US Equity Futures Slide Under 2000, Recover Losses After USDJPY Tractor Beam Reactivated

While some were wondering if last night’s sudden, commodity-liquidation driven selloff would last, most were not, expecting that the perfectly predictable levitation in the USDJPY around a round “tractor beam” number would provide a floor under the market . Sure enough, starting around midnight eastern, the USDJPY BTFDers emerged, oblivious to comments from former BOJ deputy governor Iwata who late last night said the obvious, and what we have been saying since January 2013, namely that a weak yen puts Japan at recession risk, and that a USDJPY in the 90-100 range reflects Japan fundamentals. And, as expected, the 109 level is where the algos have hone in today as a strange FX attractor, which also means that ES has reverse sharper overnight losses and was down just 7 points at last check even as the poundage in the commodity sector continues over rising fears of a sharp Chinese slowdown driven by its imploding housing sector (most recently observed here) without an offsetting stimulus program, following several comments by high-ranked Chinese individuals who poured cold water on any hopes of an imminent Chinese mega-QE or even modest rate cut.
And speaking of pouring cold water on easing plans, the ECB did just that, when several of its governing council members, but most notably Ignazio Visco, said that the ECB may not do further easing after all because it had managed to punk the market once again, and the EURUSD is low enough to where the whole point of QE is now moot. In other words, the market once again discounted action by the ECB… which now will never come. It remains to be seen if the central bank FX traders (which as we now know are openly trading via the CME) will allow the EURUSD to return to its pre “discounting” levels as the ECB returns to full “jawbone Off” mode.
European, Asian stocks fall with oil, metals after China declines to make policy changes in response to slower growth. Miners among largest underperformers, iron ore prices lower. U. S. equity index futures decline. Yields on 10-year U. K. gilts, German bunds fall. Tesco leads FTSE 100 declines after saying it overstated 1H profit by GBP250m.

This post was published at Zero Hedge on 09/22/2014.

Can the Economy Withstand Another Housing Breakdown?

With the three fascinations of the week, the Fed’s FOMC statement, the separation vote in Scotland, and the Alibaba IPO, now history, will investors re-focus on the economy?
Given what the Fed actually said in its statement, and some recent economic reports, it might be a good idea.
Investors were anxious to judge how long the Fed will leave interest rates at low levels by whether or not it left the words ‘for a considerable time’ in its FOMC statement.
They might be better counseled to focus on the fact that the Fed emphasized again that the timing will depend entirely on the economy, specifically mentioning its concern of ‘significant under-utilization of labor resources’ [a euphemism for unemployed workers], and that ‘the housing sector remains slow’. In fact, the San Francisco Fed said, ‘The public might not give enough weight to how dependent the Fed’s guidance is on incoming economic data.’
[Read: Watching for Signs of U. S. Housing Market Activity] That said, as we all know, the two major driving forces of the economy, in both directions, are the housing and auto industries. Their products are the largest purchases most consumers make in their lifetimes. They also have the longest tails as far as driving sales, manufacturing, and services in numerous other sectors of the economy
Their problems led the way down into the Great Recession. They then led the way out, thanks to massive automaker and bank bailouts, and incentives to auto and home buyers.
The problem is that while auto sales continued to recover almost all the way back to pre-recession levels, the housing recovery stalled more than a year ago.

This post was published at FinancialSense on 09/19/2014.

Latest HRA Media: Eric Coffin’s Interview with The Gold Report – “Can Investors Still Find Tenbaggers?”

The continuing strength of the U. S. dollar is bad news for the price of gold, and Eric Coffin believes that in the short term a price of $1,200/oz is possible, though there is room now for an oversold bounce. This, of course, is bad news for gold miners and explorers. But in this interview with The Gold Report, the publisher of Hard Rock Analyst counsels that even in a bull market, investors are advised to seek out potential tenbaggers, and presents several companies in gold, base metals and uranium with the potential to flourish even in hard times.
The Gold Report: You told The Gold Report last year you were “neutral” on the state of the U. S. economy. Since then, the headline unemployment number has improved. Even so, asDavid Stockman, former director of the Office of Management and Budget, says, there have been no net new jobs created since July 2000, and jobs paying over $50,000 per year have disappeared by 18,000 per month since 2000. What is your view of the health of the U. S. economy?
Eric Coffin: I’m more positive than neutral these days, but I do agree somewhat with Stockman. As unemployment falls toward 6%, we would expect an increase in wage gains. But we’re just not seeing that. And five years into the latest expansion, we’re not seeing the economic growth spurts that tend to occur coming out of a really bad recession. I don’t see how the U. S. economy keeps reproducing the 4% Q2/14 growth if we don’t see higher wage gains and higher paying jobs created.

This post was published at GotGoldReport on Saturday, September 20, 2014.

Monetary Policy Killing the System

The USFed monetary policy is killing the system, simply and boldly put. They call it stimulus, when the extreme accommodation is actually just a backdoor Wall Street bailout combined with a pass on the USGovt debt discipline. No debt limit is enforced anymore, a travesty. The United States is looking more like a Third World nation with each passing month, with colossal fraud, economic decay, war and sanctions, and no leadership. The US Federal Reserve has ventured into very dangerous ground, putting hyper monetary inflation as the installed policy, while making money free for the Interest Rate Swap machinery that operates the derivative for maintaining the easy policy. So foreign creditors have largely exited the room, with no great entities to finance the yawning annual $trillion debt. So derivative machinery is relied upon to maintain the absurd 10-year USTreasury (TNX) yield at 2.60% without buyers. So asset markets like the US Stock Market go to monthly new high levels, despite the USEconomy mired in the worst recession since the Great Depression. The visible piece is shopping malls with one third of stores shuttered, and the jobless rate over 22% in the real world without rose colored glasses. These conditions cannot be sustained, especially since the credit machinery is all jammed. The big US banks are insolvent structures dedicated to the bond carry trade, where that same cheap money is used to invest, often with leverage, in the long-dated maturity USTreasury Bonds. The banks serve the casino, not the business sector.
In no way can the current easy money policy be reversed, and put into a normal mode. In no way can the accommodation be tapered. The entire Taper Talk is a lie, and always has been a lie. The Jackass called out the USFed last June and July, and was proved correct by September. Since that time, the USFed has been lying vigorously and creatively. The Belgium Bulge showed itself as a $400 billion abscess visible to the world, hardly a real savings account by the small nation. It was either a Hidey Hole for USTBonds or else a loading depot for BRICS sourcing of Gold bullion for their upcoming central bank. In no way can the enormous bond carry trades be stopped. They are the only source of actual income for the big US banks. Their other source of narco funds money laundering. Doing so would put the carry trade engines into reverse, forcing an unwanted Bond Convexity episode of leveraged selling of USTreasury Bonds by the same large corrupted banks which are so clearly involved in the derivatives game. In no way can the USFed hike rates, since their own outsized bond portfolio would register huge losses, only to gain ugly publicity. They after all bought the top in bonds, and continue to buy the top in bonds every month that QE continues. They are the fools buying the asset bubble at the top. See a parallel in Japan…

This post was published at GoldSeek By Jim Willie CB, /19 September 2014.

Dow Theory: Yellow Flags or Green Light?

Mixed Message for Manufacturing Stock prices have a high correlation to economic activity and earnings. History tells us bear markets are often kicked-off by recessions. Recent economic data does not hint at an imminent recession. However, a mixed message came in a September 15 report on industrial production. From The Wall Street Journal:
U. S. industrial production fell in August for the first time since January, the latest sign of uneven improvement in the economy…’The trend in the data still looks decent, but has moderated noticeably from the much stronger gains reported earlier this year,’ said J. P. Morgan Chase economist Daniel Silver.
What Is Dow Theory? Dow Theory’s stance has changed in the last 30 days; this article covers the recent improvement in the observable evidence. Before we cover the updated charts, it is important to revisit the fundamental concepts they convey. Dow Theory is based on a series of Wall Street Journal articles written by Charles Dow. The basic tenets are easy to understand. Charles Dow believed that:
In order for industrial companies to increase their earnings, they had to produce and sell more goods. If industrial companies are selling more goods, then transportation companies must be delivering more goods to retailers and wholesalers.

This post was published at FinancialSense on 09/18/2014.

Food-stamp enrollment in Illinois outpaces job creation by nearly 2-to-1

Illinois’ sluggish jobs recovery is coming at a tremendous cost. For every post-recession job created in Illinois, nearly two people have enrolled in the Supplemental Nutrition Assistance Program, commonly known as food stamps.
In the recession era, the number of Illinoisans dependent on food stamps has risen by 745,000. Without adequate job creation in the state, Illinois families have had no choice but to depend upon food stamps to put bread on the table.
The Prairie State has had the worst recovery from the Great Recession of any state in the U.S. There are nearly 300,000 fewer Illinoisans working today than in January 2008, and 170,000 fewer payroll jobs.

This post was published at Illinois Policy

Seth Klarman: “We Are Recreating The Markets Of 2007″

We don’t know now (nor do we ever know) what the overall market will do. As we’ve discussed in recent letters, there are reasons for investors to be frightened but also numerous individual opportunities worth seizing. Today’s limited opportunity set means that we are still holding sizable cash balances, about 35% of the portfolio at June 30. This dry powder will become more valuable if the markets become more turbulent.
Equity markets continue to hit successive record highs, volatility remains strikingly low in equity and most other markets, and inflation is ticking higher. Investors have clearly grown weary of worrying about risky scenarios that never seem to materialize or, when they do, don’t seem to matter to anyone else. U. S. GDP, for example, was recently restated to minus 2.9% for the first quarter of 2014. Normally, this magnitude drop signals recession. Equities, nevertheless, marched relentlessly higher.

In today’s ebullient markets, we see many investors ratcheting up their own risk levels–buying substandard credits and piling up leverage are two favorite methods–in an attempt to generate near-term performance.

The financial markets could be getting closer to an inflection point, where the economic weakness that the bond market seems to be reflecting derails the more optimistic equity market. Or perhaps things can go on forever exactly as they are: a ‘Goldilocks’ stock market resulting from a tepid economy, dampened volatility, and relentlessly low interest rates. Amidst the market rally, complacent investors continue to ignore a growing array of global trouble spots. Contrary to claims from the Obama Administration, the world is not a tranquil place at present. As such, risks facing investors seem to be rising but are not yet priced into the markets.

This post was published at Zero Hedge on 09/17/2014.

‘Finest Worksong’

‘In theory there is no difference between theory and practice. In practice there is’ – Yogi Berra, as cited by Ben Hunt in today’s Outside the Box. Or, to put it in macroeconomic terms, ‘Why is global growth so disappointing?’ In the aftermath of the Great Recession, fearing a deflationary equilibrium (which, as Ben notes, is macroeconomic-speak for falling into a well, breaking your leg, at night, alone), the Fed bought trillions of dollars in assets … and saved the world. Sort of. If you don’t count the reckoning yet to come. Thetheory was that with all that monetary-policy injections, global growth would spring back to ‘normal.’
But what did practice show? The global economic engine never fired back up. The central banks’ answer? Do more. So the Fed gave us QE 2 and QE 3, and then we got Abenomics, and now it’s Draghinomics.
Still no real growth. What’s missing? asks Ben. He has a surprising answer. Read on.
Ben works for Salient Partners and writes the fascinating letter called Epsilon Theory. You can subscribe to it for free here, or by emailing [email protected].
I had dinner last night with my good friend Richard Howard, who, besides being a charming young Australian lad, is also the wickedly brilliant chief economist of Hayman Advisors, the hedge fund outfit run by my friend Kyle Bass. We try to get together every few months at one of the local eateries and hash out the world. And yes, for those interested, the recent action in Japan has both of us smiling a ‘we told you so’ sort of smile. But also thinking that the magic will last for Abe-sama a little while longer. Actually, we talked about why this trade could take a lot longer than most yen bears expect.

This post was published at Mauldin Economics on SEPTEMBER 17, 2014.

The Taylor Rule Won’t Save Us

Various criticisms have been raised against the Fed, not only from the side favoring the abolition of central banking, but also from the side of those who argue that the Federal Reserve is indispensable for stability. One of those arguments came from respected economist John Taylor, who is the author of the often mentioned ‘Taylor Rule’ on how to conduct monetary policy, with two House Republicans recently proposing to impose this ‘rule’ on the Fed .
Like Taylor, politicians who advocate for such a rule blame huge credit expansion for the Great Recession. Unfortunately such policymakers are usually not convinced by the Austrian arguments in favor of abolition of the Federal Reserve. Instead they are convinced by John Taylor’s statistical demonstrations. According to Taylor, the Fed set the interest rates too low in the beginning of this century, which led to an unsustainable real estate boom. He adds nonetheless: if only the central bank followed his rule of proper interest rate levels, then monetary policy would work very well.
For Taylor, the Federal Funds rate in recent years should have looked something like this:

This post was published at Ludwig von Mises Institute on Wednesday, September 17, 2014.

Poor Americans carry a record level of debt leverage: Subprime economics and leveraging the poor into a treadmill of continual poverty.

Poor Americans carry deeper debt levels than they did during the depths of the Great Recession. To boost auto sales, many dealers have decided to offer subprime loans to prospective clients that have very little financial means. Many for-profit colleges have a business model that virtually solicits and lures in poor Americans into their debt saddling paper mills. So it is probably no surprise that poor Americans are now carrying the heaviest debt loads in history. The argument is interesting from some of these financial institutions and similar to what was being delivered during the subprime housing days. These ‘generous’ lenders are making loans where no one else is. Of course the caveat is they are gambling with other people’s money. In the case of student debt, the American people will foot the bill for any implosion that happens and in the mean time salaries for executives at these institutions are extremely high. The model of financing based on too big to fail is all too familiar. The financial system has mastered the art of being a viper and extracting all wealth possible before things go bust. Poor Americans are in worse shape today than during the Great Recession.
The poor are massively in debt
Our system has replaced access to debt with wealth. The days of prudently saving and paying for college or actually buying a car outright seem like a distant memory. When many universities charge $40,000 or $50,000 per year in tuition how is the typical US household making $50,000 per year going to pay for their kids to go to school? They can’t. And that is why we have a massive student loan bubble with $1.2 trillion in outstanding debt and the CBO is projecting another $1 trillion over the next decade.
While American households overall have deleveraged since the Great Recession hit, poorer households have not:

This post was published at MyBudget360 on September 16, 2014.

Is Risk-On About to Switch to Risk-Off?

Cranking markets full of financial cocaine so they never correct simply sets up the crash-and-burn destruction of the addict.
1. Junk bonds. Two charts below (one from Lance Roberts and the second from Chris Kimble) suggest the risk-on extremes have reached the point of reversal.
2. Soaring U. S. dollar. Without going into detail, it’s increasingly clear that the soaring USD is destabilizing the global foreign exchange (FX) markets. FX has been the source of many of the risk-on carry trades that have been driplines of financial cocaine for global stock markets.
3. Reversal of the Federal Reserve’s quantitative easing (QE) programs. Though the stock market has roundly ignored the withdrawal of $600 billion of free money for financiers stock market stimulus all year, the October end of the QE asset buying program now looms large.
The Fed has already trimmed its asset-buying binge from $85 billion/month ($1 trillion/year) to $25 billion/month. Risk-on proponents claim that this reduction has been replaced by Bank of Japan and European Central Bank QE programs, but this belief fails to take into account the diminishing returns on BOJ and ECB stimulus.
THose spigots have been open for so long that adding more monetary stimulus no longer moves the needle positively. Rather, the extreme measures push the global fianncial system into increasingly risky territory.
4. Geopolitical spillover. One key element of the risk-on trade is the magical-thinking belief that the U. S. stock market is completely decoupled from geopolitical dynamics. In other words, Japan and Europe can sink into recession, China’s growth can slow, the Mideast can be destabilized by multiple open conflicts and none of these issues will ever matter, as long as “the Fed has our backs,” “corporate profits keep rising,” etc.

This post was published at Charles Hugh Smith on SUNDAY, SEPTEMBER 14, 2014.


‘Facts are stubborn things, but statistics are pliable.’
‘ Mark Twain

I never believe government manufactured numbers. They will always be adjusted, massaged, and manipulated to achieve a happy ending for the propagandists attempting to control and fleece the sheep. Yesterday, the government produced retail sales numbers for August that were weak and the corporate MSM propaganda machine immediately threw up bold headlines declaring how strong these numbers were. Positive stories were published on the interwebs and Wall Street hack economists were rolled out on CNBC, where the bubble headed bimbos and prostitutes for the status quo like Jim Cramer and Steve Liesman declared the recovery gaining strength. Woo Hoo.
If everyone else is whipping out that credit card, why aren’t you? Credit card debt has reached a new post recession high. They tell me consumer confidence is soaring. Forget about the 92 million working age Americans supposedly not in the labor force. Forget about real household income hovering at 1999 levels. Forget about median household net worth still 30% lower than 2007. Forget about what you see with your own two eyes in malls, strip centers and office parks as you motor around our suburban sprawl empire of debt. Those Store Closing, Space Available, and For Lease signs mean nothing.

This post was published at The Burning Platform on 13th September 2014.

Taking an exit from the labor force: Over the last ten years 16 million Americans have dropped out of the labor force.

The US economy has not recovered in typical fashion. Following the Great Recession, we witnessed a large growth in those not in the labor force. Part of this has to do with anolder population but that does not address the issue completely. The US has added 16 million people to the ‘not in the labor force’ category over the last decade and this trend has also assisted in padding the unemployment numbers. How so? If you are not in the labor force, you are not counted therefore the rate miraculously drops. It would be one thing if all older Americans were entering retirement age with adequate savings. This is simply not the case. Many Americans are simply broke and their version of retirement includes working until you drop. You would think that things got better since the recession officially ended back in 2009. The opposite is true since 12 million people have dropped out of the labor force within the last five years alone. In other words, the bulk of the people dropping out of the labor force occurred during a labeled recovery.
Taking an exit from the labor force
All things in economics intersect. For example, many people losing their jobs have decided to go back to school to pursue other avenues and careers. With the high cost of college, the student debt bubble continues to expand. These people selectively remove themselves from the workforce. However, a large portion of the growth has come in the form of people losing work and simply not being able to find it again. Many find work with wages that pale in comparison to what they once earned.

This post was published at MyBudget360 on September 13, 2014.


‘Facts are stubborn things, but statistics are pliable.’ ‘ Mark Twain
I never believe government manufactured numbers. They will always be adjusted, massaged, and manipulated to achieve a happy ending for the propagandists attempting to control and fleece the sheep. Yesterday, the government produced retail sales numbers for August that were weak and the corporate MSM propaganda machine immediately threw up bold headlines declaring how strong these numbers were. Positive stories were published on the interwebs and Wall Street hack economists were rolled out on CNBC, where the bubble headed bimbos and prostitutes for the status quo like Jim Cramer and Steve Liesman declared the recovery gaining strength. Woo Hoo.
If everyone else is whipping out that credit card, why aren’t you? Credit card debt has reached a new post recession high. They tell me consumer confidence is soaring. Forget about the 92 million working age Americans supposedly not in the labor force. Forget about real household income hovering at 1999 levels. Forget about median household net worth still 30% lower than 2007. Forget about what you see with your own two eyes in malls, strip centers and office parks as you motor around our suburban sprawl empire of debt. Those Store Closing, Space Available, and For Lease signs mean nothing.

This post was published at Washingtons Blog on September 14, 2014.

Harsh Austerity Sends Italian, Spanish Debt To Record Highs

Damn you debt-reducing austerity-that-is-blamed-for-everything-that-is-wrong-with-Europe’s-triple-dip-recessionary-economy-when-it-is-the-corrupt-socialist-incompetent-politicians’-fault. Damn you to hell! Oh wait a minute:
Italy’s government debt rose to a record 2.169 trillion in July from 2.168 trillion in June, the Bank of Italy says in its public-finances supplement. Spain total govt debt amounted to a record 1.01 trillion in 2Q, up from 995.9b in 1Q, Bank of Spain says; 2Q Total Govt Debt Rises to 98.9% of GDP From 97.4% in 1Q With austerity like this, who needs to spend like a drunken sailor?

This post was published at Zero Hedge on 09/12/2014.

American credit-card debt hits a post-recession high

U.S. consumers may be relying too heavily on their plastic.
Americans added $28.2 billion to their credit cards in the second quarter of 2014, the largest amount in the last six years and nearly 200% more than in the second quarter of 2009, when the economy emerged from the depths of the Great Recession, according to new research from personal finance website After paying off $32.5 billion owed during the first quarter of 2014, consumers ran up roughly 86% more debt during the following quarter.
The average household’s credit-card balance now stands at $6,802, up slightly from $6,628 in the first quarter, but still down from $8,431 at the end of 2008. By the end of the year, this figure is expected to exceed $7,000, reaching levels not seen since the end of 2010. U.S. consumers will be roughly $1,300 away from the credit card debt “tipping point,” where minimum payments become unsustainable and delinquencies skyrocket, the report says.

This post was published at Market Watch

Inside Today’s Inventory Report – -Signs Of Fading GDP Growth

The wholesale trade figures still confound both the ‘rebound’ narrative and the drastic revisions of GDP made in July. The broader context of wholesale trade remains as it has been since early 2013, as although growth appears to be increasing it is doing so at a deficient rate. That counts for both inventory and sales, though there is, I believe, more going on than just what these figures suggest.

The similarities between the current period and that which preceded the Great Recession are a reminder of how much inventory is unsettled around economic inflection. The fact that inventories gain is not necessarily a signal of optimism in the supply chain, as inventory calibrates badly to changes in demand at these points. It may be hard to determine of the chart immediately above, but it was wholesale sales that led inventory higher heading into the Great Recession. Currently, sales and inventory are much more aligned.

This post was published at David Stockmans Contra Corner on September 10, 2014.

Alan Greenspan’s Nine Reasons “Why The Economy Stinks”

Yesterday, former Fed Chairman Alan Greenspan was the keynote speaker at KPMG’s 2014 Insurance Industry Conference Tuesday, where he answered questions such as 1) where the economy is going, 2) why, and 3) when (if ever) is it likely to improve. The answers, as reported by Property Casualty 360, are:1) nowhere fast, 2) because nobody is willing to invest, and 3) eventually, but nobody can tell when. He listed 9 specific reasons why the “economy stinks”, although surprisingly, nowhere did he mention the fact that the current and future economic disaster is all a direct result of his ruinous reign at helm of the Fed where as a result of his “great moderation” and the Fed’s catastrophic monetary policies conceived mostly under Greenspan himself, the economy is now perpetually stuck in a boom-bust cycle, and where every time a bubble bursts another has to replace it or else the entire western way of life will be gone in a heartbeat.
So without further ado, here are, in reverse order, Greenspan’s 9 reasons why the S&P 500 is at an all time high the economy is a complete disaster (thanks to the Fed).
9. Lack of confidence.
The U. S. economy is in a state of extraordinary change, Greenspan said, the likes of which he has never seen before. The most interesting thing about the current recession and recovery, he said, is that in the 10 recoveries we saw since WWII, every one except the current one was led by construction, essentially. This recovery is so sluggish because construction is, as Greenspan so delicately put it, ‘dead in the water.’ The reason why construction is so dead is due, in part, to excess capacity built up before the economy crashed in 2008. But more importantly, businesses and households across the board are so skeptical of the future, they’re not willing to invest in it. Nobody is putting money into longer-lived assets, and until they do, the economy won’t really return to form.
Case in point: in the early 1990s, the amount of liquid cash assets companies were willing to invest in illiquid, long-term assets was way higher than it is now. You also see this in the yield spread in 5-year U. S. Treasury notes versus 30-year U. S. Treasury bonds, which is the widest in U. S. history. Why? Because people are far more willing to invest on a 5-year return than a 30-year one. That speaks to the depth of the worry people have in the future. And that kills growth.

This post was published at Zero Hedge on 09/10/2014.

US has Lost 1.4 Million Full Time Jobs Since 2008, Thanks To The Fed

Let’s cut to the chase: There were 1,446,000 fewer people working full time in August 2014 than in August 2008, according to the Bureau of Labor Statistics household survey (CPS).

That’s after an increase of 210,000 full-time jobs in August. That’s the actual count, not the seasonally adjusted abstraction. So we have to compare that with past Augusts to get an idea if its any good or not. August is a swing month, sometimes up, sometimes down. The average change over the prior 10 years, which included a couple of ugly years in the recession, was -63,000. So this number wasn’t bad. It was slightly better than August of last year and 2012, but come on….

This post was published at Wolf Street on September 8, 2014.