero Hedge - September 30th, 2011 4:59 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Jeffrey Snider via Real Clear Markets
Looking Back To the Late ’80s For ‘Contagion’ Guidance
The clock has been turned back to 1989 and the stock market briefly cheered the temporal transformation, although credit markets have remained far less sanguine. With Europe on everyone’s collective mind, rumors of an expanded European Financial Stability Fund (EFSF) acting akin to the early version of U.S. TARP had many hoping that a true resolution had finally been found. Of course, the first plan (the one sold to Congress) for TARP was to act as a resurrected Resolution Trust Corporation (RTC), so the markets are reaching back to the late 1980′s for guidance on how to "successfully" contain banking contagion.
The RTC was created in response to the widening savings and loan crisis of the mid-1980′s. By the time it opened its doors on August 9, 1989, 296 thrift banks had already failed, with approximately $125 billion in combined assets. Policymakers at the time were desperate to avoid what many believed was another forming Great Depression.
The plan for the RTC was simple and straightforward: buy up the assets of the failed banks, fund and warehouse them over time so that the inevitable firesales that typically accompany bank failures could be avoided and not hinder any expected recovery or, worse, drag even healthy institutions down. All that required funding, of course, but, more importantly, it meant absorbing losses since the pool of assets the RTC would gather would largely consist of non- or sub-performing (by 2008 they called this kind of asset "toxic").
The FDIC notes contemporary loss estimates at the outset:
"For example, most loss projections for RTC resolutions during the year leading up to passage of FIRREA in 1989 were in the range of $30 billion to $50 billion, but some reached as high as $100 billion at that time. Over the next few years, as a greater-than-expected number of thrifts failed and the resolution costs per failure soared, loss projections escalated. Reflecting the increased number of failures and costs per failure, the official Treasury and RTC projections of the cost of the RTC resolutions rose from $50 billion in August 1989 to a range of $100 billion to $160 billion at the height of the crisis peak in June 1991; a range two to
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