Dallas Fed Latest Economic Contraction Confirmation; Survey Respondents’ Gloom Soars
by Zero Hedge - August 29th, 2011 10:52 am
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
The second economic disappointment of the day comes from the Dallas Fed, which dropped from -2.0 to -11.4 on expectations of -9.0- this was the 4th consecutive negative print month. The report was, in a word, horrible, with just 2 of the 15 constituent indices posting an increase, and the bulk solidly in the red, led by Unfilled and New Orders which dropped 16.8 and 11.2, respectively: not good for economic growth. On the employment side there was nothing good either, with both employment and hours worked declining by -6.7 and -10.1, respectively. The only components rising were materials Inventories (must.restock.always), and CapEx, up 10.7. The most critical Production index declined by 9.7, just barely positive at 1.1, and the second lowest in 2011, with a worse number before that printing all the way back in 2009. Yet the most descriptive are the responses from the survey respondents themselves: two words “peak gloom.” And why not: the ISM will print in the mid 40s and the NFP could well be negative. Which of course will send stocks soaring even higher on QE3 being priced in for the 666th time.
Break down :
Dallas Fed Conditions:
Production:
And the always amusing comments from the Survey Respondents – absolutely nothing good here.
Primary Metal Manufacturing
There has been a significant decrease in new orders over the past three to four weeks.
Fabricated Metal Product Manufacturing
Our high revenue period is usually April through September. This year we increased as expected but have seen a decline beginning in late June and continuing into August, with a continuing declining forecast for September. We had to let go our temporary labor in July and August as well as a few regular team members. This was a very difficult decision since we focus on creating manufacturing jobs. We believe customers, markets, etc. became concerned with the length of time it took Congress to address the debt issue. This resulted in customers taking a wait and see attitude. Business has not gone away, but it has been pushed out due to risk concerns.
Some of our competitors are going out of business.
Nonmetallic Mineral Product Manufacturing
Low levels of consumer confidence are reflected in the housing numbers. Continued unemployment coupled with eroding stock market values…
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DiggThe Great Snore of 2011
by Zero Hedge - August 29th, 2011 10:23 am
Courtesy of ZeroHedge. View original post here.
Submitted by madhedgefundtrader.
As I expected, Ben Bernanke’s long awaited Jackson Hole speech turned out to be a huge nonevent. He effectively put off any serious action to repair the sagging economy until the next Federal Open Market Committee (FOMC) meeting on September 20-21. He will look at the world then and decide if the global financial system needs any further assistance to avoid a collapse.
His reasoning? The economy is already humming along well enough to postpone any further stimulative action. In fact, he stated that he expects GDP to be stronger in the second half than in the first. This is in sharp contrast to the market’s opinion that things are going to hell in a hand basket, and that Armageddon is near.
Who is right? Mr. Bernanke, or Mr. Market? Could “surprise at the failure of the economy to accelerate” become the most commonly used phrase in future Fed releases?
The Dow immediately tanked 200 points on news that Ben wasn’t pouring another pint of 200 proof ethanol into the punch bowel. It then rallied 400 points. Gold soared by $70 in anticipation of a big “RISK OFF” trade next week. At the end of the day, stocks and gold were rising at the same time, which never happens. I thing that traders were just throwing up their hands in despair and going flat so they could board up their windows ahead of the approaching hurricane.
With Ben now out of the picture, I think we are in for a period a continued tearing your hair out type market volatility that could extend all the way into the next FOMC meeting in 3 ½ weeks. Look for the S&P 500 (SPX) to continuing putting in a narrowing triangle off the 1,100 bottom that could pave the way for a more robust move to the upside in the fall. If 1,100 fails, the market will try again to find a floor just above 1,000.
I believe that there is a 50% chance that we already saw the bottom of this move at 1,100, and a 50% probability that it is at the 1,000 handle. Let me toss this silver dollar and I’ll tell you where it is for sure. Cling. And the answer is….
To see the data, charts, and graphs that support this research piece,…
“Can’t Let Any Low-Volume Meltup Go To Waste”
by Zero Hedge - August 29th, 2011 10:22 am
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
Perhaps it is time to redefine the term “distribution.” And somehow everyone has forgotten to bash High Frequency Trading on days when it is the primary bidder of a levitating stock market.
Pending Home Sales Another Miss
by Zero Hedge - August 29th, 2011 10:09 am
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
The NAR just reported that pending home sales, yet another metric of that long-forgotten housing market, dropped 1.3% in July, on expectations of -1.0%, and down from 2.4% in June. Market reaction is none, because this metric does not matter: all that matters is who and what else petrodollars can bail out next. From the report: “The Pending Home Sales Index,* a forward-looking indicator based on contract signings, slipped 1.3 percent to 89.7 in July from 90.9 in June but is 14.4 percent above the 78.4 index in July 2010. The data reflects contracts but not closings.” And the soundbite from the always hilarious and massively discredited and conflicted Larry Yun: “The market can easily move into a healthy expansion if mortgage underwriting standards return to normalcy,” he said. “We also need to be mindful that not all sales contracts are leading to closed existing-home sales. Other market frictions need to be addressed, such as assuring that proper comparables are used in appraisal valuations, and streamlining the short sales process.” Ah yes, mortgage underwriting standards, in other words if banks were to actually do something about mortgage that are delinquent by nearly 2 years. Those standards?
More amusement from the NAR:
The PHSI in the Northeast declined 2.0 percent to 67.5 in July but is 9.7 percent above July 2010. In the Midwest the index slipped 0.8 percent to 79.1 in July but is 18.8 percent above a year ago. Pending home sales in the South fell 4.8 percent to an index of 94.4 but are 9.5 percent higher than July 2010. In the West the index rose 3.6 percent to 110.8 in July and is 20.6 percent above a year ago.
“Looking at pending home sales over a longer span, contract activity over the past three months is fairly comparable to the first three months of the year, and well above the low seen in April,” Yun said. “The underlying factors for improving sales are developing, such as rising rents, record high affordability conditions and investors buying real estate as a future inflation hedge. It is now a question of lending standards and consumers having the necessary confidence to enter the market.”
So… this miss is good news Got it.
Did You Know That The Upcoming Italian Auction Can Spark Contagion That Touches A BIG US Bank?
by Zero Hedge - August 29th, 2011 10:03 am
Courtesy of ZeroHedge. View original post here.
Submitted by Reggie Middleton.
Early last year, I released The BoomBustBlog Sovereign Contagion Model, a sovereign contagion model which illustrated prospective paths of contagion throughout much of the financially developed world. This model was unique in that it didn’t simply assume “x” country owed “y” country “z” among, but attempted to focus on the nuances that could cause contagion to veer off of the expected course and into unexpected areas. The update to said contagion model this year is the research note released to subscribers, The Inevitability of Another Bank Crisis. This piece garnered significant interest from the banking sector, as could have been expected. It was followed by the blog post Is Another Banking Crisis Inevitable? and the keynote speech at ING’s Valuation Conference in Amsterdam.
On August 12th of this year I released research the Bank Run Liquidity Candidate Forensic Opinion. In said piece I made it very clear that the subject bank in question has roughly 40% of its equity exposed to Italy (the economy to be affected by the debt crisis that cannot be rescued via bailout), among a plethora of other risk factors (those who don’t subscribe can access the free preview French Bank Run Forensic Thoughts – pubic preview for Blog). This bank has proven to be an exceptional short candidate that has (and still is) throwing off extranormal returns for everyone who moved on the research on a timely basis. The bank’s price movement was pertinent due to the acute stress that Italy was experiencing, stress that we warned of thoroughly a year in advance – please reference Italian Bank Problems Now At The Forefront. It is now apparent to the markets in general that several French banks are at risk, and in no small part due to Italy’s woes.
- France, As Most Susceptible To Contagion, Will See Its Banks Suffer
- Observations Of French Markets From A Trader’s Perspective
- The French Government Creates A Bank Run? Here I Prove A Run On A French Bank Is Justified And Likely
The EU has implemented several mechanisms to stem Italy’s financial fall, including having the ECB outright purchase Italian debt on the secondary market (charter prevents primary market direct purchases). Alas, this artificial manipulation of market forces tends…
Zynga To Delay IPO Due To “Market Conditions”
by Zero Hedge - August 29th, 2011 10:00 am
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
Nobody could have seen this coming. From Reuters: “Zynga, the social games maker may delay its plans for an initial public offering until November because of poor market conditions, the New York Post newspaper reported late on Sunday. The New York Post, citing two sources with knowledge of Zynga’s plans, said the company hoped its shares would be listed as soon as possible but is “no longer in a rush because of the rocky stock markets.” Another source close to the company said its public debut could be delayed until November but the company will know more after Labor Day, the newspaper said.” Maybe Zynga can just find some of those sophisticated buyers of Sino Forest stock who were betting on a dead cat bounce, or all of those distressed funds who were bidding up the bonds at 50. If that fail, it can just approach the Sovereign Wealth Funds which bailed out the biggest (pro forma) Greek and American bank for a few days.
Prepare to Be Forgiven, Ye Mortgage Sinners
by Zero Hedge - August 29th, 2011 9:54 am
Courtesy of ZeroHedge. View original post here.
Submitted by RickAckerman.
Although we waxed skeptical here the other day about Warren Buffett’s just-announced $5 billion stake in Bank of America, we allowed for the possibility that the deal will provide a handsome payoff to him no matter what happens to the bank. B of A could implode, after all, a victim of sinking collateral values for its mortgage loans, and of litigation over its securitized-lending business. There is also the wild card of homeowners challenging lenders in court to show clear title to properties that are in line for foreclosure. In fact, this issue alone has the ability to capsize the global financial system, since “clear title” is exactly what ceased to exist when the feather merchants of the banking world leveraged out real estate to-the-max earlier in the decade to create an $800 trillion derivatives edifice – the Mother Lode of Digital Money, as it were. All of that sum must be viewed at the moment as deflationary overhang, by the way – not to mention, a key stumbling point for those who argue that The Great Economic Crisis must eventually precipitate out as hyperinflation.
So, how do you produce even mild inflation, let alone hyperinflation, with the housing market in a full-blown Depression? Most surely not by expanding the capacity of banks to make mortgage loans. That’s been tried to death – first moderately, then aggressively, and finally desperately — with zero success. Despite trillions of dollars worth of mortgage stimulus and supports both implied and real, the residential market looks even grimmer than it did a few years ago. Existing-home sales fell 3.5 percent in July despite the fact that prices were 4.4 percent lower than in July 2010. Now that’s deflation. There’s also the $6.6 trillion loss of home equity that has occurred since the onset of the housing bust five years ago. Will it ever return? We can’t imagine how, although it’s possible that Buffett and our President think they see a way. The two have been pretty tight lately, raising suspicions that they had hatched a rescue plan for housing before the Sage of Omaha sank a pile of dough into B of A preferred stock, a fat six-percent dividend, and warrants exercisable for $7.14 a share. (The stock ended the week at 7.75 after trading as high as $8.80).…
Bank Of America Sells 13.1 Billion Shares In China Construction Bank, Raises Another $8.3 Billion “It Does Not Need”
by Zero Hedge - August 29th, 2011 9:48 am
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
Bank Of America continues to desperately raise firesale capital (which it most certainly does not need).
- BANK OF AMERICA AGREES TO SELL 13.1B SHRS OF CHINA CONSTRUCTION
- BANK OF AMERICA SEES SALE GENERATING $8.3B PROCEEDS
- BANK OF AMERICA KEEPS 5% STAKE IN CCB
- BOFA SEES CUTTING RISK-WEIGHTED ASSETS BY ABOUT $16.1B BASEL
- BOFA SEES SALE GENERATING ABOUT $3.5B ADDED TIER 1 CAPITAL
- BOFA SEES GAIN $3.3B ON SALE
In summary: That’s $13.3 billion in new capital in the past week that BofA promises it does not need. At all. As for the buyers: the same sovereign wealth funds that just bailed out the Greek banking sector for a few more days.
As ECB Monetizes Another €7 Billion In PIIGS Debt, Trichet Says A Prudent ECB “Is Not The Fed”
by Zero Hedge - August 29th, 2011 9:23 am
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
Earlier today we speculated that the latest ECB monetization tally of insolvent PIIGS debt would be between €10 and €15 billion. Well, the final number was below the bottom end of the range or €6.7 billion (with €1.3 billion maturing). This follows €22 billion and €14.3 billion in the past two weeks, bringing the total under the ECB’s debt monetization facility to €120.3 billion, a number that Germany must be simply ecstatic about. Keep in mind this is debt that local banks can not pledge to the ECB in return for 100 cents on the euro, and in essence removes liquidity from the system. What was hilarious, however, is the immediate defensive posture by the ECB’s Trichet who said on the subject of whether ECB taking on too much risk, that the increase in ECB’s balance sheet not as large as Fed or BoE. He also said that “Everybody understands that particularly in the present situation that the ECB would maintain a solid anchoring of inflation expectations,” Trichet told the European Parliament’s economic committee during a special session called to discuss the debt crisis. “All countries would be hampered” if they became unanchored, Trichet added. Bottom line – the most modern spin on an old maxim: “the ECB is not the Fed” – we are not sure if that is a good or a bad thing: frankly it is all central planning. What we are concerned about is that contrary to what self-aggrandizing economist PhD’s, somehow the ECB did not refute the fact that there is central bank risk. Yes, even with all that fiat printing capacity.
Personal Saving Rate Plunges From 5.5% To 5.0% As July Energy Expenditures Soar
by Zero Hedge - August 29th, 2011 8:51 am
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
July personal income and expenditures were quite surprising in that while many were expecting the drop in the market to force consumer saving to upshift (lower spending than income), not only was this not true, but expenditures spiked by 1 whole percent from -0.2% to 0.8%, on expectations of 0.5%, even as Personal Income came in line with expectations of 0.3%, up from a revised 0.2% (concurrent with extensive prior data revisions). This was the biggest difference between a monthly change in income and spending since October 209. The net result was a plunge in the savings rate from 5.5% to 5.0%. And while on the surface this would be good news, as in Americans are spending again, a quick look at the PCE components indicates that virtually the entire surge is due to a spike in Energy goods and services. In other words, the entire spike in spending was to… pay for gas and associated energy expenses. Which makes sense: in June this was a drop of -4.5%, it is only logical that the subsequent jump in Brent and WTI forced American savings to drop. All in all: in July Americans continued to max out their credit cards to pay for gas. As for the income side, transfer payments as a % of spending refuse to budge: thank you Uncle Sam.
The source for the spike in PCE:
Transfer Payments:
Monthly difference between Spending and Income:
And the Savings Rate:
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