Christmas Property Sale-down 83% from peak levels
Europe has its own property collapse, although not too many talk about it. The super hot market in Ireland, is totally imploding. We have argued for the mainly Spanish property market to resume the implosion, as there simply are too many empty houses, and land to build on for the next 40-50 years. With unemployment spiking further, the property economies of Europe are facing the same future, as some of the worst hit areas in the US. Today we get a true story of what is happening in Dublin. From the Independent in Ireland;
Global PMIs breaking down
One chart tells it all. This is what Contraction looks like. Just breaking the support levels.
GDP-get the consumer back
With the GDP falling, the consumer needs to come back asap. From D Short;
Over the time frame of this chart, the Personal Consumption Expenditures (PCE) component has shown the most consistent correlation with real GDP itself. When PCE has been positive, GDP has been positive, and vice versa. PCE in the latest update came at 1.63 of the 2.0 real GDP. However, the 1.63 is a downward revision from the Advance Estimate of 1.72.
For a long-term view of the role of personal consumption in GDP and how it has increased over time, here is a snapshot of the PCE-to-GDP ratio since the inception of quarterly GDP in 1947. Full charts below.
China slows-back to the drawing table
Many have forgotten, China is supposed to bail out the World, but something else is happening. It seems growth will return as the main obsession for the Chinese rulers. Back to the drawing board and start painting those perfectly decoupled 8-9% growth rates, irrespective of what is going on in the World. Flash PMI out of China suggests trouble ahead. What happens when China does not want to buy more debt? From Markit;
• Flash China Manufacturing PMITM at 48.0 (51.0 in October). 32-month low.
• Flash China Manufacturing Output Index at 46.7 (51.4 in October). 32-month low.
More charts below.
News That Matters
Ft.com
Nomura has approached big private equity firms about the possible sale of domestic businesses, including its real estate arm, as the Japanese bank moves to shore up its capital buffers, reports the FT. http://ftalphaville.ft.com/thecut/2011/11/23/759061/nomura-steps-up-its-asset-sale-plans/
The US Federal Reserve is unlikely to ease monetary policy any further until it has settled on a new communication strategy, according to the minutes of its November meeting released on Tuesday, reports the FT. http://ftalphaville.ft.com/thecut/2011/11/23/759041/fed-unlikely-to-institute-qe3-2/
Egypt’s ruling generals have promised to speed up the handover of power to elected civilians but the gesture failed to placate the hundreds of thousands of protesters who have packed Cairo’s Tahrir Square in a replay of the demonstrations that brought down the rule of Hosni Mubarak, http://ftalphaville.ft.com/thecut/2011/11/23/759011/egypt%e2%80%99s-generals-pledge-quick-handover-2/
Goldman Sachs’ planned redevelopment of one of the City of London’s largest unoccupied offices hit a snag on Tuesday after the government granted protected status to murals adorning the front of the building, http://ftalphaville.ft.com/thecut/2011/11/23/758981/goldman-hits-a-wall-over-city-hq-plan/
More Stress Tests-just what the market needed
Just when everybody just finished buying the dip, Fed comes with the Kicker, another stress test of the US Banks. This is definitely not what the fragile market wanted to hear. Not that any stress tests have been creditworthy, but this will revive the uncertainty in the markets. ES futures plunging after hours…Santa Claus rally might not happen this year? Full press release from the Fed:
The Federal Reserve Board on Tuesday issued a final rule requiring top-tier U.S. bank holding companies with total consolidated assets of $50 billion or more to submit annual capital plans for review.
Also, the Federal Reserve launched the 2012 review, issuing instructions to the firms, including the macroeconomic and financial market scenarios the Federal Reserve is requiring institutions to use to support the stress testing used in their capital plans. As a part of the review, known as the Comprehensive Capital Analysis and Review (CCAR), the Federal Reserve in 2012 will carry out a supervisory stress test based on the same stress scenario provided to the firms to support its analysis of the adequacy of the firms’ capital.
How good is the Role model?-Germany’s Finances Not as Sound as Believed
Merkel & Co like us to believe, Germany is the “promised” country, with finances in good shape. Well, things aren’t that good. Germany next? Spiegel reports;
The German government likes to pride itself on its solid finances and claim the country is a safe haven for investors. But Germany’s budget management is not nearly as exemplary as it would have people believe, and the national debt is way over the EU’s limit. In some respects, Italy’s finances are in much better shape.
When it comes to fiscal stability, frugality and responsible economic management, German Chancellor Angela Merkel and Finance Minister Wolfgang Schäuble have only one role model: themselves.
The chancellor praises herself and her team for having “a clear compass for reducing debt,” and insists: “Getting our finances in order is good for our country.”
Window of Opportunity for Rajoy?
Rajoy won the elections in Spain over the weekend. A name not too experienced is supposed to lead the increasingly collapsing Spanish Economy. Fitch is already out “warning” Rajoy to start acting, and it better be fast. We have covered the problems of Spain for the past six months. Unfortunately, nobody has really addressed those problems, as the world has been obsessed with the Greek and Italian situation. With rates spiking, and inversion of the yield curve reaching levels not seen in fifteen years, people are acknowledging the Spanish Disease. From El Pais;
Just two days after the opposition Popular Party won an absolute majority in Sunday’s general elections, Fitch Ratings urged the incoming government to come up with new measures to tackle the public deficit.
“The government’s fresh mandate, following the victory, with an outright majority, of the Popular Party in Sunday’s parliamentary election, provides a window of opportunity,” Fitch said. “If it is to improve market expectations of its capacity to grow and reduce debt within the confines of the euro zone, it must positively surprise investors with an ambitious and radical fiscal and structural reform program.”
Rajoy has no time to waste, and Merkel is probably already losing patience. Povre Rajoy….
More below.
Fed Minutes
From the Fed’s minutes:
Financial markets were quite volatile over the period since the September FOMC meeting. Investor senti- ment was strongly influenced by prospects for Europe, as market participants remained highly attuned to de- velopments regarding possible steps to contain the fis- cal and banking problems there. Economic data releas- es that were, on balance, somewhat better than market participants expected provided some support to finan- cial markets.
Longer-term Treasury yields declined appreciably fol- lowing the release of the September FOMC statement. Investors reportedly viewed the Committee’s assess- ment of the economic outlook as more downbeat than anticipated. In addition, the announcement that the Federal Reserve would lengthen the average maturity of its portfolio by purchasing longer-term Treasury securi- ties and selling an equivalent amount of shorter-term Treasury securities reportedly contributed to the de- cline in longer-term yields on the day. Yields on cur- rent-coupon agency MBS also moved lower on the an- nouncement that the Federal Reserve would begin to reinvest principal payments on agency securities in agency MBS. Over the following weeks, movements in yields were driven by shifts in investors’ assessments of the ongoing efforts to address the European fiscal and banking situation and by somewhat stronger-than- expected U.S. economic data. On balance since the September FOMC meeting, Treasury yields on shorter- dated securities and the expected path of the federal funds rate implied by money market futures quotes were not much changed. Yields on Treasury securities with maturities beyond 10 years moved down. Meas- ures of near-term inflation compensation derived from nominal and inflation-protected Treasury securities rose slightly over the intermeeting period, while similar measures of longer-term inflation compensation were about unchanged.
MF Global Revelations Keep Getting Worse
MF Global is somehow “escaping” the main stream media. This is a huge scandal and people have lost life savings due to reckless behavior. Remember, this is not happening in some small country majority of people can’t even pronounce the name of, this is happening in the US, today. Another great piece by Tavakoli.
Shortfall estimated at $1.2 billion or more (up from $600 million)
“Repo-to-Maturity” is a “Total Return Swap-to-Maturity,” a Type of Credit Derivative
Probable Shortfalls Throughout 2011
Regulators Waive Required Tests for Jon Corzine
Jon Corzine to Credit Derivatives Head: Next Time “Double Up”
JT Note: Subsequent to this report Jim Parascandola told me that he was never told to increase the size of any position, albeit his trades were profitable.
Questions About How MF Global Became a Primary Dealer
MF Global Wrote Rubber Checks for some Electronic Checks for Others
Tip-Offs for Some Customers?
CFTC’s Gary Gensler Didn’t Act
MF Global Debacle Damages a Key Global Market
Full reading below.
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