by Zero Hedge - December 7th, 2013 12:30 pm
Submitted by Asia Confidential.
The traditionally quiet period for markets in December is turning out to be not-so-quiet, thanks to a key meeting of the U.S. Federal Reserve starting December 17. The meeting will decide on whether a reduction in quantitative easing (QE) is necessary. Consequently, every economic data point up to the meeting is being analysed and over-analysed. But it does appear that the Fed seems committed to so-called tapering at some point soon and the odds are 50:50 that it’ll pull the trigger in December.
A few weeks ago, I was asked for my 2014 global outlook by a large precious metals website and I told the editor that while tapering will be a key theme, Japan is likely to prove equally important if not more so. The editor was taken aback by this and I can understand why. But let me explain…
The Fed has been flagging tapering for some time and markets appear to have gotten used to the fact that it’ll happen soon. In May, when Bernanke first hinted of tapering, markets freaked out as they assumed a rise in interest rates would come simultaneously. Since then, the Fed has been at pains to say that interest rates will stay low for several years to come while a wind down in QE occurs. Markets appear to have bought this line. They may continue to buy the line through 2014 and even 2015.
While the U.S. cuts back on stimulus, Japan is likely to move in the opposite direction, increasing its own stimulus very soon. That’ll be on top of Japan’s existing QE which is the equivalent of 3x that of the U.S. when compared to GDP. The reason for even more QE is that the grand experiment known as Abenomics, almost one year old, has been a failure. It hasn’t lifted key components such as core inflation, wages or business spending.…
by Zero Hedge - December 7th, 2013 11:42 am
Submitted by Tyler Durden.
Authored by Yannos Papantoniou (Greece's Economy & Finance Minister 1994 to 2001), originally posted at Project Syndicate,
As the eurozone debt crisis has steadily widened the divide between Europe’s stronger northern economies and the weaker, more debt-laden economies in the south (with France a kind of no man’s land economy in between), one question is on everyone’s mind: Can Europe’s monetary union – indeed, the European Union itself – survive?
While the eurozone’s northern members enjoy low borrowing costs and stable growth, its southern members face high borrowing costs, recession, and deep cuts in incomes and social spending. They have also suffered substantial output losses, and have far higher unemployment rates than their northern counterparts. Unemployment in the eurozone as a whole averages about 12%, compared to more than 25% in Spain and Greece (where youth unemployment now stands at 60%). Indeed, while aggregate per capita income in the eurozone remains at 2007 levels, Greece has been pushed back to 2000 levels, and Italy today finds itself somewhere in 1997.
Europe’s southern economies owe their deteriorating circumstances largely to excessive austerity and the absence of measures to compensate for demand losses. Currency devaluation – which would boost the competitiveness of domestic industry by lowering export prices – obviously is not an option in a monetary union.
But Europe’s stronger economies have resisted pressure to undertake more expansionary fiscal policies, which would lift demand for its weaker economies’ exports. The European Central Bank did not follow the lead of other advanced-country central banks, such as the US Federal Reserve, in pursuing a more aggressive monetary policy to cut borrowing costs. And no financing has been offered for public-investment projects in the southern countries.
Moreover, fiscal and financial measures aimed at strengthening eurozone governance have been inadequate to restore confidence in the euro. And Europe’s troubled economies have been slow to undertake structural reforms; improvements in competitiveness reflect wage and salary cuts, rather than productivity gains.
While these policies – or lack thereof – have impeded recovery in the southern countries, they have yielded reasonable growth and very low unemployment rates for the northern economies. In fact, by maintaining large trade surpluses, Germany is exporting unemployment and recession to its weaker neighbors.
by Zero Hedge - December 7th, 2013 11:23 am
Submitted by EconMatters.
Actively Monitor 401k Designations
The stock market is so corrupt, such a gamed enterprise it is comical and is no place for 401k type investors to have their life savings and only retirement funds at risk with the lunatics and absolute corruption of the US stock market.
I am an experienced market participant so I know all the tricks from the inside, and even I am fooled by Wall Street shenanigans from time to time, and I have seen it all and have historical data and sophisticated tools that the mom and pop investor has absolutely no ability to access.
Take my advice and put your incredible gains – you have probably through dumb luck actually performed better than most hedge funds – but take these massive gains and park your capital in a nice and safe money market fund or cash equivalent instrument depending upon your company`s plan options.
Predictable Risk Aversion & Jobs Report
The recent trend has been to sell off the market before the job`s report, this is ultra-conservative smart money wanting to get out before the jobs number as the market sold off for five days,
by Zero Hedge - December 7th, 2013 9:27 am
Submitted by Tyler Durden.
It was inevitable that a few short days after Wall Street lovingly embraced Bitcoin as their own, with analysts from Bank of America, Citigroup and others, not to mention the clueless momentum-chasing, peanut gallery vocally flip-flopping on the “currency” after hating it at $200 only to love it at $1200 that Bitcoin… would promptly crash. And crash it did: overnight, following previously reported news that China’s Baidu would follow the PBOC in halting acceptance of Bitcoin payment, Bitcoin tumbled from a recent high of $1155 to an almost electronically destined “half-off” touching $576 hours ago, exactly 50% lower, on very heave volume, before a dead cat bounce levitated the currency back to the $800 range, where it may or may not stay much longer, especially if all those who jumped on the bandwagon at over $1000 on “get rich quick” hopes and dreams, only to see massive losses in their P&Ls decide they have had enough.
Which incidentally, like gold, is to be expected when one treats what is explicitly as a currency on its own merits in a world of dying fiat – with the appropriate much required patience – instead of as an asset, with delusions of grandure that some greater fool will pay more for it tomorrow than it is worth today. Sadly, in a world of HFT trading, patience is perhaps the most valuable commodity.
As for Bitcoin, while the bubble may or may not have burst, and is for now kept together with the help of the Winklevoss bros bid, all it would take is for another very vocal institutiona rejection be it in China or domestically, where its “honeypot” features are no longer of use to the Fed or other authorities, for the euphoria to disappear as quickly as it came…
Two day chart, showing the epic move from $1155 to $576 in hours:
And longer term chart showing the overnight action in its full glory:
by Zero Hedge - December 7th, 2013 7:53 am
Submitted by Marc To Market.
Contrary to what many, including ourselves thought, the expected divergence of monetary policy between the Federal Reserve tapering on one hand, and the European Central Bank (and Bank of Japan) which likely to have to provide more monetary support next year on the other hand, has not spurred a US dollar rally against European currencies. There is little reason to expect this to change, from a technical point of view.
That said, the dollar’s losses have not been broad based. Sterling and euro (and the Swiss franc and Danish krone) are where the greenback’s losses have been concentrated. In part, the market appears to be taking the Fed’s guidance seriously. Tapering is not tightening. The premium the US offers over Germany on 2-year money has been nearly halved over the past week to 9 bp. The nearly 20 bp discount of the US compared to the UK is near the largest since late 2011.
Yet, when it comes to the yen, it does not appear that interest rate differentials were the key driver. Normally, we find the exchange rate is more sensitive to long-term rate differentials. The US 10-year rate premium over Japan widen to new multi-year highs of almost 224 bp on December 5, even as the dollar was recording six-day lows against the yen. We suspect the pullback in Japanese equities (~4.5% fall Dec 3-5) was a more significant factor. The combination of the bounce in the dollar against the yen after the US employment data, the rally in US shares, and the strong close in the Nikkei, warns that last week’s gap, found 15579 and 15661 will likely be tested early in the week ahead (pre-weekend close 15300) .
This suggests that the dollar will have another run at JPY103.75, high set in late May. Support has been established near in the JPY101.65-80 area.
The dollar’s weakness against the European currencies does not appear exhausted. The only cautionary note from technical indicators is that the euro and Swiss franc are at the top of their Bollinger Bands, which are set +/- 2 standard deviations from the 20-day moving average. Although the returns (changes) in currency prices are not normally distributed, a break of the bands may still be seen as reflecting a stretched market.…
by Zero Hedge - December 6th, 2013 10:22 pm
Submitted by Tyler Durden.
Submitted by Michael Krieger of Liberty Blitzkrieg blog,
The drone issue is just another topic in which President Barrack Obama has proven himself to be a world-class liar and master of deception. Despite his claims that drone strikes do little damage to civilian populations, in July we discovered that “of the 746 people killed in drone strikes in Pakistan from 2006-2009, an incredible 20% were civilians and 94 (13% of the total) were children.”
I suppose that number just isn’t good enough, because The Pentagon has decided to change the rules of engagement when it comes to drone strikes, now making it easier to target civilians. From The Washington Times:
The Pentagon has loosened its guidelines on avoiding civilian casualties during drone strikes, modifying instructions from requiring military personnel to “ensure” civilians are not targeted to encouraging service members to “avoid targeting” civilians.
Hey cops, how about you “try to avoid” beating the shit out of people and violating their constitutional rights for no reason. Yeah, because that’ll work.
In addition, instructions now tell commanders that collateral damage “must not be excessive” in relation to mission goals, according to Public Intelligence, a nonprofit research group that analyzed the military’s directives on drone strikes.
Administration officials say the strikes are legal because the U.S. is at war with al Qaeda and its associates. They also insist there is a wide gap between the government’s civilian casualty count and those of human rights groups.
Right, we are at “war with al Qaeda,” when it is convenient to be at war with them. When it is convenient to be allies with al Qaeda, we will do that too.
Despite Mr. Obama’s pledge for more transparency on drone strikes, the administration “continues to answer legitimate questions and criticisms by saying, ‘We can’t really talk about this,’” said Naureen Shah, advocacy adviser at Amnesty International.
Can’t. Make. This. Stuff. Up.
Full article here.
by Zero Hedge - December 6th, 2013 9:42 pm
Submitted by Tyler Durden.
The stock market. Source of unknown riches – but not necessarily for investors. So-called "professional" investors offer to manage your money. However, their fees are based on the level of assets managed, not performance. Hence their goal is to maximize assets, not performance, and prey for markets to behave. You will never hear a bad word about stocks from a professional money manager. the by-laws of many mutual funds do not allow the manager to have cash levels above 5% of assets. He has to be invested at least 95% at all times. On one hand, it is probably right to force money managers to concentrate on stock picking, not market timing. On the other hand, this puts the onus of market timing onto the inidiviual investors. Lighthouse's Alex Gloy's excellent presentation below proves finance doesn't have to be complex (people make it complex).
Via Lighthouse Investment Management's Alex Gloy,
The money management industry would like to have their clients' assets indefinitely, through bull- and bear markets. Ride the wave during good times. And simply state that "nobody could have foreseen this", "we don't have a crystal ball" or "it's too late to sell now" in case of a crash.
There must be a better way to invest.
This publication tries to assess the following questions:
1. What kind of return can be reasonably expected from stock market investments? Is that rate
2. What kind of simple tools exist to tell if the stock market is cheap or expensive?
3. Are stock market returns mean-reverting?
4. Are we going to continue to see similar cyclical fluctuations in the future, or are we in the midst of a structural break?
I will try to keep things as simple as possible. Finance doesn't have to be complex (people make it complex). A picture says more than a thousand words – I hope the following charts help.
Performance: How to Visualize It
How do we look at performance?
Above you see the S&P 500 Index since 18711. By looking at the black line (nominal, non-logarithmic scale) you would think there was no point in investing before 1981. That's why you should look at longterm data on a logarithmic scale. The green surface is the real (inflation-adjusted) S&P 500. Should we look at nominal or real returns? What…
by Zero Hedge - December 6th, 2013 9:13 pm
Submitted by Tyler Durden.
Authored by Marc Faber, originally posted at The Daily Reckoning blog,
As a distant but interested observer of history and investment markets I am fascinated how major events that arose from longer-term trends are often explained by short-term causes. The First World War is explained as a consequence of the assassination of Archduke Franz Ferdinand, heir to the Austrian-Hungarian throne; the Depression in the 1930s as a result of the tight monetary policies of the Fed; the Second World War as having been caused by Hitler; and the Vietnam War as a result of the communist threat.
Similarly, the disinflation that followed after 1980 is attributed to Paul Volcker’s tight monetary policies. The 1987 stock market crash is blamed on portfolio insurance. And the Asian Crisis and the stock market crash of 1997 are attributed to foreigners attacking the Thai Baht (Thailand’s currency). A closer analysis of all these events, however, shows that their causes were far more complex and that there was always some “inevitability” at play.
Take the 1987 stock market crash. By the summer of 1987, the stock market had become extremely overbought and a correction was due regardless of how bright the future looked. Between the August 1987 high and the October 1987 low, the Dow Jones declined by 41%. As we all know, the Dow rose for another 20 years, to reach a high of 14,198 in October of 2007.
These swings remind us that we can have huge corrections within longer term trends. The Asian Crisis of 1997-98 is also interesting because it occurred long after Asian macroeconomic fundamentals had begun to deteriorate. Not surprisingly, the eternally optimistic Asian analysts, fund managers , and strategists remained positive about the Asian markets right up until disaster struck in 1997.
But even to the most casual observer it should have been obvious that something wasn’t quite right. The Nikkei Index and the Taiwan stock market had peaked out in 1990 and thereafter trended down or sidewards, while most other stock markets in Asia topped out in 1994. In fact, the Thailand SET Index was already down by 60% from its 1994 high when the Asian financial crisis sent the Thai Baht tumbling by 50% within a few months. That waked the perpetually over-confident bullish analyst and media crowd from their…
by Zero Hedge - December 6th, 2013 8:37 pm
Submitted by Tyler Durden.
“Earnings” matter… until they don’t. What’s wrong with these two charts?
EBITDA -7% from previous peak…
S&P 500 nominal price +15% from previous peak…
Still think stocks are “cheap” compared to the last cycle?
by Zero Hedge - December 6th, 2013 7:53 pm
Submitted by Tyler Durden.
Submitted by Brandon Smith of Alt-Market blog,
“Men (people) are rarely aware of the real reasons which motivate their actions.” — Edward Bernays, Propaganda, 1928
The winter holidays are traditionally supposed to embody a certain ideal of that which is best in the hearts of human beings. As the world around us retreats into ice and snow and the Earth’s northern cycle returns to death once again, the holidays represent a time of contemplation, as well as an opportunity to shine a light in an otherwise dark and dreary period. This heritage is as old as history, dating back to an era in which agriculture was paramount and men garnered far more respect for the tides of nature. The parallel relationship between social “renewal” and seasonal renewal has served the collective psyche of Western society, in my view, for the better. Unfortunately, this process has all but vanished today, twisted and mutilated into something sinister and poisonous.
Those of us who pay attention are well aware of a trend of cultural decline within our nation, and this problem is disturbingly visible from Thanksgiving to Christmas. It’s not just the highly publicized Black Friday (now Black Thursday) riots over semi-cheap Chinese-made garbage. Those are certainly vile examples:
Rather, it’s the behavior of people throughout the season on a daily basis that is most disconcerting. I have personally witnessed, as I’m sure many people have, a magnified and astonishing disregard for conscience and basic decency growing worse each year for at least the past decade. That which is most unsettling about our society today is somehow unleashed with wild abandon every year at this time.
The idiocy and barbarism seems to span all economic “classes” — from the upper-middle-class snob screaming at bewildered cashiers over a coupon worth 50 cents, to the middle-class suburbanites brawling on the sticky floors of Wal-Mart over flat-screen TVs, to the part-time employee who sold her soul for minimum wage and who now yells at people on Thanksgiving eve to stop filming the mindless brawls that her corporate masters encourage because such videos might “reflect badly” on the company image. The dark side truly knows no social or financial bounds.