by ilene - August 21st, 2014 5:32 pm
For many, food prices, especially as they go up and up, are not "noise." Prices of necessities have been marginalized by those wanting to maintain there is no significant inflation. ~ Ilene
Courtesy of SoberLook.com
Economists and central bankers tend to be less focused on what consumers pay at the grocery store because food and energy prices have historically been more volatile – remember, it's just "noise". However what they can't ignore is how shoppers view inflation – i.e. inflation expectations. And food prices have a significant impact on households' views on future inflation.
Deutsche Bank: – … food prices factor significantly into households’ perceptions of overall price pressures. This is illustrated in the following figure, which shows year-ahead inflation expectations from the University of Michigan Survey of Consumer Sentiment versus CPI food. In fact, it is worth noting that CPI food demonstrates a higher degree of correlation with one-year price expectations than either the headline or core metrics — and it similarly surpasses energy, core goods, core services and shelter. … while forecasters are focusing on service-sector inflation in general and shelter inflation more specifically, they should be careful to not ignore mounting food price pressures, because this category could provide important insight toward the evolution of inflation expectations. If food price inflation accelerates, as we project, the stability of inflation expectations could degrade – and this would be a vexing development for monetary policymakers.
|Source: Deutsche Bank|
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by ilene - August 21st, 2014 5:09 pm
Submitted by Tyler Durden.
Following Russia's closure on several McDonalds in Moscow, the CEO of the American Chamber of Commerce is worried: "The question on my mind is: Is this going to be a knock on the door, or is this going to be the beginning of a campaign?" As Reuters reports, businessmen from both West and East are increasingly frustrated with the tit-for-tat sanctions (and their apparent lack of efficacy at anything but slowing global growth).
Russian and Ukrainian CEOs joined Richard Branson to write "We, as business leaders from Russia, Ukraine and the rest of the world, urge our governments to work together to ensure we do not regress into the Cold War misery of the past." As we noted previously, Europe has suffered most, and the following European companies remain the most exposed to escalation.
We already explained why Europe is suffering the most… as Stocks are discounting…
Russia said on Thursday it was investigating dozens of McDonald's restaurants, in what many businessmen said was retaliation for Western sanctions over Ukraine they fear could spread to other symbols of Western capitalism.
"Obviously, it's driven by the political issues surrounding Ukraine," said Alexis Rodzianko, President and CEO of the American Chamber of Commerce in Russia.
"The question on my mind is: Is this going to be a knock on the door, or is this going to be the beginning of a campaign?"
In a sign of growing frustration at the threat to trade, several mid-tier Russian businessmen signed off on a letter by British entrepreneur Richard Branson calling on politicians to stop the conflict.
"We, as business leaders from Russia, Ukraine and the rest of the world, urge our governments to work together to ensure we do not regress into the Cold War misery of the past," the letter said.
So far no other prominent Western brand has reported coming under extra scrutiny from the Russian authorities, though there were Russian media reports that Jack Daniels was being
by ilene - August 21st, 2014 4:16 pm
If you are serious about trading, Elliott Wave International's (EWI) Jeffrey Kennedy has some advice for you: learn emotional discipline. In this article from his Trader's Classroom Collection, he shares some expensive lessons he learned during his 20+ years trading the markets.
EWI is hosting a free Trader Education Week through August 27. It will feature video trading lessons from Senior Instructor and Chartered Market Technician, Jeffrey Kennedy. Register now and get immediate access to the lessons that EWI has already posted, plus 3 introductory learning resources — and you'll receive more lessons as they're unlocked each day of the event.
Why Emotional Discipline is Key to Success
By Jeffrey Kennedy, EWI
To be a consistently successful trader, the most important trait to learn is emotional discipline. I discovered this lesson the hard way trading full-time a few years ago. I remember one day in particular. My analysis told me the NASDAQ was going to start a sizable third-wave rally between 10:00-10:30 the next day … and it did. When I reviewed my trade log later, I saw that several of my positions were profitable, yet I exited each of them at a loss.
My analysis was perfect — it was like having tomorrow's newspaper today. Unfortunately, I wanted to hit a home run, so I ignored singles and doubles.
I now call this emotional pitfall the "Lottery Syndrome." People buy lottery tickets to win a jackpot, not five or 10 dollars. It is easy to pass up a small profit in hopes of scoring a larger one. Problem is, home runs are rare. My goal now is to hit a single or double, so I don't let my profits slip away.
Since then, I've identified other emotional pitfalls that I would like to share. See if any of these sound familiar.
Inability to Admit Failure
Have you ever held on to a losing position because you "felt" that the market was going to come back in your favor? This is the Inability to Admit Failure. No one likes being wrong, and, for traders, being wrong usually costs money. Many of us would rather lose money than admit failure. I
Obamacare Manufacturing Facts: 85% of Firms Raise Premiums, 91% Raise Deductibles, 74% Raise Out of Pocket Maximum, 15% Decrease Employment
by ilene - August 21st, 2014 4:00 pm
Courtesy of Mish.
A special question on the impact of Obamacare on businesses in the August Philly Fed Manufacturing Survey shows the stunning failure of Obamacare.
Here are the results in table form. I added the net results in red.
click on chart for sharper image
Net Percentage of Manufacturing Firms That …
|Increase Part-Time Workers||16.7|
|Raise Healthcare Premiums||85.3|
|Raise Healthcare Deductibles||91.2|
|Raise Out of Pocket Maximums||73.6|
|Reduce Medical Coverage||38.3|
|Decrease Network Choices||26.5|
As always, I encourage everyone to look on the bright side: A net 2.9% of manufacturing firms cover a higher percentage of the lower number of employees they have.
Mike “Mish” Shedlock
by ilene - August 21st, 2014 3:54 pm
Americans are keeping record amounts of their funds in cash and safe, low-interest bank and money market accounts. Does this so called "hoarding" represent a failure by the Fed to push people towards more risky, high-yielding assets? Rex Nutting argues it does in The 10.8 trillion failures of the Federal Reserve.
Cullen Roche of Pragmatic Capitalism disagrees in "There Isn’t $10.8 Trillion “Stuffed Under Mattresses” Because of QE."
Who's correct? Has the Fed’s ZIRP (Zero Interest Rate Policy) caused a speculative mania for risky, high-yield investments? Or has the Fed failed to push American investors into high-risk assets?
Rex reports data that suggests to him that the Fed's tactics have largely failed to ignite market speculation, contrary to what many believe (MarketWatch):
Data from the little-noticed financial accounts report show the American people have $10.8 trillion parked in cash, bank accounts and money-market funds that pay little or no interest. At the end of the first quarter, low-yielding assets totaled 84.5% of annual disposable personal income, the highest share in 23 years. Sure, people need to keep some money handy to pay their bills and some folks might have a few hundred or a few thousand in a rainy-day fund, but no one needs immediate access to the equivalent of 11 months of income. In essence, there’s $10.8 trillion stuffed into mattresses. That $10.8 trillion hoard represents a failure of Fed policy.
Since the Fed began quantitative easing in September 2012, U.S. households have socked away $1.17 trillion in their low-yield accounts. That means that 95% of the Fed’s $1.24 trillion QE3 ended up not in bubbly markets but in a safe and boring bank account.
Let's assume Rex's numbers are correct. Let's say that $10.8 trillion is parked in cash, bank accounts and money-market funds, and that low-yielding assets total 84.5% of annual disposable personal income. Does his conclusion that 95% of the Fed's $1.24 trillion QE3 money ended up in a "safe and boring bank account" follow? No.
Cullen makes the argument that Rex's conclusion is based on a misunderstanding of how QE works:
I have to comment on this MarketWatch piece because I’ve now seen a number of people comment on
by ilene - August 21st, 2014 3:12 pm
Courtesy of The Automatic Earth.
Dorothea Lange Country filling station owned by tobacco farmer, Granville County, NC Jul 1939
I woke up today to a request to comment on an article I hadn’t even read yet at the time. Now, I don’t do requests, but when I saw that it was an article by my favorite nemesis Ambrose Evans-Pritchard, and I has read this piece, I thought alright, let’s have a go. Just this once.
Ambrose sings the praise of solar and natural gas in this one, and that‘s not because he’s green, the only green he likes is the color of money. And that’s just why he’s interested in solar etc.: great fortunes to be made!
As is usual in his finance articles, Ambrose is great at collecting data, and far from great at interpreting them. He gets carried away by grand visions. But that, in my eyes, makes him charming too. Finance is easily dull enough that it needs its ‘color(ful) commentators’.
Since Ambrose talks a lot about the demise of oil, and the risk of prices falling further, I’ll start off with a Yahoo Finance article that features Dan Dicker, who’s not so sure about those price drops.
Personally, I would think too many people draw too many hasty and easy conclusions. All you need in today’s world to raise oil prices is one bomb in the wrong – or is that the right? – place, and to make that happen, I’m sure Big Oil would be more than happy to drop a Little Boy.
In my view betting against oil and gas is either for big time gamblers or for people who don’t think or know enough about 1) how volatile production and delivery is at the moment, and 2) what oil really is (unique carbon structures).
To top it off, I’ll conclude with the best take down I’ve seen in a while of the imaginary German solar miracle. Might as well throw that in too. First, then, Dan Dicker:
Commodity traders and analysts have wondered why oil hasn’t gone higher. Geopolitical tensions abound across the world; the Middle East seemingly hasn’t been this unstable in years. In fact, some believe the commodity could actually go lower. [..]
Spain Dips 37% Into Social Security “Piggy Bank”, Fund Depletion in 4 Years at Current Rate; What, Me Worry?
by ilene - August 21st, 2014 1:24 pm
Courtesy of Mish.
The “recovery” news in Spain keeps piling up. Via translation from El Economista, Government has already taken 37% of the total ‘pensions piggy bank’. If extractions continue at the current rate, the fund would be exhausted in 4 years.
The Government of Mariano Rajoy has released 24.65 billion euros of the Social Security Reserve Fund in less than two years. Such amount represents nearly 37% of the total 66.815 billion fund accumulation. That figure marks the highest cumulative piggy bank draw-down in history, following its commissioning in 2000 and after eleven years in which successive governments did not need to dip into it.
The situation changed dramatically with the height of the crisis. The current government has broken into the social security bank twelve times since 2012. The total amount withdrawn exceeds 24.6 billion euros while 54.69 billion remains.
This implies “at the current depletion rate, in a period of four years or so, the fund would be exhausted”.
Advice of the Day
I am sure glad no one sees a problem here. As we all know, problems vanish if you ignore them. It’s mind over matter. I learned that from former US secretary of treasury, Tim Geithner.
And as long as you are ignoring some problems, why not ignore all problems?
For example, please ignore Spain’s trade deficit unexpectedly rising as noted in Recovery Mirage in Spain Dissipates Into Ashes.
Instead, let’s focus on the dramatic improvement of Spain’s unemployment rate.
click on chart for sharper image
In a few years, at the current rate of progress, Spain’s unemployment rate may be back to a mere 21% or so. Isn’t that something to be proud of?
I sure would think so. But will there be anything left in the piggy bank?…
by ilene - August 21st, 2014 10:46 am
Courtesy of Pam Martens.
Any ideas that household balance sheets in the U.S. have been repaired since Wall Street took a wrecking ball to the nation’s economy in 2008 were dashed with the release of a study earlier this month by the Federal Reserve. As Federal Reserve Chair Janet Yellen ponders what will happen in the markets when the Fed starts to eventually raise interest rates, she has to also worry about what will happen to the cash-strapped consumer who is barely hanging on and has no emergency funds to meet a job loss or hike in credit card interest payments.
The Fed study was conducted in September 2013 by the Fed’s Division of Consumer and Community Affairs. Its stated aim was to “capture a snapshot of the financial and economic well-being of U.S. households, as well as to monitor their recovery from the recent recession and identify any risk to their financial stability.”
The Fed didn’t receive welcome news.
One question in the survey asked respondents if they had set aside an emergency or rainy day fund that would cover three months of living expenses. (See a previous article from Wall Street On Parade on why a rainy day fund needs more than three months of expenses.) Shockingly, the respondents providing an affirmative “no” to the answer went up, instead of down, in the older groups, until age 60. Persons answering “no” in the 18 to 29 age group came in at 63 percent; 63.6 percent of the age category 30 to 44 said “no”; and 64.1 percent of those aged 45 to 59 said “no.” For respondents aged 60 and over, 41.7 percent reported having no rainy day fund. Among respondents of all ages, a majority, 57.9 percent, answered no to the question.
This is not the financial tanker that any Fed Chairman wants to contemplate navigating through future storm waters – particularly a Fed with a $4.3 trillion balance sheet which will restrain its ability to flood the markets again with liquidity in a major downturn – and zero historical perspective on what happens if you hike rates when a majority of Americans are financially…
by ilene - August 21st, 2014 10:03 am
Submitted by Tyler Durden.
Following July's drop in US Manufacturing PMI (and biggest miss in 11 months), August's Flash print hit 58.0 – its highest since April 2010, beating expectations of 55.7 and up from the 55.8 July final print. With China (biggest PMI miss on record) and Europe (13-month low PMI) both disappointing, the world needed some help and the US 'soft' survey offered it up in spades… Production levels surged, employment rose at the fastest pace since March 2013, and new orders picked up once again.
This was the biggest beat on record – well above even the highest economist's estimate. Mission Accomplished…
Biggest beat on record – well above even the highest economist's estimate.
To April 2010 highs…
Well above even the highest economist estimate…
Highlights from the report:
- Manufacturing PMI rebounds sharply from July’s three-month low
- Output and new orders both rise at faster rates
- New export business increases at steepest pace for three years
- Employment growth accelerates to strongest since March 2013
And as Markit concludes:
“Overall, with job hiring gathering momentum and input buying expanding at the sharpest pace for at least seven years, it seems US manufacturers are increasingly confident that the recovery is firmly back on track and are gearing up for a sustained rebound in production schedules over the months ahead.”
So job done Fed, or will Yellen continue pointing out all those weaknesses we first observed in 2010 (part-time jobs, no wage growth) as the alibi for the Fed to continue pumping stocks to higher record highs before it is content that its job is done? More color tomorrow when Yellen speaks.
Charts: Bloomberg and Markit
by ilene - August 21st, 2014 8:56 am
Courtesy of Larry Doyle.
The Department of Justice is soon expected to announce a $17 billion settlement with Bank of America. Is this justice?
I will defer in writing my own commentary this morning because the words and details on this topic provided by Dean Starkman qualify as a Sense on Cents Instant Classic:
There’s a much deeper problem here, however, and one that has received far less attention: Not only has the Department of Justice (DOJ) failed to build any criminal cases for financial-crisis misdeeds, but it’s also now settling with these banks without even filing civil complaints.
A complaint is the cornerstone of civil litigation, the foundation for even routine lawsuits. One of its primary benefits—and of adversarial legal proceedings generally—is that a complaint can bring huge amounts of previously undisclosed information into the public record. In these mortgage securities cases, the Justice Department had not only an obligation but an opportunity: to show the country what it found, to deter future misconduct, to complete the story of the financial crisis in humanizing, clarifying, searing detail.
And to do all that, the department didn’t need to do anything special. Just what lawyers normally do. Instead, by imposing a fine without documenting the underlying abuses, the Justice Department has permitted the banks, for a price, to bury their sins.
. . . New York’s superintendent of financial services, Benjamin M. Lawsky, made the following observation: “In order to deter future offenses, it is important to remember that banks do not commit misconduct—bankers do.”
After reading Starkman’s piece is there any doubt that the Department of Justice is a misnomer? The fines imposed by DOJ on Wall Street banks are anything but justice.
I could not possibly more highly recommend, Wrecking An Economy Never Means Having To Say You’re Sorry
Please order a hard copy or Kindle version of my book, In Bed with Wall Street: The Conspiracy Crippling Our Global Economy.