After the initial post-Taper-talk rate-rise-driven marginal-buyer-crushing collapse in mortgage applications in the US, the un-Taper provided a brief period of hope for the NAR and market apologists that all-cash buyers are all we need and mortgage applications dead-cat-bounced on the rate drop. However, all that hope ended in early November and as of this morning's print, mortgage applications have plunged back to the almost record lows of October 2008 (levels not seen since December 2000). As Bob Shiller recently explained, "we can't trust momentum anymore," in housing and the speculators are leaving the buildings.
Today’s AM fix was USD 1,213.00, EUR 892.57 and GBP 741.13 per ounce.
Yesterday’s AM fix was USD 1,219.00, EUR 898.50 and GBP 743.07 per ounce.
Gold rose $3.70 or 0.3% yesterday, closing at $1,222.70/oz. Silver slipped $0.03 or 0.16% closing at $19.12/oz. Platinum climbed $14.50, or 1.1%, to $1,352.25/oz and palladium rose $3, or 0.4%, to $711.97/oz.
Gold in euros fell to 892.16 euros/oz, the lowest since August 3, 2010. Gold in euros has fallen 30% this year, against 28% for gold in dollar terms. Gold fell to 740.64 pounds/oz, the lowest since August 3, 2010. Gold has fallen 28% in sterling terms this year.
Gold is higher in Aussie dollars this morning, due to weak Q3 GDP growth and concerns about the Australian economy.
Gold fell to the lowest in almost five months in London this morning as very tentative signs of improving U.S. economic growth added to continuing speculation that the Federal Reserve may reduce its massive $85 billion per month bond buying programme.
U.S. manufacturing accelerated at the fastest pace in more than two years in November, data showed on December 2. Less positive data showing consumer sales on Black Friday were worse than expected was ignored.
Gold is set for the first annual drop in 13 years as trend following traders and more speculative investors lose faith in the metal as a trade. Store of value and financial insurance bullion buyers remain steadfast and continue to buy physical on the dip - especially in Asia and of course China.
It is interesting to note that the hedge fund Tiberius, who have been highly vocal as bearish on gold for years have changed their long term position. They remain bearish in the short term but believe that weak hands have been washed out of the market. They believe that strong hands will propel prices higher again - possibly later in 2014.
Minutes of the Fed’s October meeting released November 20 showed that policy makers expected an improving economy to warrant trimming debt purchases in coming months. The Fed next gathers on December 17-18.
Reducing the huge bond buying programme has been suggested for some years now. As ever, ignore the jawboning - watch what they do, rather than what they say.
Era Of Bond Holder Bailouts Ending - That Of Depositor Bail-In Cometh (Part 1)
The era of bondholder bailouts is ending and that of depositor bail-in is coming.
The changing financial landscape post crisis poses challenges to savers and investors globally. It is important we consider how savings and investments can be protected.
Bail-ins are a risk in the coming years and yet there is a lack of appreciation of this risk as there was a lack of appreciation of the risks posed by property bubbles and the global debt crisis.
This research note is therefore timely and welcome as there is a lack of research regarding a bailin and bail-ins and the ramifications thereof.
It will take a number of years for the final configuration of the new financial order to become clear. This means that there are difficulties inherent in selecting appropriate investments when the ultimate outcome is unclear. Apart from that, what we do know at present is that there are straws in the wind that should concern savers.
The approach taken with failing banks in Europe, to in one form or another socialise the debts across taxpayers created a so called doom loop. As the banks got weaker more and more of their debts were passed to already strained sovereign treasuries, weakening them and making it more difficult for them to intervene early in stressed banks. The realisation that, with banks which were multiples in size of the sovereign regulating them, this could not go on was slow to emerge but it has now done so.
In an as yet to be determined but medium term future, banks which face losses will have to act in an avowedly capitalistic manner. First reserves and equity, then senior, then junior debt will be used as the risk capital in order to fill these debt holes. What is new is that if losses continue, after burning through this capital, rather than the state, it is depositors who will be in play.
Beyond that we see other threats to the stability and profitability of the banking system. The EU has launched a consultative process on the sustainability of the present financial system and has concluded in early work that a much more hybrid system, merging the bank based continental system and the Anglo Saxon market scheme, is needed.
Combined with the inevitability of inflation (even the desirability of same in so far as it entails in its early stages a recovered economy), these suggest that savers will face a complex and perhaps lower return environment in the medium term.
In that context a move to increased allocation of savings to alternative investments, including a prudent allocation of some 5% to 10% to precious metals, is a sensible policy.
This research note is very useful in pulling together some of these strands and others and should be required reading for savers internationally and for medium and long term investors.
*Dr Brian Lucey is Professor of Finance at the School of Business at Trinity College Dublin. He studied at graduate level in Canada, Ireland and Scotland, and holds a PhD from the University of Stirling. His research interests include international asset market integration and contagion; financial market efficiency, particularly as measured by calendar anomalies and the psychology of economics.
His research on gold has established that gold is important as a long term diversification due to gold’s “unique properties as simultaneously a hedge instrument and a safe haven.”
Download our Bail-In Guide: Protecting your Savings In The Coming Bail-In Era(11 pages)
The chart below from the WSJ, summarizes perfectly the hell that US retailers find themselves in. In brief: sales down and inventories soaring, means liquidation sales have to surge, while profits and cash flows crater.
Simeon Siegel, an analyst with Nomura Equity Research, looked at the inventory carried by those and other specialty-apparel retailers at the end of the third quarter and compared it with his projections for the chains' fourth quarter sales. He found that in most cases inventory growth far outpaced sales growth. Normally, the two should be growing about the same. "The ratios are the worst we have seen in quite a while," Mr. Siegel said.
"The worry now is about demand falling, not going through the roof," Mr. Johnson said.
Abercrombie ended the third quarter with inventory up 22% from a year earlier. Yet Mr. Siegel of Nomura predicts the retailer's sales will fall 14% in the fourth quarter.
Marshal Cohen, the chief industry analyst for the NPD Group, said he spotted signs throughout the weekend that stores were overstocked, including goods
stacked high up on shelves and ample merchandise in storerooms.
"When the most common sizes of popular items don't sell out, that's a problem," Mr. Cohen said.
Yes, it is - it means the consumer is fully tapped out courtesy of Bernanke's 5 year (and ongoing) wealth transfer experiment from the middle class to the 0.1%.
Gap and L Brands have had strong years, with their shares up more than 30%. But apparel sales have been suffering as shoppers direct their attention elsewhere. Many consumers, when they are spending at all, are plowing money into their homes and buying new cars.
They don't call it "fun-da-mentals" for nothing. And with Uncle Sam providing all the car loans one could ever need, why buy clothes when you can live naked (or simply rent clothes as they do in Europe) in their NINJA loan purchased (thanks to the government's generosity) Government Motors.
Finally, don't worry about any of the above: surely there is a weather excuse for all of it.
Treasury yields are surging on the ADP's Good news this morning with 10Y topping 2.84% - its highest yield in almost 3 months. The USD is surging, stocks are fading; but despite an initial dip... gold is rallying.
Moments ago, the Census Bureau announced that in October the US trade gap narrowed to $40.6 billion (which still missed expectations of "only" a $40 billion deficit) from an upward revised September deficit of $43 billion, as oil sales boosted exports to record level. Total exports rose to a record $192.7 billion up $3.4 billion from last month's $189.3 billion, while imports rose just $1 billion to $233.3 billion resulting in a $40.6 billion gap. Among the report highlights: October exports of goods and services ($192.7 billion), exports of goods ($135.3 billion), and exports of services ($57.4 billion) were the highest on record; October imports of goods and services ($233.3 billion) were the highest since March 2012 ($234.3 billion); and perhaps the best news for shale fans: October petroleum exports ($12.5 billion) were the highest on record.
Looking at the key goods category, The September to October increase in exports of goods reflected increases in industrial supplies and materials ($1.5 billion); consumer goods ($1.0 billion); foods, feeds, and beverages ($0.6 billion); capital goods ($0.3 billion); and other goods ($0.2 billion). A decrease occurred in automotive vehicles, parts, and engines ($0.2 billion). The September to October increase in imports of goods reflected increases in industrial supplies and materials ($0.8 billion); consumer goods ($0.5 billion); other goods ($0.4 billion); and foods, feeds, and beverages ($0.3 billion). Decreases occurred in automotive vehicles, parts, and engines ($1.0 billion) and capital goods ($0.3 billion)
Broken down by country, The October figures show surpluses, in billions of dollars, with Hong Kong $2.8 ($3.2 for September), Brazil $1.7 ($1.0), Australia $1.4 ($1.5), and Singapore $1.2 ($1.3). Deficits were recorded, in billions of dollars, with China $28.9 ($30.5), European Union $14.3 ($8.0), Germany $6.9 ($6.1), Japan $6.4 ($5.5), OPEC $5.6 ($5.9), Mexico $4.1 ($5.3), Ireland $3.2 ($1.8), Saudi Arabia $3.1 ($3.2), Canada $3.0 ($3.2), India $2.0 ($1.7), Venezuela $1.9 ($1.3), and Korea $1.7 ($2.1).
Finally, the US reported record exports with Canada and Mexico, while both exports and imports with China hit a new all time high.
Judging by massive revision in the October print, from 130K to 184K, or nearly a 50% error, one would think that instead of actually tabulating specific private jobs as it by definition does, using the data entering the ADP private payrolls system, the ADP makes its estimate of jobs based on high inaccurate surveys just like the BLS. Either that, or it was desperate to catch up on the upside to the BLS' own propaganda numbers, which are just as "realistic." That said, the November ADP print soared from 130K to an upward revised 184K in October blowing through expectations of 170K and printing at a whopping 215K. And so the Taper dance is back on as everyone will now expected Friday's NFP to come in scorching hot, and force the Fed to cut its monthly flow by a whopping $10 billion to $75 billion.
The punchline from the report:
Mark Zandi, chief economist of Moody’s Analytics, said, "The job market remained surprisingly resilient to the government shutdown and brinkmanship over the treasury debt limit. Employers across all industries and company sizes looked through the political battle in Washington. If anything, job growth appears to be picking up.”
But... but... all the fearmongering.
This is what the current and revised data looked like:
The main driver for today's major revision and beat: the ADP's desire to mimic the NFP numbers. Which makes one wonder: what's the point of having an ADP number if it has an error range of +/- 50%?
Total Nonfarm Private Employment by Company Size (in thousands):
Change in Total Nonfarm Private Employment by Selected Industry
A more detailed breakdown:
Of course, since ADP is a joke, the greatest utility from this irrelevant service is that it is now social-media friendly and provides a ready to go infographic:
OncoMed Pharmaceuticals (NASDAQ: OMED) surged 8.30% to $30.00 in the pre-market session after ...
It is only fitting that on the morning in which Europe levied the largest cartel fine in history against the criminal syndicate known as "banks", that Goldman Sachs would issue its #6 "Top Trade Recommendation" for 2014 which just happens to be, wait for it, a "long position in large-cap bank indices in the US, Europe and Japan." Supposedly, in a reflexive back and forth that should make one's head spin, this also includes Goldman Sachs (unless they specifically excluded FDIC-insured hedge funds, which we don't think was the case). So is Goldman recommending... itself? Joking aside, this means Goldman is now dumping its bank exposure to muppets.
Top Trade Recommendation #6: Long DM (Japan, US and European) Banks
- Our sixth Top Trade recommendation for 2014 is a long position in large-cap bank indices in the US, Europe and Japan, implemented via equal parts of the BKX, SX7E and TPNBNK indices.
- We expect a significant pick-up in DM economic growth, stemming from domestic demand strength …
- … fading fiscal headwinds in the US and Europe…
- … and a continuation of accommodative policies by major central banks that will keep short-term rates anchored
- Banks valuations remain well below pre-crisis levels…
- … and steeper yield curves may help improve net interest margins
- Risks include growth disappointments, violent rate shifts as monetary accommodation is withdrawn, and a change of sentiment towards the banking sector
Top Trade Recommendation #6: Long DM (Japan, US and European) Banks
Our sixth Top Trade recommendation for 2014 is a long position in a basket of developed market banks: US banks (via the BKX index), European banks (via the SX7E index) and Japanese banks (via the TPNBNK index), in equal portions with an initial target of 20% and a stop at -10%. The opening price of 100 for the indexed basket will be marked on the US open on 4 December 2013.
The BKX index was one of our 2013 Top Trade recommendations as well. The trade was closed at the end of August of 2013, for potential gains of about 27%, as the broad summer risk-off move, driven in part by the US government shutdown and debt debate, drove the index below the trade’s stop loss, which had been raised multiple times throughout the course of the year. Although the US financial sector has not led the market higher since then, the fundamental case for banks, in our view, remains intact. The 2014 Top Trade recommendation is a more global implementation and leans on our 2014 macro views.
Two forces that supported the banking sector in the US in 2013 are also likely to be present more broadly in major DM economies (US, Europe and Japan) in 2014. The first is a significant pick-up in economic growth, which from a DM perspective, is mostly about domestic demand strength (along with fading fiscal headwinds in the US and Europe). The second is a continuation of accommodative policies by major central banks that will keep short-term rates anchored and maintain easy financial conditions, even if the forward outlook for incrementally more policy accommodation is different in the three regions.
DM equities more generally remain the most likely asset to benefit from this combination of forces, with the DM financial sectors still well discounted even after significant 2013 rallies.
DM growth acceleration and policy accommodation at the heart of this trade recommendation
Our headline theme for 2014 is 'Showtime for the DM recovery' as we foresee that DM economies will, for the first time since the financial crisis, reach, and perhaps even surpass in some places, trend growth. We expect the US economy to accelerate to about 3.0%-3.5% over the coming quarters, spurred primarily by a pick-up in consumer spending and business investment, along with fading fiscal headwinds. The case for Europe is a bit more muted, but there too we expect growth at around a 1% rate, which is moderate, but significantly above the 2013 run rate. And while Japanese growth is likely to remain stable, the DM-wide domestic impulse is likely to support portions of the economy that are particularly levered to consumer spending, including the housing market and the banking sector.
Along with better growth outcomes, we also expect yields to gradually climb. However, here the picture is a bit more nuanced, as some central banks will likely begin to exit from accommodative policies sooner than others. In the US, we expect that process to start with the 'tapering' of asset purchases in March of 2014. That said, the US move towards the exit will be combined with increased commitment (through forward guidance) to supportive policies. And while it is possible that these shifts will generate some yield volatility, we think violent shifts in short-term yields are unwarranted. Overall, we expect banks, particularly in the US, to benefit from steeper curves. And while a steepening curve may provide less of a tailwind for European banks, there are some likely benefits in bank regulatory harmonization and the potential lower cost of capital.
While more dramatic rate views are clearly a risk to our constructive equity views in general, longer-term yields are priced more or less in line with our macroeconomic expectations. Our base scenario calls for only moderately faster growth in 10-year yields relative to the short end of yield curves. This leaves the 'belly' of the curve – with maturities in the 5 to 7 year range – as the most exposed to further steepening forces.
Historically, the performance of banks (and to a lesser degree, banks’ outperformance relative to broader equity indices) is mildly positively correlated with the level of yields, both in the 5-year and the 10-year range, as well as with the steepening of the curves, with banks' fundamentals providing a likely linkage between the two. A steeper yield curve is likely to support banks’ net interest margin (NIM), a spread between the rate at which banks lend, normally a longer-term rate, and the rate they pay for the borrowed funds, normally a short-term rate.
Currently, NIMs in all three indices are at the lower end of their ranges over the last 10 years. In the US, the median NIM in the BKX index in 2013 is 3.2%, around 20bp below the 2012 level, as the steeping yield curve has so far failed to push it higher. Historically, the median NIM in the BKX has fluctuated in the 3%-4% range over the last 10 years. And in both Europe and Japan, median NIMs for our chosen bank indices are at the low ends of their 10-year ranges, around 1.5% in Europe and 1.3% in Japan. If we do see steeper yield curves in 2014, it is possible that some improvement in NIMs will follow.
Even after the 2013 rallies, banks trade at a discount
Alongside broader equity indices, bank indices in the US, Europe and Japan have all had strong years. Japanese banks are up almost 40% year-to-date (with much of that gain front-loaded, and a touch below the broader TOPIX index year-to-date). European banks struggled early in 2013, but have since recovered, and are now up around 20% on the year and ahead of the STOXX index by a couple of percentage points. And US banks have rallied about 26% year-to-date, and have outperformed the S&P 500 index by around 3% over the same period, as they gave away a considerably wider outperformance margin gained earlier this year.
Yet these rallies still leave the banks well below pre-crisis levels, and in the case of Europe, even below post-crisis 2010 highs. While shifting regulatory and structural backdrops suggest that 2007 levels are not likely to be attainable in the near term, the recent strong performance is modest when looked at in a longer perspective. And from a valuation perspective, while the 2013 rally has increased indices’ price-to-book ratios, but they remain near 10-year lows. In the US, the index is trading about 1.2x book, with Japan and Europe still trading below book at 0.7x and 0.8x respectively. Like price levels themselves, these ratios are well below pre-crisis values. To be fair, historical comparisons of current P/B ratios with the values over the past decade may be less relevant given regulatory changes and the prolonged presence of supportive fiscal policies and accommodative environments. Still, while a return to pre-crisis valuations seems unreasonable, it is reasonable to expect some improvement here too, as the overall risk-taking backdrop improves.
As this trade leans on some of the key components of our 2014 outlook – an improvement of growth in DM economies and a well-managed gradual withdrawal of some policy measures – the risk to the trade is that these views do not materialize. Specifically, we can identify three main risks.
First, domestic DM growth may disappoint. While this will affect the most pro-cyclical parts of the market the most, the banking sector will likely be affected by lower consumer spending, including weaker housing markets and weaker investment.
Second, rate moves may prove to be more dramatic and volatile, if the tools to manage the stimulus withdrawal prove insufficient. While we in general believe that possible overreactions to the stimulus withdrawal are unwarranted, some of the price shifts in 2013 proved that these episodes may be quite painful.
Third, even if the growth shows up and the stimulus withdrawal is well managed, the regulatory backdrop and sentiment in the banking sector in particular may turn more negative, driving this segment of the equity market lower relative to broader indices.
Another day, another confirmation of not only manipulation by the largest TBTFs in the largest market in the world, this time focusing in Europe, but pervasive collusion. Moments ago EU regulators fined 8 banks €1.71 billion for colluding in an attempt to manipulate key benchmark rates, which is also the EU's largest ever penalty in a cartel case. The banks participating in the settlement include some of the world's biggest banks such as Deutsche Bank, Société Générale SA, Royal Bank of Scotland Group PLC and J.P. Morgan Chase JPM. According to WSJ calculation, this latest action brings to roughly €6 billion the total penalties levied by regulators against financial institutions in connection with probes into manipulation of the London interbank offered rate, or Libor, and other widely used financial benchmarks.
Some obligatory soundbites from Joaquin Almunia, Europe's competition commissioner, who is shocked, shocked there was cartel collusion going on here:
The EU "is determined to purse all those who may have been involved in the cartel," Mr. Almunia said. He said that if the institutions are proven guilty, they will eventually receive "adequate sanctions." "What is shocking about the Libor and Euribor scandals is not only the manipulation of benchmarks, which is being tackled by financial regulators world-wide, but also the collusion between banks who are supposed to be competing with each other," Mr. Almunia said.
Actually, what is shocking is that even with everything else being manipulated, nobody seems to ever touch gold...
The summary of the fined banks, as well as the squealers, pardon, whistleblowers UBS and Barclays:
- Deutsche Bank gets biggest combined penalty of €725.4mln.
- SocGen fined €445.9mln for Euribor manipulation.
- RBS agrees to pay €391mln in cartels
- JPMorgan fined €79.9mln in JPY LIBOR case.
- R.P. Martin Holdings Ltd fined €247,000
- UBS and Barclays escape fines as EU whistle-blowers.
Finally, while we have shown this previously, below once again is a summary of how Wall Street manipulates, well, everything.
Regulators are looking into whether currency traders have conspired through instant messages to manipulate foreign exchange rates. The currency rates are used to calculate the value of stock and bond indexes.
Banks have been accused of manipulating energy markets in California and other states.
Since early 2008 banks have been caught up in investigations and litigation over alleged manipulations of Libor.
Banks have been accused of improper foreclosure practices, selling bonds backed by shoddy mortgages, and misleading investors about the quality of the loans.
- EU Fines Financial Institutions Over Fixing Key Benchmarks (Reuters)
- Euro-Area Economic Growth Slows as Exports, Consumption Cool (BBG) - someone has a very loose definition of growth
- Ukraine Officials Scour Globe for Cash as Protests Build (BBG)
- Oops: Franklin Boosted Ukraine Bet to $6 Billion as Selloff Began (BBG)
- Japan Plans 18.6 Trillion Yen Economic Package to Support Growth (BBG) - or about 2 months of POMO
- How Peugeot and France ran out of gas (Reuters)
- Iran threatens to trigger oil price war (FT)
- Abe Vows to Pass Secrecy Law That Hurts Cabinet’s Popularity (BBG)
- Brazil economy turns in worst quarter for 5 years (FT)
- Australia’s Slowdown Suggests RBA May Need to Do More (BBG)
- Biden calls for trust with China amid airspace dispute (Reuters)
- Al Qaeda now America's friend? U.S., Allies Reach Out to Syria's Islamist Rebels (WSJ)
- Heavy Inventories Threaten to Squeeze Clothing Stores (WSJ)
- Budget Negotiators Seen Near to Deal to Ease U.S. Cuts (BBG)
- Regulators Set to Approve Toughened 'Volcker Rule' (WSJ)
- Brisk Demand Lifts U.S. Auto Sales (WSJ)
Overnight Media Digest
* U.S. Vice President Joe Biden's visit to Beijing on Wednesday was long intended to boost trade but instead has become an urgent diplomatic mission.
* Federal regulators are expected next week to approve a toughened version of the so-called Volcker rule, opening a new phase of stricter oversight for Wall Street.
* Forget Internet IPOs: One of the best investments of the past couple of years was a bankrupt airline.
* Big banks have been retrenching from the mortgage business recently, leaving smaller players to pick up larger chunks of business. The midsize and smaller players have grown despite tightening their underwriting standards, much like larger banks have since the financial crisis. But the smaller banks' capital rules aren't as stringent as those that make mortgages a costly enterprise for the biggest firms.
* European antitrust authorities are set to hit several banks with heavy fines as soon as Wednesday for allegedly colluding to rig interbank lending rates, people familiar with the matter said.
* Former Tyco CEO Dennis Kozlowski is set for parole early next year following his 2005 criminal conviction and imprisonment for looting the company.
* Apparel chains have heavy inventory loads, raising concern their weak Thanksgiving showing will force bigger markdowns that could hurt fourth-quarter profits.
* November U.S. auto sales ran at their strongest pace in more than six years, aided by sales promotions, but there were also signs that competitive pressure is ratcheting up on Detroit's auto makers.
Brussels is expected to levy fines on Wednesday
on 10 global banks charged with fixing Euribor, Yen Libor or both. The
EU competition commissioner will announce a decision on the allegedly
formed cartels to rig two global interest rate benchmarks.
British government backed BP in a U.S. ban, which bars the company from
government contracts, calling it "excessive". The decision in the 2010
Deepwater Horizon oil spill case, affects jobs and pensions of workers
in the United Kingdom, the United States, and elsewhere, it said.
Financial Policy Committee said the Bank of England could ask banks to
disclose capital ratios using standardised risk weights, along with the
ratio based on their internal models.
A high court ruling on
Tuesday said HTC will have to stop the sale of its "One Mini" brand in
the UK as the Taiwanese company was found guilty of infringing Finnish
counterpart Nokia's patents.
French phone company Iliad is set to
prolong a two-year price war with its rivals by providing 4G services
for 19.99 euros per month, similar to its 3G offers.
has spent 25 million pounds in cutting prices before Christmas, and will
spend a further 50 million in the first quarter of 2014 -- a move that
is expected to put pressure on the Big Four supermarkets.
* In a ruling that could reverberate far beyond Detroit, a federal judge held on Tuesday that this battered city could formally enter bankruptcy and asserted that Detroit's obligation to pay pensions in full was not untouchable.
* At a picturesque century-old factory, Count Anton-Wolfgang von Faber-Castell is the eighth in a long line carrying on the family name in the pencil business. Faber-Castell, the largest maker of wood-encased pencils in the world, illustrates how midsize companies - which account for about 60 percent of the country's jobs - are able to stay competitive in the global marketplace.
* The FDA allows the sale of some devices to treat small groups of patients without requiring proof that the devices work, or any rigorous study of the medical results.
* Testimony to Parliament from the top editor of The Guardian illustrated the aggressive investigative and spying tactics increasingly faced by news organizations.
* Newsweek, the struggling weekly magazine that ceased print publication last year, plans to turn the presses back on. The magazine expects to begin a 64-page weekly edition in January or February.
* The Illinois legislature on Tuesday ended a day of emotional debate and fierce back-room arm-twisting by passing a deal to shore up the state's debt-engulfed pension system by trimming retiree benefits and increasing state contributions.
* Jon Horvath has been positioned as a star witness for federal prosecutors in the insider trading trial of Michael Steinberg, his former boss at SAC Capital Advisors. But under questioning by the defense on Tuesday, Horvath, a former analyst at SAC, acknowledged having some memory lapses, potentially undercutting some of his credibility.
* Edward Lampert, the hedge fund manager who serves as Sears Holdings' chief executive, remains struggling retailer Sears' biggest shareholder. But his firm, ESL Partners, has cut the size of its stake, disclosing in a regulatory filing on Tuesday that it now owns 48.4 percent of its shares, down from 55.4 percent.
THE GLOBE AND MAIL
senators are blocking Liberal efforts to hear the testimony of an
auditor, a partner at Deloitte, who is alleged to have intervened in a
review of Senator Mike Duffy's expenses at the behest of the Prime
* Toronto Mayor Rob Ford says he had
no idea three men he posed with for a picture at last weekend's Buffalo
Bills football game had ties to the Hells Angels.
Reports in the business section:
Potash Corp of Saskatchewan is laying off staff and slashing output
capacity in a bid to become a lower-cost producer amid falling prices
and slumping demand from key customers.
* CNOOC Ltd's
financial performance is being hurt by its purchase of Nexen Inc, a
situation exacerbated by its pledge to Ottawa that it will not reduce
its newly-acquired Canadian staff, the Chinese company's own leading
* Bank of Montreal's latest quarterly
results served as a sharp pinch for those who had been lulled into a
slumber by the recent rally in bank stocks.
Despite strong wealth
management earnings, encouraging Canadian loan growth and a solid profit
of $1.1 billion for the quarter, BMO's results included rising
provisions for bad loans and a deteriorating outlook for U.S. personal
and commercial banking.
Detroit finalizes the terms of the largest public bankruptcy in U.S.
history this week, its across-the-river Canadian neighbor, the city of
Windsor, is boasting a fiscal record the envy of any city its size on
the continent: five years without a tax hike, an eight-figure paydown of
municipal debt, all while weathering the effects of Ontario
Before embarking on a controversial expansion of the Canada Pension
Plan, the Canadian government should consider Australia's successful
experience closing gaps in retirement savings through mandatory
workplace pensions, according to the authors of a paper published on
Tuesday by the Fraser Institute.
Canada's finance ministers will
be meeting this month to discuss whether there is consensus to move
ahead with expansion of the Canada Pension Plan.
Tax-loss selling opportunities are slim heading into the last month of
the year, resulting in an especially potent headwind for those unlucky
stocks that have not participated in this year's market rally.
Ltd, Potash Corp and Barrick Gold Corp are among 10 Canadian stocks
that are bound for bruising in tax-loss selling, according to Pierre
Lapointe, head of global strategy and research at Pavilion Capital
Markets in Montreal.
- The Chinese government will strengthen the position of foreign-invested enterprises by simplifying the examination and approval process for investing abroad, Zhang Xiaoqiang, deputy director of the National Development and Reform Commission, said on Tuesday.
- China will reveal a new national urbanisation plan next year, according to a statement from the Politburo. The plan has reportedly met resistance from local governments as it touches on the redistribution of land revenue between farmers and governments.
- Courts in Central China's Henan province will end the handcuffing and caging of suspects during trials. Suspects should also be allowed to wear normal clothes rather than prison uniforms while on trial, said Zhang Liyong, president of Henan High People's Court.
- For a political party, suggesting a strategic vision is important, but of greater importance is a party's ability to implement that vision, said the paper that acts as the party's mouthpiece. Concrete steps should be taken to promote reform, said the paper.
RICHARD BRANSON ATTACKS QANTAS BOSSES AS FOREIGN OWNERSHIP ROW HEATS UP
The British billionaire's outburst on his Virgin website follows Qantas' backing of a plan suggested by Australian Treasurer Joe Hockey that foreign ownership rules concerning the country's flag carrier should be relaxed.
UK HOUSEBUILDING COMES OUT 'ALL GUNS BLAZING' WITH FASTEST GROWTH IN A DECADE
Housebuilding in November rose at the strongest pace since 2003, according to Markit, as rising confidence and improving credit conditions helped to boost activity across the sector.
YOUNG WORKERS' PAY HAS TUMBLED SINCE FINANCIAL CRASH, SAYS THINKTANK
The Resolution Foundation said younger workers faced an almost unprecedented squeeze on both the wages and employment chances four years after the financial crash. The pay of workers in their 20s has tumbled by almost 12 percent since the peak of the recession, according to the thinktank.
OSBORNE STATIONERS GOES INTO ADMINISTRATION
Osborne Stationers, a high street chain founded nearly two centuries ago, has gone into administration placing 140 jobs at risk. Directors at the Birmingham-based company took the decision amid the tough retail conditions it has faced since the start of the downturn in 2008.
PUBLIC'S 40 PERCENT HOLDING IN EUROSTAR WILL BE SOLD OFF
The Government is to sell off its 40 percent stake in Eurostar, the operator of high-speed passenger trains between London, Paris and Brussels.
KPMG WAS LOCKED OUT OF BRITANNIA'S BOOKS DURING CO-OP TAKEOVER
KPMG was blocked from examining Britannia Building Society's loss-making corporate loan book during due diligence of the lender on behalf of the Co-operative Bank, it emerged on Tuesday.
RIVAL LLOYDS BRANCH BIDDER URGED TO SUE BANK
The bidder which lost out to the Co-operative Group in the auction of 632 Lloyds Banking Group branches is being urged to consider legal action to recover the 30 million pounds it spent on its bid.
MOULTON SIZES UP BID FOR AILING PAWNBROKER
Sky News has learnt that Better Capital, Mr Moulton's investment firm, is among a pack of suitors examining offers for the company after it was forced to put itself up for sale.
Fly On The Wall 7:00 AM Market Snapshot
BB&T (BBT) upgraded to Overweight from Equal Weight at Morgan Stanley
Owens Corning (OC) upgraded to Buy from Neutral at SunTrust
Premiere Global (PGI) upgraded to Strong Buy from Outperform at Raymond James
Sonic (SONC) upgraded to Outperform from Market Perform at William Blair
U.S. Bancorp (USB) upgraded to Conviction Buy from Neutral at Goldman
AT&T (T) downgraded to Neutral from Overweight at JPMorgan
Bank of Kentucky (BKYF) downgraded to Neutral from Outperform at RW Baird
ChemoCentryx (CCXI) downgraded to Neutral from Buy at Citigroup
Citigroup (C) downgraded to Neutral from Conviction Buy at Goldman
eBay (EBAY) downgraded to Equal Weight from Overweight at Evercore
Flextronics (FLEX) downgraded to Sell from Neutral at Goldman
Old Line Bancshares (OLBK) downgraded to Neutral from Outperform at RW Baird
Agrium (AGU) initiated with an Outperform at RBC Capital
Allegion (ALLE) initiated with a Market Perform at Bernstein
CF Industries (CF) initiated with a Sector Perform at RBC Capital
CommScope (COMM) initiated with a Buy at Deutsche Bank
CommScope (COMM) initiated with a Buy at Goldman
CommScope (COMM) initiated with a Buy at Mizuho
CommScope (COMM) initiated with a Hold at Jefferies
CommScope (COMM) initiated with an Outperform at Credit Suisse
CommScope (COMM) initiated with an Outperform at Raymond James
CommScope (COMM) initiated with an Outperform at Wells Fargo
CommScope (COMM) initiated with an Overweight at Evercore
CommScope (COMM) initiated with an Overweight at JPMorgan
CommVault (CVLT) initiated with a Perform at Oppenheimer
DDR Corp. (DDR) initiated with an Outperform at Imperial Capital
JGWPT Holdings (JGW) initiated with a Buy at Deutsche Bank
JGWPT Holdings (JGW) initiated with a Buy at Jefferies
JGWPT Holdings (JGW) initiated with an Outperform at Keefe Bruyette
JGWPT Holdings (JGW) initiated with an Overweight at Barclays
MacroGenics (MGNX) initiated with an Outperform at Wedbush
Mosaic (MOS) initiated with an Outperform at RBC Capital
Potash (POT) initiated with a Sector Perform at RBC Capital
Splunk (SPLK) initiated with an Outperform at Oppenheimer
Sprague Resources (SRLP) initiated with a Buy at BofA/Merrill
Sprague Resources (SRLP) initiated with an Equal Weight at Barclays
European Commission fined eight banks (DB, SCGLY, JPM, C) EUR 1.71B over interest rates
JPMorgan (JPM) reached EUR 79M settlement with EC related to Libor matter
Deutsche Bank (DB) confirmed EUR 725M settlement with EC
CF Industries (CF) said intends to raise up to $1.5B in long-term debt in early 2014
“Cyber Monday” saw an online spending increase of 18% vs. 2012 (AMZN, EBAY, BBY, WMT), comScore reports
Lennar (LEN) awarded $1B in damages in defamation and extortion case
Kinder Morgan (KMI, KMP, KMR, EPB) raised FY14 dividend 10% to $1.72 per share, sees $6.4B in business segment earnings before DD&A in FY14
Yahoo (YHOO) acquired Ptch, terms not disclosed
Universal Technical Institute (UTI) sees high single digit applications growth in FY14
Companies that beat consensus earnings expectations last night and today include:
Powell (POWL), OmniVision (OVTI), Guidewire Software (GWRE), United Natural Foods (UNFI)
Companies that missed consensus earnings expectations include:
Descartes Systems (DSGX), Bob Evans (BOBE), Golub Capital (GBDC), Universal Technical Institute (UTI)
- Apparel retail chains including Abercrombie & Fitch (ANF), Chico's FAS (CHS), Gap (GPS) and Victoria's Secret came into Q4 with heavy inventory loads. The concern now is the retail industry's weak showing over Thanksgiving weekend will force them to take bigger markdowns that could hurt their Q4 profits, the Wall Street Journal reports
- U.S. auto sales (F, GM, TM, NSANY, HMC, DDAIF, VLKAY) in November ran at the strongest pace in more than six years, aided by Black Friday sales promotions, but there were also signs that competitive pressure is ratcheting up on Detroit's automakers, the Wall Street Journal reports
- Just a few years ago, Morgan Stanley (MS) lacked the expertise, infrastructure or desire to do a lot of lending, but today it is making a big push into loans to bridge a profit gap with rivals, Reuters reports
- Toshiba Corp. (TOSBF) will tie up with German real estate company Gagfah SAS to sell energy directly to residents in Germany, sources say, beginning in March, Reuters reports
- InterContinental Hotels (IHG) plans to open “at least the same” number of hotels in China next year--17--as 2013, even as growth in room revenue slows, Bloomberg reports
Access Midstream (ACMP) files to sell 6M units representing limited partners
American DG Energy (ADGE) files to sell 633K shares for holders
Celldex (CLDX) files to sell 6.5M shares of common stock
Clovis (CLVS) 2M share Secondary priced at $57.50
Del Frisco's (DFRG) files to sell 5.39M shares for holders
EVERTEC (EVTC) files to sell 15.29M shares for holders
Norwegian Cruise Line (NCLH) 22M share Secondary priced at $33.25
Oasis Petroleum (OAS) files to sell 7M shares of common stock
The euro traded steadily at $1.3585 ...
Brent crude oil settled at $112.87 at 5:00 GMT on Wednesday morning after rallying to a new ...
ETF Outlook for Wednesday, ...
Federal Reserve taper speculation is beginning to ...
US stock futures rose in early pre-market trade, ahead of economic data. The ADP national employment report will ...
While there was a plethora of macro data (starting with some ugly numbers out of Australia which clobbered AUD pairs overnight), China HSBC Services PMI dipping slighlty from 52.6 to 52.5, Final Eurozone PMI Services (printing at 51.2 up from 50.9 and beating expectations of the same on an increase in German PMI numbers from 54.5 to 55.7 and a decline in French PMI from 48.8 to 48.0), Eurozone retail sales declining by 0.2%, on expectations of an unchanged print, and much more (see below), perhaps the most important news of the day came from Japan which many expect will be the source of much more easing in the coming months and thus serve as marginal lever to push global fungible markets higher. However, not only did various BOJ officials for the first time in a while talk down expectations of a QE boost, but the head of the Japan GPIF said that it doesn't need to sell JGBs right now as it would "rock markets" and that instead can achieve its targeted 52% weighing as bonds mature, that it may buy foreign bonds instead to raise weighting to core target (as the Fed buys Japan bonds?), and that it will be very difficult for Japan to hit the BOJ's inflation target in 2 years. Is Japan already getting cold feet on rumors of more QE and did it realize there are only so many assets it can monetize. If so, watch out below on the EURJPY which has now priced in about 700 pips of expected BOJ QE boosting in early 2014.
Looking at Europe, stocks traded broadly higher this morning, supported by the bounce back by basic materials names which underperformed yesterday and also lower trading Bunds, which were weighed on by the looming supply. At the same time, as RanSquawk reports, a combination of somewhat cautious trading update release by Standard Chartered which consequently pressured HSBC, together with the fact that a number of blue-chip stocks were trading ex-dividend meant that the FTSE-100 index has underperformed its peers. This together with reports that the EU Commission is to fine 6 banks USD 1.7bln over rate rigging manipulation meant that heading into the North American cross over, financials are among the worst performers.
European services PMIs looked as follows:
Looking elsewhere, AUD came under distinct selling pressure overnight and this morning as market participants digested the release of weaker than expected GDP data and also comments by Australian treasurer Hockey who said Australia has challenges ahead and faces a growth hole as mining investment drops, government GDP forecasts will not be achieved and that GDP growth is not strong enough to create jobs. Analysts noted that AUD/USD's ability to fall easily is a reflection of speculative positions, since bets on a lower AUD are about half the level when AUD/ USD was last down at these levels. This morning also saw the release of the latest UK Services PMI, which failed to meet consensus estimates and in turn resulted in GBP underperforming EUR. Going forward, market participants will get to digest the release of the latest ADP report, New Home Sales survey from the US and the BoC rate decision.
Finally, there is just one POMO today amounting to $2.75-$3.50 billion in the 2021-2023 maturity range.
Overnight news bulletin from Ransquawk and Bloomberg
- Stocks traded broadly higher in Europe this morning, supported by the bounce back by basic materials names which underperformed yesterday and also lower trading Bunds, which were weighed on by the looming supply.
- The EU Commission is to fine 6 banks USD 1.7bln over rate rigging manipulation, with Barclays and UBS being exempt because they were they whistle-blowers for the case.
- Going forward, market participants will get to digest the release of the latest US ADP report, New Home Sales survey, DoE Inventories, BoC rate decision and any comments from the OPEC meeting.
- Treasuries decline, with 10Y yields holding around 2.80%; 2/10 near widest since July 2011 as focus remains on Friday’s jobs report, possibility FOMC may decide to announce QE tapering at Dec. meeting.
- Deutsche Bank AG and RBS are among six companies fined a record EU1.7b by the EU for rigging rates linked to Libor
- Deutsche Bank bans multi-party chat rooms at its fixed income business, widening a measure imposed for fx in February after alleged attempts by traders to rig rates, says Michael Golden, spokesman for co
- Wall Street banks, which already shut proprietary trading units that helped fuel record profits, are girding to learn next week how much revenue the Volcker rule may cut from the $44b they say comes from market-making
- Franklin Resources Inc.’s biggest funds ramped up their bet on Ukraine by more than $1.4b in 3Q, adding to its status as the country’s largest international bondholder weeks before street protests deepened the worst rout in developing markets
- Australia’s economy expanded slower than economists forecast last quarter after households boosted savings, suggesting the central bank may need to do more to spur spending
- China offered Japan talks on the safety of aircraft in overlapping air defense zones after Biden urged Asia’s top two economies to set up channels for resolving their disputes
- After struggling for two months to fix the healthcare.gov web site at the core of his signature legislation, Obama yesterday began what aides say will be a three-week campaign to use his bully pulpit to regain momentum for his initiative
- 57% of Americans said they opposed Obamacare in a Washington Post/ABC News poll taken Nov. 14-17, and the country was evenly split 49% to 49% on whether it could even be salvaged
- Sovereign yields higher. EU peripheral spreads narrow. Asian stocks mostly lower, with Nikkei falling 2.2%, European stocks lower while U.S. equity index futures gain. WTI crude and copper rise, gold falls
US event calendar
US: ADP employment change, cons 170k (8:15)
US: ISM Non-mfg composite, cons 55.0 (10:00)
US: POMO in $2.75-$3.50 billion in the 2021-2023 maturity range (11:00)
Goldman Sach's 6th top trade for 2014: long Japan, US and Europe banks.
- Goldman Sachs 5th top trade for 2014; long 7y CDX IG21 junior mezz
- Goldman Sachs 4th top trade for 2014: long China stocks/short copper
- Goldman Sachs 3rd Top Ten 2014 Trade is long USD/CAD; targeting 1.14.
- Goldman Sachs 2nd Top Ten 2014 Trade recommendations to go long 5 yr EONIA vs short 5 yr US Treasuries.
- Goldman Sachs 1st Top Ten 2014 Trade is Long S&P500, short AUD/USD.
Japan GPIF Head says that they don't need to sell JGBs immediately as it would rock markets and thinks can lower JGB weighting to recommended 52% without selling as bonds mature. Furthermore, the head also said it is very difficult for Japan to hit BoJ's 2% inflation target in 2 years.
Chinese HSBC Services PMI (Nov) M/M 52.5 (Prev. 52.6)
Japan national government, local governments and private sector plan a total JPY 18.6trl stimulus package to cushion the impact of the sales tax increase in April.
BoJ board member Sato does not expect sales hike to cause a severe economic downturn and said there is no need to ease pre-emptively if the economic impact of the sales tax hike is temporary.
EU & UK Headlines
EU Commission fines 6 companies for benchmark manipulation, 2 exempted
- Deutsche Bank gets biggest combined penalty of EUR 725.4mln.
- RBS agrees to pay EUR 391mln in cartels.
- SocGen fined EUR 445.9mln for Euribor manipulation.
- JPMorgan fined EUR 79.9mln in JPY LIBOR case.
- UBS and Barclays escape fines as EU whistle-blowers.
EU GDP SA (Q3 P) Q/Q 0.1% vs Exp. 0.1% (Prev. 0.1%)
- EU GDP SA (Q3 P) Y/Y -0.4% vs Exp. -0.4% (Prev. -0.4%)
Eurozone Retail Sales (Oct) M/M -0.2% vs Exp. 0.0% (Prev. -0.6%)
- Eurozone Retail Sales (Oct) Y/Y -0.1% vs Exp. 1.0% (Prev. 0.3%)
UK PMI Services (Nov) M/M 60.0 vs Exp. 62.0 (Prev. 62.5)
Eurozone PMI Services (Nov F) M/M 51.2 vs Exp. 50.9 (Prev. 50.9)
- Eurozone PMI Composite (Nov F) M/M 51.7 vs Exp. 51.5 (Prev. 51.5)
German PMI Services (Nov F) 55.7 vs Exp. 54.5 (Prev. 54.5)
- German PMI Composite (Nov F) M/M vs 55.4 Prev. 53.2
French PMI Services (Nov F) 48.0 vs Exp. 48.8 (Prev. 48.8)
Spanish PMI services (Nov) M/M 51.5 vs Exp. 49.7 (Prev. 49.6) - Strongest growth since June 2010
Italian PMI Services (Nov) 47.2 vs Exp. 50.4 (Prev. 50.5) - lowest since June
- Services PMI new business index drops to 47.0 vs. 50.7 in Oct - lowest since July.
Germany sells EUR 3.285bln in 1.00% 2018, b/c 1.6 (Prev. 2.3) and avg. yield 0.68% (Prev. 0.71%), retention 17.8% (Prev. 18.3%)
According to sources an EU document suggests watering down proposed EU commission role in single resolution mechanism with EU commission role possibly being limited to final yes or no.
Fed's Williams (dove, non-voter) said Fed should cap QE3, and end it over a period of months once completely confident job market is on right track, adding that he expect to end QE3 sometime next year.
Williams said he is in favour of cutting interest rate Fed pays on excess bank reserves and Fed should be more concrete about what could prompt rate hikes once unemployment falls below 6.5%.
A combination of somewhat cautious trading update release by Standard Chartered (-6.5%) which consequently pressured HSBC (-1.20%), together with the fact that a number of blue-chip stocks were trading ex-dividend meant that the FTSE-100 index has underperformed its peers this morning. Reports that the EU Commission is to fine 6 banks USD 1.7bln over rate rigging manipulation also weighed on financials, which have underperformed its peers. Nevertheless, heading into the North American cross over, major equity indices in Europe are seen broadly higher, supported by the bounce back by basic materials names which underperformed yesterday and also lower trading Bunds, which were weighed on by the looming supply.
AUD underperformed its peers as market participants digested the release of weaker than expected GDP data and also comments by Australian treasurer Hockey who said Australia has challenges ahead and faces a growth hole as mining investment drops. As a result, the pair tested the key 0.9000 level (3-month low), while the 1-month vol spiked to its highest level since mid-October and tested the 100DMA line. Elsewhere, the release of weaker than expected UK Services PMI report ensured that GBP underperformed its major counter-part EUR, with EUR/GBP rising above 0.8300 in the process.
Heading into the North American open, WTI crude futures trade in positive territory following yesterday's API data which showed a large drawdown in crude oil of 12400K, which was the first drawdown in 10 weeks. This move was further exacerbated by news that the opening of the Southern leg of the Keystone pipeline is to begin carrying crude to Texas next month which will reduce current domestic US stockpiles. Meanwhile, Brent crude futures trade with losses after recent bullish gains being curbed by comments from Iran and Iraq saying they both plan to increase output by about 1mbpd each. Perhaps one of the most notable events for the day is ongoing OPEC meeting with the press conference scheduled for 1600GMT/1000CST. In terms of commentary from the conference, so far we have seen the Iran oil minister says Iran wants to return to the oil market and will not follow any limitations once it returns to the oil market.
Furthermore, the UAE oil minister expects OPEC to keep same level of production.
Iran have said that they will pump 4mbpd even if oil falls to USD 20 per barrel.
Saudi Arabia have decided that its oil production should be based on demand from its customers and its own consumption needs, not on those of other oil producers.
OPEC Secretary General El-Badri's term may be extended as there has been no agreement on who should be his successor, according to OPEC sources. However, later reports suggested that three candidates are in the running for the position.
Libya oil minister said expects same level of OPEC production; says Libya producing 250,000 bpd and someone should cut when Libya and Iran output resumes. He added that he expects all problems to be resolved in 10 days and output will rise to 1.5mln bpd in 10 days.
The Iranian Oil Minister expects the nation's oil output at 4mln bpd at end of 2014, whilst, the Iraqi Oil Minister says there is no need for Iraq to cut production next year.
DB's Jim Reid concludes the overnight even recap
What was meant to be a relatively quiet day for markets yesterday turned out to be quite the opposite. Indeed the S&P500 (-0.32% on the day) was down 13 points and on track for its largest fall in one month at one stage yesterday, while the Stoxx600 (-1.53%) had its worst fall in more than three months. On a day with little news flow, most of the weakness in equities was attributed to the squaring of positions and profit-taking ahead of a number of risk events this week including ADP employment today, the ECB tomorrow and payrolls on Friday.
Equities have now been in consolidation mode for three straight sessions but this does come after a solid couple of months of performance. The Dow and the S&P500 have each recorded gains for eight consecutive weeks, the longest such streak for the Dow in two years and the longest consecutive weekly increase in nearly 10 years for the S&P500 (CNBC). After the stronger than expected ISM manufacturing print on Monday, yesterday’s US dataflow did little to calm Fed tapering fears. November total vehicle sales increased to an annual run rate of 16.3M vs 15.15M the prior month and 15.80M forecast. However some commentators noted that steep discounts during the month, averaging more than $2,500 per vehicle, may have boosted sales numbers higher. The average price paid for a new vehicle fell in November by about $200 from the same month a year earlier, the first such drop in nearly three years, according to car-shopping website TrueCar.com (WSJ). Other data also
surprised to the upside including the IBD/TIPP economic optimism survey which gained 2.7 points to 43.1 and beat expectations of 43.0. The ISM New York increased more than 10points to 69.5.
Despite the tapering fears, treasuries and other DM bond markets managed to recoup some of their losses from Monday. 10yr UST yields closed 1.3bp firmer at 2.782%. There was talk of short UST positioning skews, but we should also highlight that treasuries were also supported by a double Fed buy-back. The Fed bought $940m of notes due from 2024 to 2031, followed up $3bn-$4bn of notes due 2019 and 2028. The EUR continued its recent surge against the USD, and it will be interesting to see how it trades in the lead up to Thursday’s ECB meeting. Tapering fears were more evident in the EM space including across a number of FX crosses such as the USDBRL (+0.65%), ISDINR (+0.1%) and USDTRY (+0.23%). Other EM asset classes also fared poorly yesterday including equities (MSCI EM index -1.06%) and bonds (JPM Emerging Market bond index +3bp in spread)
This morning, risk assets are again trading lower led by Japanese equities where the Nikkei (-2%) and TOPIX (-1.4%) are on track for their weakest day in more than a month. Again, there is not much in terms of news flow to drive markets but Japanese equities are being weighed by the 0.4% fall in USDJPY yesterday. Chinese A-shares are outperforming today (Shanghai Composite +1.3%) and there is talk that Chinese regulators are aiming to implement free trade zone rules including interest rate liberalisation and capital account loosening within three months. S&P500 futures are up 0.05% as we type. China’s HSBC services PMI for November printed at 52.5 which was a decline
of 0.1pt on last month but the market reaction was relatively muted. In Australia, the Q3 GDP report came in below expectations (0.6%qoq vs 0.7% expected) and the AUDUSD fell about 50pips in response. In the fixed income space, the benchmark Asian and Australian iTraxx credit indices are a 1-2bp wider this morning, and the high-beta Indonesia 5yr CDS is underperforming (+5bp).
In terms of other headlines, Italy’s PM Letta has set a confidence vote for one week from now (December 11th) in an effort to solidify his power in the Senate after the country’s recent political developments. According to the FT, Letta continues to have the support of Mr Alfano’s New Centre right party, the president, the majority of the Democratic Party as well as the EU institutions, the foreign press and other EU governments. Staying in Europe, our European bank analyst Matt Spick has published his latest investment banking industry outlook where his main message is that he expects the revenue environment to still be challenging, but less so than in 2013. The headwinds from regulation and leverage are now better captured by consensus forecasts, and Matt anticipates that management teams will respond in 2014 with more cost cuts and business exits. We forecast industry revenues up 5% in 2014.
Looking at today’s calendar, the focus will be on the US ADP employment report which will be the last major jobs data release before Friday’s payrolls. For the record, DB is looking for a +190k change in the headline, which is about 20k higher than where consensus stands. Also relevant for payrolls will be today’s November non-manufacturing ISM where forecasts are expecting a print of around 55.0 or about 0.4pt lower than last month. There’s plenty of other US data on today’s docket including international trade, new home sales (for both September and October) as well as the Fed’s Beige Book. In Europe, service sector PMIs will be the main highlight.
Getting ready for Christmas? What’s Santa got in his sack for you this year? Well, if there’s one thing you should be preparing for, then it can only be the big crash of February 2014. The signs have been there for months now and it’s definitely now on the books for February next year. Santa will be emptying his sack and it won’t be presents that will be falling from the sky as his sleigh goes whizzing past us.Preordained Events
Stick the date in your diary, pop it on your iPad and synch it with your iPhone. Use them while you can, because they will be relics of the past most undoubtedly in the coming months. You won’t be needing anything in the future, once the financial world implodes and it is set to happen in February 2014.
If we were in 1929, this would be June 1929, just a few months before the crash happened back then. Yes, we can say whatever we like with numbers, but like cameras, there are some calculations that never seem to lie.Businesssweek’s Tom DeMark, a financial analyst has put together indicators that are able to predict movements of the market with surprising accuracy. DeMark states that “the market’s going to have one more rally, then once we get above that high, I think it’s going to be treacherous. I think it’s all preordained right now”.
Some might be saying that we didn’t need a crystal ball and we had no need for mathematics either to show that. You just had to look at how the Federal Reserve has bounced the financial markets back into a false-sense of security without actually doing anything at all to change the economy. Where’s the employment, where’s the increase in industry? It’s in the past. The only thing that is there right now is the virtual prosperity of the financiers and the banks. The next US shutdown and arrival at the debt ceiling will be just in time too for the biggest crash in history and will probably be linked.
Cash in on the last rise of the financial markets before what has been set down long ago comes of age and ripens completely. After that, who knows! You’ll have to buy low and wait a long time before the markets move back up.
The chart that compares pre-1929 and today is uncannily identical. Take a look for yourself. Pooh-pooh it, refuse to see it, do whatever you wish, but the crash will be coming and it’s the banks that started it all. The government will finish it all. God bless America! Game over! Goodnight!
It’s something when you end up witnessing the downfall of your own country. Some have been predicting it for years now and have been shouted down. They will be consoled by ‘I-told-you-so’ vociferating. But, it’s doubtless if that will help them anymore than anyone else.
The number of companies that is pushing the stock markets higher is narrowing at an alarming rate and there are a handful today that are taking the markets higher. That handful will gradually reduce and collapse. The eggs that were put into one basket by Ben Bernanke will end up being splattered on Janet Yellen’s face as she takes over. She should get out now while she can! The few companies that are dragging the financial market up by the collar are distorting the perception of the rest of the companies there and so speculation is becoming greater and greater.
January will see the bull rush on the financial markets for the last time. Then things will fall dramatically. You’ve been warned.
Yet again, those that believe they know will turn their noses up and say it’s never going to happen. Granted, the markets are unpredictable. But, there is one thing we all have to agree on, they are buoyant on nothing right now. They are increasing without any reason to do so. That won’t last at all.
January is named after the ancient Roman mythological God Janus. He’s the god of beginnings and transitions, changes and endings or new beginnings. This year Janus, the gateway god, will be looking back into the past to 1929, stopping off on the way at the financial crisis of 2007/2008. But, he isn’t two-faced for nothing.
He’ll be looking into the future and pin-pointing February as the time you’ll need to take cover. Forget the financial crisis of yesteryear or yester-century. This one will be the biggest, the best, the most of everything you could imagine.
The Americans always did excel in verbose language and hyperbole. They always did excel at showing the world that they were the top of the roost and the best at whatever they did. As the last beats of Auld Lange Syne play out, ringing in your ears, the Americans will be surely remembered as those that started it all. Well done the Federal Reserve; well done the successive governments.Above all, well done the banksters, the gangsters of the financial world. Let’s remember the old acquaintances… Shid ald akwentans bee firgot, an nivir brocht ti mynd?
Originally posted: Getting Ready for the Big One: February 2014
Pornvestments | The Stooges are Running the Show, Obama | Banks: The Right Thing to Do | Bitcoin Bonanza | The Super Rich Deprive Us of Fundamental Rights | Whining for Wine |Cost of Living Not High Enough in EU | Record Levels of Currency Reserves Will Hit Hard | Internet or Splinternet | World Ready to Jump into Bed with China
Indian Inflation: Out of Control? | Greenspan Maps a Territory | Gold Rush or Just a Streak? | Obama’s Obamacare: Double Jinx | Financial Markets: Negating the Laws of Gravity |Blatant Housing-Bubble: Stating the Obvious | Let’s Downgrade S&P, Moody’s and Fitch For Once | US Still Living on Borrowed Time | (In)Direct Slavery: We’re All Guilty |
Express (NYSE: EXPR) is expected to report its Q3 earnings at $0.25 ...
Some of the stocks that may grab investor focus today are:
Wall Street ...
This book encourages you to invest most of your savings abroad, away from the imperfect but good protections offered by US law. I wrote a piece on this idea a few years ago that pointed out the problems with this idea. (Note to those reading this at Amazon.com, Google “Aleph In Defense of Home Bias” and you will find my article.)
Now don’t get me wrong — I invest in foreign companies. One-third of the assets that I run are invested abroad, in both developed and emerging markets. International investment is good, but it is not a panacea. There is no inherent advantage to investing abroad versus investing in the US. Even if emerging markets are growing more rapidly, that doesn’t mean they are better to buy. because valuations are higher, and government policies are more fickle.
This book is rather facile about problems in emerging markets. Problems with Brazil led me to sell my stocks when Dilma Rousseff was elected President. Lula promoted markets, Dilma did not.
I found this book to be long on cliches, and short on sharp ideas. If you try to take the advice as an amateur, you will have a hard time doing it. If you decide to hire an advisor other then the authors, you won’t get what the book offers. Thus I can tell you that the book is merely a marketing pitch for their services, and so I tell you to avoid it.
Already expressed, though I would also add that the book didn’t feel right. Too casual in the way that it treated topics.
Who would benefit from this book: Few would benefit from the book; the theory is flawed. If you want to, you can buy it here: Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing.
Full disclosure: The publisher sent me the book after asking me if I wanted it.
If you enter Amazon through my site, and you buy anything, I get a small commission. This is my main source of blog revenue. I prefer this to a “tip jar” because I want you to get something you want, rather than merely giving me a tip. Book reviews take time, particularly with the reading, which most book reviewers don’t do in full, and I typically do. (When I don’t, I mention that I scanned the book. Also, I never use the data that the PR flacks send out.)
Most people buying at Amazon do not enter via a referring website. Thus Amazon builds an extra 1-3% into the prices to all buyers to compensate for the commissions given to the minority that come through referring sites. Whether you buy at Amazon directly or enter via my site, your prices don’t change.