Category Archives: USA

When hedge funds are overwhelmingly on the same side as the broader market, you know it’s a crowded trade.

 

When even hedge funds are overwhelmingly on the same side of an investment as the broader market, you know it’s a crowded trade.

This is where the euro finds itself going into 2015. Traders, investment banks, asset managers and the so-called “smart money” of hedge funds are all betting on a weaker euro, leaving the only point of disagreement being by how much.

The rationale behind it is simple: the European Central Bank will aggressively ease monetary policy by undertaking a large-scale government bond buying programme to prevent low growth and inflation from strangling the region’s economy.

The contrast between monetary easing and weak economic growth in the euro zone with likely monetary tightening and stronger growth in the United States should push the euro lower.

ECB president Mario Draghi has indicated that the central bank is poised to expand its balance sheet by around 1 trillion euros of asset purchases, including politically sensitive purchases of government debt.

It is a policy that has already been adopted by the U.S., UK and Japanese central banks since the 2007-08 financial crisis, with varying degrees of success.

But the only problem with the expectation of a lower euro next year is that everybody shares it.

“I’ve never seen such a big consensus in my 20 years of investment life,” said Yves Kuhn, chief investment officer at Banque Internationale à Luxembourg.

“I just don’t like a consensus like that.”

http://www.reuters.com/article/2014/12/09/markets-euro-idUKL6N0TS3GT20141209

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    It certainly could be, but the odds do not favor it. Statistically speaking, it is far more likely that a run-of-the-mill correction is now underway and working its way through each sector of the market, to varying degrees of severity. Counter-trend rallies are sharp and short (think Wednesday), which is…
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  • 69
    The August 2013 gross domestic product report by the US Bureau of Economic Analysis drew little attention, but it contained a fairly remarkable piece of data: Inflation-adjusted GDP per capita in the United States hit a new all-time high in the second quarter of 2013, the first time a new…
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  • 64
    För 10 år sedan verkade den globala ekonomin att vara på bättringsvägen.  Räntorna gick ner till 1 %, Storbritannien var i sitt 12:e år av oavbruten tillväxt, Kina var en del av WTO och alla trodde på att marknaderna själva kunde korrigera sig. Den monetära systemkrasch som kom var oförutsedd…
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  • 62
      For investors, the key to 2017 will not be Brexit, nor the French elections but rather USA bond yields. If the 10-year yield breaches 3pc we would expect major dislocations in many markets and a huge repricing of assets across the globe.
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A Checkpoint with this Week’s Expected End of QE

 

What’s New: With the curtain falling on the Fed’s QE. let’s take a look at what’s been happening of late for US Treasuries. The yields on the 10-, 20- and 30 year Treasuries have generally trended downward since the end of 2013.

The latest Freddie Mac Weekly Primary Mortgage Market Survey last Thursday puts the 30-year fixed at 3.92%, well off its 4.53% 2014 peak during the first week of January and its lowest rate since June 2013.

 

Here is a snapshot of the 10-year yield and 30-year fixed-rate mortgage since 2008.

A log-scale snapshot of the 10-year yield offers a more accurate view of the relative change over time. Here is a long look since 1965, starting well before the 1973 Oil Embargo that triggered the era of “stagflation” (economic stagnation with inflation). I’ve drawn a trendline connecting the interim highs following those stagflationary years. The red line starts with the 1987 closing high on the Friday before the notorious Black Monday market crash. The S&P 500 fell 5.16% that Friday and 20.47% on Black Monday.

Here is a long look back, courtesy of a FRED graph, of the Freddie Mac weekly survey on the 30-year fixed mortgage, which began in May of 1976.

A Perspective on Yields Since 2007

 http://www.advisorperspectives.com/dshort/updates/Treasury-Yield-Snapshot.php

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    The Federal Reserve holds its last policy meeting of the year on Tuesday and Wednesday, resulting in plenty of material to be scoured for clues about when interest rates will start inching up. The central bank’s policy committee releases its statement and new economic projections at 2 p.m. Wednesday, followed…
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    Several Fed Officials Said Forecasts Overstated Rate Rise Meeting minutes revealed that in March, Fed Reserve policy makers discussed that a rise in their median projection for the main interest rate exaggerated the likely speed of tightening. Treasury yields rose last month after policy makers predicted that the benchmark interest…
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  • 61
    Here’s what to look for from the Federal Reserve Bank of Kansas City’s annual economic symposium in Jackson Hole,Wyoming, which runs Aug. 21-23. -- Yellen’s keynote: The highlight will be Fed Chair Janet Yellen’s speech Aug. 22 on labor markets at 10 a.m. New York time. She’ll probably reiterate the Fed’s view…
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Jack vs Jeff: The two biggest ecommerce billionaires in the world are total opposites

 

In 1990, Jack Ma was teaching English to a group of university students at Hangzhou Dianzi University. Who would have thought that, 24 years later, he would be China’s richest man?

In that same year, Jeff Bezos was working at D.E. Shaw & Co., an investment management firm based out of New York City. After graduating summa cum laude from Princeton university with a Bachelor’s degree in computer science and electrical engineering, there was no doubt Bezos would end up in tech, it was just a matter of time.

Years later, both of them would come up with similar names for their companies. Bezos wanted Cadabra, a name that signified magic. Ma wanted Alibaba, hoping that the name would open doors with an “open sesame”. But that might be as similar as they can get: ecommerce and magic.

These origin stories are tell-tale signs of two diverging philosophies and the companies they gave birth to. And yet they meet in some inroads. Just one month after Alibaba’s IPO, let’s take a deeper look at the two founders and the companies that are destined to shape the future of online retail.

Putting customers first?

Amazon is notorious for its obsession with customers. In fact, it’s Bezos’ go-to mantra and arguably his number one rule when it comes to how the culture of Amazon should be set. Bezos is a customer-centric founder:

We have so many customers who treat us so well, and we have the right kind of culture that obsesses over the customer. If there’s one reason we have done better than of our peers in the Internet space over the last six years, it is because we have focused like a laser on customer experience, and that really does matter, I think, in any business. It certainly matters online, where word of mouth is so very, very powerful.

But Jack Ma has a slightly different angle. Ma told CNBC newscasters, minutes after Alibaba listed on the New York Stock Exchange on September 22, “Customers first, employees second, and shareholders third.” What the newscasters didn’t realize was that when Ma thinks of customers, he’s not talking about everyday consumers in the same way as Bezos. To Ma, his customers are the small businesses that use the firm’s Taobao and Tmall marketplaces. Speaking at Stanford in 2013, Ma outlined this clearly:

Alibaba is not a company for consumers […] I knew that we didn’t have the right DNA to become a consumer company. The world is changing very fast, and it’s hard to gauge consumers’ needs. Small businesses know more about the needs of their customers. We had to empower our power sellers and our SME’s to support their customers.

This divergence is profoundly clear when you dig into stories about Amazon’s dealings with small businesses. In 2006, Amazon throttled the sales of a 200-year-old German business selling knives. In 2007, when Amazon released the Kindle, it didn’t reveal the US$9.99 price to publishers until the day of the release. And just this year, Amazon is making it harder for customers to buy books from publisher, Hachette, all because, as Forbes notes, “Amazon wants a bigger piece of its suppliers’ profit margins to purportedly pass on to its customers in the form of lower prices.” Amazon functions like a monopolistic empire.

You just won’t see this kind of behavior at Alibaba. The philosophy is poles apart from Amazon’s. This is what Jack Ma had to say on this very topic at Stanford in 2011:

I believe in the internet time, there is no empire thinking. I hate the empire. Empire thinking means join me or I’ll kill you. And I don’t like that model. I believe the ecosystem. […] I believe everybody should be helping each other, connecting each other. It’s an ecosystem. So Taobao become so big, so fast, and I worry about that. Give the industry some opportunity, give the competitors some opportunity.

See: Jack Ma’s Last Speech as Alibaba CEO
## No money, no technology, and no plans

When you dig deeper into the business philosophies of these two giants, you start to see even deeper discrepancies. When Ma spoke again at Stanford in 2013, he outlined some peculiaritiesof Alibaba’s founding story.

The ignorant are not afraid. There were three reasons behind our success. They were very valid points. First, we had no money. Second, we didn’t understand technology. Third, we never planned.

Alibaba started with RMB 50,000. That’s about US$8,150. When Amazon started out, Bezos got US$300,000 from his parents.

Ma was an English teacher before starting his entrepreneurial journey. Bezos graduated from an Ivy League school.

In contrast to Ma’s “no plan” (he goes into it much deeper here), Bezos is the meticulous planner. In a short video in 2009, following the acquisition of Zappos, Bezos outlines the “only things he knows.” The list includes: obsessing over customers, inventing, and thinking long-term. Bezos adds:

Any company that wants to invent on behalf of customers has to be willing to think long-term. And it’s actually much rarer than you might think. I find that most of the initiatives that we undertake may take five to seven years before they pay any dividends for the company […] It requires and allows a willingness to be misunderstood.

But in one or two ways, these tech titans are growing. Today, Ma’s net worth is US$21.8 billion, making him the 37th richest person in the world. Bezos is worth US$30.5 billion, putting him 21st on the list.

Epilogue: Beyond Alibaba, beyond Amazon, beyond money, beyond humanity

https://www.techinasia.com/jack-ma-jeff-bezos-amazon-alibaba-billionaires-ecommerce/

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The US debt level of over $17.9 trillion would take more than 398 million years to pay off.

Debt-Chain-Slavery

October 22, 2014
Santiago, Chile

The US government’s debt is getting close to reaching another round number—$18 trillion. It currently stands at more than $17.9 trillion.

But what does that really mean? It’s such an abstract number that it’s hard to imagine it. Can you genuinely understand it beyond just being a ridiculously large number?

Just like humans find it really hard to comprehend the vastness of the universe. We know it’s huge, but what does that mean? It’s so many times greater than anything we know or have experienced.

German astronomer and mathematician Friedrich Bessel managed to successfully measure the distance from Earth to a star other than our sun in the 19th century. But he realized that his measurements meant nothing to people as they were. They were too abstract.

So he came up with the idea of a “light-year” to help people get a better understanding of just how far it really is. And rather than using a measurement of distance, he chose to use one of time.

The idea was that since we—or at least scientists—know what the speed of light is, by representing the distance in terms of how long it would take for light to travel that distance, we might be able to comprehend that distance.

Ultimately using a metric we are familiar with to understand one with which we aren’t.

Why don’t we try to do the same with another thing in the universe that’s incomprehensibly large today—the debt of the US government?

Even more incredible than the debt owed right now is what’s owed down the line from all the promises politicians have been making decade after decade. These unfunded liabilities come to an astonishing $116.2 trillion.

These numbers are so big in fact, I think we might need to follow Bessel’s lead and come up with an entire new measurement to grasp them.

Like light-years, we could try to understand these amounts in terms of how long it would take to pay them off. We can even call them “work-years”.

So let’s see—the Social Security Administration just released data for the average yearly salary in the US in fiscal year that just ended. It stands at $44,888.16.

The current debt level of over $17.9 trillion would thus take more than 398 million years of working at the average wage to pay off.

This means that even if every man, woman and child in the United States would work for one year just to help pay off the debt the government has piled on in their name, it still wouldn’t be enough.

Mind you that this means contributing everything you earn, without taking anything for your basic needs—which equates to slavery.

Now, rather than saying that the national debt is reaching $18 trillion, which means nothing to most people, you could say that the debt would currently take almost 400 million work-years to pay off. Wow.

When accounting for unfunded liabilities, the work-years necessary to pay off the debt amount to astonishing 2.38 BILLION work-years…

And the years of slavery required are only growing.

As an amount alone the debt is meaningless, but in terms of your future enslavement it can be better understood.

To put this in perspective even further—what was the situation like previously?

At the end of the year 2000, the national debt was at $5.7 trillion, while the average yearly income was $32,154. That’s 177 million work-years.

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12 Charts That Show The Permanent Damage That Has Been Done To The US Economy

Most people that discuss the “economic collapse” focus on what is coming in the future.  And without a doubt, we are on the verge of some incredibly hard times.  But what often gets neglected is the immense permanent damage that has been done to the U.S. economy by the long-term economic collapse that we are already experiencing.  In this article I am going to share with you 12 economic charts that show that we are in much, much worse shape than we were five or ten years ago.  The long-term problems that are eating away at the foundations of our economy like cancer have not been fixed.  In fact, many of them continue to get even worse year after year.  But because unprecedented levels of government debt and reckless money printing by the Federal Reserve have bought us a very short window of relative stability, most Americans don’t seem too concerned about our long-term problems.  They seem to have faith that our “leaders” will be able to find a way to muddle through whatever challenges are ahead.  Hopefully this article will be a wake up call.  The last major wave of the economic collapse did a colossal amount of damage to our economic foundations, and now the next major wave of the economic collapse is rapidly approaching.

http://theeconomiccollapseblog.com/archives/12-charts-that-show-the-permanent-damage-that-has-been-done-to-the-u-s-economy

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THINGS TO WATCH IN FRIDAY’S JOBS REPORT

The Labor Department’s initial estimate of August job growth on Friday is expected to show another solid month of hiring. Economists surveyed by The Wall Street Journal forecast the economy added 225,000 jobs, which is roughly in between the 12-month average of 214,000 and the 3-month average of 245,000. The unemployment rate is expected to drop to 6.1% after ticking up to 6.2% in July. Beyond those headline figures, here are five things to watch on Friday.

Read the 5 things to watch here :  http://blogs.wsj.com/briefly/2014/09/04/5-things-to-watch-in-fridays-jobs-report-2/

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    Is there something seriously wrong with the economy? It's a scary prospect, and a concern that's gotten louder and louder over the past year. In economic circles, it goes by the alliterative name of "secular stagnation." And it's a phrase that Fed watchers are likely to hear more and more in the…
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Reminder :: Quantitative easing alone will not do the trick

Very low inflation poses a mounting threat to the economic stability of the eurozone. The rate of consumer price inflation has been below 1 per cent since October, and hence far below the European Central Bank’s (ECB) target of just below 2 per cent. This highlights the degree of weakness in the eurozone economy – and reinforces it – notwithstanding the optimism generated by a return to modest growth. And it further increases doubts over debt sustainability across the currency union: without a healthy dose of inflation, it is much harder for households, firms and governments to reduce their debt burdens.  To make things worse, in the most indebted countries, such as Greece, Portugal, Spain and Italy, inflation is even lower than the eurozone average. In response, many observers argue that the ECB should employ unconventional tools like quantitative easing (QE) to boost inflation. The problem is that QE alone is unlikely to be effective without a significant change in the ECB’s approach to monetary policy. The ECB needs to manage people’s expectations about the future path of demand, income and inflation more forcefully if it is to generate a proper economic recovery across the Eurozone. 

 

See more at: http://www.cer.org.uk/insights/quantitative-easing-alone-will-not-do-trick#sthash.00rBSkSf.dpuf

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Jackson Hole Guide: Investors Seek Yellen Job-Market View

Here’s what to look for from the Federal Reserve Bank of Kansas City’s annual economic symposium in Jackson Hole,Wyoming, which runs Aug. 21-23.

— Yellen’s keynote: The highlight will be Fed Chair Janet Yellen’s speech Aug. 22 on labor markets at 10 a.m. New York time. She’ll probably reiterate the Fed’s view that there is plenty of room for improvement in the labor market, according to Dean Maki, chief U.S. economist at Barclays Plc in New York.

— In July, the Federal Open Market Committee changed the language of its policy statement to highlight “significant underutilization of labor resources” as a justification for continued easy-money policies, even though the unemployment rate has fallen faster than Fed officials had forecast. The Fed chief will probably “point to measures like the elevated number of workers that are employed part time for economic reasons as evidence” of continued slack, Maki said.

— Yellen “would like to move away from this being a market-moving policy speech and get it back to being more of an academic exercise,” said Michelle Girard, chief U.S. economist at RBS Securities Inc. in Stamford,Connecticut. “I don’t think that she will use this as a tool to signal anything in terms of the Fed’s thinking, or certainly any meaningful change in the Fed’s thinking.”

— Wage focus: Tepid growth in wages is one area Yellen could choose to explore in more detail if she wants to advance the conversation, said Ethan Harris, co-head of global economics research at Bank of America Corp. in New York.

Stagnant Wages

— Average hourly earnings rose 2 percent in July from the year before, matching the mean increase over the past five years and down from 3.1 percent in the year ended December 2007, Labor Department data showed in the latest employment report. Separately, the employment cost index, a measure of labor cost changes, advanced 2 percent in June from the previous year.

— “A more careful look at wages would be a good place for her to plow some new ground,” Harris said. “They are way too weak, no sign of improvement, and if you’re going to defend why the Fed is going so slowly here, that’s your exhibit A: slow wage growth.”

— Conference participants will be mostly academics and central bankers; economists from major Wall Street banks weren’t invited this year.

— Draghi’s outlook: European Central Bank President Mario Draghi will follow Yellen with the keynote luncheon address. Investors will be seeking further insights into how weak his 18-nation economy is and whether he’s more likely to deploy Fed-style quantitative easing that the ECB has resisted.

Europe Stalls

— The euro area unexpectedly stalled in the second quarter as its three biggest economies failed to grow, adding to the region’s deflation risks. Draghi already committed this month to intensifying the unprecedented stimulus he unveiled in June if the outlook deteriorates.

— Draghi’s challenge may be compounded if Yellen remains focused on boosting the U.S. labor market, according to Alberto Gallo, head of macro credit research at Royal Bank of Scotland Group Plc in London. That’s because her bias toward continued stimulus will keep the dollar weak against the euro.

— Draghi “has tried to push down the euro and has so far won little ground against the dollar,” Gallo said. “The ECB is under even more pressure to do more.”

— Structural woes: Panel discussions on labor-market research presented at the conference may reveal “a growing awareness that underutilized labor resources may be a more permanent fixture,” rather than a cyclical shift, said Eric Green, global head of foreign exchange and rates at TD Securities USA LLC in New York.

‘Hawkish’ Tone

More here : http://www.bloomberg.com/news/2014-08-20/jackson-hole-guide-investors-seek-yellen-job-market-view.html

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FOMC not so important this month

The Federal Open Market Committee releases minutes from its last meeting on Wednesday afternoon, but Wall Street is already downplaying the event as a sideshow in comparison to an annual symposium on monetary policy in Jackson Hole, Wyoming, two days later.

“The FOMC minutes are telling us about what happened three weeks ago, and Jackson Hole, given its precedent for signaling meaningful policy shifts, has taken on this very elevated status; it gets that extra attention even if it is just an academic conference,” said Jeff Greenberg, senior economist at J.P. Morgan Private Bank.

While investors will parse Wednesday’s minutes for clues as to when the Fed will start hiking interest rates, “the real look ahead for any hints as to monetary policy is Jackson Hole,” said Art Hogan, chief market strategist at Wunderlich Securities.

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Secular stagnation :: Is there something seriously wrong with the economy?

Is there something seriously wrong with the economy?

It’s a scary prospect, and a concern that’s gotten louder and louder over the past year. In economic circles, it goes by the alliterative name of “secular stagnation.” And it’s a phrase that Fed watchers are likely to hear more and more in the months ahead.

Recent comments by the vice chairman of the Federal Reserve, Stanley Fischer, indicate questions within the central bank about whether the slow growth that has followed the recent recession could reflect, or at least could potentially morph into, longer-term issues within the economy. And while Fischer avoided the phrase “secular stagnation” in his Monday speech, Minneapolis Fed President Narayana Kocherlakota is planning to host a November symposium that directly addresses the issue of secular stagnation by name, CNBC has learned.

“I think there’s a lot of concern about how long this will last, and I think that’s certainly high on the agenda right now. At least people are entertaining that possibility now that it could drag on for longer,” said Brown University associate professor of economics Gauti Eggertsson, who authored (along with fellow Brown economist Neil Mehrotra) the landmark paper “A Model of Secular Stagnation,” which provides an in-depth explanation of how a long period of low growth could come about.

The theory of secular stagnation was first developed by Alvin Hansen, who wondered in the midst of the Great Depression whether diminishing investment opportunities in a maturing economy would stunt economic growth and permanently prevent full employment—at least in the absence of robust government intervention, which soon came in the form of the second world war.

These theories have found a new life in the aftermath of the so-called Great Recession, as the U.S. is experiencing (albeit to a much less dramatic degree) slow growth over a relatively long time period.

In November 2013, noted economist Larry Summers (who was considered, alongside current Chair Janet Yellen, a leading candidate to head the Fed) began to invoke the same phrase in arguing that the interest rate that the economy requires has fallen below zero.

The problem is that it is very difficult for nominal interest rates to fall below zero due to a constraint known as the zero lower bound. The upshot? Even with the Fed keeping short-term rates just above zero, market interest rates cannot possibly create adequate demand for loans, and thus the economy stagnates.

Without embracing the secular stagnation thesis, in Sweden on Monday, second highest-ranking Fed official Fischer gestured toward those concerns.

Noting slow growth in “labor supply, capital investment and productivity,” Fischer warned that “This may well reflect factors related to or predating the recession that are also holding down growth” and noted: “How much of this weakness on the supply side will turn out to be structural—perhaps contributing to a secular slowdown—and how much is temporary but longer than usual lasting remains a crucial and open question.”

“There was a level of concern on that point that I don’t think we generally hear,” said Nicholas Colas, chief market strategist at ConvergEx, referring to Fischer’s speech.

The stagnation debate will also be addressed by a new eBook entitled “Secular Decline,” which is due to be published on Aug. 18, and hosts contributions from Paul Krugman and Nomura’s Richard Koo, in addition to Summers, Eggertsson and Mehotra, and others.

http://www.cnbc.com/id/101914044

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