by ilene - April 18th, 2015 12:35 pm
From Around the Web:
Not All Macro Models Failed to Predict Crisis (MultiplierEffect)
Noah Smith has a post on the failure of macro theory to predict the crisis. He concedes that DSGE models did very badly on this score, but, he continues, “There are no other models out there that did forecast the crisis” and there is nobetter alternative. (More)
6 Illegal Cocktails Banned in the U.S. and the United Kingdom (HuffingtonPost)
It's human nature to want to raise the bar. If your car has 300 horsepower, you want 400. If you have a 2,000-square-foot house, you want 3,000. So why should it be any different when it comes to booze? These six cocktails upped the alcoholic ante--then ended up getting slapped by the long arm of the law. (Continue reading)
The Cozy Suite by independent seating manufacturer Thompson Aero Seating of Northern Ireland is a brilliant idea that rethinks economy seating without sacrificing the passenger experience for anyone — including the person stuck in the middle seat. (Read more)
Outsmart Your Own Biases (HBR)
Suppose you’re evaluating a job candidate to lead a new office in a different country. On paper this is by far the most qualified person you’ve seen. Her responses to your interview questions are flawless. She has impeccable social skills. Still, something doesn’t feel right. You can’t put your finger on what—you just have a sense. How do you decide whether to hire her? (Full article)
The long, loving gazes. The ritualized, often high-pitched, expressions of affection. The heroic self-sacrifice one would readily endure for the other.
What is it about the bond between human and dog that is not like the relationship between parent and child?
Now science offers a new explanation for the similarity. When our dogs gaze into our eyes with that “you are everything to me” look, our
by ilene - April 18th, 2015 10:55 am
Courtesy of Marc To Market
The US dollar fell against the major currencies and many emerging market currencies last week. Punished by disappointing data, it threatened to breakout of ranges that have confined it. However, the third consecutive upside surprises on core CPI helped the greenback stabilize ahead of the weekend. The price action reinforces our sense that after trending for several months, the dollar has entered a consolidative phase. Trading is choppy, and positioning is still stretched, but the divergence of monetary policy trajectories will likely prevent sharp dollar losses.
The Canadian dollar may be an exception. The combination of a less dovish central bank, higher than expected inflation and stronger than expected retail sales, coupled with the 30% rally in oil prices over the past month, sent the Canadian dollar sharply higher. Indeed, the Canadian dollar was among the best performing major currency (2.6%), behind another petro-linked currency the Norwegian krone (3.4%) and Swiss franc (2.8%), where Grexit fears found succor.
Even though it was the biggest weekly advance in four years, the pre-weekend price action is potentially a bearish signal for the Canadian dollar (hammer). The US dollar appears to have found support near CAD1.2080. This corresponds to three standard deviations from the 20-day moving average (Bollinger Bands are two standard deviations from the 20-day average). The CAD1.2300-30 area offers initial resistance, but it probably requires a move back above CAD1.24 to signal the breakout was false.
The euro rallied three and a quarter cents of the low set at the start of the week near $1.0520. It ran out of steam near $1.0850. The RSI and MACDs are constructive, and the five-day moving average is above the 20-day. Slow stochastics is crossing higher. The broad range that has confined the euro for over a month now is seen $1.05-$1.1050. The double top that we discussed last week has now been complimented with a double bottom.
The cyclical recovery in the euro area, which is expected to be extended in next week's flash PMI readings are largely offset by the ECB's asset purchases and the drop in yields. A little more than half of the outstanding German bunds now have negative yields, for example. In addition, many perceive that the risks of…
by ilene - April 18th, 2015 1:13 am
Greece’s major creditors are not ready to let the country drop out of the euro as long as Prime Minister Alexis Tsipras shows willingness to meet at least some key demands, according to two people familiar with the discussions.
Chancellor Angela Merkel will go a long way to prevent a Greek exit from the single currency, though only so far, one of the people said. Every possibility is being considered in Berlin to pull Greece back from the brink and keep it in the 19-nation euro, the person said. (Read more)
It just keeps getting hotter.
March was the hottest month on record, and the past three months were the warmest start to a year on record, according to new data released by the National Oceanic and Atmospheric Administration. It's a continuation of trends that made 2014 the most blistering year for the surface of the planet, in to records going back to 1880. (More)
Those who want to buy tickets for next month’s fight between Floyd Mayweather and Manny Pacquiao may soon need to confront the possibility that there will be no public sale.
While promoters from both sides have said fewer than 1,000 tickets would be sold to the public for face value, multiple dates have passed and no official announcement has been made. With about two weeks remaining until the May 2 bout, and a secondary market that has been quiet in anticipation of the public sale, it’s possible that resale will be the only option, according to Chris Matcovich, a spokesman for aggregator TiqIQ. (Read here)
Near California’s Success Lake, more than 1,000 water wells have failed. Farmers are spending $750,000 to drill 1,800 feet down to keep fields from going fallow. Makeshift showers have sprouted near the church parking lot.
“The conditions are like a third-world country,” said Andrew
by ilene - April 17th, 2015 10:36 pm
Courtesy of Mish.
Denials in Greece about its sorry state of affairs are now so ridiculous that even some ardent Greek supporters are likely laughing out loud (off the record of course).
Please consider Greece Scrapes Bottom of Barrel in Hunt for Cash to Stay Afloat.
Greece will need to tap all the remaining cash reserves across its public sector — a total of 2 billion euros ($2.16 billion) — to pay civil service wages and pensions at the end of the month, according to finance ministry officials.
Greece’s finance ministry denied that it would need to tap remaining cash reserves to meet salary payments, without providing any figures.
“News agencies’ reports that refer to the state’s cash reserves are groundless, we categorically deny them,” the ministry said in a short statement on Friday.
“This is the last bit of cash that the Greek state has,” a senior finance ministry official, who requested anonymity, told Reuters.
For months, the government has been borrowing from different parts of the state administration, including the Athens subway system, to pay the wages and pensions of public sector workers. Now, however, it is reaching the end of the line.
Finance ministry officials say the state’s cash balance will be negative from April 20 if the government does not extract the 2 billion euros in cash deposits remaining in various public bodies, including a handful of pension funds and regional administrations.
Without that money, the state would be 1.6 billion euros short of what it needs to pay month-end salaries and wages.
Regular tax revenues, which start flowing in early in the month, should help the state’s financial position of course. Tax revenues had begun to slip early in the year, when Tsipras’ government was elected, but have stabilized since to around 4 billion euros a month.
Still, the financial pressure will not subside because Athens faces a new round of payments to the IMF next month. It needs to give the IMF 950 million euros by May 12 — then domestic commitments kick in once again.
Shell Games and Check Kiting
One can only keep these rob Peter to Pay Paul shell games going so long. Eventually they always blow up. Of course, if Greece convinces creditors to lend it more money, of if the Troika decides to unleash more funds, perhaps Greece can make it until June….
by ilene - April 17th, 2015 8:05 pm
Courtesy of EconMatters
Everyone this week focused on the slight production declines that this was a sign to go long oil, but what seemed to go under the radar was another build in both Cushing and the Gulf Coast storage hubs.
Cushing added another 1.3 million barrels to weekly storage and stands at 61.5 million barrels. The Gulf Coast added another 600 thousand barrels to storage and stands at 237 million barrels. By comparison Cushing had 26.8 million barrels in storage this time last year, and the Gulf Coast had 207.2 million barrels in storage a year ago.
Refinery Utilization Rate 92%
This is with refineries operating at 92.3 percent of capacity which is robust and near the top end of this metric. We also have about 17.6 million more barrels of Gasoline in storage versus this time last year, and 17 million more barrels of Distillate stocks in storage this year versus last year.
Analysts have pointed out the increased demand for products, and this makes sense given lower prices, but the numbers are inflated because much of the demand is artificial by turning the oil into gasoline and distillates and just storing the products in another form of storage. It isn`t as if demand is so robust that we are lower in product inventories versus this time last year, in fact it is just the opposite.
The only reason total inventories didn’t have another 10 million build this past week was because imports were down 1.12 million barrels per day versus this same period last year. This would add an additional 7.9 million barrels to last week’s 1.3 million barrels build bringing the total to 9.2 million barrels. So the market got a respite this past week, but with OPEC and Saudi Production at record levels as witnessed by the latest readings, traders may not be able to rely on lower import numbers as the norm going forward into the summer driving season.
Moreover, despite lower import numbers and
by ilene - April 17th, 2015 7:40 pm
Courtesy of Jim Quinn via The Burning Platform
The Chinese real estate bubble has been imploding for the last year. The Chinese economy is barely growing at 1.6% after decades of 10% growth. There are millions of unoccupied condos. There are dozens of ghost cities and empty office towers. It’s the most corrupt nation on earth. We are in the midst of a global recession.It’s pure madness that the Chinese stock market would soar when its leading economic indicators crash to 2008 lows.
Its stock market has gone up 115% in the last 9 months. It has gone up 80% in the last 5 months. It has gone up 35% in the last month. Housewives and other uneducated gamblers have opened a record 10.8 million new stock accounts this year, more than the total number for all of 2012 and 2013 combined.
The Hong Kong stock market has gone up 14% in three weeks.
Since real estate investing is failing miserably, the Chinese middle class have piled into stocks on margin. Where have I seen that before? Margin debt on the Shanghai Stock Exchange climbed to a record 1.16 trillion yuan on Thursday. When has buying overvalued stocks on margin when the economy is tanking ever gone wrong before? Have we already forgotten 2000 and 2008? Humans truly act like irrational herds of cattle stampeding in whatever direction they are pushed by their keepers.
After the markets closed for the weekend today in China regulators announced they were clamping down on the use of shadow financing for equity purchases and increased the supply of shares available for short sellers. Bloomberg explained what happened a few hours ago:
Investors have used umbrella trusts, which allow for more leverage than brokerage financing, to ramp up wagers on Chinese stocks after monetary stimulus sparked a world-beating rally in the nation’s benchmark equity gauge. Permitting mutual funds to lend their holdings to short sellers would make it easier for bearish traders to bet on a retreat after the Shanghai Composite Index closed at a…
by ilene - April 17th, 2015 5:06 pm
Courtesy of Lance Roberts via STA Wealth Management
Speaking of seeming backward, the economic data has continued to disappoint on virtually all fronts, earnings are weak and markets are grossly extended. Yet, investors are more bullish than ever as noted yesterday:
"While investors may be looking for returns, they are 'extraordinarily optimistic about their investment prospects in both the short and long term,' says Natixis. Respondents say they need 10.1 percent return on their investments, and 81 percent of them feel their expectations are realistic.
Fifty-four percent expect their returns this year to be better than 2014.
Stocks will be the best-performing asset class this year, according to 45 percent of the respondents, followed by 17 percent who say cash will be the top performer."
While it has been repeatedly stated that individuals have "missed out" on surging asset prices, it has only been those with little or no money actually to invest with. However, for those that are invested, they are as optimistic as at every previous bull market peak in history. As shown in the chart below from the American Association of Individual Investors (AAII), individuals are at the highest levels of stock allocations, and lowest cash, since the financial crisis.
But then again, maybe it is just me.
But, for now, the markets clearly remain in their bullish trend as discussed in last weekend's newsletter. This suggests that portfolios remain tilted more heavily to equity based exposure at the current time, but attention should be paid to the rising levels of risk that exists.
With that said, I wanted to share with you my list of articles I have downloaded to read while winging my way to Arizona.
1) Stock Market Losses With Low Interest Rates by Ben Carlson via Wealth Of Common Sense
"One of the common misconceptions I’m starting to hear from investors is that because we’re in a low interest rate environment, stocks either can’t or won’t fall very far from these levels. This is the TINA (there is no alternative) argument that says because over the longer-term bonds returns will be much lower from today’s yield levels, stocks should be supported
by ilene - April 17th, 2015 4:01 pm
Courtesy of Mish.
New Seasonal Pattern?
Yesterday Fed Governor Stanley Fischer proclaimed U.S. Economy Should Rebound After ‘Poor’ First Quarter.
“There’s definitely a rebound on the way already, and we’ll see at what speed it proceeds,” Mr. Fischer said during an interview on CNBC. “The first quarter was poor. That seems to be a new seasonal pattern. It’s been that way for about four of the last five years.
Richmond Fed President Jeffrey Lacker said Wednesday that he thinks a “strong case” can be made to raise rates at the Fed’s June policy meeting, and suggested the economy’s recent performance may have been weighed down by temporary factors.
U.S. wage growth has been stagnant for years, but many economists expect pay raises will accelerate as the labor market continues to tighten. “There are more signs every day, and lots of papers come through my computer explaining that this is the turning point, right now,” Mr. Fischer said. “But they’ve been coming for a while.”
Déjà Vu All Over Again
The Atlanta Fed Macro Blog investigates Fisher’s claim in Déjà Vu All Over Again.
Output in the first quarter has grown at a paltry 0.6 percent during the past five years, compared to a 2.9 percent average during the remaining three quarters of the year.
What’s causing this pattern? Well, it could be we just get really unlucky at the same time every year. Or, it could be a more technical problem with seasonal adjustment after the Great Recession (this paper by Jonathan Wright covers the topic using payroll data). It also seems likely that we can just blame the weather (see this Wall Street Journal blog post).
Whatever the reason for the first-quarter weakness, it appears to be happening again. Our current quarterly tracking estimate—GDPNow—has first-quarter growth hovering just above zero. As for the rest of the year, we’ll have to wait and see. We of course hope it follows the postrecession pattern.
Pattern Real or Imaginary?
Is there really a pattern?
I see two weak Q1s, one weak Q3, and one weak Q4.
by ilene - April 17th, 2015 2:34 pm
Courtesy of Mish.
Not wanting to be left behind in the race for autonomous cars, French manufacturer Peugeot says the 508 Peugeot Model will contain "self-driving aids for bottleneck situations." Via translation from l'informaticien.
Imagine a car that automatically adapts to a bottleneck ahead, handling the "accordion " for you. All drivers who have experienced long minutes of wait will welcome what Peugeot will do in 2018.
Peugeot has not yet fully detailed his concept: it is not known if the driver will completely do something else for a traffic jam or if it will still "attend" the car in one way or another. Other manufacturers are working on these kinds of concepts, including the BMW-Mercedes-Audi Germans.
This is yet another way people will get accustomed to letting technology take over. If drivers get comfortable letting the car drive in slow-speed setups and parking, that comfort will quickly spread to higher speeds and more situations.
Mike "Mish" Shedlock
by ilene - April 17th, 2015 12:03 pm
There are numerous reasons for the increasing amount of inequality in the US and for a subcomponent of that: an increasing ratio of CEO compensation to employee compensation. Contributing to the inequality: the very nature of capitalism, the political power to sustain the status quo, tax policy, outsourcing to lower-cost workers in poorer countries, higher job demand than job supply (holding wages down).
Via Business Insider
As John Rubino discusses here, breakthroughs in robotics will exacerbate the problem.
Courtesy of John Rubino
New York artist Stephen Green’s latest painting, DemandedDislocation, combines current affairs irony with a deeply sad vision of the future. Check out the workers demanding higher wages in front of the discount robots store.
Green’s point is that two big trends are intersecting:
1) The push by workers for their fair share of record corporate profits, in the form of a higher minimum wage and better pay for jobs a rung or two up on the income ladder.
2) Breakthroughs in robotics that make it possible to automate a whole range of service and factory work. See The burger flipping robot that could put fast food workers out of a job and Meet the robots shipping your Amazon order.
A cynic might observe that trend number 2 appears to explain why trend number 1 is proceeding so smoothly. In the past year a growing number of cities and states have raised their minimum wage while corporations like McDonald’s and Wal-Mart have begun paying their people more. That they’re doing so without much of a fight would be suspicious if they didn’t have an angle. Now we see what it is:
Corporations seem be running the numbers on the latest generation of robots and finding that they don’t profitably replace $7-an-hour workers. But raise the prevailing wage to $10 or $15 and suddenly it becomes justifiable (actually mandatory from a profit-maximization standpoint) to replace millions of unpredictable, argumentative, messy humans with low-maintenance, tireless, ever-improving mechanical slaves. It’s a fantasy…