by ilene - May 22nd, 2015 11:22 pm
Financial Markets and Economy
"It would be difficult to overstate the recent downside surprise in global consumer spending," writes JPMorgan Senior Global Economist Joseph Lupton.
Though retail sales in the U.S. have missed expectations for five consecutive months, disappointing consumer spending is far from just a made-in-the-USA story, he observes.
Japan’s foreign investments and assets climbed to a record in 2014, keeping it in front of China and Germany as the world’s top creditor nation.
The reading stretches Japan’s lead as No.1 creditor country to 24 years, with 71 percent more in net assets than China, even after its Asian neighbor surpassed it to become the world’s second-largest economy in 2010.
French telecommunications group Altice SA is talking to several banks about raising debt for a potential bid for Time Warner Cable Inc, the second-largest U.S. cable operator, according to people familiar with the matter.
The talks are an important step for Altice in putting together a bid for Time Warner Cable, which is also being courted by Charter Communications Inc after Comcast Corp abandoned its $45.2 billion offer for Time Warner Cable last month over U.S. antitrust concerns.
Deutsche Lufthansa AG scrapped its dividend this year partly because of charges tied to its pension fund. Investors have been shunning the shares — and those of peers that are likely to follow suit.
An unintended consequence of Mario Draghi’s bond-buying campaign has been an increase in the estimated cost of providing for retired workers. According to an index designed by Citigroup Inc., companies with the biggest pension deficits that have been forced to reduce profit forecasts are trailing the rest of the market by the most since 2013.
by ilene - May 22nd, 2015 12:36 pm
To be "fiscally conservative/socially liberal" means overlooking many of the facts that make it impossible to separate social and fiscal issues. The following article discusses why the social and fiscal aspects of any political theory are so tangled that one is often just an unfortunate side of the other and why the relatively innocuous "fiscally conservative/socially liberal" position is inconsistent — a mix of ideas that do not hold up well together.
For a "top down" approach to sorting out the inconsistencies of your economic and political theories (forgetting the "liberal" and "conservative" labels for a moment), explore how the laws define our economic playing field. (E.g. read Stiglitz on Inequality, Wealth, and Growth: Why Capitalism is Failing.)
Thoughts? Please give us yours in the comment section.
It's a popular refrain among "centrists." The truth is that social and fiscal issues are inextricably bound
By Greta Christina, originally published at Alternet (via Salon)
Well, I’m conservative — but I’m not one of those racist, homophobic, dripping-with-hate Tea Party bigots! I’m pro-choice! I’m pro-same-sex-marriage! I’m not a racist! I just want lower taxes, and smaller government, and less government regulation of business. I’m fiscally conservative, and socially liberal.”
How many liberals and progressives have heard this? It’s ridiculously common. Hell, even David Koch of the Koch Brothers has said, “I’m a conservative on economic matters and I’m a social liberal.”
And it’s wrong. W-R-O-N-G Wrong.
You can’t separate fiscal issues from social issues. They’re deeply intertwined. They affect each other. Economic issues often are social issues. And conservative fiscal policies do enormous social harm. That’s true even for the mildest, most generous version of “fiscal conservatism” — low taxes, small government, reduced regulation, a free market. These policies perpetuate human rights abuses. They make life harder for people who already have hard lives. Even if the people supporting these policies don’t intend this, the policies are racist, sexist, classist (obviously), ableist, homophobic, transphobic, and otherwise socially retrograde. In many ways, they do more harm than so-called “social policies” that are supposedly separate from economic ones. Here are seven…
by phil - May 22nd, 2015 8:18 am
I told you so.
I told you so yesterday and, much more profitably, I told you so on the morning of May 11th, when FXI opened at $50.75 on news of more Chinese stimulus and we called for a short using the FXI June $50 puts, which were $1.20 at the time and are now $1.60 – up 33% in 12 days. We're already done with those and have moved on to new FXI short positions.
Yesterday we talked about the sudden and still unexplained failures of Hanergy and Goldin and now, this morning, Ordos' (the ghost city) Huyan Investment Group is unable to pay the piper on $194M round of bonds as they have $1.1Bn in debt and just $3.5M in cash remaining.
Huyan is just a drop in the Ordos bucket, where $3-5BBn worth of bonds are likely to default every year for the next 12 years – so the hits just keep on coming in China. Ordos city bonds have climbed to 9.63% as the city's rating has been cut to A on negative watch. In the rating statement, Pengyuan described the Ordos property market as “extremely not optimistic” because of the slowing economy and pressure the coal industry is facing. Several other firms have also been downgraded and will be having trouble rolling their debt in the next round.
Meanwhile, Zhuhai Zhongfu Enterprise (a bottling company) is short $72M of the next $106M they owe on May 28th and they have just $10M left in the bank. This company employs 4,000 people and bottles for both KO and PEP in China. Meanwhile, shares of ZZ are up 126% this year but have been suspended since April 29th with a $10Bn market cap. This is the state of Chinese companies, folks – there are many more examples and here's even more. .
The above chart illustrates the game that is being played in China to keep things LOOKING good, even while they are falling apart. Then we have to take into account that 90% of the public companies in China are some form of quasi-state controlled entities. While a lot of "investors" take solace in that, believing the Government will back…
by ilene - May 21st, 2015 8:20 pm
Michael Santoli Interviews Ian Bremmer on Yahoo Finance.
By John Mauldin
Ian Bremmer’s new book on the future of the US and geopolitics, Superpower, just hit the streets yesterday, and it’s already creating quite a buzz. It draws on Bremmer’s remarkable understanding of politics, America, and the world. I first ran into Ian at a conference about four years ago, where he was the after-dinner keynote speaker. It was one of those dinners where I had to go (I had spoken earlier), and I had no knowledge of Ian other than his official bio. A professor of geopolitics. From New Yawk. So this Texas boy settled in while Ian walked on stage … and in three seconds I realized that this was an uber-nerd. Total geek. Seriously, when Hollywood wants to type cast a brilliant super-nerd, they should use Ian as the model. He hit all my stereotype buttons, and I of all people should know better.
Within five minutes, this nebbish professor was blowing me away. I was totally captivated. He took me on a trip through the geopolitical landscape as profound as any I had ever been on.
Ian gave one of the most compelling presentations at our most recent Strategic Investment Conference. No fancy Powerpoint, just one machine-gun idea after another, strung together in what I now realize is his own carefully crafted style.
As I shared with you in Thoughts from the Frontline last week, Ian’s summary of the geopolitical situation and America’s role in managing it can be expressed in two words: it’s bad.
The US is not in decline, he asserts in today’s Outside the Box, citing “the strength of the dollar, US equity markets, employment levels and the economic rebound, the energy and food revolutions, and generation after generation of technological innovation.” But America’s foreign policy and international influence are most certainly in decline. Nevertheless, no other country can even come close to claiming superpower status, so the role the US chooses to play in the world remains of paramount importance.
by ilene - May 21st, 2015 7:57 pm
Courtesy of Bill Bonner
Bonds: A Crowded Trade
In the financial markets, we have been waiting for a crash of U.S. stock prices. And waiting. And waiting. It still hasn’t come.
Last week the spectacular bull market in U.S. stocks that began in March 2009 continued with even more gains. On Friday, the S&P 500 hit another all-time high.
But the real action was in the bond market. Over the last three weeks, about half a trillion dollars has been wiped off the value of global bonds … despite lower than normal trading volumes.
According to Citigroup strategist Mark Schofield, the sell-off is a “stark reminder of just how congested a lot of market positioning has become.” This makes it “increasingly difficult for investors to exit those positions when the time comes to do so.”
As Bloomberg reports:
“That means that it will be increasingly difficult for central banks to start backing away from their unprecedented stimulus efforts as growth takes hold – no matter how much they may want to – without causing a massive traffic jam of investors all trying to sell at once.”
Uh … yes.
Italy’s 10 year government bond yield – an example of recent bond market indigestion – click to enlarge.
A Modern-Day John Law
Nobody knows whether the recent correction in bond prices (and the accompanying rise in yields) will continue or not.
It is almost too classic to believe. Serious economists – and anyone with any common sense – have realized for centuries that you can’t increase the quantity of debt without also decreasing its quality. The more you owe, the less likely you are to pay.
But central banks have been encouraging businesses, households, and governments all over the planet to take on more debt. They claim this will “stimulate” the economy… and that the resulting “growth” will make it easy to repay the debt.
by ilene - May 21st, 2015 4:30 pm
Financial Markets and Economy
Here they're doing that grumbling in letters to clients the day after their guilty pleas. There is no promise of reform here: The Justice Department caught the banks doing things that it didn't like and fined them billions of dollars, but won't stop them from doing most of those things. As long as there are no more ambiguities or misunderstandings about what they are. It's a weird stalemate. The Justice Department doesn't like these practices, the banks like them fine, and they've agreed to disagree. These practices have been singled out, in the context of criminal plea agreements (a bad context!), as things that happened. But not quite as crimes. And the banks are careful to make clear: They're going to keep happening.
The Senate Has a $66 Billion Gift for U.S. Banks (Bloomberg)
A U.S. Senate proposal to raise the level at which banks are deemed systemically important could help free up as much as $66 billion in capital at 11 lenders and allow for increased shareholder payouts.
The jitters were so intense that it took a clear message from European Central Bank policy makers that the central bank stands firmly behind its aggressive stimulus program, for the market to calm and resume some bullish momentum.
The first road-legal autonomous truck made a splashy debut earlier this month. The Freightliner Inspiration Truck is shiny and new, but it will not be good for everyone. Autonomous trucks will destroy
by ilene - May 21st, 2015 3:23 am
Financial Markets and Economy
Janet Yellen’s Federal Reserve is “reasonably confident” it can drive up consumer prices. Mario Draghi says his European Central Bank’s stimulus has already “proven so far to be potent.” The Bank of England reckons inflation is “likely to return” to its target within two years.
While not quite declarations of victory, such statements show policy makers’ optimism that record-low interest rates and bond-buying will be enough to return inflation to the 2 percent range most of them eye.
At a time when 8.5 million Americans still don't have jobs, some 40 percent have given up even looking.
The revelation, contained in a new survey Wednesday showing how much work needs to be done yet in the U.S. labor market, comes as the labor force participation rate remains mired near 37-year lows.
Record spending by foreign tourists is providing a timely boost to the world’s third-largest economy.
Spending by visitors jumped to the highest level in at least 20 years, adding about 0.1 percentage points to Japan's gross domestic product, data showed. That’s no small change for a country that’s trying to claw itself out of decades of economic stagnation.
Unless the name is Ben Bernanke or Alan Greenspan, ex-Fed guys don’t always grab your attention.
But Lawrence Lindsey, who was at the Fed in the 1990s, made a few people sit up and take notice after firing off some spicy comments at a panel discussion yesterday. He blasted away at the current Fed, saying it’s pushing its luck when it comes to normalizing interest rates. And rates at zero, with unemployment at 5.4%? Madness!
Bank of Communications, China’s fifth-largest commercial