Around the Globe 05.22.2013

Target cuts full-year forecast after weak first quarter | Reuters.

TGT 05.21.2013

Target, Kohl’s and Walmart have all reported declines in same store sales for the 1st quarter. The retailing titans are quick to blame the weather over the actual reason, a huge social security tax increase for workers. Why would they spin the results this way? Weather can improve, but smaller paychecks are a permanent part of the new normal. The companies are attempting to persuade investors that poor sales are temporary, but they aren’t buying it as the stocks underperform the market.

Bernanke: Too Soon to Consider Tapering Bond Buying.

Bernanke touts benefits of Fed easing, no hint of pullback | Reuters.

Bernanke Says Premature Fed Tightening Would Endanger Recovery – Bloomberg.

Fed QE versus SP500

For months, we have been writing that the Fed cannot possibly lower
the rate of money printing for fear of a market swoon.  Today, the
chairman admits as much:

A premature tightening of monetary policy could lead interest rates
to rise temporarily but would also carry a substantial risk of slowing
or ending the economic recovery and causing inflation to fall further.
interest rates will kill the stock market rally in an instant, and the
algos will create the mother of all panics as they all try to sell on
the news in unison.  Until this happens, enjoy those paper profits in
your 401(k).

Cotton Moving Average Signals Further Slide: Technical Analysis – Bloomberg.

Cotton Price 05.21.2013

When central banks commenced printapalooza, the hot money flowed into
commodities as the cotton price chart shows.  Cotton was also given a
boost by the spread of the Arab Spring to Egypt, a major cotton
exporter.  Since then, concerns of a shortage have alleviated, and the
hot money has flowed into the stock and bond markets.  Weak demand from
both manufacturers and speculators should continue to push prices

Four Reasons Housing Recovery Isn’t Yet Boosting Economy – Real Time Economics – WSJ.

Sales of Previously Owned U.S. Homes Climb to Three-Year High – Bloomberg.

US Home Sales Rise to Highest Level in More Than 3 Years.

Existing home sales highest in almost three-and-a-half years | Reuters.


Here is one reason why the “housing recovery” has yet to significantly boost the economy: the housing recovery does not exist. Sales of existing homes have finally clawed their way back to the lows of the 2001 recession, but in order to experience pre-2008 levels of economic growth housing sales still need to increase another 40%. With declining real wages for the vast majority of U.S. workers, a large increase in sales is a pipe dream. The chart above shows how far we have really fallen.

Iceland Freezes EU Plans as New Government Shuns Euro Crisis – Bloomberg.

Iceland GDP PerformanceEurozone GDP Performance 05.13.2013

Politicians like to talk.  The newly elected Icelandic government
gives many reasons for shelving EU accession talks, but the real reason
lies within the charts above.  While the Eurozone economy atrophies,
Iceland has achieved steady economic growth in the wake of its financial
crisis.  Hmmm, what is the difference between the Icelandic and Eurzone

Bank of Japan vows market steps to curb bond turbulence | Reuters.

JGB 10 Year 05.22.2013

Japanese bond yields have not risen all that much considering their history. What is troubling is the recent bouts of volatility. Wide, intraday price spreads have no precedent. These volatile days foreshadow the widespread panic that will engulf this market one day, just don’t ask me which day that will be.

Italy to outline youth jobs plan as government struggles | Reuters.

Italy Considers ‘Generational Handoffs’ for Jobs –

Enrico Letta

Yesterday, we discussed the problem of protective labor laws:

Since businesses in Europe have learned how difficult it is to shed workers during recessions, they are loathe to increase hiring during boom times. Paradoxically, worker protection laws do not protect workers on a net basis. Sure, the few who have good jobs may get to retain them a little longer but at the expense of the many unemployed.

It is a political nonstarter to suggest rolling back these protections so that a freer labor market results in more hiring, so politicians propose good looking solutions that actually do nothing. Letta’s job creation proposals fall into this category.

Sweden’s capital hit by worst riots in years | Reuters.

Sweden stunned by third night of rioting – World News.

Swedish riots

All is not well in the world. Preserving middle class entitlements has created a permanent underclass that has no prospects. This problem is not limited to Sweden, Europe and, indeed, the United States have a similar problem. Fortunately, the riots have been limited to Europe, so far.


One thought on “Around the Globe 05.22.2013

  1. The “CORE” issue everywhere is of course “EMPLOYMENT”.
    Everything is based upon employment.
    Whether it be Bernake issuing more $;
    Sales at local retailers,
    Or Housing.

    Unfortunately the current administrations absolute but dimented short term “fix”
    is not working, and only making the issue even worse (exponentionally worse).

    We are not kicking down the road, we are kicking it higher and higher up the cliff
    so the fall will be all that much greater.


    Here is what is happening locally to my area:

    1. A few people I know work(ed) at the local Grocery – a National Chain.

    One friend tells me
    The hours were cut to 21 hours. No more than 21 hours a week are permitted.
    They are forced to find second part time jobs.

    The “experienced” workers at $ 12 and $ 14 an hour are being phased out,
    emphasis on new workers part time pay $ 7.95.
    No one appears to care whether the younger workers perform
    or make errors, or have experience.

    2. Through the years I know a few people at my local Bank – a National Chain.

    All except one, the bank manager, are gone.
    I never see them, after seeing them for years and years.

    They are replaced by yes, what appears to be High School Seniors.
    Literally, one of my friends sons works there, he is a local high school senior.

    My hats off to him of course great job for a local high school senior.
    But of course the employees that were there, quite unfortunate for them.


    The BERNAKE folly is making it to the TOP of the banks and rewards and bonus
    but is not coming near to the tellers and the local day to day workers.

    The Obamacare addition, has meant removal of full time jobs,
    shortening of hours, and no benefits for most.

    ++++++++ P.S.

    Several months ago one of my friends got 95 % financing ! I said its impossible
    they don’t do that anymore, but they got it !!! And they borrowed the 5%
    from parent, and were not required to pay off their credit card balance first.

    Today ONE OF MY FRIENDS just told me they are
    getting 100 % financing ! Yes, buying a new house and getting
    100 % financing !!

    Go Housing Market Go !!!

    Keep printing everyone, keep printing,
    and don’t worry our kids will pay it !!



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