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
by ilene - May 20th, 2015 2:28 pm
Financial Markets and Economy
Ending the Minimum-Wage Subsidy (Barry Ritholtz, BloombergView)
This week, Los Angeles became the third major West Coast city and the biggest in the U.S. to agree to raise the minimum wage to $15 an hour, an increase that will go into effect by 2020. Los Angeles follows Seattle, which will require employers with 500 workers or more to pay $15 by 2017. San Francisco will require the $15 hourly minimum by 2018.
The Seattle increase in particular has caused all sorts of analytical errors from people who should know better. Seattle Magazine ran one article with the headline “Why Are So Many Restaurants Closing Lately?,” which cited the wage increase as among the reasons. This was quite surprising, given the lack of any notable rise in restaurant closings, which are running at about the same pace as before the minimum wage increase. Even more telling, permits for new restaurants are rising. The data overwhelmingly disproves the assertion that the minimum wage increase is leading to restaurant closings — or is discouraging people from opening new ones.
Housing Starts Rise 20%…Still Well Below Normal (Value Walk)
The NAHB HMI(Housing Market Index) and Single Family Starts were reported the past two days. The HMI ($XHB) at 54 and Starts at 733,000 indicate that a positive trend remains in place. Many appeared to have been surprised by this and talk of a 20% rise in Housing Starts. But, if you look at the chart below, you will see an uptrend created by choppy monthly reports. That the uptrend from early 2013 simply continues is all that one can say at the moment.
European Central Bank policy makers will discuss Greek bank aid on Wednesday in a chore that is getting more uncomfortable every week.
The Governing Council will meet in Frankfurt to debate whether to tighten rules on Greek access to Emergency Liquidity Assistance as the country veers toward default. At the same time, officials are well aware their decision could worsen the political crisis just
by phil - May 20th, 2015 8:26 am
Japan grew 0.6% in Q1.
That's a 2.4% annualized growth rate but, of course, that's priced in Yen, which are down 14.8% since last year so, in fact, Japan's economy, in Dollar terms, is losing 12.4% from last year. This is not the headline you'll hear in the MSM though, where the overwhelming message is "Don't Worry, Be Happy" and, in fact, Robert Shiller just wrote an article telling people to cheer the F'ck up to avoid a Depression.
As you can see from the chart above, adding 80Tn Yen worth of debt in the last 5 years has only added 25Tn Yen worth of GDP and the current 495Tn Yen GDP is still well below 2007's 505Tn Yen and, at the time 505Tn Yen was worth $5.5Tn but now, 495Tn Yen is only worth 41.25Tn so, in Dollar terms (or any steady currency), the GDP of Japan has actually DROPPED 25% since 2007 and this quarter's "boost" of 0.6% comes on the back of an additional 5% drop in they Yen since Q4 of last year.
Yet no one will mention this in the MSM. Why? Well first of all it's complicated and even NYTimes readers' eyes glaze over when you start doing math. Secondly, it doesn't fit the narrative that our Corporate Masters want you to swallow – that QE is working and more QE is better and all that matters is that the stock market goes up and everything else will be fine.
I ranted about this in yesterday's Live Trading Webinar and you can watch a replay of that HERE, so I won't get into it again. We also made $100/contract live trading the Russell Futures and our bullish trade on Gasoline Futures (/RB) that we played into the close is already up $1,000 per contract this morning as /RB is back over $2.02 already (you're welcome).
So, moving on from Japan (and I sent out an Member's Alert this morning with in-depth coverage and trade ideas), as you can see from Dave Fry's SPY chart, our record highs are still coming on record low volumes and that means that…
by ilene - May 19th, 2015 5:02 pm
Financial Markets and Economy
Macquarie analyst David Doyle thinks the U.S. economy doesn’t need to add too many jobs for the unemployment rate to keep moving downwards.
Housing starts surge 20% in April (Market Watch)
In a show of housing-market vitality, the pace of construction started on new U.S. homes in April jumped to the strongest level since the onset of the Great Recession, the government reported Tuesday.
Construction started on new U.S. homes sprang up 20.2% in April to a seasonally adjusted annual rate of 1.14 million. That’s the biggest monthly percentage gain in more than 24 years and the highest level since November 2007, the U.S. Commerce Department reported.
Following two ugly months of dramatically missed expectations, Housing Starts exploded to 'recovery' highs (highest since Nov 2007) jumping 20.2% MoM to 1.135million (against 1.015 exp.). This is the 2nd biggest MoM jump in history. Both single-family (3rd biggest MoM surge since the crisis peak) and multi-family starts surged. Permits also surged in April (jumping 10.1% MoM – the most since 2012) to 1.143 million (well above expectations) and the highest since June 2008. These huge mal-investment spikes make perfect sense in light of the collapse in lumber prices (and thus demand).
LOS ANGELES — The nation’s second-largest city voted on Tuesday to increase its minimum wage to $15 an hour by 2020, in what is perhaps the most significant victory so far in the national push to raise the minimum wage.
The increase — which the Los Angeles City Council passed in a 14-1 vote — comes as workers across the country are rallying for higher wages, and several large companies, including Facebook and Walmart, have moved to raise their lowest wages
Hedge Fund AUM Hits A Record High Of $2.2 Trillion (Value Walk)
Hedge funds posted their fourth consecutive month of
by phil - May 19th, 2015 8:22 am
Bad news is great news!
The Greek talks have stalled, England's CPI is deflating, German GDP slipped to 0.3% in Q1 and German Investor Sentiment (ZEW) dove to a 5-month low, dropping over 20% in one month to 41.9. That and collapsing bond prices were the last straw for the ECB, who announced this morning they would "front-load" their $75Bn monthly bond-buying into May and June, to avoid having to bother over the holidays.
Separately on Tuesday, Christian Noyer, the head of France’s central bank and a member of the ECB governing council, said the ECB was ready to go further if needed to meet its inflation target. “The purchase program will continue until the end of September 2016 and beyond if we do not see a sustained adjustment in the path of inflation,” he said.
Does anyone besides me think it's strange to announce more QE WHILE the markets are making record highs? Anyone???
We have indeed fully embraced the worst kind of Voodoo Economics, with the World's Central Banks creating endless supplies of money out of thin air by simply writing checks to buy bonds which enable the Sovereign nations to go endlessly into debt. There have been, so far, no consequences for this behavior and even countries like Greece, who have no possibility whatsoever of being able to pay off their debts, are lent more and more money.
by ilene - May 19th, 2015 3:47 am
Financial Markets and Economy
The numbers are in on 2014 CEO compensation, and as the old Seinfeld joke goes, they are real and they are spectacular. CEO pay is also controversial as the income gap widens in America.
The average S&P 500 company CEO made 373 times the salary of the average production and non-supervisory worker in 2014, up from 331 times in 2013, according to the AFL-CIO.
Here's the story behind that huge disconnect in the stock market (Business Insider)
There's been a growing disconnect in stocks.
Over the last few weeks, we've highlighted versions of the following chart from Bank of America Merril Lynch, which shows that US equity funds have seen massive outflows this year while stocks continue to climb to record highs.
Wall Street is on the verge of saying 'recession' (Business Insider)
Wall Street has almost said it.
In a note to clients on Monday morning, Deutsche Bank's Jim Reid comes within inches of saying the word "recession" to describe the US economy's fate during the first half of the year.
Graphing The Evolution Of The World's Debt Addiction (Zero Hedge)
It's no secret that the world is addicted to debt.
China for instance, has an astounding $28 trillion debt load that amounts to 282% of GDP, while the country's local governments are now undertaking a multi-trillion yuan refi initiative in order to cut the debt servicing costs on a mountain on high interest loans they acquired off balance sheet in an effort to skirt official borrowing limits.
Investors might want to add a little cash and some gold to their portfolio’s summer outfit.
So say analysts at Bank of America Merrill Lynch, who are forecasting a grim summer for stocks this year. In other words, it might be wise to apply ample dollops of market-correction block in addition to any sunscreen you might wear.