James Kunstler writes on climate-gate as another distraction on the way to societal collapse, as is the baloney sandwich we’re trying to make with Iran as baloney and Afganistan as a slice of white bread. - Ilene
Against a greater welter and flow of incoherence jerking the nation this way and that way en route to collapse comes "ClimateGate," the latest excuse for screaming knuckleheads to defend what has already been lost. It is also yet another distraction from the emergency agenda that the United States faces – namely the urgent re-scaling, re-localizing, and de-globalizing of our daily activities.
What seems to be at stake for the knuckleheads is their identity, their idea of what it means to be an American, which boils down to being an organism so specially blessed and entitled that it is excused from paying attention to reality. There were no doubt plenty of counterparts among the Mayans when the weather changed and their crops failed, and certainly the Romans had their share of identity psychotics who doubted reality even when Alaric the Visigoth was hoisting off their household treasure.
Reality doesn’t care if we are on-board with its mandates or not. The human race has to get with whatever program reality is serving up at a particular time. Are we shocked to learn that scientists fight among themselves and cheat as much as congressmen? Does that really change the relationships we understand about parts-per-million of carbon dioxide in the earth’s atmosphere and the weather?
What the people of the world can do or will do about a change in climate is something else. My guess is that the undertow of entropy is now too great to provoke any meaningful unified change in behavior. The collapse of the US economy is too close to the horizon, and the so-called developing nations will have problems equally severe. In the meantime, it is unlikely that any of the major players will burn less coal and oil, or not cheat on each other even if they pledge to burn less. People who are not knuckleheads will make the practical arrangements that they can. These will, by definition, be localized, small-scale, and non-global communities, doing what they would have to do anyway.
The International Monetary Fund (IMF) is the organization that audits the books of countries world-wide to determine their real financial health. The IMF is also responsible for bailing out countries in trouble, and stabilizing the world’s economic systems.
On May 11th, U.S. News & World Report pointed out that bank loan loss rates will be much higher than during the Great Depression.
On May 7th, Investment advisor, risk expert and "Black Swan" author Nassim Nicholas Taleb said "The current global crisis is “vastly worse” than the 1930s because financial systems and economies worldwide have become more interdependent."
Steve Schwarzman, CEO of Blackstone said Wednesday he was seeing “more than green shoots” for the economic rebound. He sees the deal market coming back to life and a return to the good old days of leveraged loans, toxic assets and IPO’s where you sell your company to the public at the most insane valuation of all time (sarcasm intended). Despite this his optimism remained somewhat muted:
“We do not expect the U.S. economy to slip back into recession but we do believe that weak consumer spending and continued constraints on bank lending will dampen the U.S. economic recovery in 2010 and 2011.”
On the earnings front, JP Morgan confirmed what we have believed for a long time – the banks are juicing. The company trounced analysts expectations by 30 cents and reported a 79% jump in revenues. JP Morgan actually lost money on the lending side of their business as well as their card services segment (the consumer is still very weak), but they made up for it in their trading and investment banking where they are helping to shower the market with secondary offerings and trading this Fed induced liquidity rally to new highs. A look under the hood questions the sustainability of these earnings. After all, banks are in the business of lending money:
Consumer Lending reported a net loss of $1.0 billion, compared with a net loss of $659 million in the prior year and $955 million in the prior quarter. Compared with the prior quarter, results decreased by $81 million, reflecting a decrease in mortgage production revenue, an increase in the provision for credit losses and lower loan balances, largely offset by higher MSR risk management results and wider loan spreads.
Net revenue was $7.5 billion, an increase of $3.4 billion, or 85%, from the prior year. Investment banking fees were up 4% to $1.7 billion, consisting of equity underwriting fees of $681 million (up 31%), debt underwriting fees of $593 million (up 19%) and advisory fees of $384 million (down 33%). Fixed Income Markets revenue was $5.0 billion, up by $4.2 billion, reflecting strong results across most products and gains of approximately $400 million on legacy leveraged lending and mortgage-related positions, compared with markdowns of $3.6 billion in the prior
Treasury Secretary Timothy Geithner said signs of economic recovery are “stronger” and have appeared “sooner” than expected, while reiterating it’s not yet time to roll back stimulus programs.
Financial conditions have improved “dramatically,” particularly in the U.S., where the housing market has stabilized, Geithner said in a statement issued in Istanbul today. Still, jobless rates are “unacceptably high” and the financial system remains damaged. As a result, it’s too soon for governments to withdraw stimulus, Geithner said.
“Planning for an eventual exit is the responsible and necessary thing to do, but we are not yet in the position where it would be prudent to begin to withdraw fiscal and monetary policy support,” Geithner said in remarks released after a meeting of finance ministers and central bankers from the Group of Seven nations.
“Exit will not be like flipping a switch,” he said. “Instead, as conditions stabilize and growth strengthens, we will unwind the extraordinary policy measures we’ve taken, phasing them out carefully to avoid a damaging cliff.”
Signs, Signs, Everywhere A Sign
One might expect to see a few signs given the $trillions in expansion of the Fed’s balance sheet along with the massive stimulus programs coming from Congress.
However, cash-for-clunkers just blew up and we will soon find out what housing does after $8,000 handouts are taken off the table, and the Fed’s monetization of treasuries stops.
Certainly the stock market has recovered, but it is highly debatable if the stock market is any kind of leading indicator. I will have more in a look at leading indicators next week.
If one wants to consider signs, look no further than the treasury market which is flashing a huge warning message with a flattening of the yield curve. The 10-year note has fallen from a high of 4 to 3.22, 78 basis points of flattening.
If the treasury market was expecting a sustainable recovery, yields at the low end would not be sitting near 0 with yields on the top end falling like a brick.
This is the same warning message people have ignored before.
Note that all of these are from the BLS "A" tables – that is the actual count of people from a survey, not the cooked, "birth-death-adjusted" nonsense that BLS calls a "headline" number.
This first chart shows the bad news – the blue line is monthly change from the previous month. It is very noisy, as you’d expect.
The solid line is annualized change – that is, the actual count compared to one year prior.
Notice that employment went to a negative 12-month rate of change right at the start of 2008 – coincidentally, right at the start of the official "start" of the recession.
Also note that the last recession, which began at the end of the first quarter of 2001, also had the rate of change on a 12-month basis go negative at roughly the same time.
(Not-so-coincidentally, you also got a 12 month advance warning of the recession when the trend changed in both cases too. Now you know what one of the indicators I used in my 2008 "Outlook" Ticker in which I said we would enter a formal recession was…..)
I want to to pay particular attention to the bottom of the last recession, which was (officially) 11/01.
Notice that the spike bottom in the first derivative, that is, when the rate of change on a 12 month basis turned positive, was almost exactly when NBER called that recession (in retrospect) "over".
Has the first derivative turned in the table at this point on an annualized basis? NO.
First question: What does this say about the calls that "the recession is over"?
You will also note that in terms of the 12 month rate of change this recession is more than three times as severe in its impact on employment as was the 2001 recession. In fact, "by the numbers" we have 8,236,000 fewer people employed now than we had at the peak in July of 2007.
It is, however, worse than it first appears. Here’s the second chart, and this is the chart
Despite the cornucopia of costly bailouts, the billions in borrowed money being scattered about like candy, the quick fixes like cash-for-clunkers, the junk-led surge in stocks and the accompanying euphoria on Wall Street, the distorted data points, and the relentless spin coming from the powers that be, most Americans simply aren’t buying the so-called recovery story.
Is it because they are not paying attention? Or is it because the "little people" — as the now departed Manhattan hotelier and real-estate magnate Leona Helmsley once referred to average Joes — have their eyes wide open to the disturbing reality that still surrounds us? You know my answer, of course.
Most small business owners remain cautious in their economic outlook, with more than two-thirds saying the recession is not over for them, according to this month’s Discover Small Business Watch index released on Monday.
In addition, more than half of owners rate the economy as poor, up from 48 percent in August. Only 10 percent said it’s excellent or good.
That’s a change after three consecutive months of gains. The index fell 2.1 points to 87.7 in September from August. The latest Discover index is based on a random telephone survey of 750 U.S. small business owners who have less than five employees and 3,000 consumers.
Ryan Scully, director of Discover’s business credit card, called it more of a pause than a reversal of recent trends. Many people “are eager for a definitive signal that the economy is on the mend, but America’s small business owners aren’t sending that message yet,” he said.
The outlook for the rest of the year isn’t much better. Nearly half of small business owners expect the fourth quarter to be worse than a year earlier, according to the index. Thirty percent expect no change and 21 percent expecting a year-over-year improvement.
Small businesses still struggle to control operating costs. The report shows that half of small business owners say they plan to cut spending on business development, such as advertising, inventory and capital expenditures,…
Based on what Julian Robertson said yesterday, and the fact we all know America is playing with fire – this CBSMarketwatch story had to be the scariest headline of the week. I don’t know how realistic it is, but if China eventually turns into a net importer rather than exporter (which is where they need to take their economy in the long run) … without a commensurate massive increase in savings in the United States – it will be time to call in ScoobyDoo: "RuhRohRaggy!" The fact they could potentially be moving to net importers as early as next year? First time I’ve heard that.
China is emerging as a key export destination for Asian economies faster than many expected, thanks to the impact of rising income levels and government stimulus on the nation’s consumption.
But as import growth continues to outpace the nation’s export growth after bottoming out earlier this year, the world’s largest foreign-exchange accumulator is now on a path to start reporting trade deficits soon, according to Eric Fishwick, head of CLSA Asia-Pacific Markets’ head of economic research.
"China will be recording, at the current run rate of exports and import growth, monthly trade deficits early next year or the turn of the year," Fishwick said Monday at the CLSA Investors’ Forum 2009. "What is remarkable about its composition of imports is not just the pace, but the breadth. Nearly everything is going up at more or less the same sort of rate."
Official data released earlier this month showed that China’s exports slumped a larger-than-expected 23.4% in August from the same period a year earlier, while imports narrowed by a margin of 17%.
Fishwick said trade data released by other emerging countries in Asia show that China has been a big importer of a range of other products, outside of commodities, including motor vehicles and parts, along with other consumer durables and electronic products.
The trend bears out in other nations’ trade statistics as well. Singapore,
According to a recent article on Reuters, on Saturday Lou Jiwei, the chairman of the CIC, China’s sovereign wealth fund, said at a conference on Saturday in response to a question about his expected performance: “It will not be too bad this year. Both China and America are addressing bubbles by creating more bubbles and we’re just taking advantage of that. So we can’t lose.”
In my last entry I noted that after the recent “green shoots” period, during time which it seemed hard to find anyone who was skeptical of our seeming ability to turn the corner on the crisis without actually having addressed any of the underlying imbalances, it was good to see that more and more analysts, and especially policymakers, had begun to worry again. President Hoover went down in a blaze with his “light at the end of the tunnel”, and of course one of my favorite stories of that time is his response in June 1930 to a delegation requesting a public works program to help speed the recovery: “Gentleman, you have come sixty days too late. The depression is over.”
As I see it the more policymakers worry, the better. This crisis is far from over. Until we know how the continued adjustment in US household consumption and debt will evolve, and how this adjustment will play out in China’s own changing consumption rate – most importantly whether it will complement the fiscal and credit expansion embarked upon by Beijing or, as I believe, conflict enormously with it – the crisis won’t be over. We need policymakers to resist the green-shoots nonsense and to worry about what happens when fiscal, monetary and credit tools stop working.
Although I thoroughly disagree with the “So we can’t lose” part of Mr. Lou’s statement – I have been a trader for too long to hear those words with anything but the deepest dread, and I am sure he didn’t intend the way it read – it is nonetheless interesting to me that by now skepticism is so widespread that a major investor can even propose our inability to work through the imbalances as a reasonable investment strategy.
We need skepticism. For one thing it has caused Beijing increasing worry about the risks of continuing to extend…
• The market has gone nowhere over the last three trading days despite what was being construed on bubblevision as unrelenting good news (home prices, house sales, consumer confidence, durable goods orders, Bernanke’s reappointment) — any other time in the last five months, these “green shoots’ would have turned the equity screens green. Could be a sign that a lot of good news is already being discounted.
• While it is often reported that over 70% of S&P 500 companies beat their 2Q earnings estimates, only 46% did so meaningfully. Not only that, but only 23% significantly beat their top-line revenue projections. See page C2 of the WSJ (The Rally Revenue Forgot).
• Leading stocks have been seeing reduced trading volumes of late.
• VIX futures and the put/call ratio on the S&P 500 have shot upwards in the past few sessions.
• The ECRI leading economic indicator fell 0.4% in the latest week, the first decline in six weeks and only the second falloff in the past eighteen.
• Sentiment is far too bullish — to an extreme level. A sentiment index quoted in today’s NYT business section is now 89% bullish, the same as it was in October 2007; at the March lows, it was sitting at 2%. See Some Once-Bullish Analysts See an End to Market Rally on page B1 of the Monday NYT.
• Corporate insiders sold nearly 31 times more stock than they bought in August (TrimTabs data) — the long run average is 7x and it was 2x at the lows (apparently a heck of a buying opportunity at that time).
• Small-cap stocks are down for back-to-back weeks and Chinese equities are on a four-week losing streak. Finally, the market has turned in the precise same 50% advance over the same 117 time period that it enjoyed coming off the 1929 lows — that rally ended despite all the hype at the time and the market lost more than 50% in the ensuing year.
• Of course, there are the negative seasonals too — since 1950, the S&P 500 is down 1% in September, on average, and has declined twice as often as it has rallied during the month.
With no US economic news to influence the markets, the S&P 500 opened fractionally lower and sold off to its mid-morning -0.59% intraday low. The rest of the day was a slow recovery to within 0.01% of breaking even five minutes before final bell. But the afternoon recovery ran out of steam, and the index posted a -0.05% loss for the day. The 500 essentially duplicated the EURO STOXX 50, which posted a similar -0.08% at its close. In contrast, two headline Asia-Pacific indexes fared much worse: -1.01% for Japan's Nikkei 225 and -2.86% for China's Shanghai Composite.
The yield on the 10-year note closed at 2.79%, down 1 bp from Friday's close. The interim high was 3.04% at the end of 2013.
Here is a 5-minute snapshot of today's action with a bit of Friday afternoon for context.
Here is a chart showing the number of transactions that involve acquisitions of an asset management business by year. It tells us about a couple of trends developing in recent years.
1. Increasingly asset managers are bought by other asset managers in strategic acquisitions (and to a lesser degree by financial sponsors).
2. Banks have stopped acquiring asset management businesses. In fact what the chart doesn't tell us is that banks have been actively selling their asset management businesses (especially in alter...
The dramatic moves in fuel cell related stocks continues this week, with shares in Plug Power (Ticker: PLUG), FuelCell Energy (Ticker: FCEL) and Ballard Power Systems (Ticker: BLDP) beginning the trading week with explosive gains ahead of FuelCell Energy’s first-quarter earnings report after the closing bell, and following on the heels of a large order from Walmart for Plug Power, which the company confirmed in a press release on February 26th.
Shares in PLUG rose as much as 38% to touch $11.41 this afternoon, marking a near 150% move to the upside in the price of the underlying since Monday morning of last week when the stock opened at $4.60....
For those who have been following every twist and turn of the Ukrainian political crisis ever since its start in November of last year, the following post is likely a recap of familiar facts and dates. For everyone else, or those who just wish to plug the occasional hole in their memory, here is a full timeline of events that led to the coup that replaced the elected president Yanukovich - despite the signing of an agreement memorandum which was endorsed by Europe and the West keeping him in power and calling for presidential elections - with an acting president who has been classified as illegitimate by Russia, in exchange for which, as well as for numerous other reasons, Moscow has completely occupied th...
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After a requisite knee-jerk selloff, stock market bulls shook off Russia’s military action in Ukraine and Crimea as just another buying opportunity. Even adding the Russian Bear to their arsenal couldn’t give bears the upper hand for long. The S&P 500 large cap index set yet another all-time intraday high and closed at a new record high on Friday. Also, the Russell 2000 small cap index set new record intraday and closing highs last week north of 1200. However, the technical condition is getting overbought, and Sabrient’s SectorCast rankings have moved from bullish to a more neutral bias.
The eagerly-awaited jobs report on Friday showed greater jobs creation than expected in February, and January's figure was revised higher, as well. Friday was the S&P 500's fifth record closing high i...
Mt. Gox is well-known for creating one of the world's first Bitcoin trading posts. Unfortunately, in the company's most recent attempt to save its legacy, the virtual company has had to file for bankruptcy to protect its remaining assets, while trying to expand internationally.
Mt. Gox has filed for Chapter 15 bankruptcy proceedings in the United States. Chapter 15 bankruptcy is special because it often deals with cases and scenarios that are related to other countries as well. The goal of this proceeding is to combine efforts to come to a mutual agreement....
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Ladies and Gentlemen, hobos and tramps,
Cross-eyed mosquitoes, and Bow-legged ants,
I come before you, To stand behind you,
To tell you something, I know nothing about.
And so the circus begins in Union Square, San Francisco for this weeks JP Morgan Healthcare Conference. Will the momentum from 2013, which carried the S&P Spider Biotech ETF to all time highs, carry on in 2014? The Biotech ETF beat the S&P by better than 3 points.
As I noted in my previous post, Biotechs Galore - IPOs and More, biotechs were rushing to IPOs so that venture capitalists could unwind their holdings (funds are usually 5-7 years), as well as take advantage of the opportune moment...
Welcome to the fouth update of the IRA Virtual Portfolio. First I am going to summarize the current state of the Portfolio then I will get into all the activity we had during September expiration.
Profit and Loss – Net of closed positions the portfolio is up a total of $769
Market Commentary – Last expiration I said, "I would like to put a total of $20,000 to work by the end of SEP expiration. If the VIX pops up to around 20 I plan to put about $50,000 total to work." The market didn't quite reach the goal but I did manage to deploy $15,000 of buying power. I still feel the market is too high and expect a correction during October. If the vix pops up to around 20 I still plan to put about $50,000 to work. If a correction doesn't happen I still plan to have a total of $25,000 in buying power put to work by October expiration. Now on to the act...
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