by Market Shadows - September 23rd, 2016 12:20 am
Financial Markets and Economy
The European Central Bank handed 45.3 billion euros ($51 billion) to euro-area lenders at a zero interest rate, in the second round of its program to boost credit to the real economy.
Stocks and bonds are moving in lock-step more than at any time since the financial crisis, making life difficult for asset allocators and driving investors into the one asset guaranteed to bring zero return – cash.
Time is running out for Japan's economy (South China Morning Post)
Recently, Japan’s second quarter GDP growth was revised upwards, to 0.7 per cent, after four consecutive quarters of stagnation. But don’t set your hopes too high.
The housing market has certainly made progress since 2008, when its crash nearly broke the global financial system.
But it works in cycles. And while few economists are warning about existing 2008-type conditions, some housing markets are getting close.
ECB President Says Crowded Banking Sector Hurts Profits (The Wall Street Journal)
FRANKFURT—European Central Bank President Mario Draghi said Thursday that overcrowding in Europe’s banking sector is hurting profitability, pushing back somewhat against critics who blame the central bank for putting pressure on Europe’s banks.
Congressional Barbs Don’t Rattle Mylan Investors (The Wall Street Journal)
Washington D.C. has turned up the heat on a few companies recently, but Wall Street doesn’t seem to have much trouble keeping its cool. Mylan executives were under fire during Wednesday’s House Oversight Committee hearing over price hikes of Mylan’s lead product, EpiPen.
With the decline of manufacturing jobs, and the onset of automation to take over almost all kinds of work, society is on the hunt for a long-term, scalable solution to our future productivity.
by ilene - September 22nd, 2016 8:37 pm
Courtesy of Michael Hudson
To paraphrase Mark Twain, everyone complains about inequality, but nobody does anything about it.
What they do is to use “inequality” as a takeoff point to project their own views on how to make society more prosperous and at the same time more equal. These views largely depend on whether they view the One Percent as innovative, smart and creative, making wealth by helping the rest of society – or whether, as the great classical economists wrote, the wealthiest layer of the population consist of rentiers, making their income and wealth off the 99 Percent as idle landlords, monopolists and predatory bankers.
Economic statistics show fairly worldwide trends in inequality. After peaking in the 1920s, the reforms of the Great Depression helped make income distribution more equitable and stable until 1980. Then, in the wake of Thatcherism in Britain and Reaganomics in the United States, inequality really took off. And it took off largely by the financial sector (especially as interest rates retreated from their high of 20 percent in 1980, creating the greatest bond market boom in history). Real estate and industry were financialized, that is, debt leveraged.
Inequality increased steadily until the global financial crash of 2008. Since then, as bankers and bondholders were saved instead of the economy, the top One Percent have pulled even more sharply ahead of the rest of the economy. Meanwhile, the bottom 25 percent of the economy has seen its net worth and relative income deteriorate.
Needless to say, the wealthy have their own public relations agents, backed by the usual phalange of academic useful idiots. Indeed, mainstream economics has become a celebration of the wealthy rentier class for a century now, and as inequality is sharply widening today, celebrators of the One Percent have found a pressing need for their services.
A case in point is the Scottish economist Angus Deaton, author of The Great Escape: Health, Wealth, and the Origins of Inequality (2013). Elected President of the AEA in 2010, he was given the Nobel Economics Prize in 2015 for analyzing trends in consumption, income
by Market Shadows - September 22nd, 2016 12:24 pm
Financial Markets and Economy
EL FURRIAL, Venezuela — One oil rig was idle for weeks because a single piece of equipment was missing. Another was attacked by armed gangs who made off with all they could carry. Many oil workers say they are paid so little that they barely eat and have to keep watch over one another in case they faint while high up on the rigs.
Global stock and bond markets have been all over the place of late. Rarely have investors been so lacking in conviction. Confusion as to future direction reigns, and with good reason after the spectacular returns of recent years.
If a politician said he thought he should tax the income from your retirement plan, right now, at 50% (no matter where you are in the retirement process, that would certainly hurt the ability of your portfolio to compound), what would you think (other than that he was completely Looney Tunes)?
Bank of England policy maker Kristin Forbes said the initial effect of the Brexit vote on the U.K. economy has been “less stormy” than expected and she doesn’t yet see a need for more stimulus.
U.S. index futures rose, with equities poised to add to a rally yesterday prompted by the Federal Reserve’s decision to leave interest rates unchanged.
Russian bonds advanced, eliminating declines driven by hawkish comments from the country’s central bank last week, as the Federal Reserve’s decision to delay a rate increase spurred appetite for riskier assets.
China’s prudential housing bubble bind (Macro Business)
The spike in August home prices
by Market Shadows - September 22nd, 2016 12:29 am
Financial Markets and Economy
Asian stocks rallied for a sixth day, South Korea’s won strengthened and regional bonds rose after the Federal Reserve damped the outlook for U.S. interest-rate increases.
The dollar fell against all its major peers, extending a slide toward its biggest annual decline in seven years, after the Federal Reserve delayed raising interest rates again, saying more time was needed to assess U.S. economic conditions.
Billionaire Leon Cooperman and his Omega Advisors hedge fund were charged Wednesday with insider trading, the Securities and Exchange Commission announced.
Asian shares surged on Thursday, taking their cue from Wall Street, after the Federal Reserve left U.S. interest rates unchanged and slowed the pace of future hikes, slugging the dollar and lifting commodity prices.
WASHINGTON — A divided Federal Reserve, struggling to decide how soon to prune its economic stimulus campaign, said on Wednesday that it would wait at least a little longer.
Commodity trading advisers, the catch-all phrase for a breed of quantitative investors who use trends in asset prices and volatility as trading signals, posted some of the hedge fund industry’s worst losses in August — and it isn’t getting better.
Fed leaders decided not to increase the bank's key interest rate on Wednesday at the conclusion of a two-day meeting. The decision was largely expected by economists and investors who bet there was very little chance of a move.
by ilene - September 21st, 2016 6:44 pm
Courtesy of John Mauldin
I’ve been saying for the past couple years that the next recession here in the US will probably be triggered by an external macro event or cascade of events, coming out of Europe or China. Today’s Outside the Box sharpens our focus on China, which had already got quite a lot sharper with Michael Pettis’s piece in Outside the Box on Sept. 2.
Today’s post comes from Ambrose Evans-Pritchard of the London Telegraph. He is commenting on the recently released quarterly report of the Bank for International Settlements (“the central banks’ bank”), in which the BIS repeats Pettis’s warning that China faces escalating risk of a major debt and banking crisis.
The BIS is also rightly concerned about spillover from China to the global economy. After noting that outstanding loans in China have reached $28 trillion – as much as the commercial banking loan books of the US and Japan combined – Ambrose adds, “The scale is enough to threaten a worldwide shock if China ever loses control. Corporate debt alone has reached 171pc of GDP, and it is this that is keeping global regulators awake at night.”
Total Chinese debt reached 255% of GDP at the end of 2015, a jump of 107% in the past eight years – and still rising fast. Every year, China’s leadership promises to rein in debt growth, and every year the growth just keeps accelerating. That is because China’s GDP growth is fueled by debt, and that debt is becoming increasingly inefficient in producing GDP.
Does China still have the resources to deal with this issue? The answer is a qualified yes – but then there may not be the resources to deal with the other little items on China’s shopping list. The New Silk Road that China seems to be actually in the process of building is estimated to cost $1 trillion, and that’s without cost overruns. Plus, the Chinese leadership has promised massive spending on the interior part of the country to bring up the quality of people’s lives there.
by Market Shadows - September 21st, 2016 1:04 pm
Financial Markets and Economy
Hong Kong’s leader, Leung Chun-ying, defended his decision to postpone two phases of a massive public housing project in the city’s northern outskirts, as he sought to address allegations that the government made the decision to benefit rural landlords.
In a day dominated by two of the world’s premier central banks, bond traders are already turning their focus to the Federal Reserve after shrugging off the Bank of Japan’s policy tweaks.
After years of failed efforts to pull Japan out of deflation, the country's central bank is trying something different.
The Bank of Japan said Wednesday that it's introducing a new long-term interest rate target of around zero.
South Africa’s inflation fell below the upper end of the central bank’s target band in August for the first time this year, leaving room for policymakers to continue to pause their tightening cycle.
OAKLAND, Calif. — The docks at the Port of Oakland are a tangle of cranes, shipping containers, railroad tracks and snaking lines of trucks waiting to load and unload cargo.
Much has been written about the Belt and Road initiative since Xi Jinping made it Beijing’s flagship initiative in September 2013. There are many interpretations of the initiative’s ultimate objectives, but one objective is clear.
Ruble-denominated bonds halted four days of losses as oil prices rose and optimism global central banks won’t rush to dial back stimulus boosted appetite for Russian risk.
The state of macroeconomics is not good (The Washington Post)