Links: 2013-05-18
BoE policymaker Martin Weale douses hopes of monetary stimulus when Mark Carney arrives – Telegraph
“Martin Weale, a member of the rate-setting Monetary Policy Committee, warned that more stimulus risked a damaging surge in inflation because price rises have already been higher than the Bank’s 2pc target for most of the past four years. The persistent overshoot, he said, “is a constraint on my freedom of action”.
“Failure to damp sufficiently any new shock pushing up on inflation would result in inflation expectations becoming more entrenched. That, in my view, limits the scope we have to support demand at the current juncture,” he told the British-American Business Council Transatlantic Conference in Birmingham.”
Markets Insight: Phoney QE peace masks rising risk of instability – FT.com
“For while the flood of central bank liquidity is enabling the system to absorb small shocks, it is also masking a host of internal contradictions and fragilities that could surface if a shock hits. Or, to echo a point often made by Nassim Taleb, precisely because central banks are trying to pursue stability at all costs, the potential for a future violent instability is rising apace; “tail risk”, as statisticians say, is growing.
That does not mean a shock will necessarily occur soon; this phoney peace may last months, if not years. But as those equity markets soar, investors would do well to ponder on the data dislocations. Nobody can afford to feel complacent, least of all if they sit in a western finance ministry – or central bank.”
5 Reasons Why Gerard Minack Is The Most Underrated Strategist On Wall Street – Business Insider
“Earlier today, Morgan Stanley’s Head of Global Developed Markets Gerard Minack announced his retirement.
Most people have never heard of this Australia-based strategist. However, his concise two-page notes regularly provided the sharpest insights on the state of the markets. The savviest investors followed his work closely. And we often featured his wild charts on Business Insider.
Here are a few highlights from Minack’s recent work that show why he was the most underrated strategist on Wall Street:”
Australia: The housing rally to have, when you’re not having a rally | Business Spectator
“it appears that the recent house price rise ran out of steam in January, and resulted in prices being a whole 1.8 per cent higher, in real terms, than at the nadir in September. They are now just 1.6 per cent higher.”
ECB to keep monetary policy loose for as long as needed | Reuters
“The European Central Bank will keep its loose and growth-supportive monetary policy stance in place for “quite a long time”, ECB executive board members said on Friday.”
“Let’s briefly review the history of the ECRI recession call. ECRI adamantly denied that the sharp decline of their indicators in 2010 marked the beginning of a recession. But in 2011, when their proprietary indicators were at levels higher than 2010, they made their controversial recession call with stunning confidence bordering on arrogance:
Early last week [September 21, 2011], ECRI notified clients that the U.S. economy is indeed tipping into a new recession. And there’s nothing that policy makers can do to head it off….
Here’s what ECRI’s recession call really says: if you think this is a bad economy, you haven’t seen anything yet. And that has profound implications for both Main Street and Wall Street.
Ironically enough, on the same day ECRI forecast a recession, Chairman Bernanke announced a new policy, Operation Twist, which was followed by QE3 in September 2012 and unlimited easing (aka QE4) in December 2012.
Essentially ECRI claim that “there’s nothing that policy makers can do to head it [a recession] off” was a bet against the Fed.”
“Last October, senior Obama officials anonymously unveiled to the Washington Post their newly minted “disposition matrix”, a complex computer system that will be used to determine how a terrorist suspect will be “disposed of”: indefinite detention, prosecution in a real court, assassination-by-CIA-drones, etc. Their rationale for why this was needed now, a full 12 years after the 9/11 attack:
Among senior Obama administration officials, there is a broad consensus that such operations are likely to be extended at least another decade. Given the way al-Qaida continues to metastasize, some officials said no clear end is in sight. . . . That timeline suggests that the United States has reached only the midpoint of what was once known as the global war on terrorism.””
China April home prices rise 4.9 percent: Reuters calculation | Reuters
“Average new home prices in China’s 70 major cities rose 4.9 percent in April from a year earlier, according to Reuters calculations based on official data published on Saturday, marking the fourth straight month of year-on-year increase.”
Google Wallet: Gen Y credit card? – MarketWatch
“Facing stiff competition and tepid demand, Google Wallet has not made a big splash in the world of mobile payments. But experts say young Americans may help revive its fortunes.”
Danish PM shelves plan for a vote on joining euro – Independent.ie
“Denmark is shelving indefinitely its goal of adopting the euro. Prime Minister Helle Thorning-Schmidt has said that an exchange-rate peg without full euro membership is proving the best currency regime for her country.
A referendum on joining the euro “in this election term is unrealistic”, Ms Thorning-Schmidt said, adding: “I don’t think it makes any sense to discuss the option of a euro referendum in the next term” (set to run from 2015 to 2019).
Ms Thorning-Schmidt, who is half-way through her first four-year term, said Denmark’s chosen model of an opt-out from the euro had shielded the economy from the worst of the crisis further south.
However, she added: “Denmark will remain at the core of European co-operation.””
Is This Another Bubble? We Can’t Know Without Better Data – Bloomberg
“Economists have long advocated that regulators pay more attention to leverage and do a better job of measuring it. In a 2011 paper, John Geanakoplos of Yale University and Lasse Pedersen of New York University proposed publishing a suite of leverage indicators. In consumer markets such as mortgages and auto loans, they would monitor down payments. In the so-called repo market, where investors put up securities as collateral for loans, they would track the “haircuts” that define how much money can be borrowed against different types of securities. Data on new transactions would offer insight into what was driving current buying, while averages for all loans outstanding would give a sense of the market’s fragility.”
ekathimerini.com | After upgrading Greece’s credit rating, Fitch boosts banks
“Fitch Ratings on Friday upgraded several Greek Banks following a decision earlier this week to raise the country’s credit rating by one grade, to B- from CCC, citing the government’s progress in rebalancing the economy and bringing its deficits under control.
The agency upgraded the long-term issuer default rating (IDR) of National Bank of Greece, Piraeus Bank, Alpha Bank and Eurobank to B- from CCC, the short-term IDR to B from while viability ratings were boosted to B- from F.
The ratings come as the recapitalization of the Greek lenders is in progress.”
Surprise: Yahoo’s mobile push is working better than you think — Tech News and Analysis
“Don’t look now but it looks like Yahoo’s mobile apps push is bearing fruit, at least according to new data from Onavo.
Case in point: Yahoo Weather, which rolled out recently, already has what Onavo CEO Guy Rosen calls an “unprecedented” 3 percent market share among U.S. iPhone owners. That’s about 1.5 million users total which makes it the 91st most popular iPhone app three weeks after release, according to Onavo Insights data. That’s very good for a new app, Rosen said in an interview.
Other Yahoo mobile apps including Yahoo Messenger and the Yahoo app are also doing well. “In general, what we found is that although Yahoo has been quiet on mobile, when we look at the top apps, we see quite a few up there. They have a decent footprint.””
iTunes security hole lets users download any pre-release album stream for free | The Verge
“iTunes started streaming the highly-anticipated new Daft Punk album Random Access Memories earlier this week. However, it looks like a security flaw in iTunes is letting users download the full album in a high-quality 256kbps MP4 file with no DRM protection — with the right tool, you can grab this pre-release for free right from the world’s biggest music retailer. We’ve tested ourselves and confirmed this leak to be real — and it works for any streaming album preview on the site.”
Calculated Risk: Preliminary May Consumer Sentiment increases to 83.7
“The preliminary Reuters / University of Michigan consumer sentiment index for May increased to 83.7 from the April reading of 76.4. This is the highest level since July 2007.
This was well above the consensus forecast of 78.0. Sentiment has generally been improving following the recession – with plenty of ups and downs – and one big spike down when Congress threatened to “not pay the bills” in 2011.”
“the Federal Open Market Committee (FOMC) can only meet its congressionally mandated objectives for employment and prices by taking actions that lower the real interest rate relative to its 2007 level. The FOMC has responded to this challenge by providing a historically unprecedented amount of monetary accommodation. But the outlook for prices and employment is that they will remain too low over the next two to three years relative to the FOMC’s objectives. Despite its actions, the FOMC has still not lowered the real interest rate sufficiently in light of the changes in asset demand and asset supply that I’ve described.”
Fed Officials Looking Closely at Student Debt – Real Time Economics – WSJ
“Federal Reserve officials are paying close attention to America’s mounting student debt load.
The upward march of student loan borrowing is “something we are keeping an eye on and thinking quite carefully about,” Fed governor Sarah Bloom Raskin said in response to an audience question Thursday.”
Median home price hits record highs in Arlington, the District
“The District’s median sale price of a home jumped to $470,000 in April, a $10,000 increase from the previous month and a 4.7 percent increase year over year. It was the second month in a row the city set a new median sale price high.
Arlington’s median sale price soared to $560,000 last month, a $45,000 increase from the previous month and a 2 percent increase year over year. Arlington’s previous high was $550,000 set in June 2012.”
Too Much Talk About Liquidity – NYTimes.com
Asset prices are at record highs even though Krugman tells us the real economy is depressed. That sounds like bubble blowing, if you asked me.
“Antonio Fatas is annoyed at Gillian Tett, who talks to the I-see-bubbles crowd and assumes that they have The Truth — namely, that those crazy central banks are flooding the world with liquidity, driving asset prices to crazy levels, and it will all end in terrible grief. Pretty much the same discussion we’ve been having about the armageddon hedgies.
As Fatas says, it’s hard to see what exactly in the data supports this view. Short-term interest rates are near zero because the economy is so depressed, and will stay that way for a long time. Long-term rates are low because people, rightly, expect short-term rates to stay low for a long time. “
The Problem With the Fed’s Easy Money Policies – NYTimes.com
“What was my main point? We are four years into the One Percent’s recovery. Now, we are in Round 3 of quantitative easing, the formal term for the Fed injecting hundreds of billions of dollars into the economy by purchasing longer-term assets like Treasury bonds and Fannie Mae and Freddie Mac paper. What’s that giving us? Overvalued stocks. Private equity firms racing to buy up Arizona real estate. Junk bond yields at record lows. Ratings shopping on structured financial products.
These are dangerous signs of prebubble activity.
But, much more important, quantitative easing is not giving us a self-sustaining recovery and job creation. As I put it in the column, hedge fund managers “can read markets, and they can see that the Fed isn’t engineering the hiring, inflation and recovery it would like.” There’s been a breakdown in the connection between wages and productivity. Labor participation is desperately low.
So are we moving from the bust to the bubble and missing the recovery for average people?
And if so, why?”
Who You Gonna Bet On? – NYTimes.com
“Still, in fairness, the fund managers complaining the loudest about Bernanke do seem to be guys who saw the housing bubble and made money by shorting subprime. So they have some right to feel that they have a track record.
But is it the kind of track record that suits them for analyzing monetary policy and macroeconomics? The most famous of the housing shorters, thanks to Michael Lewis, is John Paulson; and, well, Krugman or Paulson: Who you gonna bet on?
The point, I think, is that you can simultaneously fault the Fed and economists in general for failing to see this crisis coming, and ridicule the hedge fund guys for giving advice right now that is both ludicrous and dangerous. And you should.”
Why Fund Managers May Be Right About the Fed – NYTimes.com
“The Fed began its lender-of-last-resort role in 2007, but did little to avoid or minimize the financial crisis. Once it hit, it did the right thing to flood the markets with money, but — along with the Treasury and a passive Justice Department — let banks and top executives escape penalty. And now, asset prices are going wild. Junk bonds are up. Stocks are up. Housing in Phoenix and Brooklyn is going mad.
This prebubble euphoria only undermines the Federal Reserve’s fragile credibility. It reinforces the notion that it seems to know only two things: how to inflate bubbles and how to studiously not recognize them.
Flush from their victory predicting inflation and interest rates, some economists discount the worrisome market activity. Mr. Krugman, a columnist for The New York Times, recently urged Mr. Bernanke to ignore bubble talk.
And lo and behold, the Fed chairman gave a talk on the very subject last week.”
On Victory Drive, Soldiers Defeated by Debt – ProPublica
“In June 2011, when Levon Tyler, a 37-year-old staff sergeant in the Marines, walked into Smart Choice Title Loans in Columbia, S.C., it was the first time he’d ever gone to such a place, he said. But his bills were mounting. He needed cash right away.
Smart Choice agreed to lend him $1,600. In return, Tyler handed over the title to his 1998 Ford SUV and a copy of his keys. Tyler recalled the saleswoman telling him he’d probably be able to pay off the loan in a year. He said he did not scrutinize the contract he signed that day.
If he had, Tyler would have seen that in exchange for that $1,600, he’d agreed to pay a total of $17,228 over two and a half years. The loan’s annual percentage rate, which includes interest and fees, was 400 percent.”
Galaxy S4 sales to top 10 million
“Samsung Electronics said Thursday it expects its latest flagship handset, the Galaxy S4, to surpass the 10 million mark in sales next week.
“We are confident that we will pass more than 10 million sales of the S4 next week. It is selling much faster than the previous model S3,” Samsung Electronics co-CEO Shin Jong-kyun told reporters at an industry forum in Seoul, Thursday.
That would make the mobile device the fastest selling smartphone in Samsung’s history.”
Government Shouldn’t Give Americans’ Bank Info To Foreign Nations – Investors.com
“Fatca, with little fanfare, made sweeping changes to privacy laws.
It required every non-American financial institution — banks, credit unions, pension funds, stock and investment firms, etc. — to register directly with the U.S. Internal Revenue Service (IRS) and agree to provide specified financial data on the accounts of any “U.S. Person.”
What came next was all too predictable: rather than expose themselves to Fatca’s new withholding penalties, these overseas financial institutions simply began shutting down the accounts of their American depositors and selling off American investments.
However, once this initial coercion effort by the IRS began to backfire, the Treasury Department decided to work around the problem by cutting deals with foreign governments instead of each individual foreign financial institution.
These deals, known as “intergovernmental agreements,” are not nearly as innocuous as many Fatca supporters would have you believe. Indeed, they are a significant departure from normal standards and practices.”
Japan PM sets targets in latest growth strategy tranche | Reuters
“The latest tranche of Japan’s growth strategy will aim to triple infrastructure exports and double farm exports by 2020, as well as boost private investment, Prime Minister Shinzo Abe said on Friday.
The government will set a target for domestic private-sector investment of 70 trillion yen (450 billion pounds) annually, Abe said in a speech to business executives and academics, the level before the 2008 financial crisis and up about 10 percent from the current figure.”
“Samsung’s latest flagship smartphone, the Galaxy S4, is poised to pass 10 million shipments next week less than a month after the device launched, says co-CEO Shin Jong-kyun, according to the Korea Times. The S4′s international release took place on April 27, after the phone launched in Samsung’s home market on April 26.
“We are confident that we will pass more than 10 million sales of the S4 next week. It is selling much faster than the previous model S3,” Jong-kyun told reporters at an industry forum in Seoul yesterday the paper reports. “Samsung spent 50 days to pass the 10 million sales mark for the S3. The S4 will be Samsung’s first ’10 million seller’ device less than a month after its official debut.””
Canada April Inflation Lower Than Expected – WSJ.com
“The all-items consumer price index in April rose 0.4% year-over-year, below the previous month’s 1% reading. Market expectations were for a 0.6% advance, according to economists at Royal Bank of Canada.
The annual core rate, which excludes volatile components such as some food and energy, climbed 1.1%, below market expectations for a 1.2% rise.”
Ireland’s soggy patch – short view – markets – FT.com
“Ireland has been hailed as a model of austerity-driven recovery by Europe’s politicians. Unfortunately the recovery is reversing. James Mackintosh, investment editor, says Europe is unlikely to allow Ireland’s soft patch to deteriorate further. “
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